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National Guard troops from Arizona, Texas deploy to border

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Arizona and Texas announced Friday that they would send 400 National Guard members to the U.S.-Mexico border by next week in response to President Donald Trump’s call for troops to fight drug trafficking and illegal immigration.

Arizona Gov. Doug Ducey said about 150 Guard members would deploy next week. And the Texas National Guard said it was already sending Guardsmen to the border, with plans to place 250 troops there in the next 72 hours as an “initial surge,” according to a Guard spokesman. Two helicopters lifted off Friday night from Austin, the state capital, to head south.

The total so far remains well short of the 2,000 to 4,000 National Guard members that Trump told reporters he wants to send. New Mexico Gov. Susana Martinez’s office said Friday that it had not yet deployed any Guard members. The office of California Gov. Jerry Brown did not respond to questions about whether it would deploy troops.

Trump’s proclamation Wednesday directing the use of National Guard troops refers to Title 32, a federal law under which Guard members remain under the command and control of their state’s governor. This leaves open the possibility that California’s Brown could turn him down.

Defense Secretary James Mattis Friday night approved paying for up to 4,000 National Guard personnel from the Pentagon budget through the end of September. A Defense Department memo says the National Guard personnel will not perform law enforcement functions or “interact with migrants or other persons detained” without Mattis’s approval. It said “arming will be limited to circumstances that might require self-defense,” but it did not further define that.

Deployments to the border under former presidents George W. Bush and Barack Obama both occurred under Title 32. Bush sent around 6,000 troops in 2006, and Obama sent 1,200 Guard members in 2010.

Trump’s proclamation blamed “the lawlessness that continues at our southern border.” Trump has suggested he wants to use the military on the border until progress is made on his proposed border wall, which has mostly stalled in Congress.

After plunging at the start of Trump’s presidency, the numbers of migrants apprehended at the southwest border have started to rise in line with historical trends. The Border Patrol said it caught around 50,000 people in March, more than three times the number in March 2017. That’s erased a decline for which Trump repeatedly took credit. Border apprehensions still remain well below the numbers when Bush and Obama deployed the Guard to the border.

News reports of a caravan of Central American migrants passing through southern Mexico also sparked angry tweets from the president. The caravan of largely Central American migrants never intended to reach the U.S. border, according to organizer Irineo Mujica. But Trump has repeatedly cited it as an example of what he called America’s weak immigration laws.

Department of Homeland Security officials have said Guard members could support Border Patrol agents and other law enforcement agencies. DHS Secretary Kirstjen Nielsen said this week that guard members could “help look at the technology, the surveillance,” and that the department might ask for fleet mechanics. Federal law restricts the military from carrying out law enforcement duties.

From 2006 to 2008, the Guard fixed vehicles, maintained roads, repaired fences and performed ground surveillance. Its second mission in 2010 and 2011 involved more aerial surveillance and intelligence work.

Leaders in both Arizona and Texas said Friday that they were working with federal planners to define the Guard members’ mission.

The Arizona National Guard said in a statement Friday that it would “provide air, reconnaissance, operational and logistics support and construct border infrastructure.”

As the helicopters were taking off Friday in Texas, Guard spokesman Lt. Col. Travis Walters said that the 250 troops going “is what our initial surge is so that we can then very quickly roll in a larger amount of forces as needed.” Walters did not specify where the first round of troops would be stationed.

About 100 Guardsmen remain deployed as part of the existing state mission in Texas’ Rio Grande Valley, the busiest corridor for unauthorized crossings on the southwest border.

Former Texas Gov. Rick Perry, now Trump’s energy secretary, originally sent about 1,000 Guard members to the border in 2014 in response to a surge in the number of unaccompanied immigrant children crossing the Rio Grande.

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Market braces for key inflation report Tuesday that may test the Fed’s mettle

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Shoppers wearing protective masks push shopping carts inside a Costco store in San Francisco, California, on Wednesday, March 3, 2021.

