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S&P 500 drops more than 1% to start the week as higher rates send tech shares lower

Stocks fell on Monday as investors grew increasingly concerned a three-year high in the benchmark U.S. interest rate would start to slow the economy.

The 10-year Treasury yield jumped above 2.78% on Monday, levels not seen since January 2019, as the Federal Reserve braces investors for tighter monetary policy ahead.

The tech-heavy Nasdaq Composite dropped 1.7% on the session as investors see growth stocks taking the biggest hit from higher rates. The S&P 500 slipped 1.3% following a losing week last week. The Dow Jones Industrial Average lost 246 points, or 0.7%.

“If we were to stack up what’s moving the markets today, I think we’re just mirroring what we’re seeing in the Treasury yield environment,” said Art Hogan, chief market strategist at National Securities. “And it’s hard to know what’s going to break that cycle except for a couple of days/weeks where rates either stabilize or are starting to pull back a bit.”

10-year yield hits highest level since 2019

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Concerns over higher interest rates have spurred investors to drop more risky assets, such as tech stocks that led losses on Monday. Microsoft declined 3.8%. Semiconductor stocks such as Nvidia and Advanced Micro Devices fell 5.3% and 4.3%, respectively.

Oil prices dropped on Monday amid fears that Covid lockdowns in China would depress global demand. International benchmark Brent crude declined 3.2% to trade at $99.45 per barrel. Meanwhile, West Texas Intermediate crude futures dropped 3%, to trade at $95.33 per barrel.

Energy stocks declined as a group. Occidental Petroleum is down 4.7%, Diamondback Energy is down 4.3% and Conocophillips fell 4%.

To be sure, airline stocks bucked the broader market’s negative trend, as Delta Air Lines spiked 4%. Alaska Air Group was up 2.7%, American Airlines Group jumped 2.8%, Southwest Airlines ticked upward 2.6% and United Airlines Holdings jumped 2.6%.

Meanwhile, AT&T popped 5.7% after spinning off its old WarnerMedia to merge with Discovery. JPMorgan analysts liked the decision, giving AT&T an overweight rating and saying the stock is now trading at a discount.

Twitter’s stock was on the move after CEO Parag Agrawal revealed that Elon Musk abandoned his plan to join the company’s board. Shares for the social media company dropped more than 8% in the premarket, but had recovered to gain 1.5% after markets opened.

Rates could get a boost again on Tuesday as an economic report is set to show inflation at the highest in decades. March’s consumer price index will show a 8.4% annual increase in prices, according to the consensus estimate of economists polled by Dow Jones.

Cleveland Fed President Loretta Mester told CBS’ “Face the Nation” on Sunday that she still believes the Fed can get inflation under control without causing major damage to the economy.

“If you look at the risks, given what’s happening in the world and in the economy, there is an increased risk [of recession],” she said. “But I remain optimistic, and certainly my modal forecast on what is going to happen this year is that the expansion will continue.”

Mester added that the Covid lockdowns in China will “exacerbate” the supply chain issues that are contributing to inflation in the U.S.

Later this week, the first-quarter earnings season will hit its stride with some major banks and airlines reporting earnings. On Wednesday, JPMorgan and Delta Air Lines will report their earnings before the bell. On Thursday, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo are expected to report before markets open.

Sony and the Lego family bet big on the ‘metaverse’ with $2 billion investment in Epic Games

Fortnite creator Epic Games has raised $2 billion in funding from Sony and the Lego family, in a massive deal highlighting the excitement from big businesses about the so-called metaverse.

Sony will inject $1 billion in the company, Epic announced Monday, while Kirkbi, the family owned investment company behind Lego, will invest an equal amount. The deal, which is subject to customary closing conditions, would value Epic at $31.5 billion.

The news arrives hot on the heels of a partnership announced by Epic and Lego last week, aimed at co-developing a “family-friendly” metaverse for kids. Lego already has a successful line of video games based on lucrative franchises, including Disney’s Star Wars and Warner Bros.′ Batman.

“A proportion of our investments is focused on trends we believe will impact the future world that we and our children will live in,” Soren Thorup Sorensen, CEO of Kirkbi, said in a statement Monday.

“This investment will accelerate our engagement in the world of digital play, and we are pleased to be investing in Epic Games to support their continued growth journey, with a long-term focus toward the future metaverse.”

Hype around the metaverse, a proposed network of vast virtual worlds, has taken the corporate world by storm lately. Facebook kicked off the trend by renaming itself Meta, and several big brands including JPMorgan, Samsung and Nike have begun experimenting with the technology.

