US FINANCIAL MARKET
Stocks Rise, Oil Drops as Investors Eye Ukraine and Russia – Wall Street Journal, 2/15/2022
- U.S. stock indexes opened higher and European indexes rallied, following days of losses, while energy prices slumped and bonds sold off, after Russia said it had pulled back some troops from the Ukrainian border.
- The S&P 500 rose 1.2% Tuesday, putting the broad index on course to halt three days of losses after the opening bell.
- The blue-chip Dow Jones Industrial Average gained 1%, while the technology-heavy Nasdaq Composite rose 1.6%.
- The threat of war between Ukraine and Russia has, in recent days, added a geopolitical element to an already troubled market outlook.
- Those fears abated somewhat Tuesday after Russia’s Defense Ministry said some troops on the Ukrainian border were returning to their bases after completing training, though large-scale military maneuvers continued elsewhere.
- Oil prices dropped from the eight-year high they hit Monday. Brent crude, the international oil benchmark, fell 3.9% to $92.67 a barrel. Benchmark European natural-gas prices slumped 8.9%.
- Fresh data on Tuesday showed that prices suppliers charged businesses and other customers jumped in January, rising a seasonally adjusted 1% in January from the prior month, the sharpest rise since May 2021.
- Producer prices rose 9.7% on a 12-month basis, nearly the same as the prior month.
- European stock indexes rallied after Monday’s sharp losses, with the pan-continental Stoxx Europe 600 up 1.3%.
- Russia’s MOEX index jumped over 3%. The Russian ruble rallied 0.9% against the dollar, and the Ukrainian hryvnia rose 0.9%.
- The yield on a dollar bond issued by the Ukrainian government maturing in 2033 fell to 10.233% from 10.807% Monday, according to Tradeweb.
- The yield on a dollar-denominated Russian government bond maturing in 2026 slipped to 3.982% from 4.307%.
- Earnings season continues, with results due from companies including Airbnb after markets close.
- Marriott International shares rose 4.8% after reporting that its fourth-quarter revenue doubled.
- Nasdaq-listed Tower Semiconductor rose 36% premarket after The Wall Street Journal reported that Intel was close to buying the Israeli chip company for nearly $6 billion.
- Asian stock markets, which mostly closed before Russia announced its pullback, were generally lower.
- Both Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index fell 0.8%. Mainland China’s Shanghai Composite Index rose 0.5%.
Burger King, Tim Hortons power Restaurant Brands sales beat – Reuters, 2/15/2022
- Restaurant Brands International beat estimates for quarterly revenue and profit on Tuesday, led by soaring online sales and a recovery in demand at its Burger King and Tim Hortons chains.
- Restaurant Brands’ total revenue rose about 14% to $1.55 billion in the fourth quarter ended Dec. 31, beating estimates of $1.52 billion, according to IBES data from Refinitiv.
- Tim Hortons, which typically accounts for over half of Restaurant Brands’ revenue, posted an 11.3% increase in comparable sales in Canada, ahead of estimates of a 10.4% growth.
- Same-store sales at Burger King in the United States rose nearly 2%, also above expectations of a marginal decline.
- Restaurant Brands’ global digital sales rose more than 65% to $10 billion in 2021 on the back of these efforts to boost the e-commerce business.
- Excluding items, the Toronto, Ontario-based company earned 74 cents per share, topping estimates of 69 cents.
Marriott Doubles Revenue Despite Omicron Setback – Wall Street Journal, 2/15/2022
- Marriott International said demand for business and leisure travel continued to grow in the holiday quarter despite a setback from the spread of the Omicron variant.
- Marriott, whose portfolio encompasses nearly 8,000 properties world-wide, said Tuesday that its quarterly revenue more than doubled to $4.45 billion from a year earlier, when Covid-19 cases were surging and health officials warned against travel.
- The company said systemwide occupancy came in at 58%, up 23% from a year earlier but still 12% below pre-pandemic levels.
- Comparable systemwide revenue per available room, a closely watched industry metric known as RevPAR, was $90.86, more than double what it was a year earlier but about 19% below 2019 levels.
