Daily Market Report | March 31, 2022
US FINANCIAL MARKET
Stocks Slip as U.S. Eyes Reserve Release – Wall Street Journal, 3/31/2022
- Stocks and oil prices dropped Thursday as President Biden prepares a substantial release of oil reserves to staunch soaring energy prices and inflation.
- The S&P 500 edged 0.1% lower, after closing down 0.6% Wednesday.
- The Nasdaq Composite Index fell 0.1%, and the Dow Jones Industrial Average retreated 0.3%.
- President Biden is expected to tap up to 180 million barrels of government oil reserves over the next six months to address the rise in energy prices in the aftermath of Russia’s invasion of Ukraine, the White House said Thursday.
- That would be the largest release from strategic stocks in history, according to RBC Capital Markets.
- Global benchmark Brent crude retreated 3.4% to $107.65 a barrel.
- Stocks are set to wrap up a volatile first quarter on a mixed note. The S&P 500 staged a rebound in recent days, rising 5% this month but the broad index is still down 3.6% for the quarter so far.
- The 10-year Treasury yield is on track for the biggest quarterly jump since 1994.
- The yield on the benchmark 10-year Treasury note ticked down to 2.345% from 2.357%, extending a three-day decline into a fourth day.
- European government debt also rallied, with Germany’s 10-year yield falling below 0.6%.
- U.S. consumer spending climbed 0.2% in February, fueled in part by higher prices but coming in below forecasts.
- Jobless claims, a proxy for layoffs, reached 202,000.
- That is a moderate increase from the previous week, which hit the lowest level since 1969, but still in line with economists’ expectations amid a tight labor market.
- Overseas, the pan-continental Stoxx Europe 600 edged down 0.7%.
- Russian stocks climbed 5.6% and the ruble strengthened 0.9% against the dollar.
- The currency traded at around 83 rubles to $1, approaching its pre-invasion level of 81.
- In Asia, most major benchmarks declined. The Shanghai Composite Index slid 0.4%, and Hong Kong’s Hang Seng Index fell 1.1%.
- Weaker-than-expected data from purchasing managers’ surveys in China for March weighed on sentiment, investors said.
UiPath stock drops 20% after outlook falls short of Wall Street expectations – MarketWatch, 3/30/2022
- UiPath shares dropped in the extended session Wednesday after the “software robot” provider’s weaker-than-expected outlook overshadowed a beat of Wall Street’s quarterly results estimates.
- Revenue rose to $289.7 million from $207.9 million in the year-ago quarter.
- The company’s ARR rose 59% to $925.3 million from a year ago.
- The company reported a fourth-quarter loss of $63.1 million, or 12 cents a share, versus net income of $26.3 million in the year-ago period.
- Analysts had estimated earnings of 3 cents a share on revenue of $283 million and an ARR of $902.5 million, based on UiPath’s forecast revenue of $281 million to $283 million and ARR of $901 million to $903 million for the fourth quarter.
- The company forecast revenue of $223 million to $225 million and an annualized renewal run rate (ARR) of $960 million to $965 million for the first quarter, while analysts surveyed by FactSet expect revenue of $247 million and ARR of $968.2 million.
- For the year, UiPath expects revenue of $1.08 billion to $1.09 billion and ARR of $1.2 billion to $1.21 billion, while analysts forecast revenue of $1.26 billion and ARR of $968.2 million.
Walgreens Posts Higher Sales, Powered by Covid-19 Vaccine, Testing Demand – Wall Street Journal, 3/31/2022
- Walgreens Boots Alliance posted higher sales for its fiscal second quarter, as Covid-19 vaccinations and tests continued to boost business amid the surge of cases from the spread of the Omicron variant.
- Overall, Walgreens posted sales of $33.76 billion for the fiscal second quarter, up from $32.78 billion in the same period the year before. Analysts surveyed by FactSet were expecting sales of $33.23 billion.
- The Deerfield, Ill., drugstore chain said it administered 11.8 million Covid-19 vaccinations in the latest quarter, which ended Feb. 28, and provided 6.6 million Covid-19 tests, including over-the-counter at-home tests.
