Tag Archives: Financial Services

Companies Wrestle With Hybrid Work Plans—Awkward Meetings and Midweek Crowding

Big U.S. companies are discovering that “hybrid” work comes with plenty of complications.

As employers firm up plans to bring white-collar workers back into offices while still allowing them to do some work at home, many are encountering obstacles. Companies are grappling with what new schedules employees should follow, where people should sit in redesigned offices and how best to prevent employees at home from feeling left out of impromptu office discussions or being passed over for opportunities, say chief executives, board directors and others.

The insurer

Prudential Financial Inc.,

PRU -0.08%

which expects most of its roughly 42,000 employees to work in the office half the time starting after Labor Day, wants to make certain not all staffers choose to stay home Mondays and Fridays and then work in the office midweek. At the travel company

Expedia Group Inc.,

EXPE -2.41%

executives are trying to figure out how to have in-person meetings that don’t disadvantage those who aren’t in the room. Other employers, including the software company

Twilio Inc.,

predict that the new era of work could lead to shuffling between teams, with staffers gravitating to bosses who embrace their preferred styles of working.

Hybrid work “is going to redefine expectations, rules, permissions,” says Kevin McCarty, chief executive officer of the Chicago-based consulting firm West Monroe, which employs 1,360 people, and is rethinking when its employees should work at home or come into its offices.

The new style of work is bound to be another transition for workers who a year ago had to adjust to life at home. Though executives say it would be easier to manage if every employee returned to an office, or all stayed remote, surveys have repeatedly shown that most workers want a mixed approach as more adults are vaccinated. In a February survey of 1,000 companies commissioned by LaSalle Network, a national staffing and recruiting firm, the majority of companies said they would adopt a hybrid model.

Companies have also polled their organizations to find out how employees feel. At

Prudential,

PRU -0.08%

most employees indicated that they enjoyed working remotely but missed the planning, ideation and collaboration that takes place in person, says

Rob Falzon,

vice chair of the company.

Prudential has been redesigning its office space floor by floor and repurposing most of it for meeting rooms, collaboration and open space so people will be more likely to interact. Mr. Falzon says he insisted on adding video capacity in more small meeting spaces, not just conference rooms, so people working from home won’t feel excluded.

Like many employers, the company is reducing its physical footprint so there won’t be available desks for people who want to go to the office more frequently, with exceptions for some employees including traders. “We don’t have a desk for you every day,” Mr. Falzon says. “We have a desk for you three days a week.”

Hybrid models range by company. The technology company

Adobe Inc.

plans to allow employees to work from home up to two to three days a week, with staffers able to make reservations for office desks, says

Gloria Chen,

the company’s chief people officer. Other companies are hesitant to put out a specific number on days allowed at home. Factors including the length of a commute, type of job and an employee’s seniority could determine how often an employee needs to visit an office, executives say.

“We won’t prescribe” from a company level, says

David Henshall,

CEO at the technology company

Citrix Systems Inc.

“Based on the type of role you have, you’ll find that right balance.”

Prominent tech companies are embracing remote work in the midst of an exodus of skilled labor from Silicon Valley. WSJ looks at what that could mean for innovation and productivity and what companies are doing to manage the impact.

With flexibility can come challenges. If a team comes together in-person, but not all can make it, that potentially creates a subpar experience for those not in the room, says Expedia CEO

Peter Kern.

The travel company opened the first phases of an expansive campus—complete with Wi-Fi-equipped rocks —on the shores of Seattle’s Elliott Bay before the pandemic, and plans to initially permit spaced group team meetings at its headquarters.

Mr. Kern, though, says he has questions about whether those on Zoom will get the same level of learning, encouragement and career growth as those in the room. Then there are the scheduling issues.

Managers may need to “set up group meetings according to some crazy algorithm of: Who’s available when? Who’s got a flexible day, when?” Mr. Kern says. “There’s a lot of friction in all of that. It’s a lot easier to say, ‘Everybody go to work.’ Now someone calls a meeting, and you’re all there.”

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What would be your ideal working situation once offices begin to reopen? Join the conversation below.

A new way of working will require the company to think differently about performance, Mr. Kern says. Managers must be careful not to have biased judgments against those who may spend less time in the office, requiring the company to be “really thoughtful about how we assess people and give people opportunity so that we don’t end up with skewed outcomes.”

Training and onboarding might be more challenging in a hybrid environment, especially if new employees have a harder time grasping the company’s culture without regular, in-person interaction with colleagues, says Tom Gimbel, CEO of LaSalle Network. With younger employees, “for them to learn anything, they need to be around the more experienced people,” he says.

Other companies have said they would allow for remote work in limited circumstances. In a memo, executives at the

New York Times Co.

said the company planned to reopen its main offices in September and didn’t intend to become fully remote. The company would “approve remote work only in places where the team and nature of the work can accommodate it.”

Some human-resources professionals say companies will have little choice but to accommodate workers’ demands, as an inflexible workplace could drive employees away as the economy rebounds, and because many workers have proven themselves adept at working anywhere.

“The employer before just could say, ‘Our culture is this,’” says

Tara Wolckenhauer,

a human-resources executive at the payroll processor

Automatic Data Processing Inc.

