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Turkey"s Chief Statistician Quits For "Health Reasons" After Inflation Hits 70%

Turkey's Chief Statistician Quits For "Health Reasons" After Inflation Hits 70% Three months after Turkey's president Erdogan fired his statistics chief as inflation hit a mere 36%, now that inflation has almost doubled since then, the latest official in charge of compiling Turkish inflation statistics has decided to do the smart thing and step down on his own, becoming the latest prominent departure at an institution that’s facing harsh criticism over the reliability of its economic data. On Friday, the Turkish Statistical Institute said Cem Bas resigned as head of the department of price statistics for "health reasons." Furkan Metin, who previously oversaw the digital transformation and projects department at the agency known as TurkStat, has replaced Bas, who’ll remain on staff in a lower-profile role. The personnel change, first reported by Bloomberg, adds to a period of ongoing turmoil at TurkStat, whose president was replaced in January less than a year after his appointment. Turkish inflation data has been in the spotlight at a time when consumer prices are exploding at the fastest pace since the turn of the century, a key concern for President Recep Tayyip Erdogan’s government just over a year before elections. Furthermore, according to Bloomberg, concerns have swirled among researchers over what they call a divergence between the agency’s price statistics and the surge in the cost of living felt by wage earners. While TurkStat reported an annual inflation of 70% in April, ENAGroup, an independent group of scholars who’ve put together an alternative consumer price index, put the figure at as high as 157%. While both numbers are ridiculous, what is even more ridiculous is that until recently the central bank was cutting rates to avoid angering the president whose "Erdoganomics" theory of upside down economics recommends cutting rates when inflation rises, effectively setting the country on a path to suicide, something the Turkish lira has clearly grasped, as it has resumed plunging after cratering in 2021 and only a massive intervention by the central bank preventing an all-out economic collapse. The government is meanwhile seeking to pass legislation that would bar independent researchers from publishing their own data without seeking approval from TurkStat and potentially face a jail term if they violate the law. That should answer any questions whether the government or the shadow stat inflation data is the correct one. Tyler Durden Sun, 05/22/2022 - 20:55.....»»

Category: blogSource: zerohedgeMay 22nd, 2022

Black Monday: All Hell Breaks Loose As Stocks Plunge Into Bear Market, Curve Inverts, Cryptos Crater

Black Monday: All Hell Breaks Loose As Stocks Plunge Into Bear Market, Curve Inverts, Cryptos Crater For all those claiming that stocks had priced in 3 (or more) 50bps (or more) rate hikes, we have some bad news. All hell is breaking loose on Monday, with futures tumbling (again) into bear market territory, sliding below the 20% technical cutoff from January's all time high of 3,856 and tumbling as low as 3,798.25 - taking out the May 10 intraday low of 3,810 - before reversing some modest gains. S&P 500 futures sank 2.5% and Nasdaq 100 contracts slid 3.1%, in a session that has seen virtually everything crash. Dow futures were down 567 points at of 730am ET. The global selloff - which has dragged Asian and European markets to multi-month lows and which was sparked by a hotter than expected US CPI print which heaped pressure on the Federal Reserve to step up monetary tightening - accelerated on Monday as panicking traders now bet the Fed will raise rates by 175 bps by its September decision, implying two 50-bp moves and one hike of 75 bps, with Barclays and now Jefferies predicting such a move may even come this week. If that comes to pass it would be the first time since 1994 the Fed resorted to such a draconian measure. The selling in stocks was matched only by the puke in Treasuries, as yields on 10-year US Treasuries reached 3.24%, the highest since October 2018, yet where 2Y yields sold off more, sending the 2s10s curve to invert again... ... for the second time ahead of the coming recession, an unprecedented event. The US yield curve appears destined to invert again in coming weeks after Wednesday’s CPI data: BBG We'll get two concurrent recessions — zerohedge (@zerohedge) May 12, 2022 Meanwhile, the selloff in European government bonds also gathered pace, with the yield on German’s two-year government debt rising above 1% for the first time in more than a decade and Italian yields exploding and nearing 4%, ensuring that another European sovereign debt crisis is just a matter of time (recall that all Italian net bond issuance in the past decade has been monetized by the ECB... well that is ending as the ECB pivots away from QE and NIRP). The exodus from stocks and bonds is gaining momentum on fears that central banks’ battle against inflation will end up killing economic growth. Inversions along the Treasury yield curve point to fears that the Fed won’t be able to stave off a hard landing. “The Fed will not be able to pause tightening let alone start easing,” said James Athey, investment director at abrdn. “If all global central banks deliver what’s priced there are going to be some significant negative shocks to economies.” Going back to the US market, big tech stocks slumped in US premarket trading as bets that the Federal Reserve hikes rates more aggressively sent bond yields higher, and Nasdaq futures dropped. Cryptocurrency-exposed stocks cratered as Bitcoin continued its recent decline to hit an 18- month low, precipitated by news that crypto lender Celsius had halted withdrawals... ... which sent Ethereum to the most oversold level in 4 years. Here are some of the biggest U.S. movers today: Apple shares (AAPL US) -3.1%, Amazon (AMZN US) -3.4%, Microsoft (MSFT US) -2.8%, Alphabet (GOOGL US) -3.7%, Netflix -3.8% (NFLX US), Nvidia (NVDA US) -4.5% Tesla (TSLA US) shares dropped as much as 3.1% in US premarket trading amid losses across big tech stocks, while the electric-vehicle maker also filed to split shares 3-for-1 late Friday. MicroStrategy (MSTR US) -18.4%, Riot Blockchain (RIOT US) -15%, Marathon Digital (MARA US) -14%, Coinbase (COIN US) -12.5%, Bit Digital (BTBT US) -10%, Silvergate Capital (SI US) -11%, Ebang (EBON US) -4% Bluebird Bio (BLUE US) shares surge as much as 86% in US premarket trading and are set to trim year-to- date losses after the biotech firm’s two gene therapies won backing from an FDA advisory panel. Chinese education stocks New Oriental Education (EDU US) and Gaotu Techedu (GOTU US) jump 8.3% and 3.4% respectively in US premarket trading after peer Koolearn’s endeavors into livestreaming e-commerce went viral and sent its shares up 95% in two sessions. Astra Space (ASTR US) shares slump as much as 25% in US premarket trading, after the spacetech firm’s TROPICS-1 mission saw a disappointing launch at the weekend. Invesco (IVZ US) and T. Rowe (TROW US) shares may be in focus today as BMO downgrades its rating on the two companies in a note saying it favors alternative asset managers over traditional players as a way to hedge beta risk against the current macro backdrop. In Europe, the Stoxx 600 also extended declines to a three-month low, plunging mover than 2%, with over 90% of members declining, as meeting-dated OIS rates price in 125bps of tightening, one 25bps move and two 50bps hikes by October.  Tech leads the declines as bond yields rise, with cyclical sectors such as autos and consumer products also lagging as recession risks rise.  The Stoxx 600 Tech Index falls as much as 4.3% to its lowest since November 2020. Chip stocks bear the brunt of the selloff: ASML -3%, Infineon -4.2%, STMicro -3.6%, ASM International -2.9%, BE Semi -2.8%, AMS -5.3% as of 9:36am CET. As if inflation fears weren't enough, French banks tumbled after a first round of legislative elections showed that President Emmanuel Macron could lose his outright majority in parliament. Here is a look at the biggest movers: Atos shares decline as much as 12%; Oddo says the company’s reported decision to retain and restructure its legacy IT services business in a separate legal entity is bad news for the company. Getinge falls as much as 7.6% after Kepler Cheuvreux cut its recommendation to hold from buy, cautioning that headwinds and supply chain challenges may intensify as Covid-related tailwinds abate. Elior plunges as much as 15% amid renewed worries over inflation and rising interest rates impacting a caterer that’s still looking for a new CEO following the unexpected departure of the previous one. Valneva falls as much as 27% in Paris after saying its effort to salvage an agreement to sell Covid-19 shots to the European Union looks likely to fail. Subsea 7 drops as much as 13% after the offshore technology company lowered its 2022 guidance, with analysts noting execution challenges on some of its offshore wind projects. French banks decline after a first round of legislative elections showed that President Emmanuel Macron could lose his outright majority in parliament. Societe Generale shares fall as much as 4.5%, BNP Paribas -4.2% Euromoney rises as much as 4.4% after UBS raises the stock to buy from neutral, saying the financial publishing and events firm’s “ambitious” growth targets for 2025 are broadly achievable. Earlier in the session, Asian stocks also declined across the board following the hot US CPI data and amid fresh COVID concerns in China. Nikkei 225 fell below the 27k level with sentiment not helped by a deterioration in BSI All Industry data. Hang Seng and Shanghai Comp. conformed to the downbeat mood with heavy losses among tech stocks owing to the higher yield environment and with mainland bourses constrained after the latest COVID outbreak and containment measures. The Emerging-market stocks index dropped about 3%, falling for a third day in the steepest intraday drop since March, as a fresh high in US inflation sparked concerns that the Fed may need to be more aggressive with rate hikes. In FX, the Bloomberg dollar rose a fourth day as the dollar outperformed all its Group of 10 peers apart from the yen, which earlier weakened to a 24-year low with NOK and AUD the worst G-10 performers. In EMs, currencies were led lower by the South Korean won and the South African rand as the index fell for a fifth day, the longest streak since April.  The onshore yuan dropped to a two-week low as a jump in US inflation boosted the dollar and China moved to re-impose Covid restrictions in key cities. India’s rupee dropped to a new record low amid a selloff in equities spurred by continuous exodus of foreign investors. The euro fell for a third day, touching an almost one-month low of 1.0456. Sterling fell after weaker-than-expected UK GDP highlighted the risks to the economy, with a global risk-off mood adding pressure on the currency, UK GDP fell 0.3% from March. The yen erased earlier losses after earlier falling to a 24-year low while Japanese bonds tumbled, prompting a warning from the Bank of Japan as its easy monetary policy increasingly feels the strain of rising interest rates globally. Bank of Japan Governor Haruhiko Kuroda said a recent abrupt weakening of the yen is bad for the economy and pledged to closely work with the government hours after the yen hit the lowest level since 1998. Bitcoin is hampered amid broad-based losses in the crypto space with the likes of Celsius pausing withdrawals/transfers due to the "extreme market conditions". Currently, Bitcoin is at the bottom-end of a USD 23.7-27.9 range for the session. In rates, the US two-year yield exceeded the 10-year for the first time since early April, an unprecedented re-inversion. The 2-year Treasury yield touched the highest level since 2007 and the 10-year yield the highest since 2018. Treasuries continued to sell off in Asia and early European sessions, leaving 2-year yields cheaper by 15bp on the day into the US day as investors continue to digest Friday’s inflation data. Into the weakness a flurry of block trades in futures added to soaring yields. Three-month dollar Libor jumps 8.4bps. US yields remain close to cheapest levels of the day into early US session, higher by 13bp to 6bp across the curve: 2s10s, 5s30s spreads flatter by 5bp and 5.5bp on the day -- 5s30s dropped as low as -16.6bp (flattest since 2000) while 2s10s bottomed at -2bp. US 10-year yields around 3.235%, remain cheaper by 8bp on the day and lagging bunds, gilts by 2.5bp and 5bp in the sector. Fed-dated OIS now pricing in one 75bp move over the next three policy meetings with 175bp combined hikes priced by September, while 55bp -- or 20% chance of a 75bp move is priced into Wednesday’s meeting. A selloff of European government bonds gathered pace as traders priced in a more aggressive pace of tightening from the ECB, with traders now wagering on two half-point hikes by October. The Bank of Japan announced it would conduct an additional bond-buying operation, offering to purchase 500b yen in 5- to 10-year government bonds Tuesday after 10-year yields rose above the upper limit of its policy band. In commodities, oil and iron ore paced declines among growth-sensitive commodities; crude futures traded off worst levels. WTI remains ~1% lower near 119.30. Spot gold gives back half of Friday’s gains to trade near $1,855/oz. Base metals are in the red with LME tin lagging While it's a busy week ahead, with the FOMC meeting on deck where the Fed is set to hike 50bps, or maybe 75bps and even 100bps, there is nothing on Monday's calendar. Fed Vice Chair Lael Brainard will discuss the Community Reinvestment Act in a pre-recorded video and an audience Q&A; she is not expected to discuss monetary policy given the FOMC blackout period. Market Snapshot S&P 500 futures down 2.4% to 3,803.50 STOXX Europe 600 down 2.0% to 414.12 MXAP down 2.7% to 161.61 MXAPJ down 2.8% to 534.45 Nikkei down 3.0% to 26,987.44 Topix down 2.2% to 1,901.06 Hang Seng Index down 3.4% to 21,067.58 Shanghai Composite down 0.9% to 3,255.55 Sensex down 3.2% to 52,585.17 Australia S&P/ASX 200 down 1.3% to 6,931.98 Kospi down 3.5% to 2,504.51 Brent Futures down 1.9% to $119.71/bbl Gold spot down 0.8% to $1,857.56 U.S. Dollar Index up 0.39% to 104.55 German 10Y yield little changed at 1.54% Euro down 0.3% to $1.0484 Brent Futures down 1.9% to $119.69/bbl Top Overnight News “Sell everything but the dollar” is resounding across trading desks as investors reprice the risk that the Federal Reserve hikes rates more aggressively than previously thought Investors rushed to price in more aggressive Federal Reserve rate hikes Monday as the US inflation shock continued to reverberate, sending two-year Treasury yields to a 15-year high and strengthening the dollar UK Prime Minister Boris Johnson risks reopening divisions that tore his Conservative Party apart in 2019, with his government set to propose a law that would let UK ministers override parts of the Brexit deal he signed with the European Union Crypto lender Celsius Network Ltd. paused withdrawals, swaps and transfers on its platform, fueling a broad cryptocurrency selloff and prompting a competitor to announce a potential bid for its assets French President Emmanuel Macron has a week to convince voters to give him an outright majority in parliament to ease the way for the controversial social and economic reforms he promised. Shares in France fell on the results A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks declined across the board following the hot US CPI data which rose to a 40-year high and amid fresh COVID concerns in China. Nikkei 225 fell below the 27k level with sentiment not helped by a deterioration in BSI All Industry data. Hang Seng and Shanghai Comp. conformed to the downbeat mood with heavy losses among tech stocks owing to the higher yield environment and with mainland bourses constrained after the latest COVID outbreak and containment measures. Top Asian News Beijing government said the scale of Beijing’s latest outbreak linked to bars is ferocious and explosive in nature after the city reported 166 cases in a bar cluster and with 6,158 people determined as close contacts linked to the bar cluster, while Beijing announced to halt offline sports events from today and the district of Chaoyang is to launch mass COVID testing on June 13th-15th, according to Reuters. Shanghai re-imposed a ban on dine-in restaurant services in most districts and punished officials for a management lapse at a quarantine hotel, according to Business Times. At least three Chinese cities of Beijing, Nanjing and Wuhan are trialling a shorter quarantine period of 7+7 days for international arrivals at entry points, according to Global Times. Beijing government spokesperson says that the Beijing COVID-19 bar outbreak still presents risks to the community; Beijing City reports 45 new local cases of 3pm, according to a health official, via Reuters, adding that the COVID-19 bar outbreak is still developing and epidemic control is at a critical juncture. Chinese Defence Minister Wei said China firmly rejects accusations and threats by the US against China, while he added the US Indo-Pacific strategy will create confrontation and that Taiwan is first and foremost China’s Taiwan. Wei also said those that pursue Taiwan's independence will come to no good end and that China will fight to the end if anyone attempts to secede Taiwan from China, according to Reuters. Furthermore, Wei reiterated that Beijing views the annexation of Taiwan as a historic mission that must be achieved which its military would be willing to fight for but added that peaceful unification remained the biggest hope of the Chinese people and they are willing to make the biggest effort to achieve it, according to FT. China urges local governments to raise revenue and sell assets to resolve debt risks, via Reuters. Urges local govt's to lower the debt burden; adding, they will crackdown on illegal debt raising. Japanese Defence Minister Kishi met with his Chinese counterpart in Singapore and said Japan and China agreed to promote defence dialogue and exchanges, while Japan warned China against attempting to alter the status quo in the South and East China sea, according to Reuters. Australian and Chinese defence ministers met in Singapore on Sunday for the first time in three years at the sidelines of the Shangri-La Dialogue summit with the talks described as an important first step following a period of strained ties, according to AFP News Agency. European bourses are hampered across the board, Euro Stoxx 50 -2.5%, in a continuation of the fallout from Friday's US CPI and amid fresh COVID concerns in China. US futures are in-fitting with this price action, ES -2.4% (sub-3800 at worst), ahead of the FOMC where the likes of Barclays now look for a 75bp hike after the May inflation release. Sectors in Europe are all in the red and feature Travel & Leisure as the underperformer given further cancellations going into the summer period. Top European News UK Northern Ireland Secretary Lewis said the government will publish legislation on the Northern Ireland Protocol on Monday and that the bill will rectify the issues in the protocol, according to Reuters. Reports suggest that the new law could see European judges blocked from having the final say on Northern Ireland-related disputes, according to the Telegraph. UK Tory MPs accused PM Johnson of ‘damaging the UK and everything the Conservatives stand for’ as he plans to release legislation on Monday to tear up the Northern Ireland protocol, according to FT. UK government ministers are drawing up plans to cut the link between gas and electricity to help reduce household bills for millions of families, according to The Times. UK Foreign Minister Truss says she has spoken to EU VP Sefcovic about the Nothern Ireland protocol and the preference is for a negotiated solution; adding, the EU needs to be willing to change the protocol. French President Macron’s majority in parliament is at risk as an IFOP initial estimate showed that Macron’s centrist camp is seen qualified for winning 275-310 out of 577 seats after the first round of the French lower house elections, while the IPSOS initial estimate shows the centrist camp is qualified for winning 255-295 seats, according to Reuters. Note, 289 seats are required for a majority FX Greenback extends US inflation data gains as near term Fed hike expectations crank up; DXY hits 104.750 to eclipse May 16 high and expose 105.010 YTD peak. Pound undermined by negative UK GDP and output prints plus NI protocol jitters, Cable perilously close to 1.2200 and EUR/GBP tops 0.8575. Aussie hit by heightened Chinese Covid concerns and demand implication for commodities, Kiwi feeling contagion and Loonie lurching as oil prices retreat; AUD/USD sub-0.7000, NZD/USD near 0.6300 and USD/CAD just shy of 1.2850. Euro and Franc make way for outperforming Buck, but Yen claws back losses on risk dynamics allied to technical retracement; EUR/USD under 1.0500, USD/CHF above 0.9900 and USD/JPY below 134.50 vs 135.20 apex overnight. Yuan falls as Beijing suffers ferocious and explosive virus outbreak and Shanghai reimposes restrictions in most districts, USD/CNH pivots 6.7500 and USD/CNY straddles 6.7350. Commodities WTI & Brent are hampered amid the broader market pressure; though, did experience a fleeting move off lows during a break in the newsflow. Currently, the benchmarks are lower by circa. USD 2.00/bbl given Friday's CPI, China COVID, geopolitics around US-China-Taiwan and Iran-IAEA developments (or lack of) following last week's camera removal. Iraq set July Basrah medium crude OSP to Asia at a premium of USD 3.30/bbl vs Oman/Dubai average and set OSP to Europe at a discount of USD 7.60/bbl vs dated Brent, while it set OSP to North and South America at a discount of USD 1.70/bbl vs ASCI, according to Reuters citing Iraq’s SOMO. Libya’s Minister of Oil and Gas Aoun said Libya is currently losing more than 1.1mln bpd of oil production and that most oil fields are closed except for the Hamada field and the Mellitah complex, while the Al-Wafa field continues operations from time to time, according to The Libya Observer. QatarEnegy signed an agreement with TotalEnergies (TTE FP) for the North Field East expansion project, while it will announce subsequent signings with partners in the gas field expansion in the near future and possibly at the end of next week, according to Reuters. Norwegian Oil and Gas Association reached an agreement in principle with three unions of offshore workers to avert a strike although two of the unions will ask members before signing a deal, according to Reuters. Spot gold is pressured by circa. USD 15/oz amid a stronger USD and pronounced yield action; however, the yellow metal is yet to drop below USD 1850/oz and the 10-, 21- & 200-DMAs at USD 1852, 1847 & 1842 respectively. Fixed Income Bond bears still in control and pushing futures down to fresh troughs, at 145.85 for Bunds, 112.33 for Gilts and 115-30+ for 10 year T-note. Cash yields test or breach psychological levels, like 1.50%, 2.5% and 3.25%, while 2-10 year US spread inverts briefly on rising recession risk. Monday agenda very light, but big week ahead including top tier data and multiple Central Bank policy meetings. Central Banks BoJ announces new offer for bond buying programme in which it is to purchase JPY 500bln in 5yr-10yr JGBs tomorrow and will increase amount of offers for its bond buying as needed. BoJ fixed-rate bond purchases exceed JPY 1tln, at their highest since 2018, via Bloomberg; Further reported that the BoJ accepts JPY 1.5tln of bids for the daily offers to purchase 10yr bonds. BoJ Governor Kuroda says they must support the economy with monetary easing to achieve higher wages; adding, the domestic economy is still in the midst of a COVID recovery. Increasing raw material costs are increasing downward pressure, recent sharp JPY dalls are undesirable. Additionally, Japan's Finance Minister says a weak JPY has both merits and demerits. BoJ buys JPY 70.1bln in ETF, according to a disclosure. DB's Jim Reid concludes the overnight wrap This week is squarely and firmly all about the FOMC meeting on Wednesday. We go into it with the 2yr US note up +25bps on Friday and another c.+10bps this morning in Asia. The 2s10s curve has flattened around 20bps since Friday morning to c.2bps as we type. So some dramatic moves. The problem as we enter the next couple of Fed and ECB meetings is that the central banks haven't quite been able to let go of forward guidance and are a little trapped. To recap, forward guidance has prevented the Fed and the ECB from hiking as early as they needed to, largely because both saw the need to gradually wind down asset purchases over several months first as promised. However this hasn't deterred them, and they have continued to try to flag their intentions to the market in advance with the Fed having previously all but signalled a 50bps this Wednesday, as well as in July, with the ECB now signalling 25bps in July and a strong possibility of 50bps in September. Providing clarity is admirable but in the wake of another shocking US CPI print on Friday, should a 75bps hike not be a serious consideration? It seems strange that most think policy needs to be restrictive but that it's going to take several meetings to get there from a still highly accommodative position. Without the recent Fed guidance, 75bps would be firmly on the table for Wednesday. This is highly unlikely this week, but our economists think they could break cover from their own guidance and leave the door open for 75bps in July. DB Research has long been at the hawkish end on inflation and the Fed, and on Friday our US economists further raised their hiking expectations. In addition to 50bps at the next two meetings they have now added 50bps in September and November, before a return to 25bps in December (to 3.125%). They now see the peak at 4.125% in mid-2023. This is closer to the 5% view in the "Why the upcoming recession will be worse than expected" (link here) that David Folkerts-Landau, Peter Hooper and myself published back in April. If we do have a terminal Fed rate approaching a 5-handle it does raise the question as to where 10yr yields top out. My guess would be a slightly inverted curve but it would likely mean the 4.5-5% range discussed in the note from April, mentioned above, is within reason. We'll recap details of the big US CPI print in last week's recap in the second half of this piece, but it wasn't just this that was the problem on Friday, as the University of Michigan long-term inflation expectations series hit 3.3% (3.0% last month) which was the highest since 2008. This series first hit 3% last May so has actually been range trading for a year, which has been a hope for the doves. However it now risks breaking out to the upside. It's not just the Fed this week as the BoE (Thursday) and the BoJ (Friday) will also meet. For the UK, a preview from our UK economists can be found here. The team expects a +25bps hike this week and have updated their terminal rate forecast from 1.75% to 2.5%. Staying in the UK, labour market data releases will be out tomorrow with retail sales on Friday. The week will conclude with a decision from the BoJ and how they address pressures from the yen hovering around a 20-year low, as well as the growing monetary policy divergence between Japan and other G7 economies. Our chief Japan economist previews the meeting here. He expects a shortening or even the abandonment of yield curve control in H2 2023. In data terms we go back to the US for the main highlights, with PPI (tomorrow) and retail sales (Friday) the main events. China's key May indicators on Wednesday will also have global implications as we await industrial production, retail sales and property investment numbers. Elsewhere in the US, we have June's Philadelphia Fed business outlook (Wednesday), and May industrial production and capacity utilisation (Friday) numbers. April business inventories will be out on Wednesday and provide markets with a check on corporate stockpiling after Target's renewed warning last week. Finally, a slew of housing market data is due. This includes the June NAHB housing market index (Wednesday) and May building permits and housing starts (Thursday). The impact of rising mortgage rates will be in focus. In Europe, Germany's ZEW survey for June (tomorrow) is among the key data highlights. We will also see April industrial production and trade balance data for the Eurozone on Wednesday and Eurozone construction output and April trade balance data for Italy on Friday. ECB speakers will also be on the radar for investors as they tend to start to break the party line on the Monday after the ECB meeting. A lengthy line up includes ECB President Lagarde on Wednesday and six other speakers. Asian stock markets have started the week on a weaker footing with all the major indices trading deep in the red after a rough week on Wall Street. The Hang Seng (-2.81%) is leading losses across the region in early trade amid a tech sell-off whilst the Shanghai Composite (-1.20%) and CSI (-1.07%) are both sliding as a resurgence of Covid cases in China is threating global growth. Elsewhere, the Nikkei (-2.64%) is also sharply down this morning, with the Kospi declining as much as -2.50%, hitting its lowest level since November 2020. As discussed at the top, 10yr USTs (+2.81 bps) have moved higher to 3.18% while the 2yr yield (+9.8 bps) has exploded higher to 3.16%. Will we see a fresh inversion in the hours and days ahead? Oil prices are lower with Brent futures -1.36% to $120.35/bbl and WTI futures -1.48%, falling below the $120/bbl mark. On the FX side, there is no respite for the Japanese yen from rising Treasury yields as the currency hit a fresh 24yr low, declining -0.50% to 135.08 versus the dollar. DMs equity futures point to further losses with contracts on the S&P 500 (-1.33%), NASDAQ 100 (-1.87%) and DAX (-1.37%) all trading in negative territory. Moving on to the French legislative elections. In the first round, exit polls indicate that President Emmanuel Macron is at risk of losing his outright majority after a strong showing by the left-wing alliance in the first round of the country’s parliamentary election. According to the official results, Jean-Luc Mélenchon's left-wing NUPES alliance (+25.61%) finished neck and neck with Mr Macron's Ensemble (+25.71%), in terms of votes cast in Sunday's first round. An average of 5 pollsters expect Macron to win 262-301 seats, with 289 needed to keep his majority. So a nervy wait ahead of the second round. Turning back to review last week now. The business end of the week had two huge macro events that sent markets into some degree of upheaval. On Thursday, the ECB met, confirming the end of net APP purchases this month, paving the way for liftoff in July. Beyond July they opened the door for 50 basis point hikes if inflation persists or deteriorates. Judging by their upgraded forecasts, they are now in the ‘persists’ camp. President Lagarde in the press conference took great pains to commit to fighting inflation in a hawkish tone shift. The bigger market reaction was on the apparent lack of progress on any implementation tool designed to avoid fragmentation. President Lagarde tried to downplay the lack of new tool, leaning on PEPP reinvestment flexibility, but the market wasn’t comfortable that this would be enough. All told, 2yr bunds increased +30.9bps (+13.6bps Friday) on the tighter expected policy path, with the end-2022 policy rate implied by OIS markets ending the week at 0.99%, a new high and in line with our Euro economists updated call (their full review and new call here). The lack of an immediate anti-fragmentation tool saw peripheral spreads underperform, moving to new post-Covid wides, as 10yr BTPs increased +35.9bps (+16.0bps Friday) with 10yr Spanish bonds increasing +34.0bps (+15.6bps Friday), versus a 10yr bund increase of +24.3bps (+8.6bps Friday). The Friday moves above were given a further boost by yet another above consensus US CPI report, with YoY inflation gaining +8.6% in May versus expectations it would stay consistent with the prior month’s +8.3% reading. FOMC officials have consistently cited deceleration in MoM readings as necessary to find clear and convincing evidence that inflation was stabilising and returning to target, evidence which they surely didn’t get on Friday, as MoM inflation increased +1.0% from +0.3% in April, beating lofty expectations of +0.7%. The dramatic beats drove the expected path of Fed tightening sharply higher, with 2yr Treasury yields increasing +40.9bps on the week after a +25.0bp gain Friday, it’s largest one-day move since June 2009. The expected fed funds rate by the end of the year reached a new high of 3.22%. The curve aggressively bear flattened, as the reality that the Fed will have to induce slower growth to tame inflation set in; 10yr yields gained +22.0bps on the week and +11.2bps on Friday, with almost all of the increase coming in real yields. That brings 2s10s to 8.8bps, its flattest since its early-April rebound after its brief inversion. The sharp global policy repricing weighed on equity indices. All major transatlantic indices fell, including the STOXX 600 (-3.95% week, -2.69% Friday), DAX (-4.83%, -3.08%), CAC (-4.60%, -2.69%), S&P 500 (-5.05%, -2.91%), NASDAQ (-5.60%, -3.52%), FANG+ (-2.87%, -3.37%), and Russell 200 (-4.26%, -2.60%). That brings the STOXX 600 -14.49% below its YTD highs reached in the first days of the year, with the S&P 500 -18.40% below the same corresponding metric. Both indices ended the week hovering just above YTD lows. US CDX HY and Euro Crossover were +58bps and +47bps on the week and around +30bps and +25bps wider on Friday. Both are now at their post covid wides. Tyler Durden Mon, 06/13/2022 - 07:57.....»»

