Economists Have Biggest Miss Ever in U.S. Jobs-Report Shocker

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How did economists bungle this one so badly?

The monthly U.S. jobs report can often surprise relative to projections, but forecasts have never been so spectacularly wrong as they were for May’s data out Friday, raising the question of why this miss was so wide.

A record 2.5 million workers were added by employers during the month, compared with a median projection for a loss of 7.5 million jobs. Of the 78 economists surveyed by Bloomberg, the most optimistic forecast called for an 800,000 decline. Their estimates also expected the unemployment rate to approach 20% — the highest since the Great Depression in the 1930s — when in fact it declined to 13.3%.

Playing a huge role in economists’ forecasts were floods of applications for jobless insurance and tens of millions of Americans still on benefit rolls — the extent of which the nation has never experienced in such a short timespan. Moreover, economists’ models probably failed to fully take into account the government’s relief response, specifically the Paycheck Protection Program that provides firms funding to keep workers on staff.

“High frequency data — including mobility stats and small business openings — have been pointing to a trough in economic activity since mid-April,” Jefferies economists Aneta Markowska and Thomas Simons said in a note to clients. “Jobless claims did not fit with that picture, suggesting there was no positive follow-through to the labor market. We now know that claims were wrong. The May employment report was rock solid, with broad-based gains across many industries.”

Before this year, the biggest single-month miss on the payrolls report was 318,000 in February 2003, according to Bloomberg survey data going back to 1996.

The sudden nature of the downturn is putting a premium on real-time data to help produce more in-the-ballpark estimates for economic data.

Read more on the jobs report:

  • U.S. Hiring Rebounds, Defying Forecasts for Surge in Joblessness
  • Trump Takes Credit for Shock Job Gain, Reasserting His 2020 Case
  • More State, City Jobs Lost in Two Months Than During Recession
  • These U.S. Industries Hired Most and Least in May: Graphic

“No data set that economists are using has this kind of black swan event available to them,” said David Gilbertson, vice president of strategy and operations at Kronos, a software and services company that tracks time-clock punches from clients that represent about 3.2 million U.S. workers. “There’s nothing in this data that gives an indication of what happens in an economy when this many jobs are lost this quickly. There’s nothing in their models to indicate what’s going to happen.”

Kronos’s own data showed a bounce-back in hourly workers, particularly retail, leisure, and manufacturing jobs, starting in mid-April.

Gregory Daco, chief U.S. economist at Oxford Economics, acknowledged the difference between this economic downturn, which is sharp and swift due to Covid-19 pandemic-related shutdowns, and others in the post-World War II era. The May numbers are encouraging, but at the same time, the jobless rate remains elevated and it will take time to get back to a pre-virus labor market, he said.

“It’s a very, very different animal — this recession — than prior recessions, and these types of surprises are likely to continue to occur because we’ve never been in this type of sudden hole in terms of economic activity,” Daco said. Forecasters “have to remain humble in the face of all the tremendous uncertainty.”

Michelle Meyer, head of U.S. economics at Bank of America Corp., pointed to the 1.4 million jobs added in the restaurant industry and said, “maybe this is an indication that PPP is working and it’s being distributed to small businesses — restaurants — and they’re using it to bring workers back.”

Forecast Challenges

The difficulty of economic forecasting amid sweeping change has been cited by the Trump administration. Treasury Secretary Steven Mnuchin has said repeatedly that the unprecedented situation makes it hard to predict where the economy has headed. The White House has canceled plans to release updated economic projections this summer for that reason.

The Federal Reserve, meanwhile, plans to proceed with issuing its regular quarterly forecasts next week, after skipping them in March when the pandemic was starting to rattle the economy.

On the jobs figures, one thing seems clear: it’s more difficult to get a real-time handle on hiring than on firing, especially when layoffs are temporary.

Another issue is that some workers are being counted on payrolls even if their hours or pay are minimal, said Betsey Stevenson, a University of Michigan economist who was the U.S. Labor Department’s chief economist in the wake of the 2007-2009 recession.

“The problem is that Wall Street is used to predicting job loss due to a typical recession, not one in which people are temporarily sent home en masse,” Stevenson said.

