Wall Street Breakfast: Unionbusters
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The first major unionization drive at an Amazon (NASDAQ:AMZN) warehouse in the U.S. looks set to fail as results continue to be tallied at a fulfillment center located in Bessemer, Alabama. With about half the 3,215 ballots counted so far by the National Labor Relations Board, about 70% of Amazon employees at BHM1 have sided against unionization, which is well ahead of estimates that forecast somewhat of a close race. Officials will resume counting today, when a final outcome could become clear.
Bigger picture: Over the past few weeks, Amazon has pulled out all the stops to try and convince the workers at BHM1 that unionization would not be in their favor. It seems like the efforts paid off, which included aggressive advertising, mandatory anti-union meetings and sending workers multiple texts per day. Not only did the firm attract new workers to vote against the effort, but it also appears to have changed the mindset of workers who were planning to back the union, based on the early signs of support needed to trigger the vote in the first place.
Once the results have been formally certified by the National Labor Relations Board, there will likely be an appeal from The Retail, Wholesale and Department Store Union. The RWDSU is already saying that some of Amazon's tactics against the union were illegal. For example, a drop box that was placed in the parking lot of the facility could have intimidated workers into thinking that Amazon was monitoring the vote and was a direct effort to influence the ballot. Others have pointed to Amazon's push to have the county change the timing of a traffic light leaving the warehouse parking lot, which the company says was meant to alleviate congestion, though union organizers say it deprived them of a venue for canvassing workers.
What's next? Some labor experts think the union has a pretty strong case, with local regulators having the power to overturn the vote entirely and grant the union a victory. If that were to happen, the case could go to Washington, where Amazon could appeal on a national level to the NLRB. Don't expect an easy outcome. The entire process could take another few months. (26 comments)
Stocks closed higher on Thursday as inflation fears continued to fade, as lower bond yields lifted gains for Big Tech companies. While the 10-year Treasury rate surged to 1.776% at the end of March following a string of strong U.S. economic data (stoking expectations the Fed could be forced to raise interest rates sooner than anticipated), Jay Powell appears to be getting his message across to the population. Yesterday, the Fed Chair repeated his view that any upward pressure on prices is "transitory," while price increases resulting from supply chain bottlenecks should "eventually resolve themselves."
Bigger picture: In remarks to the International Monetary Fund, Powell stated a number of factors were putting the nation "on track to allow a full reopening of the economy fairly soon." He also expressed concern over long-term "labor market scarring" and assured continued support for those out of work due to the pandemic. An unexpected rise in the number of Americans filing new claims for unemployment benefits kept a lid on the Wall Street buying enthusiasm on Thursday, but also led investors to trust Powell's statements of continuous support and calmed inflation jitters.
Money is also rotating between sectors at high speed, returning to tech yesterday as cash flowed out of energy and financials. "The pandemic accelerated changes in business," Powell declared at the IMF meeting. "It's important to remember we're not going back to the same economy. This will be a different economy. Businesses are adopting more efficient technologies and that may lead to hiring perhaps fewer people." Overnight, cyclicals were meanwhile inching ahead of their growth rivals, with contracts linked to the Dow Jones up 0.2%, while the Nasdaq dipped 0.2%, and the S&P 500 looked set to notch another record high.
More inflation data: Traders will be watching the latest report from the Labor Department this morning, which will disclose producer prices for March. The headline Producer Price Index is expected to rise 0.5% month-over-month, matching the gain seen in February.
New York passed plans this week to increase taxes on its most affluent residents, though top business leaders say the increases could backfire by driving away top earners from the city. The $212B state budget includes more aid for schools, tenants and small businesses. It also allocates billions to other progressive efforts like renewable energy and nonprofit arts, as well as workers who don't qualify for federal aid because of their immigration status.
By the numbers: While New York state income tax rates will rise and new brackets have been added, making headlines is the percentage New York City's ultra-high earners will have to pay. Marginal income tax rates could be nearly 52%, which would mean the city's wealthiest residents could end up giving more of their paychecks to federal, state and local governments than they keep for themselves. It would also push NYC past California, which currently has the highest marginal personal tax rate in the U.S. - just over 50% on income over $1M.
