US FINANCIAL MARKET

Treasuries Fall After Factory Data as Fed in Focus: Markets Wrap – Bloomberg, 4/1/2024

• The world’s biggest bond market extended losses after solid US factory data reinforced speculation the Federal Reserve will be in no rush to cut interest rates.
• Treasuries fell across the US curve — with 10-year yields climbing over ten basis points — after data showed manufacturing unexpectedly expanded for the first time since September 2022 — while input costs rose.
• Equities edged lower after the S&P 500 notched its fifth-straight month of gains — spurring speculation of a consolidation or pullback.
• Later this week, a report is expected to show employment gains continued in March while wage growth moderated, indicating the nation’s labor market is poised to keep stoking the economy with limited risk of an inflation resurgence.
• Jerome Powell — who is set to speak Wednesday — said Friday that policymakers are awaiting more evidence prices are contained.
• The S&P 500 hovered near 5,240 after notching its 22nd record this year.
• The Nasdaq 100 rose 0.3%. The Dow Jones Industrial Average fell 0.6%.
• Gold rose to a record high.
• Investors who just booked profits from one of the strongest first quarters for the S&P 500 in decades are preparing for what comes next — whether stocks are climbing higher or crashing back to earth.
• With the stock market sitting at an all-time high as the second quarter begins, the tells for what traders think lies in the options market.
• Demand for put options that pay off if a minor correction is around the lowest in years.
• Meanwhile, traders quietly pick up tail-risk hedges: instruments that do little if there’s a slight downdraft but offer protection if stocks swing wildly.
• United Parcel Service said it had been awarded a significant air cargo contract by the United States Postal Service and will become the USPS’s primary air cargo provider.
• The yield on 10-year Treasuries advanced 11 basis points to 4.31%.
• West Texas Intermediate crude rose 0.7% to $83.77 a barrel.

Postal Service Picks UPS to Move Air Cargo, Replacing FedEx – Wall Street Journal, 4/1/2024

• The U.S. Postal Service has tapped United Parcel Service as its primary partner for moving cargo by air, replacing FedEx, which had provided the service for more than 20 years.
• The USPS and FedEx had been in talks to extend the contract but could not reach an agreement, FedEx said Monday.
• The four-year contract ending in September covers domestic air transportation for First-Class Mail, Priority Mail Express, and Priority Mail.
• The USPS was FedEx Express’s largest customer.
• In recent years, the USPS contract has dragged FedEx’s earnings.
• FedEx Chief Customer Officer Brie Carere said last month that the company was progressing on renegotiating the contract on more favorable terms.
• UPS confirmed it signed an agreement with the USPS but declined to say how long the contract would last.

Tesla Dives Into Advertising After Years of Resistance – Wall Street Journal, 4/1/2024

• Tesla has been firmly opposed to advertising for most of its history.
• In recent months, however, electric vehicle makers have hiked spending on various paid media platforms—not just the ones owned by their boss, Elon Musk.
• A video ad campaign on Facebook, Instagram, and Musk’s own X, for example, is touting Tesla’s Model Y as “the #1 most American-made car,” citing a Cars.com ranking.
• The ads mark a striking about-face for Musk, who, as Tesla’s chief executive, has long held advertising was unnecessary if Tesla’s product was good enough.
• “I hate advertising,” Musk tweeted in 2019.
• Like other tech startups that became household names, such as Google and Apple, Tesla relied on word-of-mouth endorsements from early adopters and Silicon Valley techies, along with its CEO’s rising public profile, for years to raise awareness of its brand.
• Media coverage of Tesla is its primary sales driver, according to recent financial filings.
• Tesla spent approximately $6.4 million on US digital advertising in 2023, according to estimates from Vivvix, a division of ad-tracking company MediaRadar.

AT&T Reset 7.6 Million Customers’ Passcodes After Data Breach – Wall Street Journal, 4/1/2024

• AT&T said it reset the passcodes of about 7.6 million account holders whose personal information was leaked on the dark web after a data breach.
• The affected data set, including information from more than 65 million former account holders, was leaked onto the dark web about two weeks ago but appears to have come from 2019 or earlier, the company said Saturday.
• It includes personal information such as names and Social Security numbers.
• The source of the security breach isn’t yet known, AT&T said.
• AT&T said its internal investigation hasn’t turned up evidence “of unauthorized access to its systems resulting in exfiltration of the data set,” with the caveat that the probe is in its early stages.
• The company said its investigation is supported by internal and external cybersecurity experts.
• Affected customers have been contacted by the telecommunications giant, which will offer credit monitoring services.
• The company said the data breach hasn’t had a material impact on operations.

