US FINANCIAL MARKET

Wall Street Rout Goes Global on Hot Economic Signs: Markets Wrap – Bloomberg, 4/2/2024

• Stocks and bonds dropped around the globe as solid economic readings, a rally in commodities, and a flare-up in geopolitical risks spurred speculation that major central banks will keep rates higher for longer.
• In a revival of the “good news is bad news” trade, Tuesday’s better-than-estimated readings on US job openings and factory goods orders kept markets under pressure.
• Treasury 10-year yields hit the highest levels in 2024 — putting further pressure on equities — a market ignoring the hawkish repricing of rate-cut bets over the last few months.
• Aside from the macroeconomic picture, valuation concerns after a torrid rally have spurred calls for a pullback.
• Following hotter-than-estimated data worldwide, Citigroup’s Economic Surprise Index — which measures the difference between actual releases and analyst expectations — is now hovering near the highest level in about a year.
• The S&P 500 fell 1% while the tech-heavy Nasdaq 100 underperformed, with Tesla leasing losses in megacaps.
• The Nasdaq 100 fell 1.5%. The Dow Jones Industrial Average fell 1.1%.
• Treasury 10-year yields rose seven basis points to 4.38%.
• Oil hovered near $85 for the first time since October, copper rallied back above $9,000 a ton, and gold hovered near all-time highs.
• Equities have rallied this year, powered by megacap and technology stocks, as the economy has stayed resilient while inflation has been trending down, underpinning the case that rate cuts will come this year.
• Still, expectations for the first Fed cut have been pushed back — and odds that the central bank will lower rates at the June meeting are a coin-flip.
• Tesla suffered its first year-over-year sales drop since the early days of the Covid pandemic.
• The electric carmaker handed over 386,810 vehicles in the first three months of 2024.
• That fell so far from analysts’ average estimate for 449,080 deliveries that it was its biggest miss ever.
• PVH shares plunged the most since 1987’s Black Monday crash after the company gave full-year sales guidance that fell short of expectations.
• SLB agreed to acquire rival oil field service provider ChampionX for $7.8 billion in an all-stock deal. This move will bulk SLB’s portfolio as aging shale fields mean US drillers need better technology to maintain oil and gas production.
• Airbus delivered about 145 aircraft in the first three months of the year as the planemaker works to ramp up output and meet its annual handover goal of 800 jets.

Tommy Hilfiger-owner PVH shares fall as tepid Europe demand hits 2024 forecasts – Reuters, 4/2/2024

• Shares of PVH slumped up to 25% on Tuesday, a day after the Calvin Klein-owner forecast a steeper-than-expected drop in its annual revenue on the back of weakening demand in Europe.
• The company beat analysts’ quarterly sales and profit expectations due to strong holiday demand and better inventory planning.
• PVH’s wholesale revenue declined 10% in the fourth quarter, as wholesale customers across North America and Europe continued to take a cautious approach.
• The apparel maker, which also owns Tommy Hilfiger, forecast fiscal 2024 revenue to fall between 6% and 7%, steeper than the 2.3% drop estimated by analysts, according to LSEG data.
• PVH forecasted its annual earnings per share in the range of $10.75 to $11.00, versus analysts’ estimate of $11.89.
• PVH plans to significantly reduce the number of online platforms it sells to in Europe in mid-2024, CEO Stefan Larsson said on a conference call on Tuesday, adding that the move would lead to a 5% reduction in its total European sales this year.

Paychex’s stock sinks after revenue miss, lowered full-year growth outlook – Market Watch, 4/2/2024

• Shares of Paychex sank toward a five-month low in premarket trading Tuesday after the human resources outsourcing company reported fiscal third-quarter revenue expectations and trimmed its full-year outlook, citing a lower contribution from its Employee Retention Tax Credit service.
• Revenue grew 4.2% to $1.44 billion, just shy of the FactSet consensus of $1.46 billion.
• Excluding nonrecurring items, adjusted earnings per share of $1.38 topped the FactSet consensus of $1.37.
• Looking ahead, the company expects full-fiscal 2024 revenue growth in the 5% to 6% range, compared with previous guidance in the 6%-to-7% range.
• The current FactSet consensus for full-year revenue of $5.33 billion implies 6.4% growth.

