US FINANCIAL MARKET
Stocks Open Lower as Oil Prices Rise – Wall Street Journal, 3/30/2022
- U.S. stocks fell and oil prices climbed, as concerns about rising commodity prices and uncertain progress in cease-fire talks between Russia and Ukraine weighed on investors.
- The S&P 500 slipped 0.2% in early trading Wednesday, while the tech-focused Nasdaq Composite Index lost 0.2%.
- The Dow Jones Industrial Average was recently down less than 0.1%. On Tuesday, major U.S. stock indexes jumped, extending the S&P 500’s winning streak to four sessions.
- Big swings in everything from oil prices to Treasury bonds in recent weeks have periodically weighed on sentiment.
- Brent crude, the international benchmark for oil prices, rose about 4% to $111.98 a barrel.
- In Europe, natural-gas prices, which are often volatile, jumped more than 10% after Germany indicated it was bracing for a possible reduction of Russian gas supplies.
- German officials said the country’s gas supply from Russia continues uninterrupted but that it was triggering the early warning stage of a contingency plan that is in place for possible energy shortages.
- Germany’s economy minister Robert Habeck said the warning was a precautionary measure.
- In the bond market, traders say they are keeping careful watch on the so-called yield curve, which measures the spread between short- and long-term rates and is often seen as an indicator of sentiment about the prospects for economic growth.
- On Tuesday, the yield curve briefly inverted, with yields on two-year U.S. Treasurys surpassing those on the 10-year benchmark note for the first time since 2019.
- On Wednesday, the yield on the 10-year Treasury note traded higher than the yield on the two-year note.
- The 10-year recently traded around 2.378%, down from 2.399% Tuesday, according to Tradeweb.
- The two-year yield traded around 2.334%, down from 2.349% Tuesday.
- In Europe, the pan-continental Stoxx Europe 600 fell 0.6%, on pace to snap a three-session winning streak.
- Germany’s DAX index fell 1.6%. Banks and transport stocks were among those that declined in the region.
- French auto maker Renault slid 3%. Société Générale lost 2.2%. Deutsche Bank fell 1.7%.
- In Asia, indexes mostly climbed higher. In Hong Kong, the Hang Seng added 1.4%, while in mainland China, the Shanghai Composite Index rose 2%. Japan’s Nikkei 225, in contrast, fell 0.8%.
Micron Posts Strong Forecast as Data Centers Fuel Chip Sales – Bloomberg, 3/30/2022
- Micron Technology, the largest U.S. maker of memory chips, gave an upbeat forecast for the current quarter, a sign that demand remains strong from rapidly expanding data-center customers.
- In the three months ended March 3, Micron’s revenue grew 25% to $7.79 billion.
- Net income was $2.26 billion, or $2 a share, up from $603 million, or 53 cents, a year earlier.
- Sales will be about $8.7 billion in its fiscal third quarter, Micron said Tuesday in a statement.
- That compares with an average analyst estimate of $8.2 billion, according to data compiled by Bloomberg.
- Excluding certain items, profit will be about $2.46 a share, topping the $2.24 prediction.
Lululemon Posts Stronger Sales, Profit Despite Omicron Weighing on Business – Wall Street Journal, 3/30/2022
- Lululemon Athletica posted higher revenue and profit for the fourth quarter, becoming one of the few direct-to-consumer brands to find growth amid rampant supply-chain challenges and the emergence of the Omicron variant.
- The athleisure company on Tuesday reported net revenues of $2.1 billion in the quarter ended Jan. 30, up 23% from the previous year. Sales at stores open for the previous 12 months rose 32%.
- While Lululemon’s online business accounted for just over half of revenue in 2020, it represented 44% in the most recent year, as more people returned to shopping in physical stores.
- Net income grew to $434.5 million, or $3.36 a share, beating analysts’ expectations of $3.27 a share, according to FactSet.
- Lululemon projects revenue to rise between 20% and 22% this year from the $6.26 billion generated last year.
- Earnings per share are projected to be between $9.15 and $9.35 for the year. Both measures came in ahead of forecasts from analysts.
- Its board also approved a new stock buyback program of up to $1 billion.
Chewy Swings to a Loss Amid Higher Costs, Slower Sales Growth – Wall Street Journal, 3/30/2022
- Chewy shares sank roughly 13% in Tuesday’s after-hours trading session after the company issued higher-than-expected losses in the fourth quarter.
