Business

By Amruta Khandekar and Noel Randewich

(Reuters) – Wall Street rallied on Tuesday, lifted by Apple, Tesla and other megacap growth stocks after strong retail sales in April eased worries about slowing economic growth.

Ten of the 11 major S&P sector indexes advanced, with financials, materials and technology each up over 2%.

Investors were cheered by data showing U.S. retail sales increased 0.9% in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants.

Recently punished shares of Microsoft Corp, Apple Inc, Tesla Inc and Amazon gained between 1.3% and 4.4%, lifting the S&P 500 and the Nasdaq.

Tuesday’s broad rally followed weeks of selling on the U.S. stock market that last week saw the S&P 500 sink to its lowest level since March 2021.

“The largest pockets of stocks that investors tend to buy have been essentially beaten up. They’re either in correction or bear market territory,” said Sylvia Jablonski, chief investment officer of Defiance ETF. “I think investors are looking at these opportunities to buy on the dip, and I suspect that today is a good day to do that.”

The S&P 500 Banks index jumped 3.1%, with Citigroup climbing 7.9% after Warren Buffett’s Berkshire Hathaway disclosed a nearly $3 billion investment in the U.S. lender.

Another set of economic data showed industrial production accelerated 1.1% last month, higher than estimates of 0.5%, and faster than a 0.9% advance in March.

“This is consistent with continued economic growth in the second quarter and not a recession underway,” said Bill Adams, chief economist for Comerica Bank in Dallas.

The U.S. Federal Reserve will “keep pushing” to tighten U.S. monetary policy until it is clear inflation is declining, Fed Chair Jerome Powell said at an event on Tuesday.

Traders are pricing in an 85% chance of a 50-basis point rate hike in June.

In afternoon trading, the S&P 500 was up 1.27% at 4,059.02 points.

The Nasdaq gained 1.76% to 11,868.20 points, while Dow Jones Industrial Average was up 0.74% at 32,461.93 points.

GRAPHIC-S&P 500’s busiest trades: https://fingfx.thomsonreuters.com/gfx/mkt/zgpomemlwpd/SPX_by_busiest_trades.png

Walmart Inc tumbled about 11% after the retail giant cut its annual profit forecast, signaling a bigger hit to margins.

Retailers Costco, Target and Dollar Tree fell between 0.9% and 2.1%.

United Airlines Holdings Inc gained 7.3% after the carrier lifted its current-quarter revenue forecast, boosting shares of Delta Air, American Airlines and Spirit Airlines.

A positive first-quarter earnings season has been overshadowed by worries about the conflict in Ukraine, soaring inflation, COVID-19 lockdowns in China and aggressive policy tightening by central banks.

The S&P 500 is down about 15% so far in 2022, and the Nasdaq is off 24%, hit by tumbling growth stocks.

U.S.-listed Chinese stocks jumped on hopes that China will ease its crackdown on the technology sector.

Advancing issues outnumbered declining ones on the NYSE by a 3.58-to-1 ratio; on Nasdaq, a 3.15-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and 30 new lows; the Nasdaq Composite recorded 21 new highs and 108 new lows.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru, and Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta and Lisa Shumaker)

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(Reuters) -Netflix on Tuesday said it has laid off about 150 people, mostly in the United States, as the streaming service company faces slowing growth.

The layoffs represent approximately 2% of the company’s workforce in the United States and Canada.

“These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues,” the company said in a statement. “We’re working hard to support them through this very difficult transition.”

The job cuts come as Netflix reported its first loss of subscribers in more than a decade and forecast deeper losses in the coming quarter. It said the war in Ukraine and fierce competition contributed to the loss of customers.

As a result of its declining growth, Netflix said it would introduce a cheaper, ad-supported tier and look more closely at its spending.

“We’re trying to be smart about it and prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth of the business,” Netflix Chief Financial Officer Spencer Neumann told investors during the company’s most recent earnings call.

(Reporting by Dawn Chmielewski in New York; Editing by Mark Porter, Bernard Orr)

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By Sabrina Valle

HOUSTON (Reuters) – Equinor SA and Exxon Mobil Corp have taken the first steps to expand an $8 billion oil development off Brazil’s coast, the Norwegian oil producer told Reuters.

The firms want to boost future production from the Bacalhau oil field, Equinor’s largest project outside of Norway with more than 1 billion barrels of oil, the company said.

A second drilling rig and a second floating production platform are being considered for the next phase along with a more than 100-mile-long gas pipeline, three people close to the discussions said.