Category: blogSource: zerohedgeJun 13th, 2022

Dow futures plunge 600 points and a key bond yield hits a 15-year high as surging inflation shakes markets

Investors ditched global stocks in Monday trading after US inflation unexpectedly accelerated, as traders ramped up their bets on Fed rate hikes. Friday's inflation print shocked investors.Xinhua News Agency/Getty Images Dow futures shed over 600 points Monday as stronger-than-expected inflation sent shockwaves through markets. The 2-year US Treasury note yield jumped to its highest since 2007, as predictions for interest-rate hikes ramped up. US CPI inflation came in at 8.6% year-on-year in May, topping expectations for an 8.3% reading. Dow futures shed about 600 points Monday, and the 2-year US bond yield hit its highest level since 2007, as Friday's higher-than-expected inflation figures rocked financial markets.Futures on the Dow Jones Industrial Average were down 1.91%, or 598 points, as of 6:10 a.m. ET. S&P 500 futures fell 2.36%, and Nasdaq 100 futures slid 2.93%.European stocks also tumbled, with the continent-wide Stoxx 600 down 2.16%. Asian stocks dropped overnight, with Tokyo's Nikkei 225 plunging 3.01% and China's CSI 300 falling 1.17%.The sell-off in stocks followed the release of US data on Friday that showed inflation reached a 41-year high of 8.6% in May, above economists' expectations for the rate to flatline at 8.3%.US inflation hit 1% month-on-month, again far outstripping predictions. Monthly core inflation, which strips out volatile food and energy prices, came in at an elevated 0.6% for the second month running.The unexpected pick-up in price growth brutally collided with investors' hopes that inflation was cooling. That sparked a sharp drop in stocks Friday, when the Dow Jones dropped 2.73% and the S&P 500 tumbled 2.91%."Markets have set off on another rocky ride over inflation fears," said Steve Clayton, fund manager at Hargreaves Lansdown.Analysts rapidly dialed up their expectations for Federal Reserve interest-rate hikes over the weekend.Goldman Sachs' economy team, led by Jan Hatzius, said in a note they now expect the Fed to hike interest rates by 50 basis points at three meetings: this week, in September, and in November. The US central bank will announce any policy decision at the end of its two-day meeting on Wednesday.The Goldman Sachs team predicted the Fed will make two final 25 basis point hikes in December and January, taking the target federal funds range to 3.25-2.5%. The rate currently stands at 0.75-1%, after a 50 basis point hike in May.Changes in Fed predictions jolted the bond market on Monday. Yields, which move inversely to prices, shot higher.The yield on the 2-year US Treasury note, which is the most sensitive to interest rates, jumped to a high of 3.241% — a level not seen since 2007. It later pared its gains to stand at 3.204%.Meanwhile, the yield on the key 10-year US Treasury note — which sets the tone for borrowing costs worldwide — climbed 7.2 basis points to stand at 3.235%, around the highest since 2011.The dollar resumed its March higher, boosted by expectations that US interest rates will rise above those seen elsewhere. The dollar index was up 0.48% to 104.65, just shy of its highest level since 2002.Despite the nervousness among traders, some analysts believe the Fed can raise interest rates and cool inflation without triggering a recession."Although we expect growth to continue to moderate, we also do not expect a significant downturn this year," said Mark Haefele, chief investment officer at UBS Global Wealth Management."A sharp fall in household spending looks unlikely given high levels of job security."Elsewhere in markets, cryptocurrencies investors suffered another brutal weekend as investors ditched riskier investments, which look less attractive when bond yields rise.Bitcoin traded at around $23,850 Monday morning, roughly 20% below where it stood on Friday. Ethereum was harder-hit, losing around 30% since Friday morning to trade around $1,215.Oil prices, which have surged more than 50% this year, pulled back slightly. Brent crude was down 1.52% to $120.17 a barrel, while WTI crude was 1.65% lower at $118.70 a barrel.The yen hit its lowest level against the dollar in 24 years on Monday, as traders signaled their belief that the Bank of Japan will press ahead with its ultra-loose monetary policy.Read more: Home sellers are going to have to start cutting prices, says a real estate expert at a legendary $122 billion bond shop who learnt his craft during the global financial crisis. He lays out 4 reasons it won't trigger a housing collapse this time.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJun 13th, 2022

Hooker Furnishings Reports First Quarter Fiscal 2023 Results

MARTINSVILLE, Va., June 09, 2022 (GLOBE NEWSWIRE) -- Hooker Furnishings Corporation (NASDAQ-GS: HOFT) today reported consolidated net sales of $147.3 million for its fiscal 2023 first quarter ended May 1, 2022, a $15.5 million, or 9.5%, decrease as compared to a year ago. Consolidated net income for the quarter was $3.2 million, or $0.26 per diluted share, as compared to $9.4 million or $0.78 per diluted share in the prior year period. Consolidated operating income for the current year was $3.9 million compared to $12.2 million in the prior year period. In the last three quarters, consolidated sales and profitability reductions versus the comparable prior year periods were largely driven by COVID-related factory shutdowns in Asia beginning late summer 2021, followed by a slow ramp-up of production through most of the fourth quarter of last year and early this year. Even as demand and backlogs remained strong, the flow of imported furniture came to a near standstill for several months.    While consolidated net sales and profitability decreased on a year-over-year basis during our first quarter of 2023, sales improved by 9% over the fourth quarter of fiscal 2022 and the operating income in the fiscal 2023 first quarter was an improvement compared to the operating loss last quarter. "Both sales and operating income for the quarter surpassed management expectations," said Jeremy Hoff, chief executive officer. "As we expected, first quarter results continued to be hindered by the slow ramp-up of casegoods production capacity in Asia following the factory shutdowns in the second half of last year.  Backlogs have remained high throughout the two most recent quarters, but inventories were depleted and product unavailable to ship. In April at the end of the fiscal 2023 first quarter, Asian casegoods production finally reached full capacity, so we expect improving conditions and results to continue as we work through our backlog," Hoff said. "In addition, we have a record amount of inventory in transit now, and a high percentage of it is sold orders that will ship as soon as the shipments arrive in our domestic warehouses." The Home Meridian and Hooker Branded segments were most impacted by the Asian factory shutdowns and resulting sales declines, partially offset by strong sales in the Domestic Upholstery segment and the addition of Sunset West revenues in the quarterly results, following the Company's acquisition of the Vista, California-based outdoor furniture business on January 31, 2022, the first day of the first quarter. "Despite continued supply chain disruptions and high transit costs, we are pleased to have started fiscal 2023 with very strong backlogs, a leaner portfolio focused on our most profitable channels and products and with the acquisition of Sunset West, a leading player in the growing outdoor furnishings market," Hoff said. "The integration of Sunset West is going very well," he added. "Sunset West contributed above expectations to operating profitability this quarter and offers significant long term growth opportunities in the outdoor category for Hooker Furnishings." Segment Reporting: Hooker Branded The Hooker Branded segment's net sales decreased by $9.1 million, or 17.7% compared to the same period a year ago, a decline that was "fully driven by casegoods inventory unavailability from the temporary factory shutdowns in Vietnam," said Hoff.  The temporary halt of production during the summer and early fall of last year resulted in low inventory receipts in the second half of fiscal 2022 and this quarter. The decrease was partially offset by increased net sales at Hooker Upholstery. "Due to its domestic warehousing business model, Hooker Casegoods was able to sustain shipments longer, but eventually our inventory became depleted," Hoff said. "As of May, we are now moving into positive territory as our inventory levels have more than doubled compared to our fiscal year end with a record amount of inventory in transit from Asia. Additionally, a large percentage of these shipments carry the price increases we implemented in July 2021 to mitigate excess freight and logistics costs," he said. Incoming orders in the Hooker Branded segment decreased by 12.9% as compared to the prior year quarter when business dramatically rebounded after the initial COVID outbreak, and the demand for home furnishings was exceptionally strong. However, quarter-end backlog was 11% higher than at fiscal 2022 year-end and 87% higher than the end of the fiscal 2022 first quarter end and has remained at historical highs. Segment Reporting: Home Meridian The Home Meridian segment's net sales decreased by $22.3 million, or 26.4% compared to the prior year quarter, driven by lower sales in the e-commerce channel, the exit from the unprofitable Clubs channel, and to a lesser extent continued supply chain disruptions, partially offset by the launch of the Pulaski Upholstery division. "Order backlogs decreased in the Home Meridian segment due to our exit from the Clubs channel and adjustments to programmed orders by large customers, but backlogs were still about 50% higher compared to pre-pandemic levels in early 2020," Hoff said. "We've shipped essentially all the remaining Clubs channel order backlog, which is a major milestone in our Clubs channel exit and a positive and much needed step towards segment profitability. While excess chargebacks are a risk as we complete our exit, this critical step allows us to focus on more profitable customers and channels," he added. Segment Reporting: Domestic Upholstery The Domestic Upholstery segment's net sales increased by $15.8 million, or 62.2%, in fiscal 2022 due to strong sales at Bradington Young, Sam Moore and Shenandoah as well as the addition of Sunset West's sales. However, higher raw material costs and freight surcharges increased product costs which partially offset the gains from increased sales. Incoming orders decreased by 5.4% as compared to the prior year quarter due to current lead times and historically high backlogs. At the end of fiscal 2023 first quarter, backlog was 18% higher than at fiscal 2022 year-end and 80% higher than the fiscal 2022 first quarter end. Cash, Debt and Inventory Cash and cash equivalents stood at $10.1 million at fiscal 2023 first quarter end, down $59.3 million as compared to the balance at the fiscal 2022 year-end due largely to a $30.1 million increase in inventory and $26 million spent for the acquisition of Sunset West. "With a record $40 million of inventory in transit to our warehouses, we are experiencing a short-term dip in cash," said Hoff. "A very high percentage of the inventory in transit are sold goods, so we expect to quickly convert the inventory to shipments. We expect our cash balances to improve by the end of the fiscal 2023 second quarter and expect them to normalize soon thereafter," he added.  At quarter end, inventories stood at $107.7 million, including the $40 million in transit to our domestic warehouses. Outlook "We are seeing a leveling off of demand, with incoming orders down from the meteoric but unsustainable levels we experienced in the last 18 months," Hoff said.. "Once we receive all the inventory in transit, we expect to be in a near-optimum shipping position throughout the second quarter and will feel the full benefit of Asian production levels being at 100% capacity." "We are watching inflationary pressures in the economy and believe those are affecting consumers more at the lower price points than at the upper medium and upper price points. We're still optimistic about the housing market, strong levels of employment and having the two largest generation groups in prime household formation and furniture purchasing years. Our variable cost business model will allow us to adjust to changing economic conditions, and we continue to focus on multiple strategic initiatives to spur organic growth and increase market share," Hoff said. Share Repurchase Authorization On June 6, 2022, the Hooker Furnishings Corporation (the "Company") Board of Directors (the "Board") authorized the repurchase of up to $20 million of the Company's common shares. The authorization does not obligate the Company to acquire a specific number of shares during any period and does not have an expiration date, but it may be modified, suspended, or discontinued at any time at the discretion of the Board. Repurchases may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and subject to the Company's cash requirements for other purposes, compliance with the covenants under the loan agreement for the Company's revolving credit facility and other factors it deems relevant. Dividends On June 1, 2022 the Company's Board of Directors declared a quarterly cash dividend of $0.20 per share which will be paid on June 30, 2022 to shareholders of record at June 17, 2022. Conference Call Details Hooker Furnishings will present its fiscal 2023 first quarter financial results via teleconference and live internet web cast on Thursday morning, June 9, 2022 at 9:00 AM Eastern Time. The dial-in number for domestic callers is 877.665.2466 and the number for international callers is 678.894.3031. The conference ID number is 3638298. The call will be simultaneously web cast and archived for replay on the Company's web site at www.hookerfurnishings.com in the Investor Relations section. Hooker Furnishings Corporation, in its 98th year of business, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture, and fabric-upholstered furniture for the residential, hospitality and contract markets. The Company also domestically manufactures premium residential custom leather and custom fabric-upholstered furniture and outdoor furniture. Major casegoods product categories include home entertainment, home office, accent, dining, and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand. Hooker's residential upholstered seating product lines include Bradington-Young, a specialist in upscale motion and stationary leather furniture, Sam Moore Furniture, a specialist in upscale occasional chairs, settees, sofas and sectional seating with an emphasis on cover-to-frame customization, Hooker Upholstery, imported upholstered furniture targeted at the upper-medium price-range and Shenandoah Furniture, an upscale upholstered furniture company specializing in private label sectionals, modulars, sofas, chairs, ottomans, benches, beds and dining chairs in the upper-medium price points for lifestyle specialty retailers. The H Contract product line supplies upholstered seating and casegoods to upscale senior living facilities. The Home Meridian division addresses more moderate price points and channels of distribution not currently served by other Hooker Furnishings divisions or brands. Home Meridian's brands include Accentrics Home, home furnishings centered around an eclectic mix of unique pieces and materials that offer a fresh take on home fashion, Pulaski Furniture, casegoods covering the complete design spectrum in a wide range of bedroom, dining room, accent and display cabinets at medium price points, Pulaski Upholstery, stationary and motion upholstery collections available in fabric and leather covering the complete design spectrum at medium price points,  Samuel Lawrence Furniture, value-conscious offerings in bedroom, dining room, home office and youth furnishings, Prime Resources, value-conscious imported leather upholstered furniture, and Samuel Lawrence Hospitality, a designer and supplier of hotel furnishings. The Sunset West division is a designer and manufacturer of comfortable, stylish and high-quality outdoor furniture. Hooker Furnishings Corporation's corporate offices and upholstery manufacturing facilities are located in Virginia and North Carolina, with showrooms in High Point, N.C., Las Vegas, N.V., and Ho Chi Minh City, Vietnam. The company operates distribution centers in North Carolina, Virginia, Georgia, California, China and Vietnam. Please visit our websites hookerfurnishings.com, hookerfurniture.com, bradington-young.com, sammoore.com, hcontractfurniture.com, homemeridian.com, pulaskifurniture.com, accentricshome.com, slh-co.com, and sunsetwestusa.com. Certain statements made in this release, other than those based on historical facts, may be forward-looking statements. Forward-looking statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as "believes," "expects," "projects," "intends," "plans," "may," "will," "should," "would," "could" or "anticipates," or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy.  Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.  Those risks and uncertainties include but are not limited to: (1) risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, customs issues, ocean freight costs, including the price and availability of shipping containers, ocean vessels and domestic trucking, and warehousing costs and the risk that a disruption in our offshore suppliers or the transportation and handling industries, including labor stoppages, strikes, or slowdowns, could adversely affect our ability to timely fill customer orders; (2) the effect and consequences of the coronavirus (COVID-19) pandemic or future pandemics on a wide range of matters including but not limited to U.S. and local economies; our business operations and continuity; the health and productivity of our employees; and the impact on our global supply chain, inflation, the retail environment and our customer base; (3) general economic or business conditions, both domestically and internationally, and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing or (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses; (4) adverse political acts or developments in, or affecting, the international markets from which we import products, including duties or tariffs imposed on those products by foreign governments or the U.S. government, such as the prior U.S. administration's imposition of a 25% tariff on certain goods imported into the United States from China including almost all furniture and furniture components manufactured in China, which is still in effect, with the potential for additional or increased tariffs in the future; (5) risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of skilled labor, and environmental compliance and remediation costs; (6) the risks related to the recent Sunset West acquisition including integration costs, maintaining Sunset West's existing customer relationships, the loss of key employees from Sunset West, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies across the business which could adversely affect our internal control or information systems and the costs of bringing them into compliance and failure to realize benefits anticipated from the acquisition; (7) changes in U.S. and foreign government regulations and in the political, social and economic climates of the countries from which we source our products; (8) difficulties in forecasting demand for our imported products; (9) risks associated with product defects, including higher than expected costs associated with product quality and safety, and regulatory compliance costs related to the sale of consumer products and costs related to defective or non-compliant products, including product liability claims and costs to recall defective products and the adverse effects of negative media coverage; (10) disruptions and damage (including those due to weather) affecting our Virginia, Georgia, North Carolina or California warehouses, our Virginia or North Carolina administrative facilities, our North Carolina and Las Vegas showrooms or our representative offices or warehouses in Vietnam and China; (11) risks associated with our newly leased warehouse space in Georgia, including risks associated with our move to and occupation of the facility, including information systems, access to warehouse labor and the inability to realize anticipated cost savings; (12) the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers, including the loss of several large customers through business consolidations, failures or other reasons, or the loss of significant sales programs with major customers; (13) our inability to collect amounts owed to us or significant delays in collecting such amounts; (14) the interruption, inadequacy, security breaches or integration failure of our information systems or information technology infrastructure, related service providers or the internet or other related issues including unauthorized disclosures of confidential information or inadequate levels of cyber-insurance or risks not covered by cyber- insurance; (15) the direct and indirect costs and time spent by our associates associated with the implementation of our Enterprise Resource Planning system ("ERP"), including costs resulting from unanticipated disruptions to our business; (16) achieving and managing growth and change, and the risks associated with new business lines, acquisitions, including the selection of suitable acquisition targets, restructurings, strategic alliances and international operations; (17) the impairment of our long-lived assets, which can result in reduced earnings and net worth; (18) capital requirements and costs; (19) risks associated with distribution through third-party retailers, such as non-binding dealership arrangements; (20) the cost and difficulty of marketing and selling our products in foreign markets; (21) changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of our imported products and raw materials; (22) the cyclical nature of the furniture industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers' income available for discretionary purchases, and the availability and terms of consumer credit; (23) price competition in the furniture industry; (24) competition from non-traditional outlets, such as internet and catalog retailers; (25) changes in consumer preferences, including increased demand for lower-quality, lower-priced furniture and (26) other risks and uncertainties described under Part I, Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2022. Any forward-looking statement that we make speaks only as of the date of that statement, and we undertake no obligation, except as required by law, to update any forward-looking statements whether as a result of new information, future events or otherwise and you should not expect us to do so. Table I HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)     For the     Thirteen Weeks Ended     May 1,   May 2,     2022   2021           Net sales   $    147,314     $ 162,861             Cost of sales         117,855       129,279             Gross profit           29,459       33,582             Selling and administrative expenses           24,658       20,743   Intangible asset amortization                878       596             Operating income             3,923       12,243             Other income, net                278       4   Interest expense, net                 28       31             Income before income taxes             4,173       12,216             Income tax expense                991       2,773             Net income   $       3,182     $ 9,443             Earnings per share         Basic   $         0.27     $ 0.79   Diluted   $         0.26     $ 0.78             Weighted average shares outstanding:         Basic           11,866       11,833   Diluted           11,949       11,972             Cash dividends declared per share  .....»»

Category: earningsSource: benzingaJun 9th, 2022

May Payrolls Drop To 13 Month Low But Come In Hotter Than Expected; Wage Growth Eases

May Payrolls Drop To 13 Month Low But Come In Hotter Than Expected; Wage Growth Eases Heading into today's key payrolls print, we had a feeling that contrary to Wall Street's generally cheerful expectations, the jobs number would be bad based on dismal real-time indicators (as described in "We Could See A Million Layoffs Or More" - Here Comes The Job Market Shock), and the latest Goldman macro data, and we... were off, because moments ago the BLS reported that in May the US added 390K jobs, which was a drop from last month's upward revised 436K and the lowest since April 2021, but was well above the 320K expected (and once again made a mockery of the recent dismal ADP prints, which suggests that there was another political component here in the BLS data where someone likely made a phone call or two). Here is a summary of the latest data: Nonfarm payrolls 390K, est. 318k (220k to 450k), vs prior 436k in prior month; net revisions -22k from prior two months Nonfarm private payrolls rose 333k vs prior 405k; est. 301k (200k to 388k); 30 economists surveyed Manufacturing payrolls rose 18k after rising 61k in the prior month; economists estimated 39k (20k to 62k); 15 economists surveyed Avg. hourly earnings: 0.3% m/m, est. 0.4%; prior 0.3% 5.2% Y/Y; est. 5.2% Unemployment rate 3.6% vs prior 3.6%; est. 3.5% (3.4%-3.7%); 69 economists surveyed Participation rate 62.3% vs prior 62.2% Change in household employment 321k vs prior -353k And visually: More details: The change in total nonfarm payroll employment for March was revised down by 30,000, from +428,000 to +398,000, and the change for April was revised up by 8,000, from +428,000 to +436,000. With these revisions, employment in March and April combined is 22,000 lower than previously reported. Breaking down the jobs, we see that in May, lower-paying 175K service jobs were added, down notably from 273K a month earlier, while higher-paying service jobs were unchanged at 99K; manufacturing jobs collapsed to 18K from 61K, offset by a surge in minind and logging jobs to 41K. 57K government jobs rounded out the picture. The unemployment rate was unchanged at 3.6%, and missed expectations of a drop to 3.5%, which would have been the lowest print since the covid crisis. Among the major worker groups, the unemployment rate for Asians declined to 2.4 percent in May. The jobless rates for adult men (3.4 percent), adult women (3.4 percent), teenagers (10.4 percent), Whites (3.2 percent), Blacks (6.2 percent), and Hispanics (4.3 percent) showed little or no change over the month. Some more details on the composition of unemployed workers: Among the unemployed, the number of permanent job losers remained at 1.4 million in May. The number of persons on temporary layoff was little changed at 810,000. Both measures are little different from their values in February 2020 The number of long-term unemployed (those jobless for 27 weeks or more) edged down to 1.4 million. This measure is 235,000 higher than in February 2020. The long-term unemployed accounted for 23.2 percent of all unemployed persons in May The number of persons employed part time for economic reasons increased by 295,000 to 4.3 million in May, reflecting an increase in the number of persons whose hours were cut due to slack work or business conditions. The number of persons employed part time for economic reasons is little different from its February 2020 level. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. The number of persons not in the labor force who currently want a job was little changed at 5.7 million in May. This measure remains above its February 2020 level of 5.0 million. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force, at 1.5 million, changed little in May. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. Discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, numbered 415,000 in May, also little changed from the prior month. The participation rate ticked up a notch, from 62.2% to 62.3%, in line with consensus estimates. Strong wage growth persisted, even if at an increase of 0.3% in May, and the same as last month, it missed expectations of 0.4%. Meanwhile, on an annual basis, average hourly earnings rose 5.2%, in line with expectations and down from 5.5% last month. Earnings growth by industry is shown below: That said, as Obama's chief economist Jason Furman writes, average hourly earnings growth remains moderate relative to last year, shifting from a ~6% pace to a ~4.5% pace, writing that "that's the most important number in this release for inflation and it's mostly reassuring." Judging by the slump in stocks, the market does not exactly share his optimism. Average hourly earnings growth remains moderate relative to last year, shifting from a ~6% pace to a ~4.5% pace. That's the most important number in this release for inflation and it's mostly reassuring. (Note these numbers adjusted to hold industry-level composition constant.) pic.twitter.com/vnUMtGA6Gx — Jason Furman (@jasonfurman) June 3, 2022 Average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3 percent, to $31.95 in May. Over the past 12 months, average hourly earnings have increased by 5.2 percent. In May, average hourly earnings of private-sector production and nonsupervisory employees rose by 15 cents, or 0.6 percent, to $27.33. In May, the average workweek for all employees on private nonfarm payrolls was 34.6 hours for the third month in a row. In manufacturing, the average workweek for all employees was little changed at 40.4 hours, and overtime fell by 0.1 hour to 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained unchanged at 34.1 hours Reading down the report we find that the aftermath of covid will haunts the US labor market as follows: 7.4% of employed persons teleworked because of the coronavirus pandemic, down from 7.7% in the prior month. 1.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic--that is, they did not work at all or worked fewer hours at some point in the 4 weeks preceding the survey due to the pandemic. Among those who reported in May that they were unable to work because of pandemic-related closures or lost business, 19.9 percent received at least some pay from their employer for the hours not worked, also little different from the prior month. Among those not in the labor force in May, 455,000 persons were prevented from looking for work due to the pandemic, down from 586,000 in the prior month Turning to the establishment survey and a breakdown of jobs by sector, we find that notable job gains occurred in leisure and hospitality, in professional and business services, and in transportation and warehousing. Employment in retail trade declined over the month. Nonfarm employment is down by 822,000, or 0.5 percent, from its pre-pandemic level in February 2020. Some more details: Employment in leisure and hospitality increased by 84,000 in May, as job growth continued in food services and drinking places (+46,000) and accommodation (+21,000). Employment in leisure and hospitality is down by 1.3 million, or 7.9 percent, compared with February 2020. Employment in professional and business services rose by 75,000 in May. Within the industry, job gains occurred in accounting and bookkeeping services (+16,000), computer systems design and related services (+13,000), and scientific research and development services (+6,000). Employment in professional and business services is 821,000 higher than in February 2020. In May, transportation and warehousing added 47,000 jobs. Employment rose in warehousing and storage (+18,000), truck transportation (+13,000), and air transportation (+6,000). Employment in transportation and warehousing is 709,000 above its February 2020 level. Employment in construction increased by 36,000 in May, following no change in April. In May, job gains occurred in specialty trade contractors (+17,000) and heavy and civil engineering construction (+11,000). Construction employment is 40,000 higher than in February 2020. In May, employment increased by 36,000 in state government education and by 33,000 in private education. Employment changed little in local government education (+14,000). Compared with February 2020, employment in state government education is up by 27,000, while employment in private education has essentially recovered. Employment in local government education is down by 308,000, or 3.8 percent, compared with February 2020. Employment in health care rose by 28,000 in May, including a gain in hospitals (+16,000). Employment in health care overall is 223,000, or 1.3 percent, lower than in February 2020. Manufacturing employment continued to trend up in May (+18,000). Job gains occurred in fabricated metal products (+7,000), wood products (+4,000), and electronic instruments (+3,000). Employment in manufacturing overall is slightly below (-17,000 or -0.1 percent) its February 2020 level. Wholesale trade added 14,000 jobs in May, including gains in durable goods (+10,000) and electronic markets and agents and brokers (+6,000). Employment in wholesale trade is down by 41,000, or 0.7 percent, compared with February 2020. Mining employment increased by 6,000 in May and is 80,000 higher than a recent low in February 2021. Employment in retail trade declined by 61,000 in May but is 159,000 above its February 2020 level. Over the month, job losses occurred in general merchandise stores (-33,000), clothing and clothing accessories stores (-9,000), food and beverage stores (-8,000), building material and garden supply stores (-7,000), and health and personal care stores (-5,000). The bottom line is simple: this wasn't the collapse that so many were quietly expecting (certainly Elon Musk), and the lack of a negative shock, means that the Fed remains on a rate hiking autopilot. As Bloomberg writes, “for the Fed, this is stay-the-course data, in our view. The 50-bp hikes in June and July remain likely, while September will remain a close call for 25 bps or 50 bps. Data over the next three months will determine if the Fed decides to adjust the pace of hikes.” Tyler Durden Fri, 06/03/2022 - 08:36.....»»

Category: blogSource: zerohedgeJun 3rd, 2022

Turkey"s Chief Statistician Quits For "Health Reasons" After Inflation Hits 70%

Turkey's Chief Statistician Quits For "Health Reasons" After Inflation Hits 70% Three months after Turkey's president Erdogan fired his statistics chief as inflation hit a mere 36%, now that inflation has almost doubled since then, the latest official in charge of compiling Turkish inflation statistics has decided to do the smart thing and step down on his own, becoming the latest prominent departure at an institution that’s facing harsh criticism over the reliability of its economic data. On Friday, the Turkish Statistical Institute said Cem Bas resigned as head of the department of price statistics for "health reasons." Furkan Metin, who previously oversaw the digital transformation and projects department at the agency known as TurkStat, has replaced Bas, who’ll remain on staff in a lower-profile role. The personnel change, first reported by Bloomberg, adds to a period of ongoing turmoil at TurkStat, whose president was replaced in January less than a year after his appointment. Turkish inflation data has been in the spotlight at a time when consumer prices are exploding at the fastest pace since the turn of the century, a key concern for President Recep Tayyip Erdogan’s government just over a year before elections. Furthermore, according to Bloomberg, concerns have swirled among researchers over what they call a divergence between the agency’s price statistics and the surge in the cost of living felt by wage earners. While TurkStat reported an annual inflation of 70% in April, ENAGroup, an independent group of scholars who’ve put together an alternative consumer price index, put the figure at as high as 157%. While both numbers are ridiculous, what is even more ridiculous is that until recently the central bank was cutting rates to avoid angering the president whose "Erdoganomics" theory of upside down economics recommends cutting rates when inflation rises, effectively setting the country on a path to suicide, something the Turkish lira has clearly grasped, as it has resumed plunging after cratering in 2021 and only a massive intervention by the central bank preventing an all-out economic collapse. The government is meanwhile seeking to pass legislation that would bar independent researchers from publishing their own data without seeking approval from TurkStat and potentially face a jail term if they violate the law. That should answer any questions whether the government or the shadow stat inflation data is the correct one. Tyler Durden Sun, 05/22/2022 - 20:55.....»»

Category: blogSource: zerohedgeMay 22nd, 2022

The next recession isn"t here yet. Here"s when you should really start worrying about the economy.

Recession fears are on the rise, but spending data, unemployment claims, and market expectations signal a downturn is at least several months away. Pedestrians walk past a Sears store is seen on October 18, 2021 in the Flatbush neighborhood of Brooklyn borough in New York City.Spencer Platt/Getty Images Recession fears have grown throughout 2022, but data signals a downturn isn't coming soon. Layoffs are back to pre-crisis levels, and Americans' spending is at a record high despite high inflation. The US could very well be heading into a downturn, but it's likely at least several months away. Recession warnings are the loudest they've been since early 2020. The latest data, however, suggests it's early to be so worried.Outlooks toward the economic recovery have been split into two camps. In one corner, hawkish economists fear the Federal Reserve's fight with inflation will slow the rebound to a halt. Rising interest rates, according to the group, will crush spending and pull the country into a new, albeit mild, recession.In the other, more optimistic experts see little reason for such concern. They concede inflation is a problem, and that growth is slowing down. Yet they're just as focused on the rest of the economy, and although inflation data is sounding alarms, other signals show the US faring extremely well for a country that just climbed out of a historic recession.Leading indicators offer economists the closest thing to a preview of economic growth, as they tend to reveal trends earliest. Reports including weekly jobless claims and factory orders can reveal the first signs of a coming downturn, but so far, they're showing little cause for concern."I think the economy is fine," Neil Dutta, head of economics at Renaissance Macro Research, said on Bloomberg's "Odd Lots" podcast earlier in May. He said if he were forced to answer, "'do you think growth is going to come in stronger than what the consensus is for Q4 2022?' My guess would be 'probably yes.'"The Fed's rate hikes are expected to cool growth, but the effects won't be felt in full for at least several months. Until then, the most closely watched recession alarms are encouraging.Mass layoffs aren't happening yetJob losses are a hallmark of economic downturns. Concerns over rising unemployment have grown through 2022 as economists see higher rates hitting the brakes on hiring efforts.So far, there's been no sign of job creation easing up. The US added 428,000 nonfarm payrolls in April, beating economist forecasts and repeating the same increase seen the month prior. Despite having recovered about 95% of the jobs lost earlier in the pandemic, monthly payroll gains are still double the pre-crisis trend. If the pace holds, the country will complete its labor-market recovery by the end of July.Demand for workers, then, remains strong, and businesses are keeping a tight grasp on the employees they already have. Weekly filings for unemployment insurance sit close to the same levels seen before the coronavirus crash. Continuing claims, which track the number of Americans actively receiving unemployment benefits, totaled 1.32 million in the week that ended May 7, marking the lowest level since December 1969. If companies are bracing for a downturn, it's not showing up on their payrolls.If anything, it's workers that are ditching their employers, and not the other way around. Monthly quits hit a record high 4.5 million in March, reflecting the tenth straight month that more than 4 million Americans walked out of their jobs. Quitting tends to swing higher when employees are confident they can find higher pay or better working conditions elsewhere.With job openings hitting a fresh record in March and pay climbing at a historic pace, it's clear that companies are still desperate to hire and retain workers, not shed payrolls. Until jobless claims edge higher or payroll growth turns negative, a recession is likely months away from materializing.Americans are shopping through inflationShoppers are also acting like a recession is a long way out. Despite consumer sentiment sitting at the most pessimistic level in a decade, spending is still climbing. Retail sales gained 0.9% in April to hit a record $677.7 billion, according to government data published Tuesday. Inflation might be dragging on Americans' moods, but they're still spending well above the pre-pandemic trend.Sales data is among the most prescient for judging the health of the economy. Consumer spending accounts for about 70% of economic activity, meaning a sudden slowdown would have a major negative effect on the country. Business revenues would plunge, and employers would lay off workers to protect their bottom lines. While sales growth has steadily slowed throughout 2022, it's far from sliding into a contraction."What we're seeing today in the US economy is a fairly robust economic backdrop. We still have consumers spending at a decent clip," Greg Daco, chief economist at EY-Parthenon, told Insider.Businesses, meanwhile, are betting that the shopping spree will live on. New orders for manufactured goods gained 2.2%  in March, doubling the average forecast and sharply accelerating from the 0.1% increase in February. The measure is a closely watched forward indicator of economic activity, as an uptick in orders reflects expectations for strong demand.The demand side of the economy is looking plenty strong. Look for spending growth to turn negative or factory orders to contract for the first signs that the rebound is shifting into a recession. Other forward-looking gauges are in the greenEven the less conventional measures of future recession risk aren't flashing warning signs just yet.The yield curve has long been lauded by investors as a dependable forward indicator of economic downturns. The tool tracks yields for a range of Treasury maturities, effectively showing what investors expect economic conditions to look like in the future. An inverted yield curve — in which short-term rates exceed long-term yields — has preceded most major recessions, as it reflects investors moving into safer assets amid fears of a downturn.The yield curve briefly inverted in March but has since pivoted back to a more normal state. The tool only tracks market expectations, and has no direct connection to the performance of the economy. The reversion back to a normal curve, particularly so soon after the inversion, hints investors aren't so sure that a recession is looming.The Conference Board's own collection of leading indicators is also in healthy territory. The organization's Leading Economic Index edged just 0.3% lower to 119.2 in April but still sits 0.9% higher than where it was six months ago. The LEI's flat trend through 2022 is "in line with a moderate growth outlook" and economic output is likely to rebound in the second quarter, Ataman Ozyildirim, senior director of economic research at The Conference Board, said.Significant uncertainties remain, particularly as Russia continues to wage war on Ukraine, the labor shortage rages on, and lockdowns in China threaten to snarl supply chains. Yet most indicators suggest the recovery is still intact. A recession could be on the horizon, but it probably isn't coming anytime soon.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 19th, 2022

