Finance

Xie Feng, China’s new ambassador to the U.S., arrived in New York Tuesday, according to a release from China’s embassy in the U.S.
Xie assumes office after a roughly six-month period in which China did not have an ambassador to the U.S.
The prior ambassador, Qin Gang, was promoted in December to become China’s new foreign minister.

Xie Feng, China’s new ambassador to the U.S., addresses the media as he arrives at JFK airport in New York City, May 23, 2023.
Brendan McDermid | Reuters

China’s new ambassador to the U.S. arrived in New York Tuesday with a call to “safeguard the interests of China,” according to a release from the country’s embassy in the U.S.
Xie Feng assumes office after a period of about six months in which China has had no ambassador to the U.S. He was most recently a vice foreign minister.

Xie said Tuesday the bilateral relationship faces “serious difficulties and challenges,” and his mission is to “enhance China-U.S. exchanges and cooperation,” the release said in English.
The U.S. Department of State did not immediately respond to a CNBC request for comment.
The prior ambassador, Qin Gang, was promoted in December to become China’s new foreign minister. Earlier this month, Qin met U.S. Ambassador to China Nicholas Burns in Beijing for the first time since assuming his new role.

Tensions between the two countries escalated in February after the U.S. shot down an alleged Chinese spy balloon over American airspace. U.S. Secretary of State Antony Blinken had planned to visit Beijing around that time, but decided to postpone the trip after the balloon incident.
Over the weekend, U.S. President Joe Biden said those tensions would “begin to thaw very shortly.”

“We’re not looking to decouple from China, we’re looking to de-risk and diversify our relationship with China,” Biden told reporters following the Group of Seven meeting in Hiroshima, Japan, according to a White House transcript.

The most optimistic scenario for a ‘thaw’ is simply a halt in the decline of relations.

Gabriel Wildau

He did not discuss potential new rules limiting U.S. businesses’ investment in advanced Chinese technology.
“The most optimistic scenario for a ‘thaw’ is simply a halt in the decline of relations,” Gabriel Wildau, managing director at consulting firm Teneo, said in a note. “For financial markets and multinational companies operating in China, however, such a halt would be significant.”
“Even absent concrete policy changes, a general sense that the downward spiral has stopped could reduce risk perceptions and unlock new investment.”

Read more about China from CNBC Pro

Correction: This story has been updated to reflect that Nicholas Burns and Qin Gang’s meeting in Beijing this month was their first since the latter assumed his new role as foreign minister. More

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A major activist investor is betting stalled return-to-office plans will stir up more trouble in commercial real estate.
Land and Buildings’ Jonathan Litt has been shorting REITs with high office space exposure for three years, and he has no plans to shift gears.

“If you have no rent growth and your vacancies are going up and you have giant operating expenses to run an office building, you’re going backwards fast,” the firm’s chief investment officer told CNBC’s “Fast Money” on Tuesday.
Litt first warned Wall Street an “existential hurricane” was about to hit the sector in May 2020. Now, he’s saying the “hurricane has landed.”
He’s doubling down on the call — citing spiking interest rates and high inflation. Litt calls them two factors he didn’t anticipate when he first started shorting these companies in May 2020.
DC-based JBG Smith Properties is one of Litt’s major shorts. It’s down 58% since the World Health Organization declared Covid-19 as a pandemic on March 11, 2020. So far this year, JBG Smith is off 20%.
“Washington, DC is one of the toughest markets in the country today,” noted Litt. “They have a substantial office portfolio.”

He adds the crackdown on lending is compounding the problems.
“This isn’t a work from home story anymore. This is a financing story. It’s kind of like them mall business went from the mall problem to the financing problem,” Litt said. “Now, it’s a financing problem. And as these debts come due, there’s really nowhere to go because lenders aren’t lending to the space.”
JBG Smith did not immediately respond to a request for comment.
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Construction workers build a Toll Brothers home in Boca Raton, Florida.
Joe Raedle | Getty Images

Check out the companies making headlines in extended trading.
Palo Alto Networks — Shares gained 3.5% after the company’s fiscal third-quarter earnings and revenue topped estimates. The cybersecurity company posted adjusted earnings of $1.10 per share and revenue of $1.72 billion. Analysts polled by Refinitiv had estimated earnings of 93 cents per share and $1.71 billion in revenue. The company’s earnings guidance for the fiscal fourth quarter also surpassed expectations. 

