Are jobs really vanishing?
The torrid weeklong stocks rally has taken a breather as investors again shift their focus to the weakening labor market.
With inflation in retreat, the steady rise in unemployment is expected to receive added attention from Jay Powell, the Fed chair, and his colleagues at the annual Jackson Hole economic symposium that begins tomorrow. On Wednesday, markets will face another big test when the Bureau of Labor Statistics publishes its annual payroll revisions data, a release that has investors on edge.
A topsy-turvy run in the markets has renewed focus on the economy. Weaker hiring data at the start of the month helped prompt a big sell-off in global stocks and other risky assets. But investors stormed back into the markets last week after better-than-expected retail data, which suggested that consumer resilience might help avert a recession.
Despite the wild swings, the S&P 500 is up about 1 percent for August so far.
Investors are bracing for Wednesday’s payroll figures, which economists say could see up to 1 million jobs disappear from previous tallies. Normally, this accounting update gets little attention, because the revisions apply to data that can be more than a year old. (Last year’s announcement wiped out 306,000 job gains, but markets largely shrugged off the news.)
But a jumbo-size revision could add more pressure on the Fed, which has faced more questions about whether it has waited too long to cut interest rates and risked an economic downturn. Adding to the volatility: Bond traders are making huge bets (with borrowed funds) that the Fed will soon cut rates.
Markets on Wednesday are pricing in a rate cut in September, the Fed’s first in four years. But by how much? A big revision on Wednesday, followed by a lackluster report on Sept. 6 could add to the calls for an aggressive cut — and reignite a political debate. (Donald Trump has warned the Fed not to cut until after Election Day, while Senator Elizabeth Warren and other Democrats have urged the central bank not to delay.)
“The best for the Fed would be to stay out of the limelight as much as possible during and right after the campaign so that Fed actions — and Fed independence — do not turn into a significant campaign issue,” Holger Schmieding, the chief economist at the investment bank Berenberg, wrote in a research note on Wednesday.
Schmieding added that a steady series of small cuts, perhaps of a quarter-percentage point each, “would likely be the least controversial option — as long as fundamentals continue to support such a strategy.”
HERE’S WHAT’S HAPPENING
Target delivers upbeat quarterly results, and the stock soars. Shares in the company were up more than 14 percent in premarket trading on Wednesday after it reported higher-than-expected fiscal second quarter revenues. Investors have been glued to retailers’ earnings for signs of consumer strength amid growing recession concerns.
A federal judge strikes down a ban on noncompetes. The reversal of the Biden administration’s planned prohibition on such clauses, which had been set to go into effect next month, is a blow to a key initiative for promoting competition in the workplace. The F.T.C. has estimated that removing noncompetes would cause worker earnings to rise by up to $400 billion over the next decade; it may appeal the ruling.
Walmart is said to sell its holdings in a Chinese e-commerce giant. Shares of JD.com fell nearly 9 percent in Hong Kong on Wednesday after Reuters reported the stake sale, which could net Walmart roughly $3.6 billion. Walmart plans to increase investment in its Sam’s Club China business.
The tech mogul Mike Lynch remains missing. The Italian Coast Guard is continuing to search for six passengers — including Lynch; his daughter Hannah Lynch; Jonathan Bloomer, the chairman of Morgan Stanley International; and Chris Morvillo, one of Lynch’s lead criminal defense lawyers — who are still missing after a luxury yacht sank on Monday. But a spokesman for the Coast Guard said that “we are more likely to find the missing people inside the boat.”
The money gusher for Harris continues
The second night of the Democratic National Convention saw two of the party’s biggest stars, Barack and Michelle Obama, making their cases for Kamala Harris.
But just as big of a story is how Harris has continued to raise eye-catching amounts of campaign donations, more than keeping pace with Donald Trump in a race that both sides caution remains achingly close.
Here’s a recap of last night’s event:
Former President Barack Obama sought to burnish Harris’s record on policing business, describing her fights with banks and for-profit universities as California’s attorney general and with pharmaceutical companies as vice president. He also said that Harris “won’t just cater to her own supporters,” perhaps a dig at Trump promising to roll back environmental rules if oil executives were to back his campaign.
Yes, Obama also poked fun at Trump’s fixation on crowd sizes.
Michelle Obama revamped her approach to taking on Trump, openly criticizing his attacks on her family. She also made one of the night’s biggest zingers, turning his “Black jobs” campaign line against him.
Harris herself campaigned in Wisconsin on Tuesday, seeking to shore up working-class support in a key battleground state.
Harris’s fund-raising success continues to grow. Her campaign has raised around $500 million in the month since President Biden dropped out of the race, Reuters reports. Female donors have been an especially active funding source.
That has helped Democrats erode Republicans’ recent lead in fund-raising. Trump’s campaign raised $47.5 million in July, and was outspent by Harris’s campaign by roughly three-to-one. Both the Republican National Committee and the Democratic National Committee reported raising nearly $31 million for July.