David Paul Morris | Bloomberg | Getty Images

The pace of consumer inflation is likely to have returned to prepandemic levels in March, and it is expected to heat up even more in the next couple of months.

Rising inflation is one of the biggest fears in the market, and if it gets too hot, it could corrode asset values, limit buying power and eat away at corporate margins.

It is inevitable the reopening economy will generate some pick-up in inflation, with demand up sharply and supply chain issues resulting in shortages. Newly vaccinated consumers are also expected to resume traveling and other activities outside the home, which could create a temporary surge in services inflation.

But the Fed and some economists argue this inflationary pick up will be temporary, meaning it should not derail the recovery or result in Fed rate hikes. That makes every new inflation report very important to markets, and that is the case with Tuesday’s 8:30 a.m. release of March CPI.

The March consumer price index is expected to show a moderate 0.2% increase in core inflation, excluding food and energy prices, according to economists polled by Dow Jones. On a year-over-year basis, that is a 1.5% pace, compared to 1.3% in February.

March headline inflation is expected to increase by 0.5% or 2.5% year-over-year, up from 1.7% in February. By May, some economists expect headline inflation could be running at an year-over- year rate of 3.5% or more. The headline rate was last at 2.5% in January, 2020.

“We remain positive but once we get to the end of this year and early next year, and we’ve worked through the supply chain bottlenecks and demand has normalized, as the economy opened up, we don’t think it’s a sustained source of inflation over the medium term,” said Blerina Uruci, senior U.S. economist at Barclays.

Uruci expects core inflation to reach 2.3% by May but then it could be below 2% in the second half of the year.

The Fed has taken great pains to assure markets that it does not expect the inflation trend to remain hot and that the increase is largely the result of base effects. That means the gains in inflation appear larger when compared to the weakness in prices a year ago, when the economy was shutdown.

“I think this year we should be prepared for a lot of volatility in inflation. We’ll have those base effects now and we have a little bit of deceleration after that,” Uruci said.

The central bank has also altered its inflation policy and says it will tolerate inflation running above its 2% target for a period, before it would raise interest rates.

Fed Chairman Jerome Powell has been driving the message that the Fed is not worried about inflation just yet. He told it to the audience of “60 Minutes” Sunday evening. On an International Monetary Fund panel last week, Powell argued that the U.S. has lived in a period of low inflation for a quarter century and he expects that trend to continue.

“We want to see inflation move up to about 2%. And we mean that on a sustainable basis. We don’t mean just tap the base once. But then we’d also like to see it on track to move moderately above 2% for some time. And the reason for that is we want inflation to average 2% over time,” Powell said in the “60 Minutes” interview. “Inflation has been below 2%. We want it to be just moderately above 2%. We want it to be just moderately above 2%. So that’s what we’re looking for. That’s the situation we’re looking for. And when we get that, that’s when we’ll raise interest rates.”

Fed: Don’t be alarmed

Jim Caron, head of global macro strategy at Morgan Stanley Investment Mangement, said the market is now taking its cue from the Fed and that Powell has prepared the markets.

“He gave the market a pregame to see these high inflation prints and not get alarmed. His message to the market is don’t be alarmed by it. It’s coming back down,” said Caron. He said Powell has made it clear that inflation should not be a long-term problem. The Fed has said it wants to keep policy easy to help the economy and the labor market, with millions still unemployed.

“The way we frame this debate is whether we think inflation is unanchored or anchored,” said Caron. “I think where Powell is coming down is he’s saying it is anchored because it really is just base effects…The way he’s coming down on it is by saying there’s a lot of slack in the economy.”

But then there’s the potential for surprises, like on Friday, when March producer price inflation showed a surprise 1% jump, double what was expected. The market took the data in stride, but that may not be the case if the CPI is hotter.

“The CPI will be more relevant for the market,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group. Boockvar expects inflation to be more persistent than the Fed expects, and the market could react to any signs of that.