“Employers have to take a step back and think about it very differently.”

Write to Emily Glazer at emily.glazer@wsj.com and Chip Cutter at chip.cutter@wsj.com

How the Reopening Will Affect You

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Citigroup, Wells Fargo, Bank of America urge shareholders to vote against racial-equity audits

Three of the nation’s biggest banks are asking shareholders to reject racial-equity resolutions after they expressed solidarity with the Black Lives Matter movement last year.

Citigroup Inc.
C,
+0.37%,
Wells Fargo & Co.
WFC,
+1.25%
and Bank of America Corp.
BAC,
+0.82%
were among the many large U.S. companies to make public statements of support in response to widespread protests last summer after the police killings of George Floyd and Breonna Taylor. In recent days, they have all officially opposed shareholder groups’ calls for them to conduct and publicize racial-equity audits and other changes, saying they are already doing enough to address equity issues.

The shareholder proposals urge the banks to examine their practices and policies and identify ways to “avoid adverse impacts on nonwhite stakeholders and communities of color,” something the banks says is unnecessary because they are juggling different, related initiatives and/or have committed money to such issues internally and externally. The proposals are included in proxy statements to shareholders, which allow for the companies to support or oppose shareholder resolutions and explain why ahead of a vote at their annual meetings.

For more: Companies declared ‘Black lives matter’ last year, and now they’re being asked to prove it

CtW Investment Group wrote in its proposal to Citi shareholders that the bank “has a conflicted history when it comes to addressing racial injustice within the communities it serves.” The group provides examples, including Citi getting fined by the Treasury Department in 2019 for failing to offer all customers mortgage discounts and credits; its required minimum maintenance fees and minimum daily balances; and the fact that it has only one Black executive in the C-suite (Chief Financial Officer Mark Mason).

“While we disagree with the overall approach in this proposal, we are completely aligned with its stated goal of addressing racial inequity in the financial sector,” Citi said in its proxy filed Wednesday.

The bank pointed to its $1 billion commitment to providing greater access to banking and mortgages for communities of color, plus making investments in Black businesses. It also said, “As recently as September 2020, Citi released a 104-page report on the economic cost of Black inequality in the United States titled ‘Closing the Racial Inequality Gaps,’” and said its efforts on these issues are available to the public.

Citi is also recommending shareholders vote no on a couple of other racial equity-related resolutions, such as adopting a “Rooney Rule” policy to increase diversity in its board of directors and disclosing its direct and indirect lobbying activities in a report.

See also: Women could pave the way for ESG investing in the U.S.

CtW also mentioned minimum requirements for deposits and fees in its Bank of America resolution, adding that the Treasury Department found in 2018 that the bank offered proportionately fewer home loans to minorities than white applicants in Philadelphia, and that BofA’s C-suite is just 8% Black.

Bank of America said in its proxy released last week that it has committed $1 billion to supporting minority-owned businesses, jobs initiatives in Black and Hispanic communities, affordable housing and donations to historically Black colleges and universities and more. It also touted its work with “consumer advocates in the design and marketing of our financial services and products” and its efforts to diversify its workplace and leadership.

In its proposal at Wells Fargo, the Service Employees International Union Pension Plans Master Trust mentions the bank’s record of discriminatory lending practices that have led to different lawsuits and a settlement with the Department of Justice in 2012, as well as settlements of employment-discrimination claims.

Wells Fargo, which released its proxy Tuesday, said it is conducting a “human rights impact assessment,” and that it will release a summary of those results and the actions it plans to take in response. The company also said it is making efforts toward diversity, equity and inclusion in its workplace and among its top ranks.

Dieter Waizenegger, executive director of CtW, worked with the SEIU on the shareholder proposals. While he said he “welcomed” the banks’ pledges on racial equality and justice issues, “as investors, we believe a critical part of this work is an independent assessment of the effectiveness of these promises.” 

Read: This California investor predicts a 10-year ‘good economy’ revolution that shoves the sharing economy aside

The shareholder groups also had pointed out that the banks’ political and charitable donations have contradicted their stated commitments to justice and equity.

Wells Fargo “has donated to Senator Tom Cotton, who called for military air strikes on Black Lives Matter protests, as well as other members of Congress with racist records,” the SEIU shareholder resolution says.

CtW said “Citi donated $242,000 during the 2020 election cycle to 74 members of Congress who are rated ‘F’ by the NAACP,” and that Bank of America has been involved in issuing “judgment obligation bonds, a portion of which was used to pay for police related settlements” in Los Angeles.

Both Wells Fargo and Bank of America have donated to police departments that “bypass normal procurement processes to buy equipment for police departments, including surveillance technology that has been used to target communities of color and nonviolent protestors,” the shareholder resolutions say.

Goldman Sachs Group Inc.
GS,
+0.95%,
Morgan Stanley
MS,
+1.60%
and JP Morgan Chase & Co.
JPM,
+1.03%
are facing similar shareholder proposals, and have yet to release their proxies. This article will be updated when they do.

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Asian markets decline ahead of Fed comments

TOKYO — Asian shares were lower Wednesday as world markets cautiously awaited the U.S. central bank’s latest comments on the economic outlook.

