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FBI director under pressure to resign after Florida school shooting

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Pressure is mounting on the FBI director to resign after his agency admitted it failed to investigate a warning that the man accused of killing 17 people at a Florida high school possessed a gun and the desire to kill.

The disclosure spread angry disbelief among residents of the Miami suburb of Parkland where Wednesday’s massacre unfolded, and led Florida’s governor Rick Scott to call for FBI chief Christopher Wray to resign.

“The FBI’s failure to take action against this killer is unacceptable,” Scott, a Republican, said in a statement. “We constantly promote ‘See something, say something’, and a courageous person did just that to the FBI. And the FBI failed to act.”

Scott’s comments came after the Federal Bureau of Investigation said in a statement that a person described as someone close to accused gunman Nikolas Cruz, 19, called an FBI tip line on Jan. 5, weeks before the shooting at Marjory Stoneman Douglas High School, to report concerns about him.

“The caller provided information about Cruz’s gun ownership, desire to kill people, erratic behaviour, and disturbing social media posts, as well as the potential of him conducting a school shooting,” it said.

That information should have been forwarded to the FBI’s Miami field office for further investigation, but “we have determined that these protocols were not followed”, it said.

U.S. Attorney General Jeff Sessions said he has ordered a review of FBI procedures following the shooting, carried out by a gunman armed with an AR-15-style assault rifle and numerous ammunition cartridges.

“We have spoken with victims and families, and deeply regret the additional pain this causes all those affected by this horrific tragedy,” Wray said in a statement.

The FBI has also separately been criticized by some Republicans over its investigation of allegations of Russian meddling in the 2016 presidential election, heaping further scrutiny on the agency led by Wray since President Donald Trump fired James Comey last year. Russia denies any involvement.

The mishandled information followed a tip-off to the FBI in September about a YouTube comment in which a person named Nikolas Cruz said: “I’m going to be a professional school shooter.”

The FBI said it investigated that comment but was unable to trace its origins, closing the inquiry until Cruz surfaced in connection with Wednesday’s shooting.

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The Fed will continue to dominate the market in the week ahead after sell-off

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Traders on the floor of the New York Stock Exchange.

Source: NYSE

The Federal Reserve’s signal that it is looking to step away from some of its easy policy is expected to be a dominant trading theme in the week ahead and likely for the rest of the summer.

In the past week, investors repositioned across the financial markets after Fed Chairman Jerome Powell said Wednesday that the central bank was considering tapering its purchases of Treasurys and mortgage securities. That is important since when the Fed eventually acts, it would be the first serious reversal of the easy policies it put in place to add liquidity to markets when the economy shut down last year because of the Covid crisis.

The purchases, which amount to $120 billion a month, would be gradually whittled away once the Fed decides to slow down and end the bond buying, or quantitative easing. That could then open the door to interest rate hikes, which the Fed now projects would come in 2023.

The Federal Reserve sent ripples across financial markets after its meeting Wednesday. The dollar jumped, stocks fell and bond yields moved to imply higher short-term interest rates in the future. The Dow fell 3.5%, its worst week since October. The S&P 500 was down 1.9% for the week, its worst weekly loss since February, and the Nasdaq lost just 0.3%, helped by a small weekly gain in tech.

“I think the market is still digesting the Fed meeting,” said Ed Keon, chief investment strategist at QMA. Stocks were trading sharply lower Friday, after weakness Wednesday and Thursday. Yields fell on longer duration bonds, like the benchmark 10-year, but rose on the shorter duration 2- and 5-year notes.

The spreads between those shorter-duration notes and the 10- and 30-year bond yields narrowed dramatically in a so-called flattening trade. That’s common when interest rates are rising. The higher short rates reflect the expected increases in the fed funds rate, while the longer duration yields fall, because the thinking historically has been that a tightening Fed slows the economy.

The Fed also provided new economic forecasts, including a chart on interest rates that shows it expects to hike its fed funds rate twice in 2023, after its prior forecast included no increases.

