Stocks Tumble as Inflation Concerns Resurface: Live Business Updates

Stocks fell around the world on Tuesday, extending a sell-off that began on Wall Street on Monday in the tech sector.

Traders remain unsettled by rising prices and the impact that could have on inflation. In turn, this could prompt central banks to rein in monetary stimulus sooner.

The S&P 500 was 1.6 percent lower on Tuesday, while the tech-heavy Nasdaq dropped 1.2 percent after the index fell 2.6 percent on Monday.

The Stoxx Europe 600 index dropped 2.3 percent, the worst day since late December. The Nikkei 225 in Japan closed 3 percent lower.

Commodity prices have soared recently. Futures on copper, which is often seen as a barometer for the global industrial economy, reached record highs on Friday and oil prices have recently hovered near levels not seen since 2018. Even though commodities pulled back from their highs on Tuesday, the elevated prices are expected to raise costs for businesses.

It’s fuel for a debate about how temporary the increase in inflation this summer will be. Federal Reserve policymakers have said they expect it to be transitionary — because bottlenecks in supplies will be resolved, and comparisons to last year’s slowdown make inflation numbers appear worse.

Still, investors have been spooked by the prospect that the Fed might be forced to raise interest rates to rein costs in sooner than it has indicated it will. Higher interest rates discourage risk taking in the markets, and high-flying stocks can be hit hard when concern about inflation dominates. On Wednesday, the U.S. government will report its Consumer Price Index for April.

On Monday, a survey showed Americans’ year-ahead inflation expectations rose to 3.4 percent in April, the highest level since 2013, but the longer-term outlook — over the next three years — held steady at 3.1 percent.

“The recovery in demand coupled with the supply disruptions across the world are raising fears” that the jumps in inflation reported over the next few months “may not quickly reverse,” Henry Ward, an analyst at HSBC, wrote in a note. “Commodity prices from lumber to oil are rising and house prices continue to hit new highs.”

On Tuesday, oil prices fell. Futures on West Texas Intermediate, the U.S. crude benchmark, dropped 0.5 percent to $64.63 a barrel. Last week, the price climbed above $65 to the highest since October 2018.

“We are now entering a time of year when stocks have historically found it more challenging to advance,” Mark Haefele, the chief investment officer at UBS Global Wealth Management, wrote in a note. With stock indexes already near record highs and concerns rising about coronavirus variants, “investors may be tempted to follow the old adage: Sell in May and go away,” he wrote.

But he recommended that investors stay in the market, despite expected volatility, because the government spending coupled with consumer spending as economies further unlock will lead to more economic growth, which would be good for stocks.

Credit…Doug Mills/The New York Times

Semiconductor companies and big businesses that use chips have formed a new coalition to push for tens of billions of dollars in federal funding for semiconductor research and manufacturing in the United States.

The new group, the Semiconductors in America Coalition, announced its formation on Tuesday amid a global semiconductor shortage that has caused disruptions throughout the economy. Its members include chip makers like Intel, Nvidia and Qualcomm and companies that rely on semiconductors, like Apple, Google, Amazon Web Services, Microsoft, Verizon and AT&T.

The coalition is calling on Congress to provide $50 billion for semiconductor research and manufacturing, which President Biden has proposed as part of his $2.3 trillion infrastructure package.

“Leaders from a broad range of critical sectors of the U.S. economy, as well as a large and bipartisan group of policymakers in Washington, recognize the essential role of semiconductors in America’s current and future strength,” said John Neuffer, the president and chief executive of the Semiconductor Industry Association, a trade group.

In a letter to congressional leaders, the new coalition noted the shortage of semiconductors and said that in the long term, federal funding “would help America build the additional capacity necessary to have more resilient supply chains to ensure critical technologies will be there when we need them.”

The shortage has been acutely felt in the auto industry, forcing carmakers to idle plants. Ford Motor expects the shortage to cause profit to be about $2.5 billion lower this year and to cut vehicle production by about 50 percent in the second quarter.

The new coalition does not include any automakers, which have their own ideas for how the government should encourage domestic semiconductor manufacturing. In a letter to congressional leaders last week, groups representing automakers, automotive suppliers and autoworkers expressed support for Mr. Biden’s $50 billion proposal but emphasized the need to increase production capacity for automotive grade chips as part of the effort.

The letter — from the American Automotive Policy Council, the Motor & Equipment Manufacturers Association and the United Automobile Workers union — suggested providing “specific funding for semiconductor facilities that commit to dedicating a portion of their capacity to motor vehicle-grade chip production.”

In a letter to congressional leaders last month, technology trade groups argued against setting aside new production capacity for a specific industry, saying that such a move would amount to “unprecedented market interference.”