Japan’s benchmark Nikkei 225
NIK,
-0.02%
gave up early gains and slid 0.2% while South Korea’s Kospi
180721,
-0.64%
retreated 1%. Australia’s S&P/ASX 200
XJO,
-0.47%
dipped 0.7%. Hong Kong’s Hang Seng
HSI,
+0.03%
declined 0.2%, while the Shanghai Composite
SHCOMP,
-0.03%
fell 0.4%. Benchmark indexes in Singapore
STI,
+0.22%,
Taiwan
Y9999,
-0.60%
and Indonesia
JAKIDX,
-0.50%
slipped as well.

Investors are awaiting the Federal Reserve’s latest economic and interest rate projections, expected later in the day. Economists expect Fed Chair Jerome Powell will try to convince jittery financial markets that the central bank can continue providing support without igniting higher inflation.

Those worries have recently pushed bond yields higher, sapping buying demand for shares.

The Fed meeting “carries the potential to either allay or heighten some of the market’s recent concern with regard to the soaring bond yields,” said Jingyi Pan, senior market strategist at IG in Singapore.

Wall Street capped a choppy day of trading with indexes closing mostly lower. Losses by banks, industrial stocks and companies that rely on consumer spending, including cruise line operators, outweighed gains by Big Tech and communication services stocks.

The S&P 500
SPX,
-0.16%
dropped 0.2% to 3,962.71. The Dow Jones Industrial Average
DJIA,
-0.39%
lost 0.4% to 32,825.95. The Nasdaq
COMP,
+0.09%
bucked the trend, benefiting from the rally in technology stocks and rising 0.1%, to 13,471.57.

Investors weighed new economic data Tuesday that showed Americans cut back on spending last month, partly due to bad weather in wide parts of the country that kept shoppers away from stores, and partly due to December and January stimulus payments running out.

“We’re still in the midst of getting back to a more normal environment,” said Jason Pride, chief investment officer of private wealth at Glenmede. “Given the lumpiness of government stimulus payments, we’re going to see numbers jumping around.”

In energy trading, U.S. benchmark crude
CLJ21,
+0.63%
fell 9 cents to $64.71 a barrel in electronic trading on the New York Mercantile Exchange. It lost 59 cents to $64.80 on Tuesday. Brent crude
BRNK21,
+0.54%,
the international standard, lost 15 cents to $68.24 a barrel.

In currency trading, the U.S. dollar
USDJPY,
+0.14%
rose to 109.12 Japanese yen from 108.99 yen.

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Betting on the post-pandemic boom? Bank of America has 17 stock recommendations

Here’s one possible all-clear signal. COVID-19 is no longer a “tail risk” for investors, the first time since February 2020, says Bank of America in its latest fund manager survey. A tail risk is an unlikely event that could cause outsize losses or gains.

Scroll down for that chart.

Meanwhile, the Federal Reserve’s two-day policy meeting begins on Tuesday, and investors will be on the lookout for any hawkish signals that could take some steam out of stocks. The premarket is showing some mixed action after some disappointment over retail sales.

But many remain stuck into the idea of a post-pandemic boom, at least in the U.S. as vaccinations roll out.

Read: Value stocks are making a comeback. Don’t get left behind, these analysts say

That has kept the records coming for the Dow Jones Industrial Average
DJIA,
+0.53%
and S&P 500
SPX,
+0.65%
and those stocks geared toward a recovery. Our call of the day comes from strategists at Bank of America, who offer up 17 stocks to buy for the three R’s they see coming — recovery, reflation and rerating.

Strategists Jill Carey, Savita Subramanian and Ohsung Kwon say the economy has reached the mid-cycle phase, where inflation typically is strongest. In prior such phases, excluding the technology bubble, small-caps have outperformed larger ones, and value has beaten growth.


Uncredited

The Bank of America team says there are two reasons to like those stocks: many of the companies they highlight are still not expensive, and active funds aren’t positioning for that rising inflation, with heavier exposure to mega than smaller caps.


Uncredited


Uncredited

Onto the stocks (nearly half are small-to-midcap companies)…

Alcoa
AA,
-1.49%
— BofA has a share price target $37 for the miner. Aluminum prices could go either way, but global demand growth is a plus for Alcoa.

Axalta Coating Systems
AXTA,
-0.70%
— Share price target £37 for the global coatings group. The pace of automobile recovery will be key and a stronger dollar and lower raw material costs could be a boost.

Broadcom
AVGO,
+4.34%
— Share price target $550. Risks for the semiconductor company include sensitivity to U.S.-China trade relations and competition in networking, smartphone and other markets.

Hess
HES,
-1.40%
— Share price target $95. Among the energy company’s risks are oil and gas prices, as well as slowing developments in drilling.

Marriott International
MAR,
+2.24%
— Share price objective $150. Economic weakness and worse-than-expected spending by businesses and consumers are among the risks for the hospitality company.

Walt Disney
DIS,
-0.20%
— $223 price objective for the entertainment giant that has “best in class assets.” Downside risks include slowing ESPN growth from people deciding not to keep a cable television subscription, weaker consumer confidence, and low theme park attendance. Also watch out for potential film flops.