Still, the conservative megadonor Timothy Mellon gave $50 million last month to a pro-Trump super PAC, taking his total donations to the group to $115 million since the start of last year.
The pros and cons of Bronfman Jr.’s Paramount bid
The deal that Wall Street has been talking about for nearly a year — the sale of Paramount — is dominating conversations among rainmakers and investors again.
This time, one question is the talk of the town: Does Edgar Bronfman Jr.’s bid for Paramount have a chance at toppling the entertainment company’s agreement with Skydance?
The case for Bronfman: His bid’s structure could change as he raises more money; that could mean making a tender offer, in which his group would directly buy from shareholders. Bronfman’s group also has ties to people associated with Shari Redstone, Paramount’s controlling shareholder. One of his advisers is Jonathan Miller, the C.E.O. of Integrated Media Company, who previously partnered with Redstone on an investment firm, Advancit Capital.
Bronfman’s proposal carries a potential investment upside. If he were to pursue a tender offer, it would mean buying out nonvoting shareholders at a higher $16-per-share price than what Skydance is offering ($15 a share).
Bronfman also has extensive experience running a media company facing drastic challenges, having helped usher Warner Music Group into the digital age.
The case against Bronfman: Unlike Skydance, which has the backing of the tech billionaire Larry Ellison (the father of its C.E.O., David Ellison), Bronfman’s partners are an eclectic array of backers, including: Brock Pierce, a crypto entrepreneur who as a child actor starred in “D2: The Mighty Ducks”; Jeff Ubben, the activist investor, and his wife; Simon Falic, the chairman of the retailer Duty Free Americas; and Nurali Aliyev, a telecom executive and grandson of Nursultan Nazarbayev, the autocratic former president of Kazakhstan.
The presence of some international backers — as well as Fortress Investment Group, the investment firm partly owned by Mubadala Investment Company, an Emirati sovereign wealth fund (but controlled by Fortress management) — may draw concerns from U.S. regulators who oversee foreign investment. That’s especially because Paramount owns the CBS broadcast network.
As of now, Bronfman’s deal offers no cash to Paramount’s common shareholders, which Skydance does. It’s not clear what plans or resources Bronfman’s group brings to turn Paramount around.
Shareholders so far seem unconvinced: Shares in Paramount closed down a little over 1 percent on Tuesday.
And then there’s this from Rich Greenfield, an analyst at LightShed Partners, who wonders if the Redstones are again having “second thoughts” about selling to Skydance.
“Remember, just before the Skydance deal was reached, it appeared the entire transaction had collapsed,” he wrote in a research note. “Or maybe this is all an elaborate ploy to drive up the price on Skydance/Ellison and force them to increase their bid.”
When a legal shield for tech becomes a weapon against it
For years, tech giants relied on one provision of a 1996 law — Section 230 of the Communications Decency Act — as an expansive legal shield from liability for content posted by users on their online platforms.
But a lawsuit against Meta with a novel interpretation of the law could redefine the debate over online speech, The Times’s David McCabe reports.
The background: Lawyers for Meta sent a cease-and-desist letter to the creator of a tool that allowed users to automatically unfollow everyone on Facebook. That app was taken down.
But in May, Ethan Zuckerman, a public policy professor at the University of Massachusetts Amherst, sued Meta, arguing that he has the right to offer a similar app. (He has not done so yet.)
Zuckerman is relying on a little-noticed aspect of Section 230. He is citing a part of it that spells out protection for blocking objectionable material online.
Some lawyers say that Section 230 could also be used to justify scrubbing content users don’t want to see.
His lawsuit could open a new front in the debate over online content. Most proposals seeking to rein in social media either rely on the government introducing regulations, or leaving it up to tech giants to make tough calls. (For context: A majority of respondents to a Pew Research Center poll conducted this year said that social media companies already had too much influence in politics.)
Apps that filter certain content would give more control to the user. “It is one of these solutions on the table that I think does help us avoid both of these dystopias,” Ramya Krishnan, a lawyer at the Knight Institute who is working on the case, told The Times.
Meta has moved to dismiss the case. “This suit is baseless, and was filed by the plaintiff over a hypothetical browser extension that he has not even built,” a company spokesman told The Times.
THE SPEED READ
Deals
Jeff Bezos reportedly doesn’t plan to bid for the Boston Celtics despite speculation that he was interested in buying the N.B.A. team. (The Information)
For Wall Street banks, Elon Musk’s takeover of Twitter is now the worst buyout since the financial crisis. (WSJ)
Elections, politics and policy
“A Russian warlord’s new Cybertruck shows how Western sanctions are full of holes” (Business Insider)
President Biden approved a highly classified nuclear strategic plan that reoriented America’s deterrence strategy to focus more on China. (NYT)
Best of the rest
A group of authors filed a class-action lawsuit against Anthropic, accusing the artificial intelligence start-up of plundering their works to train its Claude chatbot. (Reuters)
Alex Cooper, the host of the popular podcast “Call Her Daddy,” is jumping to SiriusXM from Spotify for a three-year deal reportedly worth $125 million. (Hollywood Reporter)
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