However, companies like Epic and Roblox have long been talking about building a metaverse.

Epic’s battle royale game Fortnite lets up to 100 players fight it out to be the last one standing. But it’s been branching out into other forms of entertainment, hosting music concerts from artists like Travis Scott and Marshmello, for example.

Roblox, meanwhile, wants to build a metaverse where millions of people can gather to play games or even work in a virtual economy fueled by Robux, its own in-app currency.

Epic Games CEO Tim Sweeney said the fresh funds would help the company “accelerate our work to build the metaverse.”

“As we reimagine the future of entertainment and play we need partners who share our vision. We have found this in our partnership with Sony and KIRKBI,” Sweeney said in a statement.

While it’s best known as the company behind Fortnite, Epic Games is a video game powerhouse. The company developed Unreal Engine, one of the biggest platforms used to create games, and operates its own online games store which competes with Microsoft and Valve.

The company has been at the center of a heated dispute between app developers and Apple over the latter’s App Store fees. Last year, a judge ruled that Apple can no longer prevent developers from directing users away from Apple’s own payment system. The tech giant typically takes a 15% to 30% cut from all in-app purchases.

Gold prices higher in early Asian trading Monday

Gold futures for June delivery rose 0.4% to close at $1,945.60 an ounce on Comex, leaving it up 1.1% for the week.

“Gold is trading around the same level it was yesterday, the day before that, the day before that and so on. Despite the spike in volatility seen elsewhere this week as a result of the hawkish Fed shift, gold has been unmoved,” said Craig Erlam, senior market analyst at Oanda.

Analysts said gold’s role as an inflation hedge appears to be buoying the metal, with an important cost of living due Tuesday with release of the March consumer price index.

“The CPI report will be the economic event of the week,” David Donabedian, chief investment officer of CIBC Private Wealth US. “We expect inflation to surge above 8%. We know the commodity component will spike and will be paying particular attention to the core inflation rate, particularly services and shelter.”

Elon Musk decides not to join Twitter board, says CEO Parag Agrawal

Tesla and SpaceX CEO Elon Musk has abandoned his plans to join the board of Twitter, his social network of choice.

Twitter CEO Parag Agrawal announced publicly on Sunday that Musk remains the largest shareholder of Twitter, and the company will remain open to his input.

Musk informed Twitter on Saturday morning that he would not, in fact, take the board seat.

Musk’s appointment would have started on Saturday, “contingent on a background check and formal acceptance,” according to Agrawal.

“We were excited to collaborate and clear about the risks. We also believed that having Elon as a fiduciary of the company where he, like all board members, has to act in the best interests of the company and all our shareholders was the best path forward,” he wrote.

The Twitter CEO did not say whether Musk gave specific reasons for changing his mind about taking on the new obligation.

Encouraging Twitter employees to remain focused, Agrawal said, “There will be distractions ahead but our goals and priorities remain unchanged.agrawal.

On April 5, Elon Musk and Twitter said he would be joining Twitter’s board. A day earlier, the Tesla CEO and world’s richest person disclosed via financial filings that he’s the social media company’s biggest shareholder.

Twitter’s stock jumped 4% on Tuesday following the board announcement. On Monday, after Musk’s stake was initially revealed, Twitter had its best day since the company’s IPO in 2013, skyrocketing more than 27%. 

A financial filing from Twitter specified that as long as Musk served on its board, he would be limited to owning no more than a 14.9% stake in the company’s common stock outstanding, including through derivative securities, swaps, or hedging transactions.

Musk could theoretically increase his 9% stake beyond that limit now.

Throughout the weekend, without revealing that he had turned down the board seat at Twitter, Musk posted a number of ideas to transform the social media company and its products.

One of the suggestions was a coarse joke in the form of a Twitter poll. Musk asked people to vote on whether Twitter should drop the “w” from its name. Doing so would turn Twitter into “titter,” an allusion to female anatomy.

More serious suggestions from Musk included to let Twitter Blue subscribers pay with dogecoin, get an “authentication” checkmark, and keep Twitter Blue free of advertisements.

“Everyone who signs up for Twitter Blue (ie pays $3/month) should get an authentication checkmark,” Musk wrote. “And no ads. The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.”

Musk also suggested that Twitter should turn its headquarters office in San Francisco into a homeless shelter, “since no one shows up anyway.”

