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  • Thursday's Scoop: Stalled 🌤️

Thursday's Scoop: Stalled 🌤️

BP backslides to oil & Gilead scores an HIV breakthrough

 
Hey friends - almost Friday. You’re doing great.
Insiders, look out for the Weekly Scoop tomorrow.
Here’s what you need to know today to inform your work, spending, and investments…

 

🌎 Big picture

  1. US banks are ready to weather a financial crisis if there is one.

  2. Layoff rates are still low, but finding a job is getting harder.

  3. Businesses have cut back on investment spending.

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 💼 Work trends

Unemployment Rate: 4.0%
Still near the lowest rate in 50+ years

Layoff rates are still pretty low, but finding a job is getting harder. The Labor Department reported that initial jobless claims decreased slightly last week to 233,000—still normal but almost concerning. However, the number of people receiving unemployment benefits for consecutive weeks rose to the highest level in 2.5 years, indicating that getting rehired is becoming more challenging. The number of available positions has shrunk in recent months to near pre-pandemic levels as companies cut back hiring plans, but the available positions are concentrated in specific industries.

Businesses aren’t investing as much in self-improvement. The Commerce Department's Census Bureau reported a surprising decline in business equipment and technology spending last month. Non-defense capital goods orders, excluding aircraft, dropped 0.6% in May after increasing 0.3% in April. So-called core capital goods are a proxy for business spending and investment. High borrowing costs and weakening economic optimism may be discouraging business owners from buying expensive, long-term equipment like computer systems or machinery.

 

 📈 Investment trends

The Market: ⬆️ +0.1%
S&P 500: 5,482.87
1Mo: +3% | 1Yr: +25% | 5Yr: +86%

The market didn’t move much again on Thursday as investors waited for the wave of month and quarter-end data releases starting next week. We’ll start to get a better picture of hiring, inflation, job openings, and corporate profits to validate the prevailing narrative of slowing spending and low inflation.

Regulators are confident that US banks can weather a financial crisis. The Federal Reserve's annual stress test showed that the 31 most systemically important banks in the US could withstand a severe recession scenario. This year's test included big names like JPMorgan Chase and Goldman Sachs and smaller regional lenders like Truist, modeled surging unemployment and plummeting commercial and residential real estate values. Despite projecting steep potential losses, the banks maintained more than the required minimum capital. A new type of exploratory analysis tested the largest banks against sudden funding stresses and trading meltdowns, which they also passed. These results highlight the strength of the US financial system to future bank failures but also point to areas needing vigilance as financial risks evolve.

 🤓 Inside Scoop: How do regulators ensure the financial system is secure enough to avoid bank failures?

The Federal Reserve is in charge of managing the stability of the whole financial system. Each year, it conducts stress tests like a health check-up for banks, ensuring they can handle harsh economic events. These tests started after the 2007-2009 financial crisis to prevent a repeat of that disaster. Each year, the Fed imagines a severe recession scenario, like high unemployment or crashing real estate prices, and sees if banks can survive financially, absorb any investment losses, and still have enough money to keep lending to those who depend on them.

Recently, the Fed expanded the number of banks it reviews and added extra challenges, like sudden financial shocks, to see if banks are resilient. The goal is to keep our financial system stable and ensure that banks are ready for any surprises.

🏭 Companies worth watching

👍👎 APPROVAL RATINGS

Join the board at America’s biggest companies. Vote and judge their decisions. (+2 pts)

BP

Backsliding to Fossil Fuels

BP's new CEO has frozen hiring and new projects in its renewable energy business to refocus hiring and investments on its profitable oil and gas projects.

BP is currently the only energy giant with a plan to reduce oil output, but it backed off on its promised transition pace this year.

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Gilead

Hopeful Advancement

Gilead’s new HIV prevention shot showed 100% effectiveness in a late-stage trial involving around 2,000 women, opening the door for HIV treatment options beyond daily pills.

The drugmaker plans to seek regulatory approval after replicating the successful trial.

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Levi Strauss

Shifting Needs

Levi Strauss has invested heavily in transitioning to more direct-to-consumer sales, already achieving half of its sales from its online and owned stores, but the shift has increased costs and dragged on profits.

The denim giant reported a slowdown in sales last quarter, despite the popularity of denim, as shoppers cut back broadly.

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 💭 Broader perspectives… (+2 pts)

Do you wear skinny jeans?

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Snap

Gender Discrimination

Snap will pay $15M to settle a lawsuit alleging that it paid its female employees less than men, exhibited gender bias in promotions, and retaliated against women who spoke out about harassment.

The social media company will hire an independent consultant to monitor pay and promotion.

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Walmart

Price Confusion

Walmart will pay $1.6M to settle allegations that it used illegal pricing practices that made it difficult for consumers to compare product prices in all its New Jersey stores.

The retail giant promised New Jersey regulators it would improve employee training and randomly screen for improper price-to-quantity measurements moving forward.

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