US FINANCIAL MARKET
Stocks Edge Higher Ahead of Fed Minutes – Wall Street Journal, 5/25/2022
- U.S. stocks edged up ahead of the release of minutes from the Federal Reserve’s most recent policy meeting, which will be combed for details on the path of coming interest-rate rises.
- After briefly opening lower, stock indexes turned green in early trading. The S&P 500 rose 0.9% after the broad-market index closed down 0.8% on Tuesday. The Nasdaq Composite Index rose 1.2%, a reversal from a sharp selloff in tech stocks the day before. The Dow Jones Industrial Average edged up 0.6%, or 198 points.
- Minutes from the Federal Reserve meeting earlier this month will be out at 2 p.m. ET and are expected to provide more signals for investors about policymakers’ outlooks on the economy and inflation.
- U.S. durable goods orders for April increased by 0.4%, a slower pace than economists expected.
- The yield on the benchmark 10-year Treasury note was down to 2.73% from 2.758% on Tuesday. It has declined for four of the past five trading sessions. Yields fall when prices rise.
- Oil prices climbed with global benchmark Brent crude rising 0.6% to trade at $111.40 a barrel. The U.S. energy secretary said the Biden administration hasn’t ruled out a ban on oil exports to tame domestic fuel prices, Reuters reported
- Retailer Nordstrom climbed 10% after raising its guidance for full-year revenue growth.
- Apparel company Express jumped 11% after posting a narrower-than-expected loss and raising sales guidance.
- Home builder Toll Brothers rose 6.4% after reporting revenue and profit that beat analysts’ expectations.
- Overseas, the pan-continental Stoxx Europe 600 edged up 0.8%. British online grocer Ocado fell 2.1% after cutting sales guidance for a joint venture due to rising prices changing consumer behavior.
- In Asia, major benchmarks were mixed. The Shanghai Composite Index added 1.2% while Hong Kong’s Hang Seng ticked up 0.3%. Japan’s Nikkei 225 declined 0.3%.
Dick’s Sporting Goods Cuts Earnings Guidance as Sales Drop – Wall Street Journal, 5/25/2022
- Dick’s Sporting Goods cut its earnings outlook for the year after posting a decline in first-quarter sales, the latest retailer projecting struggles as inflation pinches consumer wallets.
- Revenue came in at $2.7 billion, down from $2.9 billion a year earlier. Analysts polled by FactSet had been expecting $2.6 billion.
- The sports equipment and apparel chain said same-store sales, which reflect stores open at least a year and include digital sales, dropped 8.4% in the quarter while overall sales fell 7.5% from a year earlier.
- For the quarter ended April 30, Dick’s reported earnings of $260.6 million, or $2.47 a share, down from $361.8 million, or $3.41 a share, a year ago.
- Adjusted earnings were $2.85 a share, above Wall Street expectations of $2.52, according to FactSet.
- The company said it is now projecting same-store sales could fall as much as 8% this year and lowered its profit outlook.
- Dick’s new forecast calls for same-store sales to fall between 2% and 8% this year, compared with an earlier projection of being flat to down 4%.
- Per-share earnings adjusted for certain items are expected to be between $9.15 and $11.70, compared with the company’s prior guidance of between $11.70 and $13.10.
Nordstrom raises full-year outlook as first-quarter sales top expectations – CNBC, 5/25/2022
- Nordstrom on Tuesday reported fiscal first-quarter sales ahead of analysts’ expectations and hiked its full-year outlook, citing momentum in the business as shoppers visited the company’s department stores to refresh their closets with designer brands and shoes.
- Total revenue, including credit card sales, grew to $3.57 billion from $3 billion a year earlier. That beat expectations for $3.28 billion.
- At Nordstrom’s namesake banner, net sales grew 23.5%, exceeding pre-pandemic levels.
- Net sales at Nordstrom Rack rose 10.3% but were still below 2019 levels, the company said.
- Digital sales were flat on a year-over-year basis, as shoppers trimmed their online spending and headed back to stores.
- E-commerce represented 39% of total sales, compared with 46% a year earlier.
- Nordstrom reported net income for the three-month period ended April 30 of $20 million, or 13 cents a share, compared with a net loss of $166 million, or $1.05 per share, a year earlier.