Urban Outfitters — The clothing retailer’s stock popped 6%. Urban Outfitters posted earnings of 56 cents per share in the first quarter. Analysts had expected earnings of 35 cents per share, according to Refinitiv. Revenue also beat expectations, with the company reporting $1.11 billion versus consensus estimates of $1.09 billion. 
Agilent Technologies — Shares of the laboratory technology company declined more than 6%. Agilent posted an earnings and revenue beat in the fiscal second quarter, according to Refinitiv. Guidance for earnings and revenue in the fiscal third quarter was lower than anticipated.
Intuit — The tax software company’s shares fell more than 5%. While Intuit’s fiscal third-quarter earnings beat estimates, revenue fell below expectations, according to Refinitiv. The company’s earnings outlook for the current quarter was also lower than what analysts had estimated.
Toll Brothers — Shares gained more than 3% after the company’s fiscal second-quarter earnings and revenue beat analysts’ estimates. The company said the increase in demand that started in January has continued into the start of its third quarter.
VF Corp. — The apparel company’s shares jumped 2% in extended trading. VF, whose brands include Smartwool and The North Face, posted adjusted earnings of 17 cents per share on revenue of $2.74 billion during its fiscal fourth quarter. Analysts were calling for earnings of 14 cents per share on revenue of $2.73 billion, according to Refinitiv. More

Resilient government, consumer spending, improving homebuilder data, low unemployment and more tell BlackRock’s Rick Rieder that the U.S. economy is faring better than many expected.
“I think the U.S. economy’s in much better shape than people give [it] credit” for, Rieder said Tuesday at an event at BlackRock’s New York headquarters.
“I’ve never seen so much money sitting in cash, and a lot of it” waiting for a debt ceiling resolution before being deployed, he said.

Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income, speaks during a Reuters investment summit in New York, November 7, 2019.
Lucas Jackson | Reuters

NEW YORK — When the bond chief of the world’s biggest asset manager looks at the U.S. right now, he sees a lot to like.
A combination of resilient government, corporate and consumer spending, improving homebuilder data, $1.5 trillion in excess savings and low unemployment tell BlackRock’s Rick Rieder that the American economy is faring better than many expected.

“I think the U.S. economy’s in much better shape than people give [it] credit” for, Rieder said Tuesday at an event at BlackRock’s New York headquarters.
“There’s this thesis that you will have a dramatic slowdown,” he said. “When you break down the numbers, it’s just not apparent.” 
Talk of a pending recession has been building as the impact of the Federal Reserve’s interest rate increases ripple through the economy. The collapse of three midsized banks this year have stoked concerns that lenders will rein in access to credit, further slowing down the economy. Still, employment figures have confounded expectations, most recently in April, when nonfarm payrolls jumped by 253,000.
“When people talk about, ‘We’re going to a recession or a deep recession,’ it’s pretty unusual [or] almost impossible when you have an unemployment rate of 3.4%,” Rieder said.

Lots of cash sidelined

Rieder, a three-decade market veteran who oversees $2.4 trillion in assets, said he expects the Fed to pause rate increases at its next meeting. It could raise rates one more time, but he suggested the rate-hiking campaign is largely done.

That expectation, combined with slowing inflation, gives investors a good backdrop, even if he does expect the economy to slow later this year.
The biggest threat to Rieder’s thesis is a potential U.S. default on its sovereign debt, which could usher in panic and be “potentially catastrophic” for the economy, according to experts including JPMorgan Chase CEO Jamie Dimon. Treasury Secretary Janet Yellen has said tha the U.S. could lose the ability to pay its bills as soon as June 1.
Rieder puts a “very high probability” of the Biden administration striking a deal with Republican lawmakers, he said.
“I’ve never seen so much money sitting in cash, and a lot of it” waiting for a debt ceiling resolution before being deployed, he said. More

Yelp Inc. signage is displayed on a monitor on the floor of the New York Stock Exchange.
Michael Nagle | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Yelp — Shares of the online reviewing company jumped 5.7% after activist investor TCS Capital Management took a stake in the firm, saying in an open letter the company should explore strategic alternatives, including a sale. TCS built up a more than 4% position in Yelp, becoming one of the company’s top five shareholders. TCS said Yelp is “shockingly undervalued” and could be sold to a private equity buyer for at least $70 per share, a more than 120% premium.

