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February 11, 2023

Three takeaways from a busy week in markets: Morning Brief

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Saturday, February 11, 2023

Today’s newsletter is by Myles Udland, Head of News at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn. Read this and more market news on the go with the Yahoo Finance App.

Corporate earnings season is coming down the other side of the mountain after a hectic couple weeks.

But even in the absence of a Fed meeting, or jobs report, or earrings reports from the market’s biggest companies, the past week offered plenty to investors on the biggest themes in markets and the corporate world that have featured so far in 2023.

Fed bump fades

This past week, the stock market saw the major indexes cap off their worst week of 2023.

All three major indexes rallied to start 2023, with the Nasdaq enjoying its best January since 2001 after gaining more than 11{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in the year’s first month.

The early-year rally was punctuated on Wednesday, Feb. 1, when the Nasdaq gained some 2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} after Fed Chair Jerome Powell said “disinflation” had become a feature of the U.S. economy in a press conference. In an interview with financier David Rubenstein this week, Powell reiterated his view that disinflationary pressures are reaching the U.S. economy – primarily in the goods sector.

The second time around, Powell’s words didn’t excite investors much.

And as economic data shows the economy gained momentum in January, hopes for an imminent Fed pivot appear to be fading among some investors.

Outside of any Fed-related influence on the market’s day-to-day action, the volatility we continue to see is not suggestive of a healthy market. Even with a rally to start the year that washed some of the stink of 2022’s losses for some investors.

As strategists at Bespoke Investment Group wrote Friday in a note to clients, “Volatility is usually a characteristic of a weak stock market rather than a strong one.” And this year’s market has been notably volatile.

Through the first 27 trading days of 2023 – or the year’s trading through Thursday – the Nasdaq has moved 1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in either direction 15 times, according to Bespoke’s data. In the prior nine instances this volatility was seen, the market was down six times and the largest rally had been 7.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, which pales in comparison to the ~12{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} gain seen in the index this year.

Perhaps more troubling for the bulls right now are the other three years the Nasdaq saw this level of volatility through the first six weeks of the year – 1999, 2000, and 2001. The heart of the tech bubble bursting.

U.S. Federal Reserve Chair Jerome Powell responds to a question from David Rubenstein (not pictured) during an on-stage discussion at a meeting of The Economic Club of Washington, at the Renaissance Hotel in Washington, D.C., U.S, February 7, 2023. REUTERS/Amanda Andrade-Rhoades

Cuts continue

In the Corporate World, the dominant theme of the last few months has been the raft of companies announcing job cuts. This week was no exception.

Cuts at Disney (DIS) were the headliner, with the company announcing Wednesday it would trim 7,000 jobs as newly returned CEO Bob Iger looks to cut $5.5 billion out of the business.

In addition to these cuts, Iger also announced another restructuring of the company’s business lines, telling investors on the company’s earnings call these moves “will result in a more cost-effective coordinated and streamlined approach to our operations, and we are committed to running our businesses more efficiently, especially in a challenging economic environment.”

Alongside these cost cuts, Iger also said he would reinstate Disney’s dividend. His reward for this latest act of corporate wizardry? The end of a proxy fight with activist investor Nelson Peltz.

And while job cuts have spread from the tech sector out into the worlds of media, conglomerates, and beyond, the tech sector remains the center of pressure for the white collar workforce right now.

Zoom (ZM), one of the stock market’s first and biggest pandemic-related winners, announced this week it would cut 15{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of its workforce, or around 1,300 workers. CEO Eric Yuan will also take a 98{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} reduction in base pay for this year while the balance of the company’s executive staff will see a 20{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} pay cut.

Yuan said the company’s trajectory was “forever changed” during the pandemic, but said Zoom “also made mistakes” as it staffed up to meet these challenges.

“We didn’t take as much time as we should have to thoroughly analyze our teams or assess if we were growing sustainably, toward the highest priorities,” Yuan wrote in an email to employees. “[The] uncertainty of the global economy, and its effect on our customers, means we need to take a hard—yet important—look inward to reset ourselves so we can weather the economic environment, deliver for our customers and achieve Zoom’s long-term vision.”