Fed speakers will get a lot of attention in the week ahead. Powell speaks Tuesday before the House Select Subcommittee on the Coronavirus Crisis on the Fed’s policy response and the economy. His remarks could be a highlight of what looks to be a slow, but volatile first week of summer for markets.

There are a number of other Fed officials speaking, including New York Fed President John Williams on Monday and San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester, both Tuesday. Other Fed speakers include Atlanta Fed President Raphael Bostic and St. Louis Fed President James Bullard.

“Getting more color from others will certainly be key,” said Peter Boockvar, chief investment strategist at Bleakley Global Advisors. “I’m most interested certainly in what Powell has to say. They’re all going to give us now the fine print of what was in the statement and what Powell said” at the end of the Fed’s June meeting.

There should be a lot of interest in personal consumption expenditures data next Friday, since it includes the PCE inflation index, closely watched by the Fed. The Fed has been pressing its view that elevated inflation readings are just temporary and that they should calm down next year.

Boockvar said the inflation data should reflect the same spike in prices that showed up in the consumer price index for May, up 5% year over year.

“It’s going to show some pretty robust month-over-month increases,” said Boockvar. He said inflation data will be the most important for markets.

“That’s what the rest of the year is all about — inflation, inflation, inflation and how does the Federal Reserve adjust to that,” he said. “In this inflation debate, it’s not just a U.S. thing, it’s a global thing.”

While the Fed has now penciled in two interest rate hikes for 2023, the market is more skeptical about inflation. According to futures markets, investors believe there could be one or more rate hikes next year and at least four in total before the end of 2023.

The Fed forecast 3.4% PCE inflation for this year, up a full point from its March forecast, but it still expects a tame 2.1% pace next year.

Housing data will also be of big interest to markets, after the Fed’s tiny step forward toward tightening unleased a surge in mortgage rates.

The rate for the 30-year fixed loan jumped to 3.25% by Thursday, the highest in months, according to Mortgage News Daily. The Fed is currently purchasing about $40 billion a month in mortgage securities, and that would slow down along with Treasury buying.

Existing home sales are released Tuesday, and new home sales are reported Wednesday.

Value versus growth

Keon said the market is choppy but taking in stride the change in the Fed. He said he has overweight stocks in his portfolios. “We like that position with earnings likely to grow 40% this year, rates staying pretty low. That’s a good environment for stocks,” he said.

As the market traded lower this past week, tech and some growth names held their ground. Tech was barely positive, registering a nearly 0.1% gain for the week. The worst performing sectors were in the value space — commodities-related or part of the reopening cyclical trade.

Materials were down 6.3% for the week, and financials were down more than 6% as a flattening yield curve has the potential to hurt bank profits.

“We had a very good move for value stocks and for the reopening plays. They really did well for six months or so,” said Keon. “There’s nothing in the market that keeps going forever. This is probably a bit of a counter rotation. Whether it’s the beginning of a major shift or a slight bounce back [for tech], is hard to say and rates are going to be a determinant.”

Keon said if the closely watched 10-year yield goes to 2% from its current 1.5%, that would be a positive for value stocks. But if it stays anchored around 1.5%, tech could continue to do well.

The 10-year yield, which is the benchmark Treasury, fluctuated widely in the past week. After starting the week at about 1.45%, it moved higher right after the Fed meeting to as high as 1.59% but then fell back down to about 1.44% Friday afternoon.

The 2-year note yielded 0.256% on Friday, up sharply from the prior week’s Friday close of 0.149%.

“My guess is that the thinking is that at the press conference, Powell made it pretty clear he has no intention of raising rates until 2023,” said Keon. “Until you get to 2023, you’re going to get the boom we are in now, and you’re going to get pretty strong growth in 2022. By the time, you get to 2023, the economy is going to be slowing and is the Fed going to raise rates in a slowing economy? Probably not.”