— With assistance by Chris Middleton, and Saleha Mohsin

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Bears Thwarted Again by Stock Market That Believes in Recovery

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One day, maybe, it will end up being true that it was a bad idea to plow money into retailers and cruise lines whose existence was under threat by the coronavirus. Right now, that case is in deep trouble, as the market rallies with each new sign of economic recovery.

It’s a moment of reckoning for bears who never stopped sounding alarms about putting faith in the Federal Reserve and chasing shares whose valuations swelled to a 20-year high. Friday’s jobs report suggests equity resilience reflects not just central bank liquidity, but asset prices that correctly anticipated a quicker turnaround than everyone else.

“The market has a pretty good record on calling the direction on things. When you combine that with some basic economic signals, the market is a lot closer to right than a lot of the prognosticators,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “There’s a lot of talk about how Wall Street and Main Street are disconnected, but at the same time Wall Street depends on Main Street.”

One group whose acumen is being affirmed is individual investors, whose historical reputation for poor market timing is being rehabilitated. Discount brokerages like Charles Schwab and TD Ameritrade saw record new accounts opened and trading volume in the first part of the year, trends that evoked dread among professionals and are now looking almost perfectly prescient.

30,925 in BrazilMost new cases today

-8% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23

-0.​8273 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23

-2.​3% Global GDP Tracker (annualized), May

Read: ‘It’s Like Gambling’: Tiny Investors Win Big in Stock Recovery

“I had thought the market was ahead of itself in April and May and the real economy was doing much worse than the market would suggest,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “Now that it’s clear the economy actually is on the mend, I’m pleasantly surprised that there wasn’t a disconnect.”

Companies hit hardest by the lockdown soared again Friday after a broad gauge of payrolls rose by 2.5 million in May, igniting stock-market bets that the worst is over for the economy. A Goldman Sachs basket of companies with shaky finances jumped 9.8% for the best week on record relative to the market. Hertz Global, a car renter that just filed for bankruptcy, has now more than tripled over two days.

The recovery trade went into overdrive following the Labor Department’s report, amplifying gains that built all week as traders shifted out of stay-at-home tech megacaps and health-care to embrace financial, energy and transport companies. The speed of the gains are impressive: an index tracking airlines was up 37 % over the week while banks jumped 17%.

“This rotation feels like it’s coming more because the economic data is showing us reason to be optimistic. This week was a big week for that case,” said Brian Nick, chief investment strategist for Nuveen. “Even if the economy can’t fire on all cylinders yet, it’s ready to go.”

Stocks rose for a third week, with the Nasdaq 100 Index and the Nasdaq Composite Index both erasing bear-market losses to climb to an intraday all-time high. The S&P 500 advanced 4.9% while the Dow Jones Industrial Average climbed almost 7%. Both scored their best week in two months.

The worse a company’s finances, the better it did this week. A basket of firms with the highest risk of default rose 12% through Thursday, nine percentage points more than firms with better credit health, data compiled by Bloomberg show. Since bottoming in March, those stocks with riskier finances have beaten their more stable peers by 30 percentage points.

Gains are being sustained by speculation that the corporations whose finances put them most at risk will thrive as the economy improves. Also aiding the stocks is an increase in investor demand for shares trading at lower valuations.

“I can see them making a shift, saying, ‘Ok, equities still represent good return potential but maybe it’s a better risk-reward to go with the lesser valued sectors and names,” Mike Zigmont, head of trading and research at Harvest Volatility Management, said by phone. “I can see them shifting from stocks where the P/E has already inflated to stocks where the P/E hasn’t inflated that much.”

That’s a playbook that exchange-traded fund investors followed, dumping tech darlings in favor of laggards such as banks and small-caps. In the past week, they flocked to funds focused on small caps and financial firms, while pulling cash out of large-cap technology. The Financial Select Sector SPDR Fund, ticker XLF, took in roughly $875 million this week. Investors poured $900 million into the iShares Core S&P Small-Cap ETF, ticker IJR, on Thursday alone, the most in two years. Meanwhile, the Invesco QQQ Trust Series 1, QQQ, lost $2.3 billion this week, the most since Oct. 2018.

The end result of such rotation: a market whose technicals look healthier, instead of a lopsided one driven by a handful of tech giants. An equal-weight version of the S&P 500 that gives Coty Inc. just as much clout as Microsoft Corp. rose 9.6% this week, doubling the returns of the regular market-cap weighted benchmark for the best relative return in two decades.

