Markets Await Clues for Fed’s Next Move in May Jobs Report

What to watch in today’s jobs report

Market futures are looking up today after the Senate approved the bipartisan debt limit deal, averting a national fiscal crisis. (More on that below.)

Now investors are turning their focus to other looming concerns: worries over inflation, interest rates and recession, with a key reading on the U.S. economy due out at 8:30 a.m. Eastern this morning.

All eyes will be on the May jobs report. Hiring has slowed in recent months, but the unemployment rate still stands at a 53-year low despite a wave of layoffs in the technology, media and financial sectors.

Analysts say the labor market over all appears to be returning to its prepandemic state. “The Great Resignation is over, with quits and hiring slowing dramatically and layoffs higher than the last few years of the 2010s,” Bill Adams, the chief economist at Comerica Bank, wrote to clients.

The headline figure to watch today is 190,000. That’s how many new hires were made last month, according to economists polled by Dow Jones, down from 253,000 in April.

But it’s worth remembering that economists have consistently underestimated the strength of the labor market: The number of hires has come in above expectations in 13 of the past 16 months. (Incidentally, Comerica’s forecast is below consensus, at 175,000 new hires.)

Pay attention to wages, too. Data released this week by ADP, the payroll processor, showed that wages rose on average last month by 6.5 percent on an annualized basis, a sign that workers still have plenty of buying power, which could keep prices high. (Speaking of which, keep an eye out for the latest Consumer Price Index data due out on June 13.)

Fed officials will look for signs that inflation could tick up again. A hot jobs number today could influence the central bank’s interest rate policy in the second half of the year, and that uncertainty has been hanging over the markets.

Traders this morning were betting that a rate increase is off the table for the Fed’s upcoming meeting in two weeks. But some market watchers warn that a pause isn’t a done deal.

HERE’S WHAT’S HAPPENING

The Senate passes the debt limit deal. Lawmakers approved the agreement, 63-36, ending weeks of political fighting just days before the Treasury Department was forecast to run out of cash. The measure now heads to President Biden’s desk; he’s expected to address the nation tonight.

A top House Republican accuses the F.T.C.’s chair of “abuse of power.” Representative James Comer of Kentucky, who leads the House Oversight Committee, opened an investigation into Lina Khan, citing concerns about her expansive approach to antitrust regulation. The inquiry marks the latest pushback against the Biden administration’s tougher stance on mergers and acquisitions.

The judge overseeing Disney’s lawsuit against Ron DeSantis recuses himself. Judge Mark Walker of the U.S. District Court for the Northern District of Florida reversed course after discovering that a “third-degree relative” owned some Disney stock. The media giant sued DeSantis, Florida’s governor, in April over a dispute about oversight of the special tax district that encompasses Disney World.

A Meta privacy lawsuit is thrown out. A judge in the District of Columbia yesterday dismissed a case against the tech giant, which was accused of deceiving consumers by improperly sharing their data with third parties. The decision is a rare legal victory for Facebook’s parent company, which faces lawsuits and regulatory scrutiny around the world following the Cambridge Analytica privacy scandal that exposed how user data can leak and spread.

Customers say it’s hard to withdraw money from Apple savings accounts. Savers who flocked to the high-interest accounts, which are administered by Goldman Sachs, told The Wall Street Journal that they’ve struggled to move their money. It’s a black eye for Apple and Goldman, which had touted the offering as a new beachhead in consumer finance.

A veteran activist investor steps down

The changing of the guard that has swept across Wall Street has reached one of its most notable activist investment firms: Ed Garden is stepping down as chief investment officer of Trian.

Mr. Garden co-founded the firm in 2005, with the veteran financier Nelson Peltz (his father-in-law) and Peter May. Trian has become one of the most powerful activist investors around, shaking up corporate titans like DuPont, General Electric, H. J. Heinz and Procter & Gamble. Most recently, the firm waged a short-lived fight against Disney.

Mr. Garden played a key role in Trian’s campaigns, which usually involved the firm producing detailed white papers outlining its recommended changes in strategy. He has also served as Trian’s representative on boards, including at G.E., Family Dollar Stores and Wendy’s. Such was his importance that over the years some on Wall Street had expected him to eventually succeed Mr. Peltz as Trian’s leader.

Trian is elevating its next generation of leaders. The firm will appoint Josh Frank and Matt Peltz, a son of Nelson Peltz, as co-C.I.O.s, while Brian Baldwin will become head of research. (Nelson Peltz will stay on as C.E.O. and Mr. May will remain president.)

