Monday June 27, 2022

// June 27th, 2022 // Comments Off on Monday June 27, 2022 // Daily News

Wall Street layoffs likely ahead as two-year hiring boom turns to bust

KEY POINTS

• Broad-based job cuts loom at major banks for the first time since 2019, thanks to a confluence of factors that have cast a pall over markets and caused most deal categories to plunge this year, industry sources said.
• The math is ominous: Headcount at JPMorgan’s investment bank, Goldman Sachs and Morgan Stanley jumped by 13%, 17% and 26%, respectively, in the past two years amid a hiring binge. Meanwhile, capital markets revenue has fallen off a cliff.
• “When banks have a revenue problem, they’re left with one way to respond,” said one Wall Street recruiter. “That’s by ripping out costs.”

Less than six months ago, Wall Street bankers were reaping the rewards from a historic boom in mergers and IPOs.

Now, thanks to a confluence of factors that have cast a pall over markets and caused most deal categories to plunge this year, broad-based job cuts loom for the first time since 2019, according to industry sources.

The turnaround illustrates the feast-or-famine nature of Wall Street advisory work. Firms were caught understaffed when central banks unleashed trillions of dollars in support for markets at the start of the Covid-19 pandemic. The ensuing surge in capital markets activity such as public listings led to a bull market for Wall Street talent, from 22-year-old college graduates to richly compensated rainmakers.

For the first time in years, bank employees seemed to gain the upper hand. They pushed back against return-to-office mandates. They received record bonuses, multiple rounds of raises, protected time away from work and even Peloton bicycles.

But that’s over, according to those who place bankers and traders at Wall Street firms.

“I can’t see a situation where banks don’t do RIFs in the second half of the year,” David McCormack, head of recruitment firm DMC Partners, said in a phone interview. The word “RIF” is industry jargon meaning a “reduction in force,” or layoffs.

‘Very challenging’

The industry is limping into the traditionally slower summer months, squeezed by steep declines in financial assets, uncertainty caused by the Ukraine war and central banks’ moves to combat inflation.

IPO volumes have dropped a staggering 91% in the U.S. from a year earlier, according to Dealogic data. Companies are unwilling or unable to issue stock or bonds, leading to steep declines in equity and debt capital markets revenues, especially in high yield, where volumes have fallen 75%. They’re also less likely to make acquisitions, leading to a 30% drop in deals volume so far this year.

Wall Street’s top executives have acknowledged the slowdown.

Last month, JPMorgan Chase President Daniel Pinto said bankers face a “very, very challenging environment” and that their fees were headed for a 45% second-quarter decline. His boss, CEO Jamie Dimon, warned investors this month that an economic “hurricane” was on its way, saying that the bank was bracing itself for volatile markets.

Friday June 22, 2022

// June 17th, 2022 // Comments Off on Friday June 22, 2022 // Daily News

MARKETS

Stocks slip on Friday as the S&P heads for its worst week since March 2020

Top market watchers weigh in on whether there’s another leg down for stocks, or the tightening effects have been priced in

Stocks slipped on Friday as Wall Street attempted to find its footing after a brutal week of selling.

The Dow Jones Industrial Average dipped 10 points, or 0.03%, while the S&P 500 inched 0.1% lower and the Nasdaq Composite traded 1.2% higher.

Stocks were volatile in Friday’s trading, switching between gains and losses. It comes as investors grow increasingly worried about a potential economic slowdown. Several key pieces of economic data fell short of forecasts this week, ranging from May retail sales to housing starts. Additionally, the Federal Reserve raised its benchmark interest rate by the most since 1994.

Market volatility could be heightened Friday thanks to “quadruple witching.” This refers to the simultaneous expiration of stock index futures, single-stock futures, stock options and stock index options. This event happens once a quarter and typically leads to a surge in trading volume, making for choppy trading action as traders close out positions.

“It’s clear that there’s still some volatility and that’s a situation that’s going be with us for a while given the rising uncertainty,” said John Canavan, lead analyst at Oxford Economics. “I do think that after the extreme moves that we’ve seen over the past week, it’s sort of an exhausted market looking to a three-day weekend and just trying to find a place to settle in.”

The S&P 500 is down 6% and could be headed for its worst weekly performance since March 2020. All 11 of its sectors are at least 15% below their recent highs.