Pain Allocation, Frog Poison, And Druckenmiller"s Secret Weapon

Pain Allocation, Frog Poison, And Druckenmiller's Secret Weapon By Alex of the MacroOps substack “My portfolio is very balanced… I have half my assets in cash and the other half is in pain…”  My brother-in-law told me that the other day and it made me chuckle. I’m guessing that pain allocation resonates with more than a few people right now.   We’re holding 68% cash in the MO port and have been carrying productive shorts (short ETHUSD, short RTY, short NVDA) so our net exposure has been low. But even with this defensive posturing, we’ve felt some pain over the past few weeks as our port has drawn down a bit from NAV highs. It obviously could be much worse. But still, drawdowns aren’t fun.  We aren’t going to talk about markets in this note. We’ll save that for Sunday. This is going to be more of a stream of consciousness, including answers to some questions a few of you have put to me recently.  We’ll cover portfolio and trade management, thinking about macro outlooks, jungle medicine, and maybe psychedelics, we’ll see.  I did my first Kambo ceremony the other day. Kambo is known in Portuguese as the “vaccine of the forest”. It’s been used amongst the indigenous cultures of the Amazon for thousands of years and is believed to be a purgative, immunity-boosting medicine.  It’s frog poison.  They first burn your skin in a few spots and then apply the poison to the burns, so it goes straight into your bloodstream.  The poison hits quick. It first races down into your chest and sends your heart beating like a John Bonham drum solo… From there it blasts into your skull causing partial blind and deafness and then disperses throughout the rest of your body sending every single one of your cells buzzing like a bee.  Your face swells, you experience dyschronometria, and you turn into a human firehose. Hence the purgative descriptor. You can watch a Youtube video of a ceremony here.  It’s not something you do for fun.  But… they say it’s good for you .  It’s too early for me to speak to its efficacy. I’ve been pretty wiped out since and have at times felt like I was getting gut-punched by Tyson over the last few days. The practitioners told me this is from the medicine clearing out parasites in my gut and that I need to complete the treatment with two more rounds this weekend. So looks like I’ve got my weekend planned :).  I realize most of you are sane and normal and you probably read about this stuff and think my elevator doesn’t travel all the way up to the top floor. I get that. Totally understandable. I don’t blame you.  Personally, I’m open to trying things like this because they pass the wisdom of time and geography filter that I discussed last year (link here). Also, I struggled with a serious chronic illness for a number of years after my last combat tour. And as a result, I was forced to get a little (read: very) experimental on the health front. Anyways, this is definitely not medical advice. I’m not a doctor, I haven’t even watched Grey’s Anatomy. And if you ever feel compelled to try Kambo, do your research and only do it with a very experienced practitioner.  Rule #1: Don’t lose money…  @jr asked me a great question in the Slack yesterday in response to this SQ chart I posted.  The question was “How do you balance the desire to 1) buy a great value zone and 2) wait for price to prove itself (in this case, confirm a support level).”  I love trade management questions like this because there is no single right answer. It’s all nuance, context, process, goal dependent, etc…  But it’s really thinking through these nuances and developing a framework, where you make the money. Picking winners are a dime a dozen. The money-making comes in the risk and trade management.  So here’s my answer to the question that doesn’t have a simple answer. My approach to trading and investing is to not lose money. Everything I do in markets stems from this single driving desire. There are a number of ways to do this. You can, for example, be a really smart calculating business analyst/value investor type with a love for 10Ks and the patience to see your thesis born true. In this approach, your risk management (how you don’t lose money), is in your analysis, your assessment of risk, and the embedded margin of safety. A critical behavioral edge for this approach is to be able to actually sit through the portfolio volatility (ie, large paper drawdowns) that inevitably come so you don’t end up puking the lows. Something that’s easier said than done...  This is a difficult path. It’s one that most punters claim to do, usually because they’re acting out a mimetic desire to be like daddy Buffett. But few are successful at this over multiple cycles (key being multiple cycles since this is an easy one in a bull market).  Here’s the main issue with this approach. You don’t get a ton of at-bats. And, as a result, your feedback loops are very long. This makes it next to impossible to know if you actually have any skill or if you’re just the beneficiary of survivorship bias who’s on borrowed time… and eventually, your patient capital becomes purgatory positioning, which inevitably ends with you getting zeroed out of the game for good. You can see more than a few examples of this playing out today.  You don’t need to look far to find a “value” fund managers that just 12-months ago was celebrated for his/her astonishing 5-year returns and sought after for interviews, raised Buku assets, were praised for their superhuman intellects, etc… and they’re now closing up shop after erasing all of their career gains in less than 6-months…  They suffered under the delusion they were in possession of God-like analytical abilities. But in reality, they were just cluelessly surfing a macro liquidity wave juiced by a growth-at-any-cost fad. This happens every cycle. Few make it to the next. We don’t play that game.  Three maxims were inscribed in the forecourt of the Temple of Apollo (the Delphic maxims). These were: “Know thyself”, “Nothing to excess”, and “Certainty brings insanity”.  My approach to not losing money is centered around these three truths.  Know thyself… this one is the most important.  We have met the enemy and he is us to quote Oliver Perry and Pogo. To make it in this game you need to be brutally honest about what your strengths are, and more importantly, where you are weak… Self-awareness is critical to long-term investing survival. For instance, I know I’m not going to win any securities analysis contest.  I’m a Generalist with a capital G. One who likes his investment ideas simple and obvious (at least to me). There’s no edge for me in trying to parse through the legalese fine print of a 10k better than the other 10 million MBA-trained super-geniuses out there doing the same. I think the market is generally pretty good at that stuff. It is mostly efficient. Except sometimes it isn’t… sometimes it’s wildly hysterical. That’s when my back of the napkin fundamental math skills can be put to work. That’s where I do have an edge.  I’m good at staying level-headed. It takes a lot to get me excited. Market moves just don’t really do that for me.  So while my weakness is my inability to analyze the esoteric minutiae. My strength is in my wiring (due to either nature or nurture) which makes me decent at playing the metagame and identifying “the point of max pessimism” as Sir John Templeton would call it. My approach is similar to what Bill Miller lays out here:  The securities we typically analyze are those that reflect the behavioral anomalies arising from largely emotional reactions to events. In the broadest sense, those securities reflect low expectations of future value creation, usually arising from either macroeconomic or microeconomic events or fears. Our research efforts are oriented toward determining whether a large gap exists between those low embedded expectations and the likely intrinsic value of the security.  I’m good at calling BS on the market. Identifying when the Narrative Pendulum has swung wildly out to one side and no longer discounts any reasonable reality. That’s one of my strengths.  Here’s the catch, though. Even when I get real bulled or beared up on something. I’m talking high conviction, stepping to the plate for my fat pitch Babe Ruth’n it kind of excitement… I stay cognizant of the fact that I could still very much have something wrong, or that I’m missing a key piece of the puzzle and my thesis could at any moment, go Jenga.  My confidence never goes above 90%. Never.  So this is where the second maxim comes in hand, Nothing in excess…  No excess of confidence, in positioning, or overcommitment.  I’m all for going Totis Porcis and betting the ranch. The thing is, I always make sure I have another ranch. There’s a balance, an indefinable sweet spot, between conviction and fallibility, aggressiveness and risk control, striking when hot and quickly adjusting when wrong…  This leads us nicely to the third maxim of “Certainty brings insanity”.  If only the LUNAtics out there had read up on their Delphic philosophy… tuition is high at Market University, best not to make it more so with an addiction to the gamble and ignis fatuus…  You know why Druckenmiller is the GOAT?  He never lost money. Like really never lost money. The guy had five down quarters over his 30-year career of managing money. Let me repeat… Druckenmiller only had FIVE DOWN QUARTERS OVER A 30-YEAR CAREER… To quote the famous figure skater Will Ferrell, that’s mind-bottling. I know traders who’ve worked with him. They say he embodies strong opinions, weakly held. He could pound the table with conviction one moment. And just as aggressively cut and run the next, if the market hit a predefined technical uncle point or a key piece of data changed. No ego. No attachment. Just ruthless money management and a focus on capping his downside…  His mental flexibility and devotion to managing risk are the skills that made him legendary.  It’s not his deep intellectual macro insights or his penetrating fundamental analysis of stocks. He’s skilled in those areas, sure. But that’s table stakes. That’s not where his genius is.  His genius is in executing a system, a holistic process, that allows him to be wrong time and time again but not lose money. This sets him up with the capital (both financial and mental) to whole hog it when the fat pitches arrive.  Man, this is becoming a long-winded roundabout way to answer the question. What was the question again?  Oh, right… “How do you balance the desire to 1) buy a great value zone and 2) wait for the price to prove itself (in this case, confirm a support level).” Okay, so let’s use our above SQ example to illustrate.  I like Block, Inc. (SQ) the company. I like their products. I’m a frequent user of their cash app. I financed a food truck business. They use SQ’s products and love it. I see SQ products everywhere now. Young millennials I talk to all use Cash app. Not Venmo/Paypal. Not Zelle. The hard data supports this. I think Jack Dorsey is one of the most underrated Founders/CEOs in tech. It seems to me that he’s built an incredibly impressive culture capable of fast innovation at scale. And he’s doing this in hardware, software, and financial services, all simultaneously. That is rare.  There remains a LOT of low-hanging margin to eat in the overregulated noninnovative financial services industry. To me, SQ is the clear leader and has the best shot at winning big in this space over the long term. They can potentially close the consumer-merchant loop and become an impenetrable fast-growing business with a massive TAM.  Because of the above and all the reasons Brandon has laid out in his excellent research pieces on the stock. I want to be a buyer of SQ when it goes on sale.  SQ is currently on sale.  Its multiples are at or near historic lows (see graph below). Meanwhile, the company’s fundamentals have never been stronger. Its path to success has never been as clear. So we want to be looking for spots to buy. Now, we already own SQ. We put on a small starter position last month. We added another small amount to that position the other day.  We want to build this position into a big one as it’s one of our higher long-term conviction plays (outside of the still ridiculously cheap commodity shitcos we own).  At the same time, our Bear Market Shock and Trend Fragility indicators peaked out at the start of this year, giving us a lead on the current action, which is why we’ve been able to sidestep the pummeling and make a little money YTD.  While our indicators suggest we’re probably at or near a short-term tradeable bottom. We still need to see major breadth thrusts confirmation and preferably a VIX spike to mark a total washout low. Until then we should expect a continuation of the sideways volatile regime at best or a bear market at worst.  Nothing in this game is a sure thing though...  We can enter an extended bear or we can soon bottom and run… Things can change, the Fed can flip, the dollar can rip, inflation can come down or shoot up… in macro environments full of noise, as this one very much is, we need to stay balanced and nimble.  We don’t want to be binary in our thinking.  You can’t be all bull or all bear in a market like this. You can have your opinions and tilt your positioning in that direction. But you want to own some stuff that would work in case you’re wrong. That way you don’t get caught flatfooted. Not to mention, staying balanced does something to the mind. It helps keep you more intellectually flexible and honest.  We very rarely go 100% cash. The last time we did was in late Feb 2020. But the writing was on the wall for that one and today is very different. Okay, so we like SQ and want to own more. But the macro picture is uncertain. We can assign roughly equal odds to a further selloff or a near-term bottom here.  We also hold lots of cash on the books. To get a bit more balanced and in line with our equal macro odds, we want to take small swings at adding to SQ — and other names we like. SQ is at long-term support. This gives us a technical inflection point. A logical uncle point in which to nest in our stops, in case we’re wrong or early.  So we’ll add a little bit here. We’ll keep the position small because the stock remains in a larger corrective phase and because the macro is messy.  If and when we get (1) broad market breadth thrusts triggering (as shown on the breadth tab of our HUD) and/or (2) SQ shows signs it has put in a base and buyers are back in control (ie, higher pivot points, consecutive bull bars, SQN in Bull regime, etc…). Then we’ll look to more aggressively build on the position.  If breadth thrusts fail to materialize and/or SQ punches through support and continues on its downtrend. We can cut our additions and go back to our small nominal starter position.  In doing so, we protect our downside (NOT LOSE MONEY) first and foremost. While also staying engaged in a stock that has incredible asymmetry over the long haul.  This creates balance. Balance keeps us honest. In markets, it helps keep us alive. It prevents us from going full Kambo and purging our pain allocation right at the lows…  Tyler Durden Mon, 05/16/2022 - 10:40.....»»

Category: blogSource: zerohedgeMay 16th, 2022

How Warner Bros. Discovery post-merger can compete with Netflix and Disney as the streaming wars evolve

With the ink still drying on Discovery's $43 billion acquisition of WarnerMedia, CEO David Zaslav is building the combined Warner Bros. Discovery into a media powerhouse. The Warner Bros. film studio lot in Burbank, California.AaronP/Bauer-Griffin/GCImages via Getty Images WarnerMedia and Discovery have merged into Warner Bros. Discovery in a $43 billion deal. The new company has the breadth and depth of content to compete with Netflix and Disney in streaming. CEO David Zaslav, formerly chief of Discovery, is a highly regarded exec who faces challenges ahead. Amid a wave of consolidation in Hollywood over the past five years, WarnerMedia and Discovery are the latest major media companies to merge, resulting in a behemoth of more than 40,000 staffers and a portfolio that now spans properties from iconic film studio Warner Bros. to premium cable network HBO to basic cable mainstays HGTV and Animal Planet. With the ink still drying on Dicovery's $43 billion acquisition of the larger WarnerMedia, a new outline of the combined entity — now named Warner Bros. Discovery — is taking shape under the leadership of former Discovery CEO David Zaslav, following the exit of WarnerMedia chief Jason Kilar. Read Kilar's full memo that he sent to employees as he departed the companyWhile his strategy is still forming, Zaslav said during a Discovery earnings call two months ahead of the deal close that "we want to compete against Disney and Netflix, but we are a very different company than the two of them," adding that "we're much broader than Disney, and we have much more identifiable IP."Read more about how CEO David Zaslav set priorities for the new Warner Bros. DiscoveryZaslav also said the companies' combined spending on content would be "careful and judicious," telling analysts and investors that "our goal is to compete with the leading streaming services, not to win the spending war."As streaming incumbent Netflix grapples with its first subscriber declines in a decade and a plummeting stock price, here's how WBD is positioning itself to capitalize on its enormous range of assets — which include Harry Potter, Batman, and HBO hits such as "Succession."Layoffs in the C-suite and a streaming strategy resetAt the top of the WBD food chain, changes have been swift, with most of Kilar's direct reports set to leave, including WarnerMedia studio and networks chief Ann Sarnoff, HBO Max general manager Andy Forssell, CFO Jennifer Biry, communications and inclusion head Christy Haubegger, among others.Read more about the WarnerMedia senior leaders who will not stay on with the combined companyThe exits — particularly those of Forssell and Haubegger — rattled staffers. Haubegger led a uniquely empowered equity and inclusion division, reporting directly to Kilar as opposed to HR, unlike the typical structure at many Hollywood companies. Forssell, a Kilar deputy who had worked with him at Hulu many years ago, was a well-regarded exec and architect of HBO Max whom many insiders had expected to stay on. Read more about insider fears after the first round of leadership layoffs: 'Why get rid of someone who knows how the thing works?'Zaslav made his first appearance in front of former WarnerMedia staffers with a visit to CNN in mid-April, treating staff to pasta and sushi lunch just two weeks after the launch of streaming news service CNN+. At the time, he said incoming CNN chief Chris Licht would make the call on the fledgling platform's future strategy.Read more about Warner Bros. Discovery CEO Zaslav's visit to NYC, promising that a company hiring freeze would end 'pretty quickly'But not long after that, just three weeks after the launch of the paid subscription service, Warner Bros. Discovery abruptly shuttered CNN+. Licht said in a statement that CNN would be "strongest as part of WBD's streaming strategy which envisions news as an important part of a compelling broader offering along with sports, entertainment, and nonfiction content." Read more about the shutdown of CNN+, called 'a combination of the wrong strategy and wrong capital allocation' Many insiders faulted not Licht, however, but rather Kilar and recently ousted CNN chief Jeff Zucker, who had left the company in February after belatedly disclosing a relationship with a colleague. "This was all ego. All a power play for a bigger job or independence. Hubris. Nothing more," one former WarnerMedia exec said of Zucker, with another insider calling it a "vanity project." Read more about the rapid demise of CNN+ as insiders blame Jeff Zucker and Jason Kilar for the streamer's downfall New leadership in streaming and continuity in contentAs for Zaslav's plans, the CEO gathered thousands of his employees on Warner Bros. historic studio lot in Burbank, California, where Oprah Winfrey (whose OWN cable network is in the Discovery portfolio) recounted to staffers that Zas had first approached then-WarnerMedia parent AT&T about a potential merger with Discovery in early 2021.Read more about the Warner Bros. Discovery town hall where David Zaslav laid out his content strategy Longtime Zaslav deputy JB Perrette will now oversee all streaming strategy at the merged WBD, with HBO and HBO Max head Casey Bloys, TV studio chief Channing Dungey, and film studio head Toby Emmerich continuing on in their current positions. Read more about mystery man JB Perrette, who insiders say is a smart, low-key problem solverStreaming services HBO Max and Discovery+ are set to combine into one massive platform, which streaming search engine Reelgood estimated would result in a content library of over 2,900 TV shows (greater than Netflix's), and over 3,000 movies. Read more about what a combined HBO Max and Discovery+ would offer to viewers Questions remain about the DC brand, sports rights, and 'a heavy lift' to combine two global companies' forcesSeveral questions remain, including the fate of DC, which has already seen personnel cuts in the wake of WarnerMedia's previous AT&T parentage. "The Discovery merger is not scaring anyone on the comics side like the AT&T deal did," said one comics-industry insider close to DC. "I think that one showed people how disposable they were, so the Discovery merger is just another day of being a cog in a machine." Read about comic industry insiders' hopes that the merger will bring stability to DC after heavy layoffs There's also the looming fate of the unscripted teams on the former WarnerMedia side of the business. While Discovery offered limited scripted series, it is a behemoth in reality TV, known for penny-pinching and driving down costs. Insiders wonder how closely Zaslav will scrutinize the big budgets at HBO and HBO Max's original programming, where an hour-long program's production costs are said to easily run three times as high as Discovery's.Read more about industry insiders' concern that there may be 'intense pressure' to trim unscripted budgets at HBO and HBO Max at Warner Bros. DiscoveryNo word yet, either, on how salaries might be impacted. Insider analyzed salary data at WarnerMedia and Discovery staffers, where recent wages ranged from $55 an hour to $300,00 a year. Read more about Warner Bros. Discovery salaries, analyzed via work-visa disclosuresAnd challenges no doubt face even a seasoned executive like Zaslav. Analysts point to debt, sports rights cost inflation, and a hefty load of linear cable networks, including Turner's TBS, TNT, and TruTV, not to mention the uncertainty that hangs over the staff of a newly combined company, as more layoffs loom. "There are business planning rhythms that need to be harmonized; that's everything from back-of-house systems like payroll, health benefits, compensation structures, vacation policies," one media executive told Insider in late April. "All this mundane stuff can be a gargantuan distraction in addition to all of the front-of-house business planning. It's going to be a heavy lift."Read about the 5 key challenges for David Zaslav as he merges WarnerMedia and Discovery Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 11th, 2022

Futures Rise Ahead Of Biggest Fed Rate Hike Since The Dot Com Bubble Burst

Futures Rise Ahead Of Biggest Fed Rate Hike Since The Dot Com Bubble Burst May the 4th is here, and US futures are up slightly ahead of a key Federal Reserve meeting in which the Fed is widely expected to raise rates by 50bps, the biggest hike since the dot com bubble burst in May 2000, and to release plans for balance-sheet normalization; Chair Powell’s post-meeting press conference will provide guidance on potential for bigger rate hikes at subsequent meetings and policy makers’ assessment of the neutral rate. As DB's Jim Reid puts it, "if you're under 43, did 3 years at university and then joined financial markets then you won't have worked in an era of 50bps Fed rate hikes. This will very likely change tonight as the Fed are a near certainty to raise rates by 50bps. In fact it'll be the first time the Fed have hiked at consecutive meetings since 2006. So we enter a new era that won't be familiar to many." In any case, investors have already priced in the Fed’s largest hike since 2000 - in fact, OIS contracts currently price in around 160bp of additional hikes over the next three policy meetings -  and they will scrutinize Chair Jerome Powell’s speech for clues on the pace of future rate increases and balance-sheet reduction. Some traders are betting on an even larger 75 basis-point hike in June. As such, even though global financial conditions are already the tightest they have ever been (according to Goldman), S&P and Nasdaq futures are both up 0.5%, while 10-year yields drifts lower, having stalled again near 3% at the European open. "Powell’s words about how aggressively the Fed will tame inflation are likely to shape market sentiment for the next couple of weeks at least," said technical analyst Pierre Veyret at ActivTrades in London. Lyft tumbled 26% in premarket trading after the ride-hailing company’s second-quarter outlook disappointed Wall Street. Global bonds have slumped under a wave of monetary tightening, with German 10-year yields around 1% and the U.K.’s near 2%, while US 10Y yields are circling 3%. Adding to the tightening outlook, European Central Bank Executive Board Member Isabel Schnabel said it’s time for policy makers to take action to tame inflation, and that an interest-rate hike might come as early as July. Meanwhile, Iceland’s central bank delivered its biggest hike since the 2008 financial crisis and India’s raised its key interest rate in a surprise move Wednesday. “There is a difficult set up in general for risk assets” as valuations remain stretched despite a drop in equities, Kathryn Koch, chief investment officer for public markets equity at Goldman Sachs & Co., said on Bloomberg Television. She added that “some people think stagflation is a real risk.” In premarket trading, Didi Global was 6% lower and Chinese technology shares slumped as the U.S. Securities and Exchange Commission is investigating the ride-hailing giant’s chaotic 2021 debut in New York.  Advanced Micro Devices jumped 5.7% in premarket trading after the chipmaker gave a strong sales forecast for the current quarter. Starbucks gained 6.6% after the coffee chain reported higher-than-expected U.S. sales, outweighing the negative impact of high inflation and Chinese lockdowns. Here are some of the biggest U.S. movers today: Lyft (LYFT) shares slump 27% premarket after the ride-hailing company’s second-quarter outlook disappointed Wall Street, highlighting investors’ willingness to dump growth stocks at the first hint of trouble Uber (UBER) slipped as Lyft’s results hit the more diversified peer. Uber said it rescheduled the release of its 1Q financial results and its quarterly conference to Wednesday morning from the afternoon, after rival Lyft gave a weaker-than-expected outlook Airbnb (ABNB) jumps 4.5% premarket after its second-quarter revenue forecast beat estimates, with the company seeing “substantial demand” after more than two years of Covid-19 restrictions Livent (LHTM) shares surge 23% premarket, with KeyBanc highlighting an increase in the lithium product maker’s 2022 Ebitda guidance Match Group (MTCH) slips 6.7% premarket as analysts say the miss in the dating-app company’s guidance takes some of the shine off its revenue beat Didi Global (DIDI) led a drop in U.S.-listed Chinese internet stocks after news of an SEC investigation into the ride-hailing company’s 2021 debut in New York added to investor concerns around the sector Skyworks Solutions (SKWS) shares drop 2.5% premarket after the semiconductor device company gave a forecast that was below the average analyst estimate Herbalife (HLF) sinks 17% premarket after slashing its full-year forecast and setting second-quarter adjusted earnings per share outlook below the average analyst estimate Advanced Micro Devices (AMD) rises as much as 7.5% in premarket trading, with analysts positive on the demand the chipmaker is seeing from data centers Akamai (AKAM) falls as much as 14% after analysts noted that a slowdown in internet traffic and the loss of revenue due to the war in Ukraine hit the company’s first-quarter results and full-year guidance JPMorgan CEO Jamie Dimon said in an interview Wednesday that the Fed should have moved quicker to raise rates as inflation hits the world economy. He said there was a 33% chance of the Federal Reserve’s actions leading to a soft landing for the U.S. economy and a third chance of a mild recession. “The Fed remains very focused on bringing inflation down, however, any further hawkish pivots will likely be tempered to some extent by the desire to achieve a soft landing,” Blerina Uruci, U.S. economist at T. Rowe Price Group Inc., wrote in a note. In Europe, declines for retailers and most other industry groups outweighed gains for energy, media and travel and leisure companies, pulling the Stoxx 600 Europe Index down 0.6%. The DAX outperforms, dropping 0.4%, Stoxx 600 lags, dropping 0.5%. Retailers, financial services and construction are the worst performing sectors. Here are the biggest European movers: Flutter Entertainment rises more than 6.9% its 1Q update matched broker expectations. Jefferies says a strong U.S. performance fuels confidence that a profitability “tipping point” is nearing. Kindred shares advance after its second-biggest shareholder, Corvex Management LP, said it believes Kindred’s board should evaluate strategic alternatives including a sale or merger. Fresenius SE shares rise as much as 4.2% on beating 1Q expectations. The beat was driven by the Kabi pharmaceutical division, which benefited from a positive FX impact, according to Jefferies. Siemens Healthineers rises after the German health care firm upgraded its earnings guidance. The beat was driven by a “strong performance” in its diagnostics division, Jefferies says. Stillfront shares rise as much as 10% after the Swedish video gaming group presented its latest earnings. Handelsbanken says the report provides good news, justifying some relief in the shares. Yara and K+S climb after the EU’s proposal to sanction the largest Belarus potash companies. Yara may see higher input prices but its market share may rise in wake of a ban, analysts note. Skanska falls as much as 12% after the construction group presented its latest earnings. The report was overall in-line, but construction margins were a weakness, Kepler Cheuvreux says. Earlier in the session, Asian stocks declined for a third straight day, with the Federal Reserve’s upcoming policy decision and a U.S. regulatory probe into Didi Global weighing on sentiment. The MSCI Asia Pacific Index fell by as much as 0.5%, with Chinese internet giants Tencent and Alibaba the biggest drags. The sector declined on news that the U.S. regulators are investigating Didi’s 2021 trading debut in New York. India’s stock measures fell the most in the region as the domestic central bank hiked a key policy rate in an unscheduled decision. Benchmarks in Hong Kong and Vietnam also fell as some markets returned from holidays, while Japan and China remained closed. All eyes are now on the Fed’s interest-rate decision on Wednesday, with policy makers expected to hike by 50 basis points, the biggest increase since 2000.   “We have two forces of gravity working on Asian equities -the rising interest rates and the lockdowns and weaker growth in China,” Herald van der Linde, head of Asia Pacific equity strategy at HSBC, told Bloomberg Television. The MSCI Asia gauge has dropped more than 13% this year as rising borrowing costs, China’s Covid-19 lockdowns and rising inflation hurt prospects for corporate profits. Shanghai’s exit from a five-week lockdown that has snarled global supply chains is being delayed by infections persistently appearing in the community. “The most important decision Asian equity investors have to make throughout this year may be duration, how to position themselves if inflation is going to peak,” van der Linde added. In rates, treasuries advanced, outperforming bunds and rising with stock futures, although price action remains subdued ahead of 2pm ET Fed policy decision. Intermediate sectors lead the advance, with yields richer by ~2bp in 5- to 10-year sectors, before Treasury’s quarterly refunding announcement at 8:30am. Yields little changed across 2-year sector, flattening 2s10s by ~1.5bp; 10-year at ~2.96% outperforms bunds and gilts by ~3.5bp. Dollar issuance slate empty so far; two borrowers priced $3.7b Tuesday taking weekly total past $8b as new-issue activity remains light; at least two borrowers stood down from announcing deals. Bund and gilt curves bear flatten. Euribor futures drop 7-8 ticks in red and green packs following comments from ECB’s Schnabel late Tuesday. In FX, the Bloomberg Dollar Spot Index was little changed and the dollar was steady to slightly weaker against most of its Group- of-10 peers. Treasuries were steady, with the 10-year yield nudging 3%. The euro hovered around $1.0520 and European bonds fell. The pound rose past the key $1.25 level and gilts fell in line with euro-area peers, as traders braced for the FOMC rate decision later Wednesday and eyed Thursday’s Bank of England meeting. Data from the British Retail Consortium showed shop price inflation accelerated to 2.7% from a year ago in April, the most since 2011. Australia’s dollar advanced against all its Group-of-10 peers and the nation’s sovereign bonds extended losses as retail sales rising to a record high boosted bets for central bank tightening. Retail sales surged 1.6% in March to A$33.6b, more than triple economists’ forecast for a 0.5% increase. Bitcoin is bid this morning, in contrast to the recent contained sessions, posting upside in excess of 3.0% on the session; albeit, yet to mount a test of the USD 40k mark. In commodities, oil rallies after the European Union proposed to ban Russian crude oil over the next six months; however, sources indicate that Hungary and Slovakia will receive an extend phase-our period in order to appease their known opposition. WTI drifts 3.2% higher with gains capped near $105 so far. Spot gold steady at $1,868/Oz. Most base metals trade in the green Looking at the day ahead, the main highlight will be the aforementioned Fed decision, along with Chair Powell’s subsequent press conference. On the data side, we’ll also get the final services and composite PMIs from around the world, UK mortgage approvals and Euro Area retail sales for March, and US data for the March trade balance, the ISM services index for April, and the ADP’s report of private payrolls for April. Finally, earnings releases include CVS Health, Booking Holdings, Regeneron, Uber, Marriott International and Moderna. Market Snapshot S&P 500 futures up 0.3% to 4,180.00 STOXX Europe 600 down 0.4% to 444.21 MXAP down 0.3% to 167.37 MXAPJ down 0.4% to 553.87 Nikkei down 0.1% to 26,818.53 Topix little changed at 1,898.35 Hang Seng Index down 1.1% to 20,869.52 Shanghai Composite up 2.4% to 3,047.06 Sensex down 1.2% to 56,318.69 Australia S&P/ASX 200 down 0.2% to 7,304.68 Kospi down 0.1% to 2,677.57 German 10Y yield little changed at 1.00% Euro little changed at $1.0527 Brent Futures up 3.6% to $108.77/bbl Gold spot up 0.1% to $1,870.11 U.S. Dollar Index little changed at 103.40 Top Overnight News from Bloomberg A lot is riding on how Federal Reserve Chairman Jerome Powell parries a question he’ll surely be asked after Wednesday’s monetary policy decision: is a 75-basis-point rate hike in the cards at some stage? The negative-yielding bond is nearing extinction: there’s only 100 left in the world. That’s down from over 4,500 such securities last year in the Bloomberg Global Aggregate Negative Yielding Debt index, following a surge in yields as investors bet on imminent interest-rate hikes. The EU plans to ban Russian crude oil over the next six months and refined fuels by the end of the year as part of a sixth round of sanctions to increase pressure on Vladimir Putin over his invasion of Ukraine The ECB should consider raising interest rates as soon as July as inflation accelerates, ERR reported, citing Governing Council member Madis Muller North Korea launched what appeared to be a medium-range ballistic missile Wednesday, as Kim Jong Un ramps up his nuclear program ahead of U.S. President Joe Biden’s first visit to Seoul Iceland’s central bank delivered its biggest hike since the 2008 financial crisis to try to curb inflation and rein in Europe’s fastest house-price rally. The Monetary Policy Committee in Reykjavik lifted the seven-day term deposit rate by 100 basis points to 3.75%, accelerating tightening with its largest move yet since the pandemic. The increase was within the range of outcomes indicated by recent surveys of market participants A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were cautious amid holiday closures and as markets braced for the incoming FOMC. ASX 200 was rangebound as strength in financials was offset by tech and consumer sector losses. Hang Seng underperformed amid a tech rout and after a wider than expected contraction in Hong Kong’s advanced Q1 GDP, while China’s COVID-19 woes persisted with Beijing tightening its restrictions. Top Asian News Hong Kong Plots Different Covid Path to Xi’s Zero Tolerance Beijing Shuts Metro Stations and Suspends Bus Routes Didi Leads Slump in U.S.-Listed Chinese Shares Amid SEC Probe Record India IPO Opens to Retail Amid Fickle Markets: ECM Watch European bourses, Euro Stoxx 50 -0.3%, are modestly softer after another subdued but limited APAC handover amid ongoing regional closures. US futures remain in tight pre-FOMC ranges, with participants also awaiting ISM Services and ADP. In Europe, sectors are mostly lower with the exception. US President Biden's administration is reportedly moving towards the imposition of human-rights related sanctions on Hikvision, according to FT sources; final decision has not been taken. Top European News Hungary Voices Objection to EU Sanctions Plan on Russian Oil U.K. Mortgage Approvals Fall to 70.7k in March Vs. Est. 70k European Energy Prices Jump as EU Proposes Banning Russian Oil Boohoo Plunges as Online Clothing Retailer’s Growth Wilts FX DXY anchored around 103.500 awaiting FOMC and Fed chair Powell for further guidance. Aussie gets retail therapy and hawkish RBA rate calls to consolidate gains made in wake of 25 bp hike; AUD/USD pivots 0.7100 and AUD/NZD 1.1050. Kiwi elevated following NZ labour data showing record low unemployment and strength in wages, NZD/USD tightens grip of 0.6400 handle and closer to half round number above. Loonie on a firmer footing ahead of Canadian trade as oil prices bounce, USD/CAD towards base of a broad 1.2850-00 range. Indian Rupee rallies after RBI lifts benchmark rate and reserve ratio at off-cycle policy meeting, former up 40 bp to 4.40% and latter +50 bp to 4.50%. Euro, Yen and Franc remain in close proximity of round and psychological numbers, circa 1.0500, 130.00 and 0.9800 respectively. RBI raises its key repo rate by 40bps to 4.4% in an off-cycle meeting; Also raises the cash reserve ratio by 50bps to 4.5%. Will retain accommodative policy stands but will remain focused on the withdrawal of accommodation. Fixed Income Bonds attempt to nurse some losses before FOMC and a busy agenda in the run up, including ADP, Quarterly Refunding details and the services ISM. Bunds back from a 152.44 low to 153.00+, Gilts edging towards 118.00 from 117.55 and 10 year T-note fractionally above par within a 118-17+/06 range. German Green issuance well received as cover climbs from prior sale and retention dips, albeit with the average yield sharply higher. Commodities WTI and Brent are bolstered amid the EU unveiling the sixth round of Russian sanctions, seeing a complete import ban on all Russian oil, benchmarks firmer by circa. USD 3.5/bbl However, sources indicate that Hungary and Slovakia will receive an extend phase-our period in order to appease their known opposition. US Energy Inventory Data (bbls): Crude -3.5mln (exp. -0.8mln), Gasoline -4.5mln (exp. -0.6mln), Distillate -4.5mln (exp. -1.3mln), Cushing +1.0mln. India is looking for Russian oil at under USD 70/bbl on a delivered basis in order to compensate for additional components incl. securing financing, via Bloomberg sources; adding, that India has purchased over 40mln/bbl of Russian crude since late-Feb. OPEC+ sees the 2022 surplus at 1.9mln, +600k BPD from the prior forecasts, according to the JTC report. Several OPEC+ officials expected the current oil pact to continue, according to Argus Media. US Event Calendar 07:00: April MBA Mortgage Applications, prior -8.3% 08:15: April ADP Employment Change, est. 382,000, prior 455,000 08:30: March Trade Balance, est. -$107.1b, prior -$89.2b 09:45: April S&P Global US Services PMI, est. 54.7, prior 54.7 09:45: April S&P Global US Composite PMI, est. 55.1, prior 55.1 10:00: April ISM Services Index, est. 58.5, prior 58.3 14:00: May Interest on Reserve Balances R, est. 0.90%, prior 0.40% 14:00: May FOMC Rate Decision; est. 0.75%, prior 0.25% DB's Jim Reid concludes the overnight wrap I feel like I aged 20 years after the first half of the Champions League semi-final last night. Luckily the second half was less stressful and Liverpool are through to the final. I don't think I got those 20 years back though. Talking of age, if you're under 43, did 3 years at university and then joined financial markets then you won't have worked in an era of 50bps Fed rate hikes. This will very likely change tonight as the Fed are a near certainty to raise rates by 50bps. In fact it'll be the first time the Fed have hiked at consecutive meetings since 2006. So we enter a new era that won't be familiar to many. In terms of what to expect later, our US economists are also calling for a 50bps hike in their preview (link here), which follows the comment from Chair Powell before the blackout period that “50 basis points will be on the table” at this meeting. Looking forward, they further see Powell affirming market pricing that further 50bp hikes are ahead, and our US economists believe this will be the first of 3 consecutive 50bp moves, which will eventually take the Fed funds to a peak of 3.6% in mid-2023. We’re also expecting an announcement that balance sheet rundown will begin in June, with terminal cap sizes of $60bn for Treasuries and $35bn for MBS, with both to be phased in over 3 months. See Tim’s preview on QT (link here) for more info on that as well. While the Fed might have already begun their hiking cycle 7 weeks ago now, the sense that they’re behind the curve has only grown over that time. For example, the latest inflation data from March showed CPI hitting a 40-year high of +8.5%, meaning that the Fed Funds rate was beneath -8% in real terms that month, which is lower than at any point during the 1970s. Meanwhile the labour market has continued to tighten as well, with unemployment at a post-pandemic low of 3.6% in March, and data out yesterday showed that the number of job openings hit a record high of 11.55m (vs. 11.2m expected) as well. That means the number of vacancies per unemployed worker stood at a record high of 1.94 in March, which speaks to the labour shortages present across numerous sectors at the minute. Ahead of the decision later on, the S&P 500 surrendered an intraday gain of more than +1% to finish the day +0.48% higher, in another New York afternoon turnaround. Energy (+2.87%) and financials (+1.26%) did most of the work keeping the index afloat after dipping its toes in the red late in the day, while only two sectors ultimately finished lower, staples (-0.24%) and discretionary (-0.29%). A sizable 35 S&P 500 companies reported earnings before the close, but there weren’t any standout results to drive an index-wide response. Indeed, the mega-cap FANG+ index only slightly underperformed the broader index at +0.11%. In Europe the STOXX 600 was up +0.53%, closing before the New York reversal. In line with the turnaround, overall volatility remained elevated, with the VIX index (-3.09pts) closing just below the 30 mark. Ahead of today’s FOMC decision US Treasuries continued their recent back-and-forth price action. The 10yr yield ended ever so slightly lower at -0.1bps. That masks continued rates volatility, however, with the 10yr as much as -8bps lower intraday after having moved above 3% in the previous session for the first time since 2018. The back-and-forth was matched by real yields, as 10yr real yields were as many as -11bps lower before closing down just -0.1bps, comfortably in positive territory for only the second day since March 2020 at 0.14%. The curve flattened as short-end rates moved higher, with 2yr yields gaining +5.1bps, after most tenors were lower earlier in the session. In Europe, yields on 10yr bunds moved above 1% in trading for the first time since 2015 shortly after the open. Yields did then swing lower, but subsequently recovered to be down just -0.2bps at 0.961%. However, bunds were one of the stronger-performing European sovereigns yesterday, and the spread of both Italian (+2.2bps) and Spanish (+1.1bps) 10yr yields over bunds widened to fresh post-Covid highs in both cases, at 191bps and 106bps respectively. Asian equity markets are mixed in a holiday thinned session ahead of the Fed’s key rate decision later. The Hang Seng (-0.90%) is trading in negative territory as a decline in Chinese listed tech stocks is weighing on sentiment. Elsewhere, the Kospi (-0.15%) and S&P/ASX 200 (-0.08%) are fractionally lower. Meanwhile, markets in Japan and mainland China are closed today for holidays. Oil prices are slightly higher amid rising prospects of an EU embargo of Russian crude oil. As I type, Brent and WTI futures are c.+1% up to trade at $106.09/bbl and $103.53/bbl respectively. Early morning data showed that Australia’s retail sales rose for the third consecutive month, advancing +1.6% m/m in March and going past market estimates for a + 0.5% gain. It followed a +1.8% rise in February. Looking at yesterday’s other data releases, US factory orders grew by a stronger-than-expected +2.2% in March (vs. +1.2% expected). And over in Europe, German unemployment fell be -13k in April (vs. -15k expected), whilst the Euro Area unemployment rate in March fell to 6.8%, which is the lowest since the single currency’s formation. Finally, Euro Area PPI in March soared to 36.8% (vs. 36.3% expected), which is also a record since the single currency’s formation. To the day ahead now, and the main highlight will be the aforementioned Fed decision, along with Chair Powell’s subsequent press conference. On the data side, we’ll also get the final services and composite PMIs from around the world, UK mortgage approvals and Euro Area retail sales for March, and US data for the March trade balance, the ISM services index for April, and the ADP’s report of private payrolls for April. Finally, earnings releases include CVS Health, Booking Holdings, Regeneron, Uber, Marriott International and Moderna. Tyler Durden Wed, 05/04/2022 - 07:50.....»»

