A jobs report that could shake up the markets

Economists and market participants are deeply divided about Friday’s payrolls report — due out at 8:30 a.m. Eastern — and what it may signal for the Fed’s interest rate policy and the chances of a recession this year.

The numbers to watch: Economists polled by Bloomberg have estimated that employers added 225,000 jobs in June, which would represent a slight cooling of the labor market. But economists have underestimated the strength of job growth in 14 of the past 17 months, including a big miss last month.

The Fed will be closely watching wage data. It’s expected that average hourly earnings ticked up month-on-month, keeping the pressure on Fed officials to raise interest rates further in an effort to tame inflation. On Thursday, Lorie Logan, the Dallas Fed president, became the latest voting member of the rates committee to say more increases were needed.

The picture on jobs is confusing. There are far fewer vacancies than a year ago, and the “great resignation” seems to be a thing of the past, signs that wage growth should begin to ease.

Elsewhere, the labor market seems to be running red hot. on Thursday, data from the payroll processor ADP showed another surge in hiring, particularly in the leisure and hospitality sector. One possible reason: “fun-flation,” with restaurants remaining full and demand for getaways and vacations brisk despite soaring prices. And so-called JOLTS jobless claims fell to a four-month low, according to data released on Thursday by the Labor Department.

Those figures suggest a big number on Friday. Jeffrey Roach, chief economist at LPL Financial, wrote in a note to investors on Thursday that signs pointed to “another healthy jobs report.”

Wall Street seems to be bracing for bad news. The futures market this morning was pricing in a 0.25 percentage point rise at the Fed’s rate-setting meeting this month and growing odds for a second increase in September. Stocks and bonds declined on Thursday after the ADP numbers were released, as investors fretted that further Fed moves could harm economic growth.

The Fed’s own economists predict a mild recession by the fourth quarter. But that call could change too, depending on Friday’s jobs numbers. “Given the continued strength in labor-market conditions and the resilience of consumer spending, the staff saw the possibility of the economy continuing to grow slowly and avoiding a downturn as almost as likely as the mild-recession baseline,” the minutes from the Fed’s most recent rate-setting meeting said.

HERE’S WHAT’S HAPPENING

Samsung delivers a profit warning as demand for chips sags. The Korean tech giant estimated that its second-quarter earnings plunged 96 percent year on year, as a global slump in computer and smartphone sales continued to sap demand for memory chips. It’s a sign that the recent boom in A.I.-related spending has failed to overcome other weaknesses in the semiconductor market.

Beijing reportedly plans to end a crackdown on Ant Group. Chinese regulators will fine Ant, the Alibaba-affiliated fintech giant, at least $1.1 billion, one of the largest fines of an internet company in that country, according to Reuters. That is expected to wrap up a yearslong investigation into Ant, after government officials blocked the company’s plans to go public.

Ford reports strong sales. New vehicle purchases rose 10 percent in the April quarter, as truck demand roared back. But Ford’s shares fell on Thursday because its electric cars sales declined in the same period, underperforming its biggest rival, Tesla. Analysts see car sales overall growing year-on-year, but the pace is still well below pre-pandemic levels.

Food delivery giants sue over New York City’s new minimum wage rule. DoorDash, Grubhub and Uber argue that the law, which requires drivers to be paid at least $18 an hour, would unfairly hurt their industry and lead to higher prices for consumers. The regulation, which goes into effect July 12, has drawn support and opposition from drivers themselves.

Musk takes the fight to Zuckerberg

The fight between Elon Musk and Mark Zuckerberg ratcheted up a notch on Thursday, as Twitter threatened to sue Meta for stealing trade secrets to build its rival messaging platform Threads.

But some thought the legal accusation, which was short on detail, was a sign that Twitter was rattled by the new platform’s roaring success: Threads was downloaded more than 30 million times within a day of being released, the fastest pace for an app in history.

Twitter accused Meta of using its former employees to build the new business. Alex Spiro, a lawyer for the company and a longtime counsel for Mr. Musk, sent a letter to Meta on Wednesday accusing it of intellectual property theft, hiring former employees who had access to confidential information and scraping Twitter’s data in violation of its terms of service. The letter was first reported by Semafor.

“Competition is fine, cheating is not,” Musk said on Thursday. Meanwhile, Linda Yaccarino, Twitter’s new C.E.O., downplayed the new competition. “We’re often imitated — but the Twitter community can never be duplicated,” she tweeted.

