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Stocks on Wall Street dropped for the third consecutive day on Wednesday as new data on consumer prices added to investors’ concerns that inflation could upend the Federal Reserve’s efforts to keep interest rates low to bolster the economy.
The S&P 500 fell 2.1 percent, pushing its losses this week to 4 percent. It was the benchmark index’s worst day since February and its worst three-day performance since October.
The drop came after the Labor Department said the Consumer Price Index climbed 4.2 percent during the month, from a year earlier, the fastest pace of increase since 2008. From March to April, prices increased 0.8 percent.
Analysts had been expecting a high annual increase, given the comparison to last April, when the economy was cratering amid the early stages of the Covid crisis and price growth slowed to a crawl. But the report still caught them off guard.
“While the high levels were expected, not many were expecting them to be this high,” wrote analysts at Bespoke Investment Group in a note on Wednesday.
The worry for stock investors is that persistently hotter-than-expected inflation readings could force the Fed — which is supposed to focus on price stability as well as employment — to lift interest rates earlier than expected to.
Analysts agree that the Fed’s willingness to keep interest rates low has been a key driver of the stock market’s gains of more than 80 percent since March 2020; higher interest rates can discourage risk taking in the markets, and when concern about inflation dominates it can hit the highest-flying stocks hard.
On Wednesday, yields on long-term Treasury bonds — which are driven by expectations about both inflation and how the Fed may shift interest rates — rose sharply. The yield on the 10-year Treasury note rose to 1.695 percent. It was as low as 1.50 percent late last week.
The Fed has signaled that it intends to keep interest rates low for the foreseeable future, and has said that it will likely disregard signs of sharp price increases as the economy reopens from the virus, and will view them as transitory.
But on Wednesday, technology stocks, which are particularly sensitive to concerns about rising rates, were hit harder. The Nasdaq composite fell 2.7 percent, bringing its losses for the week to more than 5 percent.
In the oil markets, West Texas Intermediate, the U.S. crude benchmark, rose 1.2 percent, to $66.08 a barrel.
Gasoline prices continued to rise as the Colonial Pipeline, a 5,500-mile conduit stretching from Texas to New York, remained closed because of a ransomware attack. The AAA motor club said Wednesday that the national average price had reached $3.008 a gallon, up about 2 cents from Tuesday’s average price and 8 cents from a week ago. A year ago, the average price was $1.854. The pipeline operator said it began to restart operations Wednesday evening.
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Panic over the shutdown of a vital fuel pipeline in the United States has driven Americans to search for gas for their vehicles, causing several thousand gas stations across the nation to run out of fuel. Hundreds of others are limiting sales.
State officials in the Southeast have made efforts to stabilize the flow of gas, but consumers have become gripped by a fear that there could be a gas shortage. Many have turned to social media to vent, posting videos and pictures of long lines and empty pumps at filling stations. Some have begun comparing President Biden to President Jimmy Carter, who was the nation’s leader when gas lines rattled the country after the Iranian revolution and other Middle East troubles.
But the energy crises of the 1970s were caused by embargoes, the revolution and declining production. Experts say the reaction to the pipeline outage is somewhat out of proportion with the actual risk.
“The oil and gasoline is there,” said Amy Myers Jaffe, an energy expert at Tufts University. “We can pump it manually, we can carry it by truck, and the government and other entities can hire ships. And we have oil in inventories.”
Officials in states with the longest gas lines are asking for calm. “I’m urging everyone to be careful and be patient,” said South Carolina’s attorney general, Alan Wilson.
“Remember when it wasn’t a good idea to panic buy toilet paper last year? Please don’t do it with gas now,” the Virginia Department of Emergency Management tweeted on Wednesday.
At the White House, officials said that they were taking steps to make it easier to send fuel by ship, rail or truck, but acknowledged that those measures would take time.
The frenzy came after the Colonial Pipeline, which runs 5,500 miles from Texas to New Jersey, was shut down on Friday after a ransomware attack. Colonial Pipeline said Wednesday evening that it had begun restarting the flow of fuel.
David E. Sanger contributed reporting.
