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Daily Market Report | March 9, 2022

US FINANCIAL MARKET

Stocks Surge, Oil Falls, Extending Volatility Amid Ukraine War – Wall Street Journal, 3/9/2022

  • U.S. stocks jumped and oil prices dropped Wednesday, extending a volatile spell as investors track the economic fallout of the war in Ukraine.
  • The S&P 500 rose 2.2%, while the technology-focused Nasdaq Composite Index added 2.7%. The Dow Jones Industrial Average advanced 607 points, or 1.9%. All three indexes are poised to break a four-session losing streak.
  • A surge in oil prices, given new momentum by the U.S. embargo on Russian energy, has raised concerns that sustained inflation and lower economic growth could collide.
  • Major central banks were on track to begin tightening monetary policy before Russia invaded Ukraine.
  • The European Central Bank is meeting Thursday.
  • Federal Reserve Chairman Jerome Powell said last week that he planned to propose a quarter percentage-point rate increase at the central bank’s meeting this month.
  • Brent-crude futures, the international benchmark, declined 5.6% to $120.86 a barrel, reversing gains from earlier in the session.
  • The U.S. has banned imports of Russian oil and gas, while Russian President Vladimir Putin has issued a decree banning exports of unspecified commodities and raw materials.
  • Gold prices, another asset that investors perceive as safer, lost 2.3%. Trading in the nickel market was suspended for another day, following violent moves Tuesday that sent the metal surging to briefly top the $100,000-a-ton mark for the first time.
  • Overseas, the pan-continental Stoxx Europe 600 jumped 3.5%. Russia’s stock market remained closed, though its currency trading was open.
  • In the offshore market, the ruble edged slightly lower in volatile trading to around 128 rubles to the dollar.
  • Pricing of Russia’s currency has been choppy since the country imposed measures to stem its selloff, and Western banks have shunned Russian assets.
  • In Asia, stocks largely fell, tracking Wall Street’s Tuesday session. Japan’s Nikkei 225 lost 0.3%, while Hong Kong’s Hang Seng Index fell 0.7%. The Shanghai Composite dropped 1.1%.

Fidelity Investments Posts Record Revenue on Stock Market Rally – Wall Street Journal, 3/9/2022

  • Fidelity Investments said operating profit jumped 13% last year as an individual-investing boom and the stock market rally lifted the money-management giant’s revenue to a record.
  • FMR LLC, Fidelity’s parent company, posted an operating profit of $8.1 billion, up from $7.2 billion in 2020, the firm said Wednesday in its annual shareholder update.
  • Revenue climbed 15% to $24 billion.
  • Assets under administration, or what is in Fidelity accounts as well as Fidelity funds held by rivals’ clients, rose 20% to $11.78 trillion in 2021. The firm’s assets under management, or the amount overseen by Fidelity’s funds, totaled $4.48 trillion, up from $3.8 trillion a year earlier.
  • Net inflows into Fidelity funds totaled $191 billion, with new client money outpacing withdrawals in managed accounts as well as index and multiasset products.
  • The firm ended 2021 with 32.4 million retail-client accounts, a 22% increase from a year earlier.

MongoDB’s Stock Is Climbing. Earnings and Guidance Impressed – Barron, 3/9/2022

  • Shares of  MongoDB  surged following better-than-expected results and an upbeat outlook from the database software provider.
  • MongoDB adjusted fourth-quarter loss per share was 9 cents, narrower than the consensus loss of 22 cents among analysts tracked by FactSet.
  • Revenue for the quarter, which ended in January, was $266.5 million and higher than the $243.4 million forecast.
  • The success was driven by the company’s cloud-based service offering called Atlas, CEO Dev Ittycheria said.
  • Atlas revenue accelerated by 85% to $155 million in the quarter and represents 58% of the group’s total revenue.
  • For the full year the company reported revenue of $873.8 million, higher than the management forecast and analysts’ call of $851.1 million.
  • MongoDB on Tuesday gave a fiscal 2023 revenue guidance of $1.151 billion to $1.18 billion, higher than analysts forecast of $1.145 billion.

