Know someone who would like this newsletter? Forward it to them.
The World
U.S. stocks fell, extending their April losses, as investors digested earnings reports from leading companies and weighed concerns about inflation and the spread of Covid-19 in China. The S&P 500 closed down 2.8%, or 120.92 points, to 4175.20, a day after tech stocks led major indexes higher. The Dow declined 2.4%, or 809.28 points, to 33240.18, while the Nasdaq lost 4%, or 514.11 points, finishing at 12490.74. All three indexes are on track to lose at least 4% this month, with the technology-heavy Nasdaq—which posted its largest one-day percentage decline since September 2020—down more than 12% in April. (Wall Street Journal)
The U.S. marshaled 40 allies to furnish Ukraine with long-term military aid in what could become a protracted battle against the Russian invasion, and Germany said it would send dozens of armored antiaircraft vehicles. It was a major policy shift for a country that had wavered over fear of provoking Russia. The announcement by Germany, Europe’s biggest economy and one of Russia’s most important Western trading partners, was among many signals pointing to further escalation in the war and disappointment for diplomacy. (New York Times)
Russia begins ‘gas blackmail’ halting supplies to Poland and Bulgaria: Russia is to halt the flow of gas to Poland and Bulgaria from Wednesday, according to authorities in both EU nations, as Moscow steps up its efforts to weaponize energy supplies over the invasion of Ukraine. PGNiG, the Polish state-controlled gas group, stated on Tuesday that Russian supplier Gazprom had informed it of a “complete suspension of supplies” under its Yamal contract effective from 8am Polish time on April 27. And late on Tuesday, Bulgaria’s energy ministry said Gazprom had told its state gas company, Bulgargaz, that it would halt gas supplies as of Wednesday as well. Meanwhile, the EU is weighing a cap on price paid for Russian oil as way to hit Kremlin revenues. (Financial Times, The Guardian)
Half of Taiwanese don't believe U.S. would send troops if China invades, as negative views double from October as response to Ukraine war stirs doubts. (Nikkei Asia Review)
Kim Jong-un has warned that he intends to accelerate development of North Korea’s nuclear arsenal and have missiles ready to fire at a moment’s notice. At a large military parade in Pyongyang — at which intercontinental ballistic missiles (ICBMs), hypersonic weapons and other military hardware were on display — the North Korean leader vowed to speed up the development of weapons despite widespread international condemnation. (The Times)
Half of the U.S. population has been infected with COVID-19, including 75% of children and adolescents. From December 2021 to February 2022, during the Omicron wave in the U.S., overall seroprevalence increased from 33.5% to 57.7%. (Medpage Today)
The MA Department of Public Health reports that flu cases in Massachusetts are up 27% over the last week. (WBUR)
Biden signals he’s open to canceling student loans: In a closed-door meeting with lawmakers, the president suggests a new openness to a politically sensitive idea he has avoided until now. (Washington Post)
Less expensive cities with strong local economies climbed The WSJ/Realtorcom Emerging Housing Markets Index in 1Q22, another sign that many home buyers are giving priority to affordability. Fast-rising housing prices have pushed buyers from expensive coastal cities into cheaper housing markets in recent years. Expanded remote-work opportunities and a search for different lifestyles during the Covid-19 pandemic have accelerated the trend. The Rapid City, S.D., metro area of about 145,000 people near the Wyoming border was the top-ranked market for the quarter. It was followed by Santa Cruz, Calif.; North Port, Fla.; Santa Rosa, Calif.; and Naples, Fla. The top 20 cities in the ranking have an average population size of about 600,000. (Wall Street Journal)
Southern California water officials took the unprecedented step of declaring a water shortage emergency and restricting outdoor watering to just one day a week in parts of Los Angeles, Ventura and San Bernardino counties — an action that will impact about 6 million people. “We are seeing conditions unlike anything we have seen before,” said Adel Hagekhalil, the district’s general manager. “We need serious demand reductions.” (Los Angeles Times)
Economy
China capital outflows: As US battles inflation, Beijing goes on alert for ‘spillover effects’ from rate hikes. Foreign investors have dumped Chinese equities and bonds at a rapid pace over the past two months, while the yuan has come under strong depreciation pressure. The last time China experienced such severe capital flight came between 2015-17 and it was only halted by heavy capital controls and the release of forex reserves. (South China Morning Post)
Mainland Chinese property companies are scaling back their presence in Hong Kong as they struggle to deal with a liquidity crisis that has rocked the sector and forced the world’s most indebted developer Evergrande to default. (Financial Times)