Credit…Lam Yik Fei for The New York Times
Three months after Tesla said it would begin accepting the cryptocurrency Bitcoin as payment, the electric carmaker has abruptly reversed course.
In a message posted to Twitter on Wednesday, Elon Musk, Tesla’s chief executive, said Tesla had suspended accepting Bitcoin because of concern about the energy consumed by computers crunching the calculations that underpin the currency.
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at a great cost to the environment,” Mr. Musk wrote. “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
Earlier this year, Tesla announced that it had purchased $1.5 billion worth of Bitcoin and Mr. Musk trumpeted the company’s plan to accept the currency. Tesla later sold about $300 million of its Bitcoin holdings, proceeds that padded its bottom line in the first quarter.
“Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy,” Mr. Musk wrote on Wednesday, referring to the process through which new Bitcoin is created.
The price of Bitcoin dipped slightly after the announcement, according to Coindesk.
As cryptocurrencies explode in value, the amount of energy used by the digital currencies is increasingly under scrutiny. Some estimates put the energy use of Bitcoin at more than the entire country of Argentina.
“Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing,” Bill Gates said in February.
Mr. Musk also said on Wednesday that Tesla was “looking at other cryptocurrencies” that use a fraction of the energy consumed by Bitcoin. Mr. Musk has been a promoter of Dogecoin, a cryptocurrency that started as a joke but that has exploded in value. In an appearance on “Saturday Night Live” last week, Mr. Musk referred to Dogecoin as a “hustle.” Dogecoin fell by nearly a third in price on the night of the show.
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With fighting raging between Israel and Palestinian groups, Chevron, the American energy giant, said Wednesday that it had shut down a major offshore natural gas facility in the eastern Mediterranean on orders from the Israeli government.
“In accordance with instructions received from the Ministry of Energy, we have shut-in and depressurized the Tamar Platform,” Chevron said in a statement.
The company said that it was continuing to supply customers through another platform in Israeli waters called Leviathan that also processes gas from an offshore field.
Chevron acquired a 25 percent stake in the Tamar Platform and its gas field and wells through its $4 billion acquisition of Noble Energy last year. The deal was the first entry of a major Western oil company into exploration and production of oil and gas in Israeli waters.
The Tamar Platform is about 12 miles from the Gaza Strip, where militants have been launching rockets toward Israel and Israel has been aiming airstrikes. Leviathan is further away. The two gas facilities are major sources of fuel for the Israeli economy, especially for electric power generation.
In recent years the international oil industry has begun to consider the Eastern Mediterranean region as a potential major hub for natural gas. Israeli gas has also served to increase the country’s energy independence and strengthen economic ties with former enemies like Egypt and Jordan, which are customers for the fuel.
Last month Delek Drilling, one of Chevron’s Israeli partners, said that it had reached a preliminary agreement to sell its share of Tamar to Mubadala Petroleum, an arm of the government of Abu Dhabi, in the United Arab Emirates, for around $1 billion. The United Arab Emirates normalized relations with Israel as part of the Abraham Accords signed in August.
“This is an area that looks as if it could have the resource quality and the scale to become a pretty significant energy province,” said Mike Wirth, Chevron’s chief executive, in an interview last year.
Snap announced on Tuesday that it had suspended Yolo and LMK, two anonymous messaging services, within the Snapchat app in response to a lawsuit filed on Monday.
The lawsuit accuses Snapchat, Yolo and LMK of “creating, maintaining and distributing anonymous messaging apps to teens that are inherently dangerous and defective, and for falsely promising the enforcement of safeguards.” Yolo and LMK are developed by other companies and integrate into Snapchat using an integration provided by Snap.
The lawsuit was brought on behalf of Carson Bride, 16, who committed suicide last year after being bullied and threatened on Snapchat, Yolo and LMK, according to the suit filed in United States District Court for the Northern District of California. The plaintiffs in the case are his mother, Kristin Bride, and the Tyler Clementi Foundation, which works to combat bullying.
A representative from Snap wrote in an email to The Times that the company was suspending Yolo and LMK “out of an abundance of caution for the safety of the Snapchat community” while it investigates the claims.
LMK and Yolo both maintain separate apps outside of Snapchat. As of Wednesday, LMK is still available for download on both the Apple App Store and the Google Play store. Yolo was not available in either store.