Executives at major Wall Street firms and other New York employers have warned city officials of the consequences. In a letter delivered to Gov. Andrew Cuomo and leaders of the state Legislature, 250 business executives said the package of tax increases would "jeopardize New York’s recovery from the economic crisis inflicted by COVID-19." New York is already having a slow recovery, with the state's unemployment rate at 8.9% in February, the second highest among the 50 states and D.C.
Outlook: Elliott Management, Icahn Enterprises (IEP), Silver Lake, Blackstone (BX) and Moelis (MC) are among the firms that have either moved their HQ or opened new offices in Florida over the past year. Goldman Sachs Asset Management (GS) is meanwhile considering plans to expand in the state - which has no income tax - while JetBlue (JBLU) is looking to relocate its headquarters there from NYC. Many companies have also discovered during the work-from-home lockdowns that they didn't need to keep employees in Manhattan or that the high cost of an NYC flagship office is no longer worth it. (16 comments)
'Commercial real estate tsunami'
Shares of Levi's (NYSE:LEVI) rose 2% on Thursday and are up another 4% premarket, after the jeans maker topped expectations with its Q4 report and issued a confident outlook. The pandemic was major factor, but global digital net revenue increased approximately 41% during the quarter to comprise around 26% of total revenue. Adjusted gross margin also increased 200 basis points to 57.7% of sales, primarily due to a better mix within wholesale, price increases and lower promotions.
The company also announced plans to add to its 40 stores and 200 outlets across the U.S. to boost its direct-to-customer operations. "That represents a huge opportunity especially with the commercial real estate tsunami that is happening right now," Levi's CEO Chip Bergh told CNBC. "It gives us an opportunity to secure great locations at great leases and we're capitalizing on that."
Statistic: Vacancy rates at regional malls rose to a record 11.4% in the first quarter of 2021, up from 10.5% in the prior quarter, according to Moody's Analytics.
Go deeper: As part of its new store rollout, Levis is creating what it calls NextGen stores. Bergh says they will be much more digitally enabled and would provide for a seamless shopping experience between the digital world and the physical brick-and-mortar store. The outlets are also designed to be smaller, as little as 2,500 square feet, and are fortified with machine learning to help with inventory.
Going into 2021, almost every sell-side analyst suggested the dollar would weaken this year, but the U.S. currency has surprisingly appreciated instead. The ICE U.S. Dollar Index, a measure of the currency against six major rivals, has so far bounced nearly 3% this year following a decline of 6.7% in 2020. In the first quarter alone, the dollar climbed 7.2% against the Japanese yen, while the euro in March dropped the most in three years against the greenback.
What happened? Expectations of a weakened dollar were based on loose monetary conditions in the U.S., inflation expectations, rising public debt and a robust global economic recovery. However, signs now suggest the U.S. will outperform other major economies as Europe struggles with its COVID-19 vaccine rollout. A robust U.S. economic performance could also mean divergence in monetary policy, with the Fed tightening monetary policy relatively more quickly than the ECB. "That could see the pace of dollar appreciation accelerate this year," BofA wrote in a recent research note.
While some analysts acknowledge they were quick to make forecasts, others aren't giving in. "We do not think that the long-term outlook for the dollar has changed," said Calvin Tse, a currency analyst at Citi, who still feels the currency could fall as much as 20%. However, Goldman Sachs this week canceled its short call on the dollar, saying after a "choppy few months we are closing our recommended dollar short trade."
Outlook: The next move for the greenback may depend on whether the Fed will let the economy run hot. Last month, policymakers signaled that expectations for interest rates be kept at near zero through 2023, but some money markets are already positioning for a rate rise as soon as next year. Others suggest that even if the Fed would move early, the relationship has changed, as well as the currency's traditional role with regard to equities. Once upon a time, a weaker dollar was seen as a boon for U.S. equities, but a stronger buck didn't prevent the continuous stock market highs that were notched in the first quarter.
What else is happening...
GM (GM) idles production at plants as chip shortage worsens.
Biden targets 'ghost' guns, background checks and gunmaker immunity.