related investing news

AutoZone — The auto retailer’s shares fell 6% after missing revenue expectations for the fiscal third quarter. AutoZone posted $4.09 billion in revenue, less than the $4.12 billion consensus estimate of analysts polled by Refinitiv. Earnings of $34.12 per share topped analysts’ $31.51 forecast. Inventory increased 7.4% year over year.
Lowe’s Companies — The home improvement retailer advanced 1.7% on a first-quarter earnings report that beat analyst expectations, but the company cut its full-year outlook.
Chevron — The San Ramon, California-based energy producer added 2.9% in midday trading. HSBC upgraded Chevron to buy from hold earlier Tuesday, citing a potential rebound in oil prices.
Zoom Video Communications — Shares tumbled 8.1% following the video conferencing stock’s first-quarter report. While the company beat Wall Street expectations for both earnings per share and revenue, Zoom’s expectations for the current quarter were only in line with expectations, according to Refinitiv.
Broadcom — Broadcom shares added 1.2% after Apple announced a multibillion-dollar chip deal with Broadcom. The multiyear plan stems from the iPhone maker’s commitment to funnel $430 billion into the U.S. economy.

BJ’s Wholesale — Shares dropped 7.3% after the wholesale club’s quarterly revenue was modestly worse than estimates from analysts polled by Refinitiv. Comparable club sales excluding gasoline also came in slightly weaker than expected.
Peloton — Shares lost 1.1% after the connected fitness equipment company, largely known for its at-home exercise bike, unveiled a fresh marketing strategy to grab new customers. The brand relaunch, which comes as Peloton tries to turn itself around, includes a new pricing structure for its digital app.
Advanced Micro Devices — The semiconductor company’s shares rose 0.1%, hitting a new 52-week high. Bank of America reiterated the chipmaker as a buy in a Tuesday note, saying AMD is on the “verge of another large opportunity” stemming from artificial intelligence demand.
Chimerix — The biotech stock rose 2.1% after Baird began research coverage with an outperform rating. The firm said it’s bullish on a “first-in-class agent” treatment for tumors.
Lifecore Biomedical — The stock jumped 50.2% after Lifecore announced $150 million in new financing, the repayment of outstanding term loans and a new supply agreement.
Integra Lifesciences — Shares fell 20.2% after the medical technology company gave weak guidance for its second quarter. The company said earnings per share should reach 55 cents to 59 cents, less than the prior range of 75 cents to 79 cents and the consensus estimate of 77 cents from analysts polled by FactSet. Integra said revenue should total between $372 million and $376 million, lower than prior guidance of $396 million to $400 million and the FactSet consensus of $398.1 million.
Quanterix, Myriad Genetics — The health technology stocks surged 9.2% and 13%, respectively, following upgrades to buy from neutral at Goldman Sachs. The bank said Quanterix has better operating leverage than the market expects, and Myriad has a differentiated financial profile that’s currently discounted.
Snowflake — Shares rose 1.9% ahead of the cloud computing stock’s quarterly report due Wednesday. Wells Fargo said it was bullish heading into the company’s earnings and reiterated an overweight rating.
CCC Intelligent Solutions — Shares of CCC Intelligent Solutions gained 0.8% following an upgrade to outperform from in line at Evercore ISI. The firm said the software services provider for the property and casualty insurance sector “has been on an ‘AI journey’ long before it became the trend du jour.”
Spotify — The music streaming service lost 0.6% despite Guggenheim reiterating the stock as a buy, noting usage trends remain strong and can help Spotify power a healthy growth cycle.
Regional banks — Several regional banks rose Tuesday. Closely followed PacWest jumped 7.9%, while Comerica and Zions added 2% and 4.6%, respectively.
— CNBC’s Hakyung Kim, Michelle Fox, Samantha Subin, Brian Evans, Yun Li, Sarah Min and Michael Bloom contributed reporting. More

In “Wall-E”, a film that came out in 2008, humans live in what could be described as a world of fully automated luxury communism. Artificially intelligent robots, which take wonderfully diverse forms, are responsible for all productive labour. People get fat, hover in armchairs and watch television. The “Culture” series by Iain M. Banks, a Scottish novelist, goes further still, considering a world in which ai has grown sufficiently powerful as to be superintelligent—operating far beyond anything now foreseeable. The books are a favourite of Jeff Bezos and Elon Musk, the bosses of Amazon and Tesla. In Mr Banks’s world, scarcity is a thing of the past and ai “minds” direct most production. Instead, humans turn to art, explore the cultures of the vast universe and indulge in straightforwardly hedonistic pleasures.Such stories may seem far-fetched. But rapid progress in generative ai—the sort that underpins Openai’s popular chatbot, Chatgpt—has caused many to take them more seriously. On May 22nd Openai’s More