- Demand for at-home Covid-19 tests helped drive a 43.3% increase in U.S. health and wellness sales.
- Comparable retail sales increased 14.7% in the U.S. compared with the year-ago period, the most in more than two decades, the company said.
- U.S. prescriptions filled rose by 4.7% in the latest quarter on a comparable basis, largely driven by vaccinations.
- Excluding vaccinations, the increase was 1.8%.
- The company posted net income attributable to Walgreens of $883 million, compared with $1.03 billion a year earlier.
- Earnings from continuing operations were $1.02 a share, compared with $1.06 a share in the year-ago period.
UPS Expands Deal With Google Cloud to Prepare for Surge in Data – Wall Street Journal, 3/31/2022
- United Parcel Service is set Tuesday to announce an expansion of its 2019 deal with Alphabet’s Google Cloud as the logistics company rolls out new data initiatives.
- As part of the expansion, UPS will receive increased network, storage and compute capacity.
- It will continue using Google’s artificial-intelligence and machine-learning tools to analyze its incoming data, which is expected to surge with the introduction of initiatives such as putting radio-frequency identification chips on packages.
- The companies declined to comment on the size of the cloud capacity increase or the value of the deal.
Biden Orders Record Oil Release From U.S. Reserve to Tame Prices – Bloomberg, 3/31/2022
- The U.S. will release roughly a million barrels of oil a day from its reserves for six months, a historic drawdown that underscores White House concern about rising gas prices and supply shortages following Russia’s invasion of Ukraine.
- President Joe Biden also will invoke Cold War powers to encourage domestic production of critical minerals for batteries for electric-vehicles and other uses, the White House said.
- Battery materials will join the list of items covered by the 1950 Defense Production Act.
- Biden will order as much as 180 million barrels released from U.S. reserves over the next several months.
- He’ll speak about his plan at the White House at 1:30 p.m. in Washington.
- The goal of Biden’s plan is to create a bridge for U.S. supply until the fall, when domestic production is anticipated to increase, the White House said.
OPEC+ Refuses to Deviate From Gradual Oil Output Hikes – Bloomberg, 3/31/2022
- OPEC and its allies stood back from the crisis engulfing oil markets, refusing to deviate from their schedule of gradual production increases as the U.S. considered an unprecedented release from emergency crude stockpiles.
- The cartel ratified the 432,000 barrel-a-day supply increase scheduled for May at an online meeting on Thursday, according to a statement.
- One change that did emerge from the gathering is the decision to exclude from OPEC’s crude-production estimates any data provided by the International Energy Agency, delegates said.
- It’s a minor technical change intended mainly as a public snub to the agency that represents the interests of oil consumers and plays a key role in coordinating releases from emergency stocks.
Commodities Are Poised for Best Quarter in 32 Years – Wall Street Journal, 3/31/2022
- Commodities are on track for their best quarter in more than 30 years after Russia’s invasion of Ukraine supercharged a rally in markets from oil to wheat and nickel.
- The S&P GSCI, a benchmark tracking the prices of commodities futures from precious metals to livestock, has climbed 34% in the first quarter, on pace for its biggest gain since 1990.
- U.S. crude oil prices have climbed 43% to $107.82 a barrel since the end of last year and rose as high as $123.70 in early March, a level last seen in 2008.
- That rally propelled gasoline prices to record levels, pinching consumers at the pump.
- Wheat has gained 33% this year to trade at its highest level since 2010, while corn has added 24%. Many metals—aluminum, copper, nickel and palladium—hit new highs as well.
US ECONOMY & POLITICS
U.S. Inflation-Adjusted Spending Falls as Prices Temper Demand – Bloomberg, 3/31/2022
- U.S. inflation-adjusted consumer spending declined in February, suggesting the fastest pace of price increases in four decades is starting to temper demand.
- Purchases of goods and services, adjusted for changes in prices, fell 0.4% from the prior month, following a 2.1% jump in January, according to Commerce Department figures Thursday. Spending on goods settled back after the prior month’s surge, while a decline in Covid-19 cases supported a pickup in outlays for services.
- The personal consumption expenditures price index, which the Federal Reserve uses for its inflation target, increased 0.6% from a month earlier and 6.4% from February 2021, the most since 1982.
- Unadjusted for inflation, spending advanced 0.2% from January, while incomes rose 0.5%.
- The core PCE price index, which excludes food and energy and is often seen as a more reliable guide to underlying inflation, rose 0.4% from the prior month and was up 5.4% from a year ago.
- Inflation-adjusted goods expenditures declined 2.1% from the prior month after a January surge of 5.6%. Spending on services climbed 0.6%, the most in seven months.
- The personal saving rate — or personal saving as a share of disposable income — ticked up to 6.3%, though remains near an eight-year low. When adjusted for inflation, disposable personal income declined for a seventh straight month.
U.S. Jobless Claims Edge Higher Amid Tight Labor Market – Wall Street Journal, 3/31/2022
- New applications for U.S. unemployment benefits rose slightly last week, indicating a strong labor market in which employers are holding on to their workers amid high demand.
- Initial jobless claims, a proxy for layoffs, rose by 14,000 to a seasonally adjusted 202,000 last week, the Labor Department said Thursday, up from the week before when they reached a revised 188,000, matching the lowest level in more than 52 years reached back in December.
- The four-week moving average, which smooths out volatility, decreased to 208,500 from a revised 212,000.
- Continuing claims, a proxy for the total number of people receiving payments from state unemployment programs, moved slightly down to 1.3 million for the week ended March 19 from the previous week.
- Continuing claims are reported with a one-week lag.
Mortgage Rates Surge to Highest Since 2018 – Wall Street Journal, 3/31/2022
- The average rate for a 30-year fixed-rate loan jumped to 4.67%, mortgage-finance giant Freddie Mac said Thursday, marking the weekly figure’s highest reading since December 2018.
- The 30-year fixed rate rose from 4.42% a week ago, continuing a steady rise that has pushed home-loan rates within sight of 5% for the first time in four years.
- At the beginning of the year, the average rate on America’s most popular home loan was 3.22%.
- Rising rates are reducing refinances, which powered much of the mortgage market’s boom in 2020 and 2021.
- About four million Americans could lower their monthly mortgage payments through a refinancing in February, down from close to 16 million a year ago, according to mortgage-data firm Black Knight.
- Refinancings are expected to make up 33% of mortgage originations this year, down from 59% in 2021, according to the Mortgage Bankers Association.
EUROPE & WORLD
Russia Set for Steep Slump and Long Stagnation in Wake of Ukraine War – Wall Street Journal, 3/31/2022
- Russia’s invasion of Ukraine will cause their economies to contract this year by about 10% and 20%, respectively, the region’s leading development bank said Thursday in one of the most in-depth economic assessments to date of the war’s impact on the two countries.
- The European Bank for Reconstruction and Development said the slump in Russia would likely turn into a long period of stagnation while neighboring economies would rebound next year as long as a sustainable cease-fire is secured over the coming months.
- While Ukraine will suffer more in the short term because of the extensive damage to its physical infrastructure, Russia faces more long-term challenges from an exodus of well-educated workers and the loss of access to Western technologies under current sanctions, the bank said.
- The bank said it estimates that the territory most directly affected by the fighting accounts for 60% of Ukraine’s annual economic output and that about a third of Ukrainian businesses have had to suspend operations.
- Electricity consumption is down 60% on normal levels for this time of year, it said.
- Assuming that a cease-fire can be negotiated in the next two months, the EBRD expects Ukraine’s gross domestic product to contract by a fifth this year, compared with its previous estimate of 3.5% growth.
- The economy should then rebound and grow by 23% in 2023 if it receives reconstruction assistance.
- The EBRD lowered its growth forecasts for all but two of the 33 countries in which it invests beyond Ukraine, stretching across North Africa, Central Asia, the Caucasus and Central and Eastern Europe.
- The exceptions are Azerbaijan and Turkmenistan, both of which are large producers of natural gas.
Ukrainian Troops Push Forward as Russian Forces Regroup – Wall Street Journal, 3/31/2022
- Ukrainian officials said their armed forces are pressing forward against Russian military units around Kyiv, seeking to exploit Moscow’s efforts to regroup after weeks of heavy losses.
- After taking the city of Irpin to the northwest of Kyiv this week, Ukrainian forces are now engaged in heavy fighting in the neighboring towns of Bucha and Hostomel, officials said.
- In the Chernihiv region to the north of the capital, Ukrainian forces retook a village and were pushing for further gains, officials said, while warning that it was too early to say Russian forces were withdrawing.
- In Ukraine’s east, an area long coveted by Moscow, Russia has been intensifying attacks. Russian forces have been attacking the city of Lysychansk for the past two days. Shelling by Russian troops killed at least seven people and injured dozens overnight, officials said.
- Russian Defense Ministry spokesman Igor Konashenkov said on Thursday that Russian forces had gained ground in their offensive to take swaths of Donbas and claimed further missile attacks against Ukrainian military infrastructure.
- The statement came the day Russian President Vladimir Putin signed a decree on the spring draft, which is set to bring 134,500 new conscripts into the armed forces as others end their voluntary service.
- Russia has previously admitted that conscripts have taken part in its military campaign in Ukraine, though Defense Minister Sergei Shoigu said on Tuesday that no new recruits will be sent to conflict zones.
Putin Says Gas Exports to Be Halted If Payments Not Made in Rubles – Bloomberg, 3/31/2022
- Russia will halt gas supplies to buyers from ‘unfriendly’ states unless they switch to payments in rubles from April 1, President Vladimir Putin said, the latest strike in a struggle with Europe over energy sales.
- “To buy Russian gas, they need to open ruble accounts in Russian banks,” Putin told officials in a televised speech Thursday.
- “It is from those accounts that gas will be paid for starting April 1.
- If such payments aren’t made, we will consider this a failure by the client to comply with its obligations.”
- Buyers should open special accounts in state-controlled Gazprombank to allow foreign currency to be swapped to rubles for settlements, according to an order signed by Putin.
Shanghai Will Lock Down 16 Million in Toughest Virus Test Yet – Bloomberg, 3/31/2022
- Part two of Shanghai’s phased lockdown will see some 16 million people confined to their homes, with residents urged to isolate from members of their own household as authorities seek to curtail a record outbreak that’s brought unprecedented disruptions to the financial hub.
- Residents in the western part of the city, where about two-thirds of Shanghai’s population lives, will begin a four-day lockdown at 3 a.m. on Friday.
- That’s two hours before the eastern half — home to almost 9 million people — emerges from their own lockdown that began early Monday morning.
- Late Wednesday, Shanghai’s communist party chief Li Qiang vowed to disrupt the spread of the virus through “whole-region static management”, using a phrase that in other parts of the country have indicated the toughest of movement curbs.
- Several cities in the northeastern province of Jilin, already sealed off for more than two weeks, implemented static management last week that meant residents were completely barred from leaving their homes.
Chinese manufacturing, services contract together for first time since 2020 – Reuters, 3/31/2022
- Activity in Chinese manufacturing and services simultaneously contracted in March for the first time since the height of the country’s COVID-19 outbreak in 2020, adding to the urgency for more policy intervention to stabilise the economy.
- The official manufacturing Purchasing Managers’ Index (PMI) fell to 49.5 from 50.2 in February, the National Bureau of Statistics (NBS) said on Thursday, while the non-manufacturing PMI eased to 48.4 from 51.6 in February. read more
- The sub-index for production fell below the 50-point mark for the first time since October, to 49.5, indicating a contraction. The gauge for new orders was also in negative territory.
- Weakening production and demand sped up the contraction in factory jobs, with the employment sub-index slipping to 48.6 in March, the lowest since February 2021.
- China’s official composite PMI, which combined manufacturing and services, stood at 48.8 in March versus 51.2 in February.
- The composite PMI was at its second-lowest reading on record since February 2020, when the initial COVID outbreak sent the index plummeting to 28.9.
Factmonster – TODAY in HISTORY
- The Eiffel Tower in Paris officially opened. (1889)
- Daylight Saving Time went into effect in the United States. (1918)
- The Dalai Lama, fleeing Chinese repression of an uprising in Tibet, arrived at the Indian border and was granted political asylum. (1959)
- President Lyndon Johnson announced that he would not run for re-election. (1968)
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