Category: blogSource: zerohedgeMay 4th, 2022

Futures Recover Losses After Netflix Disaster; 10Y Real Yields Turn Positive

Futures Recover Losses After Netflix Disaster; 10Y Real Yields Turn Positive US index futures were little changed, trading in a narrow, 20-point range, and erasing earlier declines as a selloff in bonds reversed with investors also focusing on the catastrophic Q1 earnings report from Netflix. Nasdaq 100 Index futures slipped 0.2% by 7:15 a.m. in New York, recovering from an earlier drop of as much as 1.2%; the Nasdaq 100 has erased $1.3 trillion in market value since April 4 as bond yields have been surging on fears of rate hikes. S&P 500 futures also recouped losses to trade little changed around 4,460. Treasuries rallied and 10Y yields dropped to 2.86% after hitting 2.98% yesterday. The dollar dropped for the first time in 4 days after hitting the highest level since July 2020, and gold was flat while bitcoin rose again, hitting $42K. In perhaps the most notable move overnight, US 10-year real yields turned positive for the first time since March 2020, signaling a potential return to the pre-pandemic normal. But that was quickly followed by a global drop in bond yields as investors assessed growth challenges from the Ukraine war and the potential for a peak in inflation. “Real yields matter for equities,” Esty Dwek, chief investment officer at Flowbank SA, said in an interview with Bloomberg Television. “It’s another aspect for the valuation picture that isn’t helping. It shouldn’t be that much of a surprise to see real yields are back closer to zero again. We’re pricing in so much bad news already between inflation and the hikes and war and supply chains.” 10-year Treasurys yield shed 7 basis points in choppy session after as money managers from Bank of America to Nomura indicated the panic over inflation has gone too far: “Our forecasts point to inflation peaking this quarter and falling steadily into 2023,” BofA analysts including Ralph Axel wrote in a note. “We believe this will reduce the panic level around inflation and allow rates to decline.”  Bank of America also said it has turned long on 10-year Treasuries. Elsewhere, Japan's 10-year yield holds at 0.25%, the top of Bank of Japan’s trading band as the central bank resumes massive intervention. Despite the BOJ's dovish commitment to keep rates low, the Japanese yen rebounded from a 13-day slump and gold extended its decline. Going back to stocks, Netflix shares which have a 1.2% weighting in the Nasdaq, sank 27% in premarket trading after the streaming service said it lost customers for the first time in a decade and forecast that the decline will continue. The shares were downgraded at many firms including UBS Group AG, KGI Securities and Piper Sandler. Other streaming stocks including Walt Disney and Roku also slipped. IBM, on the other hand, rose 2.5% after reporting revenue that beat the average analyst estimate on demand for its hybrid-cloud offerings. Analysts acknowledged the strong quarter of revenue performance. A dimmer outlook for corporate earnings as well as the rise in yields have dented demand for risk assets, with investors preferring defensive stocks such as healthcare to growth-linked stocks, which come under greater pressure from higher interest rates. Some other notable premarket movers: Interactive Brokers (IBKR US) shares fell 1.1% in after-market trading as net income missed analysts’ consensus estimates. Still, analysts at Piper Sandler and Jefferies are positive. Omnicom (OMC US) shares jumped 3.7% in postmarket. Its cautious outlook for the rest of the year could bring some positive surprises, according to analysts, after the company’s 1Q revenue beat estimates In Europe, the Stoxx 600 rose 0.8%, led by banking and technology shares while miners underperformed as metals fell, as investors assessed a mixed bag of corporate results and the outlook for France’s presidential-election runoff on Sunday.  There’s a divergence in performance of European stocks; Euro Stoxx 50 rallies 1.2%. FTSE 100 lags, adding 0.4%. Danone SA rose after reporting its fastest sales growth in seven years, and Heineken NV advanced after sales climbed. Here are some of the biggest European movers today: ASML shares rise as much as 8% with analysts saying the semiconductor-equipment group’s earnings show demand remains strong, even if a timing issue meant its outlook missed expectations. Danone shares gain as much as 9% following a French financial newsletter report that rival Lactalis may be interested in buying its businesses and after the producer of Evian reported a surge in bottled water revenue. Just Eat Takeaway shares rise as much as 7.7% after the company gave mixed guidance and said it is considering selling Grubhub. While analysts note the growth looks weak, they highlight the focus on profitability and the strategic review of Grubhub are positives. Vopak shares rise as much as 7.2%, most since March 2020, after the tank terminal operator reported higher revenues and Ebitda for the first quarter. Heineken shares rise as much as 5% after the Dutch brewer reported 1Q organic beer volume that beat analyst expectations and said net revenue (beia) per hectolitre grew 18.3%. Analysts were impressed by the company’s price-mix during the period. Rio Tinto shares fall as much as 3.9%. A production miss for 1Q could prevent the miner’s shares from recovering after recent underperformance, RBC Capital Markets says. Credit Suisse declines as much as 2.8% after the bank said it anticipates a first-quarter loss owing to a hit to revenue from Russia invading Ukraine and an increase in legal provisions. Oxford Biomedica drops as much as 10% after reporting full-year revenue that was below consensus. RBC Capital said reasons for the revenue miss were “unclear,” adding that there was no new business development news. Asian stocks rose as Japanese equities rallied on the back of a weaker yen, which will support exports. Shares in China fell as investors were disappointed by the decision among banks to keep borrowing rates there unchanged. The MSCI Asia Pacific Index gained as much as 0.9% and was poised to snap a three-day losing streak. Japanese exporters including Toyota and Sony helped lead the way, with shares also stronger in Singapore, Malaysia and the Philippines.  “It looks like the cheap yen may continue for a longer period than originally expected,” said Bloomberg Intelligence auto analyst Tatsuo Yoshida. “The weaker yen is good for all Japanese automakers.” China’s benchmarks bucked the uptrend and dipped more than 1%, as lenders maintained their loan rates for a third month despite the central bank’s call for lower borrowing costs to help an economy hurt by Covid-19 and geopolitical headwinds.  China’s rate stall, together with last week’s smaller-than-expected cut in the reserve requirement, has led some investors to believe broad and significant policy easing is unlikely. “Doubts about access to easier funding remain a bugbear despite headline easing,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note. “Inadvertent restraints on actual lending may mute intended stimulus, revealing risks of ‘too little too late’ stimulus.” In positive news, daily covid cases in Shanghai were in downtrend in recent days and number of communities with more than 100 daily infections fell for three consecutive days, Wu Qianyu, an official with Shanghai’s health commission, says at a briefing. Financial stocks outside of China gained after U.S. 10-year Treasury real yields turned positive for the first time since 2020 as traders continue to bet on a series of aggressive Federal Reserve rate hikes. This may pose more headwinds for Asian tech stocks, which have dragged the broader market lower this year. Japanese equities rose for a second day after the yen weakened against the dollar for a record 13 straight days. Automakers were the biggest boost to the Topix, which climbed 1%. Financials advanced as yields gained. Fast Retailing and SoftBank Group were the largest contributors to a 0.9% gain in the Nikkei 225. The yen strengthened slightly after shedding nearly 6% against the dollar since the start of the month. “It looks like the cheap yen may continue for a longer period than originally expected,” said Bloomberg Intelligence auto analyst Tatsuo Yoshida. “The weaker yen is good for all Japaneseautomakers, “no one loses,” he added. Indian equities snapped their five-day drop as energy companies advanced on expectations of blockbuster earnings, driven by wider refining margins. Software exporters Infosys, Tata Consultancy and lender HDFC Bank bounced back from a slump, triggered by weaker results.  The S&P BSE Sensex gained 1% to 57,037.50 in Mumbai, while the NSE Nifty 50 Index rose 1.1%. The two gauges posted their biggest surge since April 4. Thirteen of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of automobile companies. “A series of sharp negative reactions to minor misses in earnings from large caps points to a precarious state of positioning among investors,” according to S. Hariharan, head of sales trading at Emkay Global Financial. He expects corporate commentary on the margin outlook for FY23 to be key to investors’ reaction to other quarterly results, which will be released over the next couple of weeks. The benchmark Sensex lost about 5% in the five sessions through Tuesday, dragged lower by a selloff in software makers, a slump in HDFC Bank and its parent Housing Development Finance Corp. Foreign investors, who have been net sellers of Indian stocks since the start of October, have withdrawn $1.7 billion from local equities this month through April 18. The IMF slashed its world growth forecast by the most since the early months of the Covid-19 pandemic and projected even faster inflation. It expects India’s economy to grow by 8.2% in fiscal 2023 compared with an earlier estimate of 9%. Reliance Industries contributed the most to the Sensex’s gain, increasing 3%. Out of 30 shares in the Sensex index, 20 rose, while 10 fell. In FX, the Bloomberg Dollar Spot Index fell 0.4%, its first drop in four days, after yesterday reaching its highest level since July 2020, as the greenback weakened against all Group-of-10 peers. Scandinavian and Antipodean currencies led gains followed by the yen, which halted a 13-day rout. The euro advanced a second day and bunds extended gains, underperforming euro-area peers as money markets pared ECB tightening wagers. The yen snapped a historic declining streak amid short covering after the currency approached a key level of 130 per dollar. The Bank of Japan stepped in to cap 10-year yields for the first time since late March as it reiterated its ultra loose monetary policy with four days of unscheduled bond buying. The Australian and New Zealand dollars gained as risk sentiment improved after a selloff in Treasuries paused. The Aussie was supported by offshore funds buying into contracting yield spreads with the U.S. and on demand from exporters for hedging at the week’s low, according to FX traders. The pound edged higher against a broadly weaker dollar, but lagged behind the rest of its Group-of-10 peers, with focus on the risks to the U.K. economy. In rates, Treasuries advanced, reversing a portion of Tuesday’s sharp selloff which pushed the 10Y as high as 2.98%, with gains led by belly of the curve amid bull-flattening in core Focal points of U.S. session include Fed speakers and $16b 20-year bond reopening. US yields were richer by ~7bp across belly of the curve, 10-year yields around 2.87% keeping pace with gilts while outperforming bunds, Fed-dated OIS contracts price in around 222bp of rate hikes for the December FOMC meeting vs 213bp priced at Monday’s close; 49bp of hikes remain priced in for the May policy meeting. Japan 10-year yields held at 0.25%, the top of Bank of Japan’s trading band as the central bank resumes massive intervention. Australian and New Zealand bonds post back-to-back declines. Coupon issuance resumes with $16b 20-year bond sale at 1pm New York time; WI yield at around 3.10% sits ~45bp cheaper than March result, which stopped 1.4bp through.  IG dollar issuance slate includes Development Bank of Japan 5Y SOFR, Canada 3Y and ADB 3Y/10Y SOFR; six deals priced almost $19b Tuesday, headlined by financials including JPMorgan and Bank. In commodities, crude futures advance. WTI trades within Tuesday’s range, adding 1.1% to around $103. Brent rises 0.9% to around $108. Most base metals trade in the red; LME lead falls 1.6%, underperforming peers. Spot gold falls roughly $4 to trade near $1,946/oz. Looking at the day ahead now, and data releases include German PPI for March, Euro Area industrial production for February, US existing home sales for march, and Canadian CPI for March. From central banks, we’ll hear from the Fed’s Bostic, Evans and Daly, as well as the ECB’s Rehn and Nagel, whilst the Federal Reserve will be releasing their Beige Book. Earnings releases include Tesla, Procter & Gamble, and Abbott Laboratories. Finally, French President Macron and Marine Le Pen will debate tonight ahead of Sunday’s presidential election. Market Snapshot S&P 500 futures down 0.4% to 4,443.50 STOXX Europe 600 up 0.4% to 458.21 MXAP up 0.5% to 171.88 MXAPJ up 0.2% to 570.00 Nikkei up 0.9% to 27,217.85 Topix up 1.0% to 1,915.15 Hang Seng Index down 0.4% to 20,944.67 Shanghai Composite down 1.3% to 3,151.05 Sensex up 0.9% to 56,945.14 Australia S&P/ASX 200 little changed at 7,569.23 Kospi little changed at 2,718.69 German 10Y yield little changed at 0.88% Euro up 0.3% to $1.0823 Brent Futures up 1.0% to $108.27/bbl Brent Futures up 1.0% to $108.27/bbl Gold spot down 0.3% to $1,943.30 U.S. Dollar Index down 0.28% to 100.67 Top Overnight News from Bloomberg On the surface the yen looks like the perfect well for carry traders to dip into, under pressure from a Bank of Japan determined to keep local yields anchored to the floor even as interest rates around the world push higher. But despite consensus building for further losses -- peers look like better funding options on certain key metrics Almost eight weeks after Vladimir Putin sent troops into Ukraine, with military losses mounting and Russia facing unprecedented international isolation, a small but growing number of senior Kremlin insiders are quietly questioning his decision to go to war French President Emmanuel Macron and nationalist leader Marine le Pen are gearing up for their only live TV debate on Wednesday evening, a high-stakes event just days before the final ballot of the presidential election this weekend China will continue strengthening strategic ties with Russia, a senior diplomat said, showing the relationship remains solid despite growing concerns over war crimes in Vladimir Putin’s war in Ukraine A more detailed look at global markets courtesy of Newsquawk APAC stocks eventually traded mostly positive after the firm handover from the US despite continued upside in yields. ASX 200 was led by the healthcare sector as shares in Ramsay Health Care surged due to a takeover proposal from a KKR-led consortium, but with gains capped by miners after Rio Tinto's lower quarterly iron ore production and shipments. Nikkei 225 was underpinned by the initial currency depreciation and with the BoJ defending its yield cap. Hang Seng and Shanghai Comp were mixed with the mainland subdued after the PBoC defied expectations for a cut to its benchmark lending rates and instead maintained the 1yr and 5yr Loan Prime Rates at 3.70% and 4.60%, respectively. Top Asian News Fed’s Aggressive Rate Hike Plans Jolt Policy in China and Japan BOJ Further Boosts Bond Buying as Yields Advance to Policy Limit Sunac Bondholders Say They Haven’t Received Interest Due Tuesday Regulators Under Pressure to Ease Loan Curbs: Evergrande Update China Buys Cheap Russian Coal as World Shuns Moscow European bourses and US futures were choppy at the commencement of the European session, but, have since derived impetus in relatively quiet newsflow amid multiple earnings and as yields continue to ease; ES Unch. Currently, Euro Stoxx 50 +1.8%, while US futures are little changed on the session but rapidly approaching positive territory ahead of key earnings incl. TSLA. Netflix Inc (NFLX) - Q1 2022 (USD): EPS 3.53 (exp. 2.89), Revenue 7.87bln (exp. 7.93bln), Net Subscriber Additions: -0.2mln (exp. +2.5mln). Q1 UCAN streaming paid net change -640k (exp.+87.5k). Co. lost 640k subscribers in US/Canada, 300k in EMEA, and 350k in LatAm. Co. Said macro factors, including sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from COVID are likely having an impact, via PR Newswire. Click here for the full breakdown. -26% in the pre-market. Chinese Civil Aviation publishes prelim report looking into the China Eastern Airline crash; still recovering and analysing damaged black boxes from the plane: there was no abnormal communication between air crew and air controllers before the aircraft deviated from cruising altitude; no dangerous weather, goods or overdue maintenance. Top European News Le Pen Upset Would Be as Big a Shock to Markets as Brexit Macron and Le Pen Set for High Stakes French Debate Riksbank Governor Leaves Door Open for String of Rate Hikes Danone Gains on Lactalis Takeover Speculation, Evian Rebound Heineken Rises; MS Says Results Were Widely Expected FX: Buck concedes ground to recovering Yen as US Treasury yields recede, USD/JPY over 150 pips below new 20 year high circa 129.42. Yuan on the rocks after PBoC set a soft onshore reference rate and regardless of unchanged LPRs, USD/CNH eyes 6.4500 after breach of 200 DMA. Aussie back in pole position as high betas benefit from Greenback retreat and Kiwi in second spot ahead of NZ CPI data; AUD/USD rebounds through 0.7400 and NZD/USD from under 0.6750. Loonie also bouncing before Canadian inflation metrics, with Usd/Cad closer to 1.2550 than 1.2625, while Euro and Pound are both firmer on 1.0800 and 1.3000 handles respectively as DXY dips below 100.500. Rand shrugs aside mixed SA CPI prints as correction from bull run continues and Gold slips under Usd 1950/oz, USD/ZAR holds above 15.0000. ECB's Kazaks says a rate hike is possible as soon as July this year; ending APP early in Q3 is possible and appropriate; zero is not an a cap for the deposit rate, via Bloomberg. Adds, a gradual approach does not mean a slow approach, do not need to wait for stronger wage growth. Fixed Income: Debt redemption, as futures retrace following tests/probes of cycle lows. Lack of concession not really evident at longer-dated German and UK bond sales, but 20 year US supply may be a separate issue. BoJ ramps up intervention and aims to anchor rather than cap 10 year JGB yield around zero percent, while BoA suggests contra-trend position in 10 year UST to target 2.25% from current levels close to 3.0%. Commodities: Crude benchmarks are firmer on the session in what is more of a consolidation from yesterday's pressured settlement than a concerted effort to move higher, also benefitting from broader equity action. Currently, WTI and Brent reside at the top-end of USD 2/bbl parameters; focus very much on China-COVID, Iran, Libyan supply and Ukraine-Russia developments. US Private Energy Inventory Data (bbls): Crude -4.5mln (exp. +2.5mln), Cushing +0.1mln, Gasoline +2.9mln (exp. -1.0mln), Distillate -1.7mln (exp. -0.8mln). Spot gold/silver are contained at present but have seen bouts of modest pressure, including the loss of the USD 1946.45/oz 21-DMA at worst. US Event Calendar 07:00: April MBA Mortgage Applications, prior -1.3% 10:00: March Existing Home Sales MoM, est. -4.1%, prior -7.2% 10:00: March Home Resales with Condos, est. 5.77m, prior 6.02m 14:00: U.S. Federal Reserve Releases Beige Book Central Bank Speakers 11:25: Fed’s Daly Discusses the Outlook 11:30: Fed’s Evans Discusses the Economic and Policy Outlook 13:00: Fed’s Bostic Discusses Equity in Urban Development DB's Jim Reid concludes the overnight wrap It took me a while to adjust to being back to the office yesterday after two and a half weeks off. No screaming kids, no stealing half their food as I made their meals, and no stepping on endless lego and screaming myself. My team at work are much better behaved, protect their food, and clear up after playing with their toys. Talking of lego, the first day of the holiday was spent in a snow blizzard at LEGOLAND and the last day in shorts and t-shirt on a family bike ride on the Thames. No I haven't been off for that long just a typical April in the UK. When I left you, I was in constant agony due to sciatica in my back and a knee that was very fragile post surgery. On my last day I had a back injection that I wasn't that hopeful about as three previous ones hadn't done anything. However after a second opinion and a new consultant, this injection hit the spot and my sciatica has completely gone and I'm just back to the long-standing normal wear and tear related back stiffness. The consultant can't tell me how long it'll last so Reformer Pilates starts next week. My knee is slowly getting better via some overuse flare ups. So until the next time, I'm in as good a shape as I have been for quite some time! It's hard to guage how good a shape the market is in at the moment as there are lots of conflicting forces. Since I've been off global yields have exploded higher, the US yield curve has resteepened notably and risk is a bit softer. As regular readers know I think a late 2023/early 2024 US recession is likely in this first proper boom and bust cycle for over 40 years. However we're still in some kind of boom phase and I've been trying not to get too bearish too early. While I was off, I published our latest credit spread forecasts and having met our earlier year widening targets, we've moved more neutral for the rest of the year. However into year end 2023, we now have a very big widening of spreads in the forecasts to reflect the likely recession. See the report here. Also while I've been off, the House View is now also that we'll get a US recession at a similar point which as far as I can see is the first Wall Street bank to officially predict this. See the World Outlook here for more. On the steepening I don't have a strong view but ultimately I think 2 year yields will probably have to rise again at some point after a recent pause as the risks are skewed to the Fed having to move faster than the market expects. The long end is complicated by QT but generally I suspect the curve will be fairly flat or inverted for most of the next few months. Coming back after my holidays and the long Easter weekend, the bond market sell-off resumed yesterday with yields climbing to fresh highs. In fact, the losses for Treasuries so far in April now stand at -2.95% on a total return basis, just outperforming the -3.04% decline in March that itself was the worst monthly performance since January 2009, back when the US economy started emerging from the worst phase of the GFC. Elsewhere the US yield curve flattened for the first time in six sessions, with 2yr yields climbing +14.4bps to 2.59%, their highest level since early 2019. Yields on 10yr Treasuries rose +8.3bps to 2.94%, a level unseen since late 2018, on another day marked by heightened rates volatility. Meanwhile 30yr yields breached 3.00% intraday for the first time since early 2019, climbing +5.4bps. And what was also noticeable was the continued rise in real yields, with the 10yr real yield closing at -0.009% yesterday, and briefly trading in positive territory for the first time since March 2020 in early trading this morning. Bear in mind that the 10yr real yield has surged roughly 110bps in around 6 weeks, and since we’ve been able to calculate real yields using TIPS, the only faster moves over such a short time period have been during the GFC and a remarkable 2-week period in March 2020 around the initial Covid-19 wave. On the other hand, as I pointed out in my CoTD yesterday (link here), the 10yr real yield based on spot inflation is currently around -5.6%, so still incredibly negative. The latest moves come ahead of the Fed’s next decision two weeks from now, where futures are placing the odds of a 50bp hike at over 100% now. We’ve been talking about 50bps for some time, and we’d probably have had one last month had it not been for Russia’s invasion of Ukraine, but it would still be a historic moment if it happens, since the last 50bp hike was all the way back in 2000. Nevertheless, we could be about to see a whole run of them, with our economists pencilling in 50bp hikes at the next 3 meetings, whilst St Louis Fed President Bullard (the only dissenting vote at the last meeting who wanted 50bps) said on Monday night that he wouldn’t even rule out a 75bps hike, which probably gave some fuel to the subsequent front end selloff. The bond selloff also took hold in Europe yesterday, where yields on 10yr bunds (+6.9ps), 10yr OATs (+5.0bps) and BTPs (+6.2bps) all hit fresh multi-year highs. Indeed, those on 10yr bunds (0.91%) were at their highest level since 2015, having staged an astonishing turnaround since they closed in negative territory as recently as March 7. Rising inflation expectations have been a driving theme behind this, and yesterday we saw the 5y5y forward inflation swap for the Euro Area close above 2.4%, which is the first time that’s happened in almost a decade, and just shows how investor confidence in the idea of “transitory” inflation is becoming increasingly subdued given that metric is looking at the 5-10 year horizon. Those moves higher in inflation expectations came in spite of the fact that European natural gas prices fell to their lowest level since Russia’s invasion of Ukraine began yesterday. By the close, they’d fallen -1.94% to €93.77/MWh, whilst Brent crude oil prices were down -5.22% to $107.25/bbl. In Asia, oil prices are a touch higher, with Brent futures +0.82% higher as we go to press. Whilst bonds sold off significantly on both sides of the Atlantic, equities put in a much more divergent performance, with the US seeing significant advances just as Europe sold off. By the close of trade, the S&P 500 (+1.61%) had posted its best day in more than a month, as part of a broad-based advance that left 446 companies in the index higher on the day, the most gainers in a month. Tech stocks outperformed in spite of the rise in yields, with the NASDAQ (+2.15%) and the FANG+ index (+1.81%) posting solid advances, and the small-cap Russell 2000 (+2.04%) also outperformed. In Europe however, the STOXX 600 shed -0.77%, with others including the DAX (-0.07%), the CAC 40 (-0.83%) and the FTSE 100 (-0.20%) also losing ground. The S&P was higher despite a day of mixed earnings. Of the ten companies reporting during trading yesterday, only 4 beat both sales and earnings expectations. After hours, Netflix was the main story, losing subscribers for the first quarter in over a decade and forecasting further declines this quarter, which sent the stock as much as -24% lower in after hours trading. It’s 2 bad earnings releases in a row for the world’s largest streaming service, who saw their stock dip -21.79% the day after their fourth quarter earnings in January. Asian equity markets are mixed this morning as the People’s Bank of China (PBOC) defied market expectations by keeping its benchmark lending rates steady. In mainland China, the Shanghai Composite (-0.21%) and the CSI (-0.43%) are lagging on the news. Bucking the trend is the Nikkei (+0.57%) and the Hang Seng (+0.66%). Outside of Asia, stock futures are indicating a negative start in the US with contracts on the S&P 500 (-0.35%) and Nasdaq (-0.75%) both trading in the red partly due to the Netflix earnings miss. Separately, the Bank of Japan (BOJ) reiterated its commitment to purchase an unlimited amount of 10-yr Japanese Government Bonds (JGBs) at 0.25% to contain yields, underscoring its desire for ultra-loose monetary settings, in contrast to the global move in a more hawkish direction. The yen has moved slightly higher (+0.3%) after depreciating for 13 straight days, a streak which hasn’t been matched since the US left the gold standard in the early 70s and effectively brought the global free floating exchange rate regime into being. The pace and magnitude of the depreciation has brought some expressions of consternation from Japanese officials, but no official intervention. The reality is, it would be extraordinarily difficult to credibly support the currency at the same time as maintaining strict control of the yield curve. 10yr JGBs continue to trade just beneath the important 0.25% level. Over in France, we’re now just 4 days away from the French presidential election run-off on Sunday, and tonight will see President Macron face off against Marine Le Pen in a live TV debate. Whilst that will be an important moment, recent days have seen a slight widening in Macron’s poll lead that has also coincided with signs of an easing in market stress, with the spread of French 10yr yields over bunds coming down to its lowest level since the start of the month yesterday, at 46.7bps. In terms of yesterday’s polls, Macron was ahead of Le Pen by 56-44 (Opinionway), 56.5-43.5 (Ipsos), and 55-54 (Ifop), putting his lead beyond the margin of error in all of them. Elsewhere, the IMF released their latest World Economic Outlook yesterday, in which they downgraded their estimates for global growth in light of Russia’s invasion of Ukraine. They now see global growth in both 2022 and 2023 at +3.6%, down from estimates in January of +4.4% in 2022 and +3.8% in 2023. Unsurprisingly it was Russia that saw the biggest downgrades, but they were broadly shared across the advanced and emerging market economies, whilst inflation was revised up at the same time. Otherwise on the data side, US housing starts grew at an annualised rate of 1.793m in March (vs. 1.74m expected), which is their highest level since 2006. Building permits also rose to an annualised rate of 1.873m (vs. 1.82m expected), albeit this was still beneath its post-GFC high reached in January. To the day ahead now, and data releases include German PPI for March, Euro Area industrial production for February, US existing home sales for march, and Canadian CPI for March. From central banks, we’ll hear from the Fed’s Bostic, Evans and Daly, as well as the ECB’s Rehn and Nagel, whilst the Federal Reserve will be releasing their Beige Book. Earnings releases include Tesla, Procter & Gamble, and Abbott Laboratories. Finally, French President Macron and Marine Le Pen will debate tonight ahead of Sunday’s presidential election. Tyler Durden Wed, 04/20/2022 - 08:02.....»»

