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The S&P 500 suffered its worst single-day drop in a month yesterday, with tech stocks hard hit. But the big story is in bonds, where yields surged (and prices fell) as investors worried that the Fed wasn\u2019t, well, worried enough.<\/p>\n
Is this another \u201ctaper tantrum\u201d?<\/strong> The sharp rise in government bond yields in recent days, particularly in the longer-dated maturities used as benchmarks for consumer loans and mortgages, reminded many of the 2013 \u201ctaper tantrum.\u201d Then, a jump in yields followed comments from Ben Bernanke, the Fed chairman at the time, that he would taper off the central bank\u2019s emergency bond-buying program, which was propping up markets after the financial crisis.<\/p>\n This time, the Fed isn\u2019t suggesting anything like that.<\/strong> Instead, it\u2019s the central bank\u2019s calm despite a potential surge in post-pandemic economic growth that seemingly spooks investors. They fear that keeping rates low and stimulus flowing freely will stoke inflation, which would require raising rates and withdrawing stimulus sooner than expected.<\/p>\n Cue the toddler metaphors.<\/strong> As every parent knows, there are several stages that a child goes through before hitting a full-blown tantrum:<\/p>\n \u201cAs long as the Fed is far away from tapering, it is too early to throw a serious taper tantrum,\u201d Holger Schmieding of Berenberg wrote.<\/p>\n This is a \u201ctantrum without the taper,\u201d noted analysts at TD Securities (and others).<\/p>\n The financial adviser Richard Bernstein, in a Financial Times op-ed, wrote that the Fed should ignore the bond selling, likening it to teaching \u201cbabies to self-soothe and fall asleep on their own.\u201d<\/p>\n But what if the tantrum is for real?<\/strong> A truly serious bond sell-off often leads to \u201ccontagion, illiquidity, busts, bankruptcies\u201d and other ills, across all assets, analysts at Bank of America noted. That said, the 2013 tantrum faded relatively quickly and markets regained their footing. Now, the \u201conly reason to be bearish is there is no reason to be bearish,\u201d the analysts wrote (as good a reason as any for most tantrums).<\/p>\n Stocks are still mostly up on the year, and futures this morning suggest that equities and bonds are set for modest gains as cranky investors calm down \u2014 or take a breather before resuming their protest.<\/p>\n A minimum wage lift is blocked from the stimulus bill.<\/strong> The Senate\u2019s parliamentarian ruled that the proposal to raise the federal minimum rate to $15 an hour couldn\u2019t be included in President Biden\u2019s $1.9 trillion plan. Democratic senators are studying ways to raise taxes on companies that don\u2019t<\/em> pay that rate as a workaround. (Costco won\u2019t be one of them: It plans to raise its minimum wage to $16 an hour.)<\/p>\n The White House enlists corporate America in the pandemic fight.<\/strong> Major trade groups like the Chamber of Commerce and companies like Ford, the Gap and Uber will announce measures to join Mr. Biden\u2019s call for a \u201cwartime\u201d mobilization, The Morning newsletter\u2019s David Leonhardt reports. Steps will include donating face masks and giving people free rides and paid time off to get vaccinated.<\/p>\n The finance firm TIAA hires a top JPMorgan Chase executive as its next C.E.O. <\/strong>Thasunda Brown Duckett, the head of Chase Consumer Banking, will become one of only a few Black C.E.O.s in the Fortune 500 when she succeeds Roger Ferguson. (TIAA is also the first Fortune 500 company to have two Black C.E.O.s in a row.)<\/p>\n States are beginning to ease pandemic lockdowns.<\/strong> Governors across the U.S. are relaxing restrictions as infection rates decline and vaccinations increase. But Republicans are moving more quickly than Democratic counterparts.<\/p>\n Coinbase draws back the curtain as it prepares to go public.<\/strong> The cryptocurrency exchange disclosed its finances in its public filing for a direct listing yesterday, revealing that it made a $322 million profit, on $1.3 billion in revenue, last year. It warned that its fortunes were tied to the volatile nature of the crypto market.<\/p>\n AT&T is spinning off its television businesses \u2014 DirecTV, AT&T TV and U-verse \u2014 into a unit that will have the private equity group TPG as a minority shareholder. The deal values the brands at $16.25 billion, or about a quarter of the $67 billion value AT&T placed on DirecTV when it bought it in 2015.<\/p>\n \u201cWe certainly didn\u2019t expect this outcome <\/strong>when we closed the DirecTV transaction in 2015, <\/strong>but it\u2019s the right decision to move the business forward,\u201d John Stankey, AT&T\u2019s chief, told analysts. Streaming businesses have eaten into the earnings of broadcast companies like DirecTV: Over the past year, the unit lost more than three million subscribers. But despite falling sales and profits, it generates more than $4 billion in annual cash flow.<\/p>\n AT&T wants to focus on telecom and streaming. <\/strong>The company\u2019s biggest forays beyond its wireless business \u2014 the DirecTV deal and the $85 billion purchase of Time Warner in 2018 \u2014 contributed to its $157 billion in debt. (It also bid $23 billion this week on 5G spectrum licenses.) The company will continue to consider selling noncore assets to pay down that debt, sources told DealBook.<\/p>\n They did not specify which units could be on the block, but AT&T executives suggested in a call with analysts that it would evaluate the company\u2019s DirecTV Latin America business, which is not part of yesterday\u2019s deal. There has also been speculation that it might consider selling CNN.