Morgan Stanley is the latest Wall Street bank to acknowledge significant losses tied to last month’s giant implosion of Archegos Capital Management, the investment firm run by former hedge fund trader Bill Hwang.
As part of its quarterly earnings report, Morgan Stanley — which unlike some competitors had kept quiet on its exposure to Archegos — disclosed that it had lost $911 million related to its dealings with fund. Archegos was a so-called family office, meaning it did not manage outside money, but it had borrowed all over Wall Street to finance incredibly large, concentrated positions.
When Archegos’s bets went bad, banks found themselves in a race to dump securities related to its trades. In the fire sale that ensued, some fared better than others. Goldman Sachs was able to move quickly and is widely seen to have fared the best in terms of extricating itself from an ugly situation.
But the fallout nonetheless left deep losses across Wall Street. Credit Suisse and the Japanese bank Nomura seemed to suffer the worst damage, disclosing $4.7 billion and roughly $2 billion in losses related to Archegos’s trades.
On a conference call with analysts, Morgan Stanley’s chief executive, James P. Gorman, faced questions about why his bank had chosen not to disclose losses as others had.
He answered that the size of the loss was not large enough to matter in the context of the otherwise strong performance of the bank in the first three months of the year.
“We were having a record quarter. The business was having a record quarter. The equities business where this resided was having a record quarter,” he said, according to a transcript of the call. “So you’ve got to be at a level where it’s material to the overall quarter, and I’ll leave that up to the lawyers but we’re very comfortable with that.”
Christopher Waller, the newest governor on the Federal Reserve’s Washington-based board, said on Friday that he expects an unfolding acceleration in inflation — which is expected to intensify in the coming months — will prove short-lived.
“I do buy into the idea that this is going to be temporary,” Mr. Waller said on CNBC, during his first television interview since President Donald J. Trump nominated him to the role and the Senate confirmed him. “Whatever temporary surge in inflation we see right now is not going to last.”
Inflation data are being measured against very low readings from 12 months ago, causing a mechanical year-on-year jump, he noted. Spending tied to government stimulus and supply chain constraints will also have an effect.
“We know the stimulus is going to have some impact, but once the stimulus checks are spent, they’re gone,” Mr. Waller said. “We also know that the bottlenecks that are currently there are going to go away.”
The Consumer Price Index, a closely watched inflation measure, rose 2.6 percent in March from a year ago, the Labor Department said earlier this week. But it was skewed by the comparison to March 2020, when prices of some items fell as consumers pulled back spending in the face of the pandemic.
While the C.P.I. and other inflation gauges are expected to rise even higher in coming months, Fed officials and most economists project that they will settle back down before long. Many officials see key measures hovering near the central bank’s 2 percent average inflation target by the end of the year.
Mr. Waller said that investors themselves are not betting on “outrageous, runaway inflation” and that even if the data show a stronger pickup, the Fed stands ready to contain that and is not going to just let inflation “rip.”
“I don’t think anyone would be very comfortable if it got to three, three-plus and stayed there for a while,” Mr. Waller said, noting that the bigger concern would be if inflation expectations jumped.
Millions of workers are wondering what the office will be like when they go back after a long stretch of remote work. Employers are trying to prepare them for it.
IBM has designed a “reorientation” program to help its employees adjust when they return to a familiar setting but face a host of unfamiliar new procedures, the DealBook newsletter writes.
“It’s sort of like the first day of school,” said Joanna Daly, the company’s vice president of talent. “A day early, kids go and get to see the classroom or see how things work.”
This is needed, she said, because it is “not simply returning to the workplace as it existed before or the ways of working as it existed before.”
IBM made a “day in the life” video to show employees what to expect. One version of the 11-minute-long video seen by DealBook starts with “Paul” going back to one of IBM’s offices in Britain. To start the day, he goes through a self-screening checklist to assess potential exposure. He enters the office through designated entrances and picks up his masks for the day (and disinfectant wipes if he needs them). Arrows guide him through the halls and up one-way staircases. Only one person is allowed in the bathroom at a time.
The cafeteria is closed, so Paul must bring his lunch. He can’t use the whiteboards or marker pens in conference rooms (and he shouldn’t linger there longer than necessary). If Paul sees other IBMers not following the safety protocols, “It is OK to politely remind them,” the narrator assures him.