For Exxon, Bacalhau could provide its first barrel of oil from offshore Brazil, one of its top growth prospects, and a new supply of oil from lower carbon operations. First oil is due in 2024 from the venture’s 220,000 barrel per day (bpd) production vessel.

Exxon referred questions to Equinor, which operates the field. Equinor told Reuters it plans to drill a new appraisal well in the north of the Bacalhau field next year “to better understand the reserves base for the Phase 2 development.”

The partners are assessing awarding a contract for a second drilling rig. Pre-drilling of phase 1 wells should start in the third quarter this year, a spokesperson said. Equinor did not comment on plans for a new FPSO or pipeline.

INVESTMENT MAY DOUBLE

“Bacalhau is a globally competitive project with a break even below $35 in a key energy region,” the spokesperson said in response to Reuters questions.

The second phase could potentially double the project investment if the new exploration works are successful, two people close to discussions said.

One of the issues to be decided is whether the field will produce enough oil to justify a second floating platform, or FPSO, and a gas pipeline to bring the field’s natural gas to shore, two of the people said.

Equinor and Exxon could use a subsea tieback if the findings do not justify a second platform, two of the people said. Wells would be connected to the first FPSO, which would reinject the gas into the reservoir.

The first FPSO is being built by Japan’s Modec Inc and was designed to keep greenhouse gas emissions intensity 65% below Exxon’s average, according to a company presentation.

DRILLING TO COMMENCE

The partners last year signed a $380 million, four-year contract with Seadrill Ltd for the phase 1 campaign.

Bacalhau is Brazil’s first pre-salt field not to be developed by state-controlled Petroleo Brasileiro SA, which made the discovery in 2012 and sold it to pay down debt. Equinor holds a 40% stake, as does Exxon. Petrogal Brasil owns a 20% share.

Seadrill’s West Saturn rig will drill Bacalhau’s first six of 19 approved wells, according to Equinor. It is the same rig that Exxon has used in offshore blocks it operates in Brazil, with no exploration success.

(Reporting by Sabrina Valle; Editing by Sam Holmes)

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By Marcelo Teixeira

(Reuters) – Brazilian sugar cane mills are cancelling some sugar export contracts and diverting production to ethanol to cash in on high energy prices, according to people with direct knowledge of the deals, raising concerns of a sugar shortage.

Nearly every company involved in sugar trading in Brazil has seen cancellations, a trader at a large international commodities merchant told Reuters on the sidelines of Sugar Week in New York last week. He estimated total cancellations so far at 200,000 to 400,000 tonnes of raw sugar.

“It is happening because of the production mix change and also because of the crop delay,” the trader said.

Brazil exports around 2.2 million tonnes of sugar per month during the peak of the crop. A large fall in sugar output could lead to a global sugar shortage, some traders say.

Most mills in Brazil are flexible and can partially shift from sugar or ethanol production. Right now, production is shifting in favor of ethanol as high energy prices driven by pandemic recovery and war in Ukraine spur more fuel output.

Recent analyst projections show lower sugar output numbers and higher ethanol volumes because biofuel sales have become more profitable for mills. Ethanol sales increased 2.6% in April.

A second trader, also working for a large international food merchant, confirmed the cancellations – known in the industry as washouts – and said most traders are trying to be flexible when negotiating. “These are take-or-pay contracts, there is a fee, so sometimes the cost could be high for the mill,” he said.

An executive at one of the largest mills in Brazil who asked not to be named said the gains from shifting from sugar to ethanol offset the costs of cancellations. Brazil is second largest ethanol producer after the United States.

“Ethanol sales are paid in one or two days, while export sugar takes much longer, and mills have many bills to pay in the harvest kick-off,” he said.

Hydrous ethanol was trading at the equivalent of a sugar price of 20 cents per pound late last week, while sugar futures in New York were trading a bit over 19 cents per pound. [SOF/L]

Last season mills used 45% of the sugarcane crop to make sugar and 55% to make ethanol. Every percentage point corresponds to around 700,000 tonnes of sugar.

According to data from sugar industry group UNICA, the lowest sugar mix was 34.3% in 2019, a year of low sugar prices. The highest was 49.7% in 2006, when higher prices prevailed.

(Reporting by Marcelo Teixeira; editing by Richard Pullin)

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By Nupur Anand

MUMBAI (Reuters) – Shares in state-owned Life Insurance Corp of India (LIC) slid 5% in their market debut on Tuesday, with sentiment hurt by recent market volatility.