Crypto industry can’t hire enough lawyers: Crypto exchanges and companies are poaching attorneys to help them navigate an evolving regulatory landscape and to cut down legal costs. (Wall Street Journal)
Chipotle says inflation for food such as avocados, tortillas and dairy items may run into 2023: “Right now, if I was going to build a model, I would not build in a reduction in food cost,” Chief Financial Officer Jack Hartung said during a conference call. “It looks like it’s more going to be something in 2023 before we see that.” (Bloomberg)
‘Cash is king’ as VC spigot slows: Rising inflation, a stalled IPO market and ongoing geopolitical instability have injected new caution into startup investing. As a result, investors and others in the industry say startup leaders should tamp down on spending and conserve cash. (Crunchbase)
Robinhood is cutting 9% of full-time staff as ‘hyper growth’ ebbs. (Bloomberg)
Technology
Google’s pandemic boom may finally be slowing, as Alphabet reports weak earnings and revenue on big YouTube miss. Alphabet’s profit drops 8% as Google’s pandemic boom shows signs of slowing. The results were below analysts’ expectations for a net profit of $17.33 billion on revenue of $68.05 billion. (CNBC, New York Times)
With expenses up compared to 2021, Alphabet’s net profit actually dropped to $16.4 billion compared to last year’s $17.9 billion. Research and development costs for the quarter rose by over $1 billion compared to Q1 2021, going from $7.485 billion to $9.1 billion. Google’s search business brought in $39 billion, up significantly over the Q1 2021 result of $31 billion. The overall advertising business, including Search, YouTube, and its various ad networks, managed to pull in $54 billion in the first quarter alone. YouTube advertising revenue was also up, reaching $6.86 billion, but showed slower growth than it has over the last couple of years during the pandemic. (The Verge)
The scientist who co-created CRISPR isn’t ruling out engineered babies someday: Jennifer Doudna is the co-discoverer of CRISPR editing, the revolutionary method for engineering genes that, 10 years after her original breakthrough, is now making its way into human trials. (MIT Technology Review)
Given the amount of debt he is taking on in the acquisition, Elon Musk will have a big incentive to lift Twitter’s profits as fast as possible. That almost certainly means shrinking Twitter’s workforce, perhaps by as much as 10% to 20%. As things stand now, each of Twitter’s 7,500-strong employees generates less revenue than their counterparts at Snap, Pinterest, Alphabet and Meta Platforms, public disclosures show. Just to match the average of Snap and Pinterest would require cutting about 11% of Twitter’s employees, which could translate to a nearly 20% lift in profits. (The Information)
Elon Musk can walk away from his $44bn takeover of social media platform Twitter for $1bn, a significantly lower penalty than in the typical leveraged buyout. The “reverse termination fee” means Musk could abandon the deal by paying less than 1 per cent of his net worth and a fraction of the $21bn of equity he has committed to complete the acquisition. (Financial Times)
Tesla valuation slides more than $125bn after Elon Musk’s Twitter deal: It seems Tesla shareholders aren’t too happy with Elon Musk’s Twitter deal. And who can blame them? Not only is Musk using his 21% stake in Tesla as a piggy bank to help fund the deal, but the acquisition is sure to distract him from his duties at Tesla. Tesla shares dropped 12% today to close at $876, which means it has fallen 23.5% since Musk revealed his Twitter stake on April 4. What’s striking about today’s stock action is that Twitter shares also fell 4% today, suggesting investors are less confident that the deal will close. (The Information)
MIT engineers have developed a paper-thin loudspeaker that can turn any surface into an active audio source. This thin-film loudspeaker produces sound with minimal distortion while using a fraction of the energy required by a traditional loudspeaker. The hand-sized loudspeaker the team demonstrated, which weighs about as much as a dime, can generate high-quality sound no matter what surface the film is bonded to. To achieve these properties, the researchers pioneered a deceptively simple fabrication technique, which requires only three basic steps and can be scaled up to produce ultrathin loudspeakers large enough to cover the inside of an automobile or to wallpaper a room. (MIT News)
Smart Links
Black homeownership continues to lag in 50 largest U.S. cities. (Washington Post)
Business schools try to talk M.B.A. prospects into quitting their jobs. (Wall Street Journal)
Fidelity to allow retirement savers to put bitcoin in 401(k) accounts. (Wall Street Journal)
Older adults shouldn't start a routine of daily aspirin, task force says. (NPR)
Credit, private equity and real estate rank as top alternative investments. (Pensions & Investments)
Study finds new patterns of antibiotic resistance spread in hospitals. (Broad Institute)
America has a plan to throttle Chinese chipmakers; it will deny them tools to do the job. (The Economist)