“Companies are only now beginning to increase prices to offset their own cost pressures,” he said.

Uruci said the inflation picture has altered since the pandemic, but she was not surprised by the jump in PPI, as it is consistent with what she is seeing in CPI. “We have really been highlighting the buildup of pipeline price pressures,” Uruci said. She said PPI was boosted by two things that would not necessarily show up in problem for consumer inflation. One was a rise in export prices and the other a strong gain in prices of goods sold to the government.

“We expect services to only start picking up in Q3 and Q4. If we’re wrong in that forecast ,and that happens sooner, we could see elevated inflation for the rest of the year,” she said.

Inside the March CPI, she expects to see a pickup of 0.1% in shelter, which is about a third of the index. Because of the slowdown in rentals, shelter inflation has slowed to about 1.6% from over 3% prepandemic. She said the vaccine news may help lower vacancy rates in some metropolitan areas, lifting rental prices.

The test for the Fed is how March CPI and the next several reports line up.

“Fed officials can utter the word “transitory” until they are blue in the face, but 1) how will they know? and 2) will market participants still get nervous, despite Fed reassurance, when the inflation readings reach levels not seen in a very long time? ” wrote Stephen Stanley, chief economist at Amherst Pierpont. “Buckle up, this could be a bumpy ride!”

Stanley made the comment following Friday’s PPI report.

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NYSE launches ‘First Trade’ NFTs of Spotify, Snowflake and more

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People walk by the New York Stock Exchange (NYSE) on the morning that the music streaming service Spotify begins trading shares at the NYSE on April 3, 2018 in New York City.

Spencer Platt | Getty Images

The New York Stock Exchange announced Monday it would launch “First Trade” NFTs, to memorialize the true first trade of six stocks on the public markets.

NFTs, or non-fungible tokens, are a type of digital asset created to track ownership of a virtual item using blockchain technology. Such unique items could be a piece of art or sports trading cards.

During a company’s public debut, the exchange processes over 350 billion order, quote and trade messages across its markets on its busiest days, NYSE president Stacey Cunningham said in a LinkedIn post.

Each message is recorded on the exchange’s digital ledger.

“Only one of those messages marks the NYSE First Trade: the exact moment a company became public, creating an opportunity for others to share in their success,” Cunningham said. “The NYSE First Trade NFT memorializes that unique moment in a company’s history.”

NYSE’s first class of NFTs represent the first trade of Spotify, which executed the inaugural direct listing on the exchange.

In a direct listing, a company makes its debut by selling existing shares directly to the public instead of bringing in intermediaries.

The exchange’s NFT offerings also include Snowflake, the biggest software IPO ever, as well as Unity, DoorDash, Roblox and Coupang, the largest initial public offering of 2021 so far.

NFTs have boomed in popularity this year along with a rise in the values of digital currencies, like bitcoin and ether. The market is growing rapidly, with some digital collectibles being sold for millions of dollars. 

Twitter CEO Jack Dorsey sold the first-ever tweet for over $2.9 billion on the “Valuables” platform run by blockchain company Cent. Meanwhile, auction house Christie’s sought bids on a virtual work from the artist Beeple which eventually sold for $69 million.

Investors can access NYSE NFTs on crypto.com

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— with reporting from CNBC’s Ryan Browne.

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Microsoft hunts for big acquisitions as antitrust spotlight on rivals

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CEO of Microsoft Satya Nadella gives a lecture about dream, struggle and creation at Tsinghua University on September 25, 2014 in Beijing, China. Nadella visited China for the first time on Thursday.

Visual China Group | Getty Images

Twenty years ago, the United States government filed suit against Microsoft for abusing its market power. Today, Microsoft is empire building because the country’s regulatory focus is on its biggest rivals.

Microsoft announced Monday it had acquired Nuance Communications for $16 billion ($19.7 billion including net debt). The deal gives Microsoft a company that specializes in voice transcription and related artificial intelligence software. Nuance has a particular niche in health care, providing software to digitize conversations from doctor’s visits and facilitate clinical documentation.

