US FINANCIAL MARKET

Stocks Open Higher Ahead of Anticipated Fed Rate Rise – Wall Street Journal, 3/16/2022

• U.S. stocks gained in early trading and bond yields rose ahead of an expected interest-rate increase from the Federal Reserve, and technology stocks led a blistering rebound in Chinese markets after supportive comments from Beijing policy makers.
• The S&P 500 opened 1% higher Wednesday, building on Tuesday’s gains.
• The tech-focused Nasdaq Composite Index advanced 1.4% the Dow Jones Industrial Average added 0.9%, or 321 points.
• Fed Chairman Jerome Powell has said he would propose a quarter-percentage-point rate increase—which would be the first rise since 2018—at the central bank’s meeting Wednesday as officials look to cool demand and control inflation.
• The central bank is navigating an unusually complicated environment of a tight labor market, supply disruptions, spiraling inflation, Russia’s invasion of Ukraine and Covid-19 lockdowns in China—the latter two of which are likely to compound inflationary and supply-chain issues.
• Bond yields rose ahead of the Fed meeting. The yield on the benchmark 10-year Treasury note ticked up to 2.163% from 2.160% Tuesday. Yields and prices move inversely.
• Germany’s benchmark 10-year bund yield rose to 0.388% Wednesday, up from 0.326% Tuesday and having had a negative yield earlier this month.
• Chinese officials said they would “coordinate pandemic prevention and control and economic development, keep the economy operating within a reasonable range and keep the capital market running smoothly,” according to a report on Wednesday by Xinhua, China’s state news agency.
• This helped soothe some fears over an economic slowdown in China that would also sap growth globally.
• Hong Kong’s Hang Seng Index soared 9.1%, led by gains in technology stocks. The Hang Seng Tech Index jumped more than 20%, clawing back most of its losses from the past three sessions. China’s Shanghai Composite climbed 3.5%.
• London’s nickel market reopened and promptly closed again. Prices for the industrial metal fell 5% to $45,590 a metric ton, the London Metal Exchange’s newly imposed trading limit for nickel.
• Trading was suspended last week following an unprecedented price surge that saw the metal top $100,000 a ton.
• Brent-crude futures, the international benchmark, edged up 1.5% to $101.35 a barrel.
• Elevated oil prices have prompted concerns that the U.S. and Europe could see sustained inflation and lower economic growth, as higher gas and energy prices eat away at household spending on other goods and services.
• Overseas, the pan-continental Stoxx Europe 600 climbed 2.6%, led by a jump in its technology sector. Russia’s stock market remains closed through the rest of the week.

Stock Pickers Watched the S&P 500 Pass Them By Again in 2021 – Wall Street Journal, 3/16/2022

• Last year was a great one for the U.S. stock market. It was another disappointment for most stock-picking fund managers.
• Fueled by rip-roaring corporate profits and easy monetary policy, the benchmark S&P 500 notched a total return, including price gains and dividends, of 28.7% last year.
• That was a stronger showing than that of 85% of U.S. large-cap stock-picking mutual funds, according to data from S&P Dow Jones Indices.
• The average return last year of large-cap U.S. funds, weighted by fund assets, was 23.3%, more than 5 percentage points lower than that of the S&P 500, according to S&P Dow Jones Indices.

Three million barrels of Russian oil, products could be shut in next month: IEA – Reuters, 3/16/2022

• Three million barrels per day (bpd) of Russian oil and products may not find their way to market beginning in April in the wake of its invasion of Ukraine, the International Energy Agency (IEA) said on Wednesday, as sanctions bite and buyers hold off.
• Rising commodity prices and sanctions on Russia “are expected to appreciably depress global economic growth” and impact inflation, said the Paris-based IEA, offering a bleak picture of undersupply and uncertainty for the oil market.
• It was the first monthly report on oil from the IEA, which represents 31 mostly industrialized nations but not Russia, since Russia’s invasion of its neighbor briefly sent Brent crude to nearly $140 a barrel.
• The IEA lowered its forecast for world oil demand for the second to fourth quarters of 2022 by 1.3 million bpd.
• For the full year it cut its growth forecast by 950,000 bpd to 2.1 million bpd for an average of 99.7 million bpd.
• That would mean a third year of demand below pre-pandemic levels which the agency had previously seen recovering in 2022.
• The world is set for a supply deficit of 700,000 bpd in the second quarter, the IEA said.