Keon said that would keep a cap on the size of the Fed rate hikes. He said there’s little chance the Fed will hike before 2023 unless there’s an upside surprise in inflation.

“The market thinks the Fed is not going to raise rates until 2023, absent an unexpected surprise to inflation, and that they’re not going to raise rates that much in 2023 because they’ll be risking a recession,” he said.

Julian Emanuel, head of equities and derivatives strategy at BTIG, said the Fed has now injected a new level of volatility into the markets. He expects investors will be on edge now as the Fed’s late July meeting approaches and again as the Fed heads to Jackson Hole, Wyoming, in late August for its annual symposium.

Many economists expect Jackson Hole to be the forum where the Fed releases details of the tapering program. Once the Fed announces it will cut back, it is then expected to wait a few months before slowly paring back the purchases over many months. The end of the easing program is important since it would then open the door to a potential rate hike, based on the strength of the economy.

“The narrative here is the markets are likely to continue going back and forth with regard to their view on the Fed assessment of whether transitory is correct or not,” Emanuel said. “Transitory” is how the Fed describes its view that the surge in inflation will be short-lived.

In the past week, some of the inflationary pressure in the market dissipated with a major sell-off across the commodities complex. The Fed’s policy talk helped spur a surge in the dollar, which was part of the reason for the selling. But the first catalyst was a move by China to cool the hot commodities markets. Reuters reported that a Chinese government agency planned to release reserves of aluminum, copper and zinc.

Copper was down more than 8.4% on the week, its worst week since March 2020.

Week ahead calendar (ET)

Monday

9:30 a.m. St. Louis Fed President James Bullard

3 p.m. New York Fed President John Williams

Tuesday

Earnings: Korn Ferry

10 a.m. Existing home sales

10:30 a.m. Cleveland Fed President Loretta Mester

1 p.m. San Francisco Fed President Mary Daly

2 p.m. Fed Chairman Jerome Powell before Congress on pandemic programs and economy

Wednesday

Earnings: IHS Markit, Winnebago, KB Home, Steelcase

8:30 a.m. Q1Current account

9:10 a.m. Fed Governor Michelle Bowman

9:45 a.m. Manufacturing PMI

9:45 a.m. Services PMI

10 a.m. New home sales

11 a.m. Atlanta Fed President Raphael Bostic

4:30 p.m. Boston Fed President Eric Rosengren

Thursday

Earnings: Accenture, Darden, Rite Aid, Nike, FedEx, Blackberry

8:30 a.m. Jobless claims

8:30 a.m. Durable goods

8:30 a.m. Q1 real GDP (third reading)

8:30 a.m. Advance economic indicators

9:30 a.m. Atlanta Fed’s Bostic

11 a.m. New York Fed’s Williams

1 p.m. St. Louis Fed’s Bullard

Friday

Earnings: CarMax, Paychex

8:30 a.m. Personal income/spending/PCE inflation

10 a.m. Consumer sentiment

11:35 a.m. Cleveland Fed’s Mester

1 p.m. Boston Fed’s Rosengren

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Supply chain problems could limit what you can buy

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A worker assembles a box for delivery at the Amazon fulfillment center in Baltimore, Maryland, U.S., April 30, 2019.

Clodagh Kilcoyne | Reuters

Amazon sellers who had hoped for an easier Prime Day after 2020’s pandemic-driven chaos aren’t likely to catch a break this year.

The company’s two-day discount bonanza kicks off on Monday. It’s coming as the retail industry is grappling with widespread supply chain issues that are making it more challenging to stock stores and distribution centers and keep up with consumer demand.

Several cascading issues are hitting businesses at once. The global supply chain is still feeling the ripple effects of the Covid-19 pandemic, which forced many factories to shut down temporarily amid worsening outbreaks of the virus. Supply chains have been further disrupted by shortages of shipping containers and air freight capacity, along with materials like semiconductors and plastics. Labor shortages have caused major backlogs throughout the system.

