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Daily Market Report | April 18, 2022

US FINANCIAL MARKET

U.S. Stocks Open Higher as Treasury Yields Keep Climbing – Wall Street Journal, 4/18/2022

  • U.S. stocks hovered around the flatline on Monday, while the 10-year Treasury yield continued its upward march following a three-day holiday weekend.
  • The S&P 500 was up 0.2% in morning trading, while the Dow Jones Industrial Average ticked up 0.1%.
  • The technology-heavy Nasdaq Composite Index gained 0.4%.
  • U.S. government bonds tumbled again, sending the yield on the benchmark 10-year Treasury note to a high of 2.884% in early trading, according to Tradeweb.
  • Among individual stocks, Bank of America shares rose 2.7% after the bank reported on Monday that its first-quarter profit beat analysts’ expectations.
  • Charles Schwab shares tumbled 10% after the brokerage’s earnings missed expectations.
  • In oil markets, global benchmark Brent crude was recently up 1.2% to $113.07 a barrel. Its U.S. counterpart, West Texas Intermediate, or WTI, was up 1.1% to $108.11 a barrel.
  • In Asia, the Nikkei Stock Average fell 1.1% Monday, and South Korea’s Kospi slipped 0.1%. Markets in Hong Kong, Australia and much of Europe were closed for the Easter holiday.
  • Chinese stocks fell after official data showed that the world’s second-largest economy grew 4.8% in the first quarter.
  • The CSI 300 index of the biggest stocks listed in Shanghai and Shenzhen fell 0.53%.
  • China’s quarterly growth data beat economists’ expectations and its economy expanded at a faster pace than in the final three months of 2021 on an on-the-year basis.
  • However, other data pointed to continued weakness in the property market and retail sales, as fresh Covid-19 outbreaks and lockdowns weighed heavily on consumers.

Bank of America’s Quarterly Profit Falls 12% – Wall Street Journal, 4/18/2022

  • Bank of America said Monday that its first-quarter profit fell 12%, its first quarterly decline since 2020.
  • Revenue totaled $23.23 billion, up 2% from a year ago. Analysts had expected revenue of $23.13 billion.
  • Investment banking fees fell 33% from a year earlier to $1.53 billion, dragged down by a 75% drop in equities underwriting.
  • Adjusted trading revenue dropped 8%, with fixed-income down 19% and equity trading up 9%.
  • Overall, outstanding loans and leases grew 10% from a year earlier to $993.15 billion.
  • Loans in the bank’s commercial division rose 13%, while loans to consumers increased 6%.
  • Bank of America’s net interest income, which includes the money it makes on loans, rose 13% from a year earlier to $11.57 billion.
  • Mortgage originations rose 7% from a year ago, compared with a 37% decline at JPMorgan and a 27% drop at Wells Fargo.
  • Bank of America released $362 million in funds it had set aside to cover potential future losses. It also set aside some money to cover potential losses related to about $700 million in exposure to Russia, largely loans to Russian companies.
  • The second-largest U.S. bank earned $7.07 billion, down from $8.05 billion a year earlier. Per-share earnings of 80 cents topped the 75 cents that analysts polled by FactSet had expected.

World Bank Cuts 2022 Global Growth Outlook on Russia Invasion – Bloomberg, 4/18/2022

  • The World Bank cut its forecast for global economic expansion this year on Russia’s invasion of Ukraine and is planning to mobilize a funding package bigger than the Covid-19 response for nations to deal with various resulting and ongoing crises.
  • The Washington-based institution has lowered its estimate for global growth in 2022 to 3.2% from a January prediction of 4.1%, President David Malpass told reporters on a call on Monday.
  • The decline was spurred by a cut in the outlook for Europe and central Asia, which include Russia and Ukraine, he said.
  • The global forecast for this year compares with 5.7% expansion in 2021, he said.

