Look Past Jobs Data. This Is What Matters for the Fed’s Inflation Fight

That isn’t quite what’s happening. Inflation has also slowed dramatically since its peak, even without a big rise in unemployment. And research has suggested the causes of the worst inflation in a generation have little to do with wage growth, at least so far.

Figuring out the labor market is one of the Fed’s tougher puzzles at the minute. One idea is that companies are hoarding labor—hanging on to workers they would normally let go because of concern it will be hard to hire them back.

Another possibility is that higher rates might reduce job vacancies enough to keep a lid on wages by discouraging people from switching jobs, even if the overall unemployment rate stays low. This is the thesis of the soft landing, whereby the Fed beats inflation without causing a recession or a spike in joblessness. It’s also why data this week showing a jump in job openings were a little scary, because that suggests the Fed has more work to do.

But really, the labor market is still a puzzle. So when the Fed says it’s data dependent, it’s probably putting more weight on other data—for example, the recent big jump in bond yields.

San Francisco Fed President Mary Daly said yesterday the yield spike may mean the central bank doesn’t have to raise rates again this year. That’s probably a more reliable source for the Fed’s intentions than jobs figures.

—Brian Swint

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Exxon Set to Buy Shale Driller Pioneer in $60 Billion Deal

Exxon Mobil is close to announcing a significant deal to buy Pioneer Natural Resources for about $60 billion, The Wall Street Journal reported.

• With Pioneer’s current market value at about $50 billion, Exxon’s purchase would be its biggest since its merger with Mobil in 1999. It would also eclipse Occidental Petroleum’s purchase of Anadarko in 2019 for $38 billion.

• The move comes after oil prices started to perk up again after mostly falling this year. Last year’s price spike in the wake of Russia’s invasion of Ukraine led to record profits for Exxon and the rest of Big Oil. Although both Brent Crude and West Texas Intermediate are on course for a weekly loss, after rising gasoline inventories in the U.S. triggered a selloff.

• Separately, Exxon’s rival Shell’s third-quarter update was relatively positive. Significantly, it announced that natural gas trading increased over the previous quarter.

What’s Next: Acquiring Pioneer would make Exxon the dominant player in the U.S. Permian in Texas and New Mexico. Pioneer’s acreage in the Midland Basin, the eastern part of the Permian, has some of the largest untapped fields left in the U.S.

—Brian Swint

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SEC Sues Elon Musk for Testimony in Twitter Investigation

Elon Musk skipped scheduled testimony to the Securities and Exchange Commission in September, prompting the regulator to sue in a California federal court to compel the billionaire owner of X and
Tesla
to appear. The SEC said attempts to negotiate a meeting have been met with a “blanket refusal.”

• The SEC said the testimony was in connection with its continuing investigation of potential securities-law violations related to Musk’s purchase of Twitter shares in 2022. He later renamed Twitter as X. The investigation is also looking at Musk’s statements and SEC filings related to Twitter.

• An attorney for Musk, Alex Spiro, told Barron’s: “The SEC has already taken Mr. Musk’s testimony multiple times in this misguided investigation—enough is enough.” Musk, who has accused the SEC of harassing him, posted on X that a comprehensive overhaul of agencies was “sorely needed.”

• The SEC sent Musk a subpoena in May, and the sides agreed to meet in September in San Francisco. But Musk told the SEC two days before the date he wouldn’t appear. His reasons included questioning whether San Francisco was the right location. X is based there.

• Musk attended two half-day sessions of testimony by videoconference in July 2022, the SEC said. Since then, the agency has received thousands of new documents as part of its investigation, including documents written by Musk.

What’s Next: Musk faces several other investigations not related to Twitter, or X. The Wall Street Journal reported that Manhattan federal prosecutors and the SEC are looking at whether Tesla company money was used on a project described internally as a house for Musk.

—Liz Moyer

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Constellation’s Modelo Keeps Growing After Bud Light Controversy

Sales of
Constellation Brands
’ Modelo Especial beer, which dethroned Bud Light as America’s top-selling beer by dollar sales in May, have continued accelerating. The alcoholic beverage maker said second-quarter beer sales rose 12% from last year, and raised its full-year beer-sales projections.

• Modelo’s sales had been rising for three decades when
  Anheuser-Busch InBev
  ran into difficulty this year from Bud Light’s controversial promotion with transgender influencer Dylan Mulvaney. That sparked a consumer boycott of Bud Light that boosted other beer brand sales.

• The Modelo brand now comprises 8.5% of U.S. retail-store beer sales so far this year, compared with Bud Light’s 8.1%, according to an analysis of Nielsen data by consulting firm Bump Williams. Bud Light is still the top-ranking U.S. brand by sales volume.

• Still, Constellation, which also makes wine and spirits, raised its outlook for beer sales growth, which it now sees at 8% to 9% in fiscal 2024. In contrast, it sees a net sales decline for wine and spirits of 0.5% to growth of 0.5%.