Category: blogSource: zerohedgeApr 20th, 2022

Hooker Furnishings Reports Sales & Earnings for 2022 Fiscal Year

MARTINSVILLE, Va., April 13, 2022 (GLOBE NEWSWIRE) -- Hooker Furnishings Corporation (NASDAQ-GS: HOFT) today reported consolidated net sales of $593.6 million for its 2022 fiscal year ended January 30, 2022, a $53.5 million, or 9.9%, increase compared to a year ago. The revenue gain was driven by sales increases of over 20% in both the Hooker Branded and Domestic Upholstery segments compared to the prior year, partially offset by a 1.2% sales decrease in the Home Meridian segment ("HMI"). Consolidated net income for the fiscal year was $11.7 million, or $0.97 per diluted share, as compared to a net loss of $10.4 million or ($0.88) per diluted share in the prior year period. Consolidated operating income for the current year was $14.8 million compared to a $14.4 million operating loss in the prior year period. The prior year operating loss was driven by a $44.3 million ($33.7 million net of tax) non-cash intangible assets impairment charge. "We successfully mitigated a multitude of macroeconomic challenges for much of the year on the Hooker legacy side of the business and for the first half at Home Meridian. We were able to grow sales, remain profitable and undertake transformative strategic initiatives for the long-term expansion of the business," said Jeremy Hoff, chief executive officer. "Particularly during the first half of the year, when all segments achieved double-digit sales increases, we were able to better meet historical levels of demand with the right products and inventory readiness," he added. "HMI was more quickly and severely impacted by rising freight costs, reduced vessel space and the Covid-related factory shutdowns which began in August," Hoff concluded. Macroeconomic challenges the Company faced in fiscal 2022 included soaring ocean freight costs and shipping bottlenecks throughout the year, material and component parts inflation, and staffing and foam shortages. "Over the course of the last 18 months, transportation costs have roughly tripled, substantially increasing our cost of imported goods sold," Hoff said. "We were able to mitigate many of these dynamics until late summer, when the unexpected COVID-related shutdown of our Asian factories began and continued through most of the rest of the fiscal year," Hoff said. "While incoming orders and backlogs remained historically high, this loss of production capacity substantially reduced our supply of imported products, which impacted Home Meridian immediately and even began to cause out of stock issues and low inventory receipts at Hooker Branded in the 4th quarter, despite that segment's US warehousing model," he said. As a result, the Company reported a 13.2% consolidated sales decrease in the fourth quarter that began on November 1, 2021 and ended January 30, 2022. Fourth quarter consolidated sales were $134.8 million, with the decline driven by a 23.7%, or $18.9 million, revenue decrease at HMI and an 11.8%, or $5.8 million, sales decline at Hooker Branded. These lower sales were slightly offset by a $3.2 million or 13.5%, increase in Domestic Upholstery sales during the fourth quarter. Over the last few months, our Asian suppliers have begun to ramp up production again and are "currently operating at around 85% to 90% capacity and improving weekly," Hoff said, adding that "While we anticipate that production of imported goods will reach 100% capacity sometime during the first quarter of fiscal 2023, as we forecasted last quarter, we won't feel the full impact of higher production until the second quarter." Also in the 2022 fourth quarter, the Company reported a consolidated operating loss of $5.3 million, compared to $10.5 million of operating income in the prior year period. Net loss for the fourth quarter of fiscal 2022 was $4.0 million, or ($0.33) per diluted share, as compared to a net income of $8.5 million, or $0.71 per diluted share, in the fourth quarter of fiscal 2021. Driven by a $12.0 million operating loss at HMI, contributing factors in the Company's fourth quarter consolidated net loss included inventory unavailability due to the Asian factory shutdowns, high freight costs, a decline in ecommerce and hospitality furniture sales and the Company's planned exit from unprofitable businesses and channels. "Chargebacks from the Clubs channel that we are exiting and one-time order cancellation costs as we wind down our ready-to-assemble (RTA) furniture business at HMI had a combined cost of over $5 million," Hoff said. Segment Reporting: Hooker Branded For the 2022 fiscal year, net sales increased by $38.3 million, or 23.5%, at Hooker Branded, compared to the prior fiscal year. The revenue gains are attributed to a stronger product portfolio, effective supply chain and logistics management and robust consumer demand. "Hooker Branded managed well through some turbulent economic conditions, achieving double-digit sales gains and increased profitability for the year, despite losing sales momentum in the fourth quarter when inventory outages caused by the Asian factory shutdowns caught up with us," Hoff said. By the end of fiscal 2022, the majority of shipments in the Hooker Branded segment carried price increases implemented in July 2021 to mitigate higher ocean freight and product costs we had experienced to that point. However, sales volume declined in the fourth quarter due to reduced inventory availability, resulting in lower operating income compared to the fiscal 2021 fourth quarter. Incoming orders increased by 24.2% compared to the prior year period when business dramatically rebounded from the initial Covid crisis. Backlog remained historically high and nearly doubled as compared to the prior year end when backlog was already at a high level, with part of that increase being due to lower shipments in the fourth quarter. Segment Reporting: Home Meridian The Home Meridian segment's net sales decreased by 1.2% compared to the prior year period due to decreased unit volume as the result of COVID-related factory shutdowns in Vietnam and Malaysia, which led to lower shipments. For the fiscal 2022 fourth quarter, the HMI segment's sales decreased by $18.9 million or 23.7% as compared to the prior year fourth quarter. Sales increases in the first and second quarters of fiscal 2022 at HMI were offset by the sales volume loss during the second half of the year. Driven by higher freight costs, exit costs from the RTA furniture category, and significant chargebacks from the Clubs distribution channel, HMI reported a $21.3 million operating loss for the year. Higher freight costs adversely impacted gross margin by approximately 530 bps in fiscal 2022 and were the primary driver of increased product costs. Current and expected future freight costs, which will have an adverse effect on potential profit margins caused us to rethink our entry into the RTA furniture category. Consequently, HMI exited the RTA furniture category and incurred one-time order cancellation costs of $2.6 million in fiscal 2022. In addition, due to continued poor profitability and excess chargebacks of $2.9 million, HMI made the decision to exit the Clubs channel and incurred one-time order cancellation costs of $900,000. Although these actions adversely affected our earnings and partially resulted in an operating loss, "We believe these actions allow us to focus on more profitable businesses and stable channels to drive long-term growth," Hoff said. "We're now positioning our working capital and resources on solid businesses like Pulaski, Samuel Lawrence, ACH and PRI with a goal to be in stock in our new 800,000-square-foot Georgia warehouse to service growing channels such as brick and mortar retailers, the interior design trade and ecommerce, while still growing our major partners," Hoff said. Segment Reporting: Domestic Upholstery The Domestic Upholstery segment's net sales increased by $18.6 million, or 22.2%, in fiscal 2022 due to double-digit sales increases at all three divisions of the segment. For the fiscal 2022 fourth quarter, Domestic Upholstery net sales increased by $3.2 million or 13.5%. Domestic Upholstery achieved a year-over-year sales increase during every quarter of the 2022 fiscal year. However, gross margin decreased as compared to the prior year and pre-pandemic levels as this segment faced manufacturing constraints which adversely impacted profitability, including foam shortages early in the year, higher raw material and freight costs, and labor shortages and inefficiencies. The segment reported operating income of $4.3 million, or a 4.2% operating margin, as compared to a $12.4 million operating loss in the prior year, which was attributable to $16.4 million non-cash intangible assets impairment charge. Incoming orders increased by 38%, and this segment finished the year with an order backlog 122% higher than the prior year, when backlog levels were already at a historical high. Our manufacturing capacity is increasing weekly, which will help us address this higher backlog. Segment Reporting: All Other All Other net sales increased by $197,000 or 1.7% as compared to the prior fiscal year, due principally to a sales increase at Lifestyle Brands, a business started in fiscal 2019 targeted at the interior design channel. Although this business is still small, net sales to the growing interior designer channel increased nearly 80% compared to the prior fiscal year. For the fiscal 2022 fourth quarter, All Other net sales increased by $1 million or 46.1% as H Contract net sales increased by 44.2%, which offset the sales decreases in the first three quarters. H Contract's incoming orders increased by 27% in fiscal 2022 and finished the year with backlog 126% higher than prior year end. Cash, Debt and Inventory "While inventories are still not at optimum levels due to service demand and backlogs, we have significant inventory in transit and expect our inventory levels to improve incrementally during the first quarter of fiscal 2023 and dramatically in the second quarter," Hoff said. Cash and cash equivalents stood at $69.4 million at fiscal 2022 year-end, an increase of $3.5 million compared to the balance at the fiscal 2021 year-end due primarily to collection of accounts receivable. During fiscal 2022, the Company used a portion of the $19.2 million generated from operations and $372,000 in life insurance proceeds to pay $8.8 million in cash dividends to our shareholders, and $6.7 million in capital expenditures, primarily on our newly opened Georgia distribution center and enhancements of other facilities and systems. Outlook "Incoming orders and backlogs continue to be strong in most divisions," said Hoff. "We are concerned about ongoing global logistics constraints and economic headwinds affecting the consumer that could impact short-term demand, such as inflation, high gas prices and the war in Ukraine. As we mentioned earlier, we expect production capacity of our Asian suppliers to improve significantly, reaching 100% capacity at some point during the first quarter, although the full financial impact of this improvement in inventory readiness won't be felt until the second quarter. We remain optimistic that long-term trends will continue to benefit us, such as demand for housing, the renewed and sustainable focus on home interiors and exteriors, and the Millennial generation entering their prime earning and household formation years. We were also very encouraged by the recently concluded Spring High Point market. Attendance was up significantly compared to both the Fall 2021 and June 2021 markets, more in line with pre-pandemic levels. New products were very well received with major placements across all brands, including new placements of Home Meridian's licensed products.  While we have worked through a broad spectrum of challenges during the past year, our team has continued to focus on multiple strategic growth initiatives, many of which we expect will positively impact us in the next 6 to 12 months," Hoff said. "One such initiative is the integration of Sunset West, a leading manufacturer of outdoor furniture, which we acquired on February 1st of this year. The acquisition immediately positioned Hooker in the growing outdoor furniture segment of the industry with one of the most respected brands in the category and gives Sunset West access to our East Coast distribution system, our High Point showroom and retail and interior design customer base. We were pleased with the strong reception Sunset West received at its recent High Point market debut. As we integrate Sunset West and move past the current headwinds, we expect faster growth from Sunset West than our existing businesses as it is able to leverage the full capabilities of our organization," Hoff concluded. Conference Call Details Hooker Furnishings will present its fiscal 2022 fourth quarter and year-end financial results via teleconference and live internet web cast on Wednesday morning, April 13, 2022 at 9:00 AM Eastern Time. The dial-in number for domestic callers is 877.665.2466 and the number for international callers is 678.894.3031. The conference ID number is 5331177. The call will be simultaneously web cast and archived for replay on the Company's web site at www.hookerfurnishings.com in the Investor Relations section. Hooker Furnishings Corporation, in its 98th year of business, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture and fabric-upholstered furniture for the residential, hospitality and contract markets. The Company also domestically manufactures premium residential custom leather and custom fabric-upholstered furniture. It is ranked among the nation's largest publicly traded furniture sources, based on 2020 shipments to U.S. retailers, according to a 2021 survey by a leading trade publication. Major casegoods product categories include home entertainment, home office, accent, dining, and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand. Hooker's residential upholstered seating product lines include Bradington-Young, a specialist in upscale motion and stationary leather furniture, Sam Moore Furniture, a specialist in upscale occasional chairs, settees, sofas and sectional seating with an emphasis on cover-to-frame customization, Hooker Upholstery, imported upholstered furniture targeted at the upper-medium price-range and Shenandoah Furniture, an upscale upholstered furniture company specializing in private label sectionals, modulars, sofas, chairs, ottomans, benches, beds and dining chairs in the upper-medium price points for lifestyle specialty retailers. The H Contract product line supplies upholstered seating and casegoods to upscale senior living facilities. The Home Meridian division addresses more moderate price points and channels of distribution not currently served by other Hooker Furnishings divisions or brands. Home Meridian's brands include Accentrics Home, home furnishings centered around an eclectic mix of unique pieces and materials that offer a fresh take on home fashion, Pulaski Furniture, casegoods covering the complete design spectrum in a wide range of bedroom, dining room, accent and display cabinets at medium price points, Samuel Lawrence Furniture, value-conscious offerings in bedroom, dining room, home office and youth furnishings, Prime Resources, value-conscious imported leather upholstered furniture, and Samuel Lawrence Hospitality, a designer and supplier of hotel furnishings. The Sunset West division is a designer and manufacturer of comfortable, stylish and high-quality outdoor furniture. Hooker Furnishings Corporation's corporate offices and upholstery manufacturing facilities are located in Virginia and North Carolina, with showrooms in High Point, N.C., Las Vegas, N.V. and Ho Chi Minh City, Vietnam. The company operates distribution centers in North Carolina, Virginia, Georgia, California, China and Vietnam. Please visit our websites hookerfurnishings.com, hookerfurniture.com, bradington-young.com, sammoore.com, hcontractfurniture.com, homemeridian.com, pulaskifurniture.com, accentricshome.com, slh-co.com and sunsetwestusa.com. Certain statements made in this release, other than those based on historical facts, may be forward-looking statements. Forward-looking statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as "believes," "expects," "projects," "intends," "plans," "may," "will," "should," "would," "could" or "anticipates," or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to: (1) disruptions involving our vendors or the transportation and handling industries, particularly those affecting imported products from Vietnam, China, and Malaysia, including customs issues, labor stoppages, strikes or slowdowns and the availability and cost of shipping containers and cargo ships; (2) the effect and consequences of the coronavirus (COVID-19) pandemic or future pandemics on a wide range of matters including but not limited to U.S. and local economies; our business operations and continuity; the health and productivity of our employees; and the impact on our global supply chain, inflation, the retail environment and our customer base; (3) general economic or business conditions, both domestically and internationally, and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing or (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses; (4) adverse political acts or developments in, or affecting, the international markets from which we import products, including duties or tariffs imposed on those products by foreign governments or the U.S. government, such as the prior U.S. administration's imposition of a 25% tariff on certain goods imported into the United States from China including almost all furniture and furniture components manufactured in China, which is still in effect, with the potential for additional or increased tariffs in the future; (5) risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, ocean freight costs, including the price and availability of shipping containers, vessels and domestic trucking, and warehousing costs and the risk that a disruption in our offshore suppliers could adversely affect our ability to timely fill customer orders; (6) risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of skilled labor, and environmental compliance and remediation costs; (7) the risks related to the recent Sunset West acquisition including integration costs, maintaining Sunset West's existing customer relationships, the loss of key employees from Sunset West, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies across the business which could adversely affect our internal control or information systems and the costs of bringing them into compliance and failure to realize benefits anticipated from the acquisition; (8) changes in U.S. and foreign government regulations and in the political, social and economic climates of the countries from which we source our products; (9) difficulties in forecasting demand for our imported products; (10) risks associated with product defects, including higher than expected costs associated with product quality and safety, and regulatory compliance costs related to the sale of consumer products and costs related to defective or non-compliant products, including product liability claims and costs to recall defective products and the adverse effects of negative media coverage; (11) disruptions and damage (including those due to weather) affecting our Virginia, Georgia, North Carolina or California warehouses, our Virginia or North Carolina administrative facilities, our North Carolina and Las Vegas showrooms or our representative offices or warehouses in Vietnam and China; (12) risks associated with our newly leased warehouse space in Georgia, including risks associated with our move to and occupation of the facility, including information systems, access to warehouse labor and the inability to realize anticipated cost savings; (13) the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers, including the loss of several large customers through business consolidations, failures or other reasons, or the loss of significant sales programs with major customers; (14) our inability to collect amounts owed to us or significant delays in collecting such amounts; (15) the interruption, inadequacy, security breaches or integration failure of our information systems or information technology infrastructure, related service providers or the internet or other related issues including unauthorized disclosures of confidential information or inadequate levels of cyber-insurance or risks not covered by cyber- insurance; (16) the direct and indirect costs and time spent by our associates associated with the implementation of our Enterprise Resource Planning system ("ERP"), including costs resulting from unanticipated disruptions to our business; (17) achieving and managing growth and change, and the risks associated with new business lines, acquisitions, including the selection of suitable acquisition targets, restructurings, strategic alliances and international operations; (18) the impairment of our long-lived assets, which can result in reduced earnings and net worth; (19) capital requirements and costs; (20) risks associated with distribution through third-party retailers, such as non-binding dealership arrangements; (21) the cost and difficulty of marketing and selling our products in foreign markets; (22) changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of our imported products and raw materials; (23) the cyclical nature of the furniture industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers' income available for discretionary purchases, and the availability and terms of consumer credit; (24) price competition in the furniture industry; (25) competition from non-traditional outlets, such as internet and catalog retailers; (26) changes in consumer preferences, including increased demand for lower-quality, lower-priced furniture and (27) other risks and uncertainties described under Part I, Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2021. Any forward-looking statement that we make speaks only as of the date of that statement, and we undertake no obligation, except as required by law, to update any forward-looking statements whether as a result of new information, future events or otherwise and you should not expect us to do so.   Table I HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)                       For the     Thirteen Weeks Ended   Fifty-Two Weeks Ended     Jan 30,   Jan 31,   Jan 30,   Jan 31,       2022       2021       2022       2021                     Net sales   $ 134,805     $ 155,259     $ 593,612     $ 540,081                     Cost of sales     118,409       121,648       491,910       427,333                     Gross profit     16,396       33,611       101,702       112,748                     Selling and administrative expenses     21,132       22,490       84,475       80,410   Goodwill impairment charges     -       -       -       39,568   Trade name impairment charges     -       -       -       4,750   Intangible asset amortization     596       596       2,384       2,384                     Operating (loss)/income     (5,332 )     10,525       14,843       (14,364 )                   Other income, net     213       229       373       336   Interest expense, net     29       107       110       540                     (Loss)/income before income taxes     (5,148 )     10,647       15,106    .....»»

Category: earningsSource: benzingaApr 13th, 2022

Americans aren"t likely to lose their homes if the real estate bubble bursts, 2 economists say

"If buyers can't afford to pay their mortgages, they can sell their homes, pay off their mortgages in full, and avoid foreclosure," one expert said. Collectively, US households have gained about $2.5 trillion in excess savings during the pandemic and more than half of US states recorded their strongest-ever personal income growth in 2021.Getty Images There is a growing imbalance of supply and demand in the real estate market. As home prices soar, many fear a repeat of the 2008 foreclosure crisis. But two economists told Insider it's unlikely. Homeowners have a lot more financial power this time. Housing affordability may be plummeting — but that doesn't mean Americans are likely to lose their homes if the real estate bubble bursts.Home prices have soared to new highs as buyers continue to duke it out for the limited amount of homes available for sale. As the imbalance widens, fears of a second foreclosure crisis, like the one in 2008, have flooded financial markets and the Twitterverse. —Yolanda Taylor (@law4community) April 8, 2022 Odeta Kushi, the chief economist at First American, thinks that's unlikely to happen for two reasons. Both have to do with the fact that homebuyers are in a far better financial position than they were in 2008."First, the housing market is in a much stronger position compared with a decade ago," Kushi told Insider. "Accompanied by more rigorous lending standards, the household debt-to-income ratio is at a four-decade low and household equity near a three-decade high."The debt-to-income ratio is a common measure of financial health that compares the total amount of debt a person owes each month to their income. It is considered in mortgage applications.Despite inflation surging to a 40-year high in February, Americans still have a tremendous amount of wealth. Collectively, households have gained about $2.5 trillion in excess savings during the pandemic and more than half of US states recorded their strongest-ever personal income growth in 2021. With the average mortgage borrower currently owning about $185,000 in tappable home equity —  the amount of money a homeowner can access while retaining at least 20% equity in their homes —  the Covid-19 housing market hardly resembles the housing bubble that gave rise to the 2008 foreclosure crisis. Holden Lewis, an analyst at NerdWallet, told Insider he agrees."When the housing market crashed in 2008 and 2009, it was because many people owed more than their houses were worth," Lewis said. "So when they couldn't afford to make their payments, they lacked the ability to sell their homes, pay off their mortgages, and start over. They ended up in foreclosure instead."That's not going to happen this time, he says. According to Lewis, the real estate market is in a far better position as banks and lenders have raised the standards for acquiring loans. "In 2008, the saying was that if you could fog a mirror, you could get a mortgage," he said. "Lending standards were lax, and borrowers didn't even need to prove that they earned enough money to afford their monthly payments."Lending standards are stricter now than they were in 2008. The US government has since enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act to help prevent some of the predatory lending practices that spurred the subprime mortgage crisis. No-money-down mortgages are almost unheard of and borrowers have to go through larger hoops to qualify for a mortgage.All these factors combined with historically high home prices and robust homebuyer demand means American homeowners are sitting pretty. "If buyers can't afford to pay their mortgages, they can sell their homes, pay off their mortgages in full, and avoid foreclosure," Lewis said. "There will be few foreclosures for the foreseeable future, and that means a housing crash is unlikely."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderApr 8th, 2022

CONAGRA BRANDS REPORTS THIRD QUARTER RESULTS

CHICAGO, April 7, 2022 /PRNewswire/ -- Today Conagra Brands, Inc. (NYSE:CAG) reported results for the third quarter of fiscal year 2022, which ended on February 27, 2022. All comparisons are against the prior-year fiscal period, unless otherwise noted. Certain terms used in this release, including "Organic net sales," "EBITDA," "Two-year compounded annualized," and certain "adjusted" results, are defined under the section entitled "Definitions." See page 6 for more information. Highlights Third quarter net sales increased 5.1%; organic net sales increased 6.0%. On a two-year compounded annualized basis, third quarter net sales increased 6.8% and organic net sales increased 7.8%. Operating margin decreased 387 basis points to 12.3%; adjusted operating margin decreased 230 basis points to 13.7%. Diluted earnings per share (EPS) for the third quarter decreased 22.4% to $0.45, and adjusted EPS decreased 1.7% to $0.58. On a two-year compounded annualized basis, third quarter EPS increased 3.5% and adjusted EPS increased 11.1%. The company is updating its fiscal 2022 guidance, and providing fourth quarter guidance, to reflect expectations for continued top line strength, higher cost of goods sold inflation, and the timing of additional pricing actions. The company's updated fiscal 2022 guidance is as follows: Organic net sales growth is expected to be approximately +4% versus prior guidance of approximately +3% Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 16% versus prior guidance of approximately 14% Adjusted operating margin is expected to be approximately 14.5% versus prior guidance of approximately 15.5% Adjusted EPS is expected to be approximately $2.35, versus prior guidance of approximately $2.50 Pro Forma FY22 adjusted diluted EPS is estimated at approximately $2.65, excluding the impact of the FY22 lag between inflation and in-market pricing The company's Fiscal 2022 fourth quarter guidance is as follows: Organic net sales growth is expected to be approximately +7% Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 16% Adjusted operating margin is expected to be approximately 15.5% Adjusted EPS is expected to be approximately $0.64 CEO PerspectiveSean Connolly, president and chief executive officer of Conagra Brands, commented, "Our business delivered another quarter of strong net sales growth as our brands continued to resonate with consumers. Our focus on strategic innovation and our intentional approach to investment helped us capture share across each of our domains – frozen, snacks, and staples. The team's dedication to executing our Conagra Way playbook has continued to pay dividends in the face of a challenging external landscape." He continued, "We experienced higher-than-expected cost pressures as the third quarter progressed and expect those pressures to continue into the fourth quarter, particularly in certain frozen, refrigerated, and snacks businesses. In response, we have taken steps to implement additional inflation-driven pricing actions. We will begin to see the benefits of these actions in the first quarter of fiscal 2023. Consumer demand has remained strong in the face of our pricing actions to date, but there will continue to be a lag between the timing of the incremental inflation and the benefits of our mitigating actions." Total Company Third Quarter ResultsIn the quarter, net sales increased 5.1% to $2.9 billion. The increase in net sales primarily reflects: a 0.8% net decrease from the divestitures of the Peter Pan peanut butter business and the Egg Beaters business (collectively, the Sold Businesses); a 0.1% decrease from the unfavorable impact of foreign exchange; and a 6.0% increase in organic net sales. The 6.0% increase in organic net sales was driven by a 8.6% improvement in price/mix, which was partially offset by a 2.6% decrease in volume. Price/mix was driven the company's inflation-driven pricing actions that were reflected in the marketplace throughout the quarter and favorable brand mix. The volume decrease was primarily a result of the elasticity impact from inflation-driven pricing actions; however, the elasticity impact was favorable to expectations. Gross profit decreased 8.1% to $697 million in the quarter, and adjusted gross profit decreased 7.9% to $701 million. Third quarter gross profit benefited from higher organic net sales, supply chain realized productivity, lower COVID-19 pandemic-related expenses, and cost synergies associated with the Pinnacle Foods acquisition. These benefits, however, were not enough to offset the impacts of cost of goods sold inflation of 15.4%, the lost profit from the Sold Businesses, and elevated supply chain operating costs. Gross margin decreased 344 basis points to 23.9% in the quarter, and adjusted gross margin decreased 342 basis points to 24.1%. Selling, general, and administrative expense (SG&A), which includes advertising and promotional expense (A&P), increased 9.2% to $338 million in the quarter primarily due to an impairment on businesses held for sale. Adjusted SG&A, which excludes A&P, decreased 3.3% to $237 million driven by decreased incentive and deferred compensation. A&P for the quarter decreased 11.5% to $65 million, driven primarily by reduced broadcast media investments. Net interest expense was $95 million in the quarter. Compared to the prior-year period, net interest expense decreased 6.1% or $6 million, primarily due to a lower weighted average interest rate on outstanding debt. The average diluted share count decreased 1.1% compared to the prior-year period to 482 million shares, driven by the company's share repurchase activity in prior quarters. In the quarter, net income attributable to Conagra Brands decreased 22.4% to $218 million, or $0.45 per diluted share. Adjusted net income attributable to Conagra Brands decreased 3.1% to $279 million, or $0.58 per diluted share, in the quarter. The decreases were driven primarily by the decrease in gross profit. Adjusted EBITDA, which includes equity method investment earnings and pension and postretirement non-service income, decreased 2.4% to $553 million in the quarter, primarily driven by the decrease in adjusted gross profit, partially offset by a strong performance from the company's Ardent Mills joint venture. Grocery & Snacks Segment Third Quarter ResultsNet sales for the Grocery & Snacks segment increased 6.2% to $1.2 billion in the quarter reflecting: a 0.8% decrease from the impact of the Sold Businesses; and a 7.0% increase in organic net sales. On an organic net sales basis, price/mix increased 8.8% and volume decreased 1.8%. Price/mix was primarily driven by favorability in inflation-driven pricing coupled with favorable brand mix. The volume decline was primarily due to the elasticity impact from inflation-driven pricing actions. In the quarter, the company gained share in staples categories such as beans and syrup, and in snacking categories, including popcorn and meat snacks. Operating profit for the segment decreased 20.2% to $232 million in the quarter primarily related to a prior year gain from the divestiture of the Peter Pan business. Adjusted operating profit decreased 2.7% to $238 million, primarily driven by cost of goods inflation, elevated supply chain operating costs, and the lost profit from the Sold Businesses. These negative impacts were partially offset by higher organic net sales, supply chain realized productivity, lower COVID-19 pandemic-related expenses, and cost synergies associated with the Pinnacle Foods acquisition. Refrigerated & Frozen Segment Third Quarter ResultsNet sales for the Refrigerated & Frozen segment increased 2.9% to $1.2 billion in the quarter reflecting: a 1.0% decrease from the impact of the Sold Businesses; and a 3.9% increase in organic net sales. On an organic net sales basis, price mix increased 8.4% and volume decreased 4.5%. The price/mix increase was driven by favorability in inflation-driven pricing and favorable brand mix. The volume decline was primarily due to the elasticity impact from inflation-driven pricing actions coupled with supply constraints. In the quarter, the company gained share in categories such as frozen single serve meals, frozen multi serve meals, and frozen desserts. Operating profit for the segment decreased 26.4% to $158 million in the quarter. Adjusted operating profit decreased 20.6% to $176 million primarily due to cost of goods sold inflation, elevated supply chain operating costs, and the lost profit from the Sold Businesses. These impacts were partially offset by the benefits of supply chain realized productivity, higher organic net sales, lower COVID-19 pandemic-related expenses, and cost synergies associated with the Pinnacle Foods acquisition. International Segment Third Quarter ResultsNet sales for the International segment increased 0.1% to $241 million in the quarter reflecting: a 0.1% decrease from the impact of the Sold Businesses, a 0.8% decrease from the unfavorable impact of foreign exchange; and a 1.0% increase in organic net sales. On an organic net sales basis, price/mix increased 8.0% and volume decreased 7.0%. The price/mix increase was driven by inflation-driven pricing and favorable product mix. Volume decreased primarily due to the elasticity impact from inflation-driven pricing actions.    Operating profit for the segment increased 7.1% to $30 million in the quarter. Adjusted operating profit increased 7.7% to $30 million as the benefits from supply chain realized productivity, higher organic net sales, and favorable foreign exchange more than offset the negative impacts of cost of goods sold inflation. Foodservice Segment Third Quarter ResultsNet sales for the Foodservice segment increased 18.9% to $235 million in the quarter reflecting an 18.9% increase in organic net sales. On an organic net sales basis, volume increased 10.5% as restaurant traffic continued to improve from the impacts of the COVID-19 pandemic, partially offset by the elasticity impact from inflation-driven pricing actions. Price/mix was favorable at 8.4% in the quarter driven by inflation-driven pricing and favorable product mix. Operating profit for the segment decreased 63.9% to $5 million and adjusted operating profit increased 14.8% to $15 million in the quarter as the benefits of higher organic net sales and favorable supply chain realized productivity more than offset the impacts of cost of goods sold inflation and elevated supply chain operating costs. Other Third Quarter ItemsCorporate expenses decreased 32.9% to $65 million in the quarter primarily from lapping incremental expenses related to the extinguishment of debt in the prior year period. Adjusted corporate expense decreased 6.2% to $60 million in the quarter driven by decreased incentive and deferred compensation. Pension and post-retirement non-service income was $16 million in the quarter compared to $14 million of income in the prior-year period. In the quarter, equity method investment earnings were $48 million. The $27 million increase was primarily driven by favorable market conditions for the Ardent Mills joint venture, and the venture's effective management through recent volatility in the wheat markets. In the quarter, the effective tax rate was 33.4% compared to 26.5% in the prior-year period. The adjusted effective tax rate was 24.4% compared to 23.9% in the prior-year period. In the quarter, the company paid a dividend of $0.3125 per share. OutlookThe company is updating its fiscal 2022 guidance, and providing fourth quarter guidance, to reflect expectations for continued top line strength, higher cost of goods sold inflation, and the timing effect of additional pricing actions. The company previously shared its expectations that consumer demand for its retail products would remain elevated versus historical levels throughout fiscal 2022, as consumers have developed new habits during the COVID-19 pandemic. Given the trends to date, including stronger-than-expected consumer demand and lower-than-anticipated elasticities of demand, as well as additional planned pricing actions, organic net sales growth is now expected to be higher than previously anticipated. The company also continues to experience elevated cost of goods sold inflation, the rate of which was higher than expected during the third quarter of fiscal 2022. The company has taken, and plans to continue taking, a variety of actions to counteract the impact of this inflation, including incremental pricing actions and cost savings measures. Due to the nature of the timing lag associated with announcing and implementing incremental pricing actions, the benefits associated with the actions are not expected to fully offset the incremental input cost headwinds within fiscal 2022. The company's updated fiscal 2022 guidance is as follows: Organic net sales growth is expected to be approximately +4% versus prior guidance of approximately +3% Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 16% versus prior guidance of approximately 14% Adjusted operating margin is expected to be approximately 14.5% versus prior guidance of approximately 15.5% Adjusted EPS is expected to be approximately $2.35, versus prior guidance of approximately $2.50 The company's Fiscal 2022 fourth quarter guidance is as follows: Organic net sales growth is expected to be approximately +7% Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 16% Adjusted operating margin is expected to be approximately 15.5% Adjusted EPS is expected to be approximately $0.64 The above guidance is the company's best estimate of its expected financial performance in fiscal 2022. The company's ultimate fiscal 2022 performance will be highly dependent on factors including, without limitation: how consumers purchase food as foodservice establishments continue to reopen and people continue to return to in-office work and in-person school; the cost of goods sold inflation the company experiences; consumers' response to inflation-driven price increases; and the ability of the end-to-end supply chain to continue to operate effectively as the COVID-19 pandemic and world events continue to evolve. The inability to predict the amount and timing of the impacts of foreign exchange, acquisitions, divestitures, and other items impacting comparability makes a detailed reconciliation of forward-looking non-GAAP financial measures impracticable. Please see the end of this release for more information. Items Affecting Comparability of EPSThe following are included in the $0.45 EPS for the third quarter of fiscal 2022 (EPS amounts are rounded and after tax). Please see the reconciliation schedules at the end of this release for additional details. Approximately $0.02 per diluted share of net expense related to restructuring plans Approximately $0.06 per diluted share of net expense related to impairment on businesses held for sale Approximately $0.05 per diluted share of net expense related to unusual tax items The following are included in the $0.58 EPS for the third quarter of fiscal 2021 (EPS amounts are rounded and after tax). Please see the reconciliation schedules at the end of this release for additional details. Approximately $0.02 per diluted share of net expense related to restructuring plans Approximately $0.01 per diluted share of net benefit related to corporate hedging derivative gains Approximately $0.06 per diluted share of net benefit related to the gain on divestiture of a business Approximately $0.04 per diluted share of net expense related to the early extinguishment of debt Approximately $0.01 per diluted share of net expense related to consulting fees on tax matters Approximately $0.01 per diluted share of net expense due to legal matters DefinitionsOrganic net sales excludes, from reported net sales, the impacts of foreign exchange, divested businesses and acquisitions, as well as the impact of any 53rd week. All references to changes in volume and price/mix throughout this release are on an organic net sales basis. References to adjusted items throughout this release refer to measures computed in accordance with GAAP less the impact of items impacting comparability. Items impacting comparability are income or expenses (and related tax impacts) that management believes have had, or are likely to have, a significant impact on the earnings of the applicable business segment or on the total corporation for the period in which the item is recognized, and are not indicative of the company's core operating results. These items thus affect the comparability of underlying results from period to period. References to earnings before interest, taxes, depreciation, and amortization (EBITDA) refer to net income attributable to Conagra Brands before the impacts of discontinued operations, income tax expense (benefit), interest expense, depreciation, and amortization. References to adjusted EBITDA refer to EBITDA before the impacts of items impacting comparability. References to two-year compounded annualized numbers are calculated as: ([(1 + current year period's growth rate) * (1 + prior year period's growth rate)] ^ 0.5) – 1. Please note that certain prior year amounts have been reclassified to conform with current year presentation. Discussion of ResultsConagra Brands will host a webcast and conference call at 9:30 a.m. Eastern time today to discuss the results. The live audio webcast and presentation slides will be available on www.conagrabrands.com/investor-relations under Events & Presentations. The conference call may be accessed by dialing 1-877-883-0383 for participants in the U.S. and 1-412-902-6506 for all other participants and using passcode 6945305. Please dial in 10 to 15 minutes prior to the call start time. Following the Company's remarks, the conference call will include a question-and-answer session with the investment community. A replay of the webcast will be available on www.conagrabrands.com/investor-relations under Events & Presentations until April 7, 2023. About Conagra BrandsConagra Brands, Inc. (NYSE:CAG), headquartered in Chicago, is one of North America's leading branded food companies. Guided by an entrepreneurial spirit, Conagra Brands combines a rich heritage of making great food with a sharpened focus on innovation. The company's portfolio is evolving to satisfy people's changing food preferences. Conagra's iconic brands, such as Birds Eye®, Marie Callender's®, Banquet®, Healthy Choice®, Slim Jim®, Reddi-wip®, and Vlasic®, as well as emerging brands, including Angie's® BOOMCHICKAPOP®, Duke's®, Earth Balance®, Gardein®, and Frontera®, offer choices for every occasion. For more information, visit www.conagrabrands.com. Note on Forward-Looking StatementsThis document contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Readers of this document should understand that these statements are not guarantees of performance or results. Many factors could affect our actual financial results and cause them to vary materially from the expectations contained in the forward-looking statements, including those set forth in this document. These risks, uncertainties, and factors include, among other things: the risk that the cost savings and any other synergies from the acquisition of Pinnacle Foods Inc. (the Pinnacle acquisition) may not be fully realized or may take longer to realize than expected; the risk that the Pinnacle acquisition may not be accretive within the expected timeframe or to the extent anticipated; the risks that the Pinnacle acquisition and related integration will create disruption to the Company and its management and impede the achievement of business plans; risks related to our ability to achieve the intended benefits of other recent acquisitions and divestitures; risks associated with general economic and industry conditions; risks associated with our ability to successfully execute our long-term value creation strategies; risks related to our ability to deleverage on currently anticipated timelines, and to continue to access capital on acceptable terms or at all; risks related to our ability to execute operating and restructuring plans and achieve targeted operating efficiencies from cost-saving initiatives, and to benefit from trade optimization programs; risks related to the effectiveness of our hedging activities and ability to respond to volatility in commodities; risks related to the Company's competitive environment and related market conditions; risks related to our ability to respond to changing consumer preferences and the success of our innovation and marketing investments; risks related to the ultimate impact of any product recalls and litigation, including litigation related to the lead paint and pigment matters, as well as any securities litigation, including securities class action lawsuits; risk associated with actions of governments and regulatory bodies that affect our businesses, including the ultimate impact of new or revised regulations or interpretations; risks related to the impact of the COVID-19 pandemic on our business, suppliers, consumers, customers and employees; risks related to our forecasts of consumer eat-at-home habits as the impacts of the COVID-19 pandemic abate; risks related to the availability and prices of supply chain resources, including raw materials, packaging, and transportation including any negative effects caused by changes in inflation rates, weather conditions, or health pandemics; disruptions or inefficiencies in our supply chain and/or operations, including from the COVID-19 pandemic; risks related to disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine; risks associated with actions by our customers, including changes in distribution and purchasing terms; risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges; risks related to a material failure in or breach of our or our vendors' information technology systems; the amount and timing of future dividends, which remain subject to Board approval and depend on market and other conditions; and other risks described in our reports filed from time to time with the Securities and Exchange Commission. We caution readers not to place undue reliance on any forward-looking statements included in this document, which speak only as of the date of this document. We undertake no responsibility to update these statements, except as required by law. Note on Non-GAAP Financial MeasuresThis document includes certain non-GAAP financial measures, including adjusted EPS, organic net sales, adjusted gross profit, adjusted operating profit, adjusted SG&A, adjusted corporate expenses, adjusted gross margin, adjusted operating margin, adjusted effective tax rate, adjusted net income attributable to Conagra Brands, two-year compounded annualized organic net sales, two-year compounded annualized adjusted EPS, two-year compounded annualized operating profit, net debt, net leverage ratio, and adjusted EBITDA. Management considers GAAP financial measures as well as such non-GAAP financial information in its evaluation of the Company's financial statements and believes these non-GAAP measures provide useful supplemental information to assess the Company's operating performance and financial position. These measures should be viewed in addition to, and not in lieu of, the Company's diluted earnings per share, operating performance and financial measures as calculated in accordance with GAAP. Certain of these non-GAAP measures, such as organic net sales, adjusted operating margin, and adjusted EPS, are forward-looking.  Historically, the Company has excluded the impact of certain items impacting comparability, such as, but not limited to, restructuring expenses, the impact of the extinguishment of debt, the impact of foreign exchange, the impact of acquisitions and divestitures, hedging gains and losses, impairment charges, the impact of legacy legal contingencies, and the impact of unusual tax items, from the non-GAAP financial measures it presents.  Reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures are not provided because the Company is unable to provide such reconciliations without unreasonable effort, due to the uncertainty and inherent difficulty of predicting the occurrence and the financial impact of such items impacting comparability and the periods in which such items may be recognized.  For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results. Hedge gains and losses are generally aggregated, and net amounts are reclassified from unallocated corporate expense to the operating segments when the underlying commodity or foreign currency being hedged is expensed in segment cost of goods sold. The Company identifies these amounts as items that impact comparability within the discussion of unallocated Corporate results.   Conagra Brands, Inc.Consolidated Statements of Earnings(in millions)(unaudited) THIRD QUARTER Thirteen Weeks Ended Thirteen Weeks Ended February 27, 2022 February 28, 2021 Percent Change Net sales $ 2,913.7 $ 2,771.1 5.1 % Costs and expenses:      Cost of goods sold 2,216.5 2,012.7 10.1 %      Selling, general and administrative expenses 338.0 309.7 9.2 %      Pension and postretirement non-service income (16.1) (13.7) 17.0 %      Interest expense, net 94.6 100.6 (6.1) % Income before income taxes and equity methodinvestment earnings 280.7 361.8 (22.4) % Income tax expense 109.9 101.6 8.3 % Equity method investment earnings 48.1 21.5 124.3 % Net income $ 218.9 $ 281.7 (22.3) % Less: Net income attributable to noncontrolling interests 0.5 0.3 54.7 % Net income attributable to Conagra Brands, Inc. $ 218.4 $ 281.4 (22.4) % Earnings per share - basic Net income attributable to Conagra Brands, Inc. $ 0.45 $ 0.58 (22.4) % Weighted average shares outstanding 480.3 485.7 (1.1) % Earnings per share - diluted Net income attributable to Conagra Brands, Inc. $ 0.45 $ 0.58 (22.4) % Weighted average share and share equivalents outstanding 482.2 487.6 (1.1) %   Conagra Brands, Inc.Consolidated Statements of Earnings(in millions)(unaudited) THIRD QUARTER YEAR TO DATE Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended February 27, 2022 February 28, 2021 Percent Change Net sales $ 8,625.9 $ 8,445.2 2.1 %      Costs and expenses:      Cost of goods sold 6,500.5 5,987.7 8.6 %      Selling, general and administrative expenses 993.5 967.7 2.7 %      Pension and postretirement non-service income (48.3) (41.2) 17.0 %      Interest expense, net 283.7 322.0 (11.9) % Income before income taxes and equity methodinvestment earnings 896.5 1,209.0 (25.9) % Income tax expense 263.8 269.0 (1.9) % Equity method investment earnings 97.8 51.0 92.0 % Net income $ 730.5 $ 991.0 (26.3) % Less: Net income attributable to noncontrolling interests 1.2 1.7 (31.8) % Net income attributable to Conagra Brands, Inc. $ 729.3 $ 989.3 (26.3) % Earnings per share - basic Net income attributable to Conagra Brands, Inc. $ 1.52 $ 2.03 (25.1) % Weighted average shares outstanding 480.3 487.4 (1.5) % Earnings per share - diluted Net income attributable to Conagra Brands, Inc. $ 1.51 $ 2.02 (25.2) % Weighted average share and share equivalents outstanding 482.2 489.2 (1.4) %   Conagra Brands, Inc.Consolidated Balance Sheets(in millions)(unaudited) February 27, 2022 May 30, 2021 ASSETS Current assets      Cash and cash equivalents $ 79.7 $ 79.2      Receivables, less allowance for doubtful accounts of $3.4 and $3.2 914.5 793.9      Inventories 1,766.5 1,709.7      Prepaid expenses and other current assets 129.5 95.0      Current assets held for sale 24.4 24.3           Total current assets 2,914.6 2,702.1 Property, plant and equipment, net 2,655.5 2,572.0 Goodwill 11,332.4 11,338.9 Brands, trademarks and other intangibles, net 4,077.6 4,124.6 Other assets 1,487.2 1,344.7 Noncurrent assets held for sale 32.0 113.3 $ 22,499.3 $ 22,195.6 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities      Notes payable $ 362.8 $ 707.4      Current installments of long-term debt 706.3 23.1      Accounts payable 1,593.9 1,655.9      Accrued payroll 142.8 175.2      Other accrued liabilities 717.1 743.0      Current liabilities held for sale 1.7 1.6           Total current liabilities 3,524.6 3,306.2 Senior long-term debt, excluding current installments 8,089.1 8,275.2 Other noncurrent liabilities 2,029.9 1,979.6 Noncurrent liabilities held for sale 2.4 3.2 Total stockholders' equity 8,853.3 8,631.4 $ 22,499.3 $ 22,195.6   Conagra Brands, Inc. and SubsidiariesCondensed Consolidated Statements of Cash Flows(in millions)(unaudited) Thirty-Nine Weeks Ended February 27, 2022 February 28, 2021 Cash flows from operating activities: Net income $ 730.5 $ 991.0      Adjustments to reconcile net income to net cash flows from operating activities:           Depreciation and amortization 285.6 289.6           Asset impairment charges 72.7 4.2           Loss on extinguishment of debt — 68.7           Gain on divestitures — (55.0)           Equity method investment earnings in excess of distributions (59.7) (19.3)           Stock-settled share-based payments expense 26.8 41.1           Contributions to pension plans (8.6) (23.7)           Pension benefit (38.5) (29.2)           Other items (31.6) 12.6           Change in operating assets and liabilities excluding effects of business acquisitions and          dispositions:                Receivables (120.7) 18.5                Inventories (57.0) (206.7)                Deferred income taxes and income taxes payable, net 38.4 15.9                Prepaid expenses and other current assets (34.7) (27.9)                Accounts payable (12.0) (24.1)                Accrued payroll (32.4) (21.4)                Other accrued liabilities 19.3 1.8                Deferred employer payroll taxes (25.5) 33.9           Net cash flows from operating activities 752.6 1,070.0 Cash flows from investing activities:      Additions to property, plant and equipment (364.2) (396.7)      Sale of property, plant and equipment 18.0 1.1      Purchase of marketable securities (2.5) (6.8)      Sale of marketable securities 2.4 8.3      Proceeds from divestitures, net of cash divested 0.1 112.2      Other items 3.3 —           Net cash flows from investing activities (342.9) (281.9) Cash flows from financing activities:      Issuance of short-term borrowings, maturities greater than 90 days 392.6 298.6      Repayment of short-term borrowings, maturities greater than 90 days (392.6) (49.9)      Net (repayment) issuance of other short-term borrowings (344.6) 478.9      Issuance of long-term debt 499.1 988.2      Repayment of long-term debt (43.1) (2,312.1)      Debt issuance costs (2.5) (6.2)      Repurchase of Conagra Brands, Inc. common shares (50.0) (298.1)      Payment of intangible asset financing arrangement (12.6) (12.9)      Cash dividends paid (431.9) (341.7)      Exercise of stock options and issuance of other stock awards, including tax withholdings (14.1) (8.4)      Other items (7.3) —           Net cash flows from financing activities (407.0) (1,263.6) Effect of exchange rate changes on cash and cash equivalents and restricted cash (3.2) 2.9 Net change in cash and cash equivalents and restricted cash (0.5) (472.6) Cash and cash equivalents and restricted cash at beginning of period 80.2 554.3 Cash and cash equivalents and restricted cash at end of period $ 79.7 $ 81.7   Conagra Brands, Inc.Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures(in millions) Q3 FY22 Grocery &Snacks Refrigerated& Frozen International Foodservice Total ConagraBrands Net Sales $ 1,199.0 $ 1,238.6 $ 241.2 $ 234.9 $ 2,913.7 Impact of foreign exchange — — 1.9 — 1.9 Organic Net Sales $ 1,199.0 $ 1,238.6 $ 243.1 $ 234.9 $ 2,915.6 Year-over-year change - Net Sales 6.2 % 2.9 % 0.1 % 18.9 % 5.1 % Impact of foreign exchange (pp) — — 0.8 — 0.1 Net sales from divested businesses (pp) 0.8 1.0 0.1 — 0.8 Organic Net Sales 7.0 % 3.9 % 1.0 % 18.9 % 6.0 % Volume (Organic) (1.8) % (4.5) % (7.0) % 10.5 % (2.6) % Price/Mix 8.8 % 8.4 % 8.0 % 8.4 % 8.6 % Q3 FY21 Grocery &Snacks Refrigerated& Frozen International Foodservice Total ConagraBrands Net Sales $ 1,129.5 $ 1,203.1 $ 240.9 $ 197.6 $ 2,771.1 Net sales from divested businesses (8.8) (11.0) (0.2) (0.1) (20.1) Organic Net Sales $ 1,120.7 $ 1,192.1 $ 240.7 $ 197.5 $ 2,751.0 Q3 FY21 Grocery &Snacks Refrigerated& Frozen International Foodservice Total Conagra Brands Net Sales $ 1,129.5 $ 1,203.1 $ 240.9 $ 197.6 $ 2,771.1 Impact of foreign exchange — — 0.7 — 0.7 Net sales from divested businesses (8.8) — (0.2) (0.1) (9.1) Organic Net Sales $ 1,120.7 $ 1,203.1 $ 241.4 $ 197.5 $ 2,762.7 Year-over-year change - Net Sales 10.9 % 11.7 % 9.0 % (17.3) %.....»»

