Morning News: July 19, 2022
Posted by Eddy Elfenbein on July 19th, 2022 at 7:05 am

Indian Rupee Hits Weakest Level Ever Against the Dollar

Romania Warns Corn Exports May Slump as Drought Shrinks Harvest

Polish Households Face 180% Power Price Hike, Watchdog Warns

US Gasoline Prices Fall to Two-Month Low With Pump Pain Easing

How Joe Manchin Left a Global Tax Deal in Limbo

New Vatican Policy Orders Foreign Investment Accounts Closed

Yellen Calls for Trade Overhaul to Diversify From China

Banks’ Snubbing of Junk-Rated Loan Funds Worsens Financing Logjam

BofA Survey Shows Full Investor Capitulation Amid Pessimism

This Pioneering Economist Says Growth Obsession Must End

Housing Boom Fades World-Wide as Interest Rates Climb

Air Travel Is Broken. Here’s Why.

Who Will Blink First in the Battle for Control of Spirit Airlines?

GM Will Finally Have a Rival to Tesla’s Model Y With Blazer EV

IBM Second-Quarter Earnings Advance on 9% Sales Growth

Toys ‘R’ Us Is Coming Back. Soon, It’ll Be Almost Everywhere

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How AFLAC Hedges Currency Risk
Posted by Eddy Elfenbein on July 18th, 2022 at 11:02 am

AFLAC (AFL) gets about 70% of its income from Japan. This causes an issue for the company because that money needs to be converted to dollars for its shareholders.

The problem is that a large currency swing can wipe out its profits. Right now, the yen is at a 20-year low versus the dollar.

That’s why AFLAC hedges its currency risk. The WSJ had an article today taking a closer look at how the company goes about this. The company employs three strategies.

First, AFLAC’s Japanese subsidiary owns dollar-denominated assets. Conversely, the U.S. holding company owns yen-denominated debt. The third part is that the company buys forward contracts that let it convert yen to dollars at different prices and at different times. The contracts typically go out less than two years and are long the dollar and short the yen.

This helps AFLAC reduce its currency risk, but there’s always going to be some. For example, in Q1, the currency exchange pinged its earnings by six cents per share. That’s not so much.

The next earnings report is due out on August 1.

A Few Small Items
Posted by Eddy Elfenbein on July 18th, 2022 at 10:32 am

A few items to pass along.

Google (GOOG) split 20-for-1 today. This is the first split in the company’s history. The share price drops 95% but you now have 20 times as many shares. In 2004, the stock went public at $85 per share, which is $4.25 per share in split-adjusted terms.

The earnings “beat rate” this season is running around 60%. That’s below the 5-year average of 77%, but it’s still early.

Trex (TREX) said it will report Q2 earnings on August 8. Wall Street expects 67 cents per share.

Ross Stores (ROST) said that in June and July, it opened 21 Ross Dress for Less stores and eight dd’s DISCOUNTS® stores.

“These recent openings reflect our ongoing commitment to expanding our two chains,” said Gregg McGillis, Group Executive Vice President, Property Development. “This summer, we expanded our presence in our largest markets of California, Florida, and Texas, and also added locations in newer states, including North Carolina for dd’s as well as Ohio for Ross. Looking ahead, we remain confident in our ability to grow to at least 2,900 Ross Dress for Less and 700 dd’s DISCOUNTS locations over time.”

The Fed Is Leaning Towards a 0.75% Hike
Posted by Eddy Elfenbein on July 18th, 2022 at 10:04 am

The stock market is having a good morning so far. The S&P 500 is currently up 0.79%.

More banks are reporting earnings. This morning, Goldman Sachs said it made $7.73 per share. Wall Street had been expecting $6.58 per share. Bank of America made 73 cents per share. That was five cents below estimates.

Yesterday, the Wall Street Journal reported that the Fed will raise interest rates by 0.75% at its meeting next week. There had been some speculation that the Fed would go for a full 1% increase.

From the WSJ:

On Friday, a University of Michigan survey of consumers’ long-term inflation expectations fell to its lowest level in a year, which weakened the case for a 1-percentage-point rate rise. Fed officials keep a close watch on households’ and businesses’ expectations of future inflation because they believe such expectations can be self-fulfilling.

Market-based measures of future inflation have also drifted to their lowest levels since Russian President Vladimir Putin’s invasion of Ukraine in late February.

“They can take comfort from that,” said Laurence Meyer, a former Fed governor. “This takes the pressure off of them. I don’t think they want to go 100.”

Morning News: July 18, 2022
Posted by Eddy Elfenbein on July 18th, 2022 at 7:05 am

Economic War of Attrition Takes Toll on Russia, West

Europe Fears Economic Fallout if Russian Gas Outage Drags On

Recession Fears, Trade Shifts Whipsaw Global Grain Markets

Bread for $10 Is the New $5 Gas as Demand Wanes for Basics

Global Central Banks Ramp Up Inflation Fight

Why the US Dollar Is Booming and Creating a Possible Doom Loop

The US Is Exporting Inflation, and Fed Hikes Will Make It Worse

A Goldman Legend, Crypto Star and Top Banker Warn of Next Big Risk

Morgan Stanley Sees Stock Losses Even If There’s No Recession

The True Inflation ‘Crisis’ Is a Redefinition of the Word ‘Inflation’

Mexico’s Unicorns Unlikely to IPO Locally, Says Mexican Exchange CEO

Massive Wall Street Layoffs Feared As Banking Profits Tank

Diverging Jobs Data Raise Questions About Labor Market Health

Amazon C.E.O. Andy Jassy Breaks From the Bezos Way

Delta Buys 100 Boeing Max Planes, Its First Major Order with the Manufacturer In More Than a Decade

Bed Bath & Beyond Is In Crisis Mode. What Went Wrong?

China Weighs Mortgage Grace Period to Appease Angry Homebuyers

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The Market Breaks Its Losing Streak
Posted by Eddy Elfenbein on July 15th, 2022 at 1:32 pm

After five down days in a row, the stock market is having a nice rebound today. The S&P 500 is currently up over 1.6% as I write this.

As you might expect, the High Beta and riskier stocks are leading the charge. Some of the most defensive stocks like Hershey (HSY) and Church & Dwight (CHD) are down slightly today.

But the big winner today is Citigroup (C). Its shares are up over 12% thanks to a surprisingly strong earnings report. For Q1, the bank earned $2.19 per share. Wall Street had been expecting just $1.68 per share. That’s still a drop from the $2.85 per share the bank made in last year’s Q1.

Wells Fargo (WFC) is also having a good day. The shares are up about 6% after the bank reported earnings of 82 cents per share. That was a two-cent beat. A year ago, WFC reported earnings of $1.38 per share.

This morning, we got the retail sales report for June, and it was as expected. Retail sales rose by 1%. The Street had been expecting 0.9%. Excluding cars, the increase was also 1%. Wall Street was looking for 0.7%.

Morning News: July 15, 2022
Posted by Eddy Elfenbein on July 15th, 2022 at 7:02 am

China’s Surveillance State Hits Rare Resistance From Its Own Subjects

China’s Economy Hits a Slump as Covid Policy Takes a Toll

Euro Slips Below Dollar as Europe’s Economic Fortunes Slump

ECB Bond Aid Plan’s Fault Lines Exposed by Italy’s Political Crisis

Germany Hopes to Outrace a Russian Gas Cutoff and Bone Cold Winter

Energy Was the Only Bright Spot in the Stock Market’s Gloom

Manchin Crushes Biden’s Hopes for Revival of Economic Agenda

A Truly Massive Interest Rate Hike Is Now on the Table

People Have Money but Feel Glum—What Does That Mean for the Economy?

How to Get In on the Electric Vehicle Boom

Wall Street Texting Habit Sticks Banks With Rare $1 Billion Bill

Retail Sales Expected to Have Risen Amid Higher Inflation

Amazon Has Been Slashing Private-Label Selection Amid Weak Sales

Wave of Airline Flight Delays This Year Mostly Self-Inflicted

Tech Workers Long Got What They Wanted. That’s Over.

Would You Pay $40 a Month to Have Strangers Watch You Work?

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Morning News: July 14, 2022
Posted by Eddy Elfenbein on July 14th, 2022 at 7:04 am

Inflation Soared in June, Pinching Consumers and Challenging Policymakers

Dollar Gauge Hits Record High, Surpassing Pandemic Panic Peak

‘Don’t Fight It’: Hedge Funds, Wall Street Double Down on Dollar

Hot Inflation Report Puts Pressure on Federal Reserve

How to Invest When Inflation Is Bad and a Recession May Loom

Beware Wishful Thinking About Inflation and Recession

Why A 2022 Recession Would Be Unlike Any Other

The Housing Shortage Isn’t Just a Coastal Crisis Anymore

China Convenes Banks on Mortgage Boycott Roiling Markets

U.S. Electric Car Sales Climb Sharply Despite Shortages

Panasonic is Building the World’s Largest EV Battery Factory in Kansas

Russia Warns that G7 Attempt to Cap Oil Price Risks Higher Prices

Gas Prices, a Big Inflation Factor, Are Coming Down Sharply

ConocoPhillips to Acquire 30% Stake in Sempra’s Port Arthur LNG Project

Delta Predicts Travel Rebound Will Stretch Past Summer

JPMorgan Chase Says Second-Quarter Profit Fell 28% After Building Reserves for Bad Loans

Crypto Lender Celsius Files for Bankruptcy After Cash Crunch

Netflix With Ads Is Coming

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Inflation Rose Over 9% Over the Last Year
Posted by Eddy Elfenbein on July 13th, 2022 at 9:06 am

The June CPI report is out and it’s another strong one. Over the past 12 months ending in June, consumer prices rose by 9.06%. Wall Street had been expecting an increase of 8.8%.

The core rate rose by 5.92%. Wall Street was looking for an increase of 5.7%.

Over the last month, headline inflation rose by 1.3% while core inflation was up by 0.7%.

Energy prices surged 7.5% on the month and were up 41.6% on a 12-month basis. The food index increased 1%, while shelter costs, which make up about one-third of the CPI rose 0.6% for the month and were up 5.6% annually. This was the sixth straight month that food at home rose at least 1%.

Rental costs 0.8% in June, the largest monthly increase since April 1986, according to the BLS.

(…)

Much of inflation rise came from gasoline prices, which increased 11.2% on the month and just shy of 60% for the 12-month period. Electricity costs rose 1.7% and 13.7%, respectively. New and used vehicle prices posted respective gains of 0.7% and 1.6%.

Medical care costs increased 0.7% on the month, propelled by a 1.9% increase in dental services, the largest monthly change ever recorded for that sector in data that goes back to 1995.

Airline fares were one of the few areas seeing a decline, falling 1.8% in June though still up 34.1% from a year ago. The meat, poultry, fish and eggs category also fell 0.4% for the month but is up 11.7% on an annual basis.

The S&P 500 looks to open down 1.76%.

Morning News: July 13, 2022
Posted by Eddy Elfenbein on July 13th, 2022 at 7:04 am

Europe’s Economies Show Resilience as Fresh Energy Threat Looms

Dollar Looks Like a Winner as Markets Brace for Even Faster Inflation

Gold Steadies Near Nine-Month Low Ahead of US Inflation Report

U.S. Inflation Seen Reaching a New Four-Decade High

Fed’s Inflation Dashboard Puts More Weight on Volatile Energy, Food Prices

The Era of Expensive Oil Is Here to Stay

A Quarter of Americans Say Their Next Car Will Be an EV

Manchin, Playing to the Home Crowd, Is Fighting Electric Cars to the End

US Says Will Back Miners to Stop China’s Weaponization of Battery Metals

Twitter Lawyers Say They Can Prevail Over Musk in Just Four Days

It’s Officially Too Hot for Crypto Mining in Texas

How Three Arrows Capital Blew Up and Set Off a Crypto Contagion

Google Tells Staff to Act ‘More Entrepreneurial.’ Translation: Work Harder, or Else

Delta Sees ‘Meaningful’ Full-Year Profit on Resilient Consumer Demand

Spirit Airlines Plans to Delay Frontier Deal Vote to July 27

Targeted by Beijing, One Chinese Tutoring Company Reinvents Itself With Live Streams Selling Groceries

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