Rivian CEO Warns of Looming Electric-Vehicle Battery Shortage – Wall Street Journal, 4/18/2022

  • Rivian Automotive Chief Executive RJ Scaringe is warning that the auto industry could soon face a looming shortage of battery supplies for electric vehicles—a challenge that he says could surpass the current computer-chip shortage.
  • Mr. Scaringe said building enough batteries will be among the biggest hurdles for an industry trying to boost electric-vehicle sales from a few million today to tens of millions within the decade.
  • The shortages will occur everywhere from the mining of raw materials, to processing them, to building the battery cells themselves, he said.
  • “Put very simply, all the world’s cell production combined represents well under 10% of what we will need in 10 years,” Mr. Scaringe said last week, while giving reporters a tour of the company’s plant in Normal, Ill. “Meaning, 90% to 95% of the supply chain does not exist,” he added.

U.S. Natural Gas Surges to 13-Year High on Global Supply Crunch – Bloomberg, 4/18/2022

  • U.S. natural gas prices surged to a 13-year high as robust demand tests drillers’ ability to expand supplies.
  • Futures rose as much as 4.8% to $7.652 per million British thermal units on Monday in New York, topping January’s short squeeze rally and roughly double levels from the start of the year.
  • Below-normal temperatures are forecast across parts of the northern U.S. from April 25 to May 1, according to the National Oceanic and Atmospheric Administration.
  • That could increase demand for the heating and power-plant fuel, diverting supply that normally goes to storage during this time of year.
  • A shortage of coal in the U.S. has also helped fuel the gas rally, limiting power generators’ ability to switch fuels.

Oil Gains as Libya Shuts Its Largest Oil Field Amid Protests – Bloomberg, 4/18/2022

  • Oil rose with the shut down of Libya’s biggest oil field in an already under-supplied market overshadowing signals that China’s lockdowns are weighing on its economic growth.
  • Global markets face further interruptions to oil supplies after demonstrations against Libya’s Prime Minister Abdul Hamid Dbeibah shut down Sharara, the country’s biggest oil field.
  • Protesters also forced two Libyan ports to stop loading, with output halted at the El Feel field.
  • In a weekend phone call, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman gave a “positive assessment” of their efforts to stabilize the oil market, suggesting that no change in production policy is likely.
  • The two nations lead the alliance that groups the Organization of Petroleum Exporting Countries and its partners, known as OPEC+.

US ECONOMY & POLITICS

Homebuilder Sentiment in U.S. Drops to Lowest in Seven Months – Bloomberg, 4/18/2022

  • U.S. homebuilder sentiment fell to a seven-month low as rising mortgage rates and high asking prices led to declining sales and prospective buyer traffic.
  • The National Association of Home Builders/Wells Fargo gauge decreased two points in April to 77, figures showed Monday.
  • The measure has declined four straight months.
  • The NAHB’s measure of current sales dropped two points to 85, the lowest since September.
  • A gauge of prospective buyer traffic decreased 6 points to an eight-month low of 60.
  • Sales expectations for the next six months improved after dropping in March to the weakest reading since mid-2020.

Small Businesses Object to Clawback of Covid-19 Aid – Wall Street Journal, 4/18/2022

  • Small-business owners are bristling over a congressional proposal that would redirect unspent money from Covid-19 programs to provide $10 billion for the federal government’s pandemic health response, including vaccines and therapeutics.
  • At issue is about $5 billion that Congress allocated for three small-business aid programs but which hasn’t yet been spent.
  • Some lawmakers want to repurpose those existing funds for healthcare, rather than allocate new money, because they are increasingly focused on reining in the federal deficit and spending amid a surge in inflation, which is at a 40-year high.
  • The proposal to claw back funding is “not in alignment with the professed need of small businesses and the professed desire on both sides of the aisle to help small businesses,” said John Arensmeyer, chief executive of the Small Business Majority, an advocacy group.