The acquisition comes about a month after Microsoft closed its $7.6 billion deal for ZeniMax, the parent company of video game publisher Bethesda. That transaction is meant to boost Microsoft’s Xbox against growing video gaming competition. Microsoft has also been in talks to acquire Discord, a voice, text and video-chatting platform for games, for more than $10 billion. Those discussions have happened concurrently to the Nuance transaction discussions, which started in December, according to a person familiar with the matter.

Microsoft’s recent deal talks don’t stop there. The company nearly acquired TikTok’s U.S., Canadian, Australian and New Zealand operations last year in a deal that was being discussed in the $20 billion to $30 billion range. Microsoft has also recently approached Pinterest to gauge their interest in selling, according to a Financial Times report in February. Pinterest has a market capitalization of more than $51 billion.

Less than three years ago, Microsoft paid $7.5 billion for GitHub. Less than five years ago, Microsoft paid more than $26 billion for LinkedIn.

Spending tens of billions on acquisitions is starkly different from the strategies of the world’s other technology super giants — Apple, Amazon, Google and Facebook. It also just so happens that Congressional Democrats and government agencies including the DoJ and FTC have taken a close look at whether Apple, Amazon, Google and Facebook have abused their market power, and are considering separating their businesses or unraveling previous large acquisitions.

Other than Microsoft, Amazon is the only member of the big five that has spent more than $5 billion on an acquisition in the last five years, buying grocery foods chain Whole Foods for more than $13 billion in 2017.

Nuance is Microsoft’s fourth such takeover.

Not ‘some aggregation play’

Apple, Amazon, Google and Facebook, well aware they’re under regulatory fire, are all proceeding cautiously with larger acquisitions, according to people familiar with the matter. A major purchase for any of them would almost certainly draw political attention, especially as their market capitalizations have ballooned during the pandemic. It’s possible a big M&A transaction would become the catalyst for more draconian actions, such as a company breakup or forced divestitures.

But Microsoft has avoided the same level of scrutiny. That eliminates bidding wars and makes Microsoft the current buyer of choice — a role it likely wouldn’t have played five years ago.

This dynamic popped up during last year’s TikTok discussions, when Google felt it couldn’t lead a deal for the U.S. assets because of its regulatory positioning.

CEO Satya Nadella alluded to why he thinks the government has treated Microsoft — a company with a $1.9 trillion market valuation — differently in an interview with CNBC.

“Our job is to provide technology so that [doctors and providers] can keep all of the data secure,” Nadella said, speaking specifically about Nuance.

“This is not about some aggregation play. This is about pure platform providers. That makes Microsoft very distinct in how we approach most of what we do.”

In other words, Nadella is making the argument that Microsoft is agnostically providing technology while competitors are using consumer data in potentially harmful or monopolistic ways.

Microsoft shareholders will ultimately have to decide how much empire building they’re comfortable with. Nadella has turned the company around with his focus on enterprise technology. Nuance fits the focus. Other targets are further afield. But, as Wedbush analyst Dan Ives wrote in a note to clients, “clearly, Redmond is on the ‘offensive’ around M&A with the company in a clear position of strength.”

So far, shareholders are not showing any trepidation about the Nuance deal, sending Microsoft shares up about 0.5% in afternoon trading Monday.

WATCH: Microsoft, Nuance CEOs on $16 billion deal, cloud strategy, health-care AI solutions

Less than three years after Microsoft acquired GitHub for $7.5 billion. Less than five years ago, Microsoft bought LinkedIn for $26.2 billion.

None of the other technology giants — Amazon, Google, Apple or Facebook — have spent anywhere close

on the aspects of regulation. these are superi important tipioocs.

one ofthe things we are doing — al labout providers patiets doctors — their data. provide tech so they can in fact keep data secure — use evenAI to benefit health care. not an aggretaion play — pure platform providers. microsoft distinct in how we approach most of what we do.

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