A Covid-19 outbreak in the southern Chinese province of Guangdong has compounded the problem. Local officials have introduced restrictions, such as limits on vessel entry, to limit the spread of the virus. That means one of the world’s busiest ports, the Yantian International Container Terminal in Shenzen, has shrunk in available capacity.

Small- and medium-sized Amazon sellers who import their products from China are on edge as a result of global shipping snafus. Many businesses stocked up on as much inventory as they could months ahead of Prime Day.

‘I’ve not seen anything like this’

Isaac Larian, the toy maker behind the popular Bratz brand of dolls, said his company MGA Entertainment is in good shape for Prime Day because it started planning many months ago. That planning likely paid off, as Larian said he’s now looking at hundreds of containers of goods tied up at shipping ports in Yantian, while shipments that are on their way to the U.S. are taking weeks longer than expected to arrive.

“In 42 years in this business, I’ve seen a lot of challenges, but I’ve not seen anything like this,” Larian said.

These issues are adding “increased time and cost” to the global supply chain, said Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation, a trade group.

Across the NRF’s 16,000-plus members, more than two-thirds of members said they’ve been forced to add two to three weeks to their supply chains, the NRF wrote in a recent letter to President Joe Biden calling for action on the port challenges. All NRF members reported to the group that their costs had increased as a result of the disruptions.

“It’s not just one sector that’s being harmed as a result,” Gold said. “Everyone is hurt because of it.”

Because consumer demand remains high and inventory supply is limited, items could run out more quickly than in years past. Cargo marketplace Freightos surveyed 177 small- and medium-sized businesses who sell on Amazon and found that just over 75% of them continue to experience supply chain disruptions. Nearly half of respondents said they’re expecting inventory shortages on Prime Day due to freight delays.

Amazon Prime Day 2021 coverage

Read more about Amazon and other have planned for this year’s sales events:

“People may plan for Prime Day months in advance, but most sellers… don’t have the cash to bring in the inventory three months before,” said Freightos CEO Zvi Schreiber. “They’ve got to pay for the inventory and then they’ve got to pay for the storage and they’re all working with slim margins. Now, with the shipping costs, they’re working with even slimmer margins. So, if you’ve got slimmer margins and you don’t have spare cash, you can’t just fill a warehouse three months in advance.”

Millions of small- and medium-sized businesses hawk their goods on Amazon’s third-party marketplace. The segment now accounts for more than half of Amazon’s e-commerce sales and has helped it bring in record revenue.

An Amazon spokesperson told CNBC in a statement that Prime Day 2021 will feature more deals than last year, with more than 1 million deals from small- and medium-sized businesses around the world, indicating that seller participation remains high in the event.

Additionally, more than 2.5 million consumers used a pre-Prime Day promotion to buy goods from small businesses within the first 24 hours of the offer going live. Amazon didn’t share how many merchants participated in the promotion.

“We continue to innovate and grow Prime Day to ensure our Prime members and selling partners find incredible value,” the spokesperson said.

Bernie Thompson’s business is taking it on all sides. His electronics company, Plugable Technologies, has been hurt by the shipping container shortages, along with the continued chip shortage driven by a surge in demand for electronics.

Making matters worse, Thompson estimates that about $60,000 worth of Plugable’s goods remain stuck on the Ever Given, a massive container ship that was wedged in the Suez Canal for six days in March, stalling traffic in one of the world’s busiest waterways.

As a result, Plugable has had to “severely limit” its participation during this year’s Prime Day, Thompson said. One of its top products, typically selected by Amazon as a featured Prime Day deal in the U.K., is currently stuck on the Ever Given.

“We’re about to run out of stock on that product on Amazon U.K.,” Thompson said. “There’s no way for us to have a Prime Day deal in the U.K. Our goods are on the Ever Given.”

Prime Day participation

Thompson is confident Prime Day will still draw in many brands and sellers, but participation may be “down dramatically” compared to last year, as companies may not feel confident they have enough product in stock to run deals.