Along with the video, IBM produced an 18-page presentation depicting “Sonia’s’’ return to the workplace, serving as a friendly, cartoon-filled back-to-work manual.
“We’re looking now at how might anxiety manifest itself differently for different employees around being back together and then how do we address that,” Ms. Daly said, “through practical understanding of health and safety and also through having enough flexibility in the environment that everyone can kind of get used to coming back.”
IBM, which has 346,000 employees, hasn’t set a timeline for when its U.S. workers will return to the office. The company’s chief executive, Arvind Krishna, has said he expects 80 percent of them will work in a hybrid fashion when they do.
Mercedes-Benz unveiled an electric counterpart to its top-of-the-line S-Class sedan on Thursday, the latest in a series of moves by German automakers to defend their dominance of the high end of the car market against Tesla.
The EQS, which will be available in the United States in August, is the first of four electric vehicles Mercedes will introduce this year, including two S.U.V.s that will be made at the company’s factory in Alabama and a lower-priced sedan. Mercedes did not announce a price for the EQS, but it is unlikely to be lower than the S-Class, which starts at $94,000 in the United States.
The cars could be decisive for Daimler, the parent company of Mercedes, as it tries to adapt to new technology.
“It is important to us,” Ola Källenius, the chief executive of Daimler, said of the EQS during an interview. “In a way it is kind of day one of a new era.”
The EQS has a range of 770 kilometers or about 480 miles, according to Mercedes. If that figure is confirmed by independent testing, the EQS would dethrone the Tesla Model S Long Range Plus as the production electric car that can travel the farthest between charges. The Tesla currently occupies the No. 1 spot with a range of just over 400 miles, according to rankings by Kelley Blue Book.
The EQS owes its stamina to advances in battery technology and an exceptionally aerodynamic design, Mr. Källenius said. Some analysts question whether Mercedes can sell enough electric vehicles to justify the cost of development, but Mr. Källenius said, “We will make money with the EQS from the word ‘go.’”
The EQS is the latest attempt by German carmakers to show that they can apply their expertise in engineering and production efficiency to battery-powered cars. Vehicles are Germany’s biggest export, so the carmakers’ success or failure will have a significant impact on the country’s prosperity.
On Wednesday, Audi, the luxury unit of Volkswagen, unveiled the Q4 E-Tron, an electric SUV. The Q4 shares many components with the Volkswagen ID.4, an electric SUV that the company began delivering to customers in the United States in March. Though priced to compete with internal combustion models, neither vehicle offers as much range as comparable Tesla cars.
In the S-Class tradition, the EQS offers over-the-top luxury features like software that can recognize when a driver might be feeling fatigued and can offer to turn on the massage function embedded in the seat.
“You’re going to get S-Class level refinement in a very, very high performing electric car,” Mr. Källenius said. “That’s your buying argument.”
China on Friday reported that its economy grew by a remarkable 18.3 percent in the first three months of this year compared with the same period last year. But the spike is as much a reflection of how bad matters were a year ago — when the China’s output shrank by 6.8 percent — as it is an indication of how China is doing now.
Global demand for the computer screens and video consoles that China makes is soaring as people work from home and as a pandemic recovery beckons. That demand has continued as Americans with stimulus checks look to spend money on patio furniture, electronics and other goods made in Chinese factories.
China’s recovery has also been powered by big infrastructure. Cranes dot city skylines. Construction projects for highways and railroads have provided short-term jobs. Property sales have also helped strengthen economic activity.
Exports and property investment can carry China’s growth only so far. Now China is trying to get its consumers to return to their prepandemic ways.
Unlike much of the developed world, China doesn’t subsidize its consumers. Instead of handing out checks to jump-start the economy last year, China ordered state-owned banks to lend to businesses and offered tax rebates.
Travel restrictions over the Lunar New Year holiday dampened consumer appetite and slowed the momentum of Chinese shoppers. But retail data on Friday showed that March sales were better than expected, raising hopes that consumers might be starting to feel confident.
By: Ella Koeze·Data delayed at least 15 minutes·Source: FactSet
Global stocks rose on Friday after a string of strong economic reports and company earnings.