As for the rest, they like CNH Industrial
CNHI,
+0.59%,
Comcast
CMCSA,
+0.77%,
Emerson Electric
EMR,
-1.39%,
Herc Holdings
HRI,
+1.98%,
Knight-Swift Transportation
KNX,
-0.67%,
Occidental Petroleum
OXY,
-4.34%,
Parker Hannifin
PH,
+0.75%,
Principal Financial
PFG,
-0.45%,
Robert Half International
RHI,
-1.11%,
Union Pacific
UNP,
-0.66%
and World Fuel Services
INT,
+0.08%.

The chart

Here’s that “tail risk” chart from the latest BofA monthly fund manager survey. Bigger risks are higher-than-expected inflation and a “tantrum” in the bond market.


Uncredited

The markets

Dow and S&P futures
YM00,
-0.06%

ES00,
+0.08%
are flat, while Nasdaq-100 futures
NQ00,
+0.52%
are up. European stocks are higher
SXXP,
+0.62%.
It was also an up day for Asian markets. Elsewhere, oil
CL.1,
-1.39%
and the dollar
DXY,
-0.06%
are weak and bitcoin
BTCUSD,
-2.98%
is backing further away from the $60,000 hit over the weekend.

The buzz

Retail sales dropped a bigger-than-expected 3% in February, though they surged a revised 7.6% in January. Import prices rose 1.3%. That data will be followed by industrial production and a National Association of Home Builders index. Aside from the Fed meeting kickoff, investors will also be watching the outcome of a an auction of 20-year Treasury bonds.

Ray Dalio, the founder of Bridgewater, the world’s biggest hedge fund firm, declares investing in bonds as “stupid” and investors should stick to a “well-diversified portfolio.”

AstraZeneca
AZN,
+0.72%

AZN,
+3.37%
shares are higher after Jefferies upgraded the drug company to buy from hold. AstraZeneca has been in the hot seat as several European countries suspend its COVID-19 shots over reports of blood clots from inoculations.

Finnish telecoms group Nokia
NOKIA,
+0.52%

NOK,
+1.90%
is cutting up to 10,000 jobs to save $716 million over two years.

A team from the U.S. government’s highway safety agency is headed to Detroit to investigate a “violent” crash after a Tesla
TSLA,
+2.05%
vehicle drove under a semitrailer, leaving two people critically injured.

Random reads

Office nostalgia — Redditers swap coworkers-from-hell stories.

When a hacker gets all your texts for $16.

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Short Sellers Boost Bets Against SPACs

Short sellers are coming for SPACs.

Investors who bet against stocks are targeting special-purpose acquisition companies, one of the hottest growth areas on Wall Street. The dollar value of bearish bets against shares of SPACs has more than tripled to about $2.7 billion from $724 million at the start of the year, according to data from S3 Partners.

Some of the stocks under attack belong to large SPACs that surged in recent months, in part because they were backed by high-profile financiers. A blank-check company created by venture capitalist

Chamath Palihapitiya

that plans to merge with lending startup Social Finance Inc. is a popular target, with 19% of its shares outstanding sold short, according to data from S&P Global Market Intelligence. The short interest in

Churchill Capital Corp. IV,

a SPAC created by former investment banker

Michael Klein

that is merging with electric-vehicle startup Lucid, more than doubled in March to about 5%.

Others are wagering against companies after they combine with SPACs. Muddy Waters Capital LLC announced last week it was betting against

XL Fleet Corp.

, a fleet electrification company that went public in December after merging with a SPAC. XL has since said Muddy Waters’s report, which alleged XL inflated its sales pipeline and made misleading claims about its technology among other issues, had “numerous inaccuracies.” 

XL’s stock price dropped the day Muddy Waters released its report by about 13%, to $13.86, from its prior close on March 2. Shares closed Friday at $12.79.

Shares of

Lordstown Motors Corp.

fell nearly 17% Friday after Hindenburg Research released a report saying the electric-truck startup had misled investors on its orders and production. The company, which merged with a SPAC in October, said the report contained half-truths and lies. The short interest in Lordstown shares rose to 5% from 3.4% in the week before the report’s publication, according to data from S&P.

“SPACs are an area of focus,” said Muddy Waters’s

Carson Block.

The veteran short seller said SPACs largely make up the universe of companies he views as both “abysmal” and relatively free from technical challenges, such as high short interest, which can make betting against them difficult.

SPACs are shell firms that raise capital by issuing stock with the sole purpose of buying or merging with a private company to take it public. They are dominating the market for new stock issues, becoming a status symbol for celebrities while pumping the value of acquisitions, like betting company

DraftKings Inc.,

into the tens of billions of dollars.

Hedge funds that buy into SPACs early see them as a way to make lofty returns without much risk. Individual investors are attracted by the chance to get positions in newly public companies that they could rarely purchase through traditional IPOs. The Securities and Exchange Commission issued a statement on Wednesday warning that it “is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it.”

A monthslong rally in the stocks lost steam recently amid a broad selloff in technology and high-growth companies. An index of SPAC stocks operated by Indxx fell about 17% from mid-February to March 10, while the Nasdaq Composite Index declined about 7.3% over the same period.