Passing on Prime Day can mean missing out on a flurry of sales. While the company doesn’t break out revenue from the event, Amazon is estimated to have brought in $10.4 billion globally during last year’s Prime Day in mid-October, according to Digital Commerce 360.

Launched in 2015, Prime Day is partially designed to draw in more Prime subscribers, to promote Amazon’s products and services, and to provide a sales boost during a normally slower shopping period.

It can also give a significant boost to third-party sellers’ businesses. In 2020, Amazon said third-party sellers’ Prime Day sales were $3.5 billion and grew faster year-over-year than its own first-party retail business.

Rick Watson, CEO of e-commerce consulting firm RMW Commerce Consulting, said all of his clients, which range across the furniture, fashion, home and food and beverage categories, are experiencing supply chain disruptions but that they’re still planning to participate in Prime Day.

Watson said larger sellers could benefit more during this year’s Prime Day because they’re in a better position to secure top ad placement, such as “Lightning Deals,” which are limited-time offers that are often featured prominently on Amazon’s homepage. These ad placements are typically secured months in advance and require sellers to provide Amazon with the inventory levels for the promoted product, he added.

“If you’re going to get certain advertising, they want to know what inventory is behind it,” Watson said. “It could advantage larger sellers this Prime Day, because it’s more likely that they have the financial flexibility to make those commitments this year.”

Some sellers are already growing nervous about having enough merchandise in stock for the holiday shopping season — a crucial sales period during the year. Retailers typically start planning and ordering their inventory in the spring so that it arrives by fall.

Thompson said the global chip shortage has meant that some of his vendors are forecasting lead times as long as one year from now, which means it’s a bottleneck that could last several quarters, or into next year.

“Prime Day is just a week or so away, but I’m not thinking about Prime Day right now,” Thompson said. “I’m thinking about Christmas and I’m thinking about the beginning of next year.”

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Stock futures dip slightly after Dow’s worst week since October

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Traders on the floor of the New York Stock Exchange, June 18, 2021.

Source: NYSE

Stock futures dipped slightly on Sunday to kick off a new week of trading after the Dow posted its worst week since October.

Futures on the Dow Jones Industrial Average fell 49 points, or 0.15%. S&P 500 futures slid 0.16% and Nasdaq 100 futures edged 0.07% lower.

U.S. stocks fell on Friday as investors digested new economic projections from the Federal Reserve and worried rate hikes could come sooner than expected.

The Fed on Wednesday raised its inflation expectations and forecast rate hikes in 2023. St. Louis Fed President Jim Bullard said Friday on CNBC’s “Squawk Box” that it was natural for the central bank to tilt a little more “hawkish” and saw higher interest rates as soon as 2022.

The Dow dropped 3.5% last week, while the S&P 500 and Nasdaq dipped 1.9% and 0.2%, respectively, on the week.

Sectors tied to the economic recovery led last week’s dip. The S&P 500 financials and materials sectors lost more than 6% on the week, while energy fell more than 5% and industrials dropped more than 3%.

“Investors may be interpreting the Fed’s hawkish tilt Wednesday as a sign that an extended US post-pandemic economic expansion may be a bit harder to achieve in a potentially emerging environment of less accommodative monetary policy,” Goldman Sachs’ Chris Hussey said in a note.

The Treasury yield curve also flattened last week. The yields of shorter-term Treasurys, like the 2-year note, rose — reflecting expectations of the Fed raising rates. Longer-term yields, like the 10-year note, retreated — a sign of less optimism toward economic growth.

Investors await public appearances from Fed members on Monday. Bullard and Dallas Fed President Robert Kaplan are set to speak virtually on a Official Monetary and Financial Institutions Forum panel at 9:00 a.m. ET. New York Fed President John Williams is expected to deliver remarks at a Midsize Bank Coalition of America event Monday afternoon.

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