Member Briefing May 10, 2022

May 10, 2022

Posted By: Harold King in Daily Briefing,

Recession Fears Send Stocks to Lowest in 2022 as Rout Continues

Major indexes fell to their lowest levels of the year to date, with the S&P 500 declining 3.2%, adding to losses after closing out its longest streak of weekly declines since 2011. The Nasdaq Composite tumbled 4.3% and the Dow Jones Industrial Average shed 2%.

Markets have been shaken this year by a flurry of investor worries. Inflation is running at its fastest pace in decades. That has forced the Federal Reserve to kick off what economists anticipate will be its most aggressive monetary policy tightening campaign since the 1980s. Investors are questioning whether the Fed will be able to pull off its planned course of interest-rate increases and cuts to its balance sheet without tipping the economy into recession. Many money managers are also worried about the global economic outlook. China’s implementation of lockdowns to contain the spread of Covid-19 and Russia’s war against Ukraine have bolstered concerns of supply-chain disruptions and reduced consumer spending.

Invasion of Ukraine Headlines

Cutting Tool Consumption Up 11% YTD

Machine shops and other domestic manufacturers consumed $196.4 million worth of cutting tools during March, up 17.2% from the February total, and up 10.6% from the March 2021 figure. Through three months of 2022, U.S. cutting tool consumption totals $523.9 million, ab increase of 11.0% compared to January-March 2021.

The data is drawn from the monthly Cutting Tool Market Report, which presents cutting-tool consumption data reported by participating manufacturers who represent the majority of U.S. suppliers of those goods. CTMR results offer an index to overall manufacturing activity, because cutting tools are widely used in the production of parts and components supplied to a very wide range of industrial sectors.

N.Y. Redistricting Master Holds Key to Congressional Power

For the next two weeks, one of the most powerful people in politics is a professor whose professional life has been devoted to studying demographics, political behavior, and mapping. Jonathan Cervas has until May 20 to redraw New York’s congressional and state Senate district lines, translating complex data into maps that will pass constitutional muster and stand for a decade.

A native of Pittsburgh, Pa., Cervas is a postdoctoral fellow at the Carnegie Mellon University Institute for Politics and Strategy, where this fall he’ll teach a graduate seminar on American political institutions and behavior. He has done research on the Electoral College, given talks on gerrymandering, and has been an assistant to redistricting guru Bernard Grofman at the University of California, Irvine.

US COVID – Cases of COVID Could More Than Double Late This Year

The U.S. could see 100 million COVID infections this fall and winter—and potentially a sizable wave of deaths, the White House warned this past week. The projection is “broadly consistent with our modeling,” said Dr. Arijit Chakravarty, a COVID researcher and CEO of Fractal Therapeutics, referring to his research team.

The news, first reported by the Washington Post, was shared Friday by a senior administration official during a background briefing. The country has so far seen nearly 82 million cases of COVID since the pandemic’s beginning, according to the U.S. Centers for Disease Control—though the actual case count is undoubtedly much higher, experts say. Regardless, a wave of 100 million would more than double the country’s all-time reported total.

New York Governor Hochul Tests Positive for COVID

New York Gov. Kathy Hochul has tested positive for Covid, she announced via a tweet on Sunday afternoon. “Thankfully, I’m vaccinated and boosted, and I’m asymptomatic. “I’ll be isolating and working remotely this week. A reminder to all New Yorkers: get vaccinated and boosted, get tested, and stay home if you don’t feel well,” She said.

Several top officials in the state, including New York City Mayor Eric Adams, have tested positive recently as case loads have increased. Some 13,902 positive results were reported throughout the state on Thursday, compared to 8,452 a week before and 5,904 four weeks prior.

Long COVID

Long COVID is likely an umbrella term for a combination of issues and conditions: People who have long-term COVID infections who are able to continue to spread the disease, people whose COVID after-effects clear up after a few weeks, and people with Long COVID itself, in which people aren’t infectious, but experience all kinds of symptoms for much longer.

What’s more, COVID patients whose disease was severe enough to require ICU admission may suffer post-ICU complications like muscle weakness, shortness of breath, cognitive issues, anxiety, and depression—symptoms that look a lot like Long COVID, but are not, further muddying the waters, Galiasatos says. Those issues might occur due to extended periods of immobility and ventilator use, and other traumatic medical events.

Bill Gates Explains “How to Prevent the Next Pandemic”

Bill Gates’s career-switch from entrepreneur and philanthropist to crusading author is developing nicely. It is just over a year since he published “How to Avoid a Climate Disaster”. Now he sets out to explain “How to Prevent the Next Pandemic”. As Larry Brilliant, one of the epidemiologists who helped to eradicate smallpox, observes, “Outbreaks are inevitable [the nature part of the equation] but pandemics are optional [the human part].” And that provides an opening for the sort of techno-optimistic approach that Mr Gates loves.

While covid-19 remains fresh in people’s minds, Mr Gates suggests creating a global “fire brigade” of 3,000 experts scattered around the world, recruited for skills ranging from epidemiology and genetics, through drug and vaccine development and computer modelling, to diplomacy. This outfit, which would probably work under the auspices of the World Health Organisation, would remain on permanent standby, ready to respond to any detected outbreak. It would cost roughly $1 Billion per year.

Saudi Energy Minister: Insufficient Investment To Blame For High Fuel Prices

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday the gap between crude prices and prices for jet fuel, diesel and gasoline was around 60% in some cases due to lack of investment in refining capacity. The prince, speaking at an aviation summit in Riyadh, said the world needed to look at energy security, sustainability and affordability as a whole.

