The Fed Hasn’t Tamed Shoppers Yet. That’s Good for FedEx, Bad for Powell.

FedEx is seen as a bellwether of consumer spending, so it’s worth picking apart these results for any signs a possible recession that has been long predicted will finally come to pass.

The earnings report gets to the nub of the tension between expectations and what is actually happening. The bottom line is that consumers aren’t acting like they’re in bad shape, even though they should be in theory.

A huge jump in interest rates, persistent inflation, the depletion of pandemic-era savings and worries about the economic outlook have stoked fears of a consumer-led recession for months now. But it hasn’t come.

In fact, consumer confidence rose in June and retail sales beat expectations in May. Unemployment remains near historical lows, even if some would point to California’s rising joblessness as a harbinger of deteriorating labor market conditions which could spread.

This could be a problem for Federal Reserve Chairman Jerome Powell this week as he heads to the Hill to face Congress. The Fed paused its rate-hike campaign for the first time in more than a year this month to allow time for more data.

But more data may also show a more urgent need for higher rates. That’s what happened in the U.K. on Wednesday. Inflation came in hotter than expected at 8.7% for May, putting pressure on the Bank of England to keep thrusting rates upward.

Of course, shoppers may soon run out of steam. But there’s scarce sign of it yet.

—Brian Swint

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Try your hand at this morning’s Barron’s Daily crossword puzzle and sudoku games. For all games, including a digital jigsaw based on the week’s cover story, click here.

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AT&T Sees Subscriber Growth Slowing Amid Competition

AT&T
delivered fiscal year 2023 guidance in remarks at a conference, saying it expects to add fewer postpaid phone subscribers in the second quarter compared with the same time last year and this year’s first quarter as growth slows and competition revs up.

• AT&T projects it will add slightly more than 300,000 subscribers, down from 424,000 net additions in the first quarter. It attributed the drop to “deliberate decisions to not pursue business with an uneconomic return profile,” and the temporary impact from competitors’ products.

• AT&T Chief Financial Officer Pascal Desroches reiterated guidance for full-year free cash flow of $16 billion or better and second-quarter free cash flow of $3.5 billion to $4 billion, up from $1 billion in the first quarter. The company reports second-quarter earnings July 26.

• It also said it is still on track with building its next-generation 5G and fiber networks. It expects to bring 5G spectrum to 200 million people by the end of 2023, and surpass 30 million consumer and business locations in its traditional service area with the fiber network by the end of 2025.

• T-Mobile US
  said it sees “significant” postpaid phone growth in the U.S., and second-quarter net additions “at or above” the 380,000 postpaid net account additions from the second-quarter 2022.

What’s Next: The Federal Communications Commission wants to require cable and satellite TV companies to give upfront, all-in prices as part of President Joe Biden’s fight against “junk fees.” Biden criticized providers for charging “broadcast TV” or “regional sports fees” that can raise bills 25% with no additional services.

—Angela Palumbo and Janet H. Cho

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Rivian Is Latest to Embrace Tesla’s EV Charging Technology

Rivian Automotive
became the latest auto maker to announce it will adopt
Tesla’s
charging plug and technology. Rivian owners also will be able to charge using Tesla’s supercharger network, the largest in North America. Rivian shares rose 5.5% on Tuesday, while Tesla’s rose 5.3%.

• The agreement gives Rivian drivers access to more than 12,000 Tesla superchargers in the U.S. and Canada starting in 2024. Rivian’s R1T and R1S model owners can access them using an adapter. Future Rivian models will use Tesla’s charging-port configuration starting in 2025.

• Ford Motor
  and
  General Motors
  have similar deals, which are helping to build a potentially lucrative side business for Tesla. Wedbush Securities analyst Dan Ives tweeted that it’s quickly becoming “Game, Set, Match” for Tesla regarding the charging landscape in the U.S.
  Stellantis
  said it is evaluating Tesla’s charging standard, The Wall Street Journal reported.