Category: earningsSource: benzingaApr 7th, 2022

Meet the college basketball player turned US senator who pitched a tax on billionaires like Elon Musk to fund Biden"s economic agenda

Sen. Ron Wyden's optimism is being tested in the 50-50 Senate as he tries to bring Joe Manchin on board. Sen. Ron Wyden is playing a big role trying to revive Biden's economic agenda after a Democratic holdout torpedoed it last year.Ron Wyden; Marianne Ayala/InsiderThe shot-clock is about to hit zero to pass President Joe Biden's economic agenda as the midterm elections draw near. But Sen. Ron Wyden of Oregon says he's far from beaten.Wyden, 72, chairs the Senate Finance Committee, a powerful panel with major sway over tax and health policy. He's spent much of the past year wheeling and dealing on Biden's social- and climate-spending package that's withered in the Senate for over three months.Congress is about to get a closer look at what can happen when an unstoppable force meets an immovable object.The Oregon Democrat is confident he can lock down a holdout standing between the party's failure or victory: Sen. Joe Manchin of West Virginia, the conservative Democrat who sank the legislation at the end of last year. "I talked to him a few minutes ago," he told Insider at the US Capitol on February 1.Not even 2 1/2 minutes had passed (or the full length of Marvin Gaye and Tammi Terrell's "Ain't No Mountain High Enough") before Manchin walked past him and killed the bill all over again."What Build Back Better bill?" Manchin told Insider when asked about the future of Biden's economic agenda. "I don't know what you're all talking about.""It's dead," he said, re-emphasizing his opposition to the House bill as if to double-check it had no pulse. Despite Manchin's dismissal, Wyden accepts he has a crucial but uphill battle to revive the Build Back Better plan in some form. He's near the center of the effort to pull the Democratic agenda from the shredder that Manchin threw it in. The midterms are approaching, and voters will likely judge Democrats on pledges to curb prescription drug costs and provide financial relief for families. But the evenly divided Senate has also tested the limits of Wyden's optimism in a chamber where every Democrat is a president with veto power."Rounding up 50 votes in the Senate is not for the faint-hearted," Wyden told Insider in two wide-ranging interviews. "Legislating is not a spectator sport. You've got to be hands-on."Wyden has played a key role in shepherding several COVID-19 relief packages through Congress over the past two years. Those measures briefly expanded the safety net with direct payments and enhanced unemployment insurance to buoy struggling Americans. It demonstrated that the US can reduce poverty even in the middle of one of the worst economic crises since the Great Depression.Now, Wyden's focus is on reviving a bill without any of the chaos and blown deadlines from last fall. The mercurial Manchin says he's open to cutting a deal, floating a summer deadline to pass legislation without committing to it. But Wyden and other Democrats haven't managed yet to sort through the wreckage of their domestic ambitions to assemble another bill that fits his narrow demands.Some Democrats, particularly progressives, are souring on the odds he'll ever vote for anything. "Another week, another Manchin," Rep. Alexandria Ocasio-Cortez of New York told Insider in early March. "The moment he's actually willing to do something, I'll be listening. But as long as he's talking about doing something, I don't really have much faith."There are signs of a similar pessimism spilling into Democratic leadership. Sen. Dick Durbin of Illinois, the second-ranked Senate Democrat, openly conceded he had effectively thrown in the towel on the social and climate package. He laid the blame on Manchin and Sen. Kyrsten Sinema of Arizona, another holdout.Rounding up 50 votes in the Senate is not for the faint-hearted. Sen. Ron WydenWyden acknowledged the numerous obstacles still separating Democrats from success on the centerpiece of their economic agenda."This is a uniquely challenging political time," Wyden said, noting war in Ukraine and supply-chain breakdowns at home contributing to the highest inflation in four decades. "I've never seen anything coming at us with this kind of velocity."But Wyden seems determined not to call it quits just yet even with time running short."Ron Wyden is one of the biggest optimists I've ever encountered," Josh Kardon, Wyden's former longtime chief of staff, said in an interview. "He wakes up every morning believing that he can make a difference, even when all the evidence around him suggests that's not so. It's really quite extraordinary."Sen. Joe Manchin of West Virginia, left, and Wyden before a 2018 Senate committee hearing.Tom Williams/CQ Roll CallThe brigade to put Build Back Better back on trackSince he sided with the GOP to sink most of Biden's economic agenda, Manchin has dropped hints about his priorities. "Just fix the tax code," he said in February. "We have to basically get our financial house in order," he said another time. For Biden and Democrats in Congress, decoding Manchin is comparable to interpreting hieroglyphs — but without a Rosetta Stone to crack the meaning.He sketched out a smaller bill focused on prescription-drug savings, stepping up taxes on the rich, climate-related spending, and deficit reduction. Yet he's grown skeptical of domestic initiatives he views as social programs like affordable childcare. He told Insider in February that he "wants nothing to do with that."Wyden wants to meet him somewhere in the middle. Almost immediately after the talks went off the rails in December, the Oregon Democrat outlined a possible alternative centered on Obamacare subsidies to reduce the price of health insurance, cutting prescription drug costs, and clean-energy tax credits.There has been occasional speculation that Manchin could switch parties. But Wyden thinks negotiations with the conservative Democrat have been in good faith. "We all get an election certificate to represent the people in our state," he said.He's kept hitting the phones and dialed up fellow Democrats on reviving the party's broader agenda. Sens. Ed Markey of Massachusetts, Patty Murray of Washington, Jeff Merkley of Oregon, Sheldon Whitehouse of Rhode Island, Tom Carper of Delaware, and Sherrod Brown of Ohio are a few members forming a Build Back Better brigade to put the bill back on track, Democratic aides and offices said."My wife in fact said, 'Is there any day when these discussions about these next efforts on health and climate don't take place?'" Wyden said in late February. "I said, 'They're every day.' I've been in several today already. And it's only 5 o'clock, and I got probably two more to go."Sen. Elizabeth Warren, left, and Wyden at the US Capitol.Drew Angerer/Getty ImagesThe Democratic two-step on chasing billionaire wealthAmong Wyden's top responsibilities is designing a litany of new taxes on the richest Americans and large corporations to finance the suite of climate, health, and childcare programs. But he's faced a familiar Democratic two-step on many of his ideas, including one of his biggest hopes: taxing billionaires.Wyden pitched ambitious tax plans through 2021, such as a tax on carbon emissions and ending the step-up loophole.  But fellow Democrats nixed them one-by-one. Then Sinema closed the door on rolling back swaths of the 2017 GOP tax cuts, depriving the party's plans of about $700 billion in new revenue from raising individual and corporate rates.The last-minute scramble for cash led Wyden to dust off what's perhaps his most audacious plan that had been in the works for two years.In the fall, he unveiled a billionaires' income tax to finance a large chunk of the package, targeting about 700 of the richest Americans who tend to park growing fortunes in tradable assets like stocks. The tax would apply to all the gains in value on those investments from the time they were first purchased.The novel plan took a cue from Sen. Elizabeth Warren of Massachusetts, who pushed a wealth tax on the superrich during her 2020 presidential campaign that proved popular with voters.But Wyden's plan didn't get a warm reception among his colleagues: Plenty of Democrats treaded cautiously around the largely untested measure, and a few powerful ones assailed it. Manchin branded it as divisive within hours, and House Speaker Nancy Pelosi privately slammed it as a "public-relations stunt."Wyden also made a rival out of a tech titan. Tesla CEO Elon Musk unleashed vulgar attacks on Wyden and other prominent Democrats as the party debated his billionaire-tax proposal. That measure would have slapped Musk with a $10 billion annual tax bill over the first five years. He brushed off Musk. "I knew a long time ago that people say stuff online that can't exactly go into the old-fashioned community newspaper," Wyden said. "I just do my job. I've got my hands full trying to get stuff done that helps people."Biden recently unveiled a billionaire tax proposal of his own, the first time the White House had drafted a plan specifically aimed at some of the richest people in America. Wyden was on board. But it was dead within 12 hours after Manchin came out against it.To make up some of the lost revenue, Wyden is looking overseas to domestic companies paying little or no taxes if they're headquartered abroad."He's put together a very solid revenue package," Sen. Mark Warner of Virginia, a member of the Senate Finance Committee, told Insider. "If and when we get something through, it'll have a lot of those international components."From left, Democratic Sens. Debbie Stabenow, Wyden, and Chuck Schumer and Commerce Secretary Gina Raimondo attend a press conference about supply-chain issues.Joshua Roberts/Getty Images'He's just situated impossibly'Democrats can go only so far with needle-thin majorities. They don't have a vote to spare in the Senate after their surprise victories in the 2021 Georgia runoffs handed them control of the White House and Congress for the first time in a decade. Democrats control the 50-50 upper chamber with a tie-breaking vote from Vice President Kamala Harris.The party also holds only a three-seat House majority. The near-unanimity needed to pass legislation means they're bound to settle for much less than the original aim to strengthen the American welfare state and invest enormous sums on healthcare, education, clean energy, and tax credits for low-income families."Wyden is trying to deal with the fact that the Senate is composed of 50 Republicans who will always say no," Steve Rosenthal, a senior fellow at the Tax Policy Center, said in an interview. "And can he bring along Sinema, Manchin, and a few other Democrats in a direction that advances the Democratic agenda?" Rosenthal added: "He's just situated impossibly.""Chairman Wyden knows how to reach a deal," said Kardon, now a partner at the lobbying firm Capitol Counsel. "He learned long ago not to allow the perfect be the enemy of the good."The party's first big priority after the 2020 elections was muscling through a $1.9 trillion stimulus law to pump fresh money to Americans, hospitals, and state and local governments. Wyden initially sought to restore the $600-per-week unemployment insurance established early in the pandemic. He calculated the original amount — meant to fully replace a worker's lost wages — on his iPhone in a meeting with then-Treasury Secretary Steven Mnuchin in March 2020.He settled for less, and Democrats nearly lost the whole package due to Manchin's 11th hour demands to cut federal unemployment benefits. "This is the best that can be done for people who are hurting now," Wyden said in an interview at the time."He's cared about this stuff," Sen. Michael Bennet of Colorado, an architect of the expanded child tax credit, said in an interview. "He's done it because he's passionate about trying to make the tax code fair for working people and for families."No Republican in either chamber voted for the package, foreshadowing their unified opposition to the Build Back Better plan. The ongoing partisan warfare has prompted Wyden to grow more circumspect on the big bipartisan compromises he once sought."It's always a heavy lift. It's clearly much harder today," Wyden said. But on restricting prescription-drug costs, there might be a brief window of opportunity. Sen. Chuck Grassley of Iowa, a senior Republican on the Senate Finance panel, told Insider he believed a bipartisan agreement can be struck while Democrats still control Congress. He teamed up with Wyden on a drug bill in 2019. But it didn't go anywhere, partly because Mitch McConnell, then the Senate majority leader, sabotaged his efforts."We know what the situation is in the Congress of the United States when you put Republicans and Democrats together," Grassley said. "Even if Republicans control the Congress next time, there's going to be a lot of new members. I know what we got now, and we ought to move now."From left, Sens. Max Baucus, Mike Crapo, and Wyden speak at the US Capitol in December 2012. Baucus was the last Democrat before Wyden to serve as Senate finance chair.Bill Clark/CQ Roll Call'The value of having a gavel'Congress today couldn't be more different from the one that a lanky, younger Wyden first stepped into. A former college basketball player and the son of a journalist, Wyden was first elected to the House in 1980. He later became the first US senator to win an election conducted entirely by mail in 1996.In the Senate, Wyden carved out a profile as a liberal unafraid to work with Republicans. Over the years, he's partnered with Sen. Lisa Murkowski of Alaska on campaign-finance reform, former Rep. Jason Chaffetz on GPS privacy, and former GOP Sens. Orrin Hatch of Utah and Bob Bennett of Utah on healthcare reform. After President Barack Obama took office in 2009, Democrats saw a once-in-a-generation opportunity to push through healthcare reform.Wyden reintroduced legislation alongside Republicans like Sen. Lindsey Graham of South Carolina to secure universal healthcare for Americans by expanding private insurance. Though the plan gathered dust, its guardrails preventing insurers from denying coverage to people with pre-existing conditions ended up in what became the Affordable Care Act, the law that expanded health coverage to many Americans.Wyden's chief of staff at the time thinks that era formed a valuable learning experience the senator still draws from.Democrats overcame Republican opposition and internal splits to forge the ACA. Sen. Max Baucus of Montana, the last Democratic chair of the Senate Finance Committee before Wyden, tried courting a handful of GOP votes for Obama's healthcare plan only for it to sputter out. Then Wyden fought with Baucus to make the law more ambitious in scope. But Baucus won out, helped get the bill over the finish line and signed into law in March 2010. "I think the senator above all learned the value of having a gavel," Kardon said of Wyden."As chairman, it remains to be seen what can be accomplished in this particular environment in a bipartisan fashion," Kardon said. "But those skills also have lent themselves to his dealings with the more conservative side of his caucus."Wyden takes the stage to speak at the "Time to Deliver" Home Care Workers rally and march on November 16 in Washington, DC.Jemal Countess/Getty Images for SEIUWyden's willpowerThe economy is in far better shape compared to a year ago. In 2021, the economy grew at its fastest rate since the Reagan years, creating a record 6.4 million jobs with wages rising at their fastest pace in years. But inflation is wiping out those pay increases and surveys indicate that Americans are souring on the economy.Democrats face enormous challenges hanging onto their narrow majorities this year — and Wyden is warning of blowback if the party fails to keep its campaign promises. I've never seen anything coming at us with this kind of velocity. Ron Wyden"My point has been, 'Senators, how many times have we promised that we were going to get serious about holding down the cost of medicine?" Wyden said in a Zoom interview, banging his fist on the desk. "How do you keep a straight face when you go home if you're not serious about doing this?" Other Democrats are keenly aware of the high stakes, particularly if they end up losing the House, Senate, or both. "We're not giving up," Sen. Sherrod Brown of Ohio said in a brief interview. "There's too many important things."For now, Wyden is taking a lead role in bipartisan efforts to revoke trade relations with Russia, a step that essentially treats the country as an international pariah. He doesn't intend to sit around like a "potted plant" while Manchin makes up his mind about casting a vote on a smaller climate and energy bill."Every single day, he wakes up, reads about eight newspapers, starts quizzing his staff, and tries to figure out how to move the ball," Kardon said. "That's who the guy is." Read the original article on Business Insider.....»»

Category: dealsSource: nytApr 1st, 2022

Gap Between Job Openings And Unemployed People Grows To 5 Million

The Great Resignation in the U.S. continued in February as 4.5 million workers quit their jobs last month, as reported by the Bureau of Labor Statistics on Tuesday. With the phenomenon still looming, there are 5 million more job openings than unemployed individuals in the country. Quitting Phenomenon Persists As reported by CNBC, the gap […] The Great Resignation in the U.S. continued in February as 4.5 million workers quit their jobs last month, as reported by the Bureau of Labor Statistics on Tuesday. With the phenomenon still looming, there are 5 million more job openings than unemployed individuals in the country. Quitting Phenomenon Persists As reported by CNBC, the gap between available jobs and unemployed people increased overall. In February, the number of openings dropped slightly from January to 11.27 million while the number of those categorized as “unemployed” hit 6.27 million, leaving 5 million more vacant positions than available workers. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2021 hedge fund letters, conferences and more Between January and February, the Great Resignation added 94,000 people quitting their jobs, “also a slightly higher level as a percentage of the workforce, up to 2.9% from 2.8%.” According to the Job Openings and Labor Turnover Survey, the sectors with the highest job openings last month were education and health services with 2.23 million. The second industry was professional and business services at 2.1 million, followed by trade, transportation, and utilities with 2.86 million. “The quits level was off its November 2021 high of 4.51 million, which amounted to 3% of the overall workforce,” CNBC informs. Outlook James Knightley, chief international economist at ING Groep NV (NYSE:ING), told CNN, “Should Friday's payrolls report disappoint, it is down to a lack of supply of workers to fill the jobs available rather than any issue with demand.” “In a service sector economy, the biggest cost is your workforce. Given clear evidence of corporate pricing power this means inflation will stay higher for longer as firms pass higher costs onto their customers,” he added. Despite offering better salaries, businesses are fighting to lure workers back in the saddle while the higher wages help minimize the impact of soaring consumer prices. Looking ahead, Lynn Franco, senior director of economic indicators at The Conference Board, says: “Expectations... weakened further with consumers citing rising prices, especially at the gas pump, and the war in Ukraine as factors.” “Meanwhile, purchasing intentions for big-ticket items like automobiles have softened somewhat over the past few months as expectations for interest rates have risen.” Updated on Mar 29, 2022, 5:01 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMar 29th, 2022

4.4 Million More Americans Quit Their Jobs in February, Making a Total of 13.2 Million Resignations Since November

Job openings hovered at a near-record level in February, little changed from the previous month, continuing a trend that Federal Reserve officials see as a driver of inflation. There were 11.3 million available jobs last month, matching January’s figure and just below December’s record of 11.4 million, the Labor Department said Tuesday. The number of… Job openings hovered at a near-record level in February, little changed from the previous month, continuing a trend that Federal Reserve officials see as a driver of inflation. There were 11.3 million available jobs last month, matching January’s figure and just below December’s record of 11.4 million, the Labor Department said Tuesday. The number of Americans quitting their jobs was also historically high, at 4.4 million, up from 4.3 million in January. More than 4.5 million people quit in November, the most on records dating back two decades. Many people are taking advantage of numerous opportunities to switch jobs, often for higher pay. The vast majority of those quitting do so to take another position. [time-brightcove not-tgx=”true”] Tuesday’s report is separate from the government’s monthly employment report, which in February showed that employers added a robust 678,000 jobs. The data “shows that the labor market remains torrid,” Stephen Stanley, chief economist at Amherst Pierpont, said in a research note. “In a month when the economy added 678,000 jobs, the number of job openings only went down by 17,000. That speaks to the depth of the bid that employers have for labor.” The outsize number of available jobs and quits has contributed to rampaging inflation, as many companies have had to raise pay to attract and keep workers. In February, there were 1.8 openings for every unemployed worker. Before the pandemic, there were usually more unemployed people than job openings. The unemployment rate, at 3.8%, is near the pre-pandemic level of 3.5%, which was the lowest in five decades. And there are still several million fewer people working or looking for work than before the pandemic, forcing employers to compete among a smaller labor pool. Because of those trends, Federal Reserve Chair Jerome Powell has singled out openings and quits as a key measure of the labor market’s health and a target of the Fed’s interest-rate policies. Powell has said that the central bank hopes to reduce the number of available jobs as a way of cooling wage increases and price inflation. “If you were just moving down the number of job openings … you would have less upward pressure on wages,” Powell said. “We need to use our tools to move supply and demand back” into alignment. With employers desperate to find workers, wages and salaries rose 4.5% in 2021, the fastest pace in at least two decades. Many businesses have, in turn, charged their customers more to cover the higher labor costs. Inflation jumped 7.9% in February from a year earlier, a four-decade high. Earlier this month the Fed said it had raised its short-term interest rate for the first time in four years, to about 0.375%, to rein in inflation. More rate hikes are expected this year, including potentially one or more half-point increases. Powell’s hope is that by reducing job openings and slowing wage gains, the Fed can bring down inflation without causing widespread layoffs and pushing unemployment higher. Economists overall are skeptical, however, that the Fed can achieve such a “soft landing” for the economy. They worry that the Fed’s rate hikes will result in job losses and potentially even a recession......»»

Category: topSource: timeMar 29th, 2022

Anticipating Anticipation

Anticipating Anticipation By Macro Ops One of the coolest things to watch in nature is a Starling murmuration. Starlings -- which are small and not particularly intelligent birds -- are somehow able to form these amazingly complex and beautiful airborne systems that are capable of extremely intricate flight patterns which shift and shape with near-instantaneous coordination.  They do this apparently in response to threats; to thwart off and confuse predators.  I’m fascinated by systems that display emergent properties such as murmurations. Where a network operating off simple behavioral rules can emerge complex, seemingly intelligent, behavior.  Scientists have long been awed by the same and using the latest technology they’ve been able to gain a fuller understanding of exactly how Starlings accomplish this.  The following excerpt is from a paper on murmurations by Italian researchers. You can find the whole thing here (emphasis by me).  From bird flocks to fish schools, animal groups often seem to react to environmental perturbations as if of one mind… Here we suggest that collective response in animal groups may be achieved through scale-free behavioral correlations… This result indicates that behavioral correlations are scale-free: The change in the behavioral state of one animal affects and is affected by that of all other animals in the group, no matter how large the group is. Scale-free correlations provide each animal with an effective perception range much larger than the direct interindividual interaction range, thus enhancing global response to perturbations.  Scale-free correlations mean that the noise-to-signal ratio in a Starling murmuration does not increase with the size of the flock. It doesn’t matter what the size of the group is, or if two birds are on complete opposite ends. It’s as if every individual is linked up to the same network.  The Starlings accomplish this feat by following very simple behavioral rules. Wired magazine notes the following:  At the individual level, the rules guiding this are relatively simple. When a neighbor moves, so do you. Depending on the flock's size and speed and its members' flight physiologies, the large-scale pattern changes.  It's easy for a starling to turn when its neighbor turns – but what physiological mechanisms allow it to happen almost simultaneously in two birds separated by hundreds of feet and hundreds of other birds? That remains to be discovered, and the implications extend beyond birds. Starlings may simply be the most visible and beautiful example of a biological criticality that also seems to operate in proteins and neurons, hinting at universal principles yet to be understood.  A Starling murmuration is a system that is said to always be on the “edge”. These are systems that exist in what’s called a “critical state” and are always, at any time, susceptible to complete total change.  Wired writes that Starling murmurations are “systems that are poised to tip, to be almost instantly and completely transformed, like metals becoming magnetized or liquid turning to gas. Each starling in a flock is connected to every other. When a flock turns in unison, it’s a phase transition.”  What are the benefits of this emergent behavior?  The broader effective perception range combined with their existence in a constant state of criticality, provides Starlings with a strong competitive advantage for survival. The Italian researchers conclude that:  Being critical is a way for the system to be always ready to optimally respond to an external perturbation, such as a predator attack as in the case of flocks.  Individual Starlings operating off their own simple self-interested rules in aggregate create a vastly superior “collective mind” that broadens their perception range — and thus information intake — which enables them to operate in a continuously critical state. A state that’s optimal for responding to threats which helps raise their odds of survival.  You might be asking at this point, “Interesting stuff Alex, but what does this have to do with markets?”  Fair question…  Well, isn’t the market just one big collective mind?  Similar to a murmuration, the market is just the aggregation of individual actors operating off simple inputs (prices, data, narratives) in order to try and avert danger (ie, lose money on the way down or miss out on the way up).  Like Starlings, market participants instinctively key off one another. Robert Prechter, the popularizer of Elliott Wave Theory, writes in his book “The Socionomic Theory Of Finance” that:  Aggregate investor thought is not conscious reason but unconscious impulsion. The herding impulse is an instrument designed, however improperly for some settings, to reduce risk.  Human herding behavior results from impulsive mental activity in individuals responding to signals from the behavior of others. Impulsive thought originates in the basal ganglia and limbic system. In emotionally charged situations, the limbic system’s impulses are typically faster than the rational reflection performed by the neocortex… The interaction of many minds in a collective setting produces super-organic behavior that is patterned according to the survival-related functions of the primitive portions of the brain. As long as the human mind comprises the triune construction and its functions, patterns of herding behavior will remain immutable.  These simple inputs create a market that is collectively smarter than its individual constituents. It has a much broader perception range and exists in a critical state (always ready to phase shift from bull to bear regime) which allows it to more ably respond to changes in the environment.  When Stanley Druckenmiller first got into the game, his first mentor Speros Drelles -- the person he credits with teaching him the art of investing -- would always say to him that, “60 million Frenchmen can’t be wrong.”  What he meant by that is that the market is smarter than you. It knows more than you thus its message should be heeded because 60 million Frenchmen can’t be wrong…  Druckenmiller often says that “The best economist I know is the inside of the stock market. I’m not that smart, the market is much smarter than me. I look to the market for signals.”  We’ve known about the wisdom of crowds and the power of collective intelligence ever since Francis Galton — a British statistician and Charles Darwin’s cousin — discovered the phenomena while observing groups of people guess the weight of an ox at a county fair (the individual guesses were far off but the average of all guesses were spot on). There’s since been a significant amount of work done on the topic; The Wisdom of Crowds by James Surowiecki is a good summation of it.  But, there are a few key differences between markets and murmurations and the unique impact and limitations of crowd intelligence in financial markets, specifically.  The first is — and this is a big one — that markets are reflexive.  George Soros was the first to discover this truth. He wrote that “Reflexivity sets up a feedback loop between market valuations and the so-called fundamentals which are being valued.” This means that the act of valuing a stock, bond, or currency, actually affects the underlying fundamentals on which they are valued, thus changing participants' perceptions of what their prices should be. A process that plays out in a never-ending loop…  This is why Soros says that “Financial markets, far from accurately reflecting all the available knowledge, always provides a distorted view of reality.” And that the level of distortion is “sometimes quite insignificant, and at other times quite pronounced.”  This means that markets are efficient most of the time except for some of the times when they become wildly not so.  The key driver between low and high distortion regimes are the combined effect of (narrative adoption + price trends + time). These three inputs all work in unison. So when there’s a narrative that becomes broadly adopted, it drives steady price trends, and when these price  trends last for a significant amount of time, they then drive more extreme narrative adoption. And so on and so forth…  This positive feedback loop hits at the unconscious impulsion herding tendencies of investors and drives them to focus on trending prices in the act of valuation at the near exclusion of all other factors (ie, earnings, cash flows, valuation multiples, etc…).  Most of the time, there are enough competing narratives that drive price volatility and keep the market fairly balanced.  Another major difference is that Starlings aren’t aware of the broader complex system they are an integral part of. It’s all instincts... evolutionary programming… they turn when the bird next to them does.  Whereas in markets, we can be aware of the system of which we form. We can consciously separate ourselves from the herd and view the whole objectively (at least to the best of our abilities).  This is important. Because as traders, we’re in competition for alpha with the rest of the flock. We don’t just want to turn when and where the others turn. We want to get to where they’re going before them. And to do this, we need to be able to develop a sense of where they’re headed…  This brings us to the lesson I’m trying to impart.  The reason I’ve been chatting so much about birds, collective intelligence, reality distortion, and all that jazz… is because if we understand the signaling power of certain areas of the market, whether in a low or high distortion regime, we can eschew the need to try and predict all together and instead let the market tell us where things are headed.  I was reminded of this while listening to this Knowledge Project podcast interview with Adam Robinson. Here’s Part 1 and Part 2.  For those of you who don’t know him, Adam is a prodigy who “cracked the SAT” and created The Princeton Review. He now spends his time thinking, writing, and advising hedge funds on strategy. He’s the penultimate first principles thinker. He shared some of these principles in the above interview which we’ll cover now.  To begin with, here’s Adam summarizing the lens in which he views markets (emphasis by me):  The fundamental view of investing is that you can figure out something about the world that no one else has figured out. It’s a bit like prospecting, right, gold prospecting. You can go out with your pan and find something that no one else has found. Well, the difference between investing and gold prospecting is that gold prospecting, you actually find gold that you can actually go sell, right? If you find a value that no one else has found, what makes you think.... If people are irrational enough to believe that the price of gold is different from what you think it is or should be, what makes you think they’re going to become rational tomorrow? There’s that great quote by John Maynard Keynes, “Markets can stay irrational longer than you can stay solvent.” Good luck with that.  So, there’s a third way, and John Maynard Keynes said, “Successful investing is anticipating the anticipation of others.”  My approach to markets is simply this, to wait for different groups of investors to express different views of the future, and to figure out which group is right. I look for differences of opinion strongly expressed, and decide which one is right.  Whatever else you may think about the world, the world is the product of our thinking. So is the economy. So are our investments. If you think about it, an investment is nothing more than the expression of a view of the future. So when you buy Facebook, or you short the dollar-yen, or you buy gold or short US Treasuries, you are expressing a view of the future. Your view of the future can be right or wrong, and your means of expression can be right or wrong, but that’s what you’re attempting to do, right?  So, if you and I were to go to Columbia Business School or Harvard Business School right now and ask the assembled MBA students, “What is a trend?” They wouldn’t be able to define it at all. In fact, I don’t know that any investor in the world can define a trend. They can define it simplistically like this: “A trend is the continuation of a price series.” Yeah, well that’s great. What’s causing the continuation? Right? And I’ll tell you what a trend is—this is an investment trend—actually it’s true for all trends. A trend is the spread of an idea. That’s all a trend is. It’s the spread of an idea.  Adam doesn’t believe in the existence of intrinsic value but rather views markets as an evolutionary narrative continuum; where stories spawn, develop, spread, only to eventually get outcompeted and then wither and die.  This is similar to what The Philosopher said in Drobny’s The Invisible Hands which I discussed in my piece on How To Be a Smart Contrarian. Here’s the Philosopher in his own words (emphasis by me):  Market prices reflect the probability of potential future outcomes at that moment, not the outcomes themselves. One way to think about my process is to view markets in terms of the range of reasonable opinions. The opinion that we are going to have declining and low inflation for the next decade is entirely reasonable. The opinion that we are going to have inflation because central banks have printed trillions of dollars if also reasonable. While most pundits and many market participants try to decide which potential outcome will be the right one, I am much more interested in finding out where the market is mispricing the skew of probabilities. If the market is pricing that inflation will go to the moon, then I will start talking about unemployment rates, wages going down, and how we are going to have disinflation. If you tell me the markets are pricing in deflation forever, I will start talking about the quantity theory of money, explaining how this skews outcomes the other way… People tell stories to rationalize historical price action more frequently than they use potential future hypotheses to work out where prices could be.  Adam references the work done by Everett Rogers in the study of the Diffusion of Innovations (Rogers has a book by the same title which is well worth a read). This line of study is about how the adoption of technology spreads but the work really can be applied to how everything spreads: narratives, ideas, social norms, etc…  Rogers breaks down the categories of adopters as innovators, early adopters, early majority, late majority, and laggards. Well in markets there is a similar breakdown of participants who are consistently early or late to the adoption of narratives and thus trends.  Knowing which groups are which and what their signaling means has been a critical part of Druckenmiller’s process over the years. Here’s Druck in his own words:  One of my strengths over the years was having a deep respect for the markets and using the markets to predict the economy, particularly using internal groups within the market to make predictions. And I think I was always open-minded enough and had enough humility that if those signals challenged my opinion, I went back to the drawing board and made sure things weren’t changing.  Adam breaks down these groups as follows, from earliest trend spotters to later adopters:  Metal traders  Bond traders  Equity Traders  Oil Traders  Currency Traders  Economists  Central Bankers  What does this mean in practical terms?  Well, metal traders tend to be the most farsighted of the group. They are usually right and early about changing trends in the economy.  Why is this?  Adam gives three reasons, “The first is, they [metal traders] are the Forrest Gumps of the investing world. Their view of the world is very simplistic. Are people buying copper? And if they are, thumbs up. All is good in the world’s economy. Great. I guess interest rates are going higher. That’s the way metal traders view the world. And if people are buying less copper, they go, ‘Oh, that’s bad. Economic slowdown’.”  Secondly, “People buy and sell copper. It’s used -- it’s a thing. It’s not just a number on a screen, which is all currency traders look at. Right?” And third is the time frame, “Commercial metal traders look months to years ahead. Because if you want to take copper out of the earth, it’s going to take years to open that mine, right? So, metal traders are the most farsighted. They have the simplest model of the world, and they are actually in touch with the world economy.”  In our November MIR, China is a Teacup, we pitched the case for buying US treasuries. One of the reasons why was because metal traders were signaling slowing economic growth ahead and slower growth means lower rates (bonds get bought). The trade was an easy layup… The metals market usually leads the bond market but bond traders lead equity traders and looking at various parts of the credit market can serve as a good signal for broader stocks. Adam quips that “I will tell you that 19 times out of 20 when those two groups disagree, the bond traders are right and early. They are right and early. When I say 19 times out of 20, really I mean 99 times out of 100. If you want to find out when a stock is going to be in trouble, follow the corporate bonds of that company relative to US Treasuries.”  Speaking of using corporate bonds to see where a company’s equity is headed, well… Tesla (TSLA) bulls might want to pull up a chart of the company’s traded debt….  Equity traders are in the middle of the pack and they lead moves in the currency market. FX is driven almost entirely by speculative flows which is why we always write that you need to follow the money when trading currencies. Relative equity market performance is a good indicator of where a currency pair is headed and relative financial stock performance is even better. You can include both stocks AND bond total returns to get an even better leading indicator of currency pair direction.  We can look at market internals, at things like cyclical vs. defensive stocks (a favorite indicator of Drucks) to get an under the hood look at the underlying risk appetite of market participants. Cyclical stocks, especially front-end cyclical (think semis, autos, housing etc…), should lead or at least confirm an uptrend. And a divergence typically spells trouble for the broader market. The last group of traders (the Late Adopters) are oil and currency traders. Both of these are highly speculative markets, meaning positioning and sentiment matter more than fundamentals over the short to medium term and price trends are often self-fulfilling leading to a constant boom/bust cycle.  That’s the hierarchy of trading groups and how one can use market internals, as Druck does, to see where the market is about to turn. It’s how we can anticipate the anticipation of others without trying to predict but rather only needing to track the expression of these different groups of traders and the bets they place. And then using that to figure out which one is more probabilistically right than others and act accordingly.  It’s a way for us to leverage the collective intelligence of the market. To stand apart from the herd and look to the leaders to see where things are headed next. It’s an easy way to Play the Player. Tyler Durden Sun, 02/06/2022 - 15:00.....»»

