US FINANCIAL MARKET

Stocks Waver as Earnings Season Kicks Off – Wall Street Journal, 4/13/2022

• U.S. stock indexes notched slight gains in early trading as the first earnings reports from major companies began to roll in and investors considered the highest inflation in four decades.
• The S&P 500 was up less than 0.4% on Wednesday morning, after it closed down 0.3% on Tuesday.
• The Nasdaq Composite rose about 0.5%, and the Dow Jones Industrial Average was up about 0.1%.
• Shares of Delta Air Lines jumped 3.3% Wednesday morning after it reported a quarterly loss, but said it returned to profitability in March and expects to report a profit in the second quarter.
• JPMorgan Chase declined 3% after it posted first-quarter profit that came in below Wall Street’s estimates.
• Retailer Bed Bath & Beyond fell 4% after it reported a quarterly loss, saying it was hit by supply chain disruptions.
• Goldman Sachs, Citigroup, Morgan Stanley and Wells Fargo are set to report earnings on Thursday.
• The U.S. producer-price index, another gauge of inflation, rose by 11.2% in March compared with a year ago, coming in above expectations. That marked the largest gain since records began in 2010.
• The sharp rise in producer prices indicates that disruptions to key supply chains continue to drive up prices.
• The yield on the benchmark 10-year Treasury note edged down to 2.676% from 2.724% on Tuesday, extending its decline into a second day. Yields fall when prices rise.
• Oil prices rose, with global benchmark Brent crude adding 2% to trade at $106.65 a barrel. Traders are assessing energy demand in China, as some lockdown measures in Shanghai eased but more factories in the region, including two run by Apple suppliers, halted production.
• Further disruptions to energy supplies are expected, according to the International Energy Agency. It said on Wednesday that oil output from Russia was likely to fall by nearly 3 million barrels a day from May, a bigger decline than other analysts had predicted.
• Overseas, the pan-continental Stoxx Europe 600 slipped 0.9%. British supermarket chain Tesco declined 4.4% after it said it expects lower profit as rising prices change shoppers’ habits.
• In Asia, major benchmarks were mixed. The Shanghai Composite Index fell 0.8% and Hong Kong’s Hang Seng Index ticked up 0.3%.

JPMorgan Profit Sinks 42% After a Pandemic Boom – Wall Street Journal, 4/13/2022

• JPMorgan Chase’s first-quarter profit dropped 42%, weighed down by lower Wall Street fees and higher expenses.
• Revenue fell 5% to $30.72 billion, ahead of analyst expectations for $30.59 billion.
• Total loans increased 6%, a welcome sign after two years of sluggish loan growth. The bank’s net interest margin, a measure of what it collects on loans minus what it pays for deposits, rose to 1.67% from 1.63% at the end of December.
• In consumer banking, revenue fell 2% while profit dropped 57%, hurt particularly by the credit comparison to a year ago.
• Consumer spending on credit cards rose 29% and credit-card loans increased 15%.
• Though card loans remain below prepandemic levels, the increase is a sign that customers have started to burn through stimulus funds that buffered them throughout the pandemic.
• Mortgage originations dropped 37% from a year ago, largely due to rising interest rates.
• In the corporate and investment bank, revenue dropped 7% and profit fell 26%.
• Trading revenue fell 3% from the year earlier, when corporate debt sales, initial public offerings and an army of individual investors powered a stock-market boom. Fixed-income trading was down 1% and equities trading was down 7%.
• Total investment banking fees fell 31%, with declines in debt and stock underwriting.
• Profit in the commercial bank fell 28% to $850 million. In asset and wealth management, profit dropped 20% to $1 billion.
• Total expenses, which investors were watching closely, rose 2% to $19.19 billion in the quarter, roughly in line with expectations.
• JPMorgan took $1.5 billion in total credit charges for the quarter; a year ago, the bank got a $4.2 billion boost from freeing up money it had earlier set aside for potential defaults.
• The bank said it budgeted $900 million for higher credit losses this quarter because of economic challenges such as inflation and the war in Ukraine, and to account for its exposures in Russia.
• The nation’s biggest bank earned $8.28 billion, or $2.63 per share, compared with $14.3 billion, or $4.50 per share, a year ago. Analysts had expected $2.72 per share, according to FactSet.
• “We remain optimistic on the economy, at least for the short term,” Mr. Dimon said in a release, citing the financial health of consumers and businesses.
• But Mr. Dimon said he also sees “significant geopolitical and economic challenges ahead.”

