Advertisement

SKIP ADVERTISEMENT

DealBook Briefing: The Stock Market Hit a Record. Thank the Fed.

Credit...Richard Drew/Associated Press

Good Friday. (Want this by email? Sign up here.)

Stocks rose to a record high yesterday, a day after the Federal Reserve opened the door to interest rate cuts in the coming months, Matt Phillips of the NYT reports.

The S&P 500 closed at 2,954.18, about eight points higher than its previous high-water mark, which it reached on April 30. The index is now up more than 7 percent for the month and 18 percent for the year.

Why? The likelihood of rate cuts. “After the Fed’s monetary policy announcement on Wednesday, investors are putting the probability of a rate cut at the Fed’s next meeting in July at 100 percent,” Mr. Phillips writes.

The rebound is “a repeat of a situation in January, when the central bank backed away from its plans to keep raising interest rates.” That was seen as preventing a recession, and led some investors to think that the Fed would act in a way that benefits the markets.

But rate cuts might suggest bigger economic problems. Some analysts argue that stock valuations are too high and earnings are beginning to stagnate. And government bond yields are falling, which is often a sign of weaker growth and lower inflation ahead. “It’s too late to be bullish,” Sophie Huynh, a strategist at Société Générale in London, told Bloomberg.

Image
Credit...Johannes Eisele/Agence France-Presse — Getty Images

The workplace messaging company is now worth $19.5 billion after its first day of trading on the N.Y.S.E., nearly tripling its valuation after pulling off an unconventional direct listing of its shares, Erin Griffith of the NYT writes.

Slack’s shares opened at $38.50 yesterday, well above a $26 reference price that the company had set on Wednesday. Remember that this wasn’t an I.P.O.: Slack didn’t actually sell any shares at $26, so it didn’t raise any capital or leave any money on the table.

But it shows public-market investors are interested. And we may be seeing the emergence of a trend: Ms. Griffith points out that big names like Lyft and Uber have had disappointing ventures onto the public markets, while lesser-known start-ups like Zoom and CrowdStrike have done much better.

Slack’s experience could persuade others to ditch the I.P.O. Stewart Butterfield, the company’s C.E.O., told Andrew that a direct listing avoided the traditional complexities of an I.P.O. and let big institutional investors acquire huge stakes more quickly. (Some other start-ups, like Airbnb, are reportedly weighing direct listings.)

Still, not everyone can do it. A direct listing means that a company isn’t selling any new shares to raise capital. Slack has $793 million in cash, and its losses aren’t huge. A company like WeWork that loses over a billion dollars in a quarter can’t go down this route, because it needs the extra money.

Image
President Trump and Jay PowellCredit...Carlos Barria/Reuters

It is no secret that President Trump has been displeased by Jay Powell’s refusal to lower interest rates in his role as Fed chairman. So it wasn’t totally surprising to find out this week that Mr. Trump had reportedly investigated whether he could demote Mr. Powell. Charlie Savage of the NYT looks at how possible that might be.

The Fed is shielded from political intervention. The idea is that the central bank should serve the country’s long-term interests, rather than politicians’ short-term ones. By law, Fed governors cannot be removed except “for cause.”

But it’s unclear if that protection extends to the position of chairman. The Fed law about designating a chair does not contain the “for cause” removal phrase, which means Mr. Trump could try his luck.

If Mr. Powell were demoted, he could sue. “A judge who analyzes the dispute based on the text alone would most likely rule that Mr. Trump could demote Mr. Powell,” Mr. Savage writes, “while a judge who thinks the statute should be analyzed in light of Congress’s intent of structuring the Fed to be able to resist political pressure could rule the other way.”

Any conflict could be headed off. The Senate could tell Mr. Trump that it wouldn’t confirm any replacement before the election. Or Congress could enact legislation that clearly protects the chair from being removed without good cause.

But that might be unnecessary. Speaking about the Fed’s announcement that it was prepared to cut rates in the near future, Mr. Trump said, “They should have done it sooner, but what are you going to do?” Of Mr. Powell, he said, “Eventually he’ll do what’s right, perhaps. Let’s see what he does.” That suggests Mr. Powell may keep his position — for now.

The retail giant agreed to settle an investigation by the Justice Department and the S.E.C. over a sprawling bribery and corruption scheme that spanned three continents from 2000 to 2011.

Walmart first drew fed scrutiny in 2012, after the NYT revealed that the company had paid off officials in Mexico and then tried to conceal those payments from senior management.

Investigators later uncovered payments of millions to middlemen around the world who helped Walmart obtain permits. They included an unnamed individual in Brazil nicknamed the “sorceress,” a business partner in India and a local landlord in China.

It’s a landmark investigation, and was one of the biggest-ever under the Foreign Corrupt Practices Act, which makes it illegal for American companies to bribe overseas officials. Regulators blamed Walmart’s expansion desires and a “low-cost philosophy” that led to poor internal controls.

But the company got away lightly. It ended up paying less than the $600 million fine that the government initially sought as part of a proposed plea agreement during the Obama administration. (President Trump has criticized the anti-bribery law.) Some context: Walmart made $7 billion in profit in its 2018 fiscal year.

Image
Jean-Dominique Senard, left, the chairman of Renault, and Hiroto Saikawa, the C.E.O. of Nissan, in March.Credit...Eugene Hoshiko/Associated Press

The two carmakers announced a plan to repair their alliance yesterday, reaching a compromise over Nissan’s corporate governance, Liz Alderman of the NYT reports. What comes next is unclear.

