What’s new? (July 3-9)
A Verdict on Theranos and Silicon Valley Culture
For many tech start-ups, the era of seemingly endless optimism and immunity – from scrutiny, skepticism and, above all, serious legal consequences – began to unravel when an expose about blood testing company Theranos was published in 2015, which raised questions. on the effectiveness of the company’s technology. A jury on Thursday found Theranos No. 2 executive Ramesh Balwani guilty of 12 counts of fraud, delivering another powerful warning to Silicon Valley. Prosecutors’ evidence against Mr. Balwani showed he was deeply involved in nearly every aspect of the business and knowingly misled investors and customers. The verdict was harsher than that of Elizabeth Holmes, the founder and chief executive of Theranos, who was convicted in January of four counts of fraud. It also comes amid other troubling signs in the start-up world: Tech stock prices have fallen this year and investors have become more risk averse.
Job growth remains strong
U.S. employers added 372,000 jobs in June, giving the labor market a bigger-than-expected boost — perhaps too big for the Federal Reserve, whose officials are seeking to slow the economy. Wages also continued to climb rapidly last month, and although Fed Chairman Jerome H. Powell maintains that high wages are not the main cause of rising prices, the numbers were another sign that the inflation rate is still far from that of the central bank. 2% target. But as concerning as these data points may be for the Fed, they were mostly reassuring for President Biden, as Friday’s jobs report suggested that the United States was not in recession and that the labor market , which he considers a feather in his cap, was still strong.
No Amazon hub in Newark
Amazon had once been confident about the prospect of building an airport cargo hub at Newark Liberty International Airport, but last week admitted defeat. The company had faced strong opposition from unions and advocacy groups who had called on Amazon to strike labor agreements and commit to a zero-emissions benchmark at the factory. Some of those groups have seen Amazon’s abandoned Newark project as another victory for workers and residents who want a say in the tech giant’s expansion in their community. The same concerns spurred resistance to Amazon’s efforts in 2019 to build a second headquarters in New York.
And after? (July 10-16)
Earnings season kicks off
Unlike anxious investors, Wall Street analysts don’t seem shaken by a possible recession, at least judging by their forecasts for upcoming corporate financial reports. For now, they expect S&P 500 companies to report earnings for the past three months 4.3% higher on average than a year ago, according to FactSet. PepsiCo, which saw a surge in revenue in the first quarter after raising product prices, will release its financial statements on Tuesday, followed on Wednesday by Delta Air Lines, which expects pent-up travel demand to bolster its profits . A group of banks, including JPMorgan Chase and Citigroup, will share their financial statements later this week, and their reports on loan demand, credit card spending and merger activity will attract more attention than usual as they can provide a window into the direction of the economy.
The euro is collapsing
The euro continues to trend towards parity with the dollar and hit its lowest level in two decades on Tuesday, another sign of the growing threat of a global economic slowdown. The currency began its fall after Russia invaded Ukraine in February, and in May many analysts predicted that the euro would equal the dollar by the end of the year and continue to fall in 2023. Its dwindling value is due to factors such as disrupted trade channels, Russian energy sanctions, and high commodity and food prices. But the decline is also the result of the dominance of the dollar, which is its strongest in years and persists as the safe haven of choice for worried investors.
Elon Musk walks away from his Twitter deal
In April, Elon Musk struck a $44 billion deal to buy Twitter. But on Friday, less than three months later, it signaled its intention to pull out of its acquisition of the influential social networking service. Mr Musk said the company failed to provide the information needed to calculate the number of spam accounts and appeared to make inaccurate statements. Twitter quickly responded that it was determined to force the deal. Next up is the courts, in what promises to be a major legal battle, involving months of expensive litigation and high-stakes negotiations by elite lawyers on both sides.
Ben & Jerry’s is suing Unilever, its parent company, to stop it from selling the distribution rights for the ice cream brand to a licensee in Israel. Caught between two competing purchase offers, Spirit Airlines has once again chosen to postpone its decision a little longer. New consumer price data will be released this week, giving Federal Reserve officials an idea of the effectiveness of their efforts to calm inflation.