The S&P 500 rose 0.4 percent, its fourth straight week of gains and another record. The benchmark gained 1.4 percent for the week, and is up more than 5 percent so far this month.
The Stoxx Europe 600 rose 0.9 percent on Friday, also climbing to a record, while the FTSE 100 in Britain climbed above 7,000 points for the first time since February 2020. Stock indexes in Japan, Hong Kong and China all closed higher.
China reported on Friday that its economy grew by 18.3 percent in the first three months of the year compared with the same period last year, when swathes of the country had been shut down because of the coronavirus pandemic. On Thursday, data showed U.S. retail sales in March leapt past expectations, increasing by nearly 10 percent, and initial state jobless claims fell last week to their lowest level of the pandemic.
This week, banks including Goldman Sachs and JPMorgan Chase reported better-than-expected earnings, and their chief executives delivered upbeat economic forecasts.
The yield on 10-year Treasury notes slipped to 1.57 percent on Friday. Last month, concerns that government spending would overheat the economy and lead to higher inflation sent bond yields shooting higher, to 1.74 percent on March 31. But those worries appear to have been soothed by central bank officials, who have repeatedly said they expect increases in inflation to be temporary.
Earlier this week, data showed that prices in the United States rose 2.6 percent in March from a year earlier, a larger-than-normal increase partly because prices of some items fell in March 2020 as the pandemic took hold.
Another reason yields have drifted lower is a “remarkable” demand for bonds, ING, a Dutch bank, said. Recent Treasury bond auctions have received more bids than normal, and JPMorgan Chase sold $13 billion of bonds on Thursday, the biggest sale ever by a bank, according to Bloomberg.
“Cash has to go somewhere, and it can’t all go into equities,” the ING analysts wrote in a note to clients.
To keep you watching, YouTube serves up videos similar to those you have watched before. But the longer someone watches, the more extreme the videos can become.
Caolan Robertson learned how making clever edits and focusing on confrontation could help draw millions of views on YouTube and other services. He also learned how YouTube’s recommendation algorithm often nudged people toward extreme videos.
Over more than two years, he helped produce and publish videos for right-wing Youtube personalities including Lauren Southern, Cade Metz reports for The New York Times.
Knowing what garnered the most attention on YouTube, Mr. Robertson said, he and Ms. Southern would devise public appearances meant to generate conflict. They attended a women’s march in London and, with Ms. Southern playing the part of a television reporter, approached each woman with the same four-word question: “Women’s rights or Islam?”
They often received a confused, measured or polite response, according to Mr. Robertson. They continued to ask the question and sharpened it. Ms. Southern, for example, said it would be difficult for Muslim women to answer the question because their husbands wouldn’t let them attend the march. That caused anger to build in the crowd.
“It appears in the videos that we are just trying to figure out what is going on, gather information, understand people,” Mr. Robertson said. “But really, we were trying to find the most incendiary way of making them mad.”
Ms. Southern described the situation differently. “We asked the question because we knew it was going to force people to question their own political views and realize the contradiction in being a hard-core feminist but also supporting a religion that, quite frankly, has questionable practices around women,” she said. And, she added, they used video techniques that any media company would use.
A court has awarded attendees of the infamous Fyre Festival approximately $7,220 apiece, nearly four years after they were left scrounging for makeshift shelter on a dark beach. The $2 million class-action settlement, reached Tuesday in U.S. Bankruptcy Court in the Southern District of New York between organizers and 277 ticket holders from the 2017 event, is still subject to final approval, and the amount could ultimately be lower depending on the outcome of Fyre’s bankruptcy case with other creditors.
CBS is turning to a pair of outsiders to restore the fortunes of a news operation that trails its rivals at ABC and NBC. CBS said on Thursday that Neeraj Khemlani, a vice president at the publishing powerhouse Hearst, and Wendy McMahon, a former ABC executive, would succeed Ms. Zirinsky. The two will serve as presidents and co-heads of CBS News, a division that will be expanded to include local stations owned by the network.
Today in the On Tech newsletter, Shira Ovide talks to Cade Metz about the factors that drivie us to get into heated fights on Facebook and watch hateful videos on YouTube.