Tesla Sales Fall Short of Estimates in First Drop Since 2020 – Bloomberg, 4/2/2024

• Tesla suffered its first year-over-year sales drop since the early days of the Covid pandemic.
• The electric carmaker handed over 386,810 vehicles in the first three months of 2024, the company said in a statement Tuesday.
• That fell so far from analysts’ average estimate for 449,080 deliveries that it was its biggest miss ever.
• Tesla pointed to the early production ramp of its updated Model 3 as a factor for the volume decline.
• It also cited “shipping diversions caused by the Red Sea conflict” and an arson attack at its Berlin factory.
• The Model Y sport utility vehicle and Model 3 sedan accounted for 96% of deliveries in the fourth quarter.

Rivian Beats EV Production Estimates With Shipments Rebounding – Bloomberg, 4/2/2024

• Rivian Automotive built and delivered more electric vehicles last quarter than Wall Street expected, boosting the automaker as it grapples with production hurdles and high costs.
• The company made 13,980 EVs in the first three months of the year and handed over 13,588 to customers, according to a statement Tuesday.
• The production figures compared with analysts’ average estimates of 13,817.
• Deliveries also came in significantly above expectations.

SLB to Buy ChampionX in $7.8 Billion Oilfield Services Deal – Wall Street Journal, 4/2/2024

• Oilfield services giant SLB agreed to buy ChampionX in an all-stock deal valued at about $7.8 billion.
• ChampionX shareholders will receive 0.735 SLB shares for each share of ChampionX they already own.
• After the deal, ChampionX shareholders will own about 9% of the combined company.
• SLB Chief Executive Olivier Le Peuch said the deal will expand SLB’s presence in the less cyclical and growing production and recovery space.
• Still, he said the company will continue to focus on accelerating decarbonization and emissions reduction in SLB’s core oil and gas business.
• ChampionX provides chemistry solutions, artificial lift systems, and other equipment to help companies drill for and produce oil and gas.
• SLB said it expects to realize annual pretax synergies of about $400 million within three years after the deal closes.
• The company said the benefit will come from revenue growth and cost savings.

Disney Winning Proxy Fight Against Trian With More Than Half of Votes Cast – Wall Street Journal, 4/2/2024

• Walt Disney has pulled ahead in its proxy battle against Nelson Peltz’s Trian Partners, with more than half of all shares voted, according to people familiar with the matter.
• BlackRock, Disney’s second-largest shareholder, is among the significant investors backing Disney, the people said.
• According to FactSet, • The money manager owns around 78 million Disney shares, giving it a 4.2% stake worth around $9.5 billion.
• Its backing is a significant coup for Disney Chief Executive Bob Iger, who is trying to fend off Trian’s attempt to get two seats on the company’s board while it is in the middle of a dramatic turnaround attempt.
• T. Rowe Price, the Baltimore-based money manager, said Monday it also planned to support Disney.
• It owns about 9.3 million Disney shares, or about 0.5% of the total.
• There are no guarantees that Disney will remain ahead, given that investors are still casting votes and can change them through Wednesday’s annual meeting.

Regulator Probes BlackRock and Vanguard Over Huge Stakes in U.S. Banks – Wall Street Journal, 4/2/2024

• Banking regulators scrutinize whether index-fund giants BlackRock, Vanguard, and State Street stick to passive roles in their investments in US banks.
• The three firms manage more than $23 trillion, much of it in funds that passively mimic indexes such as the S&P 500.
• BlackRock and Vanguard each hold more than 10% of the shares at many banks, a threshold generally determining whether an investor is assumed to have a controlling interest in a lender. At the same time, State Street also holds several sizable stakes.
• Regulators are interested in policing those who own and control banks because of their unique economic role.
• At present, regulators exempt the most significant asset managers from a host of onerous banking rules—such as needing permission when acquiring shares above the 10% threshold—as long as the firms remain passive.
• The existing approach could soon change, spurred by Federal Deposit Insurance Corp members.
• One board member, Jonathan McKernan, told The Wall Street Journal he has developed a plan to enhance the FDIC’s monitoring of the firms and hopes it will receive a vote from the board over the coming weeks.
• He is pressing for an order to pause the firms’ investments in FDIC-regulated banks above the 10% threshold while the agency examines the matter.