The government raised about $2.7 billion from selling a 3.5% stake in the country’s biggest insurer and largest domestic financial investor, marking India’s biggest IPO to date.

The IPO was priced last week at 949 Indian rupees, the top of the indicated range.

Shares were trading at 900 rupees on Tuesday morning.

(Reporting by Nupur Anand in Mumbai, Chris Thomas in Bengaluru and Aftab Ahmed in New Delhi; Editing by Edwina Gibbs)

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(Reuters) – Credit Bank of Moscow (MKB), one of Russia’s largest private lenders, has obtained a gold export licence from the government, it said on Monday, becoming the latest Russian bank to turn to precious metals trade to offset the impact of sanctions.

The main operators of the gold market in Russia and its largest lenders – Sberbank and VTB – have been hit by harsh Western sanctions imposed on Moscow after it sent tens of thousands of troops into Ukraine on Feb. 24.

“MKB has a dedicated focus on developing operations with precious metals,” MKB said in a statement. The bank has also been subject to sanctions in the United States but it said they were not “blocking” its activity.

“We are following major trends on the financial market and assessing prospects for the development of our business, including the precious metals business,” it added.

Russia is one of the world’s largest producers of gold along with Australia and China. Its 2021 gold production from mines rose by 1.7% to 314 tonnes, the finance ministry said.

After the sanctions, Russia’s gold miners and banks – which can still trade precious metals abroad – are searching for buyers as demand at home is unstable.

The central bank, which used to be the main buyer of the Russian gold from commercial banks in previous years, has changed its rules for gold purchases several times since Feb. 24, including a short-lived decision to stop all buying.

Demand for gold bars from Russians spiked in March after Moscow scrapped a 20% value-added tax on gold purchases, but it has since weakened as the rouble pared initial losses and became the world’s best-performing currency due to the central bank’s control measures.

(Reporting by Reuters; editing by Barbara Lewis)

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-A small but growing number of companies, including Amazon.com and Tesla Inc, are rolling out policies to offer benefits to U.S. employees who may need to access abortion services as some state legislatures impose tighter restrictions.

An unprecedented leak of a draft opinion earlier this month suggests that the U.S. Supreme Court is set to vote to overturn the landmark 1973 Roe v. Wade ruling, which legalized abortion nationwide.

Following is a list of companies who have offered their U.S. employees reproductive healthcare benefits including abortion coverage or travel benefits for out-of-state abortions.

Company Benefit(s) Offered

Citigroup Inc The bank has started covering travel expenses for employees

who go out of state for abortions because of newly enacted

restrictions in Texas and other places, becoming the first

major U.S. bank to make that commitment.

Yelp Inc The crowd-sourced review platform will extend its abortion

coverage to cover expenses for its employees and their

dependents who need to travel to another state for abortion

services.

Amazon.com The second-largest U.S. private employer told employees it

will pay up to $4,000 in travel expenses yearly for

non-life threatening medical treatments, among them

elective abortions.

Levi Strauss & CO The apparel company will reimburse travel expenses for its

full- and part-time employees who need to travel to another

state for healthcare services, including abortions.

United Talent Agency The private Hollywood talent agency said it would reimburse

travel expenses related to women’s reproductive health

services that are not accessible in an employee’s state of

residence.

Tesla Inc Tesla’s Safety Net program and health insurance includes

travel and lodging support for its employees who may need

to seek healthcare services that are unavailable in their

home state, according to the company’s 2021 impact report.

[https://www.tesla.com/ns_videos/2021-tesla-impact-report.pdf

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Microsoft Corp Microsoft Corp said that it would extend its abortion and

gender affirming care services for employees in the United

States to include travel expense assistance.

Starbucks Corp Starbucks Corp said it will reimburse U.S. employees and

their dependents if they must travel more than 100 miles

from their homes to obtain an abortion.

(Reporting by Doyinsola Oladipo; Editing by Anna Driver and Rosalba O’Brien)

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By Natalie Grover

(Reuters) -Valneva lost nearly a fifth of its value on Monday after the French drugmaker said its COVID-19 vaccine agreement with the European Commission was likely to be scrapped and it might have to rethink its financial guidance.

Valneva said the European Commission (EC) had informed the company of its intent to terminate an advance purchase agreement for its COVID vaccine.

A final decision on the deal has still not been made, a Commission spokesperson said on Monday.

Valneva’s shares were down about 19.5% at 1455 GMT.

“The EC decision is regrettable especially as we continue to receive messages from Europeans who are looking for a more traditional vaccine solution,” CEO Thomas Lingelbach said.