Gov. Roy Cooper of North Carolina, declared a state of emergency, allowing fuel transportation waivers.
Credit…Carolyn Kaster/Associated Press

The vital fuel pipeline stretching 5,500 miles from Texas to New Jersey remained largely shut down on Tuesday after last week’s ransomware attack.

Colonial Pipeline, the company that operates the pipeline, said Monday that it hoped to restore most operations by the end of the week. The attack, which the Federal Bureau of Investigation said was carried out by an organized crime group called DarkSide, has highlighted the vulnerability of the American energy system. The pipeline provides the Eastern United States about half its energy.

Industry analysts said the impact would remain relatively minor as long as the artery was fully restored soon. “With a resolution to the shutdown in sight, the cyberattack is now treated as a small disturbance by the market and prices are trimming Monday’s panic-gains,” said Louise Dickson, an oil markets analyst for Rystad Energy.

Here are some of the latest developments:

  • Gov. Brian Kemp of Georgia has signed an executive order suspending his state’s gasoline tax through Saturday, which amounts to roughly 20 cents a gallon. He said the move would “help level the price for a little while,” and cautioned against panic buying, which he said was unnecessary.

  • According to the AAA automobile group, the national average for a gallon of regular gasoline went up 2 cents on Tuesday, with higher prices reported in the Southeast. A gallon went up an average of nearly 7 cents in South Carolina and 6 cents in North Carolina, while gas in Virginia rose about 3 cents a gallon.

  • Gas Buddy, a website that tracks gas prices, reported that nearly 8 percent of Virginia gas stations were without gasoline, apparently more a result of panic buying than a shortage of gas.

  • Roy Cooper, the governor of North Carolina, declared a state of emergency in an effort to suspend some fuel transport rules.

  • Jen Psaki, the White House press secretary, issued a statement on Monday night saying President Biden was monitoring the fuel shortages in the Southeast.

  • American Airlines added stops to two daily flights out of Charlotte, N.C. One, to Honolulu, will stop in Dallas, where customers will change planes. The other, to London, will stop in Boston to refuel. The flights are expected to return to their original schedules on Saturday. Southwest Airlines said it was flying in supplemental fuel to Nashville, but operations were otherwise unaffected. Delta Air Lines said it had not experienced any disruption so far.

  • The Environmental Protection Agency administrator, Michael S. Regan, issued an emergency fuel waiver on Tuesday to help alleviate fuel shortages in states whose supply of gasoline has been affected by the pipeline shutdown, including the District of Columbia, Maryland, Pennsylvania and Virginia. The waiver will continue through May 18.

Gillian Friedman contributed reporting.

Travelers at Salt Lake City International Airport in March. OPEC is projecting growing demand for oil and petroleum products — including airplane fuel — as global economies expand through the year.
Credit…Rick Bowmer/Associated Press

OPEC forecast on Tuesday that demand for its oil, which collapsed during the pandemic last year, would continue to roar back in 2021.

In its Monthly Oil Report, the 13-member Organization of the Petroleum Exporting Countries depicted favorable market conditions for the cartel that could potentially lead to higher prices for consumers.

The world economy will continue to recover, the OPEC analysts said, thanks to stimulus measures and vaccination programs in the United States and Europe, and accelerating growth in most Asian economies. Economic recovery will translate into a substantial rise in demand for oil.

At the same time, OPEC’s economists expect production from the cartel’s rival, the United States, to remain flat this year as the shale oil producers, who seized market share from OPEC in the years before the pandemic, rein in spending on drilling.

Over all, output from producers outside the cartel will increase by less than one million barrels a day for 2021 from 2020’s depressed levels, OPEC forecast.

OPEC said that the need for the organization’s crude would surge in 2021 by an overall 5.2 million barrels a day, or more than 20 percent, after a drop by about the same amount in the previous year. OPEC defines demand for its crude as the gap between world oil demand and the output of other producers.

Prompted by Saudi Arabia, OPEC and its allies, including Russia, have been only gradually opening up their spigots as world demand returns from the pandemic, creating a tight market that has contributed to prices for Brent crude approaching $70 a barrel. OPEC, for instance, estimated that in the first quarter of 2021 demand for its crude outstripped supply by about 700,000 barrels a day.

In April, the group known as OPEC Plus agreed to a program of gradual increases through July. The group reaffirmed these plans on April 27. Analysts say that these adjustments are still likely to add up to a market where supplies are tight.

OPEC and Russia are, however, by agreement not producing several million barrels of oil a day, and pressures will grow to open the taps if demand continues to increase. In addition, a breakthrough in ongoing indirect negotiations between the United States and Iran could lead to large volumes of Iranian oil coming into the market later this year.