- Revenue rose to $2.39 billion from $2.04 billion, below analysts’ expectations of $2.42 billion in sales for the quarter.
- The online pet-products retailer logged a loss of $63.6 million, swinging from a profit of $21 million a year ago, its first quarterly profit. Analysts were expecting a loss of $36 million.
- The company said the loss was attributable to a decline in gross margin and elevated selling, general and administrative expenses, which rose 35% to $516.5 million.
- The company, based in Dania Beach, Fla., said the number of active customers increased by 7.6% to 20.7 million in fiscal 2021.
- Net sales per active customer reached $430, up from $372.
- The company guided for revenue between $2.4 billion and $2.43 billion in the current quarter, below analysts’ expectations of $2.51 billion.
Sony’s Expanded PlayStation Plus Subscription Aims to Take on Xbox Game Pass – Wall Street Journal, 3/30/2022
- Sony’s videogame unit is bolstering its subscription options, part of an industrywide trend to lock in players to specific hardware, franchises and apps.
- Starting in June, Sony says it will begin to fold its cloud-games service, PlayStation Now, into its online multiplayer service, PlayStation Plus, for its console customers.
- The new service comes in variations with monthly, quarterly and annual price options for each.
- The current services combined have more than 50 million subscribers.
- Sony’s main videogame rival, Microsoft, has a single subscription service with multiplayer and cloud-games support for its Xbox users called Game Pass. It was launched in 2017, and Microsoft said in January that it had 25 million subscribers.
U.S. Companies’ Goodwill Write-Downs Expected to Rise After 2021 Decline – Wall Street Journal, 3/30/2022
- U.S. public companies this year are expected to write down more goodwill than last year as they contend with the financial fallout from Russia’s war in Ukraine and persistent high inflation.
- Pre-tax goodwill impairments totaled $8 billion in 2021, based on a review of filings through Monday—at which point about 47% of 8,900 public U.S. companies had filed their annual reports, according to Kroll LLC, a risk-consulting firm formerly known as Duff & Phelps LLC.
- The figure is a fraction of the total in 2020, when impairments hit a record $142.5 billion as the value of assets owned by companies declined in the first year of the Covid-19 pandemic.
- This year, impairments will likely exceed those of 2021 as companies face more economic uncertainty stemming from higher inflation and the impact of Russia’s invasion of Ukraine on financial markets and supply chains, said Carla Nunes, a managing director at Kroll.
Corn Is Out, Soy Is In on U.S. Farms Rocked by Soaring Costs – Bloomberg, 3/30/2022
- Two crops dominate U.S. farming: corn and soybeans.
- The former requires massive amounts of fertilizer.
- The latter requires very little.
- Which is why the astronomical surge in fertilizer prices — they’re up some 27% this year and 130% over the past year — is causing farmers to quickly re-calibrate the amount of each crop they put in the ground this spring.
- They’ll dedicate about 2 million more acres this year to soy, a Bloomberg survey finds, and about 2 million fewer to corn.
- The U.S. government is due to release its 2022 crop estimates on Thursday.
- Some analysts say it’s possible, albeit not likely, that plantings of soy even surpass those of corn.
- That’s only happened twice in record keeping that goes back almost a century.
Oil Pares Gains After Report Shows U.S. Gasoline Demand Fell – Bloomberg, 3/30/2022
- Oil pared gains after a U.S. government report signaled high prices may be depressing demand for fuel during a time of year that consumption is usually taking off toward its summer peak.
- Futures in New York climbed above $108 a barrel on Wednesday but pared back earlier gains after gasoline demand fell for the third consecutive week, defying seasonal trends.
- This could be the first sign of high prices impacting demand.
- Meanwhile, U.S. crude stockpiles fell 3.45 million barrels last week, larger than predicted, according to an Energy Information Administration report Wednesday.
Antitrust Bill Targeting Amazon, Google, Apple Gets Support From DOJ – Wall Street Journal, 3/30/2022
- The Justice Department Monday endorsed legislation forbidding large digital platforms such as Amazon and Google from favoring their own products and services over competitors’, marking the Biden administration’s first full-throated support of the antitrust measure.