“A lot of this is really, ‘Hey, I think we’re going to get going back to work, so I’m going to buy some of these stocks that I think will benefit if spending starts pretty quickly,’” said JJ Kinahan, the chief market strategist at TD Ameritrade. “There’s been the optimism trade for the last few weeks, that we would get going faster than people expected.”

— With assistance by Sarah Ponczek, and Katherine Greifeld

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Massive spike in foreign flows into market

Foreign portfolio investors have bought shares worth ₹20,814 crore in just five trading sessions in June.

In just under a week in June, the quantum of foreign flows in the equity market has surpassed that of any other month in the current calendar year.

Foreign portfolio investors (FPIs) have bought shares worth nearly ₹21,000 crore — ₹20,814 crore to be precise — in just five trading sessions in the current month. This is the highest in any month of 2020, with the previous high registered in May at ₹14,569 crore.

Market participants are of the view that the sudden surge has been on account of the Rights Issue of Reliance Industries Limited (RIL), stake sale in Kotak Mahindra Bank, and the slight uptick in optimism even as pandemic concerns continue to linger.

“These two corporate events saw major participation by FPIs,” said Arjun Yash Mahajan, head, Institutional Business, Reliance Securities, while referring to RIL’s Rights Issue, and Uday Kotak selling 2.83% stake in Kotak Mahindra Bank.

“Add to these two events, the broader benchmark Nifty saw a breakout and added over 4.5% since the close on 29 May. The current rally has seen money flow into sectors like automobiles, private banks and pharmaceuticals as there was continued hope of the worst being behind,” added Mr. Mahajan.


RIL’s Rights Issue — the country’s largest at ₹53,124.20 crore — closed on June 3 and was subscribed 1.59 times with many foreign institutional investors putting in significant bids.

On Tuesday, Uday Kotak sold shares worth around ₹6,800 crore of Kotak Mahindra Bank, which were bought by FPIs like the Government of Singapore Investment Corporation, T. Rowe Price, Aberdeen Asset Management, Canada Pension Plan Investment Board and Oppenheimer Developing Market Fund, among others.

The cumulative foreign flows in equities this year however, is still negative at ₹19,531 crore, since March and April saw huge outflows.

Incidentally, March witnessed a record outflow of ₹61,973 crore, which was followed by selling worth ₹6,884 crore in April.

According to Mr. Mahajan, while the current rally is based on optimism, investors need to be cautious and can even look at booking some profits and wait for better entry levels amidst the coronavirus pandemic-led disruptions caused in April and May.

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This Is What Happened to LIBOR During the COVID Crisis

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Welcome to Part V of the Odd Lots LIBOR series, in which Tracy Alloway and Joe Weisenthal take a look at life after LIBOR, the interest rate tied to more than $350 trillion worth of financial assets.

For our final episode in our series on LIBOR, we look at what this particular crisis has meant for LIBOR and the transition process. We speak with Josh Younger, a managing director at JPMorgan, who looks at what LIBOR itself did during the worst of the market stress. He also identified specific ways that the market volatility may impede some of the target dates for moving off the benchmark index.

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U.S. Jobless Claims Understate Reality With Gaps in Federal Data

The U.S. Labor Department’s weekly jobless claims report has yet to reflect at least half a million filings for a federal pandemic program, with data reporting lagging behind payouts.

Florida, Alabama, Arizona, Hawaii and West Virginia are among 18 states that showed zero initial claims under pandemic unemployment assistance, or PUA, in the Labor Department’s weekly report last Thursday. But the same states have actually received at least half a million in combined claims through the program — established by the CARES Act — which is aimed at helping those typically not eligible for regular state benefits, including the self-employed and gig workers.

The gulf between the Labor Department’s data and state numbers — compiled by Bloomberg News through state press releases, comments by officials and related data — indicates the labor-market hit from the coronavirus may be more widespread than thought. While it doesn’t significantly alter the overall picture of mass unemployment as tens of millions of Americans have filed for benefits since mid-March, the undercounting further complicates closely watched data already beset by other errors and distortions.

The weekly claims report “does give a pretty incomplete picture of exactly what unemployment looks like right now, and not even necessarily how many people have lost jobs, but how many people are just not earning an income that they were used to earning before,” said Citigroup Inc. economist Veronica Clark.