Dell (DELL), eBay (EBAY), and JPMorgan (JPM) were also among the major public companies that saw some level of staff reductions over the last week.

SHANGHAI, CHINA - FEBRUARY 27, 2022 - (FILE) Customers shop at the first Disney flagship store in China in Shanghai, China, February 27, 2022. February 9, 2023 - Disney CEO Bob Iger says the company will cut 7,000 jobs to cut $5.5 billion in costs. That's about 3 percent of the global workforce. (Photo credit should read CFOTO/Future Publishing via Getty Images) — SHANGHAI, CHINA – FEBRUARY 27, 2022 – (FILE) Customers shop at the first Disney flagship store in China in Shanghai, China, February 27, 2022. February 9, 2023 – Disney CEO Bob Iger says the company will cut 7,000 jobs to cut $5.5 billion in costs. That’s about 3 percent of the global workforce. (CFOTO/Future Publishing via Getty Images)

Crypto pressures rise

As markets rallied to start the year, crypto was front and center with bitcoin enjoying its best January performance since 2013, gaining nearly 40{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in the year’s first month.

But the early part of February has served as another reminder for the industry that crypto winter is here, even if the price for some blue chip crypto assets has firmed of late.

BNPL giant Affirm – which also announced a 19{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} cut to its staff – said this week it would shutter its Affirm Crypto initiative. Like most companies cutting back, Affirm said in a shareholder letter due to economic uncertainty, “we are doubling down on our core businesses.”

Evidently buying stuff now and paying for it later with crypto was not core to the business.

Elsewhere in corporate crypto maneuvers, Robinhood said it would take a $12 million charge and had backed out of a deal to buy crypto company Ziglu, a deal initially announced back in April 2022.

On the regulatory side, a busy year remained that way with the SEC announcing on Thursday a settlement with exchange Kraken over its staking business. As part of the settlement, Kraken agreed to pay a $30 million fine and shut down its crypto staking offering for U.S. users.

Ahead of Thursday’s announcement, shares of Coinbase (COIN) fell 13{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} after CEO Brian Armstrong cryptically tweeted about talk of the SEC trying to shut down all staking for U.S. retail investors. The stock fell another 4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} on Friday.

Whether Armstrong’s fears turn out to be founded or not, Thursday’s action from the SEC against Kraken was the agency’s fourth this year against crypto firms as the regulator continues to tighten its control of the industry.

As SEC Chair Gensler told Yahoo Finance in December: “We are enforcing [existing securities laws]. We have publicly been saying to these crypto intermediaries…to come into compliance with the law.”

Gensler told Yahoo Finance he had one goal when it came to regulating crypto in 2023: make crypto exchanges and lending platforms come into compliance.

“They can do that appropriately, working with the SEC, or we can continue on a course with more enforcement actions, and I would have to say that the runway’s getting shorter,” he said.

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December 31, 2022

Why average investors got crushed in 2022: Morning Brief

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Friday, December 30, 2022

Today’s newsletter is by Myles Udland, senior markets editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn. Read this and more market news on the go with Yahoo Finance App.

The most challenging year for investors since the financial crisis will mercifully come to an end on Friday.

All manner of superlatives can capture the damage done to portfolios the world over, but we think two charts from LPL Research circulated earlier this week show why no one had it harder than mom and pop in 2022.

And the biggest challenge for the average saver came in two forms from one place: the bond market.

The bond market hasn’t had a year this bad in two generations.

The Bloomberg Aggregate U.S. Bond Index was down 13.1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in 2022 through December 28, its worst year since inception in 1976.

And it’s not even close.

Before 2022, the index’s worst year came in 1994… when it dropped just 2.9{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}.

The U.S. bond market has never had a year worse than 2022, according to the most popular index for tracking the overall market. (Source: LPL Research)

As investors well know by now, the dominant market story this year was the Federal Reserve’s historic increase in interest rates.

The central bank raised interest rates by a cumulative 4.25{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in 2022 — from a range of 0{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}-0.25{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in January to 4.25{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}-4.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} as of December — the most since 1980. And further increases are expected next year.

As a result, yields across the Treasury curve rose sharply, weighing on prices in both government and private bond markets. At the outset of 2022, the yield on the U.S. 10-year Treasury stood at just north of 1.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}; by late October, the 10-year yield was closer to 4.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. As of this week, the 10-year yield was around 3.85{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}.

And the move in 2-year yields, which tend to be more sensitive to the path of Fed rate hikes, was even more dramatic, rising from around 0.75{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} at the beginning of the year to 4.3{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} as of this week.

Which raises another challenge for investors and the economy heading into 2023: the inversion of the yield curve. Ahead of each of the last 8 recessions in the U.S. the yield on the 2-year Treasury note has eclipsed the yield on the 10-year.

Today, the 2-year yield is about 0.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} above the 10-year, signaling trouble for the economy in 2023. But recession risks and whether the bond market will ultimately be “right” about the economy’s path is a topic that will get plenty of run in 2023.

Because whether the economy turns south or not, the damage has already been done to average portfolios in 2022.

With bonds suffering their worst year on record, it follows that the classic “60/40 portfolio” comprised of 60{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} stocks and 40{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} would also struggle.

And according to LPL, 2022 marks the second-worst year on record for this strategy going back to the inception of the Bloomberg Agg in 1976. Through the close on December 28, a hypothetical 60/40 portfolio comprised of the S&P 500 and the Bloomberg Agg would be down 16.9{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, a decline only topped by 2008’s 20.1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}.

Eclipsed only by 2008’s losses — a year in which the S&P 500 fell 38{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, which makes this year’s 20{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} decline feel quaint — the decline suffered by 60/40 portfolios will hit average investors hard because of the predominance of this strategy as relatively safe way to earn a modest return.

Moreover, 2008’s decline was more than entirely driven by the drop in stocks — in 2008, the Bloomberg Agg actually rose 5.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. Bonds, in other words, did offer some support against a plunge in stocks. In 2022, the story has been anything but.

Writing earlier this year about why the so-called “death” of the 60/40 portfolio is overstated, Roger Aliaga-Díaz, chief economist, Americas and head of portfolio construction at Vanguard, wrote: “The goal of the 60/40 portfolio is to achieve long-term annualized returns of roughly 7{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. This is meant to be achieved over time and on average, not each and every year.”

Aliaga-Díaz’s work showed that since 1976, investors have never seen a three-year rolling period in which stocks and bonds lost money. Over that period, only 6.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of the time has any trailing three-year period for 60/40 portfolios shown negative returns.

As ever, time in the market outweighs efforts to time the market.

But a one-year drop over 16{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in one of the most widely-used ways average investors organize their portfolios is hardly overcome by assurances that market history is on their side.

With thousands of Americans retiring every day, many will find their financial standing notably degraded relative to the optimism put forth by market returns in 2019, 2020, and 2021.

And left hoping Wall Street’s downbeat view on 2023 is proven wrong.

What to Watch Today

Economy

Earnings

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November 7, 2022

All that recession talk could be overblown: Morning Brief

This report first appeared in the Morning Quick. Get the Morning Short sent immediately to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Monday, November 7, 2022

Modern newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Comply with Sozzi on Twitter @BrianSozzi and on LinkedIn. Go through this and much more market news on the go with Yahoo Finance Application.

Weird moments.

So I’m sitting down on Yahoo Finance Dwell on careers report Friday, almost in a state of disbelief. Non-farm payrolls rose by an impressive 261,000. That did not strike me as a recessionary print. Then an economist sitting down next to me claims he sees a economic downturn in 2023 and a 2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} rise in the unemployment fee.

“We have a recession connect with for future yr,” Deutsche Financial institution Securities Main US Economist Matthew Luzzetti stated. “For a when, we’ve experienced that phone. We count on it to materialize all over the center of upcoming yr. We have the unemployment rate increasing to 5.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} by the stop of future yr.”

Conflicting financial signals, no doubt about it.

But conflicting alerts are currently being witnessed across the overall economy, notably as it pertains to U.S. individuals pre-holiday break and client-centric stocks.