- The letter, obtained by The Wall Street Journal, expresses support for the American Innovation and Choice Online Act, which the Senate’s judiciary panel approved in January in a bipartisan vote, as well as similar legislation moving through the House.
- Amazon.com, Alphabet’s Google, Apple and others oppose the proposed legislation, saying it would make it harder to offer popular services.
- The bills’ opponents also say it is fair for e-marketplaces, search engines and app stores to profit off their creations’ popularity.
Waymo to Send Driverless Cars Through San Francisco – Wall Street Journal, 3/30/2022
- Waymo, Google’s sister company, is sending fully autonomous vehicles onto the streets of the city, marking its first attempt to send cars without any human control into a major metropolitan area.
- The rides are currently only available to Waymo employees.
- The Alphabet unit since 2017 has been operating autonomous cars in suburban Phoenix in some capacity, which is a much less challenging traffic environment.
- In 2020, it opened rides up to the public in Chandler, Ariz.—which has a population of less than 300,000—and took away drivers.
- Waymo’s biggest competitor in San Francisco has been General Motors’s autonomous driving business called Cruise.
- Both Waymo and Cruise vehicles are active in San Francisco.
- In addition to Waymo and Cruise, six other companies had received permits from the state of California to test drive autonomous vehicles as of last year.
FedEx to test autonomous drone cargo deliveries next year – Reuters, 3/30/2022
- U.S. delivery firm FedEx Corp’s subsidiary, FedEx Express, will begin testing Elroy Air’s Chaparral autonomous air cargo system next year, the companies said on Wednesday.
- Legacy aviation and automotive industry players including Boeing, Embraer, Airbus, United Airlines, Toyota Motor and Stellantis are among the companies pouring money into the nascent electric vertical takeoff and landing (eVTOL) aircraft.
- California Bay Area-based Elroy Air’s Chaparral, launched in January, is an eVTOL aircraft that can lift 300 pounds to 500 pounds of cargo and deliver it by air up to 300 miles, the companies said.
US ECONOMY & POLITICS
U.S. economic growth accelerates in fourth-quarter; corporate profits slow – Reuters, 3/30/2022
- The U.S. economy grew robustly in the fourth quarter, the government confirmed on Wednesday, but momentum has slowed significantly amid a surge in COVID-19 infections at the start of the year, snarled supply chains and soaring inflation.
- Gross domestic product (GDP) increased at a 6.9% annualized rate, the Commerce Department said in its third estimate of fourth-quarter GDP growth.
- That was revised slightly down from the 7.0% pace estimated in February.
- The revision to the fourth-quarter GDP reading reflected downgrades to consumer spending and export growth.
- For all of 2021, the economy grew 5.7%, the strongest since 1984, after the government provided nearly $6 trillion in pandemic relief. It contracted 3.4% in 2020, the biggest drop in 74 years.
- Corporate profits growth slowed significantly in the fourth quarter as domestic financial corporations suffered a decrease.
- There were also moderate increases in profits of domestic nonfinancial corporations and from the rest of the world.
- Corporate profits with inventory valuation and capital consumption adjustments increased at a $20.4 billion rate in the fourth quarter.
Companies added 455,000 jobs in March, slightly more than expected, ADP says – CNBC, 3/30/2022
- Companies added jobs at a solid pace in March, indicating that hiring is strong despite signs of a tightening labor market, payroll processing firm ADP reported Wednesday.
- Private payrolls expanded by 455,000 for the month, the firm said, about in line with the Dow Jones estimate of 450,000 though it was the lowest since August 2021.
- The total was slightly below the upwardly revised 486,000 for February, and brought ADP’s first-quarter jobs count to 1.45 million.
- Service-providing companies added 377,000 jobs while goods producers made up the balance of about 79,000.
- By size, job gains also were spread fairly evenly, with companies employing 50 to 499 workers up 188,000 and large companies adding 177,000.
- Small businesses, which saw a decline in February, reversed that and added 90,000 in March.
401(k) Savings Plans Get a Boost in Bipartisan Retirement Bill – Wall Street Journal, 3/30/2022
- Americans could stash more in their 401(k)s and sit on their nest eggs longer under a House bill that aims to boost individual retirement savings.
- The bill, passed Tuesday by a vote of 414 to 5, raises contribution limits for older workers, and lets companies offer employees a small cash bonus just for signing up for the retirement plan.
- If passed by the Senate and signed into law, the bill would raise the age again over the next decade to 75—a change that would also boost the bottom line of the financial-services industry, which typically earns fees based on the size of retirement accounts.
- Senators are likely to consider changes to the House bill, and they could then add it to a larger piece of legislation later this year.
- The bill would allow older workers to make bigger contributions.
- People 50 and older can contribute an extra $6,500 a year to 401(k)-style retirement accounts, for a total of $27,000.
- The legislation would raise that to $10,000 a year starting in 2024 for people ages 62, 63 and 64.
- The bill would require catch-up contributions to be made after taxes.
- Under the legislation, starting in 2024, the extra $1,000 people 50 and older can contribute annually to an IRA would rise to account for inflation.
- The bill would generate about $36 billion, according to congressional estimates, to help pay for itself in the next decade, in part by requiring workers ages 50 and older who make extra contributions to 401(k)-style plans starting in 2023 to do so through Roth accounts.
- A measure would make automatic enrollment in retirement savings, which advocates say has been shown to boost participation rates for minorities, mandatory starting in 2024 for newly created 401(k) or 403(b) plans.
- It would exempt employers with 10 or fewer workers and those in business for less than three years. Those employees would be able to opt out.
- It would also permit employers, starting in 2023, to make matching contributions to the 401(k)-style accounts of employees paying off student loans who don’t contribute enough to the 401(k) plan to receive a full match.
Biden Poised to Use Cold-War Powers to Boost Battery Metals – Bloomberg, 3/30/2022
- President Joe Biden is poised to invoke as soon as this week Cold War powers to encourage domestic production of critical minerals for electric-vehicle and other types of batteries, according to people familiar with the matter.
- The White House is discussing adding battery materials to the list of items covered by the 1950 Defense Production Act, the same authority wielded by Harry Truman to make steel for the Korean War and Donald Trump to spur mask production to tackle the coronavirus pandemic, said the people, who requested anonymity as the details are not yet public.
- Adding minerals like lithium, nickel, graphite, cobalt and manganese to the list could help mining companies access $750 million under the Defense Production Act’s Title III fund, the people said.
- The move also could aid recycling of battery materials, one of the people said.
EUROPE & WORLD
Shanghai’s Covid Surge Sinks Hopes of Speedy Reopening – Wall Street Journal, 3/30/2022
- Covid-19 cases in Shanghai continued to surge, sinking hopes that business and everyday life in China’s financial capital will return to normal in the coming days.
- Close to 6,000 new local cases were found in more than a dozen districts, China’s National Health Commission said Wednesday—up by around a third from a day earlier.
- With the number of infections roughly doubling every few two or three days, authorities face the risk of an extensive outbreak that drags on for months if the current containment measures fail to break transmission chains.
- To support the local economy, the Shanghai government unveiled Tuesday a 140 billion yuan, equivalent to $22 billion, package of tax cuts for affected businesses this year and subsidies for regular Covid tests at retail and catering companies.
Russia Plays Down Peace-Talks Progress, Intensifies Attacks in Eastern Ukraine – Wall Street Journal, 3/30/2022
- Moscow dampened hope that a breakthrough in the latest peace talks had been achieved and followed through on its advertised shift in war plans in Ukraine by redoubling its ground and air assaults in eastern portions of the country.
- Kremlin spokesman Dmitry Peskov on Wednesday dispelled the idea that Tuesday’s talks in Turkey between Ukrainian and Russian delegates had represented a turning point. “No one said that the sides have made headway,” he said. “We can’t point to anything particularly promising.”
- The statement came less than 24 hours after Moscow’s chief negotiator, Vladimir Medinsky, said that Russian President Vladimir Putin agreed to meet his Ukrainian counterpart, Volodymyr Zelensky, for the initialing of a peace treaty once the negotiations are completed.
- He also said that, in a show of good will, Russia would limit its operations near Kyiv.
- The Treaty of Paris was signed, ending the Crimean War. (1856)
- The 15th Amendment to the U.S. Constitution went into effect, guaranteeing the right to vote regardless of race. (1870)
- President Ronald Reagan was shot in the chest by John Hinckley as he left a Washington hotel. (1981)
- The Queen Mother Elizabeth of England died at the age of 101. (2002)