- Marriott has seen its total costs balloon 66% over the past year to $3.81 billion.
- The company said base management and franchise fees roughly doubled to $737 million.
- The company posted net income of $468 million, or $1.42 a share, compared with a loss of $164 million, or 50 cents a share, a year earlier. Adjusted for merger-related costs and other one-time charges, earnings were $1.30 a share. Analysts surveyed by FactSet were expecting $1 a share.
Intel Agrees to $6 Billion Deal to Buy Tower Semiconductor – Wall Street Journal, 2/15/2022
- Intel agreed to buy Israeli chip company Tower Semiconductor for nearly $6 billion, bolstering a plan to make more chips for other companies.
- Tower makes semiconductors and circuits used in everything from cars and consumer products to medical and industrial equipment.
- It operates manufacturing facilities in Israel, California, Texas and Japan, according to its website.
- The company is based in Migdal HaEmek, in northern Israel near Nazareth.
GM to Restart Chevy Bolt Production in April – Wall Street Journal, 2/15/2022
- General Motors will restart production of the Chevrolet Bolt electric car after pausing output last year to fix a battery defect that can lead to fires.
- GM will resume production of the Bolt in early April and start shipping them to dealerships shortly after for sale to consumers, the company said Tuesday.
- The Detroit auto maker stopped building the Bolt, along with a new, larger version that is SUV-sized, at a suburban Detroit factory in the summer as it worked to find a fix for the problem, which led to more than a dozen car fires.
- As GM moves to a new technology, GM’s long-term plans for the Bolt remain unclear. The company recently outlined plans for a $4 billion overhaul of the factory where Bolts are made to start production of electric pickup trucks, beginning in 2024.
That Vacation Home Listed on Airbnb Might Be Owned by Wall Street – Wall Street Journal, 2/15/2022
- Investment firms are buying up more vacation homes, aiming to cash in on growing demand from tourists and remote workers.
- New York-based investment firm Saluda Grade is launching a venture with short-term-rental operator AvantStay Inc. to buy about $500 million of homes, the companies said Tuesday.
- Saluda Grade said it is also looking to raise debt by selling mortgage bonds backed by its homes to investors, the first vacation-rental mortgage securitization, according to the company.
- Low interest rates have made it more attractive to borrow and buy traditional rental homes, inflating property prices and making it harder for new buyers to turn a profit.
- That has prompted some institutions and wealthy families to look in more obscure corners of the property market where competition is smaller, investment advisers say.
Farmers Feel the Squeeze of Inflation – Wall Street Journal, 2/15/2022
- American farmers are paying significantly higher prices for their weed-killing chemicals, crop seeds, fertilizer, equipment repairs and seasonal labor, eroding some of 2021’s windfall from rising crop prices. Higher farm costs could help push up grocery bills further in 2022, analysts say, following a year in which global food prices rose to decade highs.
- A rally in prices for agricultural commodities such as corn and soybeans, which kicked off in mid-2020, pushed up incomes for U.S. farmers and led them to spend more freely on farmland and machinery.
- In 2021, U.S. farms’ net income was estimated to be about $117 billion, up 23% from 2020, according to the U.S. Department of Agriculture.
- Even as crop prices remain high, supply costs are expected to outpace the price of agricultural goods in 2022, according to a January report from the Federal Reserve Board.
- Net income for farmers in Kansas is estimated to fall 65% from a year ago, according to a January study from Kansas State University.
- Growers’ biggest expenses each year, including fertilizer and crop chemicals, such as glyphosate, used to kill weeds and other pests are soaring in price.
- Glyphosate, Roundup’s active ingredient, is up about 250% from what it was 12 months ago, said Dean Hendrickson, vice president of marketing and business development at CHS Inc., a farm cooperative and major retailer of seeds and chemicals.
US ECONOMY & POLITICS
U.S. Producer-Price Inflation Stays Hot, Reinforcing Fed’s Plan to Start Raising Rates – Bloomberg, 2/15/2022
- Prices paid to U.S. producers jumped in January by more than forecast, pointing to persistent inflationary pressures as companies contend with supply-chain and labor constraints.