Renault executives will sit on two of three new panels that will oversee Nissan. The committees are intended to tighten oversight after the arrest of Carlos Ghosn over accusations of financial improprieties. But Renault’s chairman, Jean-Dominique Senard, had blocked their creation unless his company had representation on them.

The pact eases tensions that grew after Renault tried to merge with Fiat Chrysler, a deal that came together without any input from Nissan. The French government wanted to delay that transaction, arguing that the Japanese carmaker should be on board.

Renault and Nissan’s alliance is more important than ever for both companies. With the collapse of the Fiat deal, the carmakers must stick together to compete in an industry dominated by giants and being redefined by electric and autonomous vehicles.

But yesterday’s compromise probably won’t revive a deal with Fiat, despite the hopes of the French government. So the best the companies can hope for is to continue their current, if imperfect, alliance.

More: The chairman of Fiat Chrysler, John Elkann, has retained the support of his family in the wake of the failed Renault merger — for now.

Image
Andrea Stewart-Cousins, left, New York State’s senate majority leader, and Senator Alessandra Biaggi.Credit...Patrick Dodson for The New York Times

Lawmakers passed sweeping anti-harassment legislation this week that, supporters said, would make the state’s laws among the most robust in the nation, Vivian Wang of the NYT reports.

• “The legislation eliminates the state’s ‘severe or pervasive’ standard for proving harassment, which advocates said had allowed judges to dismiss claims of inappropriate comments or even groping as insufficiently hostile.”

• “The bills also restrict employers’ ability to avoid liability for the behavior of their employees; provide for attorney fees and punitive damages in discrimination cases; expand the time frame to file complaints about workplace harassment with a state agency; and ensure that anti-harassment training is provided in multiple languages.”

“The package was the result of more than a year of lobbying by women across the state — including legislators, employment lawyers and celebrities — whose years of anger were given voice by the #MeToo movement.”

“We will make it easier for claims to be brought forward and send a strong message that when it comes to sexual harassment in the workplace, time is up,” Gov. Andrew M. Cuomo said in a statement. He has promised to sign the bills.

Foxconn named Liu Young-Way, currently the head of its chip unit, as its next chairman, succeeding Terry Gou.

Bill Ready will step down as PayPal’s C.O.O. by the end of the year.

L’Oreal named Delphine Viguier-Hovasse as the president of its namesake cosmetics label, the first woman to hold that job.

The N.R.A. suspended its top lobbyist, Chris Cox, after accusing him of participating in an attempted coup against the group’s C.E.O., Wayne LaPierre.

Deals

• Chevron Phillips Chemical is said to have offered $15 billion to buy Nova Chemicals, a Canadian plastics maker. (Reuters)

• UnitedHealth has reportedly agreed to buy Equian, which processes payments for health care companies, for $3.2 billion from the investment firm New Mountain Capital. (WSJ)

• Delta Air Lines has bought a 4.3 percent stake in the parent company of Korean Air Lines, helping defend its alliance partner against an activist investor. (Reuters)

• The Justice Department sued yesterday to stop the $1.4 billion merger of the printing companies Quad/Graphics and LSC Communications. (Reuters)

Politics and policy

• The Senate voted yesterday to block the Trump administration’s weapons sales to Saudi Arabia and the U.A.E. President Trump is expected to veto the bill. (NYT)

• A bipartisan group of House lawmakers introduced a bill to clamp down on robocalls. (NYT)

• Mr. Trump is said to have ordered military strikes on Iran to retaliate over the downing of a U.S. drone, but then withdrew the commands. (NYT)

• Roy Moore plans to run for the Senate again, potentially costing Republicans a political victory in Alabama. (NYT)

Zuck Bucks

• The first version of the code for Facebook’s cryptocurrency, Libra, doesn’t seem to work very well. (Bloomberg Opinion)

• The governor of the Bank of England, Mark Carney, said that the cryptocurrency will need to be carefully vetted by regulators. (WSJ)

• Could Libra be Facebook’s best shot at rebuilding trust? (NYT Op-Ed)

• A debit card start-up alleged that Libra’s payment platform, Calibra, has stolen its logo. (Bloomberg)

Tech

• Apple has said that U.S. tariffs on its products would reduce its contribution to the American economy. It is also reportedly weighing moving some production out of China. (CNBC, WSJ)

• Google Maps contains millions of false business addresses that are used to scam consumers. (WSJ)

• Two former WeWork executives sued the company over allegations of gender and age discrimination. (WSJ)

• A bankruptcy investigation says that the late boss of the crypto exchange Quadriga stole clients’ money and spent it on himself. (CoinDesk)

• Facebook has a new Strategic Response team. Its goal: Avoid fueling genocide. (NBC)

• JPMorgan Chase is reportedly working on a secretive digital banking project based in London. (TechCrunch)

Best of the rest

• Hong Kong’s tycoons have been enriched — and intimidated — by Beijing. (NYT)

• U.S. companies repatriated more foreign profits last year than previously estimated. (WSJ)

• Airbus plans to fight for Boeing’s deal to sell 737 Max jets to an airline owner for $24 billion. (Bloomberg)

• “Malaysia aims to recover about $5 billion in 1MDB-linked assets.” (Reuters)

• Gold has hit a six-year high. (FT)

• How a legal loophole could leave some of rock’s greatest riffs up for grabs. (Bloomberg)

Thanks for reading! We’ll see you next week.

We’d love your feedback. Please email thoughts and suggestions to business@nytimes.com.

Advertisement

SKIP ADVERTISEMENT