This article first appeared in the Morning Brief. Receive the Morning Brief delivered directly to your inbox every Monday through Friday at 6:30 am ET. Subscribe
Monday, March 28, 2022
Almost any direction you look points to higher oil prices and a potentially damaging effect on the global economy, one that the market will have to reckon with once and for all.
The stage is certainly set for a further bullish push in oil prices after a momentary relief sell-off.
President Biden’s “can’t stay in power” comments regarding Russian President Vladimir Putin at this weekend’s NATO meeting will likely be seen as bullish oil prices.
Then there is the delayed domino effect of the West’s harsh sanctions on Russia beginning to trickle down through oil markets.
“Major energy companies and commodity trading firms refused to buy crude oil from Russia in the days after the Ukraine invasion. Banks also stopped financing these trades, carriers refused to load cargoes, and insurers stopped covering them, fearful of running afoul of sanctions or upsetting company stakeholders,” The Wall Street Journal writes.
Unsurprisingly, oil prices at such high levels will hurt corporate profits, perhaps big time. Let’s use tech giant Amazon, which operates huge oil-drilling distribution centers and an army of gas-powered trucks (until Rivian delivers the company thousands of electric vehicles in 2040), as a benchmark for what might happen once Let earnings season start soon.
The higher cost of diesel caused Morgan Stanley analyst Brian Nowak will increase his estimate of fuel expenses for Amazon in 2022 for a whopping $6 billion. That’s a billion with b.
Even before oil prices rose $100 a barrel after Russia’s war with Ukraine began, companies were signaling that things could get tough, mainly due to energy-related inflation.
FactSet notes that 95 S&P 500 companies have already issued first-quarter EPS guidance, 66 of them have been warnings. The number of companies posting warnings in the first quarter is above the five-year average, FactSet says.
So whether it’s $90 oil (as seen just before the war), $100 oil, $150 oil, or $200 oil, rest assured that companies are facing higher oil prices in this moment. And that means your wallet may be up against it very soon.
Charts of the day: BTIG’s Chief Market Technician Jonathan Krinsky highlights the impressive movement in Apple stock on this chart.
With the 10-year yield rising, dragging mortgage rates along with it, housing-related stocks continue to soak up the wind. Earnings calls last week from KB Home and Lennar they weren’t exactly very encouragingthe same goes for new and recent existing home sales data.
the people in Made to size prepared the following chart that underlines the sell-off in the space.
Analyst note of the day: how have we been saying on Yahoo Finance Live, this is shaping up to be the summer of love for singles as the pandemic loosens up. Jefferies Technology Analyst brent thill I just got back from the Global Dating Insights conference (yes, this is a thing), and I offered this observation that should leave you digging into the finances of Match Group and Bumble: “(1) the dating industry is moving toward more (e.g., live video, games) rather than “swipe, match, meet”; (2) trust and safety are key investment priorities for dating apps; (3) Match’s new Stir app looks promising for single parents; (4) Snap could be the next big tech company to venture into dating, but we expect there will be minimal long-term impact on Match’s business.
Retail and auto talk: Kohl’s is responding to the two activist investors pushing the retailer to sell, both of which just appeared on Yahoo Finance Live. Kohl’s stock over the past decade: Up 24% vs. a 220% gain for the S&P 500, for Yahoo Finance Plus data.
If Levi’s thought the old approach of saying nothing when bad news arrives in the hope that it becomes a meaningless story would work with Jennifer Sey’s departure, well, that’s obviously not the case. Here’s a star profile of the now former leader of Levi’s (who was about to take over as CEO of chip bergh) from the New York Times. She was practically kicked out (although the company refutes that notion) from the company for her tweets about COVID-19 vaccinations in schools.
Meanwhile, incoming Starbucks CEO Howard Schultz must better muster all his legendary speaking skills because the unionization drive in the company’s stores is in full swing, like Yahoo Finance’s Dani Romero. reports. wall street follows minimize the financial impact of unionization at Starbucks, but maybe they need to rethink things.
Private companies with high valuations could be at risk of cutting those valuations, writes the always connected TechCrunch (a sister publication of Yahoo Finance). by instacart Ugly valuation haircut late last week. it may be a sign of things to come.
And finally, a trend that has played out this month is another stretch higher in new car prices as automakers grapple with rising materials inflation. Autoblog (another sister publication of Yahoo Finance) reports the price of new Corvettes is heading up. Tesla just raised prices again. China-based electric vehicle maker Xpeng has also raised prices recently. (Xpeng Chairman and Vice Chairman Brian Gu will be on Yahoo Finance Live this morning to discuss the earnings.)
what to see today
8:30 a.m. Eastern Time: Anticipated trade balance of goodsFebruary (-$106.3 billion expected, -$107.6 billion during the previous month)
8:30 a.m. Eastern Time: wholesale inventoriesmonth-over-month, February preliminary (1.2% expected, 0.8% over the previous month, revised up to 1.0%)
8:30 a.m. Eastern Time: Retail inventoriesmonth over month, February (1.4% expected, 4.9% during the previous month)
10:30 a.m. Eastern Time: Dallas Fed Manufacturing ActivityMarch (expected 11, 14 during the previous month)
6:30 a.m. Eastern Time: Jefferies Financial (JEF) is expected to report adjusted earnings of $0.89 per share on revenue of $1.55 billion.
7:30 a.m. Eastern Time: GTP (GTP) is expected to report adjusted earnings of $0.42 per share on revenue of $258.5 million
President Biden is set to present its budget for 2023 later this morning. The proposal is expected to include a new tax on billionairesspecifically a minimum tax rate of 20% for households with incomes over $100 million and a reduction in the deficit.
After a one week delay, the Senate is set to vote this afternoon at United States COMPETE Act — which includes $52 billion for chipmakers, among other provisions — and begin the process of settling their differences with the House of Representatives on the invoice.
European markets rise ahead of Ukraine-Russia peace talks [Yahoo Finance UK]
Yahoo Finance Highlights