The figures out each week have gained renewed attention for showing the depth of the economic damage from the coronavirus pandemic, as well as signs that a recovery is starting as business restrictions ease. The latest data, due Thursday — ahead of the May payrolls report out Friday — are set to show initial claims slowed to 1.8 million last week.

Read more:

  • One-Third of America’s Record Unemployment Payout Hasn’t Arrived
  • Next Wave of U.S. Job Cuts Targets Millions of Higher-Paid Workers
  • What Pandemic’s Toll Reveals About Jobs in America: QuickTake
  • Even Good ADP Report Isn’t Changing Bleak U.S. Payroll Forecasts

“States have been focusing on implementing the new programs and working through unprecedented claims volumes and some of the newer reporting has been delayed by the efforts to get benefits to the claimants that need them,” a spokesperson for the Labor Department said in an email. The agency added that the abilities to report in the first few weeks and months of a new emergency program “typically vary across states and the current situation is no exception.”

Bloomberg’s compilation of at least half a million uncounted PUA claims is based in part on applications filed since the week ended May 23, which covered the most recent federal report issued last week.

The Labor Department’s weekly report tracks an overall figure of initial PUA claims filed in any given week, but it’s based on incomplete data — in fact, just 32 states in last week’s report, for a total of 1.19 million in the week ended May 23. Any state that doesn’t report data that week is labeled with a zero.

The department said it’s working with states to gather the missing figures to include in the weekly tally.

The PUA claims are separate from the more widely-watched headline figure on initial claims in regular state programs, which were 2.12 million in the week ended May 23.

New Systems

When the CARES Act created the PUA program in late March, state unemployment offices often had to create entirely new systems and portals to accept and administer the benefits.

Alaska, which has received more than 10,000 of these claims, approached the new program in three stages, according to Clifford Napier, assistant director of unemployment insurance at Alaska’s Division of Employment and Training Services. The state is accepting PUA applications, and paying them out, but just not reporting the activities yet, said Napier, who expects work on the program for PUA data reporting to be complete either this week or next week.

A spokesperson for Alabama’s Department of Labor said the state has had some unspecified challenges reporting the figures to the U.S. Labor Department, but hopes to have the issues resolved this week. Over a six-week period, the state received more than 55,500 initial claims for PUA benefits.

Another issue occurs when state numbers for PUA claims aren’t readily available at the beginning of the week. That’s what happened with Maine’s figure in last week’s report, according to Jessica Picard, a spokesperson for the Maine Department of Labor.

The result: the federal report showed zero initial PUA claims from Maine for the week ended May 23, even though Maine later reported it had 20,500 for that week.

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If It’s Illegal, ‘Don’t Tell Me’: Chicken Probe Ensnares a CEO

Toward the end of every year, chicken producers compete for massive contracts with grocery stores and fast-food chains across America. At least, that’s how it’s supposed to work.

A string of text messages and emails disclosed in a federal indictment Wednesday suggest otherwise. In one 2014 exchange, Jayson Penn, the now-chief executive officer of chicken giant Pilgrim’s Pride Corp., asked an unnamed colleague about negotiations with a restaurant franchise. He noted that a competitor “did cave” to offering a lower rate to lock in a previous contract. The manager responded to say, “They are listening to my direction.”

“Who is they?” Penn asked. If “they” is illegal, he said, “don’t tell me.”

After years of talk, the feds have finally pounced: Big Chicken, they say, has been fixing prices. It’s one of the stranger examples of alleged market-rigging in a long history of cases — and an unusual one in that the chief of a company this big is actually facing criminal charges and as many as 10 years in prison. The charges the U.S. Justice Department laid out Wednesday in its indictment appear to document executives at competing companies colluding to share pricing and bidding information from 2012 through 2017 in the cut-throat world of commodity chicken.

Penn was indicted by a grand jury in Colorado along with a former vice president of the company. There are also charges against executives from Claxton Poultry Farms Inc., a tiny player with about 1% market share.

Pilgrim’s, which is majority owned by Brazilian food giant JBS SA, said it is “committed to high ethical standards, governance, and free and open competition that benefits both customers and consumers.” The company will “continue to fully cooperate with the Department of Justice in their investigation,” it said in a statement late Wednesday. Penn didn’t respond to a message seeking comment sent to him via LinkedIn.

