How are you? (May 15-21)
Another week, another drop in stocks
Stocks moved into bear market territory Friday, the insider’s term for a drop of 20 points or more from an index’s last high, before closing slightly for the day. Still, the market continued a long run of losses with the seventh consecutive weekly decline. The pessimism that is rocking Wall Street stems largely from fears of rapidly changing inflation and how aggressive the Federal Reserve can be in its efforts to bring it under control. Financial statements from Walmart and Target also fueled these concerns last week, when the companies, both of which struggled to outperform rising prices, indicated they suffered significant blows in the first three months of the year. The companies’ financial data gave investors more reason to believe the central bank could begin pursuing much larger rate hikes, which could send the economy into recession. Since World War II, recessions have almost always followed bear markets closely, with a few exceptions.
An airline’s offer becomes hostile
Spirit Airlines tried Thursday to thwart JetBlue’s offer to acquire the company. The offer turned hostile last week after JetBlue announced it would accept its offer to buy the company directly to shareholders for $30 a share. Spirit called JetBlue’s move a “cynical attempt to disrupt the already-agreed merger with Frontier Airlines,” and urged shareholders to reject the advances. February’s Spirit-Frontier deal would combine two budget carriers to make them competitive with the four major US carriers. JetBlue also wanted to compete with these airlines, stepping in last month with its own bid that would value Spirit at more than $3 billion, while Frontier’s deal with Spirit valued the company at $2.9 billion. But Spirit hasn’t been tempted so far: Spirit’s chief executive, Ted Christie, said the airline is unlikely to take up JetBlue’s offer, even if shareholders reject the merger with Frontier.
Buffalo Shooting Video Lives On
Social media platforms were faced with questions about their content moderation policies after the video recorded by the suspect in the murder of 10 people at a Buffalo supermarket circulated widely online. The suspect initially streamed the shooting on Twitch and while the platform acted quickly to remove the footage, it was quickly shared across the internet. The 18-year-old man accused of the shooting said live-streamed footage of the 2019 murders in Christchurch, New Zealand, inspired him to stream his own violent attacks in Buffalo. The Christchurch video is still alive online even after years of platforms efforts to take it down. The long afterlife of these videos shows how difficult it can be for platforms to regulate the violent content shared on and uploaded to their sites.
What’s next? (May 22-28)
Rethinking the return to the office
Businesses may soon re-evaluate their return-to-office plans as Covid rates rise. On Tuesday, Apple suspended a requirement that employees return to the office at least three days a week this month due to the latest wave of cases. The news was a victory for the thousands of Apple employees who had opposed the company’s policies in May as part of a group called “Apple Together.” The delay was a setback to Apple’s efforts to return its operations to normal, including bringing its employees back to its $5 billion headquarters in Cupertino, California, which the company opened less than a year before the pandemic. Many employers have tried to go ahead with their RTO plans, but more employers will find that their determination to prevent another change conflicts with the reality of rapidly spreading variants of the virus.
The Fed and higher interest rates
Investors will learn more about how much to worry about the Federal Reserve’s actions to curb inflation when the central bank releases its meeting minutes this week. After a Fed meeting earlier this month, Jerome H. Powell, the bank’s chairman, offered investors some reassurance by saying the Fed was not considering exceptionally large rate hikes. Stocks were on their best day since 2020 when he made the comments. But with more storm clouds gathering on the horizon – including dismal reports on corporate earnings and faster month-on-month inflation – Mr Powell could reconsider his stance.
More unrest for Netflix
The tumult at Netflix may not be over yet. Last week, the streaming company laid off 150 people across the company, or about 2 percent of its workforce. And there may be more layoffs. The cuts came about a month after Netflix released a dismal first-quarter financial report, announcing it had lost 200,000 subscribers for the first time in a decade and was projected to lose two million in the next quarter. The bleak outlook for the company, the longtime leader in global subscribers, is a potential harbinger for the entire industry, suggesting that the streaming market is approaching saturation.
What else?
The euro is approaching a one-to-one exchange rate with the dollar. As baby food shortages persist, lawmakers are pushing for sector-wide reforms. The World Economic Forum returns to Davos this week after a two-and-a-half-year hiatus.