The company said last year it was considering separating Victoria’s Secret from the rest of its business.
Credit…Ted Shaffrey/Associated Press

L Brands has decided to spin off Victoria’s Secret rather than sell it, the DealBook newsletter was the first to report.

The company said last year it was considering separating Victoria’s Secret from the rest of its business, and it tested the interest of private equity. Ultimately, L Brands decided to split itself into two independent, publicly listed companies: Victoria’s Secret and Bath & Body Works. The deal is expected to close in August.

L Brands received several bids north of $3 billion, sources familiar with the situation said, requesting anonymity because the information is confidential. It turned the offers down, because it expects to be valued at $5 billion to $7 billion in a spinoff to L Brands shareholders. Analysts at Citi and JPMorgan recently valued Victoria’s Secret as a stand-alone company at $5 billion.

“In the last 10 months, we have made significant progress in the turnaround of the Victoria’s Secret business, implementing merchandise and marketing initiatives to drive top line growth, as well as executing on a series of cost reduction actions, which together have dramatically increased profitability,” Sarah Nash, chair of the company’s board, said in a statement.

“The board believes that this path forward will return the highest value to shareholders and that the separation will allow each business to achieve its best opportunities for growth.”

The pandemic torpedoed a sale last year for much less. That agreement, announced in February 2020 with the investment firm Sycamore Partners, valued Victoria’s Secret at $1.1 billion.

Apart from a pandemic that upended the retail industry, Victoria’s Secret was dealing with a series of challenges: a brand that had fallen out of touch, accusations of misogyny and sexual harassment in the workplace and revelations about the ties between Les Wexner, the company’s founder and former chairman, and Jeffrey Epstein. (Mr. Wexner stepped down as chief executive last year and said in March that he and his wife were not running for re-election on the company’s board.)

As the pandemic shuttered stores and battered sales, Sycamore sued L Brands to get out of the deal, and L Brands countersued to enforce it, heralding a spate of similar battles between buyers and sellers. Eventually, in May 2020, the sides agreed to call off the deal.

A lot has changed since then. The retailer has overhauled its brand, de-emphasizing the overtly sexy image and products that customers saw as exclusionary. It has become “less focused on a specific demographic target and more focused on being broadly inclusive of all women of all shapes and sizes and colors and ethnicities and genders and areas of interest,” Martin Waters, the retailer’s chief executive, said on a recent earnings call.

The company also closed more than 200 stores and focused on improving profitability, which rose sharply at the end of last year, surpassing its prepandemic results.

Victoria’s Secret operating income

Victoria’s Secret is one of the retailers transformed by the pandemic, along with others like Dick’s Sporting Goods and Michaels, accelerating digital overhauls that may have otherwise taken years. Direct sales at Victoria’s Secret in North America rose to 44 percent of the total last year, from 25 percent the year before.

It’s unclear whether pandemic shopping trends will stick, and “it would be reasonable to expect some reversion,” Stuart Burgdoerfer, the L Brands chief financial officer, said at a March event. “But I also think that people have very much enjoyed some of the benefits that were forced on us or triggered through the pandemic.”

Amazon’s two-year bond has a yield just 0.1 percentage points above the equivalent in Treasuries.
Credit…Mark Lennihan/Associated Press

Amazon sold $18.5 billion worth of bonds Monday, joining other corporate giants taking advantage of ultralow interest rates to raise money because … well, why not? The e-commerce titan was able to sell some of its debt at a record-low interest rate for a corporate issuer — barely above what the U.S. government pays.

Amazon’s two-year bond has a yield just 0.1 percentage points above the equivalent in Treasuries. That’s a big vote of confidence in Amazon, which has emerged as a winner during the pandemic. Over all, investors placed $50 billion worth of orders, according to The Financial Times, underscoring enthusiasm for debt that yields next to nothing.

Amazon raised $1 billion in the form of a sustainability bond, which is meant to finance investments in environmentally minded projects like zero-carbon infrastructure and cleaner transportation. Amazon is the latest company to sell bonds aimed at so-called E.S.G. investors (short for environmental, social and governance), a market that reached $270 billion last year.

To be sure, the bulk of Amazon’s offering will finance typical corporate actions like share buybacks, acquisitions and capital expenditures, according to the bond prospectus. It will add to the nearly $34 billion in cash that Amazon had on hand at the end of March — as will profits that are growing at extraordinary rates for a company of its size.

Macy’s wants to build an office tower atop its Herald Square location.

Macy’s is proposing the construction of a commercial office tower on top of its flagship Herald Square store in New York as part of a broader redevelopment plan that would aim to improve the surrounding area and its subway stations.