BlackRock Profit Increases 20% – Wall Street Journal, 4/13/2022

• BlackRock reported higher quarterly profit even as market volatility lowered the investment firm’s assets under management to $9.6 trillion.
• Revenue rose 7% to $4.7 billion, slightly below analysts’ estimates of $4.76 billion.
• With inflation climbing to its highest levels in the past four decades, investors’ faith in the markets is low as evidenced by slowing inflows of $86 billion, down from $172 billion last year.
• The world’s largest asset manager reported net income of $1.4 billion, or $9.35 a share, in the first quarter of 2022 ended March 31, up 20% from $1.2 billion in the same period a year earlier.
• BlackRock exceeded analyst expectations of a per-share profit of $8.60, according to analysts polled by S&P Global Market Intelligence.

Delta Says Travel Rebound Is Keeping Pace With Surging Fuel Costs – Wall Street Journal, 4/13/2022

• Delta Air Lines said that surging travel demand is helping offset a sharp rise in the price of jet fuel, as the airline anticipates a bustling summer.
• Delta reported operating revenue of $9.3 billion during the first quarter, including nearly $1.2 billion in third-party sales from the oil refinery it owns.
• Delta on Wednesday reported a $940 million loss over the three months ended March 31, but said it returned to profitability during March, despite soaring fuel prices, and expects to report a profit in the second quarter.
• Delta reported a 33% increase in jet-fuel prices during the first quarter, to $2.79 a gallon. The company said it expects the price to climb to as high as $3.35 a gallon, including a 20 cent-a-gallon benefit from its refinery, in the second quarter.
• Delta said it has been successful in recouping the higher fuel prices, and expects its revenue in the second quarter to reach 93% to 97% of 2019 levels.
• Delta plans to operate at 84% of its 2019 capacity levels in the second quarter, a level of flying that Mr. Bastian described as “disciplined,” as the airline tries to avoid the growing pains and staffing shortfalls that have led some rivals to cut schedules in recent weeks.

Bed Bath & Beyond warns of slowing consumer demand after posting weak holiday-quarter results – CNBC, 4/13/2022

• Bed Bath and Beyond’s shares fell Wednesday as the home goods retailer reported a holiday-quarter loss, spoke of struggles with low inventory and congested ports, and warned that consumer demand is slowing.
• Sales fell 22% to $2.05 billion from $2.62 billion a year earlier. That fell short of estimates for $2.07 billion.
• Same-store sales, a key retail metric, dropped 12% across Bed Bath’s business compared with the year-ago period. Same-store sales declined 15% for the Bed Bath & Beyond banner and grew by low single digits for the BuyBuy Baby banner.
• Digital sales declined by 18% compared with the year-ago period, which partially reflects the shift back to stores and normalizing e-commerce levels.
• The company’s net loss grew to $159 million, or $1.79 per share, from net income of $9 million, or 8 cents a share, a year earlier.
• CEO Mark Tritton said out-of-stock merchandise caused the company to miss out on about $175 million in fiscal fourth-quarter sales. That’s higher than the prior quarter, when supply chain bottlenecks cost the company about $100 million.
• So far in the first quarter, he said same-store sales are down by about 20% — a deeper decline than the prior three months.

CNN+ struggles to lure viewers in its early days, drawing fewer than 10,000 daily users – CNBC, 4/12/2022

• Fewer than 10,000 people are using CNN+ on a daily basis two weeks into its existence, according to people familiar with the matter.
• To put that daily user number in perspective, CNN’s cable network suffered a sharp decline in viewership last year but still rang up an average of 773,000 total viewers a day.
• Axios reported earlier Tuesday that new leadership at Warner Bros. Discovery plans to cut hundreds of millions of investment dollars for the service given concern over its future.
• Incoming CNN chief Chris Licht will join Warner Bros. Discovery on May 1 and will make decisions on how best to proceed, two of the people said.

Google to Invest $9.5 Billion in U.S. Offices, Data Centers – Wall Street Journal, 4/13/2022

• Google plans to invest about $9.5 billion in U.S. offices and data centers this year, up from $7 billion in 2021, as it opens new branches and expands existing facilities.
• Alphabet Google said Wednesday that the investment in more than a dozen states will create at least 12,000 new full-time jobs by the end of the year.
• The search-engine giant plans to open a new office in Atlanta, boost its presence in New York, build out its campus in Boulder, Colo., and invest in data centers across the country, it said.
• Over the past five years, Google has invested more than $37 billion in offices and data centers in 26 states, it said.

Meta to take nearly half of sales made by its metaverse creators as fees – Reuters, 4/13/2022

• Facebook parent Meta Platforms will charge creators around 47.5% on sales of digital assets and experiences made inside the company’s virtual reality platform Horizon Worlds.
• The overall charge comprises of 30% hardware platform fee for sales made through Meta Quest Store, where it sells apps and games meant for its virtual reality headsets, and a further 17.5% cut as its Horizon platform fees, a Meta spokesperson told Reuters on Wednesday.
• Meta chief executive officer Mark Zuckerberg has been a critic of Apple’s app store fees of 30%, but Meta’s latest move to charge creators nearly half their sales on its own platform has angered many of them.

IEA Cuts Oil Demand Forecast as China Reimposes Lockdowns – Bloomberg, 4/13/2022

• The International Energy Agency cut its forecast for global oil demand this year after China reimposed lockdowns to contain the spread of a resurgent coronavirus.
• With the weaker demand outlook and the massive release of emergency oil reserves by IEA members, the agency now sees global markets in balance for much of the year.
• The Paris-based agency, which advises most major economies, lowered projections for world fuel consumption this year by 260,000 barrels a day, with a particularly steep reduction of 925,000 a day for China in April. Still, global demand remains on track to increase this year.
• World oil consumption will expand by 1.9 million barrels a day to average 99.4 million a day this year, according to the IEA.
• The IEA also dialed back estimates for the loss of Russian supplies from an international boycott over its military aggression. Production in April may be 1.5 million barrels a day lower than the prior month — roughly half the drop that was previously expected. Those losses may still double in May, the IEA said.

Record Permian Well Permits Point to Growing U.S. Oil Supply – Bloomberg, 4/13/2022

• Drilling permits for new wells have spiked to unprecedented levels in the Permian Basin, signaling crude oil suppliers in America are finally responding to higher prices, according to Rystad Energy.
• A total of 904 horizontal drilling permits were awarded last month in the shale patch that lies beneath Texas and New Mexico, an all-time-high, Rystad said. The four-week average of 210 approved permits for the week ending April 3 was also a record.
• Texas wildcatters have been saying that higher costs on labor and equipment and investors’ pressure to keep spending under control limits their ability to expand production.

Traffic Snarled at Texas-Mexico Border by New Security Measures, Protests – Wall Street Journal, 4/13/2022

• Two major international bridges were effectively shut down after Mexican truckers blocked lanes in both directions to protest a new border security initiative from Texas Gov. Greg Abbott that forced them to wait hours or days to bring products into the U.S.
• At the Pharr-Reynosa International Bridge, which spans the Rio Grande, officials scrambled to react Monday morning as truckers obstructed all lanes on the Mexican side.
• Some 700 miles away, in El Paso, a similar protest by truckers in Mexico forced the Ysleta Bridge to close late Monday afternoon. On Tuesday, it had not reopened.
• Mr. Abbott had said last week he would dispatch Texas Department of Public Safety troopers to conduct safety inspections on commercial vehicles driving into Texas from Mexico, after they had already passed federal customs. State officials said they don’t need warrants to inspect trucks for safety issues.
• The move—which has drawn pushback from the business community and threatens the $440 billion in trade that passes over international bridges on the Texas-Mexico border each year—is part of Mr. Abbott’s Operation Lone Star, which has sought to exert more state control over border security.