- Nordstrom now sees fiscal 2022 revenue, including credit card sales, up 6% to 8%, compared with a prior range of up 5% to 7%.
- It forecasts earnings per share, excluding the impact of any share repurchase activity, in a range of $3.38 to $3.68, up from a prior range of $3.15 to $3.50. On an adjusted basis, it expects to earn between $3.20 and $3.50 a share.
- Also on Tuesday, Nordstrom announced it will soon start to sell shoes from Allbirds, making it one of the sustainable sneaker brand’s few third-party retail partners, and said it had authorized a new $500 million buyback.
Stellantis, Samsung SDI Plan New EV Battery Plant in Indiana – Wall Street Journal, 5/25/2022
- Auto maker Stellantis and Samsung SDI said Tuesday that they would build a new battery plant in Indiana to support the Jeep and Ram manufacturer’s electric-vehicle production plans.
- The $2.5 billion plant is expected to break ground later this year and open in the first quarter of 2025, they said.
- The companies said they expect the project to create 1,400 jobs and supply battery modules for an unspecified range of EVs made at Stellantis’s North American assembly plants.
- The Indiana project is the Stellantis’s second planned battery facility in North America.
- In March, the company said it would build a new $4.1 billion electric-vehicle battery facility with LG Energy Solution in Windsor, Ontario.
Natural Gas Tops $9 in US as Supply Crunch Concerns Mount – Bloomberg, 5/25/2022
- Natural gas surged above $9 per million British thermal units in the US for the first time since 2008, extending a breakneck rally as fears of a supply crunch intensified.
- Stockpiles of the heating and power-plant fuel are below normal for this time of year as exports are booming, and output from shale basins is muted.
- Traders anticipate higher-than-usual gas needs this summer to fuel US power plants as consumers and businesses crank up air conditioners to combat hotter weather.
- Meanwhile, hydro-power generation and coal supplies are severely constrained, leaving limited alternatives to gas.
At $6.09 a Gallon, LA Pays Record Gasoline Price Over US Average – Bloomberg, 5/25/2022
- Los Angeles drivers know they pay more for gasoline than the average US driver: It’s the price for cleaner air in a state that’s made being green part of its DNA.
- What motorists in LA — a city famed for its car culture — may not realize is that the amount they pay over the national average soared to more than $1.80 a gallon in late March, the widest in at least 10 years, according to data from the AAA.
- The higher prices in California are partly the result of taxes and state programs to reduce greenhouse gases, like a rule requiring a less-polluting blend of fuel.
- These measures add about $1.30 to the cost of a gallon, according to the Western States Petroleum Association, a trade group.
- So far, at least, the cash squeeze at the pump isn’t crimping travel plans, even though each tank costs about $24 more.
- The Auto Club of Southern California predicts 2.6 million local residents will take to the highways this Memorial Day weekend.
- That’s up 5% from 2021 but about 7% below 2019, before the Covid-19 pandemic.
Lyft to slow hiring, assess budget cuts – Reuters, 5/25/2022
- Ride-hailing firm Lyft said on Tuesday it would slowdown hiring and assess budget cuts in some departments, joining rival Uber Technologies in attempting to rein in costs.
- Lyft said no employee layoffs are planned and added it would grant special stock options to eligible employees.
- “We’re also being responsible about costs and will significantly slow hiring,” the company said in a statement.
- Earlier this month, Uber’s Chief Executive Officer Dara Khosrowshahi said the company would scale back hiring and reduce expenditure on its marketing and incentive activities.
Ford to pay U.S. states $19.2 million over false advertising claims – Reuters, 5/25/2022
- Ford Motor will pay $19.2 million to resolve allegations it falsely advertised real-world fuel economy and payload capacity for some hybrids and pickup trucks, the Iowa Attorney General’s Office said on Tuesday.
- The multi-state settlement covers 2013–2014 C-Max hybrids and 2011–2014 Super Duty pickups. In 2013, Ford lowered the advertised fuel economy ratings on its C-Max hybrid by up to seven miles per gallon and sent checks to owners of $550 to make up the difference in fuel costs.
- The settlement, with 40 states and the District of Columbia, prohibits Ford from making false or misleading advertising claims concerning estimated fuel economy or payload capacity of a new motor vehicle.
- Ford did not admit wrongdoing.