The Justice Department filing includes some colorful text-message exchanges, with Penn boasting to colleagues at Pilgrim’s about charging customers “A-Hole Premiums.” They also suggest that the poultry giant was in regular communication with rivals over prices. The are seven suppliers referenced in the indictment, though only Pilgrim’s and Claxton are named. That indicates more changes could come after a decade of hearings on antitrust and consolidation in the industry and a slew of civil lawsuits.

“It’s hard to get anything more solid than having text messages of people working together to rig prices,” said Christopher Leonard, author of “The Meat Racket,” which examines the protein industry. “This is the most significant action in federal government on the meat industry in probably decades.”

The case against Pilgrim’s is part of an ongoing investigation into allegations of price fixing by chicken processors that came to light last year. Tyson Foods Inc. and Sanderson Farms Inc. have also received grand jury subpoenas in the investigation, according to regulatory filings. In a statement, the Justice Department said the charges were the first filed in the open probe. Together, Pilgrim’s, Tyson and Sanderson control almost half of the U.S. chicken market.

A woman who answered at Claxton’s headquarters in Georgia after a transfer from a receptionist declined to comment without identifying herself and hung up.

Sanderson said it had no comment on the matter, noting that it wasn’t named or involved in the indictment. Tyson didn’t respond to emails and phone calls seeking comment.

The charges are the latest bombshell to hit the U.S. meat industry, which has been gripped by crisis after the coronavirus pandemic sparked plant closures. Thousands of the industry’s workers got sick, and dozens have died, with unions and labor advocates saying that the protein producers didn’t do enough to protect employees. Even the U.S. Centers for Disease Control concluded in a recent report that conditions at the plants increased the risk of the infection spreading.

Meat prices surged after the plants closed. Processing companies continued to see high margins, while some grocery stores ran short of supplies, and farmers were forced to euthanize hogs. That’s brought fresh scrutiny to America’s opaque pricing mechanisms for meat and livestock.

While Wednesday’s charges are unrelated to the current crisis, they could signal that enforcers will be vigilant about issues in the industry. The Justice Department is also probing potential market manipulation at beef processors, and the U.S. Department of Agriculture is separately investigating processor margins.

The four executives charged — Penn; Roger Austin, a former vice president of Pilgrim’s; Mikell Fries, the president of Claxton Poultry; and Scott Brady, a Claxton vice president — face a statutory maximum penalty of 10 years in prison and a $1 million fine.

In the 2014 text exchange between Penn and the unnamed colleague, the latter eventually clarifies that the reference to “they” was referring to a fellow Pilgrim’s employee who was negotiating the deal for the company, not a competitor.

The text exchanges cited in the indictment are full of industry terminology dealing in the weird complexities of chicken pricing. But the document also gives a public glimpse into the arcane market.

A Look Back at Years of Chicken Price-Fixing Allegations

Restaurants and supermarkets receive bids and other pricing offers including discount levels directly from suppliers, or in the case of fast-food restaurants, through a centralized buying cooperative. Negotiations usually occur toward the end of the year and establish prices for the following 12 months.

Chicken pricing is often based on a cost model for eight-piece bone-in chicken products, know as the eight-piece COB. Dark meat is usually priced at a discount to that benchmark.

The messages between executives reveal that a difference of just pennies on a price can mean hundreds of thousands of dollars in additional profit because of the scale of volume.

Claxton’s Brady, a former Pilgrim’s employee, in a 2012 text message tells Fries that Pilgrim’s was selling eight pieces of chicken for 3 cents more than his company. His text to colleague Fries shows he found out about the price difference from Austin, the then-executive at Pilgrim’s.

Austin said “to raise our prices,” Brady texted at 4:45 p.m. on November 23, 2012.

Fries responded: “Tell him we are trying!”

U.S. chicken prices had just started picking up in 2012, after a drought affected supplies. The filing appears to deal mainly with the obscure market for small-sized chickens — the juicy, sought-after variety that has recently ignited a war for chicken sandwich dominance in national restaurant chains.

The Justice Department is likely to bring additional charges in the investigation, said Lisa Phelan, a lawyer at Morrison Foerster LLP in Washington and a former prosecutor with the Justice Department. Pilgrim’s Pride is probably negotiating a plea agreement with the government, she said, and other companies in the industry could be targeted, which is typical in a price-fixing investigation.