Campbell Soup Sales Fall On Labor, Supply Constraints – Wall Street Journal, 3/9/2022

  • Campbell Soup posted lower quarterly sales as a pandemic-driven surge in demand for its packaged foods faded, and labor and supply constraints weighed on operations and profitability.
  • The company behind namesake soups and snacking products like Goldfish crackers and SpaghettiOs on Wednesday posted $2.21 billion in sales for its fiscal second quarter ended Jan. 30, down 3% from a year earlier.
  • Analysts surveyed by FactSet were expecting $2.24 billion.
  • Higher cost inflation as well as other factors led to a 19% drop in operating earnings in the meals-and-beverages business.
  • That decrease in earnings was partially offset by raising prices, the company said. Still, overall gross margin decreased to 30.3% from 34.4% due to inflation, supply-chain challenges and unfavorable volume mix, the company said.
  • The company posted quarterly net income attributable to the company of $212 million, compared with $245 million a year earlier. Earnings were 70 cents a share, compared with 81 cents a share in the year-ago period.

Bumble Stock Surges on Earnings. The Relief Rally Is On. – Barron’s, 3/9/2022

  • Bumble shares surged in late trading Tuesday after the online dating company announced fourth-quarter results.
  • For the fourth quarter, Bumble reported a net loss of 8 cents per share on revenue of $208.2 million. Analysts polled by FactSet were forecasting a net loss of 2 cents a share and revenue of $209.6 million.
  • Total paying users rose 10.6% from a year ago, to 3 million, while total average revenue per paying user was up $2.81 to $22.83.
  • The company said revenue from Russia, Ukraine, and Belarus was about 2.8% of Bumble’s 2021 revenue, which mostly came from its Badoo App and Other revenue segment, which hit $57.7 million in revenue during the quarter, down from $59.8 million the during the same quarter a year ago. Bumble App revenue jumped 42.2% to $150.5 million.
  • For the first quarter, the firm expects revenue between $207 million and $210 million. That assumes about $2 million of lost revenue due to the conflict in Ukraine and the firm’s decision to pull its app from Russia and Belarus.
  • For the full fiscal year, the firm expects revenue between $934 million and $944 million. Consensus analyst expectations were for $939.1 million, according to FactSet.

Stitch Fix shares plummet after company cuts guidance for the year – CNBC, 3/9/2022

  • Stitch Fix shares tumbled in extended trading Tuesday after the online styling service offered a weak outlook for its fiscal third quarter and slashed its forecast for the full year, as it struggles to grow its subscriber base.
  • Stitch Fix shares shed more than 17% in extended trading, having already tumbled 41% this year as of Tuesday’s market close.
  • Revenue grew to $516.7 million from $504.1 million a year earlier, beating estimates of $514.8 million.
  • The company counted active clients of a little more than 4 million, an increase of 4% from the year-ago period.
  • Revenue per client came in $549 during the period.
  • Stitch Fix reported a net loss of $30.9 million, or 28 cents per share, compared with a loss of $21 million, or 20 cents a share, a year earlier. That was exactly in line with analysts’ estimates for the quarter.
  • For its third quarter, Stitch Fix expects net revenue to be between $485 million and $500 million, which would represent a decline of 10% to 7% from the prior year. Analysts had been looking for sales of $560.5 million.
  • For its fiscal year, which ends July 30, Stitch Fix sees revenue flat to slightly down year over year, assuming that the number of active clients is flat through the end of the 12-month period. Analysts had expected revenue to be up 8.1% for the year.