Global light vehicle sales to fall further on China lockdown – data – Reuters, 5/25/2022
- Auto industry consultants J.D. Power and LMC Automotive on Wednesday further cut their global light vehicle sales forecast for 2022, as lockdowns in China and the ongoing war in Ukraine hurt production.
- The consultants now expect 2022 light vehicle sales of 80 million units, down from their earlier forecast of 81.7 million units.
- U.S. total new-vehicle sales for May, including retail and non-retail transactions, are projected to reach 1.2 million units, an 18% decrease from last year, the consultants said in a report.
- Retail sales of new vehicles in the country are also expected to fall 20.9% but the average transaction price is anticipated to hit a May record at $44,832.
- The seasonally adjusted annualized rate for total new-vehicle sales in the United States is expected to be 13.6 million units in May, down from 3.3 million units last year.
US ECONOMY & POLITICS
US Durable Goods Orders Rise on Steady Business Equipment Demand – Bloomberg, 5/25/2022
- Orders placed with US factories for durable goods rose in April, highlighting firm and sustained demand for equipment and merchandise.
- Bookings for durable goods — items meant to last at least three years — increased 0.4% in April after a downwardly revised 0.6% advance a month earlier, Commerce Department figures showed Wednesday. The figures aren’t adjusted for inflation.
- The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, climbed 0.3% after a 1.1% gain a month earlier.
- Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, increased 0.8%, pointing to a solid start to second-quarter growth.
- Bookings for motor vehicles eased after a surge in March.
- Durable goods orders excluding transportation equipment climbed 0.3% last month.
- Even if demand for equipment slows, factory backlogs will lend support to the pace of production.
- The report also showed unfilled orders for all durable goods rose 0.5% for a second month, while inventories increased 0.8%.
Power of Trump’s Endorsements Dims in Governor Races – Wall Street Journal, 5/25/2022
- Former President Donald Trump’s stature as GOP kingmaker has been dented in the past week, as some candidates he backed in major Republican primaries—particularly for governor—lost their bids.
- In Georgia on Tuesday night, Gov. Brian Kemp decisively won his primary against the former president’s candidate, former Sen. David Perdue.
- Last week in Idaho, Mr. Trump’s candidate, Lt. Gov. Janice McGeachin, lost her challenge to Gov. Brad Little.
- A week before that, Charles Herbster, the Trump-backed businessman who ran for governor in Nebraska and faced allegations of groping women, lost to University of Nebraska official Jim Pillen.
- Mr. Trump posted Wednesday on his social media platform, TruthSocial: “A very big and successful evening of political Endorsements.”
- He pointed to a slate of wins for his candidates in states like Arkansas, where Sarah Huckabee Sanders won the GOP nomination for governor, and elsewhere in Georgia.
- Herschel Walker, the former football star, was hand-selected by Mr. Trump in Georgia’s GOP Senate primary and easily captured it Tuesday night.
- Mr. Trump didn’t mention Mr. Perdue’s loss, but wrote in the social media post that some races where he had made an endorsement “were not possible to win.”
Baby Formula Makers and FDA to Discuss Shortage With Lawmakers – Wall Street Journal, 5/25/2022
- U.S. lawmakers are scheduled to discuss on Wednesday the nationwide shortage of baby formula, as well as government and company efforts to relieve it.
- Officials from the Food and Drug Administration and from the major formula manufacturers are expected to testify before the House Energy and Commerce Committee’s oversight and investigations subcommittee about their attempts to address the short supply.
- Rep. Frank Pallone (D., N.J.), chairman of the full committee, said, “The focus of this hearing will be on better understanding the causes of the shortage, what has been done to increase production and supply thus far, and what more still needs to be done to ensure access to safe formula across the nation.”
- The hearing is the latest in Congress on the short supplies of a crucial baby product, which have left some store shelves empty, triggered an outcry from parents and prompted the Biden administration to try to address the problem.
EUROPE & WORLD
ECB Signals Delayed Bond Runoff, Diverging From Fed – Wall Street Journal, 5/25/2022
- The European Central Bank is likely to hold on to its mammoth portfolio of sovereign debt as it starts to raise interest rates, ECB officials said, underlining the fine line it is walking as it tightens monetary policy to battle inflation while trying not to weaken the bloc’s most fragile economies.
