Daily Market Report | June 8, 2022
US FINANCIAL MARKET
Stocks Edge Lower as Investors Fret About Stagflation Risks – Wall Street Journal, 6/8/2022
- U.S. stocks slipped Wednesday morning as investors parsed an ambivalent outlook for the global economy and awaited key data about inflation.
- The S&P 500 was down 0.3%, while the blue-chip Dow Jones Industrial Average weakened 0.4%. The technology-heavy Nasdaq Composite Index rose 0.2%.
- The combination of slowing growth and rising prices has raised the specter of stagflation—when growth stalls but inflation drives up prices. The World Bank on Tuesday cut its global growth forecast and warned that conditions in the economy resemble the stagflation of the 1970s.
- Treasury Secretary Janet Yellen is appearing before lawmakers for a second day Wednesday, part of two days of testimony discussing the administration’s annual budget request. On Tuesday, Ms. Yellen warned that inflation in the U.S. would likely remain elevated for some time.
- In individual stocks, Western Digital fell 1.6% after it confirmed reaching a settlement with activist investor Elliott Management that called for it to consider splitting its business.
- Campbell Soup rose 0.9% after it reported a rise in quarterly sales and lifted its sales guidance for the fiscal year.
- Smartsheet fell 7.4% after the software company reported a wider quarterly loss. Citrus farmer Limoneira rose 14% after reporting better-than-expected profit.
- In bond markets, the yield on benchmark 10-Year U.S. Treasurys rose to 3.014% from 2.969% on Tuesday. Bond yields and bond prices move in opposite directions.
- Overseas, the Stoxx Europe 600 fell 1% led by losses for financial and basic resources companies. In Japan, the Nikkei 225 rose 1% while in mainland China, the Shanghai Composite Index edged up 0.7%. Hong Kong’s Hang Seng rose 2.2% led by strong gains for technology firms.
Campbell Soup sales outlook brightens on higher prices, improved supply – Reuters, 6/8/2022
- Campbell Soup joined Kellogg and Kraft Heinz in raising its annual sales forecast on Wednesday after price hikes and easing supply chain constraints helped the maker of Swanson broth and Goldfish crackers top quarterly estimates.
- Net sales rose 7% to $2.13 billion in the three months to May 1, also beating Refinitiv estimates of $2.05 billion.
- The company posted an adjusted per-share profit of 70 cents compared with estimates of 61 cents, but kept its annual profit forecast unchanged due to inflationary pressures.
- Campbell now expects fiscal year 2022 organic net sales to rise between 1% and 2%, compared with its prior estimate of a 1% decline to a 1% rise.
OECD slashes growth outlook, but sees limited stagflation risk – Reuters, 6/8/2022
- The war in Ukraine has made the growth outlook far bleaker even though the global economy should avoid a bout of 1970s-style stagflation, the OECD said on Wednesday, slashing its growth forecasts and jacking up its inflation estimates.
- The world economy is set to grow 3% this year, much less than the 4.5% expected when the Organization for Economic Cooperation and Development last updated its forecasts in December.
- Growth will then slow further next year, easing to 2.8%, down from a previous forecast of 3.2%, the Paris-based policy forum said in its latest Economic Outlook.
- As the pandemic-related fiscal boost expires, the U.S. economy was seen growing 2.5% this year before slowing to 1.2% in 2023, down from previous forecasts of 3.7% and 2.4% growth, respectively.
- China’s economy, which has been hit by a fresh wave of COVID-19 lockdowns, is seen growing 4.4% this year and 4.9% next, down from 5.1% previously expected in both years.
- More exposed to Russian energy imports and the fallout from the war in Ukraine, the euro zone economy was seen growing 2.6% this year and 1.6% in 2023, down from forecasts of 4.3% and 2.5% respectively.
- Meanwhile, any quick relief from soaring costs is unlikely, with inflation expected to peak at 8.5% this year in OECD countries before slipping to 6.0% in 2023.
