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Business

Corporate Layoffs Spread Beyond High-Growth Tech Giants

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The headline-grabbing expansion of layoffs beyond high-growth technology companies stands in contrast to historically low levels of jobless claims and news that companies such as

Chipotle Mexican Grill Inc.

and

Airbus SE

are adding jobs.

This week, four companies trimmed more than 10,000 jobs, just a fraction of their total workforces. Still, the decisions mark a shift in sentiment inside executive suites, where many leaders have been holding on to workers after struggling to hire and retain them in recent years when the pandemic disrupted workplaces.

Live Q&A

Tech Layoffs: What Do They Mean?

The creator of the popular layoff tracker Layoffs.fyi Roger Lee and the head of talent at venture firm M13 Matt Hoffman sit down with WSJ reporter Chip Cutter, to discuss what’s behind the recent downsizing and whether it will be enough to recalibrate ahead of a possible recession.

Unlike

Microsoft Corp.

and Google parent

Alphabet Inc.,

which announced larger layoffs this month, these companies haven’t expanded their workforces dramatically during the pandemic. Instead, the leaders of these global giants said they were shrinking to adjust to slowing growth, or responding to weaker demand for their products.

“We are taking these actions to further optimize our cost structure,”

Jim Fitterling,

Dow’s chief executive, said in announcing the cuts, noting the company was navigating “macro uncertainties and challenging energy markets, particularly in Europe.”

The U.S. labor market broadly remains strong but has gradually lost steam in recent months. Employers added 223,000 jobs in December, the smallest gain in two years. The Labor Department will release January employment data next week.

Economists from Capital Economics estimate a further slowdown to an increase of 150,000 jobs in January, which would push job growth below its 2019 monthly average, the year before pandemic began.

There is “mounting evidence of weakness below the surface,”

Andrew Hunter,

senior U.S. economist at Capital Economics wrote in a note to clients Thursday.

Last month, the unemployment rate was 3.5%, matching multidecade lows. Wage growth remained strong, but had cooled from earlier in 2022. The Federal Reserve, which has been raising interest rates to combat high inflation, is looking for signs of slower wage growth and easing demand for workers.

Many CEOs say companies are beginning to scrutinize hiring more closely.

Slower hiring has already lengthened the time it takes Americans to land a new job. In December, 826,000 unemployed workers had been out of a job for about 3½ to 6 months, up from 526,000 in April 2022, according to the Labor Department.

“Employers are hovering with their feet above the brake. They’re more cautious. They’re more precise in their hiring,” said

Jonas Prising,

chief executive of

ManpowerGroup Inc.,

a provider of temporary workers. “But they’ve not stopped hiring.”

Additional signs of a cooling economy emerged on Thursday when the Commerce Department said U.S. gross domestic product growth slowed to a 2.9% annual rate in the fourth quarter, down from a 3.2% annual rate in the third quarter.

Not all companies are in layoff mode.

Walmart Inc.,

the country’s biggest private employer, said this week it was raising its starting wages for hourly U.S. workers to $14 from $12, amid a still tight job market for front line workers. Chipotle Mexican Grill Inc. said Thursday it plans to hire 15,000 new employees to work in its restaurants, while plane maker Airbus SE said it is recruiting over 13,000 new staffers this year. Airbus said 9,000 of the new jobs would be based in Europe with the rest spread among the U.S., China and elsewhere. 

General Electric Co.

, which slashed thousands of aerospace workers in 2020 and is currently laying off 2,000 workers from its wind turbine business, is hiring in other areas. “If you know any welders or machinists, send them my way,” Chief Executive

Larry Culp

said this week.

Annette Clayton,

CEO of North American operations at

Schneider Electric SE,

a Europe-headquartered energy-management and automation company, said the U.S. needs far more electricians to install electric-vehicle chargers and perform other tasks. “The shortage of electricians is very, very important for us,” she said.

Railroad CSX Corp. told investors on Wednesday that after sustained effort, it had reached its goal of about 7,000 train and engine employees around the beginning of the year, but plans to hire several hundred more people in those roles to serve as a cushion and to accommodate attrition that remains higher than the company would like.

Freeport-McMoRan Inc.

executives said Wednesday they expect U.S. labor shortages to continue to crimp production at the mining giant. The company has about 1,300 job openings in a U.S. workforce of about 10,000 to 12,000, and many of its domestic workers are new and need training and experience to match prior expertise, President

Kathleen Quirk

told analysts.

“We could have in 2022 produced more if we were fully staffed, and I believe that is the case again this year,” Ms. Quirk said.

The latest layoffs are modest relative to the size of these companies. For example, IBM’s plan to eliminate about 3,900 roles would amount to a 1.4% reduction in its head count of 280,000, according to its latest annual report.

As interest rates rise and companies tighten their belts, white-collar workers have taken the brunt of layoffs and job cuts, breaking with the usual pattern leading into a downturn. WSJ explains why many professionals are getting the pink slip first. Illustration: Adele Morgan

The planned 3,000 job cuts at SAP affect about 2.5% of the business-software maker’s global workforce. Finance chief

Luka Mucic

said the job cuts would be spread across the company’s geographic footprint, with most of them happening outside its home base in Germany. “The purpose is to further focus on strategic growth areas,” Mr. Mucic said. The company employed around 111,015 people on average last year.