United asks pilots to take unpaid time off, citing Boeing’s delayed aircraft – CNBC, 4/1/2024

• United Airlines is asking pilots to take unpaid time off next month, citing late-arriving aircraft from Boeing, according to a note sent to pilots.
• It’s another example of how Boeing customers say the manufacturer’s production problems and safety crisis impact their growth plans.
• The offer comes after United and other airlines in recent years have clamored for more pilots when the COVID-19 pandemic travel slump ended and demand surged.
• “Due to recent changes to our Boeing deliveries, the remaining 2024 forecast block hours for United have been significantly reduced,” the United chapter of the Air Line Pilots Association, the pilots’ union, said in a note to members Friday.
• “While the delivery issues surround our 787 and 737 fleets, the impact will also affect other fleets.”
• The union expects United to offer more time off “for the summer bid periods and potentially into the fall.”

Ballard Power’s stock rallies on most significant order in company history – Wall Street Journal, 4/1/2024

• Ballard Power Systems’s stock rallied Monday after the fuel-cell maker said it had inked its largest supplier deal since it was founded in 1979.
• The company signed a long-term agreement with European bus manufacturer Solaris Bus & Coach to supply up to 1,000 hydrogen-fuel-cell engines through 2027 for the European transit-bus market.
• The agreement adds about 700 fuel cell engines and related warranty services to an existing order of roughly 300 fuel cell engines.
• “This consolidated order represents the largest order of fuel cell engines in Ballard’s history,” the company said.

US ECONOMY & POLITICS

US Manufacturing Activity Expands for First Time Since 2022 – Bloomberg, 4/1/2024

• US factory activity unexpectedly expanded in March for the first time since September 2022 on a sharp rebound in production and more robust demand while input costs climbed.
• The Institute for Supply Management’s manufacturing gauge rose 2.5 points to 50.3 last month, according to data released Monday.
• While barely above the level of 50 that separates expansion and contraction, it halted 16 straight months of shrinking activity.
• The March index exceeded all estimates in a Bloomberg survey of economists.
• Production snapped back sharply from a month earlier with a gain of 6.2 points, the largest since mid-2020.
• At 54.6, output growth was the strongest since June 2022.
• The group’s measure of new orders also returned to expansion territory after contracting in February.
• Nine industries reported growth in March, led by textile mills, nonmetallic minerals, paper products, and petroleum.
• Six contracted, including furniture, plastics, rubber products, and electrical equipment.
• The ISM data showed factory stockpiles contracted at a slower rate last month than in February, while a measure of customer inventories shrank faster.
• At the same time, the cost of materials and other inputs is rising, suggesting stubborn inflationary pressures.
• The group’s price gauge rose by 3.3 points to 55.8, the highest since July 2022.
• Meanwhile, orders from overseas customers, backlogs, and imports were unchanged in March.

California fast-food workers are getting a raise. Other businesses might have to catch up – CNBC, 4/1/2024

• As fast-food chains in California start paying their workers a higher minimum wage, other business owners across the state are watching to see whether they will have to raise their pay to compete.
• Starting Monday, fast-food workers in California at chains with more than 60 national locations earn $20 an hour, higher than the state’s broader minimum wage of $16 per hour.
• The new pay floor stems from a state law passed in September, which also establishes a nine-person council that will determine future wage hikes and suggest other industry labor conditions guidelines.
• Some affected chains have responded to the mandated wage hike by slashing their workforces and hiking their menu prices.
• Franchisees for pizza chains Papa John’s, Round Table, and Pizza Hut laid off drivers before the deadline.
• McDonald’s, Wingstop, and Chipotle Mexican Grill are among the chains that have said they’ll pass on the higher labor costs to their customers by making their menu items more expensive.
• “The consequences are business owners — franchisees who are not large companies, despite what the political supporters of this law have said — these are small businesses now facing higher costs. And those costs will get passed on to the customer and will likely result in fewer jobs,” Matthew Haller, president and CEO of franchisee advocacy group the International Franchise Association, told CNBC.
• The law won’t directly touch other restaurants in California — small coffee chains, mom-and-pop diners, and upscale steakhouses — but they still could have to adjust their pay as they compete for the same employees.
• industries that rely on hourly workers, such as retail and hospitality, may face pressure to match their wages or risk losing their employees.