- The producer price index for final demand increased 9.7% from January of last year and 1% from the prior month, Labor Department data showed Tuesday. The gain from December was the largest in eight months.
- The median forecasts in a Bloomberg survey of economists called for a 9.1% year-over-year increase and a 0.5% monthly advance.
- Excluding the volatile food and energy components, the so-called core PPI increased 0.8% from a month earlier and was up by a 8.3% from a year ago.
- The cost of energy rebounded in January after falling a month earlier, rising 2.5%.
- Prices of goods accelerated in January from a month earlier, rising 1.3%, the most in three months.
- Similar to the CPI, prices for goods are still running just as hot as services.
- The cost of services advanced 0.7%, matching the prior month.
- The report captures changes in prices paid to producers as well as margins received by wholesalers and retailers.
- Producer prices excluding food, energy, and trade services — a measure often preferred by economists because it strips out the most volatile components — rose 0.9% from December, the most in a year.
- Compared with a year earlier, the gauge advanced 6.9%.
New York Factory Gauge Improves Slightly, Price Gauge at Record – Bloomberg, 2/15/2022
- Manufacturing activity in New York state barely improved in February from a month earlier, falling short of expectations for a more robust rebound, while a measure of selling prices surged to a record high.
- The Federal Reserve Bank of New York’s general business conditions index increased to 3.1 from minus 0.7 a month earlier, a report showed Tuesday. Figures below zero indicate contraction, and the median projection in a Bloomberg survey of economists called for a rebound to 12.
- The report showed sizable inflationary pressures remained. A gauge of prices received jumped 17 points to 54.1, the highest reading in data back to 2001. Meantime, an index of prices paid remained elevated and is still close to a record high.
- Some 34% of respondents reported conditions had improved over the month, while about 30% said they had worsened.
- Measures of new orders and shipments barely grew in February, while a measure of factory employment improved to a three-month high.
Russia Says Some Troops Pulling Back From Ukraine Border but Exercises Continue – Wall Street Journal, 2/15/2022
- Russia’s Defense Ministry said it was pulling back some troops from near Ukraine while noting that large-scale military maneuvers were continuing, and Western officials warned that combat units were moving into forward positions.
- The announced pullback would scale down a total force that is still estimated to number more than 120,000, and came amid a new round of shuttle diplomacy aimed at defusing the crisis.
- Moscow has warned of unspecified consequences if the U.S. and its allies reject its security demands.
- U.S. Ambassador to the North Atlantic Treaty Organization Julianne Smith said Tuesday that a pullback wasn’t yet evident. “What’s important is that we verify,” she said. “This is something that we’ll have to look at closely and verify in the days ahead,” she said.
- Meanwhile, German Chancellor Olaf Scholz arrived in Moscow for talks with Russian President Vladimir Putin over the situation, a day after Mr. Scholz visited Ukrainian President Volodymyr Zelensky in Kyiv.
- The Kremlin said the talks were expected to last for hours.
Senate Action on Russia Sanctions Bill Stalls Amid Partisan Disagreements – Wall Street Journal, 2/15/2022
- A disagreement over how to treat a Russian natural-gas pipeline has halted Democratic and Republican efforts to cut a deal on sanctions legislation targeting Russia, just days before many U.S. officials say an invasion of Ukraine is possible.
- Senators from both parties had hoped to agree on legislation that Sen. Bob Menendez (D., N.J.), chairman of the Senate Foreign Relations Committee, dubbed the “mother of all sanctions,” part of an effort to deter Russian President Vladimir Putin from invading Ukraine by ensuring that Moscow would face painful economic measures.
- At the center of the dispute are disagreements about the timing and certainty of sanctions aimed at stopping gas from flowing in the new Nord Stream 2 pipeline that connects Russia and Germany, bypassing Ukraine.
- The impasse raises the risk that the White House and Capitol Hill may not have a unified message if an invasion occurs, according to people following the talks.