US ECONOMY & POLITICS

US factory orders rise in February after two straight monthly declines – Market Watch, 4/2/2024

• Orders for manufactured goods rebounded 1.4% in February after two straight monthly declines, the Commerce Department said Tuesday.
• The increase in February orders was higher than the 1% gain expected by economists surveyed by the Wall Street Journal.
• According to the report, durable goods orders rose a revised 1.2% in February, down slightly from the advance estimate last week of a 1.4% gain.
• Non-durable goods orders rose 1.6% in February after a 0.8% drop in the prior month.
• Orders for nondefense capital goods, excluding aircraft, rose 0.7% in February, unrevised from the prior estimate.
• Shipments of these key orders fell 0.6%.

US Job Openings Were Little Changed in February at 8.76 Million – Bloomberg, 4/2/2024

• US job openings had little change in February from the prior month, suggesting labor demand is stabilizing at an elevated level.
• The number of available positions increased to 8.76 million, mainly reflecting a pickup in finance and state and local government from a downwardly revised 8.75 million in January.
• The report also showed an increase in hiring.
• The so-called quits rate, which measures voluntary job-leavers as a share of total employment, was 2.2% — the lowest since 2020.
• The ratio of openings to unemployed people eased to a four-month low of 1.36.

US to Impose Two-Person Crew Mandate on Freight Trains – Wall Street Journal, 4/2/2024

• Federal officials plan to mandate that freight railroads operate trains with two-person crews, adopting a policy that railroads have opposed and Congress failed to legislate.
• The Department of Transportation and Federal Railroad Administration is expected to announce the new requirement as soon as Tuesday, according to people familiar with the matter.
• The FRA in July 2022 proposed the two-person rule, saying it was designed to ensure safe operations.
• Most freight railroads operate with two crew members on board, but they have sought flexibility in operating with one.
• Some have been using remote-controlled trains in rail yards.
• Further details on which type of trains, lengths, and loads would be subjected to this rule couldn’t be determined.

EUROPE & WORLD

Israel Says Strike That Killed Seven Gaza Aid Workers Was Unintentional – Wall Street Journal, 4/2/2024

• Israeli Prime Minister Benjamin Netanyahu said a strike that killed seven aid workers in Gaza was unintentional as allies called for an explanation and critical humanitarian groups suspended operations in the besieged enclave.
• “Unfortunately, in the past day, there was a tragic incident of an unintentional hit by our forces on innocent people in the Gaza Strip. It happens during war,” Netanyahu said in a recorded message on X.
• “We are in touch with governments, and I’ll do everything so this doesn’t happen again.”
• World Central Kitchen, one of the most important providers of food aid in the Gaza Strip, said Tuesday that it had paused operations across the Middle East after seven of its workers, including a U.S.-Canadian dual citizen, were killed in the strike.
• It said its staff had coordinated their movements ahead of time with the Israeli military, which said it would open a probe to examine the incident.

Biden, Xi Spoke by Phone to Manage World Tensions, Opportunities – Bloomberg, 4/2/2024

• US President Joe Biden and Chinese leader Xi Jinping spoke by telephone on Tuesday, their first one-on-one communication since meeting in California last November.
• The leaders of the world’s two biggest economies have managed to maintain a veneer of diplomatic stability despite deep mutual suspicion between their countries and as their governments pursue export controls, sanctions, and tariffs.
• At the same time, they have sought common ground on issues including risks posed by artificial intelligence and combating illicit drugs like fentanyl.
• Biden also was set to reiterate with Xi that China should use its leverage with Russia and Iran to enhance stability, both around the war in Ukraine and amid turmoil in the Middle East, the official said.

Panama Canal Will Need Rest of Year to Recover From Drought – Bloomberg, 4/2/2024

• The Panama Canal will need at least the rest of this year to recover from the 2023 drought that depleted water levels fully, choked vessel traffic, and cost shippers millions of dollars.
• La Niña is expected to usher in ample rains in weeks, providing relief after record dryness afflicted the key transit channel in 2023, said Argelis Moreno Lopez, senior forecast and market analysis specialist in the Panama Canal Authority’s strategic planning division.
• The moisture deficit is so severe that it will take months of precipitation to rectify, she added.

Factmonster – TODAY in HISTORY

• Spanish explorer Juan Ponce de Leon landed in Florida. – 1513
• Congress authorized the first US mint in Philadelphia. – 1792
• Confederate president Jefferson Davis and most of his cabinet fled the Confederate capital of Richmond, Va. – 1865
• Victoria Claflin Woodhull announced her candidacy for president of the United States. – 1870
• President Woodrow Wilson asked Congress to declare war against Germany. – 1917
• Argentina seized the Falkland Islands from Britain – in 1982

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