Category: blogSource: zerohedgeFeb 6th, 2022

Dropbox"s diminishing employee perks, including free food from Michelin-starred chefs, is leading to a loss of talent

In Insider Weekly: Inside Dropbox's diminishing perks, leaked audio from CNN meeting about Jeff Zucker, and Microsoft's metaverse mess. Welcome back to Insider Weekly! I'm Matt Turner, the editor-in-chief of business at Insider.We've all heard about the "Great Resignation."The wave of quits across America has been driven by many things, from the search for more flexibility or money to burnout to toxic bosses to a yearning for adventure. Maybe we should add the end of free food to that list. Dropbox insiders told Rosalie Chan and Paayal Zaveri that the end of free perks like bulgogi from Michelin-starred chefs contributed to their decision to leave the company. Sure, they didn't quit just because of the food. But for many, the move to virtual first and an end to the kinds of perks that brought people together IRL shifted their loyalties and made leaving that bit easier. It illustrates a common challenge in corporate America. As Rosalie asks in a Q&A below, in an age of remote work, how does a company set itself apart from the competition? Read on for more.Also in this week's newsletter:CNN stars including Jake Tapper raised concerns about Jeff Zucker's exit in leaked audio.Insiders say confusion, rivalries, and canceled projects have roiled Microsoft's metaverse strategy.Three more women say the Barstool Sports founder Dave Portnoy filmed them without asking during sex.Subscribe to Insider for access to all our investigations and features. New to the newsletter? Sign up here.  Download our app for news on the go – click here for iOS and here for Android.Behind the scenes of Dropbox's diminishing perksGetty ImagesOur senior reporters Rosalie Chan and Paayal Zaveri take us inside their reporting:What got you thinking about Dropbox's perks?Rosalie: We began looking into this story because we heard there's been high employee turnover at Dropbox. As we started reaching out to employees, we noticed a common theme: how amazing the food was. The cafeteria employs chefs from Michelin-starred restaurants and serves food like artisan pizza and beef bulgogi — all for free. Though the employees who left had many reasons for leaving, Dropbox's perks and culture were a big draw, and the loss of the cafeteria was representative of something bigger. It asked the question of, in the age of remote work, where offices and free food are no longer a thing, how can a company set itself apart? What are employees saying about the loss of Dropbox's iconic benefits?Paayal: When Dropbox closed its offices, its iconic perks largely disappeared, and without them, it was hard to maintain the company's unique culture. That, combined with the loss of more traditional benefits like its health-insurance plan that covered 100% of employees' costs, a shifting product strategy, and layoffs in 2021, pushed many employees to look for new jobs. Whereas in the past employees might have stayed for the culture even amid those stumbles, it now had less pull on them, they told us.What's the zaniest perk you've heard of a company offering? Rosalie: In the age of remote work, many employees get a wellness stipend for things like gym memberships and workout equipment, and at Meta, I've heard employees can even reimburse Quidditch equipment.What do you think the future of Silicon Valley perks looks like?Paayal: The pandemic upended many of the traditional office perks that tech companies used to attract employees. At the same time, the option to work remotely has become a bigger draw for employees, and companies that don't offer that flexibility are having a harder time recruiting. Looking to the future, I think companies that can offer flexibility and perks that don't revolve around the office will be the ones employees are most drawn to. Read the full story here: Dropbox insiders say the end of office perks like free food from Michelin-starred chefs and the shift to remote work has upended its culture and made it harder to keep employees aroundCNN stars question Jeff Zucker's exit in leaked audioDETROIT, MICHIGAN - JULY 31: CNN moderator Jake Tapper speaks to the crowd attending the Democratic Presidential Debate at the Fox Theatre July 31, 2019 in Detroit, Michigan. 20 Democratic presidential candidates were split into two groups of 10 to take part in the debate sponsored by CNN held over two nights at Detroit’s Fox Theatre.Scott Olson/Getty ImagesWarnerMedia CEO Jason Kilar faced a barrage of questions from top CNN staffers over the ouster of network President Jeff Zucker in a tense meeting on Wednesday, according to an audio recording obtained by Insider. On-air talent including Jake Tapper, Kaitlan Collins, Wolf Blitzer, and Jim Acosta pressed Kilar over his decision to ask for Zucker's resignation over the executive's failure to disclose a relationship with a colleague — a decision that left CNN employees in "total shock."Listen to the leaked audio and read excerpts here.Inside Microsoft's mixed reality messMicrosoft's technical fellow Alex Kipman reveals "HoloLens 2" during a presentation at the Mobile World Congress (MWC) on the eve of the world's biggest mobile fair in Barcelona on February 24, 2019.GABRIEL BOUYS/AFP via Getty ImagesWith the introduction of its HoloLens device in 2015, Microsoft made an early bet on mixed-reality computing. But current and former employees say internal divides and a lack of a unified strategy have hobbled the team's plans.As Insider reported earlier this week, Microsoft has scrapped the HoloLens 3. Microsoft's decision is sending the company in new directions, including a partnership with Samsung and a potential cloud-based mixed reality device.Insiders describe the turmoil within Microsoft's HoloLens business.More women say Dave Portnoy filmed them during sex without askingDave PortnoyJasen Vinlove/USA TODAY SportsIn November, three young women came forward about sexual encounters they had with Barstool Sports' founder, Dave Portnoy. These women told Insider the experiences with Portnoy turned frightening and humiliating and had taken a toll on their mental health. Two of the women also said Portnoy filmed their encounters without asking.Since then, three more young women have told Insider that Portnoy filmed them during sex without asking for permission. They ranged in age from 18 to mid-20s at the time. A total of four women have now told Insider that Portnoy has sent them at least 19 unsolicited videos of what appears to be him having sex with other women.Read the full report here. More of this week's top reads:Rachel Maddow is stepping back from her MSNBC show to work on movie and podcast projects.We asked investors to share the 17 climate-tech startups to keep an eye on right now.The New York Times' gaming chief explained why Wordle was a good buy.See the pitch deck that fitness entrepreneur Grace Beverley used to raise $5.7 million for her activewear startup.We've got a comprehensive guide to tensions in Ukraine. The great venture-capital resignation is underway.Compared to millennials, Gen Z is graduating to a far better job market — and its financial prospects look far brighter.Read the original article on Business Insider.....»»

Category: dealsSource: nytFeb 6th, 2022

CONAGRA BRANDS REPORTS SECOND QUARTER RESULTS

CHICAGO, Jan. 6, 2022 /PRNewswire/ -- Today Conagra Brands, Inc. (NYSE:CAG) reported results for the second quarter of fiscal year 2022, which ended on November 28, 2021. All comparisons are against the prior-year fiscal period, unless otherwise noted.  Certain terms used in this release, including "Organic net sales," "EBITDA," "Two-year compounded annualized," and certain "adjusted" results, are defined under the section entitled "Definitions."  See page 5 for more information. Highlights Second quarter net sales increased 2.1%; organic net sales increased 2.6%. On a two-year compounded annualized basis, fiscal 2022 second quarter net sales increased 4.1% and organic net sales increased 5.3%. Operating margin decreased 435 basis points to 13.4%; adjusted operating margin decreased 500 basis points to 14.6%. Diluted earnings per share (EPS) for the second quarter decreased 26.0% to $0.57, and adjusted EPS decreased 21.0% to $0.64. On a two-year compounded annualized basis, second quarter EPS increased 3.7% and adjusted EPS increased 0.8%. The Company is reiterating its adjusted EPS guidance for fiscal 2022 and updating its organic net sales and adjusted operating margin guidance to reflect continued top line strength, higher inflation expectations, and the timing of additional pricing actions. The Company's updated fiscal 2022 guidance is as follows: Organic net sales growth is expected to be approximately +3% versus prior guidance of approximately +1% Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 14% versus prior guidance of approximately 11% Adjusted operating margin is expected to be approximately 15.5% versus prior guidance of approximately 16% Adjusted EPS is expected to be approximately $2.50, representing no change to prior guidance CEO Perspective Sean Connolly, president and chief executive officer of Conagra Brands, commented, "Our business delivered another quarter of strong net sales growth as we continued to experience elevated levels of demand across our portfolio. I am proud of our team for continuing to demonstrate great agility in navigating the dynamic external landscape with a refuse to lose attitude and dedication to executing our Conagra Way playbook every day. Our focus on strategic innovation and our intentional approach to investment helped us maintain brand momentum in the second quarter and continue capturing share across each of our domains – frozen, snacks, and staples." He continued, "Looking ahead, we expect to continue experiencing cost pressures above original expectations in the second half of fiscal 2022. However, we believe the sustained elevated consumer demand coupled with the mitigating actions we have successfully executed, and will continue executing, put us on track to overcome these near-term challenges, improve margins in the back half of the fiscal year, and deliver on our profit plan." Total Company Second Quarter Results In the quarter, net sales increased 2.1% to $3.1 billion.  The increase in net sales primarily reflects: a 0.7% net decrease from the divestitures of the H.K. Anderson business, the Peter Pan peanut butter business, and the Egg Beaters business (collectively, the Sold Businesses); a 0.2% increase from the favorable impact of foreign exchange; and a 2.6% increase in organic net sales. The 2.6% increase in organic net sales was driven by a 6.8% improvement in price/mix, which was partially offset by a 4.2% decrease in volume. Price/mix was driven by favorable brand mix and net pricing as the company's inflation-driven pricing actions were reflected in the marketplace throughout the quarter. The volume decrease was primarily a result of lapping the prior year's surge in at-home food demand due to the COVID-19 pandemic. The year-over-year comparison negatively impacted fiscal 2022 second quarter volume growth rates in the company's retail reporting segments. Gross profit decreased 15.1% to $755 million in the quarter, and adjusted gross profit decreased 14.4% to $767 million.  Second quarter gross profit benefited from higher organic net sales, supply chain realized productivity, lower COVID-19 pandemic-related expenses, and cost synergies associated with the Pinnacle Foods acquisition. These benefits, however, were not enough to offset the impacts of cost of goods sold inflation of 16.4% and the lost profit from the Sold Businesses. Gross margin decreased 500 basis points to 24.7% in the quarter, and adjusted gross margin decreased 483 basis points to 25.1%. Adjusted gross margin declined more than originally expected as the company experienced higher-than-expected cost of goods sold inflation, made additional investments to prioritize servicing orders to maximize food supply for consumers, and experienced additional transitory supply chain costs. Selling, general, and administrative expense (SG&A), which includes advertising and promotional expense (A&P), decreased 3.5% to $345 million in the quarter.  Adjusted SG&A, which excludes A&P, was relatively flat compared to the prior-year period, increasing 1.7% to $248 million.  A&P for the quarter increased 12.5% to $71 million, driven primarily by higher eCommerce investments.  Net interest expense was $95 million in the quarter.  Compared to the prior-year period, net interest expense decreased 11.8% or $13 million, primarily due to a lower weighted average interest rate on outstanding debt. The average diluted share count decreased 1.8% compared to the prior-year period to 482 million, driven by the company's share repurchase activity in prior quarters. In the quarter, net income attributable to Conagra Brands decreased 27.3% to $275 million, or $0.57 per diluted share.  Adjusted net income attributable to Conagra Brands decreased 22.8% to $306 million, or $0.64 per diluted share, in the quarter.  The decreases were driven primarily by the decrease in gross profit. The combination of higher than expected inflation, investments to service orders, and additional transitory costs is estimated to have impacted adjusted EPS by approximately $0.04 to $0.06 in the quarter.   Adjusted EBITDA, which includes equity method investment earnings and pension and postretirement non-service income, decreased 17.9% to $585 million in the quarter, primarily driven by the decrease in adjusted gross profit. Grocery & Snacks Segment Second Quarter Results Net sales for the Grocery & Snacks segment decreased 1.4% to $1.3 billion in the quarter reflecting: a 0.8% decrease from the impact of the Sold Businesses; and a 0.6% decrease in organic net sales. On an organic net sales basis, volume decreased 5.3% and price/mix increased 4.7%.  The volume decline was primarily due to lapping the prior year's surge in at-home food demand from the COVID-19 pandemic.  Price/mix was primarily driven by favorability in inflation-driven pricing coupled with favorable brand mix. In the quarter, the company gained share in staples categories such as beans, and in snacking categories, including popcorn and seeds. Operating profit for the segment decreased 21.2% to $249 million in the quarter.  Adjusted operating profit decreased 14.1% to $274 million, primarily driven by cost of goods inflation, the organic net sales decline, incremental transitory supply chain costs, and the lost profit from the Sold Businesses. These negative impacts were partially offset by supply chain realized productivity, cost synergies associated with the Pinnacle Foods acquisition, and lower COVID-19 pandemic-related expenses. Refrigerated & Frozen Segment Second Quarter Results Net sales for the Refrigerated & Frozen segment increased 3.0% to $1.3 billion in the quarter reflecting: a 0.9% decrease from the impact of the Sold Businesses; and a 3.9% increase in organic net sales. On an organic net sales basis, volume decreased 4.7% and price/mix increased 8.6%.  The volume decline was primarily due to lapping the prior year's surge in at-home food demand from the COVID-19 pandemic.  The price/mix increase was driven by favorable brand mix and favorability in inflation-driven pricing. In the quarter, the company gained share in categories such as frozen single serve meals, whipped topping, and frozen desserts. Operating profit for the segment decreased 36.3% to $168 million in the quarter.  Adjusted operating profit decreased 30.4% to $189 million primarily due to cost of goods sold inflation, additional investments the company made to service orders, increased A&P investment, and the lost profit from the Sold Businesses. These impacts were partially offset by the benefits of supply chain realized productivity, higher organic net sales, lower COVID-19 pandemic-related expenses, and cost synergies associated with the Pinnacle Foods acquisition. International Segment Second Quarter Results Net sales for the International segment increased 5.0% to $262 million in the quarter reflecting: a 0.1% decrease from the impact of the Sold Businesses, a 3.0% increase from the favorable impact of foreign exchange; and a 2.1% increase in organic net sales. On an organic net sales basis, volume decreased 5.8% and price/mix increased 7.9%. Volume decreased primarily due to lapping the prior year's surge in demand from the COVID-19 pandemic. The price/mix increase was driven by inflation-driven pricing and favorable product mix.  Operating profit for the segment decreased 5.8% to $37 million in the quarter.  Adjusted operating profit decreased 5.9% to $37 million as the negative impacts of cost of goods sold inflation and increased A&P investment more than offset the benefits from favorable foreign exchange, supply chain realized productivity, and higher organic net sales. Foodservice Segment Second Quarter Results Net sales for the Foodservice segment increased 14.9% to $246 million in the quarter reflecting: a 0.3% decrease from the impact of the Sold Businesses; and a 15.2% increase in organic net sales. On an organic net sales basis, volume increased 9.1% as restaurant traffic continued to improve from the impacts of the COVID-19 pandemic. Price/mix was favorable at 6.1% in the quarter driven by inflation-driven pricing and favorable product mix. Operating profit for the segment decreased 39.1% to $14 million and adjusted operating profit decreased 18.1% to $19 million in the quarter as the impacts of cost of goods sold inflation more than offset the benefits of higher organic net sales and favorable supply chain realized productivity. Other Second Quarter Items Corporate expenses decreased 47.0% to $59 million in the quarter primarily from lapping incremental expenses related to the extinguishment of debt in the prior year period. Adjusted corporate expense increased 10.1% to $71 million in the quarter driven by increased employee related costs. Pension and post-retirement non-service income was $16 million in the quarter compared to $14 million of income in the prior-year period. In the quarter, equity method investment earnings were $30 million.  The $7 million increase was primarily driven by favorable market conditions for the Ardent Mills joint venture. In the quarter, the effective tax rate was 23.4% compared to 17.6% in the prior-year period.  The adjusted effective tax rate was 22.9% compared to 23.2% in the prior-year period. In the quarter, the company paid a dividend of $0.3125 per share, the first dividend payment at the increased rate.  Outlook The company is reiterating its adjusted EPS guidance for fiscal 2022 and updating its organic net sales and adjusted operating margin guidance. The outlook reflects expectations for continued top line strength, and higher cost of goods sold inflation, and the timing effect of additional pricing actions. The company previously shared its expectations that consumer demand for its retail products would remain elevated versus historical levels throughout fiscal 2022, as consumers have developed new habits during the COVID-19 pandemic. Given the trends to date, including stronger-than-expected consumer demand and lower-than-anticipated elasticities of demand, as well as additional planned pricing actions, organic net sales growth is now expected to be higher than previously anticipated. The company also continues to experience elevated cost of goods sold inflation, the rate of which was higher than expected during the second quarter of fiscal 2022. The company has taken, and plans to continue taking, a variety of actions to counteract the impact of this inflation, including incremental pricing actions and cost savings measures. The company continues to expect that the timing of the associated benefits from these margin lever actions will increase as the fiscal year progresses and, as a result, the company continues to expect margins to improve in the second half of the fiscal year. The Company's updated fiscal 2022 guidance is as follows: Organic net sales growth is expected to be approximately +3% versus prior guidance of approximately +1% Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 14% versus prior guidance of approximately 11% Adjusted operating margin is expected to be approximately 15.5% versus prior guidance of approximately 16% Adjusted EPS is expected to be approximately $2.50, representing no change to prior guidance. The above guidance is the company's best estimate of its expected financial performance in fiscal 2022. The company's ultimate fiscal 2022 performance will be highly dependent on factors including, without limitation: how consumers purchase food as foodservice establishments continue to reopen and people return to in-office work and in-person school; the cost of goods sold inflation the company experiences; consumers' response to inflation-driven price increases; and the ability of the end-to-end supply chain to continue to operate effectively as the COVID-19 pandemic continues to evolve. The inability to predict the amount and timing of the impacts of foreign exchange, acquisitions, divestitures, and other items impacting comparability makes a detailed reconciliation of forward-looking non-GAAP financial measures impracticable.  Please see the end of this release for more information. Items Affecting Comparability of EPS The following are included in the $0.57 EPS for the second quarter of fiscal 2022 (EPS amounts are rounded and after tax).  Please see the reconciliation schedules at the end of this release for additional details. Approximately $0.02 per diluted share of net expense related to restructuring plans Approximately $0.02 per diluted share of net benefit related to legal matters Approximately $0.01 per diluted share of net benefit related to proceeds received from the sale of a legacy investment Approximately $0.07 per diluted share of net expense related to impairment on businesses held for sale Approximately $0.01 per diluted share of net impact due to rounding The following are included in the $0.77 EPS for the second quarter of fiscal 2021 (EPS amounts are rounded and after tax).  Please see the reconciliation schedules at the end of this release for additional details. Approximately $0.03 per diluted share of net expense related to restructuring plans Approximately $0.01 per diluted share of net benefit related to corporate hedging derivative gains Approximately $0.01 per diluted share of net benefit related to the gain on divestiture of a business Approximately $0.07 per diluted share of net expense related to the early extinguishment of debt Approximately $0.05 per diluted share of net benefit related to a release of a valuation allowance on our capital loss carryforward Approximately $0.01 per diluted share of net impact due to rounding Definitions Organic net sales excludes, from reported net sales, the impacts of foreign exchange, divested businesses and acquisitions, as well as the impact of any 53rd week.  All references to changes in volume and price/mix throughout this release are on an organic net sales basis. References to adjusted items throughout this release refer to measures computed in accordance with GAAP less the impact of items impacting comparability. Items impacting comparability are income or expenses (and related tax impacts) that management believes have had, or are likely to have, a significant impact on the earnings of the applicable business segment or on the total corporation for the period in which the item is recognized, and are not indicative of the company's core operating results.  These items thus affect the comparability of underlying results from period to period. References to earnings before interest, taxes, depreciation, and amortization (EBITDA) refer to net income attributable to Conagra Brands before the impacts of discontinued operations, income tax expense (benefit), interest expense, depreciation, and amortization.  References to adjusted EBITDA refer to EBITDA before the impacts of items impacting comparability. References to two-year compounded annualized numbers are calculated as: ([(1 + current year period's growth rate) * (1 + prior year period's growth rate)] ^ 0.5) – 1. Please note that certain prior year amounts have been reclassified to conform with current year presentation Discussion of Results Conagra Brands will host a webcast and conference call at 9:30 a.m. Eastern time today to discuss the results.  The live audio webcast and presentation slides will be available on www.conagrabrands.com/investor-relations under Events & Presentations. The conference call may be accessed by dialing 1-877-883-0383 for participants in the U.S. and 1-412-902-6506 for all other participants and using passcode 3428984. Please dial in 10 to 15 minutes prior to the call start time. Following the Company's remarks, the conference call will include a question-and-answer session with the investment community.  A replay of the webcast will be available on www.conagrabrands.com/investor-relations under Events & Presentations until January 6, 2023. About Conagra Brands Conagra Brands, Inc. (NYSE:CAG), headquartered in Chicago, is one of North America's leading branded food companies. Guided by an entrepreneurial spirit, Conagra Brands combines a rich heritage of making great food with a sharpened focus on innovation. The company's portfolio is evolving to satisfy people's changing food preferences. Conagra's iconic brands, such as Birds Eye®, Marie Callender's®, Banquet®, Healthy Choice®, Slim Jim®, Reddi-wip®, and Vlasic®, as well as emerging brands, including Angie's® BOOMCHICKAPOP®, Duke's®, Earth Balance®, Gardein®, and Frontera®, offer choices for every occasion. For more information, visit www.conagrabrands.com. Note on Forward-looking Statements This document contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Readers of this document should understand that these statements are not guarantees of performance or results. Many factors could affect our actual financial results and cause them to vary materially from the expectations contained in the forward-looking statements, including those set forth in this document. These risks, uncertainties, and factors include, among other things: the risk that the cost savings and any other synergies from the acquisition of Pinnacle Foods Inc. (the Pinnacle acquisition) may not be fully realized or may take longer to realize than expected; the risk that the Pinnacle acquisition may not be accretive within the expected timeframe or to the extent anticipated; the risks that the Pinnacle acquisition and related integration will create disruption to the Company and its management and impede the achievement of business plans; risks related to our ability to achieve the intended benefits of other recent acquisitions and divestitures; risks associated with general economic and industry conditions; risks associated with our ability to successfully execute our long-term value creation strategies; risks related to our ability to deleverage on currently anticipated timelines, and to continue to access capital on acceptable terms or at all; risks related to our ability to execute operating and restructuring plans and achieve targeted operating efficiencies from cost-saving initiatives, and to benefit from trade optimization programs; risks related to the effectiveness of our hedging activities and ability to respond to volatility in commodities; risks related to the Company's competitive environment and related market conditions; risks related to our ability to respond to changing consumer preferences and the success of our innovation and marketing investments; risks related to the ultimate impact of any product recalls and litigation, including litigation related to the lead paint and pigment matters, as well as any securities litigation, including securities class action lawsuits; risk associated with actions of governments and regulatory bodies that affect our businesses, including the ultimate impact of new or revised regulations or interpretations; risks related to the impact of the COVID-19 pandemic on our business, suppliers, consumers, customers and employees; risks related to our forecasts of consumer eat-at-home habits as the impacts of the COVID-19 pandemic abate; risks related to the availability and prices of supply chain resources, including raw materials, packaging, and transportation including any negative effects caused by changes in inflation rates, weather conditions, or health pandemics; disruptions or inefficiencies in our supply chain and/or operations, including from the COVID-19 pandemic; risks associated with actions by our customers, including changes in distribution and purchasing terms; risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges; risks related to a material failure in or breach of our or our vendors' information technology systems; the amount and timing of future dividends, which remain subject to Board approval and depend on market and other conditions; and other risks described in our reports filed from time to time with the Securities and Exchange Commission. We caution readers not to place undue reliance on any forward-looking statements included in this document, which speak only as of the date of this document. We undertake no responsibility to update these statements, except as required by law. Note on Non-GAAP Financial Measures This document includes certain non-GAAP financial measures, including adjusted EPS, organic net sales, adjusted gross profit, adjusted operating profit, adjusted SG&A, adjusted corporate expenses, adjusted gross margin, adjusted operating margin, adjusted effective tax rate, adjusted net income attributable to Conagra Brands, two-year compounded annualized organic net sales, two-year compounded annualized adjusted EPS, free cash flow, net debt, net leverage ratio, and adjusted EBITDA. Management considers GAAP financial measures as well as such non-GAAP financial information in its evaluation of the Company's financial statements and believes these non-GAAP measures provide useful supplemental information to assess the Company's operating performance and financial position. These measures should be viewed in addition to, and not in lieu of, the Company's diluted earnings per share, operating performance and financial measures as calculated in accordance with GAAP. Certain of these non-GAAP measures, such as organic net sales, adjusted operating margin, and adjusted EPS, are forward-looking.  Historically, the Company has excluded the impact of certain items impacting comparability, such as, but not limited to, restructuring expenses, the impact of the extinguishment of debt, the impact of foreign exchange, the impact of acquisitions and divestitures, hedging gains and losses, impairment charges, the impact of legacy legal contingencies, and the impact of unusual tax items, from the non-GAAP financial measures it presents.  Reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures are not provided because the Company is unable to provide such reconciliations without unreasonable effort, due to the uncertainty and inherent difficulty of predicting the occurrence and the financial impact of such items impacting comparability and the periods in which such items may be recognized.  For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results. Hedge gains and losses are generally aggregated, and net amounts are reclassified from unallocated corporate expense to the operating segments when the underlying commodity or foreign currency being hedged is expensed in segment cost of goods sold. The Company identifies these amounts as items that impact comparability within the discussion of unallocated Corporate results.   Conagra Brands, Inc. Consolidated Statements of Earnings (in millions) (unaudited) SECOND QUARTER Thirteen Weeks Ended Thirteen Weeks Ended November 28, 2021 November 29, 2020 Percent Change Net sales $ 3,058.9 $ 2,995.2 2.1 % Costs and expenses: Cost of goods sold 2,304.1 2,106.3 9.4 % Selling, general and administrative expenses 345.4 357.7 (3.5) % Pension and postretirement non-service income (16.1) (13.7) 17.7 % Interest expense, net 94.9 107.7 (11.8) % Income before income taxes and equity method investment earnings 330.6 437.2 (24.4) % Income tax expense 84.2 80.7 4.3 % Equity method investment earnings 29.5 23.0 28.3 % Net income $ 275.9 $ 379.5 (27.3) % Less: Net income attributable to noncontrolling interests 0.4 0.6 (23.2) % Net income attributable to Conagra Brands, Inc. $ 275.5 $ 378.9 (27.3) % Earnings per share - basic Net income attributable to Conagra Brands, Inc. $ 0.57 $ 0.77 (26.0) % Weighted average shares outstanding 480.2 489.1 (1.8) % Earnings per share - diluted Net income attributable to Conagra Brands, Inc. $ 0.57 $ 0.77 (26.0) % Weighted average share and share equivalents outstanding 481.9 490.9 (1.8) %   Conagra Brands, Inc. Consolidated Statements of Earnings (in millions) (unaudited) SECOND QUARTER YEAR TO DATE Twenty-Six Weeks Ended Twenty-Six Weeks Ended November 28, 2021 November 29, 2020 Percent Change Net sales $ 5,712.2 $ 5,674.1 0.7 % Costs and expenses: Cost of goods sold 4,284.0 3,975.0 7.8 % Selling, general and administrative expenses 655.5 658.0 (0.4) % Pension and postretirement non-service income (32.2) (27.5) 17.0 % Interest expense, net 189.1 221.4 (14.6) % Income before income taxes and equity method investment earnings 615.8 847.2 (27.3) % Income tax expense 153.9 167.4 (8.1) % Equity method investment earnings 49.7 29.5 68.5 % Net income $ 511.6 $ 709.3 (27.9) % Less: Net income attributable to noncontrolling interests 0.7 1.4 (50.5) % Net income attributable to Conagra Brands, Inc. $ 510.9 $ 707.9 (27.8) % Earnings per share - basic Net income attributable to Conagra Brands, Inc. $ 1.06 $ 1.45 (26.9) % Weighted average shares outstanding 480.3 488.6 (1.7) % Earnings per share - diluted Net income attributable to Conagra Brands, Inc. $ 1.06 $ 1.44 (26.4) % Weighted average share and share equivalents outstanding 482.1 490.3 (1.7) %   Conagra Brands, Inc. Consolidated Balance Sheets (in millions) (unaudited) November 28, 2021 May 30, 2021 ASSETS Current assets Cash and cash equivalents $ 68.7 $ 79.2 Receivables, less allowance for doubtful accounts of $3.0 and $3.2 977.2 793.9 Inventories 1,858.7 1,709.7 Prepaid expenses and other current assets 111.1 95.0 Current assets held for sale 23.6 24.3 Total current assets 3,039.3 2,702.1 Property, plant and equipment, net 2,622.8 2,572.0 Goodwill 11,332.0 11,338.9 Brands, trademarks and other intangibles, net 4,092.2 4,124.6 Other assets 1,441.0 1,344.7 Noncurrent assets held for sale 64.7 113.3 $ 22,592.0 $ 22,195.6 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 585.8 $ 707.4 Current installments of long-term debt 270.6 23.1 Accounts payable 1,596.9 1,655.9 Accrued payroll 114.6 175.2 Other accrued liabilities 707.4 743.0 Current liabilities held for sale 1.7 1.6 Total current liabilities 3,277.0 3,306.2 Senior long-term debt, excluding current installments 8,527.8 8,275.2 Other noncurrent liabilities 2,027.9 1,979.6 Noncurrent liabilities held for sale 2.4 3.2 Total stockholders' equity 8,756.9 8,631.4 $ 22,592.0 $ 22,195.6   Conagra Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in millions) (unaudited) Twenty-Six Weeks Ended November 28, 2021 November 29, 2020 Cash flows from operating activities: Net income $ 511.6 $ 709.3 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 193.5 193.0 Asset impairment charges 41.6 3.9 Loss on extinguishment of debt — 44.3 Gain on divestitures — (5.3) Equity method investment earnings in excess of distributions (24.2) (8.4) Stock-settled share-based payments expense 14.3 30.9 Contributions to pension plans (4.9) (20.7) Pension benefit (25.5) (19.1) Other items (14.5) 14.2 Change in operating assets and liabilities excluding effects of business acquisitions and dispositions: Receivables (183.3) (88.3) Inventories (148.4) (247.2) Deferred income taxes and income taxes payable, net (13.9) (39.9) Prepaid expenses and other current assets (10.4) (39.8) Accounts payable (14.1) 111.2 Accrued payroll (60.6) (58.0) Other accrued liabilities 0.9 (67.9) Deferred employer payroll taxes — 29.2 Net cash flows from operating activities 262.1 541.4 Cash flows from investing activities: Additions to property, plant and equipment (257.5) (282.0) Sale of property, plant and equipment 9.9 1.0 Purchase of marketable securities (1.9) (4.1) Sale of marketable securities 1.9 6.0 Proceeds from divestitures, net of cash divested 0.1 8.6 Other items 3.3 - Net cash flows from investing activities (244.2) (270.5) Cash flows from financing activities: Issuance of short-term borrowings, maturities greater than 90 days 392.6 298.6 Repayment of short-term borrowings, maturities greater than 90 days (249.8) — Net issuance (repayment) of other short-term borrowings (264.4) 68.9 Issuance of long-term debt 499.1 988.2 Repayment of long-term debt (29.4) (1,881.7) Debt issuance costs (2.5) (5.4) Repurchase of Conagra Brands, Inc. common shares (50.0) — Payment of intangible asset financing arrangement (12.6) (12.9) Cash dividends paid (282.0) (207.3) Exercise of stock options and issuance of other stock awards, including tax withholdings (17.4) (8.4) Other items (7.3) — Net cash flows from financing activities (23.7) (760.0) Effect of exchange rate changes on cash and cash equivalents and restricted cash (5.7) 3.8 Net change in cash and cash equivalents and restricted cash (11.5) (485.3) Cash and cash equivalents and restricted cash at beginning of period 80.2 554.3 Cash and cash equivalents and restricted cash at end of period $ 68.7 $ 69.0   Conagra Brands, Inc. Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q2 FY22 Grocery &Snacks Refrigerated & Frozen International Foodservice Total Conagra Brands Net Sales $ 1,264.5 $ 1,285.9 $ 262.2 $ 246.3 $ 3,058.9 Impact of foreign exchange — — (7.5) — (7.5) Organic Net Sales $ 1,264.5 $ 1,285.9 $ 254.7 $ 246.3 $ 3,051.4 Year-over-year change - Net Sales (1.4) % 3.0 % 5.0 % 14.9 % 2.1 % Impact of foreign exchange (pp) — — (3.0) — (0.2) Net sales from divested businesses (pp) 0.8 0.9 0.1 0.3 0.7 Organic Net Sales (0.6) % 3.9 % 2.1 % 15.2 % 2.6 % Volume (Organic) (5.3) % (4.7) % (5.8) % 9.1 % (4.2) % Price/Mix 4.7 % 8.6 % 7.9 % 6.1 % 6.8 % Q2 FY21 Grocery & Snacks Refrigerated & Frozen International Foodservice Total Conagra Brands Net Sales $ 1,283.1 $ 1,248.0 $ 249.8 $ 214.3 $ 2,995.2 Net sales from divested businesses (10.8) (10.1) (0.4) (0.5) (21.8) Organic Net Sales $ 1,272.3 $ 1,237.9 $ 249.4 $ 213.8 $ 2,973.4 Q2 FY21 Grocery &Snacks Refrigerated & Frozen International Foodservice Total Conagra Brands Net Sales $ 1,283.1 $ 1,248.0 $ 249.8 $ 214.3 $ 2,995.2 Impact of foreign exchange — — 6.0 — 6.0 Net sales from divested businesses (1.6) — — (0.3) (1.9) Organic Net Sales $ 1,281.5 $ 1,248.0 $ 255.8 $ 214.0 $ 2,999.3 Year-over-year change - Net Sales 12.6 % 6.8 % 6.6 % (23.1) % 6.2 % Impact of foreign exchange (pp) — — 2.5 — 0.2 Net sales from divested businesses (pp) 2.8 1.0 — 1.6 1.7 Organic Net Sales 15.4 % 7.8 % 9.1 % (21.5) % 8.1 % Volume (Organic) 13.7 % 6.4 % 6.4 % (25.4) % 6.6 % Price/Mix 1.7 %.....»»