• Most non-Tesla chargers use the Combined Charging System, or CCS, standard, on which the federal government has spent money to build a highway network. Most U.S. auto makers rely on third-party charging providers such as EVgo and
  ChargePoint.
  Tesla uses the North American Charging Standard, or NACS.

• Tesla owners can use adapters for CCS fast chargers. Around one million EVs on the road in the U.S. have CCS connectors, the Journal reported, citing
  EVgo
  CEO Cathy Zoi. The company has Tesla connectors along with CCS connectors at many locations, the report said.

What’s Next: GM, which aims to sell roughly one million EVs a year by 2025, will unveil an all-electric Cadillac Escalade luxury SUV on Aug. 9. It is also making an electric Chevy Silverado pickup, Chevy Blaze SUV, and Chevy Equinox crossover, with an ultra-high-end Cadillac CELESTIQ coming in 2024.

—Janet H. Cho and Al Root

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Ozempic Maker Files Lawsuits Over Spas Selling Drug Variants

Drugmaker
Novo Nordisk
said it has filed multiple lawsuits in federal courts targeting medical spas, wellness clinics, and compounding pharmacies, claiming they are improperly selling custom-made versions of its popular medicines for significant weight loss.

• Novo Nordisk asked the courts to prevent the spas and clinics from claiming their drugs contain semaglutide, the main ingredient in Ozempic and related drugs, and to require them to say their products aren’t affiliated with Novo Nordisk and aren’t approved.

• The Food and Drug Administration approved Ozempic and Rybelsus to treat Type 2 diabetes, and Wegovy for chronic weight management in overweight patients with other conditions such as high blood pressure. But others who don’t meet the FDA’s criteria want the drugs for weight loss.

• Demand surged so rapidly that Novo Nordisk couldn’t keep up, The Wall Street Journal reported. To access the drugs, many people turned to spas, clinics, and pharmacies that sold custom-made (or compounded) versions of semaglutide. Some charged less than Novo’s monthly list price of as much as $1,350.

• The FDA warned about compounded semaglutide, and has said some products contain a different ingredient from the one approved in Ozempic and Wegovy. Novo Nordisk is investigating with the FDA a counterfeit pen for injecting Ozempic.

What’s Next:
Eli Lilly & Co.
will present abstracts on its diabetes and obesity drug portfolio and pipeline, including late-stage trial data on its highly anticipated weight-loss drug Mounjaro, at the American Diabetes Association’s 83rd Scientific Sessions in San Diego from June 23 to 26.

—Janet H. Cho

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Biden Meets on AI as Lawmakers Assess Risks, Opportunities

President Joe Biden was in San Francisco on Tuesday to meet with artificial intelligence experts and researchers about managing the opportunities and the dangers the technology poses for employment, information, privacy, and child safety. The government is looking to regulate the fast-developing technology.

• Biden met with some of Big Tech’s loudest critics including Common Sense Media founder Jim Steyer; former Google product manager Tristan Harris, who is executive director of the Center for Humane Technology; and Algorithmic Justice League Founder Joy Buolamwini. California Gov. Gavin Newsom also attended.

• Biden attended two fundraisers in Silicon Valley on Monday as he ramps up his reelection campaign. One was co-hosted by Reid Hoffman, a venture capitalist who was an early investor in OpenAI, maker of the ChatGPT app, and serves as a director of Microsoft, which is investing in AI.

• States are also looking at AI guardrails. California lawmakers have tested several ideas, including bills to fight bias by automatic decision tools, to set up an office of artificial intelligence, and to form a working group to make an AI report to state officials.

• Users of the social media platform
  Snap
  have flocked to its AI-powered chatbot since its April launch. CEO Evan Spiegel said at a Wall Street Journal event on Tuesday that some 150 million people have used Snapchat’s My AI chatbot, sending more than 10 billion messages.

What’s Next: Biden said on Tuesday that Vice President Kamala Harris will convene a group in July including civil rights leaders, consumer protection groups, and “civil society” as the administration continues its engagement on AI.

—Liz Moyer and MarketWatch

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner