US FINANCIAL MARKET

U.S. Stocks Rise After Powell Says Fed Is Ready to Be More Aggressive – Wall Street Journal, 3/22/2022

• U.S. stocks rose and government-bond yields jumped Tuesday, as investors continued to digest Federal Reserve Chairman Jerome Powell’s more aggressive tone on reining in inflation.
• The morning’s moves had all three U.S. indexes up at least 2% for the month so far, building on last week’s gains.
• They finished Monday lower after Mr. Powell said the Fed was prepared to raise interest rates in half-percentage-point steps if needed to tamp down inflation.
• The Dow Jones Industrial Average rose 225 points, or 0.7%, in morning trading.
• The S&P 500 climbed about 1% and the Nasdaq Composite added 1.7%.
• Nike advanced 3.5% after the big apparel maker reported revenue that beat analyst expectations.
• In the U.S. Treasury market, a selloff in government bonds intensified, sending the yield on the 10-year U.S. Treasury note climbing to 2.377%, from 2.315% Monday.
• The yield on the benchmark note is now around its highest level since May 2019, before the Covid-19 pandemic upended financial markets.
• Many investors are keeping a close watch on the so-called yield curve, which measures the spread between short- and long-term rates and is often seen as a strong indicator of sentiment about the prospects for economic growth.
• Recently, the gap between yields on shorter-term and longer-term U.S. Treasury bonds has been shrinking, stirring anxieties that the bond market is close to signaling a potential recession.
• The two-year Treasury yield—which is especially sensitive to changes in monetary policy—climbed to 2.187% Tuesday, from 2.132% Monday.
• Shares of banks rose, tracking similar moves in Europe. Financial stocks led the S&P 500’s early gains, with the sector rising about 2%.
• Wells Fargo jumped 4.8%, Signature Bank and Charles Schwab, the brokerage firm, rose 4.2%.
• In Europe, Société Générale advanced 0.9% and Deutsche Bank jumped 3.6%.
• In Europe, the pan-continental Stoxx Europe 600 increased 0.5%, putting it on pace to rise for a fifth consecutive session.
• In Asia, major indexes also largely ended higher. Hong Kong’s Hang Seng gained about 3.2%, while Japan’s Nikkei 225 rose 1.5%. China’s Shanghai Composite advanced 0.2%.

Nike Sales Rise as It Navigates Supply-Chain Snarls – Wall Street Journal, 3/21/2022

• Nike sales grew in the latest period as the sneaker giant benefited from gains in its digital business while navigating supply-chain snarls and efforts to boost production in Asia.
• The company posted revenue of $10.9 billion in the quarter ended Feb. 28, up 5% from the same period a year earlier.
• Analysts expected revenue of $10.6 billion.
• Nike recorded year-over-year increases in sales in North America as well as two other divisions—Europe, Middle East and Africa; and Asia Pacific & Latin America.
• In Greater China, overall sales fell 5% to $2.16 billion.
• Profit was roughly flat compared with a year earlier at $1.4 billion, or 87 cents a share.
• Nike said Monday that consumer demand continues to outpace inventory supply.
• While the company said it expected supply-chain constraints to normalize in future quarters, other issues from rising inflation to the Russia-Ukraine crisis could hurt its sales in the short term.
• The company said its inventories were up 15% due to extended lead times.

Carnival forecasts loss in 2022 on surging fuel prices – Reuters, 3/22/2022

• Carnival, on Tuesday forecast a loss for the year as the U.S. cruise operator’s efforts to gradually restart operations after a long pandemic-led hiatus face a setback from a surge in fuel prices due to the Russia-Ukraine war.
• The cruise operator’s revenue rose to $1.62 billion in the reported quarter, from $26 million a year earlier, below analysts’ average estimate of $2.26 billion, according to IBES data from Refinitiv.
• Excluding items, the company posted a loss of $1.66 per share, compared with analysts’ expectation of a loss of $1.26.
• The company said it had resumed 75% of its guest cruise operations capacity, and expects to have its full fleet back in the summer with a positive monthly adjusted earnings before interest, taxes, depreciation, and amortization.
• The owner of Cunard and Holland America cruise lines reiterated a net loss for the second quarter, but forecast a return to profit in the third quarter as it resumes to full capacity and booking trends improve.

US banks take $4.6bn revenue hit from equity raising drought – Financial Times, 3/21/2022

• The biggest US investment banks have taken a $4.6bn revenue hit from the freeze in equity raisings because of recent market volatility, a sharp slowdown for Wall Street which raked in record profits from stock sales last year.
• Morgan Stanley, JPMorgan Chase, Bank of America, Goldman Sachs and Citigroup have generated a cumulative $645mn from equity capital market (ECM) fees so far this year, according to data provider Dealogic, compared with $5.3bn in the same period in 2021. Industry-wide ECM fees are down more than 75 per cent year on year at $2.7bn.
• There was not a single traditional initial public offering in the US between February 17 and March 14, the longest drought outside of a holiday season since 2017, according to Dealogic data.
• Volumes of follow-on share sales and convertible bond issuance have also slowed dramatically, and the dry spell is set to cause a sharp reduction in first-quarter revenues at banks that benefited from a deluge of deals early last year.
• Only one company — private equity firm TPG — has raised more than $250mn in an IPO this year, compared with 43 in the first 13 weeks of last year, excluding SPACS.
• The nine-week gap since that deal is the longest period without a $250mn IPO since 2016.

Gas Prices Shoot Up at Fastest Rate on Record – Wall Street Journal, 3/22/2022

• As summer driving season approaches, average prices for regular gasoline have been at record highs the past two weeks after going up for 11 straight weeks.
• Prices reached $4.32 a gallon on March 14, according to weekly figures from the U.S. Energy Information Administration.
• They were $4.24 this past week, according to figures released Monday.
• Those prices at the pump don’t factor in inflation, though, which reached its highest rate in four decades last month.
• Inflation-adjusted gas prices are at their highest levels since 2014 and similar to what U.S. drivers saw in the early 1980s.
• Inflation-adjusted gas prices aren’t at record highs.
• But if March prices average $4.22 a gallon, as they have so far, they still show that motorists will have been saddled with the biggest month-over-month price increase since EIA records began in the mid-’70s.
• The next-highest increase was after Hurricane Katrina in 2005.

Canadian Pacific Railway, Union Agree to Arbitration, Ending Work Stoppage – Wall Street Journal, 3/22/2022

• Canadian Pacific Railway and the union representing its conductors and engineers agreed to shift stalled contract negotiations to binding arbitration, freeing the railway to resume freight shipments after a two-day work stoppage.
• Details of the agreement weren’t disclosed. Binding arbitration typically allows an employer and union representatives to present their contract demands to an independent arbitrator, who then can decide on such terms as wage increases and benefits.
• The work stoppage at Canadian Pacific threatened to exacerbate delays that are squeezing supplies and raising prices of commodities—including the fertilizer potash ahead of the spring planting season.
• Canada is a major producer of potash, and the railway transports the bulk of the commodity to ships destined for foreign buyers.
• The railway also ships large volumes of Canadian oil, manufactured goods and wheat to the U.S. and other countries.
• Canadian cattle farmers rely on the Calgary, Alberta-based railway for shipments of cattle feed from U.S. suppliers, a drought in Western Canada last year having reduced domestic supplies.

GM recalls 740,000 U.S. SUVs over headlight glare issue – Reuters, 3/22/2022

• General Motors said Tuesday it will recall 740,000 U.S. sport utility vehicles to address a headlight glare problems after U.S. regulators rejected its request to avoid calling them back.
• Earlier this month, the National Highway Traffic Safety Administration denied GM’s 2019 petition to declare the issue inconsequential for GMC Terrain vehicles from the 2010 through 2017 model years.
• GM said the issue has been corrected in replacement parts and does not affect current generation vehicles. The automaker says it is still developing a fix.

Robinhood ups fintech competition with new debit card launch – Reuters, 3/22/2022

• Robinhood Markets on Tuesday launched a new debit card that would allow spare change investing as it looks to expand beyond trading and into more consumer finance verticals, heating up competition with fintech giants Chime and PayPal.
• With the new cash card, users could choose to round up their change to the nearest dollar and invest it in assets of their choice, Robinhood said.
• The company, known as a pioneer of commission-free trading, would also reward users of this feature with a weekly bonus, it said.
• The card is being offered by Robinhood Money, a new subsidiary of the online brokerage.

Ford F-150 Lightning’s 320-mile range beats available Rivian electric pickups, but lags GMC – CNBC, 3/21/2022

• Ford Motor’s 2022 F-150 Lightning pickup will have an electric range of up to 320 miles, according to final Environmental Protection Agency estimates released Monday by the automaker.
• The top range of the all-electric pickup is 20 miles higher than Ford initially estimated, placing it just above the range of the 2022 Rivian R1T, but still shy of the 2022 GMC Hummer EV.
• The Rivian R1T with a larger optional battery pack is rated at up to 314 miles.
• The GMC Hummer Edition 1 pickup is at a GM-estimated 329 miles.
• Both are the only versions of the vehicles currently available.
• Overall, the F-150 Lightning will come with a range of 230 miles, 300 miles or 320 miles, depending on model and size of the battery packs in the vehicles.

Goldman sees Fed hiking rates by 50 bps at May, June meetings – Reuters, 3/22/2022

• Goldman Sachs expects the U.S. Federal Reserve to raise interest rates by 50 basis points each at its May and June meetings, following hawkish remarks by the central bank’s chair Jerome Powell.
• The Fed must move “expeditiously” to raise rates and possibly “more aggressively” to keep an upward price spiral from getting entrenched, Powell said on Monday.
• “Our best guess is that the shift in wording from ‘steadily’ in January to ‘expeditiously’ today is a signal that a 50bp rate hike is coming,” the analysts wrote in a report published late on Monday.
• They anticipate four further 25 basis point rate hikes in 2022, one at each Fed meeting in the second half of this year, and three hikes in 2023.
• The analysts, however, left their forecast for the Fed’s terminal rate unchanged at 3%-3.25%.