US FINANCIAL MARKET
U.S. Stocks Open Lower, Bond Yields Stabilize After Hawkish Powell Comments – Wall Street Journal, 4/22/2022
- U.S. stocks opened lower and a selloff in government bonds stabilized Friday, after the latest sign that the Federal Reserve will tighten monetary policy aggressively to fight inflation.
- This week’s steep rise in government bond yields showed signs of steadying, with the yield on the 10-year Treasury note hovering at 2.920% in recent trading, its highest level since December 2018 and up slightly from 2.917% Thursday.
- On Thursday, Fed Chairman Jerome Powell gave investors a clear signal that the central bank is ready to tighten monetary policy more quickly and indicated it was likely to raise interest rates by a half-percentage point at its meeting in May.
- A rate increase next month, following the Fed’s quarter percentage point increase in March, would mark the first time since 2006 that the central bank increased its policy rate at back-to-back meeting.
- U.K. retail sales volumes fell sharply last month, weakening by 1.4%.
- Still, for now, investors have been encouraged by strong first-quarter earnings. Of the companies that have reported so far, nearly 80% have beat analyst expectations.
- Shares of American Express fell 0.6%, after the credit-card company logged first-quarter net income of $2.10 billion, down from $2.24 billion a year earlier, even as spending on travel and entertainment surged.
- Kimberly-Clark jumped 8.4% after the maker of Huggies diapers and Cottonelle toilet paper raised its sales-growth projection for 2022 and said that first-quarter sales increased compared with the year before.
- In overseas markets, the pan-continental Stoxx Europe 600 fell 1.3% dragged down by technology companies including German software companies SAP and TeamViewer, which fell 3.4% and 3.8%, respectively.
- In Asia, Hong Kong’s Hang Seng lost 0.2% and Japan’s Nikkei 225 fell 1.6%.
American Express tops earnings expectations as ‘tremendous rebound’ in travel marches on – MarketWatch, 4/22/2022
- The company reported net income of $2.1 billion, or $2.73 a share, compared with $2.2 billion, or $2.74 a share, in the year-prior quarter. The FactSet consensus was for $2.40 a share in earnings.
- American Express saw $11.74 billion in total revenues net of interest expense, up from $9.06 billion in the year-earlier period.
- Analysts tracked by FactSet had been modeling $11.62 billion.
- Card member spending was up 35% on a currency-neutral basis in the quarter, and volumes notched a monthly record in March.
- Amex’s network volumes totaled $350.3 billion in the quarter, up from $269.3 billion in the same period of 2021.
- Spending by the millennial and Gen-Z cohorts on Amex cards was up 56% in the quarter on a currency-neutral basis.
- The company also has been seeing an extension of the travel recovery, pinpointing that travel and entertainment spending was up 121% from year-earlier levels while adjusting for currency impacts.
- Amex reported that its consolidated provisions for credit losses led to a $33 million benefit in the quarter, compared with a $675 million benefit a year before.
- Amex continues to expect 18% to 20% revenue growth for the full year, along with earnings per share of $9.25 to $9.65.
Verizon Loses Fewer Phone Subscribers Than Expected in First Quarter – CNBC, 4/22/2022
- The company on Friday reported a loss of 36,000 monthly phone subscribers in the quarter, compared with Factset estimates of a loss of 49,300.
- Verizon said total revenue rose 2.1% to $33.6 billion for the three-month period, edging past Wall Street’s estimate of $33.54 billion, according to IBES data from Refinitiv.
- Verizon has scooped up customers through plans bundled with more services.
- Net income, however, fell 12.4% to $4.7 billion in the quarter.
- Verizon said that included a pre-tax loss from special items of approximately $1.5 billion, including a pre-tax loss of approximately $1.2 billion from early debt redemption costs.
- Excluding items, the company earned $1.35 per share.
- Verizon updated its full-year guidance to expect wireless service revenue growth at the lower end of the previously guided range of 9% to 10%.
Snap reports ‘challenging’ quarter that missed sales and profit estimates – CNBC, 4/21/2022
- Earnings per share shows a loss of 2 cents versus expected earnings of 1 cent, according to a Refinitiv survey of analysts.
- Revenue of $1.06 billion versus $1.07 billion expected.
- Global Daily Active Users (DAUs) of 332 million versus 330 million expected, according to StreetAccount, up 18% year-over-year.
- Average Revenue per User (ARPU) of $3.20 versus $3.25 expected, up 16.8% year-over-year.
- Snap said it expected June quarter revenue to rise between 20% and 25%, lower than Wall Street’s estimate of 28%.