“The DOJ always looks to hold both the companies and executives responsible for any kind of collusion in cartel conduct,” Phelan said.

While Tyson Foods, the biggest U.S. chicken producer, isn’t named, the news “casts a pall” over the company, said analysts at JPMorgan & Chase.

Shares Drop

Shares of Pilgrim’s Pride tumbled 12% on Wednesday. Tyson dropped 3.8%, and Sanderson fell 6.2%.

“If these allegations are true, they offer more evidence of an industry that has no problem exploiting workers and now possibly customers, for their gain,” said Minor Sinclair, Director of U.S. Domestic Programs at Oxfam America, an advocacy group that also holds shares in Pilgrim’s.

One tool prosecutors may be using to gather evidence is cooperation from a company. The Justice Department’s antitrust division has a leniency program that allows companies to win immunity from charges if they are the first to alert the government to price-fixing conduct and agree to cooperate and provide evidence of wrongdoing by their competitors.

A building public backlash against massive companies that dominate their business lines surfaced in the Democratic presidential primary, with several candidates joining “Big Agribusiness” to “Big Tech” and Wall Street as political bogeymen in appeals to win over traditionally Republican-leaning rural voters.

Food shortages during the coronavirus pandemic and market disruptions from outbreaks at meat plants have further focused attention on the risks in consolidation. Republican leaning hog farmers and cattle ranchers have seethed in particular at the disconnect between rising consumer prices for beef and pork and declining prices paid for their livestock. Even with the Trump administration’s anti-trust investigation into big meatpacking companies, a resolution may be months or years away. The charges against chicken processors demonstrate a commitment to enforcement of price-fixing laws.

Still, the revelations are unlikely to have a big effect on retail chicken prices, according to JPMorgan analysts. While the difference of pennies per bird can create big profits for producers, it’s unlikely to have a large impact on most grocery shoppers.

“Supply and demand remains the primary driver of prices,” the analysts said.

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Local Starbucks leaders can close stores, reduce hours if necessary amid looting

Starbucks continues to cut back during the coronavirus pandemic; Hollywood gets ready for its close up

Fox Business Briefs: Starbucks will continue to cut employee hours after it decided to keep most of its dining rooms closed during the coronavirus pandemic; Hollywood task force submits report on how to safely resume production.

Starbucks is using a localized approach to adjust store operations and protect employees in cities where peaceful protests related to the death of George Floyd were accompanied by instances of looting or the destruction of local businesses.

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Starbucks stores in several cities, including Seattle, Los Angeles and Philadelphia, were looted or damaged in recent days. Unlike companies that have made decisions on whether to close stores or limit hours at the C-suite level, Starbucks has given regional “field leaders” the authority to determine how stores should operate on a case-by-case basis.


“We empower our field leaders to make the best decision for their particular stores that will keep our partners and customers safe,” a Starbucks spokesperson told FOX Business. “That includes limiting hours or closing certain stores for a period of time.”

A Starbucks store burns during a protest on Saturday, May 30, 2020, in Philadelphia, over the death of George Floyd, a black man who died after being taken into police custody in Minneapolis. Floyd died after an officer pressed his knee into his neck (Associated Press)

Starbucks did not specify how many stores have adjusted hours or temporarily closed as a precautionary measure. A number of Starbucks stores were closed last Saturday for the safety of workers after some locations were damaged, according to the Wall Street Journal.


The decentralized decision-making process is common practice for Starbucks. The coffeehouse chain has employed a similar method to guide efforts to reopen its stores as the U.S. recovers from the coronavirus pandemic. The field leaders made decisions based on community response, discussions with store managers and guidance from local authorities.

A cinder block is framed by a broken window in a downtown Pittsburgh Starbucks store on Sunday, May 31, 2020 after a night of unrest and protests over the death of George Floyd, a black man who was in police custody in Minneapolis. Floyd died after b (Associated Press)

Peaceful protests against police brutality occurred across the country after Floyd, 46, died while in Minneapolis police custody last week. A white police officer, Derek Chauvin, was caught on video kneeling on Floyd’s neck for several minutes until he became unresponsive. Chauvin and three other officers involved in the incident face criminal charges.

Stocks in this Article

“We will confront racism to create a more inclusive and just world,” Starbucks said in a social media post on June 1. “We stand in solidarity with our black partners, customers and communities. We will not be bystanders.”

