US FINANCIAL MARKET

U.S. Stocks Fall After Russia Shells Ukrainian Nuclear Plant – Wall Street Journal, 3/4/2022

• U.S. stocks and global equity indexes fell as investor concerns mounted about Russia’s intensifying military campaign in Ukraine.
• Russian shelling in southern Ukraine, which caused a fire at a nuclear power plant, intensified fears among investors Friday morning about Moscow’s tactics and concerns about a nuclear disaster.
• However, officials said the fire didn’t affect essential equipment, lessening worries about reactor damage.
• The Dow Jones Industrial Average dropped 524 points, or 1.6%, in morning trading. The S&P 500 fell 1.8% and the Nasdaq Composite declined 2.3%. Nine of the S&P 500’s 11 sectors were in the red, with only energy and utility companies rising.
• A strong jobs number early Friday wasn’t enough to push major indexes higher. Many investors remained focused on Russia’s escalating military campaign and trying to assess how much tough Western sanctions on Russia will damage economic growth.
• The invasion and rising commodity prices could further stoke inflation at a time when prices have already been at a 40-year high.
• New data on Friday showed that the U.S. added 678,000 jobs in February, more than the 440,000 expected by economists surveyed by The Wall Street Journal.
• In bond markets, the yield on the benchmark 10-year U.S. Treasury note declined to 1.710%, down from 1.843% Thursday.
• Bond yields have swung wildly throughout the week as investors have monitored the Russian invasion, comments from Federal Reserve Chairman Jerome Powell and economic data.
• The pan-continental Stoxx Europe 600 index fell 2.8% to trade close to its lowest level in nearly a year, reflecting concerns that Europe will bear the brunt of the economic fallout from the Russia-Ukraine crisis.
• European bank stocks were hit particularly hard Friday.
• Société Générale lost around 9.5% after the French lender said Thursday that its exposure to Russia stood at 18.6 billion euros, equivalent to over $20 billion, at the end of 2021.
• Shares of Italian bank UniCredit tumbled around 13.6%.
• Meanwhile, Uniper, a major German energy company that is owed about 950 million euros by the Russia-owned company behind the Nord Stream 2 pipeline, fell 12%.
• Asian stocks dropped, in part reflecting Thursday’s action on Wall Street, where technology stocks sold off more than the broader market and U.S.-listed Chinese companies stumbled.
• Japan’s Nikkei 225 closed 2.2% lower Friday. Hong Kong’s benchmark Hang Seng Index fell 2.5%, registering its lowest close since March 2020. In mainland China, the CSI 300 index fell 1.2% to its lowest close since July 2020.

Broadcom says enterprise spending ‘on fire,’ forecasts upbeat revenue – Reuters, 3/4/2022

• Chip company Broadcom on Thursday forecast second-quarter revenue above Wall Street estimates on the back of strong demand from enterprise and cloud clients, and the ramp-up in 5G technology.
• Adjusted revenue for the quarter ended Jan. 30 was $7.71 billion, up 16% year-on-year and slightly higher than Wall Street’s expectation for $7.60 billion.
• Excluding items, the company earned $8.39 per share, beating estimates of $8.08.
• Broadcom forecast current-quarter revenue of about $7.9 billion, compared with analysts’ average estimate of $7.43 billion, according to IBES data from Refinitiv.
• Broadcom’s chief financial officer, Kirsten Spears, told analysts that the company’s hardware had an order backlog of over $25 billion at the end of the quarter compared with $22 billion in the previous quarter.

Marvell Technology Reports 4Q Profit, 68% Revenue Increase — Earnings Review – MarketWatch, 3/4/2022

• Chip maker Marvell Technology’s results beat Wall Street targets and revenue reached $1.34 billion, the third consecutive quarter of more than a billion dollars in revenue.
• Net revenue reached a record $1.34 billion from $797.8 million a year earlier.
• Analysts expected about $1.32 billion, roughly the midpoint of Marvell’s guidance.
• Fourth-quarter profit fell to $6.2 million from $16.5 million a year earlier.
• On a per-share basis, the profit was a penny, or 50 cents as adjusted. Analysts surveyed by FactSet expected a loss of 3 cents a share and an adjusted profit of 48 cents a share, at the mid-range of the company’s guidance.
• This quarter, Marvell expects a profit of a penny a share, plus or minus 4 cents, or 51 cents a share as adjusted, plus or minus 3 cents. It expects about $1.43 billion in revenue.
• That compared with analysts’ forecast of a profit of 2 cents a share, or 49 cents a share as adjusted, and $1.38 billion in revenue.