- It forecasts daily users at about 344 million, ahead of expectations of 341.4 million.
- Although the company’s overall revenue increased 38% year-over-year, Snap reported a bigger net loss and less free cash flow on an annual basis during the quarter ended in March.
- Snap said that without a $92 million unrealized loss related to an investment it previously made that went public last year, the company’s net income would have improved 7% year-over-year.
Shopify’s Stock Split Fails to Rekindle Investor Romance – Bloomberg, 4/22/2022
- After surging during the early months of the pandemic to become Canada’s most valuable company, Shopify had already tumbled 56% this year before the split.
- It’s now on the brink of falling off the list of the S&P/TSX Composite Index’s 10 most valuable companies.
- Now the next catalyst for the stock may not come until Shopify reports earnings on May 5, when investors will be looking for insight into the growth outlook as the company battles more competition and the return of shoppers to physical stores.
- To be sure, retail traders almost doubled their daily average purchases of the stock to $8.3 million in the two sessions after the split announcement.
- But the net inflow was still negligible compared to stocks like Apple and Amazon, which saw more than $170 million and $33 million of purchases each after their announcements, according to Vanda Research data.
Home Depot Revamps Tech Leadership With Focus on Customers – Wall Street Journal, 4/22/2022
- Home Depot is doubling down on online shopping, curbside pickup apps and other digital efforts that helped propel sales during the Covid-19 pandemic, shifting its veteran chief information officer to a new full-time executive role overseeing customer technology.
- The company on Tuesday named CIO Matt Carey as executive vice president of customer experience.
- Fahim Siddiqui is stepping in as CIO, overseeing technology strategy, infrastructure and software development.
- In his new role, Mr. Carey will be responsible for the vision, design and development of customer-experience technologies.
- Mr. Siddiqui will direct technology strategy, infrastructure and software development for retail stores, supply-chain facilities, offices and online systems, the company said.
High-Yield Municipal Bonds on Track for Worst Year Since 2008 – Bloomberg, 4/22/2022
- Sub-investment grade muni debt is down 9.3% so far this year — outpacing losses in both investment grade munis and high-yield corporate debt — putting it on track for its worst year since 2008, according to Bloomberg data.
- But whereas municipal debt was scarce and historically expensive last year, those conditions are no longer present, prompting muni fund outflows over the past 10 weeks.
- Investors pulled roughly $3.5 billion from municipal-bond mutual funds in the week ended April 20, marking another multibillion dollar week of outflows, according to Refinitiv Lipper US Fund Flows data.
US ECONOMY & POLITICS
Powell Hardens Hawkish Pivot Toward Half-Point Fed Rate Hikes – Bloomberg, 4/22/2022
- Federal Reserve Chair Jerome Powell outlined his most aggressive approach to taming inflation to date, potentially endorsing two or more half percentage-point interest-rate increases while describing the labor market as overheated.
- The Fed chief is taking direct aim at strong demand that the central bank wants to cool.
- Powell also reinforced expectations for another half-point increase in June, by citing minutes from last month’s policy meeting that said many officials had noted “one or more” 50 basis-point hikes could be appropriate to curb the hottest inflation in four decades.
- Investors are betting on half-point increases in May, June and possibly July.
- Critics say that U.S. central bankers are caught in a policy bind of their own making.
- Prices began to accelerate in the fourth quarter, when employers shrugged at the latest wave of the coronavirus and added more than a half-million workers each month.
- Powell said the Fed will no longer forecast relief from goods prices and improving supply chains, which could be an acknowledgment that pressures have also disbursed into service prices as well.
Democrats Urge Final Push on Stalled Agenda to Limit Possible Midterm Losses – Wall Street Journal, 4/22/2022
- Lawmakers are pushing leaders on issues ranging from student-loan forgiveness to lowering the cost of prescription drugs, steps they argue can shore up households shaken by rising inflation and economic uncertainty that Republicans have blamed on Mr. Biden.
- With polls pointing to possible deep losses in November, many Democrats said they were eager to show voters they can get more things done, after Mr. Biden’s $2 trillion healthcare, education and climate-change agenda stalled in the 50-50 Senate late last year.
- Mr. Biden has backed legislation to cancel $10,000 of student debt for all borrowers, but he has expressed skepticism about taking unilateral action without Congress.
- Once Congress returns to work, Democrats say they hope to get the bipartisan China competition bill signed into law.