Valneva’s vaccine relies on technology that has been used for decades, including in some shots against polio, influenza and hepatitis.

Valneva signed a deal with the EC last November to supply up to 60 million doses of vaccine over two years, including 24.3 million doses in 2022.

The company has already received roughly 30% in pre-payments from the EC under the contract, CEO Lingelbach said, noting that if the deal is cancelled Valneva is not required to return them.

The supply deal gave the EC the right to cancel if the vaccine was not endorsed by the European Medicines Agency (EMA) by the end of April. It still has not got an EMA green light, but Lingelbach said he remained confident that it will by June.

Under the deal, Valneva has 30 days from May 13 to win marketing authorisation or propose an acceptable remediation plan.

Valneva is working with the EC on a remediation plan and intends to make the vaccine available to those EU member states that still want it.

Certain member states, including “very big European countries” have already expressed interest, Lingelbach said.

Britain cancelled its Valneva COVID-19 vaccine supply deal in 2021.

Valneva scored its first approval in Bahrain and has since begun to deploy its vaccine there. On Monday, the company also secured emergency approval in the United Arab Emirates.

FINANCIAL HIT

Valneva said it may reconsider its financial forecast for 2022. The company has previously said it expects to generate revenue of 430 million euros to 590 million euros ($448.58 million to $615.49 million) this year.

Rx Securities analyst Samir Devani had forecast over 400 million euros in Valneva COVID vaccine sales this year, most of which was linked to the EU contract.

“Should this be terminated, a substantial downgrade is likely,” he wrote in a note.

A raft of vaccine makers, including AstraZeneca and Johnson & Johnson, have recently warned of a global COVID vaccine glut.

Devani told Reuters the EC might be looking to re-negotiate the deal given that it might not need more vaccines, but has paid 30% upfront.

One option would be to potentially use the Valneva vaccine as a booster, he said.

Valneva expects to report data on the use of its COVID vaccine as a booster in the third quarter.

($1 = 0.9586 euros)

(Reporting by Anait Miridzhanian and Benoit Van Overstraeten and Natalie Grover in London; editing by Kim Coghill, Jason Neely, Susan Fenton and Jane Merriman)

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By Yuka Obayashi

TOKYO (Reuters) – Oil prices slipped on Monday, giving up earlier gains as investors took profits after a surge in the previous session, but global supply fears loomed with the European Union preparing to phase in a ban on imports from Russia.

Brent crude futures were down 64 cents, or 0.6%, at $110.91 a barrel at 0137 GMT, while U.S. West Texas Intermediate (WTI) crude futures dropped 60 cents, or 0.5%, to $109.89 a barrel.

Both benchmarks, which jumped about 4% last Friday, earlier increased by more than $1 a barrel, with WTI reaching its highest since March 28 of $111.71.

“Oil markets are expected to gain this week as a pending ban by the European Union on Russian oil will further tighten global supplies of crude and fuels,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.

The EU still aims to agree a phased embargo on Russia oil this month despite concerns about supply in eastern Europe, four diplomats and officials said on Friday, rejecting suggestions of a delay or watering down proposals.

Last week, Moscow – which calls its actions in Ukraine “a special military operation” – slapped sanctions on several European energy companies, causing worries about supplies.

Meanwhile, U.S. gasoline futures set a fresh all-time high again on Monday as falling stockpiles fuelled supply concerns.

“Oil prices remained bullish, especially WTI’s near-term contract, as U.S. gasoline prices continued to rise amid weaker imports of petroleum products from Europe,” Fujitomi Securities’ Saito said.

On the supply side, U.S. energy firms in the week to May 13 added oil and natural gas rigs for an eighth week in a row as high prices and prodding by the federal government prompted drillers to return to the wellpad.

Elsewhere OPEC+ – the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – has been undershooting previously agreed plans for output increases due to under-investment in oilfields in some OPEC members and, more recently, losses in Russian output.

The latest monthly report from OPEC showed its output in April rose by 153,000 barrels per day (bpd) to 28.65 million bpd, lagging the 254,000 bpd rise that OPEC is allowed under the OPEC+ deal.

(Reporting by Yuka Obayashi; Editing by Kenneth Maxwell)

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By Greg Roumeliotis and Sheila Dang

(Reuters) -Elon Musk tweeted on Friday that his $44-billion cash deal for Twitter Inc was “temporarily on hold” while he waits for the social media company to provide data on the proportion of its fake accounts.