“These are all momentum stocks, and a lot of people want to short them,” said

Matthew Tuttle,

whose firm Tuttle Tactical Management runs an exchange-traded fund that allows investors to hold a portfolio of SPAC stocks. Mr. Tuttle is preparing to launch an ETF that bets against “de-SPAC” stocks of companies that have merged with a SPAC—like electric-truck manufacturer

Nikola Corp.

and baked-goods maker

Hostess Brands Inc.

—and a separate fund that invests in the stocks.

Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

Postmerger companies are particularly attractive to short because they have larger market capitalizations, making their shares easier to borrow, and because early investors in the SPACs are eager to sell shares to lock in profits, analysts and fund managers said.

Short sellers borrow stocks they believe are overvalued and immediately sell them, hoping to repurchase the shares for a lower price when they need to be returned and to pocket the difference. The strategy proved dangerous in recent months when individual investors organized on social media to push up stocks like GameStop Corp., forcing short sellers to buy shares and cap their losses, helping to drive prices still higher.

Continued strong investor demand for SPACs could catch short sellers in a similar squeeze. Shorting SPACs can also be risky because their shares have a natural floor at $10, the price at which they can be redeemed before a merger, and because they are prone to sharp price moves, analysts said.

Still, the portion of shares sold short in SPACs and their acquisitions is climbing.

A blank-check company created by venture capitalist Chamath Palihapitiya that plans to merge with lending startup Social Finance Inc. is a popular target.



Photo:

Brendan McDermid/Reuters

Some are betting against stocks they believe rose too fast, to unsustainable valuations. The price of bioplastics company

Danimer Scientific Inc.

nearly tripled to $64 in the first six weeks of the year after it was bought by a SPAC. The short interest in Danimer stock has climbed to 8.5% from around 1% in January, and its share price has traded down to about $42, according to data from S&P.

Others are making bearish bets to hedge against potential losses in SPAC stocks they own.

Veteran short seller

Eduardo Marques

cited SPACs and their boosting the number of U.S.-listed stocks as a short-selling opportunity, according to a pitch for a stock-picking hedge fund called Pertento he plans to launch this year. America’s roster of public companies had shrunk from the mid-1990s onward, but that trend has recently reversed, partly because of SPACs.

Their popularity has helped spark new Wall Street offerings.

Goldman Sachs Group Inc.

this year started offering clients set baskets of similar stocks to short, pitching them as a way to hedge SPAC exposure, people who have seen the offering said. Clients typically customize the baskets Goldman offers, which are thematic and sector-focused, such as on bitcoin and electric vehicles.

Kerrisdale Capital founder

Sahm Adrangi

started shorting postmerger SPAC companies earlier than most, with a public bet in November against the stock of frozen-food maker

Tattooed Chef Inc.,

which still trades above its price at that time. But the stock has fallen about 13% during the recent market slump.

“We saw these stocks go up a lot and now that people are de-risking, these highflying SPACs are coming down to earth,” Mr. Adrangi said.

SHARE YOUR THOUGHTS

How long do you think the SPAC boom will continue, and why? Join the conversation below.

Write to Matt Wirz at matthieu.wirz@wsj.com and Juliet Chung at juliet.chung@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Here’s how far the Nasdaq could fall if bond yields reach 2%

In early Friday action, the yield on the 10-year Treasury was rising and Nasdaq 100 futures were falling.

That’s been the pattern over the last month. After a very close connection since the pandemic began, inflation-adjusted yields have kept climbing, but the Nasdaq 100 has suffered. That makes sense given the rich valuation tech stocks enjoy — when safe bonds offer more than crumbs as return, they present an investment alternative to stocks.

So analysts are now modelling just how far techs could fall if bond yields keep rising. Joe Kalish, chief global macro strategist at Ned Davis Research, says the Nasdaq 100 could fall 20% from its peak if the 10-year Treasury reaches 2%. (The index is already down 6% from its peak.)

Kalish’s calculation depends on other relationships holding steady. He says earnings yields and forecasted corporate bond yields have moved in tandem since 2014. A 2% 10-year Treasury would likely cause the bond yields on Baa-related bonds — the lowest investment-grade rating — to reach 4.5%, requiring a 20% drop in the Nasdaq 100 to keep that relationship consistent.

Strategists at French bank Societe Generale tend to agree. They’ve looked at the theoretical impact of a rise in bond yields, at different price-to-equity ratios. Given that the Nasdaq Composite is trading on 31.5 times earnings, according to FactSet data, the chart shows the impact could be steep.

That said, most notable is that Kalish remains bullish on stocks even with those risks. He looked at another measure of valuation, using Census Bureau data on cash-flow margins. “As cash flow has improved since the early 1990s and the cost of capital has fallen with interest rates, the economic margin has risen,” he writes. Right now, that margin is above its 5-year average. In the U.S., the firm is recommending small caps over large caps and value over growth.

The buzz

The $1,400 stimulus checks from the $1.9 trillion relief package signed into law by President Joe Biden could arrive as early as this weekend. Biden set a May 1 target for all adults to be eligible to receive vaccines.

