US FINANCIAL MARKET

Dow, S&P 500 Fall, Bond Yields Tick Up on Fear of Ukraine War – Wall Street Journal, 2/14/2022

• The Dow Jones Industrial Average and S&P 500 fell on Monday as investors assessed the possibility of war between Russia and Ukraine.
• The Dow fell 342 points, or about 1%, in morning trading. The S&P dropped 0.6%.
• The technology-heavy Nasdaq Composite ticked up 0.3%.
• European markets were hard hit by the threat of a possible ground war in Ukraine.
• The pan-continental Stoxx Europe 600 was recently down 1.9%, led lower by banks and travel and leisure companies.
• The index pared losses after Russian Foreign Minister Sergei Lavrov, speaking in a meeting with Russian President Vladimir Putin, suggested Moscow should continue talks with the U.S. and its allies.
• After initially falling as investors reached for the safety of U.S. Treasurys, yields bounced back on Mr. Lavrov’s comments.
• The yield on 10-year Treasury notes was recently 2.007%, up from 1.951% Friday. Bond yields and prices move in opposite
• Oil prices held steady on Monday, after jumping on concern a war would curtail supplies of Russian crude amid a lack significant spare supplies. Futures on Brent, the benchmark in energy markets, slipped less than 0.1% to $94.47 a barrel, holding near its highest level since 2014.
• Prices for natural gas, of which Russia is the single biggest exporter globally, rose on both sides of the Atlantic.
• In the U.S., benchmark gas prices jumped 4.8% to $4.13 per million British thermal units.
• Prices in Europe, which depends on Russia for much of its gas—a chunk of it flowing through Ukraine—climbed 3.4%.
• St. Louis Fed President James Bullard told CNBC on Monday that the Fed should “front-load” its planned rate increases to combat higher-than-expected inflation, warning that the central bank’s credibility was on the line.
• Among individual U.S. stocks, Splunk rose 6.8% after The Wall Street Journal reported that Cisco Systems had made a takeover offer worth more than $20 billion for the software maker.
• Shares of airlines were hammered in Europe after reports that several were avoiding Ukraine’s airspace. Budget carrier Wizz Air dropped 6.8%, British Airways owner International Consolidated Airlines Group lost 5.3% and Deutsche Lufthansa fell 3.8%.

3M Sees Falling Mask Demand Slowing Sales Growth – Wall Street Journal, 2/14/2022

• The easing Covid-19 pandemic is expected to reduce demand for medical masks this year, 3M said Monday, a trend that America’s largest manufacturer of respirators projected will dent its earnings.
• That trend, 3M forecast, will eat into its per-share profit by about 45 cents.
• Overall, 3M is projecting per-share earnings between $10.15 and $10.65 in 2022, a range roughly in line with Wall Street analysts’ forecasts, according to FactSet.
• After accounting for lower mask uptake, sales will grow by 2% to 5% organically this year, the company estimated.
• Last year, 3M recorded $1.5 billion in sales from N95 masks and other masks, after notching $1.4 billion from such sales in 2020. In 2019, before the pandemic struck, 3M’s mask sales were $600 million.

People Are Going Out Again, but Not to the Office – Wall Street Journal, 2/14/2022

• Americans are dining again in restaurants, attending sporting events, and flying throughout the country. But most are still steering clear of their office building, a sign that more than health concerns are keeping workers away.
• Thousands of companies that closed their offices in March 2020 have yet to announce return plans. An average of 33% of the workforce returned to the office during the first week of February in the 10 major cities monitored by Kastle Systems, which records building-access-card swipes.
• The number has been slowly rising from 23% during the first week in January, when even companies that had brought back workers were sending them home because of renewed health risks.
• But the latest return rate is still well off the high of 41% in the first week of December, before the full force of the Omicron variant hit. That is true even in cities like New York, where the infection rate is closing in on the level it was at before Omicron.
• Meanwhile, the return rate to movie theaters in the first week of February was 58% of what it was before the pandemic, according to a Kastle analysis of industry statistics.
• Restaurants were nearly three-quarters as full as they were before Covid-19, and air travel had recovered to about 80%.
• Attendance at National Basketball Association games was 93% of what it was in February 2020, Kastle said.

Australia’s Crown Resorts Agrees to $6.3 Billion Blackstone Takeover – Wall Street Journal, 2/14/2022

• Crown Resorts, one of Australia’s biggest casino operators, said Monday that it agreed to a $6.3 billion takeover by Blackstone, following a roughly yearlong effort by the U.S. private-equity giant to acquire the company.
• Blackstone will pay 13.10 Australian dollars (US$9.35) a share in cash for Crown, which runs casinos in Melbourne and Perth and is preparing to open a new casino on the waterfront in Sydney. Shareholders are expected to vote on the Blackstone deal in the second quarter of this year. Regulators will also need to approve the deal.
• Crown said the Blackstone deal offers shareholders certainty at a time when the company’s business practices are being investigated by regulators, which could strip Crown of its licenses to operate its casinos. One probe by regulators in Western Australia state, which includes Perth, is scheduled to hand down its final report next month.

