Coffee With Greta: Fed Shrugs Off Recession Fears
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DJIA Futures: -157 (-0.5%)
SPX Futures: -25 (-0.6%)
NASDAQ Futures: -97 (-0.7%)
Good morning friends!
Futures are lower, giving up Wednesday’s relief rally prompted by the Fed decision.
Let’s get right to it!
Largest Rate Hike in 22 Years
The Federal Reserve approved its largest rate hike in more than two decades Wednesday.
The Federal Open Market Committee voted, as expected, to raise the federal funds rate by 0.5% to a range of 0.75% to 1.00%.
That’s the largest increase since 2000.
The FOMC also voted to begin the balance sheet reduction in June.
Starting June 1, $30 billion in Treasury securities and $17.5 billion in mortgage-backed securities will be rolled off per month.
That pace will increase to $60 billion in Treasury securities and $35 billion in mortgage-back securities after three months.
In his news conference after the meeting concluded, Fed Chair Jerome Powell said “Inflation is much too high and we understand the hardship it is causing. We’re moving expeditiously to bring it back down”.
Powell said more 0.5% rate hikes are on the table for the future but shut down the market’s expectation for larger hikes.
He said “75-basis points is not something the committee is actively considering”.
Powell said the Fed believes “the American economy is very strong and well-positioned to handle tighter monetary policy” and they will be able to achieve a “soft or softish” landing.
Weekly Jobless Claims Rise More Than Expected
Weekly jobless claims rose more than expected as the labor market remains tight.
The Labor Department reported 200,000 Americans filed initial claims for unemployment benefits last week.
That was an increase of 19,000 from the previous week and higher than economists’ expectations for 182,000.
Continuing jobless claims fell by 24,000 to 1.384 million in the week ending April 23.
Labor Productivity Plunges, Costs Surge
U.S. worker productivity tumbled 7.5% in the first quarter, marking the fastest decline since 1947.
Productivity is a measure of worker output against number of hours worked.
While productivity dropped sharply, labor costs soared 11.6% last quarter.
That brings the increase over the past 4 quarters to 7.2%, the largest gain since Q3 1982.
Economists were expecting productivity to fall 5.2% and unit labor costs to rise 10.5%
Oil Prices Climb on Supply Worries
Oil prices are rising on new supply concerns after the EU laid out its plan to phase-out Russian imports.
West Texas Intermediate crude futures are up 1.2% to over $109 bbl while Brent crude futures are up 1.4% to nearly $112 bbl.
OPEC+ also met today, sticking to its planned modest increase in production even amid uncertainty over supply in the market.
The group will increase production by just 432,000 barrels per day in June.
Meantime, the U.S. Energy Information Administration reported fuel inventories rose by 1.2 million barrels last week.
That increase came as the U.S. released more from its strategic reserve.
Shell Reports Highest Quarterly Profit Since 2008
Shell (SHEL) shares are up 0.9% ahead of the open after reporting its highest quarterly profit since 2008 in Q1.
The oil giant reported an adjusted profit of $9.1 billion or $1.20 per share.
That beat analysts’ expectations for $1.11 per share.
The surging profits came as commodity prices soared in the quarter.
Shell said it took $3.9 billion in post-tax charges related to pulling its business out of Russia.
The company increased its dividend by about 4% to $0.25 per share and said $4 billion of its $8.5 billion share buyback program is complete.
The remaining $4.5 billion in buybacks are scheduled to be complete before Shell announces Q2 earnings.
Anheuser-Busch Inbev Slips Despite Q1 Earnings Beat
Anheuser-Busch InBev (BUD) shares are down 0.6% in premarket trade despite beating Q1 expectations.
The world’s largest brewer said EBITDA rose 7.4% year-over-year to $4.49 billion or $0.67 per share.
Revenue was up 11.1% to $13.2 billion.
That topped analysts’ expectations for EBITDA to rise just 4.6% and revenue to increase by 7.6%.
AB InBev forecast 2022 EBITDA growth between 4% and 8%
Shopify Tumbles on Earnings Miss
Shopify (SHOP) shares are plunging 13.2% ahead of the open after missing Q1 expectations.
The e-commerce company reported adjusted earnings of $0.20 per share on $1.2 billion in revenue.
That missed analysts’ expectations for adjusted EPS of $0.64 on $1.24 billion in revenue.
Shopify also announced plans to spend $2.1 billion to acquire fulfillment technology provider Deliverr.
That deal will be 80% cash 20% Class A subordinate voting shares of Shopify.
Shopify’s CEO said, “Our goal is to not only level the playing field for independent businesses, but tilt it in their favor – turning their size and agility into a superpower”.
Sunrun Rallies on Strong Solar Demand
Sunrun (RUN) shares are rallying 9.4% in premarket trade after reporting stronger than expected Q1 sales.
The solar company reported a loss of $0.42 per share on $495.8 million in revenue.
That was steeper than analysts’ expectations for a $0.17 per share loss but better than estimates for $401.3 million in revenue.
Sunrun’s customer orders jumped 39% year-over-year as demand rose due to surging utility costs across the U.S.
The company added 29,463 new customers in Q1, up 20% compared to a year ago and bringing the total to roughly 690,000.
Sunrun also said it implemented “meaningful” price increases during the quarter to offset higher costs.
The company hiked its guidance, expecting installed solar capacity growth of 25% or more in 2022.
That’s up from previous guidance for 20% growth this year.
eBay Tumbles on Lower Guidance
eBay (EBAY) shares are dropping 7.4% ahead of the open after beating Q1 expectations but cutting its full-year outlook.
The online retail company reported adjusted earnings of $1.05 per share on $2.48 billion in revenue.
That was in-line with eBay’s previous guidance and beat analysts’ expectations for adjusted EPS of $1.03 on $2.46 billion in revenue.
Annual active buyers fell to 142 million in the quarter.
eBay forecast adjusted full-year earnings between $3.90 to $4.10 per share and $9.6 billion to $9.9 billion in revenue.
That’s down from previous guidance for adjusted EPS between $4.20 to $4.40 and revenue between $10.3 billion to $10.5 billion.
Etsy Plunges on Weak Q2 Forecast
Etsy (ETSY) shares are tumbling 12.4% in premarket trade after forecasting weak Q2 sales.
The e-commerce company reported Q1 earnings of $0.60 per share on $579.3 million in revenue.
That topped analysts’ expectations for EPS of