Twitter shares initially fell more than 20% in premarket trading, but after Musk, the chief executive of electric car market Tesla Inc, sent a second tweet saying he remained committed to the deal, they regained some ground.

The shares were down 9.6% to $40.71 in trading on Friday, a steep discount to the $54.20 per share acquisition price.

Musk, the world’s richest person, decided to waive due diligence when he agreed to buy Twitter on April 25, in an effort to get the San Francisco-based company to accept his “best and final offer.” This could make it harder for him to argue that Twitter somehow misled him.

Since Musk inked his deal to acquire Twitter, technology stocks have plunged amid investor concerns over inflation and a potential economic slowdown.

The spread between the offer price and the value of Twitter shares had widened in recent days, implying less than a 50% chance of completion, as investors speculated that the downturn would prompt Musk to walk away or seek a lower price.

“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk told his more than 92 million Twitter followers.

Under the terms of Musk’s contract with Twitter, he is entitled to ask the company for information on its operations following the signing of the deal. But this is meant to help him prepare for his ownership of Twitter, not to carry out due diligence and reopen negotiations.

Twitter is planning no immediate action against Musk as a result of Musk’s comment, people familiar with the matter said. The company considered the comment disparaging and a violation of the terms of their deal contract, but was encouraged by Musk subsequently tweeting he was committing to the acquisition, the sources added.

Musk came to Twitter’s office for a meeting on May 6 as part of the transaction planning process, a Twitter spokesperson said.

Twitter’s Chief Executive Parag Agrawal also weighed in, tweeting “While I expect the deal to close, we need to be prepared for all scenarios.” On Thursday, Agrawal announced leadership changes and a hiring freeze.

REAL OR FAKE?

Spam or fake accounts are designed to manipulate or artificially boost activity on services like Twitter. Some create an impression that something or someone is more popular than they actually are.

Musk tweeted a Reuters story from ten days ago that cited the fake account figures. Twitter has said that the figures were an estimate and that the actual number may be higher.

The estimated number of spam accounts on the microblogging site has held steady below 5% since 2013, according to regulatory filings from Twitter, prompting some analysts to question why Musk was raising it now.

“This 5% metric has been out for some time. He clearly would have already seen it… So it may well be more part of the strategy to lower the price,” said Susannah Streeter, an analyst at Hargreaves Lansdown.

Representatives for Musk did not immediately respond to requests for comment from Reuters.

Tesla’s stock rose 5% on Friday. The shares have lost about a quarter of their value since Musk disclosed a stake in Twitter of April 4, amid concerns he will get distracted as Tesla’s chief executive and that he may have to sell more Tesla shares to fund the deal.

There is plenty of precedent for a potential renegotiation of the price following a market downturn. Several companies repriced agreed acquisitions when the COVID-19 pandemic broke out in 2020 and delivered a global economic shock.

For example, French retailer LVMH threatened to walk away from a deal with Tiffany & Co. The U.S. jewelry retailer agreed to lower the price by $425 million to $15.8 billion.

Acquirers seeking a get out sometimes turn to “material adverse effect” clauses in their merger agreement, arguing the target company has been significantly damaged.

But the language in the Twitter deal agreement, as in many recent mergers, does not allow Musk to walk away because of a deteriorating business environment, such as a drop in demand for advertising or because Twitter’s shares have plunged.

Musk is contractually obligated to pay Twitter a $1 billion break-up fee if he does not complete the deal. But the contract also contains a “specific performance” clause that a judge can cite to force Musk to complete the deal.

In practice, acquirers who lose a specific performance case are almost never forced to complete an acquisition and typically negotiate a monetary settlement with their targets.

DEFEAT THE BOTS

Musk has said that if he buys Twitter he “will defeat the spam bots or die trying” and has blamed the company’s reliance on advertising for why it has let spam bots proliferate.

He has also been critical of Twitter’s moderation policy and has said he wants Twitter’s algorithm to prioritize tweets to be public.

Earlier this week, Musk said he would reverse Twitter’s ban on former U.S. President Donald Trump when he buys the social media platform, signaling his intention to cut moderation.

Trump, who started a rival social media app called Truth Social, took to his platform on Friday to weigh in.

“There is no way Elon Musk is going to buy Twitter at such a ridiculous price, especially since realizing it is a company largely based on bots or spam accounts,” Trump wrote in a post, adding that his site is much better.

(Additonal reporting by Nivedita Balu in Bengaluru, Ken Li in New York and Katie Paul in San FranciscoWriting by Anna Driver and Editing by Alexander Smith, Nick Zieminski and Alistair Bell)

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