🏛Hopes for an early-rate cut are dying out

Good afternoon! Today we will be covering cost-cutting measures by Nike, the lost hopes for an early rate-cut and the lawsuit against a massive $25 Billion merger between Kroger and Albertsons.

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STOCK MARKET
👟Nike Announces 2% Workforce Reduction

Sportswear giant Nike is set to cut over 1,600 jobs, constituting about 2% of its workforce, as part of a cost-cutting measure amid declining demand for its footwear. The move comes as higher rental and interest rates prompt consumers to reduce spending on premium products, impacting sportswear companies like Nike and Adidas.

In December, Nike revealed a $2 billion savings plan over the next three years, encompassing supply adjustments and managerial restructuring. The cost-cutting initiative includes $400 million to $450 million in severance costs in the third quarter. Nike aims to navigate potential softening demand and invest more in areas like running to gain market share.

The job cuts are not anticipated to affect store and distribution center employees or those in the innovation team. Following the announcement, Nike's shares declined by 4% after Oppenheimer downgraded the stock, citing concerns about sporadic consumer demand in the coming quarters.

ECONOMY
🏛Wall St is losing early rate-cut hopes

Wall Street experienced a subdued session as the producer prices report revealed higher-than-expected growth, dampening expectations of immediate interest rate cuts by the U.S. Federal Reserve. The Labor Department reported a January increase in producer prices, driven by robust gains in service costs, reinforcing fears of resurging inflation.

Jeffrey Schulze of ClearBridge Investments remarked that the data quashed hopes for early rate cuts, suggesting the earliest potential cut might be in June.

Treasury yields surged post-report, with the 10-year note reaching 4.291%, signaling traders' bets on a delayed rate cut. Megacap stocks, including a 1.8% drop in Meta Platforms, dragged the S&P 500 communication services index down 1.1%. The Nasdaq faced the end of a five-week winning streak, and the S&P 500 lost steam after a strong 5% start in 2024.

Market attention focused on remarks by San Francisco Fed Chief Mary Daly, while Atlanta Fed President Raphael Bostic emphasized the need for more data on falling inflation pressures.

M&A
🛒Colorado sues to stop $25 billion Kroger-Albertsons merger

Colorado's attorney general has filed a lawsuit seeking to block Kroger's proposed $25 billion acquisition of rival supermarket chain Albertsons, citing potential harm to consumers. The lawsuit, filed in state court in Denver, alleges that the merger would result in store closures, higher prices, job losses, and disruptions to supply chains.

Kroger and Albertsons, two major grocery chains in Colorado, defended the deal as pro-competitive and expressed disappointment in the legal action, emphasizing ongoing regulatory review. This move follows a similar lawsuit by Washington state's attorney general in January, while California has been evaluating potential antitrust violations without taking action. Kroger has proposed divesting over 400 stores to address antitrust concerns.

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