Snapchat, which had 280 million daily active users as of late March, allows vetted developers to integrate their apps through a portal called Snap Kit. Small companies can access bigger audiences through these partnerships, and Snapchat can add new functions to its app without having to develop each one.
Yolo and LMK allow users to post questions — “What color suits me best?” or “Does this outfit look good?” — on Snapchat Stories, to which other users can respond anonymously. Yolo and LMK also have features in their stand-alone apps that allow anonymous messaging in group chats.
Greg Henrion, one of the founders of Yolo, dismissed concerns about bullying on the platform in an interview with TechCrunch in 2019. “We’re strict on moderation,” he said. “When looking at the reviews about bullying, it’s like nothing compared to any other anonymous app. I think we solved 90 percent of the problem.”
Yolo and LMK did not respond to requests for comment.
The lawsuit argues that the anonymous messaging apps have been known to cause harm for decades and that the existence of bullying on LMK and Yolo was “foreseeable.”
Yik Yak, an anonymous messaging app created in 2013, shut down in 2017 after becoming associated with bullying, discriminatory speech and threats of bomb and gun violence. Other anonymous platforms, like ask.fm and Kik, have been linked to suicides by young people and sexual abuse cases. In 2018, Pew Research Center reported that 59 percent of teenagers experience cyberbullying.
Credit…Tamir Kalifa for The New York Times
Millions of low-income Americans became eligible on Wednesday for an emergency discount on high-speed internet service and devices to get online, an effort aimed at providing relief to families that have struggled during the pandemic as school, work and health care have moved online.
The Federal Communications Commission’s subsidy program, the Emergency Broadband Benefit, can be used for $50 monthly discounts for individuals on SNAP or Medicaid, recipients of Pell grants, and families with children on free and reduced-price lunch plans. Low-income households on tribal lands can apply for $75 in monthly broadband subsidies. The program also allows for a one-time $100 subsidy for a laptop or tablet.
The F.C.C. said 825 broadband providers have agreed to offer the discounts.
The program, which Congress approved $3.2 billion for late last year, is one of several efforts to bring broadband internet to all American homes. The F.C.C. earlier this week also approved a $7.2 billion program to give students high-speed internet access through schools and libraries. President Biden has promised to make broadband affordable and available for all and has proposed a $100 billion effort to connect every rural and low-income home to high-speed internet service.
The Emergency Broadband Benefit program comes late in the pandemic, with schools and workplaces beginning to open again. The delay was largely because of wrangling over details of the subsidies in Congress and at the F.C.C. during the Trump administration. And it’s unclear what will happen once the one-time emergency benefit fund runs out.
The program will end either when the $3.2 billion fund is depleted or six months after the Department of Health and Human Services declares an end to the pandemic.
“High-speed internet service is vital for families to take advantage of today’s health, education, and workplace opportunities,” Jessica Rosenworcel, the acting chair of the F.C.C., said in a statement. “And the discount for laptops and desktop computers will continue to have positive impact even after this temporary discount program wraps up.”
Credit…Pool photo by Graeme Jennings
The Senate Commerce Committee on Wednesday approved the nomination of Lina Khan to be a member of the Federal Trade Commission, clearing the way for a vote by the full Senate that would make Ms. Kahn, a prominent critic of the tech giants, one of its most powerful regulators.
The nomination of Ms. Khan, 32, has buoyed progressive hopes that President Biden will try to rein in Silicon Valley. At her confirmation hearing in April, Ms. Khan said that she saw a “whole range of potential risks” associated with the tech companies’ abilities to take over markets and dominate them.
Mr. Biden also appointed Tim Wu, a legal scholar who has pushed for antitrust action against the tech companies, to an economic policy role in the White House. Mr. Biden has yet to say who will lead the F.T.C. or the Justice Department’s antitrust division during his administration.
Ms. Khan would join the commission as antitrust regulators mount a campaign against the power of the largest tech companies. The F.T.C. last year filed a lawsuit accusing Facebook of cornering the market through acquisitions of small companies like Instagram and WhatsApp. The agency has also been investigating Amazon, and the Department of Justice last fall filed its own antitrust lawsuit against Google.
