Job Cuts Are Mounting This Earnings Season. It’s a Warning for the Economy.

Layoffs are not widespread, at least not yet, but it’s perhaps enough to make investors sit up and take notice. Virgin Galactic said Tuesday high interest rates and geopolitical unrest meant near-term capital was harder to come by, so it’s cutting jobs.
Citigroup
is reportedly considering reducing 10% of its 240,000 employee numbers. German chemicals giant
Bayer
is cutting jobs and exploring a split.

And those are just in the past 24 hours.

The picture is changing quickly in some sectors.
Delta Air Lines
announced corporate layoffs last week, not long after a record third quarter.

While companies have their own specific reasons for the cuts, the timing is no coincidence. The macroeconomic environment is making businesses take a good look at operations.

The economic data are supporting the recent flurry of corporate anecdotes. The unemployment rate is up half a percentage point from its low, jobs growth is slowing along with the number of hours worked, and continuing jobless claims are well above their lows.

It’s still at a very early stage, and all of the above are actually necessary for the Federal Reserve to execute the fabled soft landing.

So it’s all well and good for now, but a more widespread trend of layoffs could increase the odds of a hard landing.

—Callum Keown

*** Join MarketWatch reporter Jessica Hall and Ken Dychtwald, CEO of Age Wave, today at noon for a discussion about how aging and retirement are changing as the population races toward a peak in people turning 65 years old. Sign up here.

***

Oil’s Run May Be Over Amid Three-Month Lows

Oil was trading flat first thing after falling to three-month lows Tuesday on concerns about demand from both China and the U.S. While the main exchange-traded fund for oil stocks has more than tripled since its low in 2020 it may not get any higher.

• The Energy Select Sector SPDR Fund has risen to $84 from about $25 in March 2020 as crude prices headed higher in the wake of the Covid-19 pandemic. But oil stocks just can’t seem to surpass certain levels.

• U.S. oil prices have slipped back from higher than $100 a barrel last year to around $77 a barrel. Crude dropped more than 4% on Tuesday after another reported drop in Chinese exports signaled weak global demand for energy.

• The oil equity fund topped out at about $93 last year. It appeared likely to move above that point several times since then, only for sellers to knock the price lower.

• Oil stocks and prices are now hitting long-term resistance levels, or points at which people tend to sell for more than 10 years.

What’s Next: More bad news in the Middle East or better-than-expected economic demand could send oil prices and stocks up toward those resistance levels, but it would take a significant surprise on either front to send prices above them. That’s why oil as an investment is looking more risky than rewarding.

—Jacob Sonenshine and Brian Swint

***

Consumer Agency Wants to Supervise Big Fintech Payment Companies

The Consumer Financial Protection Bureau wants consumer payments companies such as
Apple,

Alphabet’s
Google, and
PayPal Holdings
to submit to regular supervisory reviews by the agency’s examiners, just like banks. Regulators are concerned about compliance with consumer-protection and privacy laws.

• CFPB Director Rohit Chopra said payment services that were once conducted almost exclusively by supervised banks are now increasingly provided by large tech and other nonbank companies. Apple, Alphabet, and PayPal could not be reached for comment.

• The CFPB doesn’t mention companies by name, but the proposed rule applies to those that handle more than five million transactions a year—a threshold the agency said would apply to 17 companies that process $13 billion in payments each year.

• In October 2021, the agency ordered Apple, Google,
  Meta Platforms,

  Amazon.com,
  PayPal, and
  Block
  to provide it with information about their business practices. Since then, the CFPB has issued rules or warnings around tech companies’ use of data gathered as they offer payment services.

• Chopra said last month that Big Tech companies are taking advantage of the “blurring” between nonbank firms and banks as they move into finance. The banking industry has also urged the CFPB to increase its oversight of Big Tech payment products.

What’s Next: The CFPB has tried to educate consumers that money stored in payment applications isn’t necessarily protected by federal deposit insurance. It will gather public comments on the proposed rule until Jan. 8, or 30 days after the rule is published in the Federal Register, whichever is later.

—Joe Light and Janet H. Cho

***

GOP Candidates to Square Off Tonight in Third Debate

Five Republican candidates competing for their party’s presidential nomination are set to face each other in a debate at 8 p.m. tonight in Miami as polling continues to show they trail the leading GOP contender—former President Donald Trump, who is holding his own rally instead of appearing on the stage alongside them.

• The debate, airing live on NBC and streaming on Noticia Telemundo’s website and social media, includes former New Jersey Gov. Chris Christie, Florida Gov. Ron DeSantis, former U.N. Ambassador Nikki Haley, South Carolina Sen. Tim Scott, and entrepreneur Vivek Ramaswamy.