Musk’s competitor and fellow centi-billionaire, Jeff Bezos, chimed in. Bezos said Twitter could turn a portion of its office into a shelter. “Worked out great and makes it easy for employees who want to volunteer,” he said sharing a story about a similar initiative at Amazon.

Chinese indexes drop at least 2% after data shows China producer inflation surging

SINGAPORE — Chinese stocks led losses in Asia-Pacific markets in Monday trade as investors reacted to China’s inflation data for March.

The Shanghai composite was down 1.75% while the Shenzhen component tumbled 2.74%.

Hong Kong’s Hang Seng index dropped 2.45%. Hong Kong-listed shares of Chinese electric vehicle maker Nio plunged more than 8% after the firm announced a suspension in production due to disruptions at its supply chain partners as a result of Covid.The more notable fact is the big gap between [China’s consumer price index] and [producer price index], and that indicates that pricing power amongst most companies in China is weak and they’re taking a hit on margins.Ramiz ChelatPORTFOLIO MANAGER, VONTOBEL ASSET MANAGEMENT

China’s producer inflation for March was higher than expected. The producer price index surged 8.3% as compared with a year ago, official data showed Monday, above expectations for a 7.9% increase in a Reuters poll.

Chinese consumer inflation also rose more than expected in March, with the consumer price index climbing 1.5% year-on-year. That was above expectations in a Reuters poll for a 1.2% increase.

The data release comes as mainland China is fighting to control its worst wave of Covid since the beginning of the pandemic in early 2020.

“I think the more notable fact is the big gap between CPI and PPI, and that indicates that pricing power amongst most companies in China is weak and they’re taking a hit on margins,” Ramiz Chelat, portfolio manager at Vontobel Asset Management, told CNBC’s “Street Signs Asia” on Monday.

“Given the infectiousness of omicron, we could see more localized lockdowns being a recurring theme,” he said. “We think you need to be very selective in China, look for companies that can deliver in a growth-challenged environment.”

Elsewhere, the Nikkei 225 in Japan slipped 0.8% while the Topix index shed 0.63%. South Korea’s Kospi dipped 0.35%.

Australia’s S&P/ASX 200 bucked the overall trend regionally as it climbed slightly.

Over in Southeast Asia, shares of tech firm GoTo soared more than 15% from their issue price as they made their debut in Indonesia. The broader Jakarta Composite also gained 0.76%.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.26% lower.

Oil falls more than 2%

Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures down 2.33% to $100.39 per barrel. U.S. crude futures shed 2.39% to $95.91 per barrel.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 99.922 after recently crossing the 100 level.

The Japanese yen traded at 124.86 per dollar, weaker as compared to levels below 123.2 seen against the greenback last week. The Australian dollar was at $0.7438 following last week’s drop from above $0.763.

Elon Musk proposes Twitter Blue subscription shakeup days after disclosing 9.2% stake

Elon Musk, Twitter Inc’s biggest shareholder, on Saturday suggested a raft of changes to the social media giant’s Twitter Blue premium subscription service, including slashing its price, banning advertising and giving an option to pay in the cryptocurrency dogecoin.

Musk, who disclosed a 9.2% stake in Twitter just days ago, was offered a seat on its board of directors, a move which made some Twitter employees panic over the future of its ability to moderate content.

Twitter Blue, launched in June 2021, is Twitter’s first subscription service and offers “exclusive access to premium features” on a monthly subscription basis, Twitter says. It is available in the United States, Canada, Australia and New Zealand.https://platform.twitter.com/embed/Tweet.html?c

In a Twitter post, the head of electric vehicle maker Tesla Inc suggested that users who sign up for Twitter Blue should pay significantly less than the current $2.99 a month, and should get an authentication checkmark as well as an option to pay in local currency.

“Price should probably be ~$2/month, but paid 12 months up front & account doesn’t get checkmark for 60 days (watch for credit card chargebacks) & suspended with no refund if used for scam/spam,” Musk said in a tweet.

“And no ads,” Musk suggested. “The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.”

Musk also proposed an option to pay with dogecoin and asked Twitter users for their views.

Twitter declined to comment on Musk’s suggestions.

The company already lets people tip their favorite content creators using bitcoin. Twitter had said last year that it planned to support authentication for NFTs, or non-fungible tokens, which are digital assets such as images or videos that exist on a blockchain.

Musk also started a poll on his Twitter account – which has more than 81 million followers – asking whether the firm’s San Francisco headquarters should be converted to a homeless shelter as “no-one shows up (to work there)”. The poll got more 300,000 votes in an hour, with 90% answering yes.