Cars are seen parked in front of a Dick’s Sporting Goods store at Monroe Marketplace in Pennsylvania.
Paul Weaver | SOPA Images | LightRocket | Getty Images

Check out the companies making headlines before the bell:
Yelp — Yelp shares surged 11.4% in premarket trading. Activist investor TCS Capital Management confirmed reports that it’s built a stake of more than 4% in Yelp, and is asking the company to explore strategic alternatives including a sale, according to an open letter to the Yelp board of directors on Tuesday.

related investing news

AutoZone — Shares of AutoZone fell more than 2% after the specialty retailer’s third-quarter revenue came up short of expectations. AutoZone reported $34.12 in earnings per share on $4.09 billion in revenue. Analysts surveyed by Refinitiv were looking for $31.51 in earnings per share and $4.12 billion in revenue. AutoZone’s inventory increased 7.4% year over year.
Lowe’s Companies — Shares dipped about 1% after the home improvement retailer lowered its full-year forecast for total sales, comparable sales and adjusted earnings per share. However, Lowe’s beat on first quarter earnings and revenue.
Dick’s Sporting Goods — Shares of the sporting goods retailer gained more than 2% before the bell on a top-and-bottom line beat for the recent quarter. Dick’s Sporting Goods beat earnings expectations by 22 cents a share and reaffirmed its 2023 forecast.
Zoom Video Communications — Zoom declined 0.7% in the premarket after posting its first quarter results. The video conferencing firm reported adjusted earnings of $1.16, more than the expected 99 cents per share, according to consensus estimates from Refinitiv. It posted revenue of $1.11 billion, higher than revenue of $1.08 billion. However, its second quarter guidance was basically in line with expectations.
Chevron — Chevron shares rose 1.2% in the premarket. HSBC upgraded the oil giant to buy from hold, saying the stock will get a boost from rising oil prices.

BJ’s Wholesale — The wholesale retailer dipped nearly 1% before the bell. BJ’s Wholesale reported revenue that was slightly below Refinitiv estimates. Comparable club sales excluding gasoline came in slightly weaker than expected.
— CNBC’s Michelle Fox, Hakyung Kim, Jesse Pound and Samantha Subin contributed reporting More

Goldman Sachs analysts found a sharp increase in Chinese people studying fields such as education, where hiring demand dropped due to regulation.
Their research revealed other mismatches in majors and available jobs in IT and manufacturing.
Young people account for nearly 20% of consumption, Goldman analysts said.

People look for jobs at a fair in Shanghai, China, on May 20, 2023.
Bloomberg | Bloomberg | Getty Images

Record unemployment among China’s young people stems partly from a mismatch between their majors and available jobs, Goldman Sachs analysts said in a report Monday.
Graduates from vocational schools studying education and sports rose by 20% in 2021 compared to 2018 — but the education industry’s demand for new hires “weakened meaningfully during the same period,” the analysts said.

Regulatory changes wiped out jobs in after-school education in 2021. Around the same time, policymakers cracked down on internet tech companies such as Alibaba and real estate developers.
That “likely contributed to the weakening of labor demand” in information technology, education and property — industries that also tend to hire more young workers, the Goldman analysts said.
Their research found that information technology saw one of the largest increases in graduates between 2018 to 2021.

On the other hand, equipment manufacturing saw the largest increase in demand for workers, but little growth in new graduates, the report showed.
Chinese factories have faced worker shortages as young people choose to pursue other fields.

Such mismatch in majors and available jobs comes as China’s overall growth has remained sluggish, even after the end of Covid controls late last year. China’s top leaders said at a regular meeting in late April the economy lacked “internal” drive.

Read more about China from CNBC Pro

The unemployment rate for people ages 16 to 24 hit a record high of 20.4% in April — remaining persistently higher than the overall jobless rate of near 5% for all people living in Chinese cities.
Uncertainty about future income also kept retail sales muted.
Young people account for nearly 20% of consumption, the Goldman report said, with the analysts warning that youth unemployment could remain high in the coming years.
They estimate China has about 3 million more unemployed 16 to 24-year-olds versus before the pandemic.

Potential solutions

Chinese authorities have repeatedly said that addressing youth unemployment is a priority.
Policymakers are trying to expand vocational training, pointed out Keyu Jin, author of “The New China Playbook: Beyond Socialism and Capitalism,” which was published this month.
Another area of opportunity is to expand the services sector, which accounts for just under half the jobs in China, far lower than the roughly 80% in Japan and the U.S., Jin said in a phone interview Monday.
She said she is more concerned about unemployment — a labor force “unable to be deployed” — than China’s aging population. More