- Previously the OECD had expected inflation to peak at 5% before gradually receding to 3% in 2023.
Spirit Airlines Delays Shareholder Vote as It Considers Frontier, JetBlue Offers – Wall Street Journal, 6/8/2022
- Spirit Airlines has postponed a planned stockholder meeting on its proposed merger with Frontier as it weighs a competing bid from JetBlue.
- Spirit on Wednesday said it would push back the meeting scheduled for Friday to June 30.
- Spirit said it still recommends that its shareholders adopt the merger with Frontier but announced the delay to continue discussions with the two bidders, as well as with its own shareholders.
Chicken Company Foster Farms Sold to Private-Equity Firm – Wall Street Journal, 6/8/2022
- Foster Farms, a West Coast-based chicken company with $3 billion in annual revenue, has agreed to a takeover by private-equity firm Atlas Holdings and will install former Tyson Foods chief Donnie Smith as its leader.
- Foster Farms employs about 10,000 workers and operates processing facilities in California, Washington, Louisiana, Oregon and Alabama. The company is the 10th largest U.S. chicken producer by pounds produced, according to meat-industry publication Watt Poultry USA.
- Financial terms of the deal weren’t disclosed. The Livingston, Calif.-based company will continue to operate under the Foster Farms name.
Microsoft’s Augmented-Reality Chief Plans to Leave Company – Wall Street Journal, 6/8/2022
- An executive at the core of Microsoft’s metaverse strategy is leaving the company.
- Alex Kipman, a technical fellow at Microsoft who led its augmented-reality headset project, is stepping down, Scott Guthrie, Microsoft’s cloud and artificial-intelligence group executive vice president, wrote in an internal email Tuesday viewed by The Wall Street Journal.
- Mr. Kipman has been at the Redmond, Wash., company for 20 years and was in charge of the team developing the HoloLens, an augmented-reality headset that projects digital objects into the real world.
Novavax shares jump as FDA panel backs COVID vaccine – Reuters, 6/8/2022
- Shares of Novavax surged nearly 20% on Wednesday after advisers to the Food and Drug Administration overwhelmingly backed the use of its COVID-19 vaccine, bringing the shot a step closer to a U.S. launch.
- The stock tumbled about 20% on Friday after the heath regulator’s reviewers flagged concerns of a type of heart inflammation following the vaccination, adding uncertainty over the outcome of Tuesday’s meeting.
- However, the voting by the outside advisers – 21 for, none against and 1 abstention – indicates that the FDA could soon authorize the fourth vaccine in the United States, where Novavax hopes it would become the shot of choice among vaccine skeptics.
Lucid, Rivian Each Awarded CEOs More Than $400 Million in Pay Last Year – Wall Street Journal, 6/8/2022
- The chief executives of electric-vehicle startups Lucid Group and Rivian Automotive each received pay packages last year valued at over $400 million, as both companies raced to public markets and increased production in the growing EV market.
- Equity accounted for the bulk of the nearly $566 million in compensation for Lucid CEO Peter Rawlinson and $422 million for Rivian chief RJ Scaringe.
- The reported pay is a steep raise from 2020 and reflects, in part, the companies’ ambitions for growth.
- What executives ultimately receive will rise or fall with the companies’ stock prices, and some of the equity awards could expire worthless if targets aren’t met or they depart.
US ECONOMY & POLITICS
U.S. wholesale inventories revised slightly up in April – Reuters, 6/8/2022
- U.S. wholesale inventories increased slightly more than initially thought in April as growth in sales moderated, data showed on Wednesday.
- The Commerce Department said that wholesale inventories advanced 2.2%, instead of 2.1% as reported last month.
- Data for March was revised higher to show stocks at wholesalers rising 2.7% instead of the previously reported 2.3%.
- Wholesale inventories increased 24.0% in April on a year-on-year basis. Inventories are a key part of gross domestic product.