The retailer said in a statement on Monday that it would commit $235 million to help improve the Herald Square subway stations and to “transform Herald Square and Broadway Plaza into a modern, car-free pedestrian-friendly urban space for New Yorkers and visitors,” according to a website it created for the proposed project.

Before Macy’s proposal can move ahead, the area needs to be rezoned to allow the new structure to be built atop the retailer’s iconic Herald Square store, which opened more than 100 years ago and would remain open during any new construction. The project would also need to go through an approval process with the city.

Macy’s added that it was eager to begin a public review process on the project and that it would “work closely with local officials, Manhattan Community Board 5, the 34th Street Partnership and other community stakeholders on final designs.”

Macy’s, which released renderings of the proposed building and pedestrian area, said that it supported the construction of the office space as part of an expected boom in new office jobs in New York this year. The beleaguered retailer added that the city was expecting a return to prepandemic office employment levels by the fourth quarter, and it estimated that its proposal would generate more than $250 million in new tax revenue for the city while supporting nearly 16,300 jobs.

“Take care of yourself, and if you don’t already have a good support system, develop one,” Joni Ratts said.
Credit…Jenna Schoenefeld for The New York Times

For millions of retirement savers, the pandemic was a gut punch. There was the jarring stock market drop in March 2020, then millions lost their jobs, health insurance and ability to fund their savings.

The pandemic stymied adults who hadn’t started saving for retirement, the number of workers taking withdrawals from their 401(k)s last year jumped, and some companies cut their 401(k) matching contributions.

John F. Wasik, a writer for The New York Times, spoke with financial advisers about the seven steps people can take now to catch up on their retirement savings:

  • Track your total spending. Spending has the biggest impact and is the input you have the most control over, said Clari Nolet, a certified financial planner and certified divorce financial analyst.

  • Focus on health insurance. When many people lose their jobs, they lose health insurance coverage for themselves and family. Those laid off can often continue their insurance under a COBRA plan, said Lori Price, a certified financial planner — but it can be onerously expensive.

  • Make catch-up contributions. If you’re 50 or older, the Internal Revenue Service gives you a little savings plum: You can save as much as an extra $6,500 annually in your defined contribution plans (which include 401(k)s, 403(b)s and 457s).

  • Automate your savings. If you’re working and offered a 401(k) with automatic payroll withdrawals, you can simply increase your contribution. Want to save even more? Many plans allow you to increase your 401(k) savings when you get a raise.

  • Adjust your portfolio. Just socking more money into a bank money-market account won’t help you catch up much at all. Yields on money markets are awful — the top rate nationally was 0.60 percent, according to

  • Retire later. If you’re able, one simple strategy is to retire after the “normal” age for Social Security benefits, which is 66 for most Americans. That will give you more time to save. Social Security will even pay you more each month if you wait until 70 to collect benefits.

  • Set up your own plan. Small-business owners or those who are self-employed can set up their own plans, from Simplified Employee Pension I.R.A.s to 401(k)s.

Dogfish Head Craft Brewery is struggling to hire manufacturing workers for its beer factory and staff members for its restaurants.
Credit…Alyssa Schukar for The New York Times

As employers race to hire before an expected summertime economic boom, they are voicing a complaint that is echoing all the way to the White House: They cannot find enough workers to fill their open positions and meet the rising customer demand.

Many managers are unwilling to raise wages and prices enough to keep up, as they worry that demand will ebb in a few months and leave them with permanently higher payroll costs. They are instead resorting to short-term fixes, like cutting hours, instituting sales quotas and offering signing bonuses to get people in the door, Jeanna Smialek and Jim Tankersley report for The New York Times.

In and around Rehoboth Beach, Del., at least 10 people, managers and workers alike, cited expanded payments as a key driver of the labor shortage, though only two of them personally knew someone who was declining to work to claim the benefit.

In Delaware, Wawa gas stations sport huge periwinkle blue signs advertising $500 signing bonuses, plus free “shorti” hoagies each shift for new associates. A local country club is offering referral bonuses and opening up jobs to members’ children and grandchildren. A regional home builder has instituted a cap on the number of houses it can sell each month as everything — open lots, available materials, building crews — comes up short.

Scott Kammerer oversees a local hospitality company that includes a brewery and restaurants. He has been able to staff adequately by offering benefits and taking advantage of the fact that he retained some workers because his restaurants did not close fully or for very long during the pandemic.

But he has also raised wages. The company’s starting non-tip pay rates have climbed to $12 from $9 two years ago. Mr. Kammerer has not been forced to raise prices to cover increasing costs, because business volume has picked up so much — up 40 percent this year compared with a typical winter — that profits remain solid.