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Daily Market Report | June 29, 2022

US FINANCIAL MARKET

U.S. Stocks Waver as Central Bankers Hold Panel – Wall Street Journal, 6/29/2022

  • U.S. stocks rose on Wednesday as investors digested comments from central bankers at a panel in Europe that provided insight into their views on the economy, inflation and the path of monetary policy.
  • The S&P 500 added 0.2%, after the broad-market index closed down 2% on Tuesday. The Dow Jones Industrial Average was up 0.5%, while the Nasdaq Composite Index rose less than 0.1%.
  • Federal Reserve Chairman Jerome Powell, speaking at the European Central Bank’s annual economic-policy conference in Portugal, said the pandemic had disrupted the economy in ways that might fuel more inflation or volatility in price pressures.
  • The yield on the benchmark 10-year Treasury note edged down to 3.130% from 3.206% on Tuesday, reversing direction after three straight days of rises. Prices rise when yields fall.
  • Southern European government bonds rallied, with Italy’s 10-year yield declining to 3.447% from 3.514% the day before.
  • The pan-continental Stoxx Europe 600 fell 0.9%. Spain’s IBEX 35 index declined 1.6% after a data release showed that the country’s inflation had surged to 10.2%, a record high.
  • Dutch food-delivery company Just Eat Takeaway.com tumbled 18% after the chief executive of its subsidiary Grubhub said a sale isn’t imminent.
  • Swedish fashion retailer Hennes & Mauritz rose 1.7% after reporting better-than-expected quarterly profit and beginning a share-buyback program.
  • Cruise company Carnival fell 15%, accelerating its two-day decline spurred by a series of price-target cuts by equity research analysts.
  • Bed Bath and Beyond fell 19% after the retailer posted a bigger quarterly loss than Wall Street expected and said its chief executive is leaving the role.
  • Oil prices edged up. U.S. crude oil rose 1.7% to $113.72.
  • A benchmark contract for nickel on the London Metal Exchange rose 6.6% after the U.K. sanctioned Vladimir Potanin, a Russian oligarch and the biggest shareholder of Norilsk Nickel, a major producer of the metal.
  • In Asia, most major benchmarks declined. The Shanghai Composite Index fell 1.4% and Hong Kong’s Hang Seng Index slipped 1.9%. Japan’s Nikkei 225 retreated 0.9%.

General Mills Sales Climb 8% on Higher Prices – Wall Street Journal, 6/29/2022

  • General Mills said higher prices helped lift sales in the recently ended quarter even as the food maker sold fewer items across the board.
  • The maker of Cheerios cereal and Betty Crocker cake mix on Wednesday posted an 8% increase in sales, to nearly $4.9 billion, for its fiscal fourth quarter ended May 29. Sales of $4.89 billion were slightly ahead of analyst expectations.
  • Organic sales, which strip out effects from currency fluctuations and mergers, rose 13%.
  • Overall for the quarter, the company’s profit nearly doubled to $822.8 million, or $1.35 a share, from $416.8 million, or 68 cents a share, in the same period a year earlier.
  • General Mills forecast costs to rise at a double-digit rate over the next year, with more cost cuts and price increases planned to try to protect profits.

Bed Bath & Beyond CEO Exits as Sales Plunge – Wall Street Journal, 6/29/2022

  • Bed Bath & Beyond replaced Chief Executive Mark Tritton, as the home-goods retailer’s sales plunged due to a mismatch between what its stores carry and what shoppers want.
  • The news came as Bed Bath & Beyond reported that its first-quarter sales plunged by a quarter compared with the same period last year while its net loss widened to $358 million from $51 million.
  • On Wednesday, the company said sales in its fiscal first quarter had dropped 25% to $1.46 billion, while its quarterly net loss swelled sevenfold compared with the same period last year to $358 million.
  • The chain ran short of its 200 best-selling items during the most recent holiday season, leading to $100 million in lost sales and posted another sales shortfall the following quarter.