The protests have turned violent as looters targeted storefronts for small businesses and corporate brands alike. Several companies opted to preemptively shut down stores in cities where violence has occurred, even as executives express support for peaceful protests and an end to racism.


Target temporarily closed or reduced hours at 200 stores, many of which are located in Minnesota. Whole Foods said its stores would close early in cities affected by curfews after locations in Los Angeles and Dallas were looted.

Other companies that temporarily closed some store locations included Walmart and McDonald’s.


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Treasuries Fall Sharply As Economic Optimism Reduces Appeal Of Safe Havens

Treasuries moved sharply lower over the course of the trading session on Wednesday, as optimism about an economic recovery reduced the appeal of safe havens like bonds.

Bond prices showed a steep drop in morning trading before moving roughly sideways in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.1 basis points to 0.761 percent.

With the significant increase on the day, the ten-year yield ended the session at its lowest closing level in nearly two months.

The sell-off by treasuries came as new economic data added to investor optimism about a quick recovery, including a report from payroll processor ADP showing the pace of private sector job losses slowed by much more than anticipated in the month of May.

ADP said private sector employment slumped by 2.76 million jobs in May after plummeting by a revised 19.557 million jobs in April.

Economists had expected employment to plunge by about 9.0 million jobs compared to 20.236 million job nosedive originally reported for the previous month.

“While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses,” said Ahu Yildirmaz, co-head of the ADP Research Institute.

Mark Zandi, chief economist at Moody’s Analytics, which compiles the report with ADP, declared the “Covid-19 recession is over” following the release of the data.

A separate report from the Institute for Supply Management also showed the pace of contraction in the service sector slowed by even more than economists had been expecting.

The ISM said its non-manufacturing index rebounded to 45.4 in May after plunging to an eleven-year low of 41.8 in April.

A reading below 50 still indicates a contraction in service sector activity, but the index came in above economist estimates for a reading of 44.0.

The U.S. data came after survey results from IHS Markit showed China’s service sector expanded for the first time in four months in May amid an easing of measures implemented to curb the spread of the coronavirus.

Reports on weekly jobless claims and the U.S. trade deficit may attract attention on Thursday, although trading activity may be somewhat subdued ahead of the release of the Labor Department’s monthly jobs report on Friday.

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Raytheon Bosses Get Merger Windfall Amid Furloughs, Pay Cuts

Raytheon Technologies Corp. Chief Executive Officer Greg Hayes spent weeks delivering grim news to employees about furloughs, pay cuts and hiring freezes as the coronavirus pandemic ravaged the economy.

“While many of these measures have been difficult, it is the right thing to do for the business,” Hayes said on a May 7 conference call with analysts as he outlined billions of dollars in cost reductions.

Just weeks later, the company tweaked terms for stock awards issued to Hayes and a large group of other managers, instantly boosting the value of their unvested awards by more than $100 million, according to calculations by Bloomberg News. Raytheon didn’t specify how much of the windfall would go to Hayes and his top lieutenants, but the figure is likely in the tens of millions of dollars.

Behind the gains, which have yet to be realized, lies the complex math that determines how equity awards are treated in large corporate transactions — in Raytheon’s case, two spinoffs and one merger all closing on the same day. Further complicating the situation: extreme stock volatility caused by the pandemic.

The change was made to ensure employees aren’t short-changed by big swings in the stock price, according to a regulatory filing Friday. Raytheon said it was reviewed and authorized by a committee of independent directors and that it’s meant to preserve employee retention and morale, as well as the company’s reputation as a “superior employer.” In previous filings, the company said it reserved the right to retroactively make certain changes to equity awards as a result of the transactions.

“They may have had the right but the issue is whether exercising that right breached an obligation to the stockholders,” said James Cox, a Duke University professor who specializes in corporate and securities law.

Bethany Sherman, a spokeswoman for Raytheon, declined to comment beyond the filing.

Deal Completion

About 3,900 current and former employees, many of them working below the executive suite, hold equity awards that will be affected by the new calculation. But companies tend to reserve the largest awards for those in leadership roles.

The change followed the completion of a series of deals that Hayes has overseen in recent years.

An accountant by training, Hayes was named CEO of manufacturing conglomerate United Technologies Corp. in 2014 after serving in various finance positions. In late 2018, the company announced that it would spin off two major divisions — the Otis elevator and Carrier air-conditioner businesses — into individual publicly traded firms so it could focus on aerospace and defense. Last June, the company struck a deal to merge with weapons manufacturer Raytheon Co.