Chemicals giant Dow said on Thursday it was trimming about 2,000 employees. The Midland, Mich., company said it currently employs about 37,800 people. Executives said they were targeting $1 billion in cost cuts this year and shutting down some assets to align spending with the macroeconomic environment.

Manufacturer

3M Co.

, which had about 95,000 employees at the end of 2021, cited weakening consumer demand when it announced this week plans to eliminate 2,500 manufacturing jobs. The maker of Scotch tape, Post-it Notes and thousands of other industrial and consumer products said it expects lower sales and profit in 2023.

“We’re looking at everything that we do as we manage through the challenges that we’re facing in the end markets,” 3M Chief Executive

Mike Roman

said during an earnings conference call. “We expect the demand trends we saw in December to extend through the first half of 2023.”

Hasbro Inc.

on Thursday said it would eliminate 15% of its workforce, or about 1,000 jobs, after the toy maker’s consumer-products business underperformed in the fourth quarter.

Some companies still hiring now say the job cuts across the economy are making it easier to find qualified candidates. “We’ve got the pick of the litter,” said

Bill McDermott,

CEO of business-software provider

ServiceNow Inc.

“We have so many applicants.”

At

Honeywell International Inc.,

CEO

Darius Adamczyk

said the job market remains competitive. With the layoffs in technology, though, Mr. Adamczyk said he anticipated that the labor market would likely soften, potentially also expanding the applicants Honeywell could attract.

“We’re probably going to be even more selective than we were before because we’re going to have a broader pool to draw from,” he said.

Across the corporate sphere, many of the layoffs happening now are still small relative to the size of the organizations, said

Denis Machuel,

CEO of global staffing firm Adecco Group AG.

“I would qualify it more as a recalibration of the workforce than deep cuts,” Mr. Machuel said. “They are adjusting, but they are not cutting the muscle.”

Write to Chip Cutter at chip.cutter@wsj.com and Theo Francis at theo.francis@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

3M to Cut Jobs as Demand for Its Products Weakens

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3M Co.

said it is cutting 2,500 manufacturing jobs globally as the company confronts turbulence in overseas markets and weakening consumer demand.

The maker of Scotch tape, Post-it Notes and thousands of other industrial and consumer products said Tuesday that it expects lower sales and profit in 2023 after demand weakened significantly in late 2022, pulling down quarterly performance.

The St. Paul, Minn., company forecast sales this year to slip from last year’s level with weak demand for consumer products and electronic items, particularly smartphones, tablets and televisions, for which 3M provides components. Fourth-quarter sales for 3M’s consumer business dropped nearly 6% from the same period a year earlier.

“Consumers sharply cut discretionary spending and retailers adjusted their inventory levels,” 3M Chief Executive

Mike Roman

said during a conference call. “We expect the demand trends we saw in December to extend through the first half of 2023.”

3M shares were down 5.2% at $116.25 Tuesday afternoon, while major U.S. stock indexes were little changed.

The company said demand for its disposable face masks is receding, as healthcare providers spend less on Covid-19 measures, and mask demand returns to prepandemic levels. 3M said it expects mask sales to decline between $450 million and $550 million this year from 2022.

3M executives said the spread of Covid infections in China is weighing on sales there, and sporadic plant closings are interrupting industrial production. China also is reducing production of consumer electronics because of weakening consumer demand, they said, and 3M’s exit from its business in Russia last year will also contribute to lower sales this year.

The 2,500 layoffs represent roughly 2.6% of the company’s workforce, which a regulatory filing said was about 95,000 at the end of 2021. Mr. Roman declined to specify where the job cuts will take place, or whether the company might make further reductions as it reviews its supply chains and prepares to spin off its healthcare unit.

“We’re looking at everything that we do as we manage through the challenges that we’re facing in the end markets and we focus on driving improvements,” he said.

The company said it would take a pretax restructuring charge in the first quarter of $75 million to $100 million.

Mr. Roman said the job cuts were unrelated to litigation facing the company. 3M is defending against allegations that the so-called forever chemicals it has produced for decades have contaminated soil and drinking water. It is also involved in litigation over foam earplugs its subsidiary Aearo Technologies LLC sold to the military. About 230,000 veterans have filed complaints in federal court alleging the earplugs failed to protect them from service-related hearing loss.

3M has said the earplugs were effective when military personnel were given sufficient training on how to use them. In litigation over firefighting foam that incorporated forms of forever chemicals, 3M is expected to argue that the products were produced to U.S. military specifications, granting the company legal protection as a government contractor.

In both cases, Mr. Roman said the company is focused on finding a way forward.

3M said the strong value of the U.S. dollar continues to erode sales from other countries when foreign currencies are converted to dollars.

The company forecast that sales for the quarter ending March 31 will be down 10% to 15% from the same period last year. For the full year, the company projects sales to fall between 6% and 2%, and expects adjusted earnings of $8.50 a share to $9 a share. The company earned $10.10 a share in 2022, excluding special charges, and analysts surveyed by FactSet were expecting the company to earn $10.22 in 2023.

For the fourth quarter, the company posted a profit of $541 million, or 98 cents a share, compared with $1.34 billion, or $2.31 a share, a year earlier.

Stripping out one-time items, including costs tied to exiting the company’s operations making forever chemicals, adjusted earnings came to $2.28 a share. Analysts were looking for adjusted earnings of $2.36 a share, according to FactSet.

Sales fell 6% to $8.08 billion for the quarter, slightly topping expectations of analysts surveyed by FactSet.

Mr. Roman said there were promising signs for some of 3M’s businesses, including in biopharma processing, home improvement and automotive electrification, the last of which he said grew 30% in 2022 to become a roughly $500 million business.

“There’s more to it than consumer electronics, but certainly the consumer-electronics dynamics are the story of the day,” he said.

Write to John Keilman at john.keilman@wsj.com and Bob Tita at robert.tita@wsj.com

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Business

Was Fed’s Powell dovish or not? 4 key takeaways from Wednesday’s press conference

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Investors reacted as if Fed Chairman Jerome Powell’s press conference Wednesday was dovish, but many economists think it was on the hawkish side of the street.

Here are some of the key takeaways from Powell’s hour-long discussion with reporters about the state of the economy and central bank policy:

Read: Fed jacks up rates to combat highest inflation in 41 years

You say ‘dovish’ and I say ‘hawkish’

After Powell spoke, stock prices
DJIA,
+1.37%

SPX,
+2.62%
rose sharply and bond yields
TMUBMUSD02Y,
2.984%
declined more at the short end than the long end, clear signs the market thought Powell was dovish.

But Robert Perli, head of global policy at Piper Sandler, disagreed with this conclusion.

“The press conference was hawkish,” he said.

“All Powell could do at the press conference today was talk about how inflation was too high, how the Fed is determined to bring it down, and implicitly how he would be willing to tolerate a recession if that’s what’s needed to get the job done,” Perli said.

The market latched on to Powell’s statement that slowing down from the pace of 0.75-percentage-point rate hikes will likely be appropriate “at some point.” Perli said this is “obvious” as the Fed can’t continue on that pace forever.

The market also liked when Powell said the Fed was moving to a new “meeting-to-meeting” phase, perhaps believing that a peak in interest rates is near.

Perli said that’s a misreading and Powell doesn’t want to give guidance because there is so much uncertainty.

Scott Anderson, chief economist at Bank of the West, said the lack of forward guidance from the Fed could increase interest-rate and stock-market volatility around important U.S. data releases, especially on inflation “as investors try to determine what it might mean for the pace of additional rate hikes and the terminal peak for rates in the current tightening cycle.”

Powell ‘bobs and weaves’ on recession

Powell managed to “bob and weave” around the questions of recession, said Josh Shapiro, chief U.S. economist at MFR.

Powell said the Fed wasn’t trying to create a recession and did not expect one, and also that we are not currently in one. He refused to categorically state how it would affect the Fed’s policy path if one materialized, Shapiro said.

The Fed chairman said there was still a path to bring inflation down while sustaining a strong labor market.

“We continue to think that there is a path [to a soft landing]. We know the path has clearly narrowed…and may narrow further,” he said.

Powell said the Fed is determined to bring inflation down, and this likely means a period of “below-trend economic growth and some softening in the labor market conditions. “

What about September?

Powell kept the door open for another “unusually large” 0.75-percentage-point hike in September, but said it would depend on the data.

Carl Tannenbaum, chief economist at Northern Trust, noted that Powell suggested that the year-end fed funds rate would be in the range of 3.25%-3.5%. That is another 100 basis points higher, which the Fed might prefer to accomplish with a 50-basis-point increase followed by two 25-basis-point hikes, rather than going from 75 basis points in September, to 25, then to zero. Powell “sounded marginally less hawkish to me,” he said.

Balance-sheet plans

Powell said the Fed’s program to shrink its balance sheet is working and markets “should be able to absorb this.” He said the plan was on track and could take two to two-and-a-half years.

Some economists have starting to forecast the Fed will end the “quantitative tightening” program next year.

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Business

Shopify Says It Will Lay Off 10% of Workers, Sending Shares Lower

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Shopify Inc.

SHOP -14.06%

is cutting roughly 1,000 workers, or 10% of its global workforce, rolling back a bet on e-commerce growth the technology company made during the pandemic, according to an internal memo.

Tobi Lütke,

the company’s founder and chief executive, told staff in a memo sent Tuesday that the layoffs are necessary as consumers resume old shopping habits and pull back on the online orders that fueled the company’s recent growth. Shopify, which helps businesses set up e-commerce websites, has warned that it expects revenue growth to slow this year.

Shopify’s shares fell 14% to $31.55 on Tuesday after The Wall Street Journal first reported on the layoffs. The shares have fallen more than 80% since they peaked in November near $175 adjusting for a recent stock split. The company reports quarterly results on Wednesday.

Mr. Lütke said he had expected that surging e-commerce sales growth would last past the Covid-19 pandemic’s ebb. “It’s now clear that bet didn’t pay off,” said Mr. Lütke in the letter, which was reviewed by the Journal. “Ultimately, placing this bet was my call to make and I got this wrong.”

The Ottawa-based company will cut jobs in all its divisions, though most of the layoffs will occur in recruiting, support and sales units, said Mr. Lütke. “We’re also eliminating overspecialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products,” he wrote. Staff who are being let go will be notified on Tuesday.

Shopify’s job cuts are among the largest so far in a wave of layoffs and hiring freezes that is washing over technology companies. Rising interest rates, supply-chain shortages and the reversal of pandemic trends, including remote work and e-commerce shopping, have cooled what was once a red-hot tech sector.

Shopify’s job cuts are the first big layoffs the company has announced since Tobi Lütke founded it in 2006.



Photo:

Cate Dingley/Bloomberg News

Netflix Inc.

cut about 300 workers in June as it deals with a loss in subscribers.

Twitter Inc.,

now mired in a legal standoff with

Elon Musk,

laid off fewer than 100 members of its talent acquisition team. Mr. Musk’s own company, electric-vehicle maker

Tesla Inc.,

late in June laid off roughly 200 people, after announcing it would cut 10% of salaried staff.

Other firms, including

Microsoft Corp.

and

Alphabet Inc.’s

Google, said they would slow hiring the rest of the year.

Tuesday’s announcement is Mr. Lütke’s first big move after Shopify’s shareholders approved a board plan to protect his voting power. The job cuts are the first big layoffs the company has announced since Mr. Lütke started the company in 2006.

Shopify’s workforce has increased from 1,900 in 2016 to roughly 10,000 in 2021, according to the company’s filings. The hiring spree was made to help keep up with booming business. E-commerce shopping surged during the pandemic, and many small-business owners created online stores to sell goods and services.

Shopify reported annual revenue growth of 86% in 2020 and 57% in 2021 to about $4.6 billion. However, the company reported a softening this year, and warned that 2022’s numbers wouldn’t benefit from the pandemic trends.

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In his memo on Tuesday, Mr. Lütke said, “What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead.”

Shopify has been expanding its business in recent years to provide more services for merchants. It has developed point-of-sale hardware for retailers, launched a shopping app for its merchants to list products and created a network of fulfillment centers to ship orders for its business partners.

In May, Shopify agreed to buy U.S. fulfillment specialist Deliverr Inc. for $2.1 billion in cash and stock. It announced partnerships with Twitter in June and with YouTube earlier this month, allowing users to buy items that Shopify merchants post on those platforms.

Shopify is offering 16 weeks of severance to the laid-off workers, plus one week for every year of service.

Write to Vipal Monga at vipal.monga@wsj.com

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Business

Kellogg Splitting Into Three Companies as It Shifts Focus to Global Snacks

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Kellogg Co.

K 1.95%

said it plans to break up its business into three companies, seeking to jump-start its larger, faster-growing snacks business while helping its namesake cereal brands regain their footing on supermarket shelves.

The move, which Kellogg said would separate snacks such as Pringles, Cheez-Its and Pop-Tarts from cereal-aisle staples including Frosted Flakes and Froot Loops, aims to create more agile, focused companies and marks a shift from the food industry’s decadeslong strategy of pursuing acquisitions and building scale.

“Bigness for bigness sake doesn’t make a lot of strategic sense,” said Kellogg’s Chief Executive Steve Cahillane, who will head the $11.4 billion snacking business, which accounted for 80% of Kellogg’s net sales last year.

The Covid-19 pandemic delivered a boost in sales for Kellogg and other food makers, as families prepared more meals in their kitchens as they stayed home from work and school. The grocery industry now is working to retain that momentum, but food makers over the past year have been battered by rising costs for fuel, labor, ingredients and packaging, creating what Mr. Cahillane called an unprecedented stretch of inflation.

Kellogg said it expects to complete the split by the end of 2023, with the North America cereal business potentially separating first, followed by its plant-based foods business as the third company. Kellogg said it also is considering selling the plant-based foods unit, which is predominantly composed of the

MorningStar

Farms brand. It has yet to name the individual companies.

Kellogg’s stock price rose about 3% on Tuesday. Shares were already up 4.8% this year as of Friday, bucking the broader market slump. The S&P 500 packaged foods and meat index on Tuesday was down about 3% so far in 2022.

Kellogg’s breakup plan follows splits announced last year by General Electric Co. and Johnson & Johnson. In the food sector, Kraft Foods orchestrated a similar split about 10 years ago, spinning off its North American grocery business to focus on its faster-growing snack brands including Oreos and Triscuits, a business it named Mondelez International Inc.

Sara Lee Corp. in 2012 split its business into two companies, one a meat-focused operation renamed Hillshire Brands Co., and an international coffee and tea business called D.E. Master Blenders NV.

Hillshire, D.E. Master Blenders and Kraft all later merged with other big food companies.

The largest of Kellogg’s three planned companies would be the global snacks business, which would include brands such as Pringles and Cheez-Its, and breakfast items including Eggo waffles and Pop-Tarts. It also would include Kellogg’s international operations—fast-growing noodle business in Africa and cereal sales overseas.

“The snacking business will have all household names with just the right level of scale,” Mr. Cahillane said. “And when you don’t have the ‘conglomerate effect,’ you can get a lot more done.”

Kellogg said it would use its international cereal supply chain and retailer connections to expand Cheez-Its and other snacks globally. In recent years, Kellogg’s Pringles brand has gained momentum in Europe and Latin America, which executives said paves the way for others in its portfolio.

Snacks have been a driver of Kellogg’s growth and an area of particular interest to Mr. Cahillane since he joined the company almost five years ago. In 2019, he sold off Kellogg’s nearly $1 billion Keebler cookies and fruit snacks business to better focus on Kellogg’s other snack brands, which were already getting more of the company’s marketing and innovation resources. Since then, Mr. Cahillane said, he has been calculating a bigger corporate split.

“The pandemic pressed pause on a lot of things,” Mr. Cahillane said. “The time is right, now.”

Mondelez, the biggest global snack company, for years has added brands through small acquisitions, and on Monday it said it would acquire Clif Bar & Co. for $2.9 billion plus the potential for more tied to earnings targets. That deal could increase competition against Mars Inc.’s KIND bar brand, which Mars bought in 2020, and Kellogg’s smaller RX Bar business, which it acquired in 2017.

Mr. Cahillane said Kellogg would continue to pursue snacking acquisitions following the split.

Other food companies have reshaped their own operations.

General Mills Inc.

took on a substantial pet-food business via acquisitions, and divested less-profitable brands such as Green Giant vegetables and Hamburger Helper.

Campbell Soup Co.

has faced investor questions about whether it would be better off splitting its snack business and soup operation in two, though executives have maintained that they are better off together.

Kellogg’s decision to spin off its North America cereal business, with about $2.4 billion in sales last year, comes as it seeks to reverse sales declines and boost profit margins.

Consumers for years have been moving away from breakfast cereals, and Kellogg’s operations more recently were disrupted by a strike among factory workers and a fire at one plant that knocked out production and cost the company market share.

Corporate titans General Electric and Johnson & Johnson both announced in late 2021 that they were splitting, two of the latest in a long string of conglomerate break ups. Here’s why big businesses divide and what it could mean for investors. Photo illustration: Tammy Lian/WSJ

Kellogg, the second biggest U.S. cereal supplier after General Mills, has regained 4 percentage points of market share this year, Mr. Cahillane said. Still, Kellogg’s North America cereal sales fell 10% in the three months ended April 2 from the prior year, largely because of to supply-chain problems, the company said.

“Frosted Flakes doesn’t have to compete with Pringles for resources,” Mr. Cahillane said. “Economists might say we can do that without splitting. But we don’t live in a textbook, we live in the real world.”

Kellogg’s plant-based foods business, with estimated 2021 net sales of $340 million, as a stand-alone company will first aim to expand in North America and eventually globally, Kellogg said.

Meat alternatives have found traction in grocery stores’ freezer aisles and meat cases, though competition has grown. Kellogg in early 2020 brought out a line of plant-based burgers and tenders called Incogmeato, part of an effort to compete against

Beyond Meat Inc.

and Impossible Foods Inc.

Mr. Cahillane said MorningStar’s Incogmeato can be more aggressive with investments in technology and its supply chain once it no longer is contributing to Kellogg’s bottom line.

Some Wall Street analysts said divvying up Kellogg could hurt each business’s ability to secure competitive prices using the larger conglomerate’s purchasing power.

Piper Sandler’s

Michael Lavery

said that it could cost some 2% of Kellogg’s current total sales for each business to take on their own sales force, distribution system and other previously-shared expenses. Analysts with investment research firm Morningstar Inc. said that Kellogg’s snacks business could thrive on its own, though the benefits for the cereal and plant-based operations were less clear.

Kellogg said the North American cereal and plant-based foods businesses would both remain based in Battle Creek, Mich. The global snacking business would be based in Chicago, Ill., with dual corporate campuses in Battle Creek and Chicago.

Moving the snack company’s headquarters to Chicago will locate it in a city that is home to other food companies as Kellogg looks to hire and expand the business.

Boeing Co.

and

Caterpillar Inc.

said in recent weeks they planned to relocate their Chicago-area headquarters to Arlington, Virginia and Irving, Texas, respectively.

—Will Feuer contributed to this article.

Write to Annie Gasparro at annie.gasparro@wsj.com

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World

Biden Invokes Emergency Power in Bid to Resolve Solar Import Dispute

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President Biden used emergency authority Monday in a bid to resolve a supply logjam that threatened the solar power industry, but the action drew complaints from U.S. manufacturers who say it will impede their efforts to build domestic production.

The four Southeast Asian countries account for roughly 80% of U.S. solar panel imports. The Commerce investigation had led importers to halt shipments, putting in jeopardy more than half of the 27 gigawatts of new solar-power capacity developers had been expected to install this year, according to the energy consulting firm Rystad Energy.

The White House acted as part of a larger package intended to resolve a conflict pitting solar power developers and utilities that rely on cheap imported components against manufacturers who want to reshore solar parts manufacturing to the U.S.

Mr. Biden invoked the Defense Production Act among other measures to help U.S. suppliers compete with Asian rivals and spur more U.S. manufacturing long-term.

The developers and utilities who import solar panels cheered the decision as a way to avoid a slowdown in new installations. But advocates for U.S. manufacturers said it undermines efforts to help U.S. companies catch up to Chinese rivals that dominate the industry.

“President Biden is significantly interfering in Commerce’s quasi-judicial process,” said Mamun Rashid, chief executive of California-based Auxin Solar Inc., a small maker of solar panels whose complaint triggered the Commerce investigation.

“By taking this unprecedented—and potentially illegal—action, he has opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law,” Mr. Rashid said in a  statement.

A solar panel in production at the San Jose, Calif., factory of Auxin Solar.



Photo:

Ian Bates for Wall Street Journal

Some trade lawyers and analysts question whether Mr. Biden has overstepped authority meant for use in wartime.

“It is highly problematic that the Administration is apparently declaring a war or similar national emergency as the basis for negating a continuing trade law investigation on solar,” said

Timothy Brightbill,

a trade lawyer at Wiley Rein LLP. “This emergency authority is used extremely rarely and it’s a dangerous precedent to use it to negate a continuing trade investigation.”

Mr. Biden cited disruptions in global energy markets caused by Russia’s invasion of Ukraine—along with extreme weather events exacerbated by climate change—as justification for his emergency declaration.

When asked about challenges to the decision’s legality, a senior administration official said the president is acting under his emergency authority under the Tariff Act of 1930 to waive import duties. The changes will not interfere in the Commerce investigation, the official said.

Administration officials said the plan creates a bridge period to keep developers supplied for now while U.S. panel-makers build up their limited capacity.

“The Federal Government is working with the private sector to promote the expansion of domestic solar manufacturing capacity, including our capacity to manufacture modules and other inputs in the solar supply chain, but building that capacity will take time,” Mr. Biden said in his declaration.

Solar developers and installers, who vastly outnumber manufacturers in the U.S. and have lobbied for protection, said the decisions could jump-start projects that have been delayed.

Executives at SOLV Energy LLC, the biggest installer of large-scale solar farms in the U.S., are now reconsidering decisions on nearly a dozen projects that were halted or delayed by fallout from the Commerce probe and would have eliminated or postponed thousands of new jobs, said George Hershman, the company’s chief executive.

“We’re starting to work with our customers and determine which projects we can restart and how quickly we can restart them,” he said.

Companies that build or support solar projects such as

Sunrun Inc.,

SunPower Corp.

and

Enphase Energy Inc.

all posted gains Monday, with

Sunnova Energy International Inc.

NOVA 6.45%

leading the group, up nearly 6.5%.

Shares of

NextEra Energy Inc.,

a utility and one of the world’s largest renewables companies, added almost 2%. Monday’s advance pares some of the sector’s recent losses.

“A big part of the tariff uncertainty and a lot of the other supply chain disruption just creates uncertainty,” said

Rebecca Kujawa,

president and CEO of NextEra Energy Resources, the company’s competitive power business. “To remove this as a point of concern, at least for a period of time, is going to be hugely helpful.”

Money is a sticking point in climate-change negotiations around the world. As economists warn that limiting global warming to 1.5 degrees Celsius will cost many more trillions than anticipated, WSJ looks at how the funds could be spent, and who would pay. Illustration: Preston Jessee/WSJ

But

First Solar Inc.,

a U.S. manufacturer based in Tempe, Az. said the administration’s actions “only benefits China’s state-subsidized solar industry.”

“The use of the Defense Production Act to boost solar manufacturing is an ineffective use of taxpayer dollars and falls well short of a durable solar industrial policy,” the company said in a statement. “Quite simply, the administration cannot stick a Band-Aid on the issue and hope that it goes away.”

First Solar manufactures solar panels using a different technology that is not affected by industry tariffs.

Washington has been central in the solar dispute in part because Mr. Biden has promised that addressing climate change with support for clean energy would grow working-class jobs in solar, wind, battery and other manufacturing businesses. In recent months a fight over tariffs has illustrated how those goals can clash rather than complement one another.

The White House has tried to help build up a U.S. supply chain by maintaining Trump-era solar tariffs on China and Taiwan. Utilities and developers—fearful the reach of those tariffs was expanding to other Asian partners—warned that threat was causing what could become a drastic slowdown in solar growth.

In Monday’s declaration, Mr. Biden accepted those industry claims that a slowdown was caused in part by import bottlenecks, and that ultimately it was threatening the reliability of the country’s electricity supply.

“The United States has been unable to import solar modules in sufficient quantities to ensure solar capacity additions necessary to achieve our climate and clean energy goals, ensure electricity grid resource adequacy, and help combat rising energy prices,” Mr. Biden said in the declaration.

Abigail Ross Hopper,

president and chief executive officer of the Solar Energy Industries Association, applauded the decision.

“While the Department of Commerce investigation will continue as required by statute, and we remain confident that a review of the facts will result in a negative determination, the president’s action is a much-needed reprieve from this industry-crushing probe,” she said in a statement.

—Anthony DeBarros and Katherine Blunt contributed to this article.

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Dow drops nearly 600 points, Nasdaq slumps ahead of megacap tech earnings

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U.S. stocks were trading sharply lower Tuesday afternoon, failing to build on the previous session’s bounce, as investors sift through a raft of company results and await earnings reports due after the bell from tech giants including Microsoft Corp. and Google parent Alphabet Inc.

How are stock indexes performing?
  • The Dow Jones Industrial Average
    DJIA,
    -2.14%
    dropped 589 points, or 1.7%, to 33, 460.
  • The S&P 500
    SPX,
    -2.47%
    fell 83 points, or about 2%, to 4,212.
  • The Nasdaq Composite
    COMP,
    -3.51%
    lost 375 points, or 2.9%, to trade at about 12,630.

Monday saw the biggest intraday reversal since February for the Dow, which rose 238 points, or 0.7%, erasing a loss of nearly 500 points. The S&P 500 rose 0.6%, and the Nasdaq Composite gained 1.3%.

Also read: U.S. stocks ended a Manic Monday in the green — but intraday bounces like this aren’t bullish

What’s driving markets?

Stocks were sinking Tuesday afternoon, with all three major benchmarks down after Monday’s rally.

“Investors are not necessarily secure” in the strength of the market, with “fragility” on display since the beginning of the year, said Aoifinn Devitt, chief investment officer at Moneta, in a phone interview Tuesday. “There is this fear of slowing growth.” 

The CBOE Volatility Index
VIX,
+14.62%
jumped about 15% to around 31 Tuesday afternoon, according to FactSet data. That compares with a 200-day moving average of around 21.

Consumer discretionary
SP500.25,
-4.08%,
information technology
SP500.45,
-2.79%
and communication services
SP500.50,
-2.00%
were the hardest hit sectors of the S&P 500 in early afternoon trading Tuesday, according to FactSet data. Tech and communications services had posted the strongest performance for the S&P 500 in Monday’s stock market rally.

“Now we have this giveback today,” said Devitt. “Markets are trying to figure out a level.”

The S&P 500 is trading not far off its closing low this year of 4,170.70 on March 8, according to Dow Jones Market Data. The Nasdaq was trading near its 2022 low of 12,581.22, hit March 14.

U.S. stocks were falling as investors wade further into the busiest week of the U.S. company-earnings reporting season, digesting results from a number of corporate heavyweights released before the opening bell. They’re also looking ahead to results from megacap tech companies Microsoft Corp.
MSFT,
-3.23%
and Google parent Alphabet Inc.
GOOG,
-2.58%
after the closing bell.

Tech giants are “big movers in the market,” said Paul Nolte, a portfolio manager at Kingsview Investment Management, by phone Tuesday. Both the S&P 500 and Nasdaq are “dramatically impacted by tech.” 

Formerly high-flying Netflix
NFLX,
-4.49%
shares have dropped more than 40% since announcing last week that it had lost 200,000 subscribers in the first quarter.

While around 80% of companies so far reporting earnings for the quarter have beaten profit expectations, including General Electric Co., United Parcel Service Inc. and Pepsico Inc., disappointing earnings forecasts are weighing on shares.

Read: First major Wall Street bank to call for a recession now sees clear outside risk it could be `more severe’

In U.S. economic data, orders at U.S. factories for durable goods rose 0.8% in March and business investment rebounded after the first decline in a year, signaling the economy is still growing at a steady pace. The rise in durable-goods orders matched the consensus expectation produced by a survey of economists by The Wall Street Journal.

 A survey of consumer confidence dipped in April to 107.3 from 107.6, but Americans signaled they are optimistic enough about the economy to keep buying big-ticket items such as news cars and appliances.

The S&P CoreLogic Case-Shiller 20-city house price index posted a 20.2% year-over-year gain in February, up markedly from 18.9% the previous month, but U.S. new-home sales decreased 8.6% to an annual rate of 763,000 in March, the government said Tuesday. 

The Federal Reserve’s policy meeting next week is meanwhile weighing on investors, who are anticipating the central bank may announce a large rate hike, potentially of 50 basis points, in an effort to tame hot inflation, according to Nolte.

“The Fed will raise rates until something breaks, and that will be the economy,” he said. “Concerns may be rising for the potential for a recession.”

Which companies are in focus?
  • Twitter Inc.
    TWTR,
    -3.28%
    shares fell about 2.7% Tuesday to around $50 after its board agreed Monday to accept Tesla chief Elon Musk’s $54.20 a share bid for the social-media platform.
  • 3M Co.
    MMM,
    -3.00%
    shares dropped 2.8% after the maker of post-it notes and industrial equipment posted better-than-expected first-quarter earnings.
  • Shares of PepsiCo Inc.
    PEP,
    -0.06%
    rose 0.3% after delivering earnings and revenue that exceeded Wall Street forecasts.
  • United Parcel Service Inc.
    UPS,
    -3.02%
    shares fell 2.6% after the package-delivery giant reported first-quarter profit and revenue that beat expectations.
  • General Electric Co.
    GE,
    -10.91%
    shares plunged 10.6% after the industrial conglomerate reported first-quarter adjusted profit and revenue that beat expectations, but missed on free cash flow and provided a somewhat downbeat outlook.
  • Shares of JetBlue Airways Corp.
    JBLU,
    -10.60%
    plummeted 10.1% after the air carrier reported a narrower-than-expected loss and revenue that more than doubled to match forecasts, but said it planned to reduce capacity growth further to help restore operational reliability. United Airlines Holdings Inc.
    UAL,
    -4.22%
    said Tuesday it is launching the biggest transatlantic expansion in its history with 30 new or resumed flights coming from mid-April through early June. United Airline shares fell 3.5%.
How are other assets are faring?
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    2.774%
    fell about 5 basis points to around 2.77%. Yields and debt prices move opposite each other.
  • The ICE U.S. Dollar Index
    DXY,
    +0.56%,
    a measure of the currency against a basket of six major rivals, rose 0.5%.
  • Bitcoin
    BTCUSD,
    -4.79%
    fell 4.6% to trade around $38,314.
  • Oil futures
    CL.1,
    +3.01%
    climbed, with West Texas Intermediate crude for June
    CLM22,
    +3.01%
    delivery rising 2.8% to trade around $101.37 a barrel.
  • In gold futures
    GC00,
    +0.11%,
    gold for June delivery
    GCM22,
    +0.11%
    rose 0.1% to trade at $1,898.10 an ounce.
  • In European equities, the Stoxx Europe 600
    SXXP,
    -0.90%
    closed 0.9% lower, while London’s FTSE 100
    UKX,
    +0.08%
    gained 0.1%.
  • In Asia, the Shanghai Composite
    SHCOMP,
    -1.44%
    fell 1.4%, while the Hang Seng Index
    HSI,
    +0.33%
    rose 0.3% in Hong Kong and Japan’s Nikkei 225
    NIK,
    +0.41%
    gained 0.4%.