U.S. Interest Rates Have Soared Everywhere But Savings Accounts – Bloomberg, 2/15/2022
- Most everywhere you look on Wall Street, interest rates are going up. For everyday savers: not so much.
- In mid-2019, Goldman Sachs Group’s popular consumer bank Marcus was also offering individuals a yield in excess of 2% to park their cash in a high-yield savings account.
- The rates are much lower today, even though U.S. yields are back at pre-pandemic levels.
- Marcus’s savings rate is 0.5%, which it notes on its website is higher than Bank of America’s 0.04% or JPMorgan Chase’s 0.02%.
- Banks simply aren’t as desperate as they once were for new deposits, said Kevin Caron, portfolio manager for Washington Crossing.
- Pandemic-era fiscal stimulus pumped so much cash into the financial system that, combined with post-2008 banking regulations, it strained the balance sheets of some of the largest U.S. lenders.
- Last year, JPMorgan Chief Executive Officer Jamie Dimon said there was a risk it would have to turn away deposits.
Renting a Home Is Even Harder Than Buying One in Unrelentingly Hot U.S. Market – Bloomberg, 2/15/2022
- Rental prices for single-family homes grew an average of 7.8% in 2021, an all-time high, according to the most recent data available from CoreLogic Inc. In December, U.S. home rents jumped 12% year over year for the month, with Miami leading the way with a 35.7% increase.
- Home values have been increasing in lockstep, with the median home price jumping 14% year over year in January to $354,750, according to Redfin Corp.
- Active listings fell 29% to an all-time low of 438,000 due to tight supply.
- Mortgage payments have continued to climb, reaching an all-time high of $1,877 due to higher borrowing costs and asking prices, the firm said.
- Institutional investors have added further pressure to home prices by snapping up existing single-family homes to rent out — so much so that they’re starting to build new ones.
- Landlords, builders and institutional backers have committed $85 billion to that effort, according to Alan Ratner, an analyst at housing research firm Zelman & Associates.
EUROPE & WORLD
Canada’s Trudeau Invokes Emergency Powers to Address Trucker Protests – Wall Street Journal, 2/15/2022
- In a highly unusual move, the Canadian government on Monday invoked a series of emergency powers that include limits on public gatherings in a bid to end disruptive demonstrations in the capital city and along the Canada-U.S. border.
- The measures, announced by Prime Minister Justin Trudeau, represent one of the most striking responses by a Western government against protests by those opposing Covid-19 vaccine mandates and social restrictions in response to the pandemic, and immediately drew fire from some Canadian leaders and civil-liberties groups.
- The government also said Monday the country was extending laws targeting money laundering to capture transactions, including cryptocurrencies, on crowdfunding platforms like GoFundMe.
- An earlier and much more restrictive version of the legislation, called the War Measures Act, was invoked three times in Canadian history.
- Its most controversial use was in 1970, when Mr. Trudeau’s father, Pierre Elliott Trudeau, used the act when he was prime minister to squelch a militant separatist group in Quebec, known as the FLQ.
Hong Kong Hospital Wards Overflow as Omicron Defies Zero-Covid Policies – Wall Street Journal, 2/15/2022
- As spiraling Omicron cases overwhelm Hong Kong’s health system, officials doubled down on their zero-Covid strategy on Tuesday by commandeering thousands of apartments and hotel rooms to isolate infected residents.
- Officials acknowledged that they were struggling to keep up with testing suspected cases across the city. There were more than 1,600 confirmed new infections reported on Tuesday. While this was lower than Monday’s record 2,071 tally, 5,400 more suspected cases awaited verification.
- While much of the world continues to open up despite the global spread of the coronavirus, Hong Kong Chief Executive Carrie Lam told residents to prepare for further tightening of what are already among the world’s most stringent anti-Covid-19 restrictions.
- The containment measures have so far failed to stop accelerating infections of the less deadly Omicron strain.
Japan’s Economy Recovered in Fourth Quarter – Wall Street Journal, 2/15/2022
- Japan’s economy returned to growth in the October-December quarter thanks to higher consumer spending, but a resurgence in Covid-19 infections is likely to hold back the recovery in the current quarter.
