Weekly Market Update: Market pressures intensify on fears of stagflation and ahead of pivotal Fed meeting next week
Investors can only hope that April showers will bring May flowers after enduring another exceedingly difficult week. The NASDAQ finished off its worst month since late 2008, and the S&P saw its worst monthly performance since March 2020. Bond funds offered little solace as rates rose significantly as the Federal Reserve and other central banks embarked on increasingly aggressive designs to tame inflation. The VIX surged back above 30 as the S&P tested below 4200 on several occasions. After a dip in US Treasury yields early in the week amid sharp risk-off trading, rates steadily rose into Friday. The US Dollar Index notched a new 2 decade high after briefly surpassing 2020 and 2017 highs. WTI crude prices rose for the final 4 trading sessions to finish up around 9% on the week following a report Germany has dropped opposition to a full EU embargo of Russian oil. For the week, the S&P lost 3.3%, the DJIA was off 2.5%, and the Nasdaq tumbled 3.9%.
Coming into the week, Russian President Putin’s rhetoric that any country trying to intervene Ukraine could be on the receiving end of a nuclear strike seemed to cast a general pall over risk appetite. China’s zero-Covid policies also continued to weigh on sentiment. Reports that manufacturing activity was slowly returning to Shanghai were offset by an opposing report the government has no intention on backtracking from its zero tolerance policies. Economic data did little to provide much in way of relief. April Richmond Fed data saw both the backlog and volume of new orders drop while wages continued to rise. The US Q1 advanced GDP print was negative, but that softness was mostly attributed to trade, inventories, and government spending. EU inflation readings offered little hope that prices were likely to backtrack anytime soon. The US March PCE data did offer some glimmers that could support the narrative that "inflation may have peaked". Nevertheless, Friday also saw a record jump in the Q1 Employment Cost Index which may have helped push rates higher into week’s end. Inflation remained the key underlying theme across nearly all quarterly earnings reports which saw many firms report solid organic revenue growth, but struggle to hold the line on gross margins.
In corporate news this week, Apple reported beats on its top and bottom line, alongside its annual share buyback and dividend increase announcements, but those results were sandbagged by executives noting that June quarter results will be negatively impacted by $4-8B due to supply constraints. Amazon missed expectations amid a massive writedown on its stake in EV maker Rivian and said it would no longer be ‘chasing physical or staffing capacity,’ and also offered lighter-than-expected revenue guidance for next quarter. Alphabet notched an EPS miss, though its revenue was inline, as its YouTube business saw some negative effects following its exit from Russia. Facebook Q2 revenue guidance came in short of expectations, but DAU numbers and tempering of expense growth expectations sparked a relief rally. Microsoft was a bright spot among the largecap tech firms reporting this week, announcing a further rise in its earnings and revenue amid continued demand in cloud services and software sectors.
In M&A news, Twitter accepted Elon Musk’s $44B takeover offer after no white knight offers materialized, though there are already reports the deal will face close scrutiny from regulators and Congress. The owners of JCPenney reportedly offered $68/share for Kohl’s valuing the chain at $8.6B.
SUN 4/24 (EU) ECB chief Lagarde: "high probability" asset purchases end early Q3; "Strong chance" rates will rise this year; Not seeing any stagflation (UR) Ukraine President Zelenskiy: Announces visit by US Sec State Blinken and Sec Def Austin; Peace talks would be over if soldiers in Mariupol were killed or pseudo-referendum is announced as part of the creation of new pro-Russian pseudo-republics (RU) Russia Pres Putin said to have lost interest in peace agreement with Ukraine and moving to strategy which implies occupying as many Ukrainian land as possible - FT (RU) Russia Defense Ministry official: Accusing US of "staging provocations" to accuse Russia of using biological, chemical or nuclear weapons in Ukraine in response to successes of Russian military operation (EU) Reportedly EU's 6th sanctions package against Russia may be presented as soon as Monday, Apr 25th and could be adopted by Friday, Apr 29th; Set to include some form of ban on Russian oil imports - press (EU) ECB members reportedly keen to end APP (conventional QE) program at the earliest possible moment and raise interest rates as soon as July but certainly no later than Sept 2022 - financial press (US) Pres Biden tweets: We will continue to support Ukrainians in their fight to defend their homeland (AU) Australia PM Morrison: China naval base in Solomon Islands a 'red line' - press MON 4/25 005380.KR Reports Q1 (KRW) Net 1.58T v 1.52T y/y, Op 1.93T v 1.66T y/y, Rev 30.3T v 27.4T y/y; Expects global chip shortage to ease gradually ROG.CH Reports Q1 (CHF) Rev 16.4B v 14.9B y/y (UR) US Sec of State Blinken: Russia is failing in its war aims, Ukraine is succeeding - comments after visiting Kyiv *(DE) GERMANY APR IFO BUSINESS CLIMATE SURVEY: 91.8 V 89.0E 6502.JP Reportedly CVC and KKR to consider bids for Toshiba - press *(CN) CHINA PBOC CUTS FOREX RESERVE RATIO REQUIREMENT (RRR) BY 100BPS TO 8.0%; Effective May 15th CVNA To sell $2.28B in Sr unsecured notes due 2030, to finance ADESA US Auction acquisition *(US) APR DALLAS FED MANUFACTURING ACTIVITY INDEX: 1.1 V 4.8E BAYN.DE CEO: Affirms FY22 Core EPS €7.00 , adj Rev ~€46B v €45.4Be, EBITDA €12B, EBITDA Margin 26% - AGM speech KSS Reportedly JCPenney owners said to have offered $68/shr valued at $8.6B - press (RU) Russia Foreign Min Lavrov: Russia will continue contacts with Ukraine Pres Zelenskiy's team; The danger of nuclear war is serious, it is real, it should not be underestimated, but Russia's strong position is that nuclear war is unacceptable PKG Reports Q1 $2.72 v $2.53e, Rev $2.14B v $2.07Be; Expect demand in our Packaging segment to remain very strong (HK) Hong Kong Chief Exec Lam: No new plans to relax border controls and flights TUES 4/26 5.HK Reports Q1 Net $2.8B v $3.9B y/y, adj Pretax $4.71B v $6.4B y/y, Rev $12.6B v $13.3B y/y; to initiate further $1.0B share buyback UBSG.CH Reports Q1 Net $2.1B v $1.8B y/y, Adj Pretax $2.7B v $2.3B y/y, Rev $9.4B v $8.7B y/y NOVN.CH Reports Q1 Core EPS $1.46 v $1.44e, Rev $12.5B v $12.8Be MAERSKB.DK Reports prelim Q1 EBITDA $9.2B v $8.11Be, Rev $19.3B v $18.6Be; Raises FY22 guidance (DE) Germany said to approve delivery of Gepard* self-propelled anti-aircraft cannons (tanks) to Ukraine - German press (RU) Donbas separatists leader Pushilin: It is necessary to commence next stage of military operation after reaching borders of Donetsk region EUR/USD Trades below 1.07 level per US dollar (1st time since Mar 2020) amid overall dollar strength (DE) German Defense Min Lambrecht: To increase support for Ukraine to €2B; Confirms to send 50 Gepard tanks to Ukraine (RU) Russia and Belarus forces to hold joint drills of air forces and anti-missile forces in Belarus - Russian press (RU) Reportedly pro-Russian Transnistrian leadership will soon take decisions for defense of Moldova's breakaway region of Transnistria interests - Russian press ROSN.UK Received no offers for its 5.1Mt of Urals crude oil tender - press UPS Reports Q1 $3.05 v $2.87e, Rev $24.4B v $23.9Be; Doubles FY22 buyback target by $1B to $2B GE Reports Q1 $0.24 v $0.20e, Rev $17.0B v $17.5Be; Recognized $230M in Russia/Ukraine was charges in Q1; Currently trending toward the low end of its guidance range DHI Reports Q2 $4.03 v $3.37e, Rev $8.00B v $7.66Be; Homebuyer demand that exceeds our pace of supply MMM Reports Q1 $2.65 v $2.33e, Rev $8.83B v $8.74Be; Raises FY22 outlook VLO Reports Q1 $2.31 v $1.61e, Rev $38.5B v $32.1Be GPK Reports Q1 $0.48 adj v $0.39e, Rev $2.25B v $2.10Be RTX Reports Q1 $1.15 v $1.01e, Rev $15.7B v $15.8Be; Cuts FY22 Rev outlook citing sanctions on Russia ADM Reports Q1 $1.90 v $1.35e, Rev $23.7B v $19.1Be; Expect reduced crop supplies "for the next few years" GLW Reports Q1 $0.54 v $0.49e, Rev $3.68B v $3.56Be; Demand for Corning content has never been greater PCAR Reports Q1 $1.72 v $1.51e, Rev $6.47B v $5.79Be (DE) Germany Econ Min Habeck: Germany is very close to independence from Russian oil; Sees Germany prepared for a halt to Russian oil supplies DHI Guides Q3 Rev $8.6-9.0B v $10Be, homes closed 21.5-22.5K, gross margin 29-29.5% - conf call comments *(US) APR RICHMOND FED MANUFACTURING INDEX: 14 V 9E *(US) MAR NEW HOME SALES: 763K V 768KE *(US) APR CONSUMER CONFIDENCE: 107.3 V 108.2E (PL) Reportedly Russia suspended gas supplies to Poland under the Yamal contract - Polish press ML.FR Reports Q1 Rev €6.48B v €6.3Be (US) Atlanta Fed GDPNow: Cuts Q1 GDP forecast to 0.4% from 1.3% (US) Vice President Kamala Harris tests positive for COVID; Has not been in contact with Pres Biden due to recent travel schedules (PL) Polish gas firm PGNIG: Russia to halt gas deliveries beginning Apr 27th; Halt is a breach of Yamal contract TXN Reports Q1 $2.35 v $2.17e, Rev $4.91B v $4.71Be; Guides Q2 well below ests MSFT Reports Q3 $2.22 adj v $2.18e, Rev $49.4B v $49.0Be GOOGL Reports Q1 $24.62 v $25.69e, Rev $56.0B v $56.0Be; Announces additional up to $70B Class A and Class C share buyback GM Reports Q1 $2.09 v $1.56e, Rev $36.0B v $36.3Be V Reports Q2 $1.79 adj v $1.65e, Rev $7.19B v $6.84Be *(AU) AUSTRALIA Q1 CPI Q/Q: 2.1% V 1.7%E; Y/Y: 5.1% V 4.6%E; Trimmed mean annual pace rises above target WED 4/27 CSGN.CH Reports Q1 (CHF) Net -273M v -252M y/y, Pretax -428M v -757M y/y, Rev 4.41B v 7.57B y/y DBK.DE Reports Q1 Net €1.06B v €0.91B y/y, Rev €7.33B v €7.23B y/y; CEO sees Ukraine crisis impacting FY results MBG.DE Reports Q1 adj EBIT €5.3B v €4.8Be, Rev €34.9B v €33.6Be; Booked €709M in charges related to Russia in Q1 GSK.UK Reports Q1 Adj EPS £0.33 v £0.61e, Rev £9.78B v £9.43Be; Affirms guidance (PL) Polish gas firm PGNIG: Reiterates Russian gas supply halt is a breach of Yamal contract (RU) Russia's speaker of the State Duma Volodin: Russia should make other unfriendly countries pay for gas in RUB currency (ruble) and cut supplies if they refuse to do so BG Reports Q1 $4.26 v $3.24e, Rev $15.9B v $15.9Be; Raises guidance ADP Reports Q3 $2.21 v $2.07e, Rev $4.51B v $4.46Be; Raises FY22 outlook GD Reports Q1 $2.61 v $2.49e, Rev $9.39B v $8.98Be FISV Reports Q1 $1.40 v $1.35e, Rev $4.14B v $3.84Be BA Reports Q1 -$2.75 v -$0.26e, Rev $14.0B v $16.0Be; Remains on track to generate positive cash flow for 2022; Confirms to delay of 777X production; Submitted 787 Dreamliner certification plan to FAA *(US) MAR PRELIMINARY WHOLESALE INVENTORIES M/M: 2.3% V 1.5%E (IN) Indonesia confirms ban on palm oil exports to begin April 28th *(US) MAR PENDING HOME SALES M/M: -1.2% V -1.0%E; Y/Y: -8.9% V -8.1%E *(US) DOE CRUDE: +0.7M V +0.5ME; GASOLINE: -1.6M V 0ME; DISTILLATE: -1.4M V 0ME (RU) Russia reportedly planning referendums on the official accession of the self-proclaimed republics in Eastern Ukraine to Russian Federation in mid-May - Meduza (US) Atlanta Fed GDPNow: Maintains Q1 GDP forecast at 0.4% (US) Association of American Railroads weekly rail traffic report for week ending Apr 23rd: 498K total units, -7.4% y/y FB Reports Q1 $2.72 v $2.54e, Rev $27.9B v $28.2Be F Reports Q1 $0.38 v $0.39e, Rev $34.5B v $28.9Be URI Reports Q1 $5.73 v $5.28e, Rev $2.52B v $2.47Be 005930.KR Reports final Q1 (KRW) Net 11.3T v 7.09T y/y; Op 14.1T v 14.1T prelim (v 9.4T y/y); Rev 77.8T v 77.0T prelim (v 65.4T y/y) THURS 4/28 *(DE) GERMANY APR CPI NORTH RHINE WESTPHALIA M/M: 0.6% V 2.7% PRIOR; Y/Y: 7.7% V 7.6% PRIOR NOKIA.FI Reports Q1 non- IFRS EPS €0.07 v €0.07 y/y, Rev €5.35B v €5.27Be; Demand in end markets remains high 066570.KR Reports final Q1 (KRW) Net 1.23T v 998B y/y; Op1.88T v 1.88T prelim; Rev 21.1T v 21.1T prelim SAN.FR Reports Q4 Business EPS €1.94 v €1.80e, Business Net €3.07B v €2.28Be, Rev €9.67B v €9.60Be UNA.NL Reports Q1 Rev €13.8B v €12.33B y/y; Affirms FY22 guidance TTE.FR Reports Q1 adj Net $9.0B v $6.8B y/y, Rev $68.6B v $43.8B y/y (CN) China govt cuts coal import tariffs to zero; effective from May 1st 2022 to end-Mar 2023 - press *(SE) SWEDEN CENTRAL BANK (RIKSBANK) RAISES REPO RATE BY 25BPS TO 0.25%; NOT EXPECTED; raises rate path outlook (EU) Germany’s Uniper and Austria’s OMV reportedly plan to use Russian rouble (RUB) accounts for gas payments; Italy's Eni weighs options - FT NOKIA.FI CEO: Supply chains are tight, but reason to hope there is an improvement in situation H2. Don't expect it to hit FY performance - post earnings comments (UR) Ukraine adviser and negotiator Podolyak: Reiterates Ukraine will defend itself in any way, including strikes on the warehouses and bases of the killers in Russia; The world recognizes this right TMO Reports Q1 $7.25 v $6.17e, Rev $11.8B v $10.6Be LIN.DE Reports Q1 $2.93 v $2.78e, Rev $8.2B v $8.06Be; May incur impairment or other charges over Russia/Ukraine MRK Reports Q1 $2.14 v $1.81e, Rev $15.9B v $15.0Be CAT Reports Q1 $2.88 v $2.66e, Rev $13.6B v $13.5Be PHM Reports Q1 $1.83 v $1.70e, Rev $3.19B v $3.05Be CAT Guides Q2 Rev higher q/q, citing strong end user demand and pricing - earnings slides LUV Reports Q1 -$0.32 v -$0.34e, Rev $4.7B v $4.66Be; Expects to be solidly profitable during remainder of 2022 IRM Reports FFO Q1 $0.91 v $0.70e, Rev $1.25B v $1.23Be MCD Reports Q1 $2.28 v $2.18e, Rev $5.67B v $5.55Be CMCSA Reports Q1 $0.86 v $0.80e, Rev $31.0B v $30.5Be DPZ Reports Q1 $2.50 v $3.07e, Rev $1.01B v $1.02Be *(DE) GERMANY APR PRELIMINARY CPI M/M: 0.8% V 0.5%E; Y/Y: 7.4% V 7.2%E GWW Reports Q1 $7.07 v $6.17e, Rev $3.6B v $3.52Be; Raises FY guidance TWTR Reports Q1 $0.90* v $0.04e, Rev $1.20B v $1.21Be; Will not provide outlook *(US) INITIAL JOBLESS CLAIMS: 180K V 180KE; CONTINUING CLAIMS: 1.41M V 1.40ME *(US) Q1 ADVANCE GDP ANNUALIZED Q/Q: -1.4% V +1.0%E (below all analysts estimates); PERSONAL CONSUMPTION: 2.7% V 3.5%E *(US) Q1 ADVANCE GDP PRICE INDEX: 8.0% V 7.2%E; CORE PCE Q/Q: 5.2% V 5.5%E (Highest since 1981) (US) Nevada reports Mar casino gaming Rev $1.36B, +26.8% y/y; Las Vegas strip Rev $746.2M, +48.8% y/y HLAG.DE Reports prelim Q1 EBIT €4.3B, EBITDA €4.7B; Avg freight rate increased by ~80%; Raises FY22 outlook (RU) Reportedly Germany has dropped opposition to EU embargo of Russian oil; Embargo now seen as imminent but no target date has been set - press (UR) White House requests further $33B in additional aid for Ukraine through Sept (US) Apr Kansas City Fed Manufacturing Activity Index: 25 v 35e INTC Reports Q1 $0.87 v $0.80e, Rev $18.4B v $18.3Be; Affirms FY22 guidance AMZN Reports Q1 -$7.56** (incl Rivian loss) v +$8.73e, Rev $116.4B v $117.0Be; Notes this year Prime Day to take place in July 2022 AAPL Reports Q2 $1.52 v $1.43e, Rev $97.3B v $94.5Be; Authorizes $90B increase to its share buyback program; Raises Quarterly dividend 4.5% to $0.23 from $0.22 AAPL CEO Cook: Supply constraints significantly lower in Q2 than in Q1 - press interview FRI 4/29 (CN) China Politburo: Will prevent 'black swan' and 'grey rhino' events; Reiterates that domestic economy is facing increasing uncertainties and complexities; Striving to attain full year social and economic targets - China Press BAS.DE Reports final Q1 Net €1.22B v €1.72B y/y, adj EBIT €2.82B v €2.32B y/y, Rev €23.1B v €19.4B y/y *(FR) FRANCE Q1 PRELIMINARY GDP Q/Q: 0.0% V 0.3%E; Y/Y: 5.3% V 5.5%E ENI.IT Reports Q1 adj Net €3.27B v €270M y/y, adj Op €5.19B v €1.32B y/y, Rev €32.1B v €14.5B y/y *(FR) FRANCE APR PRELIMINARY CPI M/M: 0.4% V 0.2%E; Y/Y: 4.8% V 4.6%E *(ES) SPAIN Q1 PRELIMINARY GDP Q/Q: 0.3% V 0.6%E; Y/Y: 6.4% V 6.7%E (CN) China said to end regulatory scrutiny over Big Tech and give sector bigger role in boosting slowing economy - SCMP *(DE) GERMANY Q1 PRELIMINARY GDP Q/Q: 0.2% V 0.2%E; Y/Y: 3.7% V 3.6%E (avoids a technical recession) *(IT) ITALY Q1 PRELIMINARY GDP Q/Q: -0.2% V -0.2%E; Y/Y: 5.8% V 5.8%E 3328.HK Reports Q1 (CNY) Net 23.3B v 22.0B y/y, Rev 73.7B v 68.4B y/y *(EU) EURO ZONE APR ADVANCE CPI ESTIMATE Y/Y: 7.5% V 7.5%E; CPI CORE Y/Y: 3.5% V 3.2%E (annual pace matches the record high since Euro's launch) CVX Reports Q1 $3.36 v $3.44e, Rev $54.4B v $47.0Be; To increase FY22 Capex by 50% or ~$1.5B HON Reports Q1 $1.91 v $1.86e, Rev $8.38B v $8.35Be (RU) Russia govt spokesperson Peskov: Considering idea of pegging the rouble (RUB) rate to gold prices (RU) Russian govt spokesperson: Have considered pegging RUB currency (Ruble) to gold (**Note: response to question) BMY Reports Q1 $1.96 v $1.92e, Rev $11.6B v $11.3Be; Cuts guidance PSX Reports Q1 $1.32 v $1.14e; Saw substantially improved financial results from our operations in March and expect continued strong performance in Q2 (CN) China regulators reportedly plan to hold off rules limiting users' activity on mobile platforms - US financial press *(US) Q1 EMPLOYMENT COST INDEX (ECI): 1.4% V 1.1%E *(US) MAR PERSONAL INCOME: 0.5% V 0.4%E; PERSONAL SPENDING: 1.1% V 0.6%E *(US) MAR PCE DEFLATOR M/M: 0.9% V 0.9%E; Y/Y: 6.6% V 6.7%E (RU) Russia Finance Min Siluanov: Channeled $564.8M in US dollars to pay coupons on 2022 and 2042 eurobonds via London branch of Citibank *(US) APR FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 65.2 V 65.7E (US) Atlanta Fed GDPNow: Initial Q2 GDP forecast at 1.9% (EU) EU countries reportedly likely to approve phased embargo on Russia oil as soon as next week - NY Times (US) Mar Dallas Fed Trimmed Mean PCE +3.1% v +4.0% m/m