• They met the party’s fund-raising and polling qualifications to participate in the debate. Former Vice President Mike Pence ended his campaign in October, and North Dakota Gov. Doug Burgum failed to meet the debate requirements. Trump’s rally is at the same time in nearby Hialeah, Fla.

• President Joe Biden’s approval rating dropped to 39%, its lowest level since April, a Reuters/Ipsos survey found. One-fifth of respondents said the economy was the top concern, 9% said crime, and 8% said war and foreign conflicts, up from 4% in October.

What’s Next: A
New York Times
and Siena poll showed Biden trailing Trump in five of six battleground states ahead of the November 2024 election. White House press secretary Karine Jean-Pierre said the results should be taken with a grain of salt, noting Mitt Romney led Barack Obama in 2012 and lost.

—Janet H. Cho

***

Robinhood Falls Short as Trading Revenue, Monthly Users Drop

Robinhood Markets
shares dropped after the digital brokerage missed Wall Street’s expectations for third-quarter revenue. Transaction revenue slowed, especially in stock and crypto trading, and monthly active users dropped during a volatile time for markets.

• Robinhood said total net revenue for the quarter rose 29% from last yearto $467 million, primarily because of higher net interest and other revenue. Analysts expected revenue of $480 million. The third-quarter net loss of 9 cents a share was better than expected.

• Transaction revenue fell 11%. That includes a 13% drop in equities transaction revenue and a 55% drop in crypto revenue. In September, Robinhood said it bought back more than 55 million shares from a company once owned by Sam Bankman-Fried, the convicted former CEO of defunct crypto exchange FTX.

• Robinhood’s platform helped fuel a meme-stock craze during the Covid-19 pandemic, when retail investors flocked to its commission-free platform, and monthly active users soared to more than 21 million by the second quarter of 2021. Monthly active users in the third quarter of 2023 fell 16% to 10.3 million.

• Robinhood Retirement has grown to nearly 400,000 accounts and assets of more than $1 billion. The firm’s premium Robinhood Gold subscriptions grew more than 1.3 million, and 95 stocks and exchange-traded funds are now available on its 24-Hour Market.

What’s Next: For the full year, Robinhood forecasts total operating expenses of about $2.4 billion, updated from its prior outlook of between $2.3 billion and $2.4 billion. Robinhood plans to start brokerage operations in the U.K., and begin crypto trading in the European Union after that.

—Janet H. Cho

***

Rivian and Lucid Report Mixed Results Amid EV Weakness

Earnings from two electric-vehicle makers,
Rivian Automotive
and
Lucid,
showed diverging trends. Investors have been worried about a slowdown in demand for EVs after weak earnings reports from some of the biggest in the business including
Tesla,
and weak fourth-quarter sales guidance from supplier
ON Semiconductor.

• Rivian Automotive reported a smaller-than-expected loss of $1.19 a share and revenue of $1.3 billion. The electric-truck maker raised its 2023 production guidance to 54,000 vehicles from 52,000. Rivian produced 16,304 units in the third quarter, a record.

• Lucid’s earnings beat expectations, but its sales of $138 million fell below forecasts. Lucid cut its 2023 production outlook to a range of 8,000 to 8,500 cars from about 10,000. It produced 1,550 in the third quarter and 6,000 in the first nine months.

• As sales for battery-powered vehicles slows, vehicle makers and dealers are lowering prices and offering discounts.
  Hyundai Motor
  and
  Ford Motor
  are offering cash rebates as high as $7,500 on some models. Others are making lease deals more attractive to drivers.

• The new Biden administration rules this year limited the number of EV models that are eligible for a full $7,500 EV tax credit. In response, affected EV makers have tried to offset the loss of the $7,500 tax credit with an equal sales incentive, The Wall Street Journal reported.

What’s Next: Lucid is offering a $7,500 incentive on its all-wheel drive Lucid Air Pure Sedan. Sales of battery-electric vehicles account for 8% of all new U.S. car sales and could reach 15% of all new sales by 2025, according to Citi analyst Itay Michaeli.

—Al Root and Liz Moyer

***

Dear Quentin,

I have been in a relationship with this man for five years. I moved into his home a year ago. The plan was for me to pay all the utilities, dog expenses, and groceries. I cook and clean, and take care of things around the house and now he is asking me to pay half his mortgage. He does not want to marry me—nor put me on the deed to his home.

I don’t think it is right that I help him pay half of his mortgage. What do I get out of this? We are both 51 years of age. I have nothing to my name, no security, and I’m not sure if it is a smart thing to do. Can you please help me? I am very confused on how to handle this. Some people say pay half and others say move out. What should I do?

—Feeling Desperate

Read the Moneyist’s response here.

—Quentin Fottrell

***

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