Frackers Say Bottlenecks Slow Them From Ramping Up as Oil Prices Soar – Wall Street Journal, 3/9/2022

  • American shale drillers say there are limits to how much and how quickly they can boost shaky oil supplies following Russia’s invasion of Ukraine, cautioning that supply-chain issues, investors wary of overspending, thinning inventories and other problems constrict growth.
  • Leaders of the fracking companies that helped make the U.S. the world’s top oil producer say they are responding to calls by the Biden administration and others to increase production after oil prices this week topped $130 a barrel and gasoline prices surged, threatening to dent the broader economy.
  • But the executives say that some investors, who felt burned after shale drillers gave priority to expansion over profits last decade and lost billions, are still concerned that the companies might spend too much if they return to rapid growth.
  • They also say that a flight of capital from the fossil-fuel industry in recent years has left U.S. oil patches without enough fracking equipment to bring a ton of new wells online, and that a resurgence of go-go drilling would deplete companies’ most valuable drilling locations.
  • U.S. oil production ended last year at about 11.6 million barrels a day, according to the Energy Information Administration.
  • Many analysts and executives are projecting output will rise by between 500,000 to 1 million barrels a day this year, representing a smaller increase, on a percentage basis, than in years before the pandemic.

Amazon Flagged to Justice Department for Possible Criminal Obstruction of Congress – Wall Street Journal, 3/9/2022

  • A U.S. congressional committee is asking the Justice Department to investigate Amazon.com and some of its executives for what lawmakers say is potentially criminal obstruction of Congress, according to people familiar with the matter and a letter containing the request.
  • The letter, dated March 9 and viewed by The Wall Street Journal, was sent to U.S. Attorney General Merrick Garland by Democratic and Republican members of the House Judiciary Committee.
  • The letter accuses the Seattle-based tech giant of refusing to provide information that lawmakers sought as part of an investigation by the body’s Antitrust Subcommittee into Amazon’s competitive practices.
  • The letter alleges that the refusal was an attempt to cover up what it calls a lie that the company told lawmakers about its treatment of outside sellers on its platform.
  • Throughout the investigation, “Amazon repeatedly endeavored to thwart the Committee’s efforts to uncover the truth about Amazon’s business practices,” the congressional letter says. “For this, it must be held accountable.” The letter says it is alerting the Justice Department to “potentially criminal conduct by Amazon and certain of its executives,” though it doesn’t specify which individuals.

Amazon to secure unconditional EU approval for $8.5 bln MGM buy – sources – Reuters, 3/9/2022

  • Amazon is expected to win unconditional EU antitrust approval for its $8.5 billion buy of U.S. movie studio MGM, people familiar with the matter said, a move that is set to ramp up competition with streaming rivals Netflix and Disney+.
  • Announced in May last year, the deal would also strengthen Amazon’s video streaming service, drawing people to subscribe to Amazon Prime, which offers fast shipping and encourages consumers to shop more regularly.
  • The MGM acquisition would give the world’s largest online retailer rights to James Bond, one of the most lucrative franchises in film history that’s earned nearly $7 billion at the box office globally, according to MGM.
  • The Federal Trade Commission is nearing a mid-March deadline to decide on the deal, according to a source familiar with the matter.

McDonald’s says Russia store closures to cost $50 million per month – Reuters, 3/9/2022

  • McDonald’s said on Wednesday that the temporary closure of its 847 stores in Russia will cost the fast-food chain about $50 million a month.
  • McDonald’s, an icon of the post-Soviet era, runs 84% of its Russian locations itself and said it will continue paying all of its 62,000 staff and restaurant employees there.
  • Other costs will come from sites it leases and supply chain operations, Chief Financial Officer Kevin Ozan said during a UBS conference on Wednesday.
  • Seven other fast-food brands with more than 2,600 outlets combined in Russia could also take a financial hit from any decisions to pull out, even though nearly all of those restaurants are owned and operated by independent franchisees.

European Fertilizer Output Cuts Pose Risks for Food Prices – Bloomberg, 3/9/2022

  • European fertilizer makers, including Yara International and Borealis, are cutting output because of surging natural gas prices, adding to the growing risks for global food inflation.
  • Russia’s invasion of Ukraine has roiled commodities markets and propelled natural gas — the feedstock of nitrogen fertilizers — to record levels. That’s forcing producers to curb ammonia output, pushing up farm input costs and adding to the risks of a worldwide food shock.
  • Yara is temporarily curtailing production at Ferrara in Italy and Le Havre in France, the Oslo-based company said on Wednesday. Output of ammonia and urea at its European facilities will be just 45% of capacity by the end of this week.
  • The two plants produce 1 million tons of ammonia and 900,000 tons a year of urea between them.
  • Natural gas is used as a feedstock for nitrogen fertilizers, usually accounting for around 80% of a manufacturer’s costs.
  • European gas futures are now about 10 times higher than a year ago.
  • Borealis, another European fertilizer producer, is reducing its ammonia production capacity because of surging gas prices.
  • It’s also considering stopping output for “economical reasons.”
  • In Northern Italy, several steel mills have also announced stops to production, with the intention of resuming activities once prices go down. About 1,500 staff could be placed on temporary furloughs, according to the Corriere del Veneto newspaper.

Food crisis grows as spiraling prices spark export bans – Reuters, 3/9/2022

  • A global food crisis sparked by Russia’s invasion of Ukraine escalated on Wednesday as Indonesia tightened curbs on palm oil exports, adding to a growing list of key producing countries seeking to keep vital food supplies within their borders.
  • The conflict in Ukraine is threatening global grain production, the supply of edible oils and fertilizer exports, sending basic commodity prices rocketing and mirroring the crisis in energy markets.
  • Ukraine announced on Wednesday it had banned a wide range of agricultural exports including barley, sugar and meat until the end of the year.
  • Russia and Ukraine are both major producers of sunflower oil and the two countries account for almost 80% of global exports, leaving customers such as India scrambling to secure supplies of alternatives such as palm oil and soyoil.
  • Serbia announced on Wednesday it will ban exports of wheat, corn, flour and cooking oil as of Thursday to counter price increases while Hungary banned all grain exports last week.
  • Bulgaria has also announced it will increase its grain reserves and might restrict exports until it has carried out planned purchases.
  • Grain supplies in Romania, a major exporter, have also tightened as international buyers seek alternatives to Russia or Ukrainian supplies although there are currently no plans to restrict shipments.

Hundreds of Ships Trapped by Ukraine War, Endangering Sailors and Global Trade – Wall Street Journal, 3/9/2022

  • The war in Ukraine has severely hobbled shipping in the Black Sea, with broad consequences for international transport and global supply chains. Dozens of cargo ships are stranded at the Ukrainian port of Mykolaiv, shipping trackers said. An estimated 3,500 sailors have been stuck on some 200 ships at Ukrainian ports, according to London-based shipping tracker Windward Ltd. More ships are stranded around the globe than at any point since World War II, maritime historians said.
  • Making matters worse for global shippers, thousands of Ukrainian and Russian seafarers are stuck in ports around the world, leaving shipowners scrambling to find replacement crews to keep strained supply chains rolling.
  • The result is a shutdown of the world’s second-largest grain exporting region. Ukraine accounts for 16% of global corn exports, and together with Russia, 30% of wheat exports. Global wheat prices have jumped more than 55% since the week before the invasion.
  • Poorer countries that depend on imports could see supply shocks. Authorities are bracing for price spikes in Egypt, Turkey and Syria. Egypt imports 85% of its wheat from Ukraine and Russia.

US ECONOMY & POLITICS

Job Openings in U.S. Hold Close to a Record at 11.3 Million – Bloomberg, 3/9/2022

  • U.S. job openings in January held close to a record, suggesting employers continued to have difficulty luring workers.
  • The number of available positions decreased slightly to 11.3 million in the month from an unprecedented 11.4 million in December, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Wednesday.
  • Some 4.3 million Americans voluntarily left their jobs in January, the fewest in three months, suggesting a moderation in labor-market churn.
  • The so-called quits rate, which measures voluntary job leavers as a share of total employment, decreased to 2.8%.
  • Fewer people quit their jobs in retail trade, construction and information. Vacancies increased in manufacturing, construction and financial activities.