Homeowner Groups Seek to Stop Investors From Buying Houses to Rent – Wall Street Journal, 4/18/2022

  • Small groups of neighborhood volunteers are blocking companies from buying single-family homes, rewriting homeownership rulebooks to thwart investor purchases of suburban housing.
  • These groups, called homeowner associations, spend much of their time enforcing rules related to things such as lawn care and parking. But they often have broad powers to regulate how homes are used.
  • Some of these associations now believe that the rise in home purchases by rental investors has led to a decline in property maintenance and made their neighborhoods less desirable. Investors are also making it more difficult for local families to buy houses, these groups say.

EUROPE & WORLD

China’s Economy Grew 4.8% in First Quarter, Beating Expectations – Wall Street Journal, 4/18/2022

  • China’s economy accelerated in the first quarter of the year, even as lockdowns closed factories and kept tens of millions confined to their homes in March, according to official data that economists say overstates the strength of the world’s second-largest economy.
  • China’s gross domestic product expanded by an annual 4.8% in the first quarter, China’s National Bureau of Statistics said Monday, a faster pace than the 4% expansion recorded in the final three months of 2021 and the 4.6% expansion predicted by economists polled by The Wall Street Journal.
  • Industrial production rose 5% in March compared with a year earlier, slowing from the 7.5% year-on-year increase in the January-February period.
  • Retail sales fell 3.5% in March from a year earlier, down from a 6.7% year-on-year increase in the first two months of the year, as lockdowns kept people indoors and shut stores. That was a bigger drop than the 2% decline economists polled by the Journal were anticipating.
  • Home sales by volume plunged 25.6% in the first quarter compared with a year earlier, while new construction starts measured by floor area dropped by 17.5%. Both of those declines were sharper than in the first two months of the year.
  • China’s headline measure of joblessness, the surveyed urban unemployment rate, jumped to 5.8% in March, officials said Monday, the highest reading in almost two years and the largest one-month increase since early 2020, when China was grappling with the initial outbreak of Covid-19 in Wuhan.

Didi Global’s Revenue Falls 12.7% Amid Preparations for U.S. Delisting – Wall Street Journal, 4/18/2022

  • Didi Global said Saturday its fourth-quarter revenue fell 12.7% from the same period a year earlier as the ride-hailing firm, under a cybersecurity investigation by Chinese regulators, prepares to delist from the New York Stock Exchange.
  • The Chinese ride-hailing company, based in Beijing, separately said it would hold a shareholders meeting May 23 to vote on its delisting from the NYSE.
  • To cooperate with the continuing cybersecurity probe, Didi said, it won’t seek a public listing elsewhere before the U.S. delisting is completed.
  • Didi posted the equivalent of $6.4 billion in revenue for the three months ended Dec. 31.
  • A 15.1% decline in revenue of its core ride-hailing business in China was responsible for the decrease in overall revenue.
  • The company reported a net loss equivalent to $27 million for the fourth quarter.

Sri Lanka Credit Rating Cut by Moody’s as Looming Default to Bring Losses – Bloomberg, 4/18/2022

  • Sri Lanka is barreling toward a “series of defaults” after deciding to stop paying its foreign debts, Moody’s Investors Service warned as it downgraded the country’s credit rating.
  • The island nation was cut to Ca from Caa2 by Moody’s on Monday, following similar downgrades by S&P Global Ratings and Fitch Ratings.
  • An interest payment due Monday is the first since Sri Lanka’s government announced last week it would halt foreign debt service to preserve cash for food and fuel imports.

Factmonster – TODAY in HISTORY

  • Paul Revere rode from Charlestown to Lexington to warn Massachusetts colonists of the arrival of British troops during the American Revolution. (1775)
  • Grace Kelly married Prince Rainier of Monaco. (1956)
  • The U.S. Senate voted to hand over the Panama Canal to Panamanian control on Dec. 31, 1999. (1978)
  • Afghanistan’s former king, Mohammad Zahir Shah, returned after 29 years in exile. (2002)

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