Keeping up with all the changes that come with every new taxation year can be difficult, especially if a client is in a complex situation such as being a caregiver or trying to determine the provisions between provincial and federal governments.

With more than three weeks to go before the tax-filing deadline, advisors have the opportunity to check in with such clients to make sure they’re on track to apply for the right claims or exemptions – depending on their situations.

Evelyn Jacks, tax expert and president of the Knowledge Bureau Inc., spoke with Globe Advisor editor Pablo Fuchs about the key tax changes for educators, students and those with disabilities.

What changes to tax credits should taxpayers be aware of this season?

If you’re an eligible educator, certified teacher, or a child care educator, then we have an educator tax credit and it has increased to 25 per cent from 15 per cent of $1,000. That’s $250 in real terms on the federal government’s side. Now, we have one in Manitoba, and it’s sort of an equivalent or a mirrored amount as it’s at 15 per cent. [But] federal and provincial taxes don’t necessarily mirror each other with all of the provisions, [which is] another thing for people to keep in mind.

We have had some changes to the disability tax credit as well. That’s a very lucrative credit. If you’re taking care of someone who has dementia, Alzheimer’s, or some kind of emotional behavioral [impairment] … that markedly restricts their daily living activities, then you will be able to perhaps qualify this year if you have the right form you’re filing… which is T2201. You have to get it over to your doctor.

Can you explain the changes affecting registered retirement savings plan (RRSP) contribution room?

First of all, you have to look to your [clients’] notice of assessment to make sure they understand what their contribution room is. Second, the government is starting to play with that contribution room with other provisions.

For example, currently, we have a new change that if you have a postdoctoral student and they had earnings granted to them to do those studies, the government is now going to allow you to go back to 2001 – over a 10-year period – to create unused RRSP contribution room. That’s fantastic news, but [eligible clients] have to apply for that by 2026. So, a professor or someone who is working on postdoctoral studies at this time, that’s really good news for them.

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Likewise, we have another provision whereby people who have contributed to a defined-contribution [pension] plan are going to be able to correct over or under contributions to those plans with the result that their pension adjustment could change. That could result in a negative RRSP contribution room in some cases. So, we want to watch for that because it’s going to become a new [financial] planning scenario.

Bank of Canada expected to announce oversized rate hike this week

The Bank of Canada is expected to announce its first oversized interest-rate hike in more than two decades this week after hawkish comments from the country’s top central bankers and growing signs that the economy is overheating.

Governor Tiff Macklem and his team have so far taken a gradual approach to tightening monetary policy, keeping borrowing costs near record lows and changing policy levers in a deliberate manner.

But with inflationary pressures broadening, and Russia’s invasion of Ukraine sending energy and food prices soaring, bank officials appear ready to push Canadian interest rates up aggressively.

There is a broad consensus among Bay Street economists that the central bank will raise its policy interest rate by half a percentage point at its Wednesday rate announcement, instead of the usual quarter percentage point. The last time it did this was in May, 2000.

This coincides with a growing sense that central bankers waited too long to start raising rates, and that the world may be entering a period of persistently higher inflation

Deputy governor Sharon Kozicki gave credence to the idea of an oversized rate hike in a speech last month. She said the bank was “prepared to act forcefully” to combat inflation, which hit a three-decade high of 5.7 per cent in February. She added that the governing council would likely discuss both the pace and magnitude of increases ahead of the April 13 rate decision – a strong hint that a half-percentage-point rate hike is on the table.

The Bank of Canada kicked off a rate-hike cycle last month, increasing its policy rate to 0.5 per cent from 0.25 per cent. Borrowing costs are still well below normal levels, and analysts expect the bank to proceed with a quick succession of rate hikes, pushing the policy rate above the prepandemic level of 1.75 per cent by the end of the year.

Recent economic data has bolstered the case for a half-percentage-point move this week.

On Friday, Statistics Canada reported that the country added another 73,000 jobs in March, bringing the unemployment rate down to 5.3 per cent, the lowest in nearly five decades of comparable data. Meanwhile, a Bank of Canada business survey, published last week, showed that companies are struggling with labour shortages and rising input costs, and are planning to pass higher expenses to consumers.

This suggests that the Canadian economy has fully recovered from the pandemic downturn and is now bumping up against capacity limits, Royal Bank of Canada economist Claire Fan said in an interview.

SpaceX capsule carrying businessmen that paid $55M each docks at space station

https://www.foxbusiness.com/technology/spacex-capsule-docks-space-station