Category: earningsSource: benzingaJan 6th, 2022

Futures Tread Water With Traders Spooked By Spike In Yields

Futures Tread Water With Traders Spooked By Spike In Yields After futures rose to a new all time high during the Tuesday overnight session, the mood has been decided more muted after yesterday's sharp rates-driven tech selloff, and on Wednesday U.S. futures were mixed and Nasdaq contracts slumped as investors once again contemplated the effect of expected rate hikes on tech stocks with lofty valuations while waiting for the release of Federal Reserve minutes at 2pm today. At 730am, Nasdaq 100 futures traded 0.3% lower amid caution over the impact of higher yields on equity valuations, S&P 500 Index futures were down 0.1%, while Europe’s Stoxx 600 gauge traded near a record high. The dollar weakened, as did bitcoin, while Brent crude rose back over $80. “The sharp rise in U.S. yields this week has sparked a move from growth to value,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. “Wall Street went looking for the winners in an inflationary environment and as a result, loaded up on the Dow Jones at the expense of the Nasdaq.” Concerns related to the pandemic deepened as Hong Kong restricted dining-in, closed bars and gyms and banned flights from eight countries including the U.S. and the U.K. to slow the spread of the omicron variant. Meanwhile, a selloff in technology stocks extended to Asia, where the Hang Seng Tech Index tumbled as much as 4.2%, sending the gauge toward a six-year low. Traders are now caught in a quandary over deepening fears on global growth combined with a faster tightening by the Federal Reserve. “Earlier we thought that rate hikes wouldn’t be on the table until mid-2022 but the Fed seems to have worked up a consensus to taper faster and hike sooner rather than later,” Steve Englander, head of global G-10 FX research at Standard Chartered, said in a note. “But we don’t think inflation dynamics will support continued hiking. We suspect the biggest driver of asset markets will be when inflation and Covid fears begin to ebb.” Data on Tuesday showed mixed signs on U.S. inflation. Prices paid by manufacturers in December came in sharply lower than expected. However, figures showing a faster U.S. job quit rate added to concerns over wage inflation. With 4.5 million Americans leaving their jobs in November, compared with 10.6 million available positions, the odds increased the Fed will struggle to influence the employment numbers increasingly dictated by social reasons. The data came before Friday’s monthly report from the Labor Department, currently forecast to show 420,000 job additions in December. In premarket trading, tech giants Tesla, Nvidia and Advanced Micro Devices were among the worst performers. Pfizer advanced in New York premarket trading after BofA Global Research recommended the stock. Shares of Chinese companies listed in the U.S. extended their decline after Tencent cut its stake in gaming and e-commerce company Sea, triggering concerns of similar actions at other firms amid Beijing’s regulatory crackdown on the technology sector. Alibaba (BABA US) falls 1.2%, Didi (DIDI US) -1.8%. Here are the other notable premarket movers: Shares in electric vehicle makers fall in U.S. premarket trading, set to extend Tuesday’s losses, amid signs of deepening competition in the sector. Tesla (TSLA US) slips 1.1%, Rivian (RIVN US) -0.6%. Beyond Meat (BYND US) shares jump 8.9% premarket following a CNBC report that Yum! Brands’ KFC will launch fried chicken made with the company’s meat substitute. Recent selloff in Pinterest (PINS US) shares presents an attractive risk/reward, with opportunities for the social media company largely unchanged, Piper Sandler writes in note as it upgrades to overweight. Stock gains 2.3% in premarket trading. Senseonics Holdings (SENS US) shares rise 15% premarket after the medical technology company said it expects a U.S. Food and Drug Administration decision in weeks on an updated diabetes- monitoring system. MillerKnoll (MLKN US) shares were down 3.1% in postmarket trading Tuesday after reporting fiscal 2Q top and bottom line results that missed analysts’ estimates. Annexon (ANNX US) was down 23% postmarket Tuesday after results were released from an experimental therapy for a fatal movement disorder called Huntington’s disease. Three patients in the 28- person trial discontinued treatment due to drug-related side- effects. Wejo Group (WEJO US) shares are up 34% premarket after the company said it’s developing the Wejo Neural Edge platform to enable intelligent handling of data from vehicles at scale. Smart Global (SGH US) falls 6% postmarket Tuesday after the computing memory maker forecast earnings per share for the second quarter. The low end of that forecast missed the average analyst estimate. Beyond Meat (BYND) shares surge premarket after CNBC KFC launch report UBS cut the recommendation on Adobe Inc. (ADBE US) to neutral from buy, citing concerns over the software company’s 2022 growth prospects. Shares down 2% in premarket trading. Oncternal Therapeutics (ONCT US) shares climb 5.1% premarket after saying it reached consensus with the FDA on the design and major details of the phase 3 superiority study ZILO-301 to treat mantle cell lymphoma. In Europe, the energy, chemicals and car industries led the Stoxx Europe 600 Index up 0.2% to near an all-time high set on Tuesday. The Euro Stoxx 50 rises as much as 0.6%, DAX outperforms. FTSE 100 lags but rises off the lows to trade up 0.2%. Nestle dropped 2.4%, slipping from a record, after Jefferies cut the Swiss food giant to underperform. Utilities were the worst-performing sector in Europe on Wednesday as cyclical areas of the market are favored over defensives, while Uniper and Fortum fall following news of a loan agreement.  Other decliners include RWE (-2.4%), Endesa (2.1%), Verbund (-1.3%), NatGrid (-1.2%), Centrica (-1.2%). Earlier in the session, technology shares led a decline in Asian equity markets, with investors concerned about the prospects of higher interest rates and Tencent’s continued sale of assets. The MSCI Asia Pacific Index fell as much as 0.6%, the most in two weeks, dragged down by Tencent and Meituan. The rout in U.S. tech spilled over to Asia, where the Hang Seng Tech Index plunged 4.6%, the most since July, following Tencent’s stake cut in Singapore’s Sea. Declines in tech and other sectors in Hong Kong widened after the city tightened rules to curb the spread of the omicron variant. Most Asian indexes fell on Wednesday, with Japan an exception among major markets as automakers offered support. The outlook for tighter monetary policy in the U.S. and higher Treasury yields weighed on the region’s technology shares, prompting a rotation from growth to value stocks.   Read: China Tech Selloff Deepens as Tencent Sale Spooks Traders Asian equities have underperformed U.S. and European peers amid slower recoveries and vaccination rates in the past year. With omicron rapidly gaining a foothold in Asia, there is a risk of “any further restriction measures, which could cloud the services sector outlook, along with disruption to supply chains,” said Jun Rong Yeap, a strategist at IG Asia Pte.  Philippine stocks gained as trading resumed following a one-day halt due to a systems glitch. North Korea appeared to have launched its first ballistic missile in about two months, just days after leader Kim Jong Un indicated that returning to stalled nuclear talks with the U.S. was a low priority for him in the coming year. India’s key equity gauges posted their longest run of advances in more than two moths, driven by a rally in financial stocks on hopes of revival in lending on the back of capex spending in the country. The S&P BSE Sensex rose 0.6% to 60,223.15 in Mumbai, its highest since Nov. 16, while the NSE Nifty 50 Index advanced 0.7%. Both benchmarks stretched their winning run to a fourth day, the longest since Oct. 18. All but six of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of banking firms. “I believe from an uncertain, volatile environment, the Nifty is now headed for a directional move,” Sahaj Agrawal, a head of derivative research at Kotak Securities, writes in a note. The Nifty 50 crossed a significant barrier of the 17,800 level and is now expected to trade at 19,000-19,500 level in the medium term, Agrawal added. HDFC Bank contributed the most to the Sensex’s gain, increasing 2.4%. Out of 30 shares in the Sensex, 18 rose, while 12 fell In FX, Bloomberg Dollar Spot index slpped 0.2% back toward Tuesday’s lows, falling as the greenback was weaker against most of its Group-of-10 peers, SEK and JPY are the best performers in G-10, CAD underperforms. Scandinavian currencies and the yen led gains, though most G-10 currencies were trading in narrow ranges. Australia’s dollar reversed an Asia-session loss in European trading. The yen rebounded from a five-year low as investors trimmed short positions on the haven currency and amid a decline in Asian stock markets. Treasuries were generally flat in overnight trading, with the curve flatter into early U.S. session as long-end outperforms, partially unwinding a two-day selloff to start the year with Tuesday witnessing a late block sale in ultra-bond futures. 10-year yields traded as high as 1.650% ahead of the US open after being mostly flat around 1.645%; yields were richer by up to 2bp across long-end of the curve while little change from front-end out to belly, flattening 2s10s, 5s30s spreads by 0.5bp and 1.8bp; gilts outperformed in the sector by half basis point. Focus expected to continue on IG issuance, which has impacted the market in the past couple of days, and in U.S. afternoon session FOMC minutes will be released. IG dollar issuance slate includes EIB $5B 5-year SOFR and Reliance Ind. 10Y/30Y/40Y; thirteen borrowers priced $23.1b across 30 tranches Tuesday, making it the largest single day volume for U.S. high-grade corporate bonds since first week of September. European peripheral spreads widen to core. 30y Italy lags peers, widening ~2bps to Germany with order books above EU43b at the long 30y syndication. Ten-year yields shot up 8bps in New Zealand as its markets reopened following the New Year holiday. Aussie yields advanced 4bps. A 10-year sale in Japan drew a bid-cover ratio of 3.46. In commodities, crude futures were range-bound with WTI near just below $77, Brent nearer $80 after OPEC+ agreed to revive more halted production as the outlook for global oil markets improved, with demand largely withstanding the new coronavirus variant. Spot gold puts in a small upside move out of Asia’s tight range to trade near $1,820/oz. Base metals are mixed. LME nickel lags, dropping over 2%; LME aluminum and lead are up ~0.8%.  Looking at the day ahead, data releases include the December services and composite PMIs from the Euro Area, Italy, France, Germany and the US. On top of that, there’s the ADP’s December report of private payrolls from the US, the preliminary December CPI report from Italy, and December’s consumer confidence reading from France. Separately from the Federal Reserve, we’ll get the minutes of the December FOMC meeting. Market Snapshot S&P 500 futures little changed at 4,783.25 MXAP down 0.4% to 193.71 MXAPJ down 0.9% to 626.67 Nikkei up 0.1% to 29,332.16 Topix up 0.4% to 2,039.27 Hang Seng Index down 1.6% to 22,907.25 Shanghai Composite down 1.0% to 3,595.18 Sensex up 0.7% to 60,300.47 Australia S&P/ASX 200 down 0.3% to 7,565.85 Kospi down 1.2% to 2,953.97 STOXX Europe 600 up 0.1% to 494.52 German 10Y yield little changed at -0.09% Euro up 0.2% to $1.1304 Brent Futures down 0.4% to $79.72/bbl Gold spot up 0.3% to $1,819.73 U.S. Dollar Index down 0.13% to 96.13 Top Overnight News from Bloomberg The U.S. yield curve’s most dramatic steepening in more than three months has little to do with traders turning more optimistic on the economy or betting on a more aggressive timetable for raising interest rates The surge in euro-area inflation that surprised policy makers in recent months is close to its peak, according to European Central Bank Governing Council member Francois Villeroy de Galhau Some Bank of Japan officials say it’s likely the central bank will discuss the possible ditching of a long-held view that price risks are mainly on the downward side at a policy meeting this month, according to people familiar with the matter Turkish authorities are keeping tabs on investors who are buying large amounts of foreign currency and asked banks to deter their clients from using the spot market for hedging-related trades as they struggle to contain the lira’s slide Italy is trying to lock in historically low financing costs at the start of a year where inflationary and political pressures could spell an end to super easy borrowing conditions North Korea appears to have launched its first ballistic missile in about two months, after leader Kim Jong Un indicated he was more interested in bolstering his arsenal than returning to stalled nuclear talks with the U.S. A More detailed breakdown of overnight news from Newsquawk Asia-Pac equities traded mostly in the red following the mixed handover from Wall Street, where the US majors maintained a cyclical bias and the NDX bore the brunt of another sizeable Treasury curve bear-steepener. Overnight, US equity futures resumed trade with mild losses and have since been subdued, with participants now gearing up for the FOMC minutes (full Newsquawk preview available in the Research Suite) ahead of Friday’s US jobs report and several scheduled Fed speakers. In APAC, the ASX 200 (-0.3%) was pressured by its tech sector, although the upside in financials cushioned some losses. The Nikkei 225 (+0.1%) was kept afloat by the recent JPY weakness, whilst Sony Group rose some 4% after its chairman announced EV ambitions. The KOSPI (-1.2%) was dealt a blow as North Korea fired a projectile that appeared to be a ballistic missile, but this landed outside of Japan’s Exclusive Economic Zone (EEZ). The Hang Seng (-1.6%) saw its losses accelerate with the Hang Seng Tech Index tumbling over 4% as the sector tackled headwinds from Wall Street alongside domestic crackdowns. China Huarong Asset Management slumped over 50% as it resumed trade following a nine-month halt after its financial failure. The Shanghai Comp. (-1.0%) conformed to the mostly negative tone after again seeing a hefty liquidity drain by the PBoC. In the debt complex, the US T-note futures held a mild upside bias since the resumption of trade, and the US curve was somewhat steady. Participants also highlighted large short-covering heading into yesterday’s US close ahead of the FOMC minutes. Top Asian News Asian Stocks Slide as Surging Yields Squeeze Technology Sector China’s Growth Forecast Cut by CICC Amid Covid Outbreaks BOJ Is Said to Discuss Changing Long-Held View on Price Risks Gold Holds Gain With Fed Rate Hikes and Treasury Yields in Focus European equities (Stoxx 600 +0.1%) trade mixed in what has been a relatively quiet session thus far with the final readings of Eurozone services and composite PMIs providing little in the way of fresh impetus for prices. The handover from the APAC region was predominantly a soft one with Chinese bourses lagging once again with the Hang Seng Tech Index tumbling over 4% as the sector tackled headwinds from Wall Street alongside domestic crackdowns. Meanwhile, the Shanghai Comp. (-1%) conformed to the mostly negative tone after again seeing a hefty liquidity drain by the PBoC. Stateside, the ES and RTY are flat whilst the NQ lags once again after yesterday bearing the brunt of another sizeable treasury curve bear-steepener. In terms of house views, analysts at Barclays expect “2022 to be a more normal yet positive year for equities, looking for high single-digit upside and a broader leadership”. Barclays adds that it remains “pro-cyclical (Industrials, Autos, Leisure, reopening plays and Energy OW), and prefer Value to Growth”. Elsewhere, analysts at Citi stated that “monetary tightening may push up longer-dated nominal/real bond yields, threatening highly rated sectors such as IT or Luxury Goods. Alternatively, higher yields could help traditional value trades such as UK equities and Pan-European Financials”. Sectors in Europe are mostly higher, with auto names leading as Renault (+3.4%) sits at the top of the CAC, whilst Stellantis (+0.6%) has seen some support following the announcement that it is planning for a full battery-electric portfolio by 2028. Elsewhere, support has also been seen for Chemicals, Oil & Gas and Banking names with the latter continuing to be supported by the current favourable yield environment. To the downside, Food and Beverage is the clear laggard amid losses in Nestle (-2.6%) following a broker downgrade at Jefferies. Ocado (+5.5%) sits at the top of the Stoxx 600 after being upgraded to buy at Berenberg with analysts expecting the Co. to sign further deals with new and existing grocery e-commerce partners this year. Finally, Uniper (-2.4%) sits near the bottom of the Stoxx 600 after securing credit facilities totalling EUR 10bln from Fortum and KfW. Top European News U.K. Weighs Dropping Covid Test Mandate for Arriving Travelers German Energy Giant Uniper Gets $11 Billion for Margin Calls European Gas Extends Rally as Russian Shipments Remain Curbed Italian Inflation Hits Highest in More Than a Decade on Energy In FX, notwithstanding Tuesday’s somewhat mixed US manufacturing ISM survey and relatively hawkish remarks from Fed’s Kashkari, the week (and year) in terms of data and events really begins today with the release of ADP as a guide for NFP and minutes of the December FOMC that confirmed a faster pace of tapering and more hawkish dot plots. As such, it may not be surprising to see the Buck meandering broadly and index settling into a range inside yesterday’s parameters with less impetus from Treasuries that have flipped from a severe if not extreme bear-steepening incline. Looking at DXY price action in more detail, 96.337 marks the top and 96.053 the bottom at present, and from a purely technical perspective, 96.098 remains significant as a key Fib retracement level. JPY/EUR/AUD/GBP/NZD - All taking advantage of the aforementioned Greenback fade, and with the Yen more eager than others to claw back lost ground given recent underperformance. Hence, Usd/Jpy has retreated further from multi-year highs and through 116.00 to expose more downside potential irrespective of latest reports via newswire sources suggesting the BoJ is expected to slightly revise higher its inflation forecast for the next fiscal year and downgrade the GDP outlook for the year ending in March. Similarly, the Euro is having another look above 1.1300 even though EZ services and composite PMIs were mostly below consensus or preliminary readings and German new car registrations fell sharply, while the Aussie is retesting resistance around 0.7250 and its 50 DMA with some assistance from firm copper prices, Cable remains underpinned near 1.3550 and the 100 DMA and the Kiwi is holding mainly above 0.6800 in the face of stronger Aud/Nzd headwinds. Indeed, the cross is approaching 1.0650 in contrast to Eur/Gbp that is showing signs of changing course following several bounces off circa 0.8333 that equates to 1.2000 as a reciprocal. CHF/CAD - The Franc and Loonie appear a bit less eager to pounce on their US peer’s retrenchment, as the former pivots 0.9150 and latter straddles 1.2700 amidst a downturn in crude pre-Canadian building permits and new house prices. SCANDI/EM - Little sign of any fallout from a slowdown in Sweden’s services PMI as overall risk sentiment remains supportive for the Sek either side of 10.2600 vs the Eur, but the Nok is veering back down towards 10.0000 in line with slippage in Brent from Usd 80+/brl peaks reached on Tuesday. Elsewhere, the Zar is shrugging off a sub-50 SA PMI as Gold strengthens its grip on the Usd 1800/oz handle and the Cnh/Cny are still underpinned after another PBoC liquidity drain and firmer than previous midpoint fix on hopes that cash injections might be forthcoming through open market operations into the banking system from the second half of January to meet rising demand for cash, according to China's Securities Journal. Conversely, the Try has not derived any real comfort from comments by Turkey’s Finance Minister underscoring its shift away from orthodox policies, or insistence that budget discipline will not be compromised. In commodities, crude benchmarks are currently little changed but have been somewhat choppy within a range shy of USD 1/bbl in European hours, in-spite of limited fresh newsflow occurring. For reference, WTI and Brent reside within USD 77.26-76.53/bbl and USD 80.25-79.56/bbl parameters respectively. Updates for the complex so far include Cascade data reporting that gas flows via the Russian Yamal-Europe pipeline in an eastward direction have reduced. As a reminder, the pipeline drew scrutiny in the run up to the holiday period given reverse mode action, an undertaking the Kremlin described as ‘operational’ and due to a lack of requests being placed. Separately, last nights private inventories were a larger than expected draw, however, the internals all printed builds which surpassed expectations. Today’s EIA release is similar expected to show a headline draw and builds amongst the internals. Elsewhere, and more broadly, geopolitics remain in focus with Reuters sources reporting that a rocket attack has hit a military base in proximity to the Baghdad airport which hosts US forces. Moving to metals, spot gold and silver are once again fairly contained though the yellow metal retains the upside it derived around this point yesterday, hovering just below the USD 1820/oz mark. US Event Calendar 7am: Dec. MBA Mortgage Applications -5.6%, prior -0.6% 8:15am: Dec. ADP Employment Change, est. 410,000, prior 534,000 9:45am: Dec. Markit US Composite PMI, prior 56.9 9:45am: Dec. Markit US Services PMI, est. 57.5, prior 57.5 2pm: Dec. FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap As you may have seen from my CoTD yesterday all I got for Xmas this year was Omicron, alongside my wife and two of our three kids (we didn’t test Bronte). On Xmas Day I was cooking a late Xmas dinner and I suddenly started to have a slightly lumpy throat and felt a bit tired. Given I’d had a couple of glasses of red wine I thought it might be a case of Bordeaux-2015. However a LFT and PCR test the next day confirmed Covid-19. I had a couple of days of being a bit tired, sneezing and being sniffly. After that I was 100% physically (outside a of bad back, knee and shoulder but I can’t blame that on covid) but am still sniffly today. I’m also still testing positive on a LFT even if I’m out of isolation which tells me testing to get out of isolation early only likely works if you’re completely asymptomatic. My wife was similar to me symptom wise. Maybe slightly worse but she gets flu badly when it arrives and this was nothing like that. The two kids had no real symptoms unless being extremely annoying is one. Indeed spending 10 days cooped up with them in very wet conditions (ie garden activity limited) was very challenging. Although I came out of isolation straight to my home office that was still a very welcome change of scenery yesterday. The covid numbers are absolutely incredible and beyond my wildest imagination a month ago. Yesterday the UK reported c.219k new cases, France c.272k and the US 1.08 million. While these are alarming numbers it’s equally impressive that where the data is available, patients on mechanical ventilation have hardly budged and hospitalisations, while rising, are so far a decent level below precious peaks. Omicron has seen big enough case numbers now for long enough that even though we’ve had another big boost in cases these past few days, there’s nothing to suggest that the central thesis shouldn’t be anything other than a major decoupling between cases and fatalities. See the chart immediately below of global cases for the exponential recent rise but the still subdued levels of deaths. Clearly there is a lag but enough time has passed that suggests the decoupling will continue to be sizeable. It seems the main problem over the next few weeks is the huge number of people self isolating as the variant rips through populations. This will massively burden health services and likely various other industries. However hopefully this latest wave can accelerate the end game for the pandemic and move us towards endemicity faster. Famous last words perhaps but this variant is likely milder, is outcompeting all the others, and our defences are much, much better than they have been (vaccines, immunity, boosters, other therapeutic treatments). Indeed, President Biden directed his team to double the amount of Pfizer’s anti-covid pill Paxlovid they order; he called the pill a game changer. So a difficult few weeks ahead undoubtedly but hopefully light at the end of the tunnel for many countries. Prime Minister Boris Johnson noted yesterday that Britain can ride out the current Omicron wave without implementing any stricter measures, suggesting that learning to live with the virus is becoming the official policy stance in the UK. The head scratcher is what countries with zero-covid strategies will do faced with the current set up. If we’ve learnt anything from the last two years of covid it is that there is almost no way of avoiding it. Will a milder variant change such a stance? Markets seem to have started the year with covid concerns on the back burner as day 2 of 2022 was a lighter version of the buoyant day 1 even if US equities dipped a little led by a big under-performance from the NASDAQ (-1.33%), as tech stocks got hit by higher discount rates with the long end continuing to sell off to start the year. Elsewhere the Dow Jones (+0.59%) and Europe’s STOXX 600 (+0.82%) both climbed to new records, with cyclical sectors generally outperforming once again. Interestingly the STOXX Travel & Leisure index rose a further +3.11% yesterday, having already surpassed its pre-Omicron level. As discussed the notable exception to yesterday’s rally were tech stocks, with a number of megacap tech stocks significantly underperforming amidst a continued rise in Treasury yields, and the rotation towards cyclical stocks as investors take the message we’ll be living with rather than attempting to defeat Covid. The weakness among that group meant that the FANG+ index fell -1.68% yesterday, with every one of the 10 companies in the index moving lower, and that weakness in turn meant that the S&P 500 (-0.06%) came slightly off its record high from the previous session. Showing the tech imbalance though was the fact that the equal weight S&P 500 was +0.82% and 335 of the index rose on the day. So it was a reflation day overall. Staying with the theme, the significant rise in treasury yields we saw on Monday extended further yesterday, with the 10yr yield up another +1.9bps to 1.65%. That means the 10yr yield is up by +13.7bps over the last 2 sessions, marking its biggest increase over 2 consecutive sessions since last September. Those moves have also coincided with a notable steepening in the yield curve, which is good news if you value it as a recessionary indicator, with the 2s10s curve +11.3bps to +88.7bps over the last 2 sessions, again marking its biggest 2-day steepening since last September Those moves higher for Treasury yields were entirely driven by a rise in real yields, with the 10yr real yield moving back above the -1% mark. Conversely, inflation breakevens fell back across the board, with the 10yr breakeven declining more than -7.0bps from an intraday peak of 2.67%, the highest level in more than six weeks, which tempered some of the increase in nominal yields. The decline in breakevens was aided by the release of the ISM manufacturing reading for December, since the prices paid reading fell to 68.2, some way beneath the 79.3 reading that the consensus had been expecting. In fact, that’s the biggest monthly drop in the prices paid measure in over a decade, and leaves it at its lowest level since November 2020. Otherwise, the headline reading did disappoint relative to the consensus at 58.7 (vs. 60.0 expected), but the employment component was above expectations at 54.2 (vs. 53.6 expected), which is its highest level in 8 months and some promising news ahead of this Friday’s jobs report. Staying with US employment, the number of US job openings fell to 10.562m in November (vs. 11.079m expected), but the number of people quitting their job hit a record high of 4.5m. That pushed the quits rate back to its record of 3.0% and just shows that the labour market continues to remain very tight with employees struggling to hire the staff needed. This has been our favourite indicator of the labour market over the last few quarters and it continues to keep to the same trend. Back to bonds and Europe saw a much more subdued movement in sovereign bond yields, although gilts were the exception as the 10yr yield surged +11.7bps as it caught up following the previous day’s public holiday in the UK. Elsewhere however, yields on bunds (-0.2bps), OATs (-1.1bps) and BTPs (+0.9bps) all saw fairly modest moves. Also of interest ahead of tonight’s Fed minutes, there was a story from the Wall Street Journal late yesterday that said Fed officials are considering whether to reduce their bond holdings, and thus beginning QT, in short order. Last cycle, the Fed kept the size of its balance sheet flat for three years after the end of QE by reinvesting maturing proceeds before starting QT. This iteration of QE is set to end in March, so any move towards balance sheet rolloff would be a much quicker tightening than last cycle, which the article suggested was a real possibility. As this cycle has taught us time and again, it is moving much faster than historical precedent, so don’t rely on prior timelines. Balance sheet policy and the timing of any QT will be a major focus in tonight’s minutes, along with any signals for the timing of liftoff and path of subsequent rate hikes. Overnight in Asia markets are trading mostly lower with the KOSPI (-1.45%), Hang Seng (-0.85%), Shanghai Composite (-0.81%) and CSI (-0.67%) dragged down largely by IT stocks while the Nikkei (+0.07%) is holding up better. In China, Tencent cut its stake in a Singapore based company yesterday by selling $ 4 billion worth shares amidst China's regulatory crackdown with investors concerned they will do more. This has helped push the Hang Seng Tech Index towards its lowest close since its inception in July 2020 with Tencent and companies it invested in losing heavily. Moving on, Japan is bringing forward booster doses for the elderly while maintaining border controls in an effort to contain Omicron. Futures are indicating a weaker start in DM markets with the S&P 500 (-0.25%) and DAX (-0.11%) both tracking their Asian peers. Oil prices continued their ascent yesterday, with Brent Crude (+1.20%) hitting its highest level since the Omicron variant first emerged on the scene. Those moves came as the OPEC+ group agreed that they would go ahead with the increase in output in February of 400k barrels per day. And the strength we saw in commodities more broadly last year has also continued to persist into 2022, with copper prices (+1.12%) hitting a 2-month high, whilst soybean prices (+2.49%) hit a 4-month high. Looking at yesterday’s other data, German unemployment fell by -23k in December (vs. -15k expected), leaving the level of unemployment at a post-pandemic low of 2.405m in December. Finally, the preliminary French CPI reading for December came in slightly beneath expectations on the EU-harmomised measure, at 3.4% (vs. 3.5% expected). To the day ahead now, and data releases include the December services and composite PMIs from the Euro Area, Italy, France, Germany and the US. On top of that, there’s the ADP’s December report of private payrolls from the US, the preliminary December CPI report from Italy, and December’s consumer confidence reading from France. Separately from the Federal Reserve, we’ll get the minutes of the December FOMC meeting. Tyler Durden Wed, 01/05/2022 - 08:07.....»»

Category: blogSource: zerohedgeJan 5th, 2022