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Daily Market Report | April 8, 2022

US FINANCIAL MARKET

U.S. Stocks Waver, Bonds Extend Selloff – Wall Street Journal, 4/8/2022

  • U.S. stocks wobbled and government bonds extended their selloff Friday as investors assessed the latest signals about Federal Reserve policy and the war in Ukraine.
  • The S&P 500, which dropped in early trading, was recently up 0.2%. The broad-market index closed up 0.4% on Thursday.
  • The Nasdaq Composite declined 0.5%. The blue-chip Dow Jones Industrial Average reversed its early losses, and was recently up 0.7%.
  • The yield on the benchmark 10-year Treasury note rose for a sixth consecutive day, notching a new three-year high before easing to 2.691%, compared with 2.654% on Thursday.
  • Shorter-dated bond yields also advanced, with the 2-year yield rising to 2.493% from 2.462%.
  • The war in Ukraine also continued to worry investors. Allegations of war crimes by Russian troops against civilians prompted a new round of sanctions from the U.S. and the European Union this week.
  • The United Nations General Assembly voted to suspend Russia from its Human Rights Council.
  • CrowdStrike shares rose 3.1% after the cybersecurity software developer said it received a key authorization to work with the Department of Defense.
  • Overseas, the pan-continental Stoxx Europe 600 rose 0.8%. Banco BPM jumped 15% after Crédit Agricole said it took a 9.2% stake in the Italian lender. Shares of Crédit Agricole ticked up 0.2%.
  • The ruble strengthened 1% against the dollar, trading at around 77 rubles to $1.
  • The Russian central bank cut its key policy rate on Friday to 17% from 20%, in a sign that efforts to stabilize the country’s financial system are having an effect. Russian stocks declined 2.5%.
  • The country’s benchmark MOEX stock index has lost more than 7% this week.
  • In Asia, most major benchmarks closed up. The Shanghai Composite Index added 0.5% while Hong Kong’s Hang Seng Index rose 0.3%. Japan’s Nikkei 225 ticked up 0.4%.

‘Unprecedented’ Inflation Squeezes Slim Jim Maker Conagra – Wall Street Journal, 4/8/2022

  • Conagra Brands said unprecedented inflation in ingredients and trucking is pushing the company to raise prices again.
  • But so far, shoppers aren’t deterred.
  • Sales rose about 5% to $2.91 billion, topping analysts’ expectations of $2.85 billion.
  • For its fiscal third quarter, the company reported a quarterly profit of $218.4 million, down 22% from a year earlier.
  • Adjusted for divestitures and other one-time items, earnings were 58 cents a share, matching expectations from analysts surveyed by FactSet.
  • Partly because of its price increases, Conagra said it now expects sales growth of 4% for the fiscal year, up from its previous guidance of about 3%.
  • Chief Financial Officer David Marberger said persistent inflation caused Conagra to lower its adjusted earnings expectations to $2.35 a share, from about $2.50 a share, for the fiscal year that ends in May.
  • “The environment isn’t getting much easier in the near term,” said Chief Executive Sean Connolly. Conagra now expects inflation in the current quarter to be “an unprecedented 26%” higher than two years earlier, Mr. Connolly said. “There is no way we could’ve called the 26%,” he said.

U.S. bank earnings to decline in first quarter – Reuters, 4/8/2022

  • Big U.S. banks are expected to show a sharp decline in first quarter earnings from a year ago, when they benefited from exceptionally strong dealmaking and trading, and funds set aside for loan losses being released.
  • Net income for the six biggest U.S. banks will be down about 35% from a year earlier, according to analyst estimates from Refinitiv.
  • Investment banking revenues stalled after the Russian invasion of Ukraine in late February.
  • The quarter will be challenging for the biggest banks, according to analyst Christopher McGratty of Keefe, Bruyette & Woods.
  • Estimated revenue declines of 36% in investment banking and 18% in trading are the biggest headwind, he said.
  • Analysts expect pre-provision net revenue – which is not clouded by swings in loss reserves set during the pandemic – to decline more modestly than overall profits plunge.

Amazon Intends to Appeal Union Victory in New York – Wall Street Journal, 4/8/2022

  • Amazon.com plans to appeal its loss last week to union organizers in New York, where workers voted to establish the company’s first U.S. union.
  • In a filing, Amazon signaled that it would appeal because of actions taken by the union, as well as the National Labor Relations Board, before and during the election.
  • Amazon said in the filing that union organizers threatened employees into voting in favor of the union. It also blamed the NLRB, claiming it suppressed voter turnout by how it set up the voting periods, causing long wait times.
  • Amazon has also taken issue with recent complaints by the NLRB against Amazon, which the company has suggested had an improper influence on the votes of workers.

U.S. labor board official wants to end mandatory anti-union meetings – Reuters, 4/8/2022

  • The top lawyer at the agency that enforces U.S. labor laws said on Thursday she will ask the National Labor Relations Board (NLRB) to prohibit businesses from requiring workers to attend meetings discouraging unionizing, which would eliminate a major tool employers use to counter union campaigns.
  • Jennifer Abruzzo, general counsel of the NLRB, said in a memo that so-called captive audience meetings discourage employees from exercising their right to refrain from listening to anti-union messages, making them illegal under federal labor law.
  • Abruzzo said that in a future case she will ask the five-member NLRB to overturn its own precedent going back to the 1940s that says captive audience meetings are legal.
  • The general counsel acts as a prosecutor, filing complaints against businesses that are then heard by the board.

Google Bans Apps With Hidden Data-Harvesting Software – Wall Street Journal, 4/8/2022

  • Google has yanked dozens of apps from its Google Play store after determining that they include a software element that surreptitiously harvests data.
  • The Panamanian company that wrote the code, Measurement Systems S. de R.L., is linked through corporate records and web registrations to a Virginia defense contractor that does cyberintelligence, network-defense and intelligence-intercept work for U.S. national-security agencies.
  • The code ran on millions of Android devices and has been found inside several Muslim prayer apps that have been downloaded more than 10 million times, as well as a highway-speed-trap detection app, a QR-code reading app and a number of other popular consumer apps, according to two researchers who discovered the behavior of the code in the course of auditing work they do searching for vulnerabilities in Android apps.
  • Measurement Systems paid developers around the world to incorporate its code—known as a software development kit, or SDK—into their apps, developers said.
  • Its presence allowed the Panamanian company to surreptitiously collect data from their users, according to Serge Egelman, a researcher at the International Computer Science Institute and the University of California, Berkeley, and Joel Reardon of the University of Calgary.

Food Prices Jump Most on Record as War Sparks Supply Chaos – Bloomberg, 4/8/2022

  • Global food prices are surging at the fastest pace ever as the war in Ukraine chokes crop supplies, piling more inflationary pain on consumers and worsening a global hunger crisis.
  • That’s sent food prices — which were already surging before the conflict started — to a record, with a United Nations’ index of world costs soaring another 13% last month.
  • The FAO’s gauge of global prices has jumped about 75% since mid-2020, eclipsing levels seen in 2008 and 2011 that contributed to global food crises.
  • Last month’s surge helped prices round out a seventh straight quarterly gain, the longest such run since 2008.
  • The surging costs are spurring some countries to hold off on imports, seek new suppliers or draw down local stockpiles, though that won’t be a long-term fix, said Erin Collier, an economist at the UN’s Food and Agriculture Organization.

Early signs of cooling housing market seen in some U.S. cities, Redfin says – Reuters, 4/8/2022

  • There are early signs of a cooldown in some of the hottest corners of the U.S. housing market, Redfin said in a report on Friday, a fresh indication that high house prices and rising mortgage rates are cutting into homebuyer demand.
  • Among those early tells, according to Redfin: Google searches for “homes for sale” dropped by double digits in Baltimore, Boston, San Francisco and Los Angeles in the second week of March from a year earlier; tours of homes for sale in California were down 21% as of March 31 from the first week of 2022, data from ShowingTime shows.
  • Redfin agents in San Francisco, Los Angeles, Washington DC, Boston and Seattle reported a drop in requests for homebuying help at the start of this year compared with last year, even as requests nationwide surged; and agents in California say they are seeing fewer offers on each home than previously.
  • The U.S. housing market is still hot, however, even in cooling California cities. The average home in Los Angeles, for instance, is sold for 5% over its asking price, with a record share selling within a week of listing, Redfin said.

US ECONOMY & POLITICS

U.S. wholesale inventories revised higher in February – Reuters, 4/8/2022

  • U.S. wholesale inventories increased more than initially thought in February, but inventory investment probably offered little or no boost to economic growth in the first quarter.
  • The Commerce Department said on Friday wholesale inventories rose 2.5% in February, instead of 2.1% as reported last month.
  • Stocks at wholesalers advanced 1.2% in January. Economists polled by Reuters had expected inventories would be unrevised.
  • Wholesale inventories surged 19.9% in February on a year-on-year basis. Inventories are a key part of gross domestic product. Wholesale motor vehicle inventories rebounded 1.4% after declining 2.3% in January.
  • Wholesale inventories, excluding autos, increased 2.6% in February. This component goes into the calculation of GDP.
  • Sales at wholesalers increased 1.7% in February after jumping 5.0% in January. At February’s sales pace it would take wholesalers 1.21 months to clear shelves, up from 1.20 months in January.

Economists Boost Inflation Expectations in Worrying Sign for Fed – Bloomberg, 4/8/2022

  • Economists have boosted their U.S. inflation forecasts — again — and downgraded expectations for economic growth through most of 2023, underscoring growing risks to the outlook as the Federal Reserve tries to curb the fastest price growth in decades.
  • The consumer price index will now average 5.7% in the final three months of the year, up from the 4.5% estimated a month ago, according to the median forecast of 72 economists in a Bloomberg survey.
  • The Fed’s preferred gauge, the personal consumption expenditures price index, is anticipated to average 4.7% year-over-year in the final three months of the year, more than double the central bank’s 2% target.
  • Estimates for economic growth were revised lower from the prior survey as expectations for consumer spending softened going forward. However, spending for the first three months of 2022 is seen stronger now than it was last month.
  • Average hourly earnings are expected to be higher than prior surveys showed, with the measure increasing by 5.6% and 5.3% from a year earlier in the second and third quarters, respectively, as businesses continue to boost wages to attract and retain workers.

Ketanji Brown Jackson Confirmed as First Black Woman on Supreme Court – Wall Street Journal, 4/8/2022

  • The Senate voted 53-47 to confirm Judge Ketanji Brown Jackson as the 116th Supreme Court justice on Thursday, making history in diversifying the bench while leaving unchanged the conservative tilt of a court tackling such hot-button issues as abortion rights and race in college admissions.
  • Judge Jackson, 51 years old, will be the first Black woman to join the Supreme Court, fulfilling a pledge made by President Biden at a pivotal moment in the 2020 Democratic presidential race, a decision that allies credited with reviving his campaign.
  • Democrats were joined by three Republicans in voting yes: Sens. Mitt Romney of Utah, Susan Collins of Maine and Lisa Murkowski of Alaska.
  • They said that while they don’t expect to agree with all of Judge Jackson’s decisions, they believe she had the qualifications and temperament for the job.

EUROPE & WORLD

Shanghai to Open 50,000-Bed Makeshift Hospital as Covid Infections Climb – Wall Street Journal, 4/8/2022

  • Shanghai authorities are preparing to open its largest makeshift hospital, with 50,000 beds, as newly reported Covid-19 cases in the hard-hit coastal megacity of 25 million people soared to a new daily high.
  • Health authorities said Friday that they logged more than 21,000 locally transmitted coronavirus infections in Shanghai on the previous day, bringing the total number of cases since the beginning of March to roughly 130,000.
  • The successive record case counts suggest that community transmissions are still occurring, municipal health official Wu Qianyu said at a news briefing on Friday, describing the outlook as “complicated and severe.”
  • Even so, Ms. Wu said, only one patient now being treated is in severe condition. Shanghai has yet to report a Covid death in the current outbreak.
  • China’s state-run People’s Daily reported Friday that three officials in Shanghai’s Pudong district were fired for failing to contain an outbreak.

Russia Cuts Interest Rate as Financial System Stabilizes – Wall Street Journal, 4/8/2022

  • Russia’s central bank cut its key interest rate following an unscheduled meeting of policy makers Friday, a sign that efforts to stabilize the country’s financial system are having an effect.
  • In a statement announcing the reduction in the key rate to 17% from 20%, the Bank of Russia said the ruble’s rebound from sharp losses in the days immediately following the Feb. 24 invasion had reduced the risk that inflation would move sharply higher.
  • The ruble weakened 2% against the dollar after the Russian central bank cut its key policy rate. It traded at 80 rubles to $1, still around the level it was at before the Ukraine invasion on Feb. 24.
  • The Bank of Russia said it “holds open the prospect” of further rate cuts over the coming months, an indication that it expects inflation to steady and some further improvement in the state of the banking system.

Sri Lanka Vows Independent Monetary Policy After Record Hike – Bloomberg, 4/8/2022

  • Sri Lanka’s central bank raised borrowing costs by an unprecedented 700 basis points amid economic and political turmoil that has sparked street protests and left President Gotabaya Rajapaksa with a minority in parliament.
  • The Central Bank of Sri Lanka increased the standing lending facility rate to 14.5% from 7.5%, it said in a statement Friday. That’s way above the median estimate of 8.5% in a Bloomberg survey of economists.
  • “I am here to implement independent policy making. There is no political interference in my regime, I have made it very clear to the authorities,” newly appointed Governor Nandalal Weerasinghe said at a subsequent briefing. “I have full support and blessing from the government, opposition parties, and most important the general public.”
  • Consumer prices accelerated to about 19% last month, Asia’s highest rate.
  • Price pressures could rise to 25% the following month and we therefore needed to apply the brakes, Weerasinghe said.

Factmonster – TODAY in HISTORY

  • The Works Progress Administration (WPA) was approved by Congress to help alleviate joblessness during the Great Depression. (1935)
  • The League of Nations assembled for the last time. (1946)
  • Artist Pablo Picasso died. (1973)
  • Actor Clint Eastwood was elected mayor of Carmel, California. (1986)

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