It’s the latest effort at succession planning on Wall Street, following moves in recent years by Apollo, Carlyle, KKR and others. Among activist investors, Carl Icahn brought his son Brett back to his investment vehicle in 2020, a move that watchers have said anointed the younger Icahn as the firm’s next leader.

Corporate America scores at the Supreme Court

Two rulings by the Supreme Court yesterday represented wins for companies that could have significant implications for businesses going public and dealing with striking workers.

The justices unanimously rejected a shareholder’s case against Slack, which accused the workplace messaging app of misleading investors ahead of its 2019 direct listing. The investor, Fiyyaz Pirani, said the company did not properly disclose relevant information about matters like service outages and competition it faces from Teams, Microsoft’s rival platform.

Slack said the lawsuit should be dismissed because Mr. Pirani bought unregistered shares that were not covered by the prospectus under securities laws. Only S.E.C.-registered shares are issued in accordance with a company’s prospectus. But in a direct listing, an alternative to a conventional initial public offering, both types of shares — including those already acquired by employees and private investors, like Mr. Pirani’s — begin trading at the same time.

The justices rejected Mr. Pirani’s argument that direct listings require rethinking securities rules and sent him back to a lower court to prove his shares were registered. The decision restricts the pool of shareholders who can easily sue over misleading registrations.

Some business leaders welcomed the ruling. Paul Grewal, the chief legal officer of the crypto exchange Coinbase (which is fighting with the S.E.C. over cryptocurrency regulations) argued on Twitter that the decision was a “warning to agencies and others that the federal securities laws are not just whatever they want them to be — limits imposed by Congress matter.”

The court also made it easier for employers to sue striking workers. In a separate case, the justices backed a concrete company that accused workers of deliberately causing damage to the company during industrial action.

The 8-1 ruling overturned a Washington State court decision that the loss was incidental and protected under the National Labor Relations Act. Some legal experts said the case would discourage workers from striking.

“I started out as a public company C.F.O. in Sept. 2000. So I’ve been doing this for almost 23 years across three different industries, almost 90 earnings calls, I think that’s plenty. I’m done with this.”

— Vasant Prabhu, the chief financial officer of Visa, explaining his decision to retire from the credit card company in unusually frank terms. Mr. Prabhu has been C.F.O. since 2015, and the announced his departure after Ryan McInerney took over as C.E.O. in February.

Deal making crawls along

The slowdown in mergers and acquisitions that has plagued Wall Street since last year shows little sign of letting up, according to new data. And that could pose more consequences for the deal makers who profit from putting those deals together.

Announced M.&A. worldwide hit $1.07 trillion through the end of May, according to Refinitiv. That’s down 42 percent year-on-year and one of the slowest starts to a year over the past decade. (The only worse showing was in 2020, at the start of the pandemic, when deal activity had failed to cross $1 trillion by this point.)

The number of transactions is also down 14 percent from the same time in 2022, plummeting to a three-year low of 21,301.

All of this is despite the announcement of some big takeovers this year, including Pfizer’s planned $43 billion acquisition of the cancer-drug specialist Seagen and Newmont’s $19 billion bid for Newcrest, a rival miner.

That dearth of deals is spurring layoffs, as banks including Lazard and Morgan Stanley have slashed jobs to reduce costs. John Waldron, Goldman Sachs’s president, said at a conference yesterday that his firm was planning more cuts — expected to affect senior executives like managing directors — because of the “tougher environment.”

THE SPEED READ

Deals

Policy

• The Pentagon agreed to buy Starlink satellite internet terminals from Elon Musk’s SpaceX for use by the Ukrainian military, months after the two sides bickered over costs. (Bloomberg)

• Senator Elizabeth Warren, Democrat of Massachusetts, renewed calls to clamp down on the crypto industry, citing data that digital currencies were being used by fentanyl producers in China. (Insider)

Best of the rest

• Ella Irwin, the second person to lead Twitter’s trust and safety team since Elon Musk acquired the social network, has resigned. (TechCrunch)

• Separately, a new poll found that Twitter had one of the worst reputations among prominent American companies, ahead of only Fox Corporation, FTX and the Trump Organization. (Axios)

• Shareholders rejected pay packages for top Netflix executives in a nonbinding vote, after a campaign by the Writers Guild of America. (NYT)

• Shares in C3.ai tumbled yesterday after the business software company offered underwhelming guidance, despite investor fervor for A.I.-adjacent companies. (Insider)

• Can you correctly spell the winning word from this year’s Scripps Spelling Bee? Hint: It’s a life form that thrives in sandy areas. (NYT)

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