US FINANCIAL MARKET
Stocks Rise Ahead of Powell Talk – Wall Street Journal, 5/17/2022
- U.S. stock indexes climbed Tuesday as investors snapped up beaten-down shares in technology, banking and other sectors.
- The S&P 500 rose 1.4% in morning trading, while the Dow Jones Industrial Average added 0.9%. The tech-heavy Nasdaq Composite jumped 1.7%, rebounding after it fell 1.2% on Monday in a late-session selloff.
- On Tuesday, fresh data from the Commerce Department showed some signs of economic resilience, with U.S. shoppers increasing retail spending in April for the fourth straight month.
- That, as well as the reopening of some stores in Shanghai this week after a strict Covid-19 lockdown, provided some sources of optimism.
- Later Tuesday, investors will hear from Fed Chairman Jerome Powell at The Wall Street Journal’s Future of Everything Festival.
- Market watchers are also continuing to assess the effects of the war in Ukraine, as well the outlook for China’s economy.
- Tech stocks were among the winners in Tuesday trading. Chip-maker Nvidia jumped 4.4%, Tesla added 2.8%, and Apple gained 1.8%.
- Shares of Citigroup rallied 6.9% after a securities filing showed Warren Buffett’s Berkshire Hathaway bought around $3 billion worth of shares in the bank.
- Walmart slumped 8.2% after the retail giant reported that earnings fell sharply from the same period last year, hurt by higher supply-chain and labor costs.
- Home Depot shares ticked up 0.1% after the home-improvement retailer boosted its outlook for the year and said shoppers were spending more per shopping trip.
- In the bond market, the yield on the benchmark U.S. 10-year Treasury note rose to 2.964% from 2.877% Monday, on pace to reverse a downward stretch for yields.
- As of Monday, the yield on the 10-year note had fallen for five of the past six trading days.
- Futures on Brent crude oil, the international energy benchmark, climbed 0.9% to $115.29 a barrel.
- In Europe, the pan-continental Stoxx Europe 600 advanced 1.2%, on pace to extend its winning streak to three days.
- Gains across the region were broad-based, with banks, transport companies and energy producers rising.
- In Asia, Hong Kong’s Hang Seng jumped 3.3%, notching its third consecutive gain.
- Japan’s Nikkei 225 added 0.4%, also extending its winning streak to three sessions.
- The Shanghai Composite gained 0.6% after falling Monday.
Home Depot Raises Outlook as Fewer Customers Spend More – Wall Street Journal, 5/17/2022
- Home Depot boosted its outlook for the year after reporting first-quarter sales rose 3.8%, as fewer shoppers spent much more per shopping trip.
- First-quarter sales came in at $38.9 billion, ahead of Wall Street expectations of $36.7 billion.
- The home-improvement chain said that the average amount spent per transaction rose 11.4% while the number of transactions declined 8.2% in the period, as inflation continues to lift prices across its stores.
- Same-store sales, which adjusts for store openings and closings, rose 2.2% in the period, including 1.7% in the U.S.
- For the three months ended May 1, Home Depot posted earnings of $4.2 billion, or $4.09 a share, compared with $4.1 billion, or $3.86 a share, in the first quarter of last year. Wall Street analysts had expected earnings of $3.71 a share, according to FactSet.
- Home Depot said Tuesday that it now expects revenue to rise 3% this year after a strong start.
- The new view came after a warning in February that sales would only rise slightly.
- It lifted its profit forecast too, with per-share earnings now expected to rise at a mid-single-digit rate.
Walmart Earnings Are Dented by Food Inflation, Staffing Costs – Wall Street Journal, 5/17/2022
- Walmart, like many of the families that shop in its stores, is getting squeezed by higher food prices and other rising costs.
- Overall revenue was up 2.4% to $141.57 billion.
- U.S. comparable sales, those from stores or digital channels operating for at least 12 months, rose 3% in the quarter ended April 29, led by strength in food categories, the company said Tuesday when it reported earnings.
- The number of U.S. transactions stayed flat during the quarter, while the amount spent each time rose 3%, the company said.
- Net income was $2.05 billion in the latest quarter. Adjusted earnings per share were $1.30, missing the consensus forecast from analysts of about $1.48, according to FactSet.
- Walmart said it expects U.S. comparable sales for the full year to grow about 3.5%, up from a prior estimate of 3%.
- It expects operating income to decrease about 1%, excluding currency fluctuations, down from a previous estimate of an around 3% increase.
U.N. Seeks to Ease Russian Blockade of Ukraine Grain Shipping to Avert Food Shortages – Wall Street Journal, 5/17/2022
- United Nations Secretary-General António Guterres is pursuing a high-stakes deal with Russia, Turkey and other nations to open up Ukrainian food exports to world markets and stave off a potential global food shortage, according to diplomats familiar with the effort.
- Russia has sealed off Ukraine’s Black Sea ports to weaken the country and conquer its coast. Mr. Guterres has asked Moscow to permit some Ukrainian grain shipments in exchange for moves to ease Russian and Belarusian exports of potash fertilizer.
- As one of the largest grain exporters, Ukraine exported 41.5 million metric tons of corn and wheat in the 2020-2021 season, and more than 95% was shipped through the Black Sea, according to Maxigrain, a Ukrainian grain broker.
- Russia doesn’t currently appear to be engaged in earnest negotiations toward a deal, the diplomats said.
- Turkey, a major Black Sea power, has expressed willingness to participate in a deal, including by removing mines from the sea and managing shipping traffic, they said.
Oil Extends Rally on Tight Fuel Markets, Risks to Russian Supply – Bloomberg, 5/17/2022
- Oil traded near a two-month high amid a broader market rally while US retail gasoline and diesel prices jumped to fresh record highs.
- West Texas Intermediate traded near $115 a barrel after rallying about 14% over the previous four sessions.
- US retail gasoline prices topped $4.50 a gallon for the first time, just a couple of weeks ahead of the summer driving season.
- US crude stockpiles at a key storage hub in Cushing, Oklahoma, have contracted by about a quarter this year.
- Holdings at the delivery point for benchmark US futures likely fell by about 2.629 million barrels in the week to May 13, traders said, citing data from consultant Wood Mackenzie Ltd.
- In China, meanwhile, Shanghai reported no new Covid-19 infections in the broader community for a third consecutive day, hitting a crucial milestone that authorities have said will allow them to start unwinding punishing restrictions.
- Still, one part of Beijing’s Fengtai district will lock down in some areas for seven days, underscoring the country’s continued battle with the virus.
Microsoft Boosts Pay in Fight for Talent – Wall Street Journal, 5/17/2022
- Microsoft’s chief executive is promising to boost employee compensation amid continued low unemployment across the U.S. and high inflation.
- Satya Nadella told Microsoft employees Monday that the software giant plans to nearly double its global budget for merit-based salary raises, a person familiar with the announcement said. Mr. Nadella also said the company would increase annual stock compensation by at least 25%, the person said.
- “This increased investment in our worldwide compensation reflects the ongoing commitment we have to providing a highly competitive experience for our employees,” a Microsoft spokeswoman said. The move by Microsoft was earlier reported by trade publication GeekWire.
Rivian Warns Dispute With Seat Supplier Threatens Production of Amazon Delivery Vans – Wall Street Journal, 5/17/2022
- Electric-vehicle startup Rivian Automotive is suing a key supplier of seats, warning that a pricing dispute could impact production of an electric van ordered by Amazon.com.
- Rivian in March sued the supplier, Ohio-based Commercial Vehicle Group, accusing it of violating the supply contracts for seats by nearly doubling an initially agreed-upon price per unit, according to records filed with a Michigan court.
- Commercial Vehicle Group, a publicly traded auto supplier, denies the claims, saying in court filings that it wasn’t contractually obligated to the lower price and raised it only after Rivian submitted multiple engineering and design changes.
- Rivian specified in the lawsuit that there is no alternative supplier for the custom-designed seat packages for the electric van and it could take well over a year for it to find another vendor.
- Rivian warned that if Commercial Vehicle Group stopped delivering the seats, the EV maker would face an imminent shutdown of its van production, which is just launching, according to the documents filed in Wayne County Circuit Court in Detroit.
Lordstown Motors’ Ability to Stay in Business Hinges on Raising Capital, Valuation, CFO Says – Wall Street Journal, 5/17/2022
- Lordstown Motors’ ability to stay in business for at least another year remains in doubt until it secures more funding and its market value rises, its finance chief said after the electric-truck maker sold its factory to raise cash.
- Lordstown, which aims to launch its first vehicle this year and doesn’t generate any revenue yet, issued a going-concern warning in June 2021, flagging worries about its financial health.
- “It will be there until we raise sufficient capital and get to a higher market capitalization,” Chief Financial Officer Adam Kroll said Monday, referring to the going-concern warning.
- Lordstown, which went public in 2020 through a merger with a special-purpose acquisition company, is in the process of crash testing the Endurance, its first vehicle, and intends to launch commercial production in the third quarter.
US ECONOMY & POLITICS
US Retail Sales Show Consumer Standing Firm in Face of Inflation – Bloomberg, 5/17/2022
- US retail sales grew at a solid pace in April, reflecting broad-based gains and suggesting demand for merchandise remains resilient despite rampant inflation.
- The value of overall retail purchases increased 0.9%, after an upwardly revised 1.4% gain in March, Commerce Department figures showed Tuesday.
- Excluding vehicles and gas stations, sales rose 1% last month. The figures aren’t adjusted for inflation.
- The median estimate in a Bloomberg survey of economists had called for an 1% increase in overall retail sales from a month earlier and a 0.7% jump in the figure excluding autos and gas stations.
- Nine of the 13 retail categories showed growth last month, per Tuesday’s release.
- While the increases could reflect strong demand for merchandise, the gains could also be a result of higher consumer prices, since the retail sales data aren’t adjusted for inflation. Real spending data will be released next week.
- Spending at gas stations fell in April, likely reflecting lower prices in the month after a spike in March stemming from Russia’s invasion of Ukraine.
- Motor vehicle purchases, meanwhile, climbed 2.2%.
- Sales at non-store retailers, which tend to be volatile from month to month, rose 2.1% in April after 0.4% in the prior month.
- So-called control group sales — which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations — rose 1% in April from a month earlier.
Motor vehicles boost U.S. business inventories in March – Reuters, 5/17/2022
- U.S. business inventories increased slightly more than expected in March, lifted by a jump in motor vehicle stocks, government data showed on Tuesday.
- Business inventories rose 2.0% after increasing 1.8% in February, the Commerce Department said. Inventories are a key component of gross domestic product. Economists polled by Reuters had forecast inventories rising 1.9%.
- Inventories surged 14.7% on a year-on-year basis in March.
- Retail inventories increased 2.3% in March, instead of 2.0% as estimated in an advance report published last month. That followed a 1.6% increase in February.
- Motor vehicle inventories rose 1.6% instead of 1.2% as estimated last month. They increased 1.4% in February.
- Retail inventories excluding autos, which go into the calculation of GDP, shot up 2.5%, rather than 2.3% as estimated last month.
- Wholesale inventories increased 2.3% in March. Stocks at manufacturers gained 1.3%.
- Business sales rose 1.8% in March after climbing 1.2% in February. At March’s sales pace, it would take 1.27 months for businesses to clear shelves, unchanged from February.
U.S. manufacturing output rises more than expected in April – Reuters, 5/17/2022
- Production at U.S. factories increased more than expected in April amid continued strong demand for motor vehicles and other goods, which should help to underpin manufacturing activity.
- Manufacturing output increased 0.8% last month after a similar gain in March, the Federal Reserve said on Tuesday.
- Economists polled by Reuters had forecast factory production would gain 0.4%.
- Output jumped 5.8% compared to April 2021.
- April’s rise in manufacturing output combined with a 1.6% increase in mining to lift industrial production 1.1%. That followed a 0.9% advance in March.
FDA Eases Baby-Formula Import Rules to Boost Supplies – Wall Street Journal, 5/17/2022
- U.S. health regulators took steps to allow more foreign baby formula on American shelves, easing rules that had effectively prevented shipments from many overseas manufacturers.
- The Food and Drug Administration on Monday said it encouraged the overseas manufacturers to apply to ship their formula to the U.S.
- It could be weeks, however, before the products come to store shelves in the U.S., an FDA official said.
- Manufacturers will first have to apply with the agency to be able to ship their products to the U.S., and then the agency will have to conduct a review to assure quality control and safety.
- Also on Monday, Abbott said it had reached agreement with the FDA for the reopening of the Sturgis, Mich., plant where the company makes many formula products.
Pennsylvania Senate GOP Contest Headlines Crucial Slate of Primaries – Wall Street Journal, 5/17/2022
- Voters in five states are casting ballots in primary elections on Tuesday, with several contests providing the latest tests of former President Donald Trump’s influence within the Republican Party and others offering Democrats a choice between their party’s liberal and centrist wings.
- In the Republican Senate primary, polls have found that a little-funded candidate, conservative commentator Kathy Barnette, has pulled within reach of two leading contenders who spent tens of millions of dollars and until recently dominated news coverage of the campaign.
- Those two candidates, celebrity surgeon Mehmet Oz and former hedge-fund manager David McCormick, and allied groups have been running TV ads and using public appearances in the final days of the race to raise questions about Ms. Barnette’s electability.
U.S. to Loosen Restrictions on Cuba, Reversing Some Trump-Era Policies – Wall Street Journal, 5/17/2022
- The Biden administration on Monday said it is loosening some restrictions on flights to and from Cuba and re-establishing a family-reunification program that had been suspended in recent years, reversing a series of Trump-era policies that had largely cut off the island and its people from the U.S.
- The policy changes would also expand consular services and visa processing, enabling more Cubans to either visit or join their families in the U.S.
- The measures the White House announced also include efforts to help Cuban entrepreneurs by encouraging commercial opportunities outside of the Cuban government to expand cloud technology, application programming interfaces and e-commerce platforms, the State Department said in a statement.
- The administration will also remove the current limit on family remittances from immigrants to people on the island of $1,000 per quarter per sender-receiver pair.
- The less restrictive travel policies will allow scheduled and charter flights to locations in Cuba beyond Havana and would reinstate groups of people to travel to the island for educational and cultural purposes. The policy doesn’t permit individuals to do so.
- Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, increased 0.6 percentage point to 79.2% in April – the highest level since April 2007. It is 1.1 percentage points above its long-run average.
- Overall capacity use for the industrial sector climbed to 79.0% last month from 78.2% in March. It is 0.5 percentage points below its 1972-2021 average.
US Homebuilder Sentiment Tumbles by Most Since April 2020 – Bloomberg, 5/17/2022
- US homebuilder sentiment tumbled this month by the most since the immediate aftermath of the pandemic as firms faced higher materials costs and a slowdown in demand.
- The National Association of Home Builders/Wells Fargo gauge decreased 8 points in May to 69, the steepest drop since April 2020, figures showed Tuesday.
- The index has declined five straight months and stands at the lowest level since June 2020. The reading was weaker than all but one estimate in a Bloomberg survey of economists.
- The NAHB’s measure of current sales dropped 8 points to 78 while a gauge of prospective buyer traffic decreased 9 points to 52 — the lowest levels since the summer of 2020.
- Sales expectations for the next six months slumped 10 points to 63.
EUROPE & WORLD
Shanghai’s Covid Cases Drop as City Prepares to Reopen After Reaching Three-Day Milestone – Wall Street Journal, 5/17/2022
- Shanghai marked a third straight day with no community transmissions of Covid-19, a key milestone toward ending an outbreak that has brought China’s financial capital to a grinding halt.
- Shanghai on Tuesday reported 777 new locally transmitted cases from a day earlier, compared with more than 25,000 daily infections at the height of the outbreak in mid-April.
- Some stores, including supermarkets and pharmacies, were allowed to reopen starting Monday, while sanitation workers cleaned public spaces to prepare for the return of people to the metropolis’s streets.
- About half the city’s manufacturers had resumed operations as of May 15, according to the state-run Economic Daily newspaper.
- Authorities in Beijing have placed 46 areas of the capital under partial or full lockdown, city officials said at a daily briefing Tuesday. There were 56 new cases detected in the city in the 24 hours to 3 p.m. on Tuesday, they said.
- Sichuan province reported on Tuesday the highest number of cases after Shanghai for a fifth straight day, with 87 new infections, according to China’s National Health Commission.
- Most of the cases were in a satellite town of Guang’an City, known as the birthplace of former paramount leader Deng Xiaoping. Over the past week, the town of about 90,000 residents recorded more than 500 new cases, with authorities imposing lockdowns and closing businesses.
Euro zone economic growth stronger than expected, employment rose – Reuters, 5/17/2022
- Euro zone economic growth was stronger than previously expected in the first quarter, revised data showed on Tuesday, and employment rose too, showing the euro zone expanded at the solid pace seen of the end of 2021 despite the war in Ukraine.
- The European Union’s statistics office Eurostat said the gross domestic product (GDP) of the 19 countries sharing the euro rose 0.3% quarter-on-quarter in the January-March period for a 5.1% year-on-year growth.
- Eurostat had earlier estimated the growth rate at 0.2 quarter-on-quarter and 5.0% year-on-year.
- Employment growth was 0.5% quarter on quarter and 2.6% year-on-year in the first quarter, Eurostat said, accelerating from 0.4% quarterly and 2.1% annual growth rates in the previous three months.
Shopee-owner Sea posts upbeat results on e-commerce strength – Reuters, 5/17/2022
- Singapore-based Sea on Tuesday beat quarterly sales estimates and posted a smaller-than-expected quarterly loss, driven by strength in its core e-commerce as well as digital payments business.
- First-quarter total revenue rose 64.4% to $2.90 billion, topping analysts’ expectations of $2.76 billion, according to Refinitiv IBES data.
- Sea, which operates Shopee, SeaMoney and gaming unit Garena, said first-quarter e-commerce revenue grew 64.4%.
- Net loss, however, widened to $580.1 million from $422.1 million.
- Excluding items, the company reported a loss per share of $1.04, compared with analysts’ average estimate of a $1.23 loss.
- Sea widened its full-year 2022 e-commerce revenue outlook range to between $8.5 billion and $9.1 billion from $8.9 billion to $9.1 billion forecast earlier.
JD.com beats revenue estimates as lockdowns boost e-commerce demand – Reuters, 5/17/2022
- Chinese e-commerce group JD.com, beat Wall Street estimates for quarterly revenue on Tuesday, as more people shopped on its platform following lockdowns in mainland China to fight a fresh COVID-19 outbreak.
- The company reported revenue of 239.66 billion yuan ($35.57 billion) for the quarter ended March 31, compared to analysts’ estimates of 236.66 billion yuan, according to IBES data from Refinitiv.
- The net loss attributable to ordinary shareholders stood at 2.99 billion yuan, compared with a profit of 3.62 billion yuan a year earlier.
- Excluding items, JD.com posted a profit of 2.53 yuan per American depository share (ADS), compared with analysts’ expectations of 1.62 yuan.
- The New York Stock Exchange was established when a group of 24 brokers and merchants met by a tree on what is now Wall Street and signed the Buttonwood Agreement. (1792)
- The first Kentucky Derby was held at Churchill Downs, in Louisville, Kentucky. (1875)
- The Supreme Court ruled unanimously against segregation in schools in Brown v. Board of Education.(1954)
- Televised Watergate hearings opened, headed by North Carolina senator Sam Ervin. (1973)
- An Iraqi warplane attacked the U.S.S. Stark in the Persian Gulf, killing 37 American sailors and wounding 62. (1987)
- In Massachusetts, same-sex couples exchanged marriage vows for the first time in the United States. (2004)