EUROPE & WORLD

China Industrial Upswing Is Latest Sign of Economic Recovery – Bloomberg, 4/1/2024

• China’s factory activity beat expectations in March, boosting optimism about its ability to achieve its ambitious growth goal of around 5% this year.
• The Caixin manufacturing purchasing managers’ index rose to 51.1 on Monday — above the 50 mark that indicates expansion for a fifth month, the longest streak in more than two years.
• Government data published on Sunday showed manufacturing PMI in March snapped a five-month contraction to rise to the highest in a year.
• Both numbers beat market expectations, proving that the country’s industrial sector is building momentum for an economic recovery.
• Exports jumped in the January-February period amid a global trade upcycle, rekindling hopes that improving foreign demand will help drive a broader recovery in the Chinese economy after being a drag last year.
• In a sign export likely continued to be robust in March, the sub-gauge of new export orders in the official PMI rebounded to 51.3, the first time in a year it expanded.
• Broader demand also picked up steam, with the sub-gauge of new orders rising to 53, the highest in a year.
• Figures released by the National Bureau of Statistics also showed a gauge of non-manufacturing activity rose to 53 in March, more robust than economists had estimated.

Tesla Rival BYD’s Sales Jump as EV Competition Heats– Wall Street Journal, 4/1/2024

• Chinese electric vehicle maker BYD reported a jump in March sales, a sign of intensifying competition from Chinese auto companies in the global EV market.
• In the first quarter, BYD sold 626,263 new-energy vehicles, which includes EVs and plug-ins, up 13% from a year earlier.
• The company said Monday that March sales surged 46% after slipping in the year’s first two months.
• BYD also reported a jump in exports in March, with overseas sales of new-energy vehicles nearly tripling to 38,434 units.
• Sales of plug-in hybrids, which comprised 52% of the company’s total first-quarter sales, rose 14%, while sales of pure battery EVs increased 13%.
• Fellow EV maker Li Auto posted a 53% jump in first-quarter deliveries to 80,400 units, while XPeng’s rose 20% to 21,821 vehicles.
• Geely Automobile sold 475,720 units, up 49% from a year earlier.

Turkey’s Erdogan Suffers Setback in Nationwide Election – Wall Street Journal, 4/1/2024

• Turkey’s main opposition party kept control of the country’s largest cities and rose to power in others while clinching a surprise victory in local elections that represented a rebuke to President Recep Tayyip Erdogan, reflecting discontent with the country’s turbulent economy.
• Istanbul’s incumbent Mayor Ekrem Imamoglu, who is one of Erdogan’s top critics and a possible presidential candidate, led his opponent by 50.8% to 40.1%, with more than 95% of ballot boxes opened in the city by early Monday morning, according to Turkey’s state-run news agency.
• The election is a setback for Erdogan, a polarizing figure in Turkey who plays an outsized role in global political affairs.
• In recent years, he has been an intermediary in the Ukraine war while aspiring to return Turkey to the status of a global power.
• The leader of a conservative religious party, he has sought to position himself as a leader of Muslim communities worldwide.
• The opposition CHP took the largest share of the total vote nationwide for the first time since the 1970s, leading in 36 provinces compared with 23 for the ruling Justice and Development Party (AKP), with more than 93% of ballot boxes opened nationwide, according to results from the state news agency Anadolu.

Israeli troops exit Gaza’s Shifa Hospital, leaving rubble and bodies – Reuters, 4/1/2024

• Israeli forces left Al Shifa Hospital in Gaza City on Monday after a two-week operation, leaving a wasteland of destroyed buildings and Palestinian bodies scattered in the dirt.
• Hundreds of people, including some who had been sheltering in the Gaza Strip’s largest hospital before the Israeli incursion, rushed back to check the damage and hunt for belongings.
• The Israeli military said it had killed or detained hundreds of Hamas militants in the hospital area, seized weaponry and intelligence documents, and lost two soldiers in the fighting but sought to prevent harm to civilians, patients, or medics.
• Hamas and medics deny any armed presence in hospitals.

Factmonster – TODAY in HISTORY

• Oliver Pollack created the dollar sign: $. – 1778
• Frederick Muhlenberg of Pennsylvania was elected the first Speaker of the House of Representatives. – 1789
• The Nazi persecution of Jews began in Germany with a boycott of Jewish businesses. – 1933
• American forces landed on Okinawa during World War II. – 1945
• Tiros I, the world’s first meteorological satellite, was launched. – 1960
• President Nixon signed a bill banning cigarette ads from radio and television. – 1970
• Steve Wozniak and Steve Jobs founded Apple Computer. – 1976
• Ayatollah Khomeini proclaimed Iran to be an Islamic Republic. – 1979
• Former Yugoslav President Slobodan Milosevic was arrested on corruption charges. – 2001
• President Bush signed the “Laci Peterson” bill, making it a separate federal crime to harm a fetus during an attack on the mother. – 2004
• Sweden becomes the fifth European country to legalize same-sex marriage. The other countries with the same rights are The Netherlands, Norway, Belgium and Spain. – 2009

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