- By holding on to its sovereign bonds, the bank would be offering some relief for the region’s most indebted governments, diverging further from the Federal Reserve, which plans to start shrinking its bondholdings next week.
- “I don’t expect any discussion on that [the ECB’s bondholdings] at least for the remainder of this year and into next year. So we will focus on [interest] rates,” said Klaas Knot, who sits on the ECB’s rate-setting committee as governor of the Netherlands central bank, in a panel discussion at the World Economic Forum in Davos, Switzerland. “That will imply that we will have a large balance sheet for still some time to come.”
- Fabio Panetta, who sits on the ECB’s six-member executive board, said the ECB would “be much more able to anticipate the consequences of gradually adjusting rates while keeping our balance sheet constant,” in a speech on Wednesday in Frankfurt.
Export Curbs Spread Globally, Adding to Food-Inflation Pressures – Wall Street Journal, 5/25/2022
- Countries around the world have enacted a wave of export curbs on food since the start of the Ukraine war, a trend that economists say risks aggravating shortages and global food-price inflation.
- On nearly every continent, nations have put new restrictions and bans on products ranging from wheat, corn and edible oils to beans, lentils and sugar. Lebanon has even banned the export of ice cream and beer.
- On Monday, Malaysia’s government said it would halt the export of 3.6 million chickens a month starting on June 1, citing tight supplies and high prices. “The government’s priority is the people,” Prime Minister Ismail Sabri Yaakob said.
- India, which banned wheat exports earlier this month, on Wednesday said it would set a cap on sugar exports between June 1 and Oct. 31.
- In all, 26 countries have implemented some form of export restriction on food or fertilizer in 2022, according to the International Food Policy Research Institute in Washington, D.C. Restrictions include outright bans on exports as well as taxes and special licensing regimes.
- Global food prices in April were 30% higher than a year earlier, according to an index published by the Food and Agriculture Organization of the United Nations.
- Meat prices were up 17%, prices for cereals such as wheat and maize were up 34% and vegetable oil prices were 46% higher.
Singapore sees 2022 GDP at lower end of forecasts amid war, supply chain woes – Reuters, 5/25/2022
- Singapore’s economy expanded more than initially estimated in the first quarter but annual GDP will likely be in the lower half of the government’s forecast range, officials said on Wednesday, citing war in Ukraine and supply chain disruptions.
- Gross domestic product (GDP) grew 3.7% year-on-year in the first quarter, the Ministry of Trade and Industry (MTI) said, higher than the government’s advance estimate of 3.4% but matching analysts’ forecasts in a Reuters poll.
- The MTI maintained its 2022 GDP growth forecast at 3% to 5%, but said growth is more likely to come in at the lower half of this range, due to uncertainties stemming from the Russia-Ukraine conflict and stringent COVID-19 measures in China.
TotalEnergies to Buy Stake in U.S. Wind and Solar Company in Green-Energy Push – Wall Street Journal, 5/25/2022
- TotalEnergies said it would buy a 50% stake in U.S. renewables company Clearway Energy Group in a deal worth about $2.4 billion, the latest move by an oil major to expand in wind and solar power.
- The French energy giant is acquiring the stake from Global Infrastructure Partners for $1.6 billion in cash plus an interest in a TotalEnergies unit that owns about half of U.S. residential solar business SunPower.
- The Clearway deal will expand TotalEnergies’ reach in the U.S. green-power sector and comes as the world’s largest energy companies seek to transition away from oil and gas toward lower carbon power amid pressure from consumers, investors and governments.
- TotalEnergies said Wednesday that Clearway is the fifth-largest U.S. renewables player, with 7.7 gigawatts of wind and solar power, and a pipeline of more than three times that volume of renewable and storage projects.
- The Constitutional Convention convened in Philadelphia under the leadership of George Washington, in order to establish a new U.S. government. (1787)
- John Scopes was indicted for teaching Darwin’s theory of evolution. (1925)
- Muhammad Ali knocked Sonny Liston out cold in the first round, after 1 minute and 56 seconds, for the world heavyweight title. (1965)
- The Gateway Arch was dedicated in St. Louis. (1968)
- The worst air disaster in U.S. history (excluding the Sept. 11 attacks) occurred when a DC-10 crashed at Chicago’s O’Hare airport, killing over 270 people. (1979)