<\/p>\n Some of the academic research that caught our eye this week, summarized in one sentence:<\/em><\/p>\n Tech start-ups that stay private for extended periods \u201callow for a buildup of bad choices and testy behaviors,\u201d not unlike a prolonged adolescence. (Donald Langevoort and Hillary Sale)<\/p>\n The tax treatment of executive pay clawbacks is really complicated. (David Walker)<\/p>\n Nursing homes owned by private equity record both higher costs and higher mortality. (Atul Gupta, Sabrina Howell, Constantine Yannelis and Abhinav Gupta)<\/p>\n This week, the regulator announced that it would \u201cenhance its focus on climate-related disclosure in public company filings,\u201d eventually updating guidelines issued in 2010. The timing of the announcement comes just days before the Senate confirmation hearings for Gary Gensler, President Biden\u2019s pick to lead the commission. It puts the issue \u201cfront and center,\u201d said the securities law partner Joseph Hall of Davis Polk.<\/p>\n The S.E.C. \u201cis setting the stage,<\/strong> sending a signal that we are no longer in an administration where \u2018climate change\u2019 is a forbidden term,\u201d Mr. Hall said. \u201cIt\u2019s a warning flare to let people know new disclosure rules are coming down the pike.\u201d He said he expected Democrats to push Mr. Gensler on adopting specific disclosure requirements, while Republicans will probably lobby for a more vague, principles-based system that gives companies extra leeway.<\/p>\n \u201cIt\u2019s a significant statement <\/strong>and one companies can see as an opportunity,\u201d according to Wes Bricker of PwC, a former chief accountant at the S.E.C. Mr. Bricker said he thought that many companies had already moved beyond what\u2019s required under the old framework, responding to the market\u2019s increasing demands for transparency on their environmental impact. For companies that are not there yet, the S.E.C.\u2019s announcement is a reminder of the direction things are heading.<\/p>\n In \u201cCrisis,\u201d a new movie about the opioid-addiction disaster by the writer and director Nicholas Jarecki, three interwoven stories offer radically different perspectives. Together, they show how fundamentally decent people \u2014 doctors, police officers, academics, government scientists, parents, children, people in pain and pharma executives \u2014 can make bad decisions in a subtly corrupting system. DealBook spoke with Mr. Jarecki about the film, out in theaters today and streaming next Friday. (The interview was edited and condensed for clarity).<\/p>\n Why this topic?<\/strong><\/p>\n I had a friend who got involved with opioids many years ago and died. It was perplexing. No one understood. How did this happen? It turns out that opioids affect people very differently and that pills were far more addictive than drug makers admitted. Meanwhile, doctors were overprescribing, encouraged by pharmaceutical companies. We\u2019re used to demonizing addicts, though in the last 10 years awareness of these problems has increased. Still, people are dying as we speak.<\/p>\n Gary Oldman plays a professor who accidentally discovers the truth. Is he a good guy?<\/strong><\/p>\n He is compromised. I like characters who are conflicted because life is really more in the gray areas. Gary\u2019s character is almost a rubber-stamp guy for a pharmaceutical company because I found in my research that doing routine lab work for corporations can bring a lot of money into schools, which suggests an inherent conflict. The professor gets caught in that. His boss is saying, \u201cDo we really want to rock the boat?\u201d He\u2019s not sure. But his actions, his dealings with the university and government and drug company, have ramifications for other characters.<\/p>\n Do you blame corporations?<\/strong><\/p>\n There\u2019s no villain in this film sitting in a corporate boardroom thinking of how to kill people. But I do like to look at institutional dysfunction and systemic corruption. I\u2019m fascinated by the role of money in American society, how well-meaning people can be perverted by financial incentives. The question then is whether there are adequate safeguards and regulations and how much responsibility we have to change things.<\/p>\n Can you talk about professionalism, how the concept shifts for characters?<\/strong><\/p>\n There\u2019s a scene where an undercover officer is seething over police bureaucracy and his boss warns him to be professional. She can sense he wants to break the rules. She\u2019s telling him, \u201cWe\u2019re here to serve a specific role, a certain function.\u201d She wants him to stay in his lane, but maybe to do the right thing you have to do the wrong thing sometimes. Maybe we shouldn\u2019t always stay in our lanes.<\/p>\n Deals<\/strong><\/p>\n The investment firm L Catterton agreed to buy control of the footwear maker Birkenstock, reportedly at a valuation of around 4 billion euros, or $4.9 billion. (FT)<\/p>\n Demand for shares of Robinhood in private secondary markets is soaring, despite criticism of the online brokerage\u2019s actions during the meme-stock frenzy. (CNBC)<\/p>\n Soho House, the private members\u2019 club chain, reportedly plans to go public next month at a valuation of $3 billion. (FT)<\/p>\n Politics and policy<\/strong><\/p>\n The House passed a bill providing sweeping protections against discrimination on the basis of sexual orientation or gender identity, though it faces long odds in the Senate. (NYT)<\/p>\n Manhattan\u2019s district attorney, Cy Vance, confirmed that his office now has former President Donald Trump\u2019s tax returns and other financial records. (NYT)<\/p>\nHERE\u2019S WHAT\u2019S HAPPENING <\/span><\/h3>\n
AT&T unloads DirecTV, kind of<\/h2>\n
In the papers<\/h2>\n
The S.E.C. fires a climate \u2018warning flare\u2019<\/h2>\n
The business of pain<\/h2>\n
THE SPEED READ <\/span><\/h3>\n