US FINANCIAL MARKET

Stock Markets Fall as Bear Market Looms Over S&P 500 – Wall Street Journal, 5/19/2022

• U.S. stocks resumed their declines Thursday on growing worries of an economic slowdown that sent investors into the haven of government bonds.
• The S&P 500 fell 0.7%, putting the index close to bear market territory—market shorthand for a 20% fall from a recent high. The index tumbled 4% Wednesday, its biggest one-day retreat since June 2020.
• After that drop, the S&P 500 had retreated more than 18% from its January all-time high.
• The Dow Jones Industrial Average fell about 1.2% Thursday, putting it about 15% below its all-time closing high. The Nasdaq Composite Index, which entered bear-market territory earlier this year, pared early losses and was recently up nearly 0.1%.
• Kohl’s fell 1% after saying sales weakened in April, making it the latest retailer to point to inflationary pressures on demand.
• Walmart and Target this week said higher costs ate into profits in the latest quarter, leading to a selloff of their shares that rippled through the broader market.
• Cisco Systems tumbled 14% after the communication-equipment firm missed analyst expectations for its quarterly results.
• The yield on 10-year Treasury notes fell to 2.814% from 2.884% Wednesday.
• The move put yields, which had shot up for much of the year as the Federal Reserve began to raise interest rates, on course to fall for seven in nine trading days. Bond yields and prices move in opposite directions.
• Meanwhile, the Labor Department said new applications for unemployment benefits rose for the third week in a row. Initial jobless claims, a proxy for layoffs, remain historically low.
• Separately, U.S. home prices reached a new high in April, according to fresh data, but the number of sales fell.
• International stocks retreated, tracking the U.S. selloff. The Stoxx Europe 600 shed 1.6%, led lower by shares of financial-services and food-and-beverage companies.
• Hong Kong’s Hang Seng Index tumbled 2.5% as shares of Tencent dropped 6.5% after the videogame giant reported its worst quarterly profit drop since listing in the city.
• Elsewhere in Asia, the CSI 300 index of the largest stocks listed in Shanghai and Shenzhen edged up 0.2%. Japan’s Nikkei 225 dropped 1.9% and South Korea’s Kospi Composite declined 1.3%.

Cisco shares slump as China lockdowns, Ukraine crisis hit outlook – Reuters, 5/19/2022

• Cisco Systems cut its full-year earnings forecast on Wednesday after COVID lockdowns in China and the war in Ukraine dragged sales below estimates in the third quarter, sending shares down 13% in extended trading.
• Cisco reported third-quarter adjusted profit of 87 cents on revenue of $12.8 billion, compared with expectations of 86 cents on revenue of $13.87 billion, according to IBES data from Refinitiv.
• It also said fourth-quarter revenue would decline by 1% to 5.5%, becoming the latest U.S. company to outline a hit from Beijing’s “Zero COVID” policy that has worsened supply-chain snags and hurt demand amid rising inflation.
• Cisco, which sells networking equipment and software to connect devices to the internet, now expects revenue growth of 2% to 3% in fiscal 2022, compared with an earlier forecast of 5.5% to 6.5%.
• Adjusted profit is estimated between $3.29 and $3.37 per share from $3.41 to $3.46 per share earlier.

Kohl’s First-Quarter Sales Fell as Retailers Struggle With Inflation – Wall Street Journal, 5/19/2022

• Kohl’s reported a 5.2% drop in first-quarter sales, the latest major retailer to struggle as inflation saps consumer spending power and raises costs for doing business.
• Total revenue was $3.5 billion, below analyst estimates for $3.7 billion.
• The department-store chain on Thursday said that sales took a hit as its customers see their disposable income contract from widespread inflation and from a lack of stimulus checks that boosted results last year.
• Its same-store sales rose 14.4% from a year ago, but that was boosted heavily by higher prices for gasoline, which it sells at pumps alongside its warehouse club stores.
• Excluding fuel, same-store sales rose 4.1% as consumers hunted for deals by buying products in bulk.
• For the quarter ended April 30, Kohl’s reported earnings of $14 million, flat from the prior year.
• Per-share earnings came in at 11 cents. Analysts had been expecting 69 cents a share, according to FactSet.
• The company is now expecting no more than 1% growth in net sales for the year, after previously forecasting that its full-year top line would rise between 2% and 3%. It also expects annual earnings to be between $6.45 and $6.85 a share, marking a 60 cent per-share reduction from the midpoint of its previous guidance.