Sweetgreen’s Sales Climb on Higher Prices, Return of Office Workers – Wall Street Journal, 3/4/2022

• Shares of Sweetgreen rose 19% in extended-hours trading after the salad chain reported better-than-expected results and outlook, boosted by higher prices and workers increasingly returning to the office.
• The company, which went public in November, reported revenue for the quarter was $96.4 million, up from $59.2 million a year earlier. Analysts expected sales of $84.7 million.
• Same-store sales, which measures sales at stores opened at least 13 months, rose 36%. Analysts were expecting the metric at 17.8%. The rise was driven mostly by an increase in transactions. Higher prices also helped same-store sales in the quarter.
• The company remained unprofitable. For the fourth quarter, it reported a net loss of $66.2 million, compared with a loss of $41.1 million a year earlier.
• For the current year, Sweetgreen said it expects revenue to range from $515 million to $535 million. Analysts were expecting $513 million. Guidance for the current quarter was also ahead of expectations.

Gap shares rise after retailer issues strong earnings guidance, despite weak revenue outlook – CNBC, 3/4/2022

• Gap shares climbed in after-hours trading Thursday after the apparel retailer offered an upbeat forecast for its profits in 2022, in spite of rising inflation and logistics challenges.
• Revenue grew about 2% to $4.53 billion from $4.42 billion a year earlier.
• That beat estimates for $4.49 billion. Compared with 2019 levels, however, Gap said its sales were down 3%.
• Same-store sales — a key metric that tracks revenue at retail stores open for at least 12 months — grew 3% year over year, short of the 3.7% increase that analysts had been looking for. On a two-year basis, same-store sales were also up 3%.
• Same-store sales at Athleta, Gap’s growing athletic apparel line for women, surged 42% on a two-year basis.
• The company said Athleta is still on track to hit $2 billion in annual sales by 2023.
• Banana Republic same-store sales dropped 2% from 2019 levels, in part due to ongoing store closures, the company said.
• Gap swung to a loss in the three-month period ended Jan. 29 of $16 million, or 4 cents per share, compared with net income of $234 million, or 61 cents a share, a year earlier.
• For the full year, Gap expects to earn between $1.85 and $2.05 per share, on an adjusted basis, with sales growing a low single digit percentage from 2021.
• Analysts were projecting annual adjusted per-share earnings of $1.86, with sales up 1.6% from prior-year levels.

Tesla Gets Approval for Vehicle Production in Germany – Wall Street Journal, 3/4/2022

• Tesla has secured local approvals in Germany to formally begin electric-vehicle productions at its new plant outside Berlin, a key pillar of Chief Executive Elon Musk’s push to rapidly boost output and sales.
• Tesla’s plant is a shot across the bow of Europe’s established auto makers, who have invested billions of euros over the past few years to develop electric cars and catch up with the U.S. EV powerhouse.
• Berlin, when fully operational, will have a production capacity to make 500,000 vehicles and will initially make Model Y compact crossover vehicles.
• Tesla produced a total of just under one million vehicles last year globally. The plant is Tesla’s third, following Fremont, Calif., and Shanghai. Tesla expects to inaugurate production at a new plant in Austin, Texas, soon.

Amazon Moves to Force FTC Antitrust Decision on MGM Deal – Wall Street Journal, 3/4/2022

• Amazon.com has given the Federal Trade Commission a fast-approaching deadline to deliver a verdict on its proposed $6.5 billion acquisition of the MGM movie and television studio, a move that could make it difficult for the agency to challenge the deal before the tech giant completes it.
• Amazon recently certified to the FTC that it had provided all the information requested by antitrust investigators, according to people familiar with the matter.
• That certification triggered a ticking clock for the FTC that expires in mid-March, the people said.
• If the commission doesn’t file a legal challenge before the deadline, Amazon could be free to consummate the deal.