Ms. Khan’s ascendence to the F.T.C. would cap a quick rise. She came to prominence in law school, when she wrote a law review note charting how Amazon’s power exposed flaws in the way judges had enforced antitrust law. After law school, she worked for a progressive member of the F.T.C. and helped write a House Judiciary Committee report criticizing the sweeping power of the tech giants. Last year, Ms. Khan also joined Columbia Law School as a professor.
Some conservatives have worried that she would be too heavy-handed in regulating industry. Four Republicans specified that they were voting against her nomination.
Senator Roger Wicker of Mississippi, the top Republican on the Commerce Committee, voted for her nomination but said he shared some concerns about Ms. Khan.
“I believe she is focused on addressing one of the most pressing issues of the day: reining in the big social media platforms,” he said. “However, I do remain concerned that a broadly over-regulatory approach as an F.T.C. commissioner could have a negative effect on the economy and undermine free-market principles.”
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The economic outlook has brightened considerably across Europe after lockdowns restricted growth at the start of the year. Now, economists foresee the complete recovery by the end of next year from the early effects of the pandemic.
The British economy grew 2.1 percent in March from the previous month, the Office for National Statistics said on Wednesday. The reopening of schools was one of the biggest reasons for the larger-than-expected jump in economic growth, as well as a rise in retail spending even though many stores remained closed because of lockdowns.
The statistics agency estimated that gross domestic product fell 1.5 percent in the first quarter, slightly less than economists surveyed by Bloomberg had predicted, while the country was under lockdown with nonessential stores, restaurants and other services such as hairdressers shut.
Though the British economy is still nearly 9 percent smaller than it was at the end of 2019, before the pandemic, the Bank of England forecasts it to return to that size by the end of this year.
The European Commission also upgraded its forecasts for the region on Wednesday. It predicted the European Union economies would grow 4.2 percent this year, up from a forecast of 3.7 percent three months ago. Germany’s economy is forecast to grow 3.4 percent this year and Spain, which suffered Europe’s deepest recession last year, is expected to grow nearly 6 percent.
“The E.U. and euro area economies are expected to rebound strongly as vaccination rates increase and restrictions are eased,” the commission, the executive arm for the European Union, said on Wednesday. The recovery will be driven by household spending, investment and a rising demand for European exports, it said.
Still, despite the optimistic outlook, the commission warned that the risks were “high and will remain so as long as the shadow of the Covid-19 pandemic hangs over the economy.”
Even as millions of people were vaccinated, the number of new coronavirus cases globally reached a peak in late April as the pandemic has struck especially hard in India. The uneven distribution of vaccines around the world and the emergence of new variants has the potential to set back the recovery.
The National Institute Of Economic and Social Research in London said on Monday that it did not expect the British economy to return to its prepandemic size until the end of 2022, predicting a slower recovery than the central bank.
Economists at the institute expect lower global growth because of uncertainty about the global vaccine rollout and lingering doubts about the end of the pandemic inducing more people to hold onto their savings, rather than spend it.
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The comeback continued for SoftBank on Wednesday, as the Japanese technology investment firm posted a net profit of more than $36 billion for the year ending in March.
Yet a recent slide in confidence in technology stocks could make it more difficult for Masayoshi Son, the founder of the technology conglomerate turned investment powerhouse, to keep up the momentum after what seemed like an impossible change of fortune.
Last May, SoftBank was in crisis after posting a loss of more than $12 billion. Its big bets on Wall Street favorites, like WeWork, the troubled office space company, and Uber, resulted in huge losses.
But it was not down for long. Riding high on a post-pandemic stock boom, SoftBank has since notched seemingly unthinkable gains. When compared with its previously released figures, the year-end results implied a profit for the first three months of 2021 alone of more than $17 billion.
In a live-streamed press event Wednesday, Mr. Son opened by showing a photo of the humble town where SoftBank began, before calling the huge earnings numbers “lucky plus lucky plus lucky.”
SoftBank Group’s net income
Mr. Son told investors on Wednesday that he would not deny that he is a gambler. But he said he regretted some decisions. The question now is whether his current run of luck can continue.
SoftBank’s profit, mostly paper gains from increases in investment values, was based heavily on a jump in the price of South Korean e-commerce firm Coupang after it listed earlier this year. Results were also lifted by strong share price rises from other SoftBank investments, DoorDash and Uber.
The share price of all three companies has fallen sharply over the past month on a broader pullback in technology shares, in part related to fears over inflation out of the United States.
Investors appeared more interested in the broader tech sell off than Mr. Son’s luck, as SoftBank’s shares fell more than 3 percent on Wednesday, despite the solid gains.
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Amazon on Wednesday won an appeal against European Union efforts to force the company to pay more taxes in the region, illustrating how American tech giants are turning to the courts to beat back tougher oversight.
The General Court of the European Union struck down a 2017 decision by European regulators that ordered Amazon to pay $300 million to Luxembourg, home of the company’s European headquarters and where regulators said the company received unfair tax treatment. The court said regulators did not sufficiently prove that Amazon had violated a law meant to prevent companies from receiving special tax benefits from European governments.
The decision, which comes as European Union and American officials attempt to reach a global tax agreement that could result in higher levies against tech companies, undercuts an effort by Margrethe Vestager, an executive vice president at the European Commission, who issued the Amazon penalty and has led efforts to force big tech firms to pay more in taxes. The companies have been criticized for using complex corporate structures to take advantage of low-tax countries like Luxembourg and Ireland. In 2020, Amazon earned 44 billion euros in Europe, but reported paying no taxes in Luxembourg.
Tech companies are using the courts to fight European regulators trying to rein in the industry’s power. Last year, Apple won an appeal against Ms. Vestager to annul a decision to repay about $14.9 billion in taxes to Ireland, where the company has a European headquarters. That case is now before the European Union’s highest court.
Google has appealed three decisions and billions of dollars in fines issued by the European Commission over anticompetitive business practices related to its search engine, advertising business and Android mobile operating system.
More legal battles may loom, as regulators have issued preliminary charges against Apple and Amazon for violating antitrust laws.
On Wednesday, Amazon cheered the decision by the Luxembourg-based court.
“We welcome the court’s decision, which is in line with our longstanding position that we followed all applicable laws and that Amazon received no special treatment,” Conor Sweeney, a company spokesman, said in a statement.
Ms. Vestager said the European Commission would study the Amazon ruling before deciding whether to appeal.
“All companies should pay their fair share of tax,” Ms. Vestager said in a statement. “Tax advantages given only to selected multinational companies harm fair competition in the E.U.”
Credit…Vinted-Investment/via Reuters
The pandemic revealed just how important e-commerce is to the future of the global fashion industry. In a year of lockdowns, millions of shoppers turned online to satisfy their desire for clothes, accelerating a shift toward digital sales and rapid growth for many e-commerce companies.
This week, two leading European names announced their latest funding rounds, as investors look to capitalize on the expansion of the online fashion market.
Lyst, a London-based online fashion platform with 150 million users, said it had raised $85 million ahead of a planned initial public offering. In 2020, the company — which acts as an inventory-free search portal for high-fashion brands and stores to sell to trend-focused online shoppers — said it had seen a 1,100 percent increase in new users on its app. It said the company has a gross merchandise value of more than $500 million.
Appetite for secondhand fashion also boomed in the last year, as more shoppers looked to declutter wardrobes, earn cash by selling old clothes and became more aware of the environmental impact of the industry.
Vinted, which is based in Lithuania, says it is Europe’s largest secondhand fashion marketplace with more than 45 million members globally. On Tuesday, the company said it had raised 250 million euros in a Series F funding round, giving the start-up a valuation of 3.5 billion euros, or $4.24 billion.
“We want to replicate the success we’ve built in our existing European markets in new geographies and will continue investing not only to improve our product, but also to ensure we continue to have a positive impact,” said Vinted’s chief executive, Thomas Plantenga.
Credit…Alvaro Dominguez
Today in the On Tech newsletter, Shira Ovide asks: When have Jeff Bezos’ ideas and his relentlessness to pull them off been helpful, and when have those same qualities led Amazon astray?
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