Lockheed Martin Scraps Aerojet Rocketdyne Deal – Wall Street Journal, 2/14/2022

• Lockheed Martin on Sunday said it had scrapped plans to buy Aerojet Rocketdyne Holdings after federal antitrust overseers last month sued to block the proposed $4.4 billion deal.
• Lockheed Martin, the world’s largest defense company by sales, had hoped to add Aerojet’s expertise in building rocket motors for its own missile and space systems.
• The proposed deal drew fire from the Federal Trade Commission and rivals that said they believed the combination could hinder competition.
• El Segundo, Calif.-based Aerojet is the only large, independent U.S. producer of engines for rockets and missiles.
• The FTC alleged that allowing Lockheed to buy Aerojet would give the defense giant the ability to deny other defense contractors access to critical components needed to build competing missiles and space systems.

Ford suspends or cuts output at plants due to chip shortage – Reuters, 2/14/2022

• Ford Motor said on Monday it will continue idling some of its assembly plants in the week of Feb. 14 due to the global semiconductor shortage.
• The U.S. automaker will idle production at its Ohio Assembly Plant as well as the production line for the Transit van at its Kansas City Assembly Plant, spokeswoman Kelli Felker said in an email. It also will operate with reduced shifts at its Kentucky Truck, Chicago and Dearborn (Michigan) Truck assembly plants.
• Last week, Ford suspended or cut production at eight plants in North America due to the shortage. Ford previously said the current quarter would be its low point for vehicle production due to the chip shortage.

AMD closes record chip industry deal with about $50-bln purchase of Xilinx – Reuters, 2/14/2022

• Semiconductor designer Advanced Micro Devices Inc said on Monday it has finalized the purchase of Xilinx in a record chip industry deal valued at about $50 billion.
• The closing of the deal comes on the heels of Nvidia abandoning its plans to buy SoftBank-owned Arm, citing regulatory hurdles.
• The purchase of Xilinx helps AMD “capture a larger share of the approximately $135 billion market opportunity we see across cloud, edge and intelligent devices,” said AMD CEO Lisa Su in a statement.

Intel’s Mobileye to launch self-driving shuttles in U.S. in 2024 – Reuters, 2/14/2022

• Intel’s Mobileye unit plans to build and deploy self-driving electric shuttles with its partners in the United States in 2024, in a bid to scale up its automated driving system beyond taxis and delivery vehicles, executives told Reuters.
• Mobileye, Benteler EV Systems and Beep will launch the on-demand driverless shuttles, which will feature 12 to 14 seats and no steering wheel or pedal.
• The vehicles will be operated in “contained geo-fenced areas” where speed limits are 35 miles an hour or less, Hinrich Woebcken, advisory board member for Beep, a mobility service provider, said.

Dry Weather in West Africa Pushes Up Cocoa Futures – Wall Street Journal, 2/14/2022

• Dry weather in West Africa has lifted cocoa futures, with supply concerns boosting a commodity that saw prices fall in 2021.
• November to March is the dry season in the Ivory Coast, by far the world’s largest exporter of cocoa beans.
• But it has been particularly dry in recent weeks, according to analysts and traders, which has investors betting on a diminished crop and sustained price rises ahead.
• Most-actively traded cocoa futures have risen about 12% this year—and 11% in February alone—to $2,811 a metric ton, on pace for the highest monthly level since April 2018.
• That has added to the challenges facing chocolate makers and sellers, which have complained about rising labor and other costs.
• Cocoa beans, which finished 2021 down 3.2% as supply levels remained steady, are one of several commodities to see prices climb recently.
• Sugar, another key ingredient in chocolate, is near four-year highs, while soybeans are edging back toward highs registered last year. Arabica coffee is up 11% in 2022.

Americans Feeling the Pain as Pump Prices Hit Highest Since 2014 – Bloomberg, 2/14/2022

• Rising energy prices mean Americans are paying more at the pump, which could ultimately curb consumer spending — creating risks for both the financial markets and the Federal Reserve.
• National gasoline prices have ticked higher, once again, according to the American Automobile Association, reaching the highest since August 2014.
• On a state-by-state basis, the highest prices are in California, where the regular grade costs $4.702 per gallon.
• If crude hits $100 per barrel by the end of February, that would lift inflation by about half a percentage point in the U.S. and Europe in the second half of the year, according to Bloomberg Economics.