Asked whether geopolitical events in Europe would speed up the transition to cleaner energy or hinder it in the medium-term, the minister said: “I think it provided us with a reality check to how aspirations … can be compromised by the realities of the day.” Even before the Ukraine crisis, he added, the “la la land scenario about net-zero had been smacked with so many realities”, including cost.

Mortgage Rates Go up Again, But One Economist Says They’ll Likely Plateau Soon

The interest rate on America’s most popular home loan moved back up this week, reaching its highest level in nearly 13 years, a widely followed survey shows. The historic surge in the 30-year mortgage rate — now two full percentage points higher than at the start of the year — is beginning to have a slight cooling effect on the market.

Aspiring buyers are being priced out and competition is softening ever so slightly as the cost of borrowing for a home has spiked 55%, according to some estimates. Though some markets remain hotter and more competitive than others. But the near constant rate hikes could moderate, according to Mortgage Bankers Association economist Mike Fratantoni, who said this week that they are likely to “plateau near current levels.”

With Higher Pay and Better Hours, Teens Jump Into the Job Market

Teens are now working in greater numbers than they have since before the 2008-09 financial crisis, when summer and part-time jobs were a more common rite of passage into adulthood, government statistics show. They have become particularly essential in the retail, tourism and hospitality industries, which many adults left behind during the pandemic.

For teens, the current conditions are shaping up to create one of the best summer job markets in years, complete with more options and, in many cases, better pay. Unemployment among 16- to 19-year-old workers was at 10.2% in April, shy of the 68-year low of 9.6% it touched in May last year, according to figures released by the Bureau of Labor Statistics on Friday. Overall, about a third of U.S. teens in that age group are now working, the federal data show.

Dollar Strengthens as Other Major Currencies Fall as Dollar Climbs Amid Economic Weakness World-Wide

Years ago, high U.S. inflation meant a weak dollar. So far, it is different this time, and many on Wall Street are betting it will stay that way. A strong dollar allows Americans to buy goods from other countries at lower prices. But it can also hurt U.S. manufacturers by making products more expensive for foreigners, and it means U.S. businesses receive fewer dollars for their exports.

The dollar is reaching multidecade highs against its trading partners, even with U.S. inflation at its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is reaching highs unseen since 2002. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling. Currency derivatives markets indicate investors expect the dollar to continue to outperform. Traders at banks said clients are buying options that pay off if the dollar continues to rise.

Airbus to Expand in US

Airbus SE will build a new aircraft assembly line at its complex in Mobile, Ala., as it moves toward a higher rate of production during the next two years. The OEM announced it will increase the production rate of its A320 series aircraft by 50% by 2025, up to 75 jets per month from the current rate of 50 jets per month.

The production-rate increase had been signaled recently when Airbus settled new supply deals with Safran and MTU Aero Engines, the two suppliers of turbofan engines for the A320 series. The A320 is twin-engine, narrow-body series that currently consists of three models – the A319neo, A320neo, and A321neo – with the A321XLR extended-range version now in a prototype stage and expected to debut in 2024.

Boeing HQ departing Chicago for Virginia

Airplane manufacturer Boeing is moving its headquarters out of Chicago, 21 years after it landed here in what was hailed as a coup for the local economy. Boeing said Thursday it plans to move its headquarters to Arlington, Virginia, close to the nation’s capital. It said the new location also will serve as a research hub.

“We are excited to build on our foundation here in Northern Virginia. The region makes strategic sense for our global headquarters given its proximity to our customers and stakeholders, and its access to world-class engineering and technical talent,” Boeing CEO Dave Calhoun said. The Wall Street Journal first reported the move. Calhoun offered thanks to Virginia Gov. Glenn Youngkin and U.S. Sen. Mark Warner, D-Va., for their support. Details about local incentives were not immediately known.

Agricultural Machinery Manufacturer Hit with Ransomware Attack

US agricultural machinery manufacturer AGCO today confirmed it was hit with a ransomware attack and anticipates adverse effects on business operations for at least several days. The attack was first reported by French daily LeParisien as taking place against Massey-Ferguson corporate websites in France, Germany and China.

The AGCO Agriculture Foundation last week donated $50,000 to the BORSCH initiative that assists Ukrainian farming communities affected by the war with Russia. President Joe Biden on March 21, 2022 warned of intelligence pointing to increased Russian cyberthreats toward US businesses and the need to prepare defenses against attacks. For companies interested in covering their bases in light of the AGCO attack, cybersecurity experts recently shared with IndustryWeek a set of

RIP Globalization – Russia’s Invasion of Ukraine Accelerates the Administration’s Efforts

History is giving Biden an opening to change the paradigm on free trade. Trump’s election in 2016 transformed a pro-globalization GOP and shocked Democrats into refocusing on working class voters hurt by trade deals. Then, shortages of masks and medical gear early in the Covid pandemic revealed the danger of America’s reliance on China. The supply chain crunches and inflation of the late pandemic disproved the thesis that free trade always lowers consumer prices. And then Russia destroyed the postwar European peace that all the free trade was supposed to support — ushering in a new era of world politics.

Congress is rushing to pass tax credits for American-made computer chips, considering new investment rules for companies in China and, potentially, making a push for broader manufacturing incentives soon. Biden’s proposed Asian economic pact has new momentum, with key ally South Korea signing on, and European allies are taking a harder line on Beijing.