Novavax
NVAX,
+8.77%
will be in the spotlight after the biotech said a completed late-stage clinical study showed that its vaccine candidate was 96.4% effective against “mild, moderate, and severe disease caused by the original COVID-19 strain.” Thailand delayed the rollout of the AstraZeneca
AZN,
-2.29%
vaccine, joining Scandinavian countries including Denmark, over blood clot concerns. Italy reportedly will impose a lockdown over the Easter weekend, according to wire service reports citing a draft decree.

China is planning ways to tame e-commerce giant Alibaba
BABA,
+2.77%,
according to The Wall Street Journal. China also fined 12 tech companies including Baidu
BIDU,
+6.76%
and Tencent
700,
-4.41%
for alleged antitrust violations.

Electronic signature company DocuSign
DOCU,
+5.90%
topped revenue and earnings expectations for its latest quarter and delivered a better-than-expected outlook on those metrics.

Producer price and consumer sentiment data highlight the economics calendar.

The markets

The yield on the 10-year Treasury
TMUBMUSD10Y,
1.594%
rose as high as 1.61% — surprising analysts given the successful auction of bonds of that maturity earlier in the week.

Stock futures
ES00,
-0.29%,
particularly on the Nasdaq 100
NQ00,
-1.30%,
slumped. Gold futures
GC00,
-1.12%
fell by around $20 per ounce.

Random reads

There’s a bull market in twins — with the birth rate up by a third since the 1980s.

Scientists want to send 6.7 million sperm samples to the Moon as a global insurance policy.

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Grab Is in Talks to Go Public Through a SPAC Merger

Grab Holdings Inc. is in talks to go public through a merger with a SPAC that could value the Southeast Asian ride-hailing startup at as much as $40 billion, making it by far the largest such deal on record.

The Singapore company is discussing a deal with a special-purpose acquisition company affiliated with Altimeter Capital Management LP that would value it at between $35 billion and $40 billion, according to people familiar with the matter. (Altimeter has two SPACS; it couldn’t be learned which one is in talks with Grab.)

As part of the deal, Grab would raise between $3 billion and $4 billion in a so-called PIPE, a funding round that typically accompanies a SPAC merger, the people said. That amount could still change as Grab and Altimeter will start meeting with mutual funds and other potential investors soon, some of the people said.

The parties could announce the deal in the next few weeks, though the talks could still fall apart and Grab could revert to an earlier plan to stage a traditional initial public offering on a U.S. exchange this year.

Should they move forward with a SPAC deal, it would be the high-water mark in a recent explosion of such transactions, in which an empty shell raises money in an IPO with plans to later find one or more companies to merge with. In some cases, the SPAC ends up with only a small sliver of the newly public target.

The vehicles have caught fire in the last couple of years, with everyone from former baseball player Alex Rodriguez to ex-House Speaker Paul Ryan getting in on the action. They have helped break a bottleneck between the private and public markets as companies that were reluctant to go public line up to combine with SPACs, which offer in many cases a speedier route to a listing without costs and disclosure limitations that accompany traditional IPOs.

The biggest SPAC deal to date is United Wholesale Mortgage’s roughly $16 billion combination with Gores Holdings IV Inc., announced in September. The biggest one so far this year is electric-vehicle company Lucid Motors Inc.’s agreement last month to merge with Michael Klein’s

Churchill Capital Corp.

IV, a deal valued at nearly $12 billion, according to Dealogic.

So far this year, a record $70 billion-plus has been raised for SPACs, which account for more than 70% of all public stock sales, according to Dealogic. A slew of companies are in talks for a SPAC merger or already have agreed to one, including office-sharing firm WeWork, online photo-book maker Shutterfly Inc. and online lender Social Finance Inc.

In addition to ride-hailing, Grab, which traces its roots back to 2011, delivers restaurant, grocery and other items and provides digital financial services to merchants.

Its backers include

SoftBank Group Corp.

,

Uber Technologies Inc.

and

Toyota Motor Corp.

It was last publicly valued at around $15 billion in an October 2019 fundraising round, according to PitchBook.

Its valuation is on the rise as public investors pile into other ride-hailing and food-delivery companies. Uber’s shares have jumped sharply in the past several months, while

DoorDash Inc.

went public in December at a valuation far in excess of where it had raised money privately. The restaurant-delivery company now has a market capitalization of nearly $47 billion.

Altimeter’s SPACs—Altimeter Growth Corp. and Altimeter Growth Corp. 2—raised $450 million and $400 million in October and January IPOs, respectively. Altimeter Capital, of Menlo Park, Calif., has around $16 billion under management and primarily invests in technology companies.

The firm has racked up a string of successful investments and was one of the main participants in a January round of funding

Roblox Corp.

raised ahead of its IPO at $45 a share. In its debut Wednesday, shares of the videogame platform traded more than 50% above that level and continued rising Thursday.

SoftBank, which invested through its Vision Fund, is also poised to win big on Grab, just as another of its bets proves to be a gigantic winner: The Japanese technology-investing giant has now made roughly $25 billion on paper on its $2.7 billion investment in South Korean e-commerce company

Coupang Inc.,

which soared 41% in its trading debut Thursday.

Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

Write to Maureen Farrell at maureen.farrell@wsj.com

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Stock Futures Rise After Dow Record

Stock futures advanced Thursday, indicating that shares of giant technology companies would push higher at the opening bell as investors awaited a fresh reading on the labor market.

Futures linked to the S&P 500 rose 0.7%. Contracts tied to the Nasdaq-100 rose 1.9%, suggesting technology stocks will rebound following muted declines for the sector on Wednesday. Futures for Dow Jones Industrial Average ticked up 0.4%, a day after the blue-chips index closed at a record high.

Investors’ demand for stocks has revived as bond markets have calmed. The yield on 10-year Treasury notes, which moves inversely to the price, slipped to 1.501% from 1.520% Wednesday, putting it on course for a third-consecutive day of declines. Yields climbed as high as 1.594% earlier this week.

Stocks have been buffeted by sharp moves in bond yields, fueled by uncertainty over how the $1.9 trillion relief bill passed by the House Wednesday will ripple through the U.S. economy.

Concerns that the size of the stimulus would lift inflation beyond the Federal Reserve’s comfort zone and trigger an increase in interest rates recently prompted yields to rise. That sapped appetite for shares in tech companies, which had benefited from an extended spell of low rates. At the same time, optimism about the economic outlook has bolstered demand for shares of companies that would benefit from a relaxation of lockdowns.

Muted inflation data for the start of the year have calmed nerves about the outlook for rates. But bond yields will likely remain volatile, shifting momentum between different segments of the stock market, said Monica Defend, head of research at French asset manager Amundi.

“Eventually it should be positive for the equity market if we have a bit more inflation, a bit more growth,” she said.

Tech stocks including Apple, Twitter and data-mining firm

Palantir Technologies

climbed before the bell in New York. Electric-vehicle maker Tesla rose 3.9%.

Shares of videogame retailer and online-trading sensation

GameStop

dropped about 6% premarket. Volatility has returned in recent sessions to the so-called meme stocks that are the darlings of individual investors who gather on internet forums.

Data on the number of people filing for unemployment benefits, a proxy for joblessness, are due out at 8.30 a.m. ET. Economists surveyed by The Wall Street Journal expect that 725,000 workers filed for initial benefits last week. That would mark a small decrease from the previous week and offer a further sign of improvement in the labor market following an easing of Covid-19 case numbers.

“We’re not completely out of the woods yet in terms of the unemployment rate,” said Mary Nicola, a portfolio manager at PineBridge Investments. The health of the labor market will be a key determinant of when the Fed decides to raise interest rates, she added.

Investors’ appetite for U.S. government debt will receive another test Thursday with the planned auction of $24 billion in 30-year bonds. The Treasury sold $58 billion of three-year notes on Tuesday and $38 billion of 10-year notes Wednesday.

In overseas markets, the Stoxx Europe 600 edged up 0.3%.

The euro ticked up 0.2% to $1.1950 after the European Central Bank left its key interest rates unchanged and said it would be flexible in its bond purchases to avoid a rise in borrowing costs. Investors expect ECB President

Christine Lagarde

to address the recent rise in bond yields in the region in the coming press conference.

“The eurozone can’t afford tightening financial conditions, and we’ve been importing that from the higher rates in the U.S.,” Ms. Defend said before the rate decision. “It is something the ECB is looking at as a matter of concern.”

Traders worked the floor of the New York Stock Exchange on Wednesday.



Photo:

Nicole Pereira/Associated Press

China’s Shanghai Composite Index jumped 2.4% in its biggest one-day rise since October. The advance followed an article in a financial newspaper encouraging new investors to seek long-term returns and not be swayed by volatility in stocks,

Deutsche Bank

strategist Jim Reid said in a note.

Markets rose elsewhere in Asia, with Japan’s Nikkei 225 and South Korea’s Kospi gaining 0.6% and 1.9% by the close respectively.

Write to Joe Wallace at Joe.Wallace@wsj.com

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GameStop stock surges to highest point since January, market cap tops $17 billion

Shares of GameStop Corp. shot higher again Tuesday, closing at its highest point since the end of January and pushing its market cap back above $17 billion.

After plunging about 90% from its highs of the meme-stock-buying frenzy in January, GameStop stock
GME,
+26.94%
has skyrocketed more than 108% in the past five trading sessions, including Tuesday’s 27% gain. Shares closed Tuesday’s regular session at $246.90, off from a record close of $347.51 on Jan. 27, and were up another 3% in after-hours trading.

GameStop shares are up more than 1,200% year to date, and more than 5,700% over the past 12 months.

Shares started spiking again Monday after GameStop announced a new  strategy committee to identify ways to accelerate its transformation, which will be led by activist investor and Chewy Inc.
CHWY,
+5.37%
co-founder Ryan Cohen.

Late Tuesday, GameStop said it will report fourth-quarter and fiscal-year earnings after the market closes March 23.

Earlier in the day, the Senate Banking Committee started hearings into financial speculation and the easy-trading practices of Robinhood and other zero-commission firms that, combined with chatter from Reddit forums, helped fuel the historic buying of heavily shorted stocks — such as GameStop and AMC Entertainment Holdings Inc.
AMC,
+13.02%
— earlier this year.