Pinterest CEO Is Stepping Down, Google Commerce Executive to Take Top Job – Wall Street Journal, 6/29/2022

  • Pinterest’s longtime chief executive is stepping down and a Google commerce executive is taking over the top job, the social-media company said Tuesday.
  • Ben Silbermann, who co-founded Pinterest in 2010 and served as its CEO ever since, is transitioning to executive chairman of the board, a newly created position.
  • His replacement, Bill Ready, comes from Alphabet’s Google, where he had been president of commerce since 2020.
  • Mr. Ready, who earlier in his career was operating chief of PayPal Holdings and before that CEO of Venmo, has also joined Pinterest’s board as a director, the company said.

OPEC, Allies Struggle to Meet Oil Production Targets – Wall Street Journal, 6/29/2022

  • As President Biden prepares to go to Saudi Arabia in July, OPEC members say the cartel and its allies have fallen far behind on their oil-production targets and are in their weakest position in recent years to help tame high crude prices.
  • The alliance, known as OPEC+, pumped nearly 3 million barrels a day less than its collective production target of about 42 million barrels a day in May, according to an independent assessment report commissioned by OPEC.
  • OPEC+ earlier this month agreed to raise output by 648,000 barrels a day in July and in August, according to delegates. That increases OPEC+’s production about 50% more than previously planned, but it is unlikely to meet its targets, analysts say.
  • The agreement, for instance, assumes Russia will increase its output by 170,000 barrels a day from July.
  • Yet estimates presented to the cartel’s delegates show its output has fallen 800,000 barrels a day under Western sanctions and is expected to fall by 2 million barrels a day after the European Union agreed to impose a partial ban on Russian oil purchases.
  • Filling these gaps would require others to produce more. But spare capacity, which is mostly concentrated in Saudi and Emirati hands, is set to almost halve to 1.7 million barrels a day next year, another report commissioned by OPEC says.
  • It will shrink to as little as 400,000 barrels a day in 2024 as producers respond to rising oil demand, it says.

U.S. vehicle quality hits 36-year low as supply, labor woes continue – J.D. Power – Reuters, 6/29/2022

  • The quality of vehicles sold in the United States fell to a 36-year low in 2022, according to automotive consultant J.D. Power, as labor shortages and supply snags continued to impact automakers.
  • The study, which collected data from 84,165 purchasers and lessees of 2022 model-year vehicles, reported that problems per 100 vehicles (PP100) rose 11%, 18 PP100 worse than last year. A lower score reflects higher vehicle quality.
  • General Motors’ Buick ranked the highest in terms of improvement in initial quality among automakers, while Stellantis’s Chrysler ranked the lowest.
  • The report also added that owners of battery-electric vehicles (BEV) and plug-in hybrid vehicles (PHEVs) cited more problems in their vehicles when compared to owners of internal combustion engine (ICE) models.
  • Tesla, which was included in the study for the first time, scored 226 PP100 compared to Polestar , which scored 328 PP100. GM’s Buick scored 139 PP100.

Oil Rises as Stockpiles at Biggest US Hub Fall to 2014 Low – Bloomberg, 6/29/2022

  • Oil rallied for a fourth day as a government report showed US stockpiles dropped last week, exacerbating global supply concerns with shipments from Libyan ports suspended.
  • West Texas Intermediate rose as much as 2.4% to trade near $114 a barrel. US crude stockpiles fell 2.76 million barrels last week, according to an Energy Information Administration report Wednesday.
  • Inventories at Cushing, Oklahoma, the largest storage hub in the US, fell to the lowest since October 2014.

US ECONOMY & POLITICS

US Personal Spending Is Revised Sharply Lower in First-Quarter Data – Bloomberg, 6/29/2022

  • US consumer spending expanded in the first quarter at the softest pace of the pandemic recovery, marking a surprise sharp downward revision that suggests an economy on weaker footing than previously thought.
  • Outlays on goods and services rose an annualized 1.8%, compared with a 3.1% pace in the previous estimate, according to Commerce Department data out Wednesday.
  • Overall gross domestic product was revised down slightly to a 1.6% annualized decline in the first quarter.
  • Private inventory investment was revised sharply higher, rising nearly $189 billion from the prior quarter compared with a previously estimated change of about $150 billion.

Powell Says Fed Must Accept Higher Recession Risk to Combat Inflation – Wall Street Journal, 6/29/2022

  • Federal Reserve Chairman Jerome Powell said he was more concerned about the risk of failing to stamp out high inflation than he was about the possibility of raising interest rates too high and pushing the economy into a recession.
  • “Is there a risk we would go too far? Certainly there’s a risk,” Mr. Powell said Wednesday. “The bigger mistake to make—let’s put it that way—would be to fail to restore price stability.”
  • “There’s a clock running here,” Mr. Powell said during a moderated discussion Wednesday at the European Central Bank’s annual economic policy conference in Portugal on Wednesday.
  • “The risk is that because of the multiplicity of shocks, you start to transition into a higher-inflation regime. Our job is to prevent that from happening.”

Fed’s Mester Says Supply Shocks Potentially Require Policy Response – Wall Street Journal, 6/29/2022

  • Federal Reserve Bank of Cleveland President Loretta Mester said Wednesday that the central bank might no longer be able to ignore sources of inflation that monetary policy can’t easily address given how those types of rising prices can affect consumers’ moods.
  • Ms. Mester, who is a voting member of the rate-setting Federal Open Market Committee this year, assessed in her prepared text what inflation expectations mean for central-bank policy. She didn’t address the near-term monetary-policy outlook.
  • The challenge is that there is no settled science for measuring inflation expectations. Meanwhile, much of what drives inflation now are supply-related shocks from food and energy factors that monetary policy can’t do much to address, according to many economists.
  • Ms. Mester said the impact that supply-related shocks have on expectations suggest that the Fed should take on board and react to these price changes, in large part to help keep inflation expectations from rising.

Home-Price Growth Slowed in April – Wall Street Journal, 6/29/2022

  • Home-price growth slowed slightly in April as competition for homes remained fierce despite rising mortgage-interest rates.
  • The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 20.4% in the year that ended in April, down from a 20.6% annual rate the prior month.
  • The Case-Shiller index, which measures repeat-sales data, reports on a two-month delay. The median existing-home price rose 14.8% in May from a year earlier and topped $400,000 for the first time on record, NAR said.
  • The Case-Shiller 10-city index gained 19.7% over the year ended in April, compared with a 19.5% increase in March. The 20-city index rose 21.2%, after an annual gain of 21.1% in March. Price growth decelerated in 11 of the 20 cities.
  • A separate measure of home-price growth by the Federal Housing Finance Agency also released Tuesday found an 18.8% increase in home prices in April from a year earlier.

Consumers’ Outlook on the Economy Hits Lowest Point in Nearly a Decade – Wall Street Journal, 6/29/2022

  • Consumers’ short-term outlook for the U.S. economy dropped sharply to its lowest point in nearly a decade on concerns about inflation, the Conference Board’s consumer-confidence survey showed.
  • The consumer-confidence index, which hints at American attitudes toward jobs and the economy, also fell, dropping to 98.7 in June, down 4.5 points from 103.2 in May, the Conference Board said on Tuesday. The board’s expectations index, which measures consumers’ short-term outlook about the labor market, business and income, reached a low of 66.4 in June from 73.7 the prior month.
  • Nearly 30% of those surveyed in June expect business conditions to worsen, according to the Conference Board survey. And 23% of consumers said business conditions were “bad,” up from 21.7% the prior month.

Fed’s Inflation Fight Made Tougher by State Relief Efforts – Bloomberg, 6/29/2022

  • States’ efforts to provide inflation relief to US consumers with tax rebates may go over well with recipients — yet they risk adding even more fuel to spending and making it tougher for Federal Reserve policy makers to cool inflation.
  • California officials over the weekend announced a relief package that will give $9.5 billion of tax rebates to residents. The checks of $200 to $1,050 are likely to go out in October to about 17 million families.
  • States including Colorado, Maine, Indiana and Delaware are implementing similar measures to help people cope with high prices, particularly for necessities like gas and food.
  • Under the California relief plan, individuals making as much as $75,000 a year, or joint filers making up to $150,000, would get $350 each plus $350 for one dependent for a maximum of $1,050. The amounts and caps are smaller for higher income brackets.

EUROPE & WORLD

UK Sanctions Richest Russian, Sparking Metal Supply Fears – Bloomberg, 6/29/2022

  • The UK government imposed sanctions on Vladimir Potanin, Russia’s richest man and the president of MMC Norilsk Nickel PJSC, in the latest escalation of economic measures against Moscow.
  • It wasn’t clear whether the sanctions on Potanin would extend to Nornickel, which is one of the world’s largest producers of nickel, palladium and copper.
  • Potanin is the company’s top executive and owns over 30% through his investment company Interros. Palladium rose as much as 7.7% on the news, while nickel prices jumped 9.2% before paring gains.
  • In its updated sanctions list, the UK said Potanin “is obtaining a benefit from or supporting the Government of Russia by owning or controlling Rosbank.” It made no mention of Nornickel.

Swiss Franc Rises to Parity With Euro for First Time Since March – Bloomberg, 6/29/2022

  • The Swiss franc rose to parity with the euro for the first time since the outbreak of the war in Ukraine, with traders piling into the so-called haven currency as concern about risks to global growth intensified.
  • The euro-Swiss franc pair fell as much as 0.8% to 0.99922 per euro, the lowest level since March 7.
  • The currency has been strengthening since the Swiss National Bank unexpectedly hiked rates by 50 basis points earlier this month and remains ready to hike again to tame inflation if necessary.

Novartis to Cut up to 8,000 Jobs World-Wide – Wall Street Journal, 6/29/2022

  • Swiss pharmaceutical giant Novartis said it plans to shed as many as 8,000 jobs globally, including 1,400 in Switzerland, as part of a previously disclosed restructuring plan aimed at saving some $1 billion in costs.
  • The cuts would affect 7.4% of Novartis’s jobs globally and 12% of its Switzerland-based workers, the company said in a statement.
  • Novartis employs some 108,000 people globally and 11,600 in Switzerland. The company said in a statement that the new structure would “accelerate growth, strengthen pipeline and increase productivity.”

Sri Lanka Restricts Fuel Use to Essential Services – Wall Street Journal, 6/29/2022

  • Sri Lanka has sharply restricted fuel use and urged residents to stay home as it struggles to shore up energy supplies amid its deepening sovereign debt crisis.
  • The South Asian nation’s wilting economy has seen Sri Lankans endure months of double-digit inflation, rolling power blackouts and severe shortages in food and medicines, sparking nationwide antigovernment protests.
  • Sri Lanka’s foreign reserves are depleted to the point that it can no longer afford to pay for essential imports, and the country defaulted for the first time in its history last month.
  • The country’s economy faced complete collapse, Prime Minister Ranil Wickremesinghe said last week.
  • Late Monday, authorities shut schools and urged all to work from home until July 10, with rationed fuel supplies reserved for public transport, medical services and food transportation.
  • Sri Lanka’s fuel shortage has worsened in recent weeks, with residents lining up for hours and sometimes days to obtain gasoline in queues that snake for miles around city blocks.

Factmonster – TODAY in HISTORY

    • London’s Globe Theatre burned down during a performance of Shakespeare’s Henry VIII. (1613)
    • The British Parliament approved the Townshend Acts. (1767)
    • The Supreme Court ruled in Furman v. Georgia that the death penalty could constitute “cruel and unusual” prompting some states to revise their laws. (1972)
    • Actress Katharine Hepburn died. (2003)

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