- Sales at wholesalers gained 0.7% in April after increasing 1.8% in March.
- At April’s sales pace it would take wholesalers 1.25 months to clear shelves, up from 1.23 months in March.
EUROPE & WORLD
Credit Suisse Warns of Another Loss as Capital Recedes – Wall Street Journal, 6/8/2022
- The Swiss bank said investment banking has been hit by companies opting not to sell new stock or bonds in volatile conditions, wiping out a main source of revenue.
- It said the poor performance will push the division and the bank overall to a loss in the second quarter, for its third consecutive quarterly loss.
- In an admission of the tough times it faces, Credit Suisse lowered its target capital ratio to 13.5% in the near term, from 14%.
- The ratio slipped to 13.8% at March 31 from 14.4% at the end of December. Executives previously said the bank doesn’t need to raise fresh capital, and that the ratio would rise back over 14% later this year.
- Credit Suisse lost the most among Wall Street lenders when the family office’s large stock positions imploded in March 2021, causing around $10 billion in losses across banks.
Yen Hits 20-Year Low, Fueling Price Rises and Apology – Wall Street Journal, 6/8/2022
- The yen touched 134 yen to the dollar Wednesday, the lowest level since February 2002.
- The yen’s value in dollar terms has fallen 16% since the beginning of the year, accelerating inflationary pressures because it takes more yen to buy imported goods denominated in dollars.
- Energy is a particular concern because Japan imports almost all of its oil and gas and needs dollars to pay for it.
- Japan’s consumer prices are rising at the fastest pace in three decades, although the inflation rate of 2.5% in April was well below 8.3% in the U.S.
China to Conclude Didi Cybersecurity Probe, Lift Ban on New Users – Wall Street Journal, 6/8/2022
- China is concluding a yearlong probe into ride-hailing giant Didi Global and preparing to lift a ban on adding new users, people familiar with the discussion said, the latest sign Beijing wants to spur economic activity from its beleaguered tech giants.
- Chinese regulators plan as well to allow the mobile apps of Didi back on domestic app stores, the people said.
- The apps were removed last July when Chinese authorities opened a data-security probe into Didi, citing national-security reasons. The lifting of the new user ban and app restorations could both happen as early as this week, the people said.
Iran Turns Off Nuclear-Monitoring Cameras Ahead of IAEA Censure Vote – Wall Street Journal, 6/8/2022
- Iran said Wednesday it had turned off some cameras monitoring its nuclear-related activities, as a confrontation with the U.S. and Europe escalated ahead of a U.N. atomic agency vote Thursday that is expected to rebuke Tehran for not cooperating with an investigation into its nuclear work.
- Iran has vowed retaliation if the International Atomic Energy Agency follows calls by Western powers to censure it on Thursday, eroding the already slim chances of striking a deal with the Biden administration to revive the 2015 nuclear deal.
- That agreement lifted most international sanctions on Iran in exchange for strict but temporary limits on its nuclear activities. The U.S. left the pact in 2018 and reimposed sweeping sanctions on Iran.
- Ahead of Thursday’s vote, Iran’s atomic energy agency said it was shutting off cameras at sites that were under IAEA monitoring as part of the 2015 nuclear deal.
- No details were given, but Iranian media said it was two cameras at one site.
Factmonster – TODAY in HISTORY
- Andrew Jackson, the 7th president of the United States, died in Tennessee. (1845)
- Tennessee became the 11th and last state to secede from the Union. (1861)
- James Earl Ray, Martin Luther King, Jr.’s, assassin, was arrested. (1968)
- President Reagan became the first American president to address a joint session of Britain’s Parliament. (1982)
- Tony Blair and his Labour Party won a second term, overwhelming the opposition at the polls. (2001)
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted. All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Wealth Management or LPL Financial. Prior to making any investment decision please consult your financial advisor regarding your specific situation.