- In the final quarter of 2021, the world’s third-largest economy after the U.S. and China grew 1.3% from the previous quarter. That was equal to 5.4% on an annualized basis, showing what would happen if the quarter’s growth continued for a full year.
- The growth was due largely to private spending, which increased 2.7% from the previous quarter. Spending on services recovered solidly after a state of emergency in Tokyo and other cities was lifted on Sept. 30.
- In the fourth quarter, Japan’s gross domestic product still fell short of its pre-pandemic level. The economies of the U.S. and China, Japan’s top two trading partners, have recovered more quickly and are now bigger than they were before the pandemic.
Decade-High Food Prices Drive Poverty and Unrest in Africa – Wall Street Journal, 2/15/2022
- Parts of Africa are contending with a wave of inflation that is, by some measures, even worse than the supply shocks cascading around the rest of the world.
- Over the past two decades, more Africans have become heavily dependent on imported food, tripling the food import bill to $35 billion in 2020, according to the World Bank, leaving them vulnerable to the rising cost of shipping food globally.
- Food prices are at their highest levels in over a decade, according to the United Nations’ Food and Agriculture Organization, compounding the plight of some 40 million people thrown into poverty by the impact of the Covid-19 pandemic and its accompanying lockdowns.
- That is creating a food crisis that threatens to spill over into unrest. In some places, it is already driving people to emigrate.
- Over the past 12 months, some 100,000 Ugandans—including teachers, accountants and social workers—have migrated to the Gulf, according to government data.
- In Malawi, one of Africa’s more established democracies, the local currency has lost around a 10th of its value against the dollar in the past year, pushing inflation into double digits, reaching 11.5% in December. Authorities have arrested more than 1,000 people in recent weeks during protests at rising costs.
Italy Electricity Bills Set to More Than Double This Quarter, Regulator Warns – Bloomberg, 2/15/2022
- Italian energy regulators warned on Tuesday that electricity bills in the country will more than double in the first three months of 2022, as the government led by Mario Draghi hurries to roll out new measures to help families and companies deal with soaring prices.
- The increase is estimated at 131% for the quarter, while natural gas bills are expected to rise over 90%, officials from the regulator, known as ARERA, said at a parliamentary hearing in Rome.
- The energy crunch has already forced at least six Italian distributors to halt contracts with clients as price guarantees become impossible to honor.
Russia’s Yandex eyes $6.5 billion annual revenue in 2022, profits slip – Reuters, 2/15/2022
- Russian internet giant Yandex on Tuesday reported a 55% drop in adjusted net profit last year, but said it expects total group revenues to continue their upward trajectory this year to 490 billion-500 billion roubles ($6.50 billion-$6.63 billion).
- Total revenues were 54% higher in the fourth quarter and rose by the same amount over the full year to 356.2 billion roubles, above company guidance of 340 billion-350 billion roubles.
- Yandex’s core advertising business, which accounted for 47% of total revenue in the fourth quarter, took a hit during the early stages of the COVID-19 pandemic, but surging interest in online transactions allowed its other businesses to flourish.
- Revenues in the taxi segment rose 93% in the final quarter to 42.9 billion roubles.
- Search and portal revenues were up 31% in the same period, during which time the company’s search market share in Russia averaged 60.2%, Yandex said.
- Yandex’s adjusted net income stood at 8 billion roubles in 2021, down 55% on a like-for-like basis including its Yandex.
- The group expects its total e-commerce gross merchandise volume (GMV) to double in 2022, while GMV in its taxi segment, which includes ride-hailing and car-sharing, should reach 700 billion-720 billion roubles in 2022.
- President Rutherford Hayes signed a bill allowing female attorneys to argue cases before the Supreme Court. (1879)
- USS Maine blew up in Havana harbor, touching off the Spanish-American War. (1898)
- The Maple Leaf Flag officially became the new national flag of Canada. (1965)
- More than 100,000 Soviet troops withdrew from Afghanistan almost 10 years after the USSR invaded the country. (1989)
- Millions of protesters around the world demonstrated against the threat of a U.S. war on Iraq. (2003)