- Turkey’s Inflation Rate Hits A New 20-Year High Of 54%
- Oil Surge Turns India’s Bonds Into Most Risky in Emerging Asia
- Europe’s Biggest Port Is Very Worried
- Talking War and Market Volatility
- The End of the Oligarch Era Nears
- The Teenager Who Tracked Elon Musk’s Jet
- U.S. Activist Investors
- Twitter Wants to Reinvent Itself
- ‘We Were Terrified’
- This Social Club Runs on Crypto Tokens and Vibes
- Nissan Ex-Executive Gets Suspended
In his testimony to Congress on Wednesday, Fed Chair Jay Powell ditched the ambiguous lingo by confirming his support for a 25 bps interest rate hike at the FOMC's next meeting in two weeks. While rate rises are not particularly friendly to stocks, markets have been pricing in the new monetary cycle for months and were happy to hear that a half point move wasn't in the cards. Going through with the removal of easy pandemic-era support also signaled that the Fed wasn't too concerned about the economic fallout from the war in Ukraine, prompting the S&P 500 to end the session up nearly 2%.
Bigger picture: Despite the advance, all three major averages are off more than 4% over the past month, with the Nasdaq Composite still in correction territory. Powell also didn't rule out a larger move in the future if inflation continues to come in hot, with the next CPI data being released on March 10 (just days before the upcoming Fed meeting). A lot could also take place on the geopolitical stage before then, with Powell acknowledging that the Russian invasion could lead to the reshaping of Western economies due to the effects of financial sanctions.
Over in oil markets, WTI crude touched as high as $116 a barrel. That could be music to OPEC+'s ears, especially key member Russia, which has been facing escalating sanctions. A high-profile meeting of the alliance yesterday saw producers leave plans in for raising collective oil output by 400K bpd in April, with no suggestion of additional increases. Remember, it wasn't easy to bring Russia back into the group during the pandemic, when a disagreement with kingpin Saudi Arabia turned into an oil price war. Crude is now up over 50% YTD, a massive increase, given that we are only two months into the year.
Go deeper: The West has so far avoided sanctioning Russia's energy sector, which is responsible for much of the country's exports and economic growth, but momentum is building. Proposals from Sens. Joe Manchin (D-WV) and Lisa Murkowski (R-AK), as well as Ed Markey (D-MA), are making rounds on Capitol Hill that would give President Biden the power to levy an oil and natural gas embargo on Moscow. While the U.S. doesn't use much Russian crude (it only accounts for 3% of American imports), the sentiment is spreading to Europe where it could be a lot more damaging. Western refiners, shippers and banks are already stepping away from Russia energy, helping attribute to the elevated prices seen over the past week. (105 comments)
In a major restructuring that's being noted across the auto industry, Ford Motor (F) has confirmed plans to create distinct internal combustion and electric vehicle businesses. "Ford Blue" will build out company's portfolio of ICE vehicles with a goal to drive growth and profitability, while "Ford Model e" is said to be aimed at accelerating innovation and delivering breakthrough EVs at scale while developing software and connected vehicle technologies. The separation aims to streamline its growing electric vehicle business and maximize profit.
Quote: "We have made tremendous progress in a short period of time. We have launched a series of hit products globally and demand for our new EVs like F-150 Lightning and Mustang Mach-E is off the charts," declared CEO Jim Farley. "But our ambition with [turnaround plan] Ford+ is to become a truly great, world-changing company again, and that requires focus. We are going all in, creating separate but complementary businesses that give us start-up speed and unbridled innovation in Ford Model e together with Ford Blue's industrial know-how, volume and iconic brands like Bronco, that startups can only dream about."
On that note, Ford said it will boost spending on EVs to $50B through 2026, up from the previous $30B by 2025. Investors cheered the move, sending the stock up 8.4% on Wednesday, and even higher in after-hours trading. Many on Wall Street have been pressuring legacy automakers for some time to separate or spin off their EV operations, with General Motors (GM) taking a similar move in 2019 to divide engineering of EVs and traditional vehicles.
Outlook: Ford reaffirmed guidance of $11.5B-$12.5B in company adjusted EBIT for 2022. Looking further ahead, the carmaker reiterated its pledge to achieve carbon neutrality by 2050, and to use 100% local, renewable electricity in all of its manufacturing operations by 2035. (124 comments)
More damaging news keeps flowing in for Russian markets as MSCI (NYSE:MSCI) and FTSE Russell (OTCPK:LDNXF) cut the nation's equities out of their widely-tracked indexes. The verdict followed two days of deliberations, in which the "overwhelming majority" involved in the consultation had reported that "the Russian equity market is currently uninvestable." The Moscow Stock Exchange will be closed for the fourth consecutive day on Thursday, while hundreds of millions of dollars in market value of Russia-based stocks and ETFs have already been wiped out in the U.S.
Bigger picture: International sanctions punishing Russia for its invasion of Ukraine have seen a slew of Western companies pull out of Russia and measures targeting the central bank's reserves have sent the ruble to record lows. The latest? Boeing (BA) and Airbus (OTCPK:EADSY) have suspended parts and maintenance support for Russian airlines, adding further barriers to continue operating their fleets, while Mercedes-Benz (OTCPK:DDAIF) discontinued deliveries to the country. Apple (AAPL) has also halted product sales in Russia, while the tech giant, Google (GOOGL) and Spotify (SPOT) have removed all content from Kremlin-backed RT and Sputnik from their platforms.
The decision by MSCI, which estimates about $16T are linked to its indices, comes after rating agencies Fitch joined S&P Global in cutting Russia's sovereign debt rating to junk. "Developments will weaken Russia’s external and public finances, severely constrain its financing flexibility, markedly reduce trend GDP growth, and elevate domestic and geopolitical risk and uncertainty," Fitch wrote in a statement. Moody's Investors Service followed shortly thereafter, downgrading Russia's credit ratings deep into junk territory.
Commentary: "Russian assets have become toxic, for a lack of better expression," explained Marek Drimal, a strategist at Societe Generale. "Onshore markets are barricaded and basically uninvestable, while offshore markets have been hammered. The speed of events as they are happening is just mind-boggling." (9 comments)
Well, that didn't work out as planned. Amazon (AMZN) plans to pivot even further away from its small brick-and-mortar footprint after deciding to close all 68 of its physical book stores, pop up shops and 4-star stores in the U.S. and U.K. It will still continue to work on other concepts, such as a fashion store in greater Los Angeles, the cashierless grocery store concept and the Whole Foods grocery chain, though it marks a setback of sorts for the e-commerce giant's push into the industry.
Flashback: Amazon surprised some retail watchers in 2016 by opening physical stores in large cities to get closer to consumers and compete with Barnes & Noble and electronics retailers in a few high-traffic areas. But the initiative was not enough to stop online shopping trends that Amazon itself helped pioneer. In fact, its "physical stores" revenue only made up 3% of Amazon's $137B in sales last quarter, and most of that largely reflects spending at Whole Foods, which the company is keeping around.
"Retail is hard, and they're discovering that," said Michael Pachter, an analyst at Wedbush Securities.
Another try? Amazon announced its first clothing store back in January, called Amazon Style. The location in Glendale, Calif., will feature men's and women's apparel, shoes, and accessories, with prices catering to a wide range of shoppers. It'll also test whether customers take to a tech-driven shopping experience, like using an app to request items to a changing room. (13 comments)
In Asia, Japan +0.7%. Hong Kong +0.6%. China -0.1%. India -0.7%.
In Europe, at midday, London -0.2%. Paris -0.7%. Frankfurt -0.7%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq -0.2%. Crude +2.5% to $113.40. Gold +0.8% to $1936.70. Bitcoin -1.4% to $43,527.
Ten-year Treasury Yield unchanged at 1.86%
Today's Economic Calendar
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Productivity and Costs
9:45 PMI Composite Final
10:00 Powell testifies before Senate Banking Committee
10:00 Factory Orders
10:00 ISM Service Index
10:30 EIA Natural Gas Inventory
12:00 PM Fed's Barkin Speech
4:30 PM Fed Balance Sheet
6:00 PM Fed's Williams Speech
What else is happening...
Beige Book: Prices rising at 'robust' pace amid elevated input costs.