One in Five U.S. Adults Quit Their Job Last Year – Bloomberg, 3/9/2022

  • About one in five non-retired U.S. adults said they quit a job last year, with the majority citing low pay, no opportunity for advancement and feeling disrespected at work as reasons why they left, according to a new Pew Research Center report Wednesday.
  • The share jumped to 37% among those younger than 30, more than double the proportion of those ages 30 to 49 who did the same, the survey conducted Feb. 7-13 showed. A majority of those who quit a job last year — and are not retired — say they are now re-employed.
  • Other key reasons cited by respondents for quitting include child care issues, a lack of schedule flexibility and not having good benefits like health insurance and paid time off.
  • Thirty-five percent of those with some college education or less reported too few hours as a reason for quitting last year, whereas only 17% of those with a Bachelor’s degree or more said the same.
  • Outcomes also differed. College graduates were more likely to say they were earning more and had more opportunities for advancement in their current role than those with less education.
  • About one in four of those with some college or less reported earning less in their current job.

U.S. Housing Wealth Skewed Even More Toward Affluent Over Past Decade – Wall Street Journal, 3/9/2022

  • The past decade’s booming residential real-estate market has enriched almost every U.S. homeowner, but the gains have largely benefited the wealthiest, a new analysis shows.
  • From 2010 to 2020, about 71% of the increase in housing wealth was gained by high-income households, according to a report released Wednesday by the National Association of Realtors.
  • Overall, the total value of owner-occupied homes in the U.S. rose $8.2 trillion over the decade to $24.1 trillion, NAR said.
  • The housing-value gap between households earning more than 200% of their area’s median income and other homeowners widened significantly over the decade.
  • In 2010, high-income homeowners held 28% of all U.S. housing wealth. By 2020, that figure rose to 42.6%.
  • The share of housing wealth held by middle-income households declined to 37.5% in 2020, from 43.8% in 2010. Low-income housing wealth fell to 19.8% in 2020, from 28.2% in 2010.

Biden to Order Study of Cryptocurrency Risk, Creation of U.S. Digital Currency – Wall Street Journal, 3/9/2022

  • President Biden will sign an executive order on Wednesday instructing agencies across the federal government to study the possible risks presented by the explosion in popularity of cryptocurrencies and consider the creation of a U.S. digital currency.
  • The executive order will urge federal regulators to review the risks a roughly $1.75 trillion crypto market presents to consumers, investors and the broader economy.
  • Federal agencies will have several months to prepare a report with their findings, which will then inform any new regulatory actions the White House takes, a senior administration official said.
  • About 16% of adult Americans, or roughly 40 million people, have invested in, traded or used cryptocurrencies, according to a White House fact sheet.

House to Vote on $1.5 Trillion Spending Bill That Includes Ukraine, Covid-19 Aid – Wall Street Journal, 3/9/2022

  • The House is set to vote Wednesday on a sweeping bill to fund the federal government for the rest of the 2022 fiscal year and send further military and humanitarian assistance to Ukraine, as well as approve money for Covid-19 vaccines and treatments.
  • The $1.5 trillion package, unveiled early Wednesday, would send $13.6 billion to Ukraine, with roughly half of that for humanitarian and economic aid and the other half for defense in Ukraine as well as U.S. allies in the Baltics and Central and Eastern Europe.
  • The package would appropriate $730 billion in nondefense funding, a $46 billion increase over fiscal year 2021 and the largest in four years.
  • The spending package appropriates $782 billion in defense funding—an increase of $42 billion over fiscal year 2021.
  • The spending package also includes $15.6 billion to combat the Covid-19 pandemic, both in the U.S. and globally.