Amazon Purchase of MGM Gets Green Light in EU – Wall Street Journal, 3/16/2022

• European Union antitrust officials gave a green light to Amazon.com’s proposed $6.5 billion acquisition of movie studio MGM, clearing one hurdle for the e-commerce giant ahead of a deadline for the U.S. Federal Trade Commission to deliver a verdict on the deal.
• The European Commission, the EU’s executive arm and its top competition regulator, said Tuesday that it has approved the deal without conditions.
• The commission said the deal wouldn’t significantly reduce competition in part because the two companies don’t significantly overlap in content production and that MGM content “cannot be considered as must-have.”
• The proposed deal, which was announced last May, would give Amazon access to an extensive film and TV catalog, including James Bond movies, that could better position its Prime Video streaming service to compete with more-dominant rivals such as Netflix.

Starbucks Wants to Ditch Those Disposable Cups for Good – Wall Street Journal, 3/16/2022

• Starbucks wants its green-and-white cups to become less ubiquitous.
• The coffee giant said Tuesday it is working to veer away from single-use paper and plastic cups and instead provide reusable ones to customers within three years.
• It is the latest effort from Starbucks as the company moves to hit company-set waste reduction goals by 2030 and address customer sustainability concerns.
• The Seattle-based company is currently testing ways to get more customers to use reusable cups.
• By 2025, Starbucks aims to have more people either bring their own cups and mugs, as they are able to do currently, or take part in a program it is calling “Borrow A Cup.”

Walmart plans to hire over 50,000 U.S. workers in Q1 – Reuters, 3/16/2022

• Walmart said on Wednesday it plans to hire more than 50,000 workers in the United States in the first quarter, as the U.S. retailer looks to bolster its fulfillment centers and stores.
• Walmart said the new hires would fill roles at its stores, clubs, campuses and supply chain facilities.
• Walmart’s average hourly rate is $16.40 an hour in the United States and the starting wage goes up to $30 an hour in select roles and markets, Chief People Officer Donna Morris said in a post on its corporate website.
• The retailer said it had hired 5,500 pharmacists or pharmacy managers, over 13,000 pharmacy technicians and nearly 4,500 truck drivers last year.
• It also unveiled in September plans to hire 150,000 new U.S. store workers, most of them permanent.

Big Four Accounting Firms Come Under Regulator’s Scrutiny – Wall Street Journal, 3/16/2022

• Regulators are carrying out a sweeping investigation of conflicts of interest at the nation’s largest accounting firms, asking whether consulting and other nonaudit services they sell undermine their ability to conduct independent reviews of public companies’ financials, according to people familiar with the matter.
• The Securities and Exchange Commission probe highlights the agency’s new focus on financial-market gatekeepers such as accountants, bankers and lawyers.
• These firms help companies raise capital and communicate with shareholders, but also have duties under federal investor-protection laws.
• Auditors are a shareholder’s first line of defense against sloppy or dodgy accounting.

Pentagon Cuts Its Request for Lockheed’s F-35s by 35% – Bloomberg, 3/16/2022

• The Pentagon will request 61 F-35s in its next budget, 33 fewer of the stealth jets from Lockheed Martin Corp. than previously planned, according to people familiar with the spending blueprint.
• The U.S. Defense Department had planned to fund 94 of the fighters in fiscal 2023, up from the 85 in this year’s budget, according to the most recent “Selected Acquisition Report” on its costliest program.
• The proposed reduction for the F-35 may be the most controversial procurement item in a national security budget request that’s expected to top $770 billion for the year that begins Oct. 1.
• Lockheed tumbled as much as 7.4%, the most intraday since October. The stock was the worst performer among the S&P 500 Industrials.

Energy Costs Set to Reach Record 13% of Global GDP This Year – Bloomberg, 3/16/2022

• Energy costs are poised to hit an all-time high of more than 13% of global gross domestic product this year as the price of keeping the world running surges.
• Primary energy expenditure as a share of output is set to double from 2021’s level of just 6.5%, according to analysis by consultancy Thunder Said Energy.
• Soaring commodity costs are pushing up inflation and adding to bills for households and industry alike.
• The 13% level for 2022 just matches the proportion of GDP in 1980, a period when oil prices were soaring.

Bond Market Races Ahead of Fed by Most Since at Least the 1980s – Bloomberg, 3/16/2022

• The bond market hasn’t moved so swiftly to get ahead of the Federal Reserve in at least four decades, underscoring the dramatic tightening in financial conditions that has rippled across markets even before the central bank starts raising interest rates.
• Yields on two-year Treasuries, which are highly sensitive to changes in monetary policy, have surged by more than 150 basis points since the end of September as traders prepare for the cycle of hikes that’s expected to begin Wednesday.
• That’s a steeper and faster jump than before any of the Fed’s liftoffs since at least the early 1980s, according to data compiled by Bloomberg.
• The two-year yield rose just 41 basis points during the six-month period before the Fed started raising borrowing costs in December 2015.
• It climbed 86 basis points in the same periods leading to the first hikes in June 2004 and 98 basis points in June 1999.