Weekly Market Update: Inflation jitters continue to drive markets
Fri, 14 May 04:13 PM EST/09:13 PM GMT
This week’s trade commenced amid angst over the historic cyber-attack that forced the closure of the Colonial Pipeline. Reports of fuel shortages at key hubs in the Southeast added to already growing concerns around rising commodity prices. Tuesday’s surge in April CPI figures only fanned those fears and resulted in a significant sell off led by the tech-heavy NASDAQ, while US Treasury yields jumped to new cycle highs. Fears started to abate by Wednesday though, when word came from the White House the Colonial Pipeline would commence a restart sequence and would likely be up and running by this weekend. Also a slew of Fed officials underscored the central bank has no intention to withdrawing support measures at this time because they need to see several more months of data on jobs and inflation before determining when to begin even thinking about tightening monetary policy. Nevertheless, Friday’s University of Michigan sentiment reading saw its survey based inflation expectations jump to a decade high, matching the rise seen in market based TIPS breakevens earlier in the week.
Key commodities like lumber, copper and iron ore rolled over by the back half of week providing fertile ground for stocks to rebound. April PPI and retail sales figures failed to stoke the same overheating concerns as the CPI and bond markets lifted along with stocks. The VIX, after surging towards 30, slid back below 20 where it had entered the week. Bitcoin and other cryptos experienced another modest drawdown after Elon Musk’s comedic turn on SNL and news Tesla would no longer accept bitcoin for purchase of its cars. WTI crude futures drifted modestly lower amid the rekindling of the Israeli-Palestinian conflict. For the week, the S&P lost 1.4%, the DJIA slipped 1.1%, and the Nasdaq was off 2.3%.
In corporate news this week, Disney reported a miss on revenue and saw its Disney+ streaming service attract fewer users than the street had anticipated. DoorDash shares gained after it said its revenue tripled even as coronavirus cases begin to wane. Some of the ‘Reddit’ names had a strong week, as AMC gained traction, and Hertz shares doubled as it prepares to emerge from bankruptcy. Cryptocurrency exchange Coinbase reported its revenue tripled on a sequential basis, and the company said it would be including Dogecoin on its platform in the coming months. Sonos shares lifted after it posted a surprise earnings beat, raising its full year guidance and affirming long-term targets. McDonald’s announced plans to raise US wages by 10% on average and set a goal to reach an average level of $15/hour by 2024. Pershing Square’s Bill Ackman said he has taken a 6% stake in Domino’s, replacing his former stake in Starbucks.
SUN 5/9 (US) Colonial Pipeline: No time line for restart after cyber attack, main lines remains closed, smaller lateral times are operational; will bring system back online when safe (US) White House has set up a task force to investigate Colonial Pipeline Security Breach, notes preliminary findings link group to Russia
MON 5/10 (US) Colonial pipeline spokesperson: aims to 'substantially' restore service by end of the week; segments of the pipeline are being brought back online in a stepwise fashion (US) April NY Fed Survey of Consumer Expectations: median year-ahead inflation expectations increased to 3.4% from 3.2% in March MSFT US Pentagon reportedly mulls ending JEDI cloud project valued up to $10B amid Amazon court fight - US financial press
TUES 5/11 2317.TW Foxconn iPhone production at India factory is down >50%; cites rise in COVID cases among co's Indian workforce; Co. has implemented a no-entry ban at its Tamil Nadu plant until late May - financial press (US) Investor Stan Druckenmiller: Fed policy totally inappropriate and endangering USD status - CNBC comments following WSJ oped (US) White House Press Sec Psaki: up to the states to continue with jobless benefits BTC/USD SEC issues warning: Volatility and lack of regulation in bitcoin are risks, it is a highly speculative investment - press
WEDS 5/12 7203.JP Reports FY20/21 Net ¥2.25T v ¥2.04T y/y; Op ¥2.20T v ¥2.40T y/y; Rev ¥27.2T v ¥29.9T y/y; Announces ¥250B share buyback (up to 1.5% of shares outstanding) and 5 for 1 share split 1810.HK To be removed from US blacklist in Lawsuit settlement (as speculated) *(UK) Q1 PRELIMINARY GDP Q/Q: -1.5% V -1.6%E; Y/Y: -6.1% V -6.1%E DGE.UK Trading Update:Recommencing return of capital program of up to £4.5B to shareholders (update) (US) Fed Vice Chair Clarida: likely to see only transitory effect on underlying inflation; expects inflation to return or perhaps run somewhat above 2% in 2022 and 2023 (US) Fed’s Rosengren (non-voter): FedNow instant payment system to begin in 2023; Fed is considering both technical and policy issues surrounding a central bank digital currency *(US) DOE CRUDE: -0.4M V -2ME; GASOLINE: +0.4M V -0.5ME; DISTILLATE: -1.7M V -1ME *(US) APR MONTHLY BUDGET STATEMENT: -$225.6B V -$208BE SONO Reports Q2 $0.31 v -$0.22e, Rev $333M v $251Me; Raises FY21, Affirms LT targets *(US) PRES BIDEN: THINKS WE WILL HAVE GOOD NEWS IN 24 HOURS RELATED TO COLONIAL PIPELINE *(US) ENERGY SEC GRANHOLM: COLONIAL TO RESTART PIPELINE TODAY AT 17:00ET TSLA CEO Musk: Suspending purchases using bitcoin, concerned about Bitcoin's environmental impact
THURS 5/13 005930.KR Plans to invest $151B in logic chips and foundry sectors by 2030 (prior $118B) - press MCD Raises US wages by 10% in average to >$13/shr; To hire 10,000 new employees over next 3 months - press *(US) APR PPI FINAL DEMAND M/M: 0.6% V 0.3%E; Y/Y: 6.2% V 5.8%E 005380.KR To invest $7.4B in the US by 2025; US facility to begin EV production in 2022 (US) Colonial Pipeline reportedly did pay hackers nearly $5M in ransom - press *(US) TREASURY $27B 30-YEAR BOND AUCTION DRAWS 2.395%; BID TO COVER 2.22 V 2.18 PRIOR AND 2.23 OVER LAST 4 AUCTIONS COIN Reports Q1 $3.05 v $3.88e, Rev $1.80B v $1.81Be DIS Reports Q2 $0.79 v $0.31e, Rev $15.6B v $16.0Be (US) Fed’s Bullard (non-voter, dove): Will be a judgment call by the Fed to discern transitory inflation from more persistent inflation pressures; Job market may be much tighter than data suggest 2002.TW Price hike planned for June will be lower than expected - Press
FRI 5/14 (IE) Ireland govt official: health service cyber attack may last for days *(US) APR ADVANCE RETAIL SALES M/M: 0.0% V 1.0%E; RETAIL SALES (EX-AUTO) M/M: -0.8% V +0.6%E (US) Atlanta Fed GDPNow cuts Q2 GDP forecast to 10.5% from 11.0% (US) New York Fed Nowcast: cuts Q2 forecast to 4.9% from 5.1%