Read more: United Technologies, Raytheon to Create Aerospace Giant

The completion of the spinoffs and merger were announced April 3. The combined company adopted Raytheon Technologies as its new name, and its shares began trading that day.

For Hayes and other Raytheon leaders, the following few days were crucial. Every move in the stock price would have an impact on one of their key benefits: Equity awards worth millions of dollars.

Fresh Shares

When public companies combine, it typically falls on a group of accountants and lawyers to figure out what to do with the troves of unvested restricted shares and stock options the two executive teams typically hold. Awards from the predecessor firms are typically canceled and replaced by fresh ones issued by the new entity, with similar terms and conditions.

Figuring out exactly how many new securities should be issued for each old one can be tricky given the fickle nature of stock prices. So companies resort to calculating a conversion ratio that’s based on the price over a period of a few days.

Earlier this year, Raytheon disclosed that it would use the average price on the fourth and fifth day that its new shares traded.

The measurement period coincided with a stretch of unusual volatility in U.S. equities. From Raytheon’s first day of trading on April 3 through its fifth day on April 9, the S&P 500 rose 10%, rebounding from the sharp drop sparked by shelter-in-place orders and concerns about the impact of the pandemic on the U.S. economy.

‘Material Discontinuity’

Raytheon, which had closed at $49.93 on its first day of trading, also surged. On the fourth and fifth days, it closed at $62.62 and $64.71, respectively. As a result, the two-day average used to calculate how many new shares executives would get came out to about $63.67 — more than 25% above where the stock had been just days earlier.

The increase, Raytheon said Friday, caused “material discontinuity” between that figure and the share price of United Technologies on its last day of trading. So it opted to retroactively change the terms of that calculation. Instead of using the $63.67 figure, the company will use the opening price on its first day of trading, which was $51.

It “preserves the company’s ability to continue to treat employees and retirees fairly in the conversion process,” the company said.

For Hayes and others who hold unvested equity awards, the lower price is much better. It means they will receive more new shares and options in exchange for their old award than if the higher figure had been used. And for those who own stock options or so-called stock appreciation rights, the benefit will be double, because the adjustment will also lower the strike price of the new securities.

Pay Cuts

The boost comes at a tough time.

Hayes said May 7 that the company was cutting about $2 billion in costs and making further efforts to conserve billions of dollars in cash, including furloughing an undisclosed number of workers, deferring merit increases and cutting pay for some salaried employees in the second half of this year.

Hayes will take a 20% salary reduction. The cut won’t affect his equity awards.

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Amazon: Pepper spray, books on race, ‘I can’t breathe’ merchandise are top sellers

Why Amazon, Roku are smart investments

JAG Capital Management CEO and CIO Norm Conley explains why he likes Roku, Inc. and Amazon stocks and dislikes AT&T’s decision to not partner with HBO’s Max launch.

Pepper spray, books on race and merchandise that reads, "I can't breathe," are top sellers on Amazon, highlighting the number of people participating in protests across the country after the murder of George Floyd.

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A search on Amazon's "Best Sellers" list and clothing subcategory shows a spike in buyer interest for t-shirts that read, "I can't breathe." “Movers and Shakers” clothing sub category / Fox Business


In the "movers and shakers" clothing sub-section, there also appears to be a spike in buyer interest for t-shirts with similar activist slogans and logos. “Clothing, Shoes & Jewelry” section / Fox Business

Buyer interest in pepper spray and books about race has also increased, according to Amazon's Best Seller lists for books and sports products, indicating the different ways in which people are taking action and trying to create change both personally and publicly.


Amazon's "Best Seller" list is based on sale volume, according to its website.

The tech giant issued a statement on March 31 condemning the treatment of black people.

"The inequitable and brutal treatment of black people in our country must stop," Amazon posted. "Together we stand in solidarity with the black community — our employees, customers and partners — in the fight against systemic racism and injustice."


Cities across the country have been grappling with how to address and contain large numbers of protesters, some of whom are peaceful and some of whom are violent.

Violent protesters have initiated attacks against business owners, looted businesses and burned buildings. More than half the states in the country have called in more than 20,400 members of the National Guard.


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