• Modelo Especial is popular among Latinos, whose population and purchasing power are growing, and Modelo Oro light beer and Modelo Cheladas canned beer cocktails are also seeing higher sales, The Wall Street Journal reported.

What’s Next: Constellation’s CEO Bill Newlands told analysts that he sees opportunities to increase sales, especially as retailers begin resetting the shelf space they allocate to different brands next spring. That resetting process can give more space to brands that have lately been selling better.

—Janet H. Cho

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Online Holiday Spending Seen Rising, Using Mobile Devices

American consumers are expected to spend a record $221.8 billion online over the holiday shopping season this year, up 4.8% from last year’s holidays, according to Adobe Analytics. And for the first time, a majority of people will shop online using smartphones and other mobile devices.

• Consumers will trim costs by skipping pricier expedited shipping, using buy-now pay-later services, and buying during discount days. The projected 4.8% increase between Nov. 1 and Dec. 31 is better than last year’s 3.5%, but still lower than the gains in 2021, 2020, and 2019.

• Online prices are down around 3% from last year and returning to prepandemic patterns. But higher borrowing costs, still-elevated grocery prices, and the return of student-loan payments are making consumers more strategic, Vivek Pandya, lead analyst for Adobe Digital Insights, told MarketWatch.

• Consumers will see record discounts of up to 35% on toys, 30% on electronics, 25% on apparel, 24% on sporting goods, and 22% on TVs, Adobe said. Clothing sales are expected to fall 0.7% as people return to buying clothes in stores.

• Half of consumers Adobe surveyed will start holiday shopping this month, but 61% said they won’t pay more for faster shipping. Amazon’s Oct. 10-11 Prime Day is expected to haul in $8.1 billion, Adobe said.

What’s Next: Cyber weekend, running from Thanksgiving through that Monday, is expected to drive $37.2 billion in online spending, up 5.4% from last year. That Monday’s spending alone is expected to reach a record $12 billion.

—Janet H. Cho

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Powerball Jackpot Surges to $1.4 Billion, But Interest Rates Bite

The multistate Powerball jackpot has ballooned to $1.4 billion after no one matched all six numbers Wednesday night. The next chance for someone to become an overnight billionaire is Saturday night. The lump-sum payout amounts have shrunk in recent drawings, however. Interest rates are to blame.

• Right now, the lump-sum payout is $643.7 million, or a winner could opt for a 30-year annuity. Both amounts are before taxes. In contrast, a $1 billion Mega Millions jackpot in 2021 offered a lump sum of $776 million. Both lotteries cost $2 for one ticket.

• The full jackpot amount reflects the returns of investing the cash prize in bonds. With the Federal Reserve raising interest rates to a 22-year high, it takes far fewer 2023 dollars to buy bonds that pay out $1 billion or so by 2052, The Wall Street Journal reported.

• The odds of winning Saturday’s jackpot are 1 in 292.2 million, regardless of how many people play or how big the prize is. The last Powerball grand prize ticket matched July 19, for $1.08 billion, though a winner has not yet come forward.

• Last month, someone claimed a $1.58 billion Mega Millions jackpot with a single winning ticket bought at a Publix in Neptune Beach, Fla., on Aug. 8. The winner has 90 days from when they claimed the ticket to stay anonymous.

What’s Next: Saturday’s grand prize would be the third-highest Powerball lottery jackpot ever and the fifth-largest among U.S. lottery jackpots.

—Janet H. Cho

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Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to [email protected].

1. California Republican Rep. Kevin McCarthy lost his job as House Speaker after a rebellion within his caucus led to a full vote to have him removed, the first for a sitting speaker. When was the last time such a vote was held (but ultimately defeated)?

a. 1900

b. 1910

c. 1920

d. 1930

2. Swiss pharmaceutical company Novartis has completed the spinoff of a business making generic and biosimilar drugs, allowing it to focus on drug development. What is the name of the new company?

a. Sandoz

b. Novdoz

c. Genartis

d. None of the above

3. Mortgage rates are climbing, with the average 30-year fixed-rate loan at 7.49%, according to Freddie Mac. That’s the highest they’ve been since when?

a. 1996

b. 1998

c. 2000

d. 2002

4. Birkenstock is moving forward with its initial public offering, filing updated paperwork this week saying the sandal-maker aims to list at around $44 to $49 a share. After initially seeking an $8 billion valuation, the new filing shows it could seek a valuation of as much as what?

a. $8.2 billion

b. $9.2 billion

c. $10.2 billion

d. $11.2 billion

5. The Powerball lottery jackpot total surged to $1.4 billion after no one claimed the top prize on Wednesday. The grand prize for the next drawing on Saturday night would rank where among U.S. lottery jackpots in history?

a. Second

b. Third

c. Fourth

d. Fifth

Answers: 1(b); 2(a); 3(c); 4(b); 5(d)

—Barron’s Staff

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner