What Walmart Paying Truckers $110,000 a Year Tells the Fed

The Walmart raise is a sign that it’s already too late. Workers haven’t seen decent pay gains for years, and now they’re finally in a position to get them.

While Walmart isn’t unionized, truckers could be just one example of a group they will have to pay more. The victory for employees to organize at the New York City Amazon warehouse is another sign that some power is shifting from capital back to labor. It also shows how hot the U.S. market is—jobless claims have dropped to the lowest on record.

Beyond that, it tells the Fed that demand for goods is strong and that lifting salaries for transport workers may be the cost of solving postpandemic supply-chain bottlenecks.

Workers are surely right to go for big pay raises while they can. It’s the Fed’s job to ensure that those wage gains aren’t eaten up by faster inflation, while at the same time stopping the feast from turning into famine with rate increases that could trigger a recession.

—Brian Swint

*** Join Mansion Global reporter Leslie Hendrickson today at noon as she talks with Redfin chief economist Daryl Fairweather and agents Shoshana Godwin, based in Seattle, and Michael Stein, who works in the Boston area, about the best strategies buyers can use to edge out the competition for their dream home. Sign up here.

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Tesla Opens Its Austin Gigafactory With a Cyber Rodeo

Tesla revealed its new gigafactory in Austin, Texas, with a “Cyber Rodeo.” CEO Elon Musk drove into the event in the first car the company made, donning a cowboy hat and sunglasses. He showed off a few of the vehicles that had been made at the factory, which he said was the size of three Pentagons. And then there were fireworks.

• The plant, featuring advanced robotic assembly, paint facilities and die-casting aluminum presses, will initially make Tesla’s Model Y and eventually its Cybertruck, with an estimated initial output of 100,000 vehicles in 2022.
• The Austin plant will soon produce about 500,000 vehicles a year. Piper Sandler analyst Alexander Potter calculated that Tesla’s Shanghai plant can produce about 3,400 vehicles a day, or up to 1.2 million vehicles a year.
• It’s a strange time for car buyers. New car volumes averaged 14.1 million in the first quarter, as half of vehicles sell within 10 days of arriving at dealerships. Wait times for Tesla Model Ys have ballooned to 10 months. New car prices are selling at a record $45,000, according to Deutsche Bank.
• Auto supplies are so constrained that online car insurance marketplace Get Jerry found that four of the top 10 bestselling cars in the U.S. cost more to buy used than new, including “lightly used” 2021 Honda Motor
  Civics and CR-Vs and Toyota Motor RAV-4s and Highlanders.

What’s Next: In addition to official festivities, Tesla aficionados are holding a five-day Tesla-Con and aiming to set a world record for the most Tesla vehicles in one place. Tesla ranks as the No. 1 auto brand on comparably.com and on Consumer Reports‘ list of best-liked cars.

—Al Root and Janet H. Cho

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Retailers in Focus as Investors Weigh Rising Prices, Growth Plans

Retailers are in focus, as investors and analysts weigh their ability to overcome rising prices and a challenging outlook for consumer spending against initiatives to build their workforces to combat supply-chain issues in the future.

• Walmart is offering up to $110,000 in first-year wages to truck drivers in a bid to recruit workers in a tight labor market and amid rising freight costs. The average pay for a long-haul driver last year was $52,240, according to the Bureau of Labor Statistics.
• Macy’s CFO Adrian Mitchell said at a JPMorgan conference that the consumer is healthy, but inflation and uncertainty will weigh on confidence and might force shoppers to make a choice between buying clothing or discretionary items, or spending on travel and entertainment.
• Wayfair ’s shares wobbled, after Wells Fargo analyst Zachary Fadem cited concerns about potentially slowing demand for its home goods during high inflation as consumers prioritize their spending elsewhere.
• Costco Wholesale reported March same-store sales jumped 17.2%, including a 19.1% increase in U.S. sales and an 8.9% rise in e-commerce sales, beating analysts’ expectations. Subtracting gasoline sales and foreign exchange impact, same-store sales rose 12.2%.

What’s Next: Conagra Brands , the maker of Slim Jim, Reddi-Wip and Hunt’s Ketchup, raised its full-year sales forecast to 4% on expectations of higher demand and more price hikes, but lowered its full-year earnings expectations to $2.35 from $2.50 a share because of rising inflation.

—Janet H. Cho

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Ketanji Brown Jackson Confirmed for Supreme Court

The Supreme Court marks another milestone when Judge Ketanji Brown Jackson is sworn in as the first Black woman to sit on the bench and its 116th Justice. The Senate voted 53-47, including three Republicans voting yes, to confirm her nomination and fulfill a campaign promise by President Joe Biden.

• Jackson said in March that she would step aside from a case pending before the court involving Harvard University’s admissions policies and affirmative action. She is on Harvard’s Board of Overseers, with a term expiring this year.
• Jackson currently sits on the Court of Appeals for the District of Columbia, a role she assumed last year after the Senate voted 53-44 to confirm her to that role, though she suspended her work during this nomination process. Jackson was a United States District judge before that.
• The Harvard graduate is also a former law clerk for Justice Stephen Breyer, the retiring Justice she is succeeding to the high court. The ideological makeup of the court will still be six conservative judges and three liberal judges. Jackson will join the court for the open of the fall term.

What’s Next: Jackson watched the results of the Senate vote with Biden and other senior staff, the White House said. She will join the president and Vice President Kamala Harris to make remarks today at 12:15 p.m. Eastern time.

—Liz Moyer and Sabrina Escobar

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Spirit Airlines to Engage With JetBlue Over $3.6 Billion Offer

The battle to buy Spirit Airlines and become the fifth-largest U.S. airline has taken another twist. Spirit said late Thursday it would engage with JetBlue Airways over its $3.6 billion all-cash offer for the ultra-low-cost carrier.

• Spirit said JetBlue’s unsolicited $33 a share all-cash offer could “reasonably be likely” to lead to a superior proposal to rival Frontier ’s cash-and-stock offer. Spirit and Frontier agreed to merge in February in a deal valuing Spirit at $2.9 billion and creating the fifth-largest U.S. airline.
• The potential deal piqued the interest of JetBlue, which said its own tie-up with Spirit would create “the most compelling national low-fare challenger” to the four dominant U.S. carriers— Delta , American , United , and Southwest .
• Spirit’s intentions to engage with JetBlue don’t necessarily mean the carrier has made its decision yet. The board’s recommendation that shareholders adopt the Frontier merger agreement hasn’t changed, the company said.

What’s Next: It isn’t just the value of the deals themselves that Spirit will have to weigh, but how the potential combinations would work. There also are likely to be regulatory hurdles for both deals to overcome.

—Callum Keown

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Corporate Stock Buybacks Losing Steam to Dividends

Stock buybacks could be losing steam this year, as companies anticipate rising interest rates and look for ways to spend their money elsewhere, such as for business investments and balance sheet management instead of taking on debt to buy their shares, putting their capital return focus on dividends.

• S&P 500 company buyback announcements, as a percentage of market value, are now half the level of the five-year average pre-Covid-19, 0.4% versus 0.8%, according to BofA Securities strategist Jill Carey Hall.
• Buybacks normally slow at the end of a quarter, Hall told Barron’s, but corporate buybacks have slowed to their lowest weekly level in 12 months. First-quarter S&P 500 dividends set a record, according to S&P Dow Jones Indices senior analyst Howard Silverblatt.
• Starbucks and Qualcomm are two examples of companies looking to change direction. The coffee retailer suspended buybacks immediately to invest in stores and people. The chip maker wants to maintain flexibility for deals and is targeting dividend increases, it told CNBC.

What’s Next: Hall is looking for 13% dividend growth for the S&P 500 this year, partly because of high demand for dividend income. Companies can be flexible with buyback strategies, while investors consider dividends to be sacrosanct.

—Lawrence C. Strauss and Janet H. Cho

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

1. What did returning Starbucks CEO, Howard Schultz, do on his first day back at the helm of the company to free up cash to invest in the coffee giant’s cafes and employees?

a. Suspended buybacks
b. Suspended the dividend
c. A but not B
d. A and B

2. Which social-media company board will Elon Musk join after disclosing he had taken a 9.1% stake in the company?

a. Twitter
b. Snap
c. Match Group
d. Zynga

3. Which airline has offered a $3.6 billion competing bid for Spirit Airlines, challenging rival Frontier Airlines in its efforts to buy the ultralow-cost airline for $2.9 billion?

a. Delta Air Lines
b. JetBlue Airways
c. Ryanair Holdings
d. American Airlines Group

4. Which company plans to launch more than 3,000 small satellites into low orbit that will beam high-speed internet service back to Earth in competition with Musk’s SpaceX?

a. Space Adventures
b. United Launch Alliance
c. Virgin Galactic
d. Amazon.com

5. Federal Open Market Committee minutes revealed that the Federal Reserve may shrink its $9 trillion balance sheet at a faster pace than it did during 2017-19. What is the new monthly cap?

a. $75 billion
b. $85 billion
c. $95 billion
d. $105 billion

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

—Barron’s Staff

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—Newsletter edited by Liz Moyer, Camilla Imperiali, Steve Goldstein, Callum Keown