U.S. Businesses See Record Price Growth in April S&P Survey – Bloomberg, 4/22/2022
- A measure of prices received by U.S. manufacturers and service providers increased to a record in April as firms shifted the burden of higher wages and surging costs to customers, further fanning inflationary pressures.
- A report Friday from S&P Global also showed an index of input price growth jumped to a record high, reflecting rising costs of raw materials, fuel, transportation and labor.
- Meantime, manufacturers enjoyed the strongest new orders growth in seven months, boosted by a surge in foreign demand.
- Overall, the S&P Global flash U.S. composite PMI — a measure of business activity — fell 2.6 points to 55.1.
- Readings above 50 indicate growth.
- In the euro area, activity unexpectedly picked up to a seven-month high.
Florida Bill to End Disney’s Special Tax District Heads to Gov. DeSantis for Signature – Wall Street Journal, 4/21/2022
- Florida lawmakers gave final approval to a bill that would end a special tax district that allows Walt Disney to govern the land housing its theme parks, escalating a weekslong dispute with Disney over its public opposition to a Florida bill that limits classroom instruction on gender and sexuality.
- The GOP-led House passed the tax district bill 70-38 on Thursday, a day after the Senate approved it 23-16.
- Stripping Disney of a key operating advantage represents one of the more high-profile backlashes in recent memory against a company for a political stance.
- The special district, created in 1967 and known as the Reedy Creek Improvement District, exempts Disney from numerous regulations and certain taxes and fees.
- Under the bill passed by lawmakers on Thursday, any special district established before the ratification of the Florida Constitution in 1968, and not renewed since then, would be dissolved on June 1, 2023.
- Disney, as the primary landowner at Reedy Creek, provided most of the $153 million in revenue from taxes and fees that the district collected in fiscal 2021.
- Disney employs nearly 80,000 people in the state, mostly at its theme parks and resorts.
- Tourism to the area contributes $5.8 billion in local and state tax revenue annually when operating at full capacity, according to Visit Orlando.
EUROPE & WORLD
Russian general says Moscow aims to capture southern Ukraine – Reuters, 4/22/2022
- Rustam Minnekayev, deputy commander of Russia’s central military district, was quoted by Russian state news agencies as saying Moscow aimed to seize the entire eastern Donbas region, link up with the Crimea peninsula, and capture Ukraine’s entire south as far as a breakaway, Russian-occupied region of Moldov.
- That would mean pushing hundreds of miles beyond current lines, past the major Ukrainian cities of Mykolaiv and Odesa.
- In Kharkiv city, Russian shellfire hit the main Barabashovo market.
- Kyiv said no new evacuations were planned for Friday.
- Moscow says it has taken 140,000 Mariupol residents to Russia; Kyiv says many of those were deported by force in what would be a war crime.
- Western countries believe Putin is desperate to demonstrate a victory after the failure of his forces to capture the capital Kyiv.
India’s Rate Panel Makes a Hawkish Pivot, Minutes Show – Bloomberg, 4/22/2022
- India’s monetary policy makers turned hawkish, pledging to start withdrawing surplus funds from the financial system as they take the first step toward an interest rate hike aimed at checking inflation that has breached the central bank’s targeted range.
- Inflation in India has stayed above the RBI’s 2%-6% range for the first three months of 2022, driven by global supply chain problems, higher food prices and a surge in energy costs.
- As a result, even though the MPC members voted to keep policy rates unchanged at 4% at the meeting, they signaled to markets that the RBI would start normalizing its ultra-loose monetary policy set to support the economy hurt badly during the pandemic.
- Higher food and fuel prices have forced Indian rate-setters to raise their inflation forecast to 5.7% from 4.5% for the current fiscal.
- That meant the RBI dropping its pledge to support growth “as long as necessary” for the first time since late 2019.
North Korea’s Kim offers rare praise for South’s departing Moon – Reuters, 4/21/2022
- North Korean leader Kim Jong Un has thanked South Korea’s outgoing president for trying to improve relations, a rare gesture of goodwill but one that analysts said may not be enough to head off growing tension between the two Koreas.
- Analysts were skeptical that North Korea’s message heralded a broader improvement in relations, and warned that the praise for Moon could be a bid to portray his successor, Yoon Suk-yeol, as responsible for any further deterioration in ties.
- Moon sent a letter on Wednesday and promised to try to lay a foundation for unification based on joint declarations reached at summits in 2018, despite the “difficult situation”.
- Kim said in his reply on Thursday that their “historic” summits gave the people “hope for the future”, and the two agreed that ties would develop if both sides “make tireless efforts with hope”.
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- Richard M. Nixon died of a stroke at the age of 81. (1994)