Credit Suisse (CS) ignored warnings on Archegos, Greensill - WSJ.
GameStop (GME) plans to elect activist investor Cohen as chairman.
Coinbase concerns? Robinhood (RBNHD) scales up crypto capabilities.
Tesla (TSLA) looking for showroom space in major Indian cities.
Cathie Wood doubles down on DraftKings (DKNG)
Apple (AAPL) reveals market definition for Epic Games antitrust trial.
Canopy Growth (CGC) drops as investors digest Supreme Cannabis deal.
AstraZeneca (AZN) woes grow as Australia curbs COVID-19 shots.
Box (BOX) plunges after taking $500M investment from KKR.
Deal with Sony (SONY) sees Netflix (NFLX) get Spider-Man streaming rights.
Today's Markets
In Asia, Japan +0.2%. Hong Kong -1.2%. China -0.9%. India -0.3%.
In Europe, at midday, London -0.1%. Paris +0.3%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.2%. S&P +0.1%. Nasdaq -0.2%. Crude +0.2% to $59.71. Gold -0.7% at $1745.70. Bitcoin +2.8% to $58375.
Ten-year Treasury Yield +3 bps to 1.66%
Today's Economic Calendar
8:30 Producer Price Index
10:00 Fed's Kaplan Speech
10:00 Wholesale Inventories (Preliminary)
12:00 PM Fed's Kaplan Speech
1:00 PM Baker-Hughes Rig Count
Companies reporting earnings today »
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Comments (115)
-------------------------------One might wonder what non-US countries provide taxpayer-funded benefits to their illegal immigrants?Ya gotta love the USA... where thousands of illegals are encouraged daily to sneak across our borders illegally by federal & local governments that wink at the obvious problem while encouraging it by making illegals eligible for special "sanctuary" protections, including making illegals eligible for taxpayer-funded healthcare* and other benefits.Here's the latest (and unbelievably extensive!) list of sanctuary cities & counties where illegals are protected (including criminals). But fortunately American citizen criminals are not so lucky. cis.org/..."According to a Border Patrol source with knowledge of what’s happening at our southern border: In one day, it encountered 4,700 people trying to illegally enter the U.S. About another 900 were observed but not detained. In addition, another 400 were detained and sent back (presumably to try again). This volume is straining resources at the border." Source: "Number of Illegal Border Crossings Now 6 Times What Obama Team Considered “Crisis” www.heritage.org/...Ya gotta love the USA! But I'd feel safer if our laws were vigorously enforced, and amended as needed. Since 9-11, it's increasingly obvious a USA that doesn't know who enters, and is ignoring the consequences of the tremendous risks it's winking at.-------------------
* Providing EMERGENCY help is mandated under federal law. The 1986 Emergency Medical Treatment and Labor Act requires hospitals with emergency departments to provide for "an appropriate medical screening" and required treatment to stabilize the condition of ANY PATIENT seeking emergency medical help.
If I understand this correctly, illegals are being offered a $15000 enticement to come to NY. This $15000 is supposed to be for illegals who have worked in NY for a certain period of time, but since there is no way to verify this information, it's free money for all comers.
"Unions are not needed anymore in these times"Sweatshop conditions today would result in a Twitter mob instantly organizing boycotts long before an overpaid thuggish union boss could pretend to care and earn their keep.As to the outdated notion that unions are required to bolster wages, in the private sector the invisible competitive hand of capitalism provides every employer an inherently strong incentive to pay commensurate to value lest an asset jumps ship to a competitor. Not to do so is akin to shooting oneself in one's own foot. People generally don't try to hurt themselves.Unions are pseudo-terrorist organizations whenever they hold employers, and indirectly, consumers "hostage" to their demands. Public unions = double-terrorists.
The best that I can tell you ...
Economics 101 is supply and demand. We have been printing and printing "new" dollars. Much of which has gone directly into savings accounts and stayed there. Thus being a neutral transaction. As economic activity increases (via a 're-opening); demand for $$ should rise and thus the value of it. There are numerous influences that can cause short term movements (like interest rates), the buying and selling of U.S. Treasuries is one example.