FedEx Suspends All Service to Russia and Belarus as War Intensifies – Bloomberg, 3/4/2022

• FedEx has suspended all services in Russia and Belarus as fighting intensifies following the invasion of Ukraine.
• FedEx earlier had suspended inbound service to Russia, but now has halted all package movements including domestic deliveries in both Russia and Belarus, according to an employee memo Friday.
• The company had also suspended services to Ukraine.

Coal Runs Hot as Russia-Ukraine War Risks Europe’s Climate Agenda – Wall Street Journal, 3/4/2022

• The war in Ukraine scrambled global energy markets, with one especially unloved commodity—coal—enjoying a renaissance as European countries look again at the dirty fuel to establish energy independence from Russia.
• A surge in a benchmark thermal coal price to a record high of $446 a metric ton this week reflected this reordering of priorities among governments that have been trying to phase out the fossil fuel because of its contribution to climate change.
• In the days after Russian troops crossed over Ukraine’s border, Poland asked Australia if it could supply coal that could displace Russian imports. Italy’s prime minister has suggested reviving coal-fired power plants because of fears of a breakdown in natural-gas supplies from Russia.
• Germany signaled that it might extend the lifespan of coal plants that were due to close by 2030, days after it suspended certification of a pipeline that would have doubled the volume of gas it imports directly from Russia.
• Futures for high energy Australian thermal coal added more than $140 a ton on Wednesday, according to ICE Futures Europe. Australia is one of the world’s top exporters of coal.
• While prices were lower at $410 a ton on Friday, they remain well above the $134 a ton the commodity was fetching at the start of 2022. European prices also broke records.

Oil rally to power on as sanctions on Russia throttle market: Reuters poll – Reuters, 3/4/2022

• A rally that has driven oil prices to their highest in almost a decade shows no signs of abating, as supplies from top exporter Russia are disrupted by sanctions after its invasion of Ukraine, a Reuters poll showed on Friday.
• A survey of 35 economists and analysts forecast Brent crude would average around $91.15 a barrel this year, a jump from January’s $79.16 consensus and the highest 2022 estimate in all the Reuters surveys.
• Among the most bullish predictions, JP Morgan expects $185 oil by the end of 2022 if disruption to Russian exports lasts that long, although its average for the year was $98.
• The highest average predictions for 2022 were Rabobank and Raiffeisen with $111.43 and $110 respectively.
• An estimated 8% of global supply has been disrupted in recent days.
• The shortfall may not be offset by the International Energy Agency’s decision to release 60 million barrels from emergency reserves or a likely return of Iranian supply, analysts said.

Wheat Mounts Historic Week as War Sparks Deepening Supply Fears – Bloomberg, 3/4/2022

• This week will go down in wheat trading history.
• Chicago futures for the grain have soared 40% — the most ever — as Russia’s war in Ukraine upends global grain supplies. That puts prices at a 14-year high, and milling wheat in Paris reached an unprecedented 400 euros ($438 per ton).
• Ukraine and Russia together account for a quarter of global trade of the staple, used in everything from bread to couscous and noodles. The conflict has closed major ports in Ukraine, and severed logistics and transport links.
• That leaves grain importers flocking elsewhere, sparking “unprecedented” demand for spot supply, according to adviser Agritel in Paris. Corn is also nearing a decade high, and soybean oil reached a fresh record on Thursday.
• The gains are accelerating global food inflation and raising concerns for countries reliant on foreign supply. That includes Egypt, which already had been struggling to maintain bread subsidies used by about 70 million people in the face of a pandemic.

Wall Street Is Pouncing on Russia’s Cheap Corporate Debt – Bloomberg, 3/4/2022

• As the U.S. and allies tighten sanctions on Russia and choke off investor demand for its assets, parts of Wall Street are jumping on the buying opportunity that it’s creating.
• Goldman Sachs Group and JPMorgan Chase have been purchasing beaten-down company bonds tied to Russia in recent days, as hedge funds that specialize in buying cheap credit look to load up on the assets, according to people with knowledge of the private transactions.
• Banks routinely scoop up debt because clients asked them to, or because they expect to find ready buyers.
• Goldman Sachs is primarily asking for corporate debt from the likes of Evraz, Gazprom and Russian Railways that matures within the next two years, and has made bids for Russian sovereign notes, the people said.