Mr. Zuckerberg wasn’t too upset. “This is as good of a start as we could have hoped for!” he wrote on Threads. Investors agreed: Meta’s stock flirted with a 52-week high on Thursday. Andy Stone, a Meta spokesman, said on Threads that no former Twitter engineers were working on the new platform.

Intellectual property lawsuits are common among big tech firms, particularly given the frequent movement of workers between them. But to win, companies need to meet a high bar, proving that a “trade secret” that provides a real competitive advantage has been stolen. More often, the two sides reach a settlement through mediation.

It’s not clear what Twitter’s actual accusations are. The letter is vague about what trade secrets were stolen and doesn’t say the employees broke confidentiality, only that they have “ongoing obligations” to the company.

“If I were writing a letter like this, and knew that they were under an express confidentiality agreement, I would say that,” Sharon Sandeen, a law professor specializing in trade secrets at Mitchell Hamline School of Law, told DealBook.

Orly Lobel, a law professor at the University of San Diego, added: “The idea of a social media platform with short news/updates is no secret — and I don’t see much that could be secret about the format and the deployment of the platform.”

Yellen calls out Beijing’s pressure on U.S. companies

On a four-day visit to China, Treasury Secretary Janet Yellen faces a high-wire act: taking a hard line on China’s often aggressive efforts to grow, while trying to moderate tensions between the two countries. Within the Biden administration, she’s known for advocating less combative stances toward China, including when it comes to limits on exports and investments.

But in some of her first public remarks of the trip, Ms. Yellen took an unusually hawkish stance, pushing back against what she said were unfair attacks by China on companies with foreign ties, The Times’s Alan Rappeport writes:

“During meetings with my counterparts, I am communicating the concerns that I’ve heard from the U.S. business community — including China’s use of nonmarket tools like expanded subsidies for its state-owned enterprises and domestic firms, as well as barriers to market access for foreign firms,” Ms. Yellen told members of the American Chamber of Commerce in China at a round-table event. “I’ve been particularly troubled by punitive actions that have been taken against U.S. firms in recent months.” Representatives of Boeing, Bank of America and the agriculture giant Cargill were among those in attendance.

Ms. Yellen said those actions, along with new Chinese measures to limit exports of some semiconductor-related minerals, justified the Biden administration’s efforts to build up non-Chinese supply chains.

Can BlackRock break through with Bitcoin?

Six years ago, Larry Fink of BlackRock dismissed Bitcoin as “an index of money laundering.” Now Fink, the C.E.O. of the world’s largest asset management firm, is driving Bitcoin prices to 13-month highs, as BlackRock joins a long line of companies seeking S.E.C. approval for a Bitcoin-tied exchange traded fund. Such a fund would let individual investors bet on Bitcoin’s price via the stock market.

But it’s unclear that even Mr. Fink, one of Wall Street’s most influential leaders, will succeed where dozens of smaller crypto players have failed.

BlackRock is pursuing the holy grail of crypto, a spot Bitcoin E.T.F. The S.E.C. has approved Bitcoin futures E.T.F.s, which, because they fall under the purview of the regulated CME commodities exchange, are considered less prone to fraud.

But the agency has repeatedly denied applications for such E.T.F.s. Among its concerns is that such funds — which would directly hold Bitcoin — may be more subject to market manipulation.

Fink’s firm is trying to address those concerns. BlackRock’s application includes a surveillance sharing agreement with Nasdaq and the crypto exchange Coinbase that is meant to prevent fraud and manipulation of the E.T.F. The measure has since been adopted by other fund managers seeking approval of their own funds.

Michael Sonnenshein, the C.E.O. of the crypto asset management giant Grayscale, told DealBook that BlackRock’s move was encouraging. But he cautioned that the surveillance sharing proposal likely isn’t a “silver bullet.”

The ultimate fate of these funds may not be up to the S.E.C., however. Grayscale sued the agency last year over its rejection of an application to convert its Bitcoin trust into an E.T.F. The firm has argued that the denial was arbitrary, since the S.E.C. has approved Bitcoin futures funds; Mr. Sonnenshein said he expected a federal appeals court to rule on the matter soon.

A lot is at stake, according to Matthew Sigel, the head of digital assets research at the investment management firm VanEck: Whichever E.T.F. is approved first may gain a hard-to-overcome lead among investors. (BlackRock declined to comment.)

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