Coffee With Greta: Powell Spooks the Bond Market
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DJIA Futures: -104 (-0.3%)
SPX Futures: -8 (-0.2%)
NASDAQ Futures: +7 (+0.1%)
Good morning friends!
Futures are mixed as yields spike following a hawkish speech from the Fed Chair.
Let’s get right to it!
Short-Term Yields Spike
Short-term Treasury yields are rallying after hawkish comments from the Fed Chair on Thursday.
The 1-year Treasury yield is up 18 basis points to 2.07% while the 2-year yield is up 16 basis points to 2.74%.
And the curve between the 5-year and 30-year yields is inverted.
The 5-year yield is at 2.97% with the 30-year yield at 2.91%.
Powell Spooks Traders
Fed Chair Jerome Powell spooked Wall Street Thursday as he officially put his support behind larger rate hikes.
Speaking at an IMF panel, Powell said he thinks “there is something to be said for front-end loading any accommodation one thinks is appropriate. … I would say 50 basis points will be on the table for the May meeting.”
Several other officials, including St Louis Fed President James Bullard, have previously called for “front-loading” rate hikes to tackle inflation this year.
The Fed Chair said, “It’s absolutely essential to restore price stability. Economies don’t work without price stability.”
He also said inflation may have peaked in March but the bank is “not going to count on it”.
CME Group’s FedWatch Tool shows 99.8% of traders expect a 0.5% rate hike in May.
The market expects the federal funds rate to be at 2.75% by year-end.
The Fed meets again May 3-4.
Snap Misses Q1 Expectations
Snap (SNAP) shares are up 1% ahead of the open after reporting a “challenging” Q1.
The Snapchat parent company reported a loss of $0.02 per share vs analysts’ expectations for earnings of $0.01 per share.
The company’s $1.06 billion in revenue was shy of the $1.07 billion Wall Street was looking for.
But Snap reported strong user numbers.
Global Daily Active Users rose 18% year-over-year to 332 million vs 330 million expected.
Average revenue per user jumped 16.8% year-over-year to $3.20.
Snap forecast Q2 revenue growth between 20% and 25%, lower than analysts’ expectations for 28%.
The company expects to have 344 million users by the end of June.
Kimberly-Clark Earnings
Kimberly-Clark (KMB) shares are rallying 5.5% in premarket trade after beating Q1 expectations.
The consumer products company reported adjusted earnings of $1.35 per share on $5.095 billion in revenue.
That was better than analysts’ expectations for adjusted EPS of $1.24 on $4.916 billion in revenue.
Kimberly-Clark hiked its full-year guidance.
The company now expects sales to rise 3% to 4% in 2022 vs the previous forecast for 1$% to 2% growth.
Kimberly-Clark reiterated its adjusted EPS guidance at $5.60 to $6.00.
Old Navy CEO is Out as Gap Slashes Outlook
Gap Inc (GPS) shares are tumbling 15.9% ahead of the open after the company slashed its fiscal Q1 2022 forecast.
Gap also announced the CEO of its Old Navy division, Nancy Green, will step down this week.
The company now expects its revenue loss will be in the low to mid-teens vs previous guidance for a loss in the mid to high-single digits.
Gap cited “macro-economic dynamics as well as the execution challenges at the Old Navy brand” as reasons for that downgrade.
The retailer will report earnings on May 26 and said it will provide updated full-year guidance then.
Oil Prices Fall
Oil prices are falling today as growth concerns outweigh supply worries.
West Texas Intermediate crude futures are down 1.3% to $102.43 bbl while Brent crude futures are down 1.3% to $106.94 bbl.
The drop comes as China’s largest city, Shanghai, is slowly emerging out of a Covid lockdown.
The city announced a new round of mitigation measures today including daily testing.
The European Union is still considering a ban of Russian oil but has not made a decision.
In Case You Missed It
- Weekly jobless claims fell less than expected last week. The Labor Department reported Thursday, 184,000 Americans filed initial claims last week vs expectations for 180,000. Continuing claims fell by 58,000 to 1.417 million in the week ending April 9.
- A new SEC filing shows Tesla (TSLA) CEO Elon Musk has secured $46.5 billion to finance a tender offer for Twitter (TWTR). That funding includes $21 billion of his own money and $25.5 billion in debt financing from Morgan Stanley Senior Funding. The tender offer comes as Twitter’s board has not responded to Musk’s original $43 billion cash offer.
- Freddie Mac’s average 30-year fixed mortgage rate jumped to 5.11% over the past week. It’s the first time that rate has been above 5% since 2011. The 30-year rate was 2.97% at the same time a year ago. The 15-year fixed-rate rose to 4.38% from 4.17% a week ago and 2.29% a year ago.