Bath & Body Works shares fall as retailer cuts profit outlook due to inflation – CNBC, 5/19/2022

• Bath & Body Works shares fell in after-hours trading Wednesday after the retailer cut its profit outlook for the year, in part due to expected increases in inflationary pressures.
• Sales fell slightly to $1.45 billion from $1.47 billion a year earlier. But revenue beat expectations for $1.43 billion.
• For the three-month period ended April 30, Bath & Body Works reported net income of $154.9 million, or 64 cents per share, compared with income of $276.6 million, or 97 cents per share, a year earlier.
• Bath & Body Works, which sells lotions, candles and other bath soaps, is forecasting its fiscal 2022 earnings from continuing operations per diluted share to be between $3.80 and $4.15, compared with a prior range of $4.30 to $4.70.
• Its second-quarter earnings per share are expected to be between 60 cents and 65 cents, compared with 77 cents a year earlier.
• Bath & Body Works now expects to take a hit of between $225 million and $250 million from inflation this fiscal year, or about $75 million more than originally planned.

Boeing Gets Boost With Long-Awaited 737 MAX Deal From British Airways Owner – Wall Street Journal, 5/19/2022

• Boeing won a key order for 737 MAX aircraft from the owner of British Airways, in a boost for the plane maker after losing a series of sales from longtime customers to rival Airbus.
• International Consolidated Airlines Group SA, which owns airlines including BA, Ireland’s Aer Lingus and Spain’s Iberia, said it placed an order for 50 of Boeing’s 737 MAX aircraft, and has options to purchase another 100.
• The aircraft deal is split evenly between the 737-8200, a version of the MAX family of jets with more seats than its popular 737-8, and the 737-10, the biggest variant of the plane that is still awaiting regulatory approval from the Federal Aviation Administration.
• The order is smaller than originally planned. Under former Chief Executive Willie Walsh, IAG signed in June 2019 a letter of intent to buy 200 MAX jets.
• That agreement, although not binding, was seen as a major coup for Boeing at the time, and a vote of confidence in the aircraft type, just months after it was forced to ground the MAX following two deadly crashes.

Harley-Davidson to suspend most vehicle assembly due to parts issue – Reuters, 5/19/2022

• Harley-Davidson said on Thursday the bike maker will suspend all vehicle assembly and shipments for a two-week period, excluding those from its electric vehicle division LiveWire, due to a parts issue related to a supplier.
• The company said it took the decision after a third-party supplier informed Harley about a regulatory compliance matter relating to the supplier’s component part.

Ford recalls 39,000 U.S. SUVs after engine fire reports – Reuters, 5/19/2022

• Ford Motor Company said Thursday it was recalling 39,000 SUVs after reports of 16 fires, and has advised owners to park their vehicles outdoors and away from structures until a fix is completed.
• The recall, which covers some 2021 model year Ford Expedition and Lincoln Navigator vehicles, was prompted as an engine compartment fire could occur while the car is parked or being driven, even with the ignition off, the No. 2 U.S. automaker said.
• This year, Ford has issued 30 recalls in the United States covering 3.5 million vehicles, the most of any automaker.

More Subprime Borrowers Are Missing Loan Payments – Wall Street Journal, 5/19/2022

• Consumers with low credit scores are falling behind on payments for car loans, personal loans and credit cards, a sign that the healthiest consumer lending environment on record in the U.S. is coming to an end.
• The share of subprime credit cards and personal loans that are at least 60 days late is rising faster than normal, according to credit-reporting firm Equifax.
• In March, those delinquencies rose month over month for the eighth time in a row, nearing their prepandemic levels.
• Some 11% of general-purpose credit cards held by consumers with credit scores below 620 were at least 60 days behind on payment in March compared with 9.8% a year prior, according to the latest data available from Equifax.
• Personal loans and lines of credit delinquencies came in at 11.3%, up from 10.4% a year prior.
• Both categories hit Covid-19-era lows of 7.5% and 8.3%, respectively, in July.
• Car loan and lease delinquencies hit a record in February, based on Equifax’s tracking, with 8.8% of subprime accounts behind on payment by at least 60 days. That edged down to 8.5% in March but was still the second highest level on record.