Under Armour’s 3rd quarter sucked final week, and so did the company’s forward direction. And still the inventory was embraced by the marketplace. Crocs experienced a stable quarter, but stock ballooned. Crimson flag, suggests my previous analyst self. The Avenue welcomed the quarter in any case. Etsy experienced a squishy quarter, and the industry took it in stride. Same goes EBay.

Then Starbucks reported an 11{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} exact-retail outlet profits boost in spite of at any time-inflating prices for its various coffees. Where is the recession there?

“What we aim on is actually: How do we maintain that ticket?” Starbucks CFO Rachel Ruggeri told me and Yahoo Finance’s Brooke DiPalma in an job interview. “Because it just isn’t just pricing, it can be really quantity as nicely, we’ve seen our clients purchase additional… so we’re observing greater volume.”

Arriving travelers are seen with their luggage outside Starbucks Coffee in the arrivals hall at Terminal 1 in Humberto Delgado International Airport on October 07, 2022 in Lisbon, Portugal. (Photo by Horacio Villalobos#Corbis/Corbis via Getty Images) — Arriving vacationers are witnessed with their luggage outside the house Starbucks Coffee in the arrivals corridor at Terminal 1 in Humberto Delgado Intercontinental Airport on Oct 07, 2022 in Lisbon, Portugal. (Picture by Horacio Villalobos#Corbis/Corbis through Getty Photographs)

And Mastercard’s CEO Michel Miebach tells me there is practically nothing in his company that suggests recession is imminent.

“Presently, based on the facts that we have, there is no this sort of indication [of a recession],” Miebach said. “The consumer is resilient, and that resilience will last. We have no indication that there is a near-expression recession.”

All of this delivers me to imagine that probably recession discuss is overblown. Possibly buyers will arrive out and shell out, spend, shell out this getaway time. Perhaps traders require to greater embrace the good details they are acquiring hit above the head with today in its place of eyeing a opportunity long term of doom and gloom.

Hold in intellect, all of these rosy feels could change on a dime when we get earnings from Walmart, Focus on, and other vendors in a couple of times. But for now, possibly embrace the constructive vibes.

Content buying and selling!

What to Watch Nowadays

Financial state

Earnings

Activision Blizzard (ATVI), BioNTech (BNTX), Option Resorts (CHH), Groupon (GRPN), Lyft (LYFT), Mosaic (MOS), Plantir Systems (PLTR), Take-Two Interactive Software (TTWO), TripAdvisor (Excursion)

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July 13, 2022

Small businesses have never felt worse about the future: Morning Brief

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Wednesday, July 13, 2022

Today’s newsletter is by Myles Udland, senior markets editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn.

Small business owners think the economy stinks right now.

In a report out Tuesday morning, the National Federation of Independent Businesses revealed confidence among small businesses polled by the trade group was the worst they’ve found in the 48-year history of the survey.

Last month, business owners expecting better conditions over the next six months fell to a net negative 61{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. Said another way, the difference between those expecting better or and those expecting worse conditions was -61{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}.

Not great!

Small business optimism sank in June as the outlook for the economy fell to the lowest in at least 48 years. (Source: Oxford Economics)

The NFIB’s headline optimism reading for June came in at 89.5, the lowest since 2013.

Digging into the report’s details, however, and we see another version of the same story being told across the business and corporate world right now — everything seems terrible, but our actions suggest otherwise.

Especially when it comes to hiring.

“It’s a mixed picture on Main Street,” said Bill Dunkelberg, chief economist at the NFIB. “Housing is still booming (but slowing) and restaurant sales continue to trend higher. Owners can’t find enough workers, not characteristic of a recession where unemployment is high, not low.”

Last week, the June jobs report showed hiring demand remains robust in the U.S. economy, with some going so far as to say this report made a “mockery” of calls that the economy is already in recession.

And in broad strokes, the NFIB report affirms this view. “Job openings and hiring plans are at record levels,” Dunkelberg added. “The percent of owners raising compensation is high, too. The percent of owners raising selling prices is historically high. Doesn’t sound like a recession, at least from the employment side.”

Where things look more recessionary, once again, is inflation.

Some 34{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of small business owners said inflation is the biggest problem facing their business today, the most since the fourth quarter of 1980.

And inflation data due out Wednesday isn’t going to be pretty.

Economists expect data for June will show the consumer price index rose 8.8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} last month, the most since December 1981 and a new high in inflation for the pandemic-induced cycle. With the White House running interference on this data a day before its release, one wonders if this consensus estimate isn’t dour enough.

Moreover, just 3{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of small business owners think now is a good time to expand their business.

And while demand for labor may serve as a positive macro signal, the current frictions in the labor market only further pressure small businesses and add to frustrations in the sector.

In a note to clients on Tuesday, Mahir Rasheed, U.S. economist at Oxford Economics, noted: “Exacerbating the toll of sharp inflation pressures is a labor supply environment that has failed to make significant progress. With 50{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of owners looking to fill current job openings, 94{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of those hiring reported few or no qualified applicants.”

Of course, filling open roles with qualified applicants can often be achieved by offering higher wages or meeting worker requests like partial or full-time remote work. Though when hardly any businesses view the present as a good time to expand, making the case for more generous benefits to fill needs is a tough sell.

“These indicators make a very strong case for a decline in economic activity. How long and how severe is now the question,” Dunkelberg said. “However this plays out, small business owners are bracing for challenging times ahead.”

What to Watch Today

Economic calendar

7:00 a.m. ET: MBA Mortgage Applications, week ended July 8 (-5.4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during prior week)
8:30 a.m. ET: Consumer Price Index, month-over-month, June (1.1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} expected, 1.0{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during prior month)
8:30 a.m. ET: CPI Excluding Food and Energy, month-over-month, June (0.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} expected, 0.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during prior month)
8:30 a.m. ET: Consumer Price Index, year-over-year, June (8.8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} expected, 8.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during prior month)
8:30 a.m. ET: CPI Excluding Food and Energy, year-over-year, June (5.7{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} expected, 6.0{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during prior month)
8:30 a.m. ET: CPI Index NSA, June (295.716 expected, 292.296 during prior month)
8:30 a.m. ET: CPI Core Index SA, June (294.451 expected, 292.289 during prior month)
8:30 a.m. ET: Real Average Hourly Earnings, year-over-year, June (-3.0{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during prior month, revised to 2.9{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a})
8:30 a.m. ET: Real Average Weekly Earnings, year-over-year, June (-3.9{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} during prior month, revised to 4.0{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a})
2:00 p.m. ET: Monthly Budget Statement (-$75.0 billion expected, -$174.2 billion during prior month)
2:00 p.m. ET: Federal Reserve Releases Beige Book

Earnings

Before Market Open:

Fastenal (FAST) is expected to report adjusted earnings of 50 cents per share on revenue of $1.78 billion
Delta Air Lines (DAL) is expected to report adjusted earnings of $1.64 per share on revenue of $12.33 billion

After Market Close:

Yahoo Finance Highlights

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Click here for the latest stock market news and in-depth analysis, including events that move stocks

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April 11, 2022

Suddenly everyone is obsessed about a recession: Morning Brief

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Monday, April 11, 2022

Today’s newsletter is by Brian Sozzi an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

By sometime next year, the U.S. economy may be limping around like Tiger Woods this past weekend at the Masters (sorry Tiger, I had to go there — I was rooting for you to win though).

And just like watching the legend’s shaky performance at the Masters, it’s almost hard to believe we are even sitting here pontificating on a recession.

The unemployment rate is near record low levels. Sub-30 year olds have never felt more emboldened to change jobs five times in under three years to boost their LinkedIn profile (and yes, skills in some cases) and send out the proverbial “personal news” tweet to their 100 followers.

Corporate profit margins remain near record highs as employers suck every last ounce of productivity from tired, overworked employees just wondering if their package of chicken thighs for dinner will cost them 20{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} more next week (inflation has increased the cost of my chicken breasts — damn shame).

Yours truly was turned away by four shops on Saturday for a paint job on his classic General Motors car. The common theme: “Bro, we just have too much business at the moment to pull bumpers off your old ass car… sorry, but not sorry.”

I only wanted a white paint job!!

Insane to be thinking about a looming recession given all of these examples? The last recession lasted just two months in 2020 from February to April, due to the COVID-19 pandemic. The economy has recovered so much since then.

Yet, here we are with recession worries beginning to pick up in financial circles (but oddly, not the stock market).

A few recent hot takes on this “growth slowdown” worth mentioning are below.

Deutsche Bank Chief U.S. economist Matthew Luzzetti in a new note:

“While timing the exact quarters of negative growth is never easy, we see the Fed’s tightening beginning to materially slow growth in the second half of 2023. Our baseline forecast has negative quarters for growth in Q4 2023 and Q1 2024, consistent with a recession during that time. The mild recession we anticipate should nonetheless lead to a meaningful rise in unemployment, which peaks above 5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in 2024.”

Luzzetti pealed back his call further on Yahoo Finance Live.

Morgan Stanley Chief economist Seth Carpenter on Yahoo Finance Live:

“If you think about what the Fed itself thinks is the long-run sustainable growth rate of the economy, they think that rate of growth is below 2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. And so if you take a growth rate in the economy that’s above 5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} or 6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, and you’re going to try to bring it down to below 2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, that 4-plus percentage point deceleration is just a massive, massive deceleration to happen, even if it happens over the course of two years or so. So I think no two ways about it, the slowing in the economy has to be dramatic.”

RBC Capital Markets head of U.S. equity strategy Lori Calvasina on Yahoo Finance Live:

“I will tell you that RBC’s economists are not making that [recession] call right now. They think the recession risks have grown, and they’re monitoring them very vigilantly, but they actually have changed their forecasts recently and pulled us down to 2 and 1/2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} [growth] for this year. And they are not making the recession call for next year yet. I actually pushed my economist the other day, and I said, what if we end up having a recession? What does it look like? Because you’re seeing very different market reactions in terms of both multiples and stock prices in different contraction periods economically. And he said, look, I think if we get this, it’s going to be something that’s more of the milder variety. I think that’s really interesting because the discussion hasn’t quite gone there yet on the Street. People are kind of focused on yes or no. But I do think that that’s probably the next place the conversation is going to go.”

Levi’s CFO Harmit Singh on Yahoo Finance Presents:

“We’re mining information each day. We’re speaking to economists regularly. The state of the buyer within the U.S. is actually robust. Balance sheets are robust. Unemployment is at an all-time low. Wage progress is going on.” Singh added Levi’s is not seeing ordering cancellations by retailers, which are usually a telltale sign of slowing economic growth.

As to why this recession chatter has intensified, pick your poison.

Gas prices are above $4 a gallon, hitting consumers hard in the wallet. Inflation for everyday items is rampant. The Federal Reserve is raising interest rates, which is already beginning to hit the U.S. housing market.

I am sure I left out a few things, but that is the current state of play. Whether a recession happens is anyone’s guess? But you can best believe the economy has slowed, and with that will likely cause an upheaval in the markets sometime soon. In the meantime, markets will probably limp along like Tiger.

Happy trading!

Odds and ends

Chart of the day: Curious on why Costco’s stock is trading at a record high (you shouldn’t be, I have been talking about this a lot) and Walmart’s shares have rocketed 12{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in the past month? This helpful chart from Jefferies analyst Stephanie Wissink says a lot. Costco and Walmart’s Sam’s Club continue to see strong store traffic as consumers buy cheaper gas from each and then go into the store to buy items in bulk to save money.

Headed to Costco for gas? Hit me with a pic on Twitter @BrianSozzi.

Stat to consider: As discussed here, the Fed’s move on interest rates has already begun to chip away at the housing market’s resilience (and shares of home-related stocks such as Home Depot and Lowe’s). Good stat to ponder from LPL Financial Chief economist Jeffrey Roach: “Several months ago, a prospective homebuyer would pay $1,347 for a $300,000 loan at 3.50{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. If the buyer waited until this week to lock in a new rate at 5.00{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, the borrower would pay $263 more per month. For most households, an additional cost of $263 per month will cut into discretionary spending, and prospective buyers will reconsider housing options.”

In other news: Here’s a good look by the WSJ at the financial impact of much higher gas prices at FedEx, Uber, Lyft and UPS. It’s brutal. 2023 is shaping up to be a “breakout” year for Tesla, says Teslarati. Makes sense as the company’s new factories will be humming right along, and there could be three new models out on the road. Warner Bros. Discovery opens for business on Monday after their headline grabbing merger. Variety runs down what could be expected in the early going.

What to watch today

Economy

Earnings

No notable reports scheduled for release

Politics

President Biden will meet virtually with Prime Minister Narendra Modi of India today to discuss a range of topics. India has continued to buy oil from Russia — at a discount — even as other countries have cut off their supply following the invasion of Ukraine.
A trio of Federal Reserve officials will appear in Nashville beginning at 9:30 a.m. ET. Atlanta Fed President Raphael Bostic as well as Governors Michelle Bowman and Christopher Waller will appear at a FedListens session focused on Nashville.

Top News

FTSE 100 tumbles as UK economic growth slows [Yahoo Finance UK]

Twitter says billionaire Musk not joining its board, warns of ‘distractions ahead’ [Reuters]

Ruble falls sharply as Russia relaxes some capital controls [Reuters]

China auto sales slump in March on COVID curbs, Tesla production sluggish [Reuters]

Yahoo Finance Highlights

‘Believe in us:’ Ukrainian tech executives make appeal amid fears of brain drain

Tesla bull predicts between 5 to 10 new gigafactories in the next two years

SEC’s new SPAC policies are ‘not going to fix the problem:’ Expert

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March 22, 2022

For stocks, ‘good news’ is a relative term: Morning Brief

This article very first appeared in the Early morning Quick. Get the Morning Temporary sent right to your inbox each Monday to Friday by 6:30 a.m. ET. Subscribe

Tuesday, March 22, 2022

Present-day publication is by Emily McCormick, a reporter for Yahoo Finance. Comply with her on Twitter

When it comes to sparking a transfer better in stocks, information doesn’t essentially have to go from poor to fantastic, or from good to wonderful.

“Very bad” to “slightly considerably less bad” can be adequate.

And that reasoning provides just one explanation for why stocks rallied into the end of very last 7 days, jumping by the most since November 2020 even in the confront of an ongoing geopolitical crisis, crimson-incredibly hot inflation and specter of nevertheless-tighter monetary coverage. In truth, very last 7 days was only the fifth time ever that the S&P 500 attained at least 1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} for four straight days, LPL Financial’s Ryan Detrick pointed out.

“You never automatically want good news for the inventory current market to do perfectly,” Baird marketplace strategist Michael Antonelli advised Yahoo Finance. “You just need to have the information to get ‘less worse’ — which is nuanced, it’s all about rate of transform.”

And without a doubt, the backdrop for equities has arguably improved to a notch higher than a recent nadir. In this article are 4 developments that propose this.

Very first, Russian President Vladimir Putin carried out what quite a few considered would be the worst-situation situation in actually launching a complete-scale armed service invasion of Ukraine on Feb. 24. In the days and months straight away next the assault, the U.S. and European nations responded with a host of sanctions on Russian people and entities. All of this was fulfilled, in transform, with a stock industry market-off that factored in important disruptions to world-wide monetary markets — regardless of whether or not or not this sort of disruptions would finally come to move or be as dire and sweeping in scope as some feared.

Since then, peak dread has at the very least temporarily come down.

“Feb. 24, which is when the news type of was as lousy as it gets involving oil and the invasion,” Antonelli mentioned.

Next, company earnings anticipations for the first quarter are however demonstrating a quarter-over-quarter decline — but the hole is narrowing.

As of the week finished March 18, Wall Street analysts expected S&P 500 earnings per share to appear in at $51.91 in combination for the to start with quarter, according to FactSet. That indicates a fall in profits in comparison to fourth-quarter genuine success, when S&P 500 earnings arrived in at $55.37 a share.

But as analysts at DataTrek pointed out in a be aware on Monday, whilst Wall Street is still projecting a decrease in earnings power in comparison to the fourth-quarter, expectations have at least occur off new lows. In the course of the week ended Feb. 25, earnings estimates fell to $51.64 for every share for S&P 500 organizations. So at $51.91, the most recent initially-quarter earnings estimate is up as opposed to 3 weeks back and in contrast to a month back, when earnings estimates ended up at $51.86.

3rd, on the inflation entrance, latest knowledge have pointed to early indicators of peaking in the amount of price tag boosts, at minimum dependent on some metrics.

Though client selling prices accelerated (all over again) in February, wholesale costs have began to stabilize. Last week, the producer selling price index (PPI) for very last thirty day period showed wholesale price ranges rose 10.{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} on an once-a-year basis, matching January’s record higher 12 months-more than-12 months level in details going back to 2009. On a thirty day period-about-month basis, the PPI slowed to a .8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} maximize, slipping far more-than-predicted from a 1.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} rise in January.

“The excellent information arrives from looking at remaining need providers price ranges have been unchanged in February for the very first time in at minimum a calendar year,” stated Chris Rupkey, chief economist at FWDBONDS, referring to the PPI print. “Inflation is not under manage by any usually means, but the tide may perhaps be turning where inflation broadly talking does not increase any even worse.”

And at last, provide chain fears among the key companies also show up to be easing from historic highs.

Mentions of “supply chain” on S&P 500 earnings convention phone calls — utilised as a proxy for precise supply chain troubles — dipped a little in the fourth quarter immediately after hitting a report higher of 362 in the 3rd quarter. In accordance to FactSet, executives at a complete of 358 S&P 500 companies mentioned “supply chain” throughout their fourth-quarter 2021 earnings phone calls.

Other metrics have pointed to a similar phenomenom. The New York Federal Reserve’s World Provide Chain Tension Index, which tracks a basket of indicators made use of to gauge disruptions to the source chain, dipped to 3.31 in February from 3.82 in January and a peak of 4.50 in December. The figures reflect the amount of common deviations the index has moved earlier mentioned its normal benefit considering the fact that 1997.

To be positive, the purpose listed here isn’t to paint a Pollyannaish picture of the present-day point out of the economic climate or geopolitical condition. Just mainly because inflation is not growing at an accelerating rate doesn’t mean costs aren’t however growing — and it definitely does not imply they are slipping. And as the New York Fed place it, “while world provide chain pressures are reducing, pressure nevertheless stays higher.” As well as, you can find even now a important volume of uncertainty in excess of how Russia’s war in Ukraine will ultimately development.

But at the very least for stocks, and for now, gains even in difficult conditions can even now occur as buyers price tag in what great information — or at minimum, what “incrementally fewer undesirable news” — they can glean.

“I imagine you have got to be asking yourself … if you are a trader or investor, is the information finding ‘less even worse?’” Baird’s Antonelli stated. “And I think for now, it possibly is.”

What to observe nowadays

Economic climate

Earnings

Pre-current market

Put up-market place

Politics

The confirmation hearings for Supreme Court docket justice nominee Ketanji Brown Jackson are established to get underway in earnest for a second working day as senators will now be able to inquire Jackson thoughts starting at 9:00 a.m. ET. Senators will have up to 50 minutes each and every.
World wide electricity charges will be in concentrate as U.S. Strength Secretary Jennifer Granholm travels to Paris to chair the Intercontinental Power Agency Ministerial Conference afterwards this 7 days. U.S. Particular Presidential Envoy for Local weather John Kerry is also scheduled to go to the conference.

Best News

European shares edge larger on improve from financial institutions, electrical power [Reuters]

Alibaba will increase share buyback to $25 billion from $15 billion [Reuters]

Powell: Fed will ‘adjust policy as needed’ to reduce inflation, steer clear of economic downturn [Yahoo Finance]

Nike earnings beat estimates irrespective of Ukraine war, source chain troubles [Yahoo Finance]

Yahoo Finance Highlights

Promote stocks, warns one particular of Wall Street’s largest bears just after refreshing rally

CEO optimism dips amid ‘unprecedented times’

Who will be the to start with trillionaire? Research predicts Elon Musk in 2024.

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