—Steve Goldstein contributed to this report.

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Health

Ventilation, Vaccination Key to Suppressing Covid-19 as People Head Back Indoors

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Forget temperature checks and deep-cleaning surfaces. The best way to protect people from Covid-19 as they return to offices and other indoor spaces is to bolster air quality and vaccination coverage, experts on the transmission of the virus say.

Their consensus reflects an evolving understanding of the spread of a virus that the World Health Organization declared the cause of a pandemic two years ago this Friday. Deep-cleaning surfaces and temperature checks—still a mainstay at many businesses—have been understood for many months to be of relatively little help stopping the virus from spreading. Rather, as businesses and communities across the U.S. begin what is shaping up to be the broadest return yet to pre-pandemic behaviors, transmission and infectious-disease experts said broad vaccine coverage and good air hygiene stand out as the most important mitigation efforts.

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Business

Student-Loan Processor Navient to Cancel $1.7 Billion of Debts

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A former unit of student loan giant Sallie Mae said it would cancel $1.7 billion in private student debt for about 66,000 borrowers to resolve claims that it engaged in deceptive lending practices.

Navient Corp.

NAVI 0.37%

, a student loan servicer that split off from Sallie Mae in 2014, agreed to the sum in a settlement with 40 state attorneys general. The loans are private loans, so the losses will be covered by Navient’s investors rather than the federal government.

Nearly all the canceled loans originated at Sallie Mae from 2002 to 2010, at a time when student debt soared, on its way to becoming the second-highest form of household credit after mortgages. Sallie Mae was at the forefront of that boom, both as the biggest originator of private loans as well as the biggest lender under a federal program that guaranteed student loans.

The loans primarily went to borrowers with poor credit, and who attended schools with shaky records, including many for-profit schools, according to a website run by the settlement administrator. All of the loans forgiven in the agreement were in default.

“For too long, Navient contributed to the national student debt crisis by deceptively trapping thousands of students into more debt,” said New York Attorney General

Letitia James.

As part of the agreement, Navient continued to deny the claims or that the company has harmed any borrowers. “The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” said

Mark Heleen,

Navient’s chief legal officer.

Navient has faced numerous lawsuits in recent years that alleged the company engaged in unfair and deceptive conduct against borrowers, including steering those with federal loans toward plans that would allow them to stop making payments but in which interest continued to accrue, rather than toward plans in which monthly payments are tied to borrowers’ income.

Last March, a Seattle-area judge ruled that the company had broken a consumer protection law in a case brought by Washington’s attorney general.

“Navient repeatedly and deliberately put profits ahead of its borrowers—it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back and placed an unfair burden on people trying to improve their lives through education,” Pennsylvania Attorney General

Josh Shapiro

said.

WSJ higher-education reporter Melissa Korn breaks down the select groups of borrowers who are currently eligible for student debt relief and what borrowers can expect next year. Photo: Getty Images

The agreements resolve all six outstanding state lawsuits against Navient, the company said. As part of the settlement, the company will make a one-time payment of approximately $145 million to the states.

In addition to loan cancellation and some restitution for borrowers with private loans, Navient will pay $95 million to about 350,000 federal loan borrowers—or about $260 each—who were placed into certain types of forbearance programs that caused them to accumulate more debt rather than entering income-based repayment plans, the states said.

States will distribute restitution to borrowers within their jurisdictions. Massachusetts, for example, will receive more than $6 million, including $2.2 million in restitution for more than 8,300 federal loan borrowers, state Attorney General

Maura Healey

said.

Federal loan borrowers eligible for restitution will be notified by mail this spring, with checks going out in the middle of the year, according to the settlement administrator’s website. Private borrowers who qualify for discharge will be notified by July.

Private loans without federal backing make up less than 10% of the total $1.7 trillion student-loan industry. About 43 million people owe $1.6 trillion in federal student debt, Education Department data show. About 5.2 million of those federal borrowers are in default. Those borrowers, unless they also held private student loans, aren’t affected by Thursday’s settlement.

Navient recently announced its exit from federal student-loan processing. It had been one of the primary federal contractors, serving around six million borrowers. Its accounts were transferred to a new contractor,

Maximus,

whose role was approved by the Education Department.

The Education Department also has taken steps to forgive billions in debt held by disabled borrowers, as well as borrowers who went to institutions that federal regulators say practiced deceptive recruiting practices, such as ITT Technical Institute. The piecemeal moves have resulted in $11.5 billion in canceled debt for around 600,000 borrowers over President

Biden’s

first year in office. Student loan payments have been suspended by the government during the pandemic, with the latest extension now set to expire on May 1.

The Biden administration is in the midst of restructuring its student-loan processing system. In November it announced it was ending its relationship with private collection agencies that had been tasked with recovering payments from federal student-loan borrowers in default to improve collections and provide borrowers with more support.

The Consumer Financial Protection Bureau has been suing Navient since 2017 over allegations that it steered borrowers into postponing payments instead of entering lower-cost, income-driven repayment plans. The CFPB has said the practice cost borrowers $4 billion in interest expense. Navient has disputed the government’s claims.

—Melissa Korn contributed to this article.

Write to Gabriel T. Rubin at gabriel.rubin@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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