EUROPE & WORLD

Russia Set to Ban Commodity Exports Following Western Sanctions – Wall Street Journal, 3/9/2022

  • Russian President Vladimir Putin is banning exports of certain commodities and raw materials, according to a decree issued Tuesday evening in Moscow.
  • The actual commodities that will be banned from export will be determined by the Russian cabinet, the decree said. Mr. Putin gave them two days to come up with a list of countries subject to the ban.
  • Russia is the third-largest oil producer in the world and the biggest exporter of natural gas.
  • The exports fuel Russia’s economy and the West was believed to be too dependent on them to quit easily.
  • The invasion of Ukraine changed that dynamic.
  • Russia is also a major supplier of grains and metals such as aluminum, nickel and palladium.
  • A sweeping ban on exports could upend global commodity markets. Nickel hit an all-time high today.

Saudi, Emirati Leaders Decline Calls With Biden During Ukraine Crisis – Wall Street Journal, 3/9/2022

  • The White House unsuccessfully tried to arrange calls between President Biden and the de facto leaders of Saudi Arabia and the United Arab Emirates as the U.S. was working to build international support for Ukraine and contain a surge in oil prices, said Middle East and U.S. officials.
  • Saudi Crown Prince Mohammed bin Salman and the U.A.E.’s Sheikh Mohammed bin Zayed al Nahyan both declined U.S. requests to speak to Mr. Biden in recent weeks, the officials said, as Saudi and Emirati officials have become more vocal in recent weeks in their criticism of American policy in the Gulf.
  • The Saudis have signaled that their relationship with Washington has deteriorated under the Biden administration, and they want more support for their intervention in Yemen’s civil war, help with their own civilian nuclear program as Iran’s moves ahead, and legal immunity for Prince Mohammed in the U.S., Saudi officials said.
  • The crown prince faces multiple lawsuits in the U.S., including over the killing of journalist Jamal Khashoggi in 2018.
  • The Emiratis share Saudi concerns about the restrained U.S. response to recent missile strikes by Iran-backed Houthi militants in Yemen against the U.A.E. and Saudi Arabia, officials said.
  • Both governments are also concerned about the revival of the Iran nuclear deal, which doesn’t address other security concerns of theirs and has entered the final stages of negotiations in recent weeks.

Chinese Nickel Giant Tsingshan Faces $8 Billion Trading Loss as Ukraine War Upends Market – Wall Street Journal, 3/9/2022

  • Chinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after Russia’s war in Ukraine set off an unprecedented rise in the price of a key metal used in stainless steel and electric-vehicle batteries.
  • The paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading in the metal on Tuesday, one of the people said. Late Tuesday, the exchange said it anticipates trading won’t resume before Friday.
  • Nickel prices usually move a couple of percent a day. They surged 66% Monday and then on Tuesday, the price briefly doubled.

Owners Fear Planes ‘Are Gone Forever’ After Russia Shields Them From Seizure – Bloomberg, 3/9/2022

  • Aircraft owners are coming to grips with the loss of hundreds of Airbus and Boeing jets that Russian carriers have effectively shielded from seizure behind a new incarnation of the Iron Curtain.
  • With the window just about closed, foreign leasing firms have succeeded in repossessing only about two dozen of the more than 500 aircraft rented to Russian carriers, according to Dean Gerber, general counsel for Valkyrie BTO Aviation.
  • The planes in limbo have a market value of about $10.3 billion, aviation analytics firm Ishka estimates.
  • Technically, lessors have until March 28 to retrieve the planes under European Union sanctions. But state-owned Aeroflot PJSC and other Russian airlines have already gathered the vast bulk of them back inside the country, out of reach of their owners.
  • The government aided the effort by instructing carriers to stop flying internationally and return the jets to Russia by Tuesday.

Factmonster – TODAY in HISTORY

  • Napoleon Bonaparte married Josephine de Beauharnais, widow of a former French officer executed during the revolution. (1796)
  • The first battle between two ironclad ships, the Monitor (Union) and Merrimack (Confederate) occurred, revolutionizing naval warfare. (1862)
  • The special session of Congress known as the “100 days” opened, launching FDR’s New Deal. (1933)
  • Dr. Antonia Novello was sworn in as both the first Hispanic and woman to be U.S. surgeon general. (1990)

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