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GE Nears Deal to Combine Aircraft-Leasing Unit With AerCap

General Electric Co. is nearing a $30 billion-plus deal to combine its aircraft-leasing business with Ireland’s

AerCap

AER 1.62%

Holdings NV, according to people familiar with the matter, the latest in a string of moves by the industrial conglomerate to restructure its once-sprawling operations.

Though details of how the deal would be structured couldn’t be learned, it is expected to have a valuation of more than $30 billion, some of the people said. An announcement is expected Monday, assuming the talks don’t fall apart.

The

GE

GE 0.29%

unit, known as GE Capital Aviation Services, or Gecas, is the biggest remaining piece of GE Capital, a once-sprawling lending operation that rivaled the biggest U.S. banks but nearly sank the company during the 2008 financial crisis. GE already took a major step back from the lending business in 2015 when it said it would exit the bulk of GE Capital, and a deal for Gecas would represent another big move in that direction.

It would also represent another significant move by GE Chief Executive Larry Culp to right the course of a company that has been battered in recent years by souring prospects for some of its top business lines and a structure that has fallen out of favor with investors.

With more than 1,600 aircraft owned or on order, Gecas is one of the world’s biggest jet-leasing companies, alongside AerCap and Los Angeles-based Air Lease Corp. It leases passenger aircraft made by Boeing Co. and

Airbus SE

as well as regional jets and cargo planes to customers ranging from flagship airlines to startups. Gecas had $35.86 billion in assets as of Dec. 31.

AerCap has a market value of $6.5 billion and an enterprise value—adjusted for debt and cash—of about $34 billion, according to S&P Capital IQ, and around 1,400 owned or ordered aircraft. The company has experience in deal making, paying around $7.6 billion in 2014 to buy International Lease Finance Corp. AerCap’s revenue last year was about $4.4 billion, down from around $5 billion in the previous few years.

The aviation business has been hit hard by the Covid-19 pandemic, which has resulted in a sharp drop in global travel and prompted airlines to ground planes. Some airlines have sought to defer lease payments or purchases of new aircraft. Gecas had an operating loss of $786 million on revenue of $3.95 billion in 2020. GE took a roughly $500 million write-down on the value of its aircraft portfolio in the fourth quarter.

Combining the companies could afford cost-cutting opportunities and help the new entity weather the downturn.

Separating Gecas could help GE with its efforts to shore up its balance sheet and improve cash flows. Despite a recent increase, GE’s share price remains below where it was before significant problems in the company’s power and finance units emerged in recent years.

The Boston company has a market value of around $119 billion after the shares more than doubled in the past six months as it posted improving results. Still, the stock has fallen by about three-quarters from the peak just over 20 years ago.

Mr. Culp became the first CEO from outside of GE in late 2018 after the company was forced to slash its dividend and sell off businesses. The former

Danaher Corp.

boss has sought to simplify GE’s wide-ranging conglomerate structure further, as other industrial giants such as Siemens AG and

Honeywell International Inc.

have done in recent years.

Activist investor Trian Fund Management LP, which has owned a significant position in the company since 2015 and holds a seat on its board, has supported such changes.

Early in his tenure, Mr. Culp said he had no plans to sell Gecas, a move his predecessor

John Flannery

had considered after the unit drew interest from private-equity firms pushing further into the leasing business.

Mr. Culp has sought to even out cash flows and refocus on core areas. Operations he has parted with include the company’s biotech business, which was purchased by Danaher in a $21 billion deal that closed last year. GE also sold its iconic lightbulb business in a much smaller deal last year, and previously said it was unloading its majority stake in oil-field-services firm Baker Hughes Co.

GE has cut overhead costs and jobs in its jet-engine unit while streamlining its power business. The pandemic continues to pressure the jet-engine business, GE’s largest division, however.

The company also makes healthcare machines and power-generating equipment, and the rest of GE Capital extends loans to help customers purchase its machines and contains legacy insurance assets too.

AerCap is based in Ireland and Gecas has headquarters there as well. The aircraft-leasing industry has long had a significant presence in Ireland due to the country’s favorable tax regime and the importance of Guinness Peat Aviation in the development of the sector. (A deal between GE and AerCap would reunite two companies that bought their main assets from GPA.) The industry has gotten more competitive as Chinese companies have gained market share, however, and the combination could help the new group stem that tide.

Shares in aircraft-leasing companies plummeted along with much of the market in the early days of the pandemic as demand from major airlines, who lease planes to avoid the costs of owning them, evaporated. But many of the major lessors’ stocks have recovered lost ground and then some in the months since as lockdowns ease and the outlook for travel improves.

AerCap’s Chief Executive Aengus Kelly said on its fourth-quarter earnings call this month that he expects airlines to shift more toward leasing planes as they rebuild their balance sheets, in what would be a boon to the company and its peers.

“Their appetite for deploying large amounts of scarce capital to aircraft purchases will remain muted for some time,” he said. “The priority will be to repay debt or government subsidies.”

Write to Cara Lombardo at cara.lombardo@wsj.com and Emily Glazer at emily.glazer@wsj.com

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