Before the Bell: Bonds, Chatbot Lawyers, Etsy Counterfeit Charges and More ManU 

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Premarket action on Friday had the three major U.S. indexes trading lower. The Dow Jones industrials were down 0.52%, the S&P 500 down 0.72% and the Nasdaq 0.91% lower.

All 11 market sectors closed lower Thursday, with consumer cyclicals (−2.16%) and technology (−1.75%) giving up the most. Consumer staples (−0.79%) and utilities (−0.82%) gave up the least. The Dow closed down 1.26%, the S&P 500 down 1.38% and the Nasdaq down 1.78%. Two-year Treasuries closed unchanged at 4.62%, and 10-year notes rose by five basis points to close at 3.86%. Oil traded down about 1.9% Thursday, and it was down by about 1.8% early Friday morning at $77.03.

Thursday’s trading volume was slightly above the five-day average, and New York Stock Exchange losers outpaced winners by 2,264 to 800, while Nasdaq decliners led advancers by about 2 to 1.

Before markets opened on Thursday, the Census Bureau reported that housing starts for December were revised downward and January starts came in below estimates. January’s producer price index (PPI) came in with a month-over-month increase of 0.7%, much higher than anticipated, and core PPI rose 0.5%, more than the consensus estimate of 0.3%. New claims for unemployment benefits came in below the estimate, and continuing claims rose by about 1% from the prior week.

Among S&P 500 stocks, West Pharmaceutical Services Inc. (NYSE: WST), a supplier of delivery systems for injectable drugs, jumped 14.54% on Thursday on a better-than-expected fourth-quarter earnings report. Cisco Systems Inc. (NASDAQ: CSCO) added 5.24% after reporting earnings Wednesday and issuing strong guidance for the current quarter and its fiscal year ending in July.

Organon & Co. (NYSE: OGN) dropped 15% after reporting results that missed estimates on both the top and bottom lines. The drugmaker issued inline guidance for its 2023 fiscal year, but that was not enough to overcome the big miss on profits. A solid dividend (yield of 3.83%) no doubt helped a bit.

Much of this week’s chatter has been about an inverted yield curve and investors rotating out of equities and into bonds, especially short-term bonds. Six-month Treasury notes closed at 4.98% on Thursday and one-year notes closed at 4.99%. As noted earlier, even 10-year notes are sneaking up on a 4% yield.

The popularity of short-term notes has another attraction besides their high yields. The shorter notes imply that a hard landing may be coming, and it is not too early to get ready. Given the expected late-summer deadline to increase the federal debt limit before the United States cannot pay its bills, a six-month T-bill looks pretty good.

The world’s seventh largest law firm, U.K.-based Allen & Overy, announced Wednesday that it has launched an OpenAI-based artificial intelligence platform that the firm has dubbed Harvey for use by its 3,500 lawyers spread out over the world:

Harvey is a platform that uses natural language processing, machine learning and data analytics to automate and enhance various aspects of legal work, such as contract analysis, due diligence, litigation and regulatory compliance. Whilst the output needs careful review by an A&O lawyer, Harvey can help generate insights, recommendations and predictions based on large volumes of data, enabling lawyers to deliver faster, smarter and more cost-effective solutions to their clients.

O brave new world, that has such lawyers in it!

Ahead of its scheduled earnings report next week, e-commerce marketplace Etsy Inc. (NASDAQ: ETSY) got smacked by short-seller Citron Research with a claim that Etsy’s management has “turned this company into the largest organized clearing house for counterfeit goods in the world while not only allowing the behavior but encouraging it and promoting it by selling placement and status to the millions of sites that regularly violate copyright laws.”

Selling counterfeit goods online has been a problem for a long time., Walmart and eBay have been targets of investigations and reports by watchdog website The Counterfeit Report for many years. Items from AAA batteries costing a few bucks to networking hardware costing a few thousand dollars have been for sale on the biggest e-commerce sites.

Initial bids to purchase Manchester United PLC (NYSE: MANU), one of the Big Six teams in England’s Premier League, are due by 10 p.m. U.K. time Friday. So far, there appear to be several contenders. A consortium of Qatari investors who have been linked to the country’s royal family has been reported to be preparing a bid of around $6 billion. A Saudi group already has submitted a bid, according to Britain’s Telegraph newspaper. Jim Ratcliffe, founder of chemical giant Ineos, and an assortment of U.S.-based private equity firms are also expected to submit bids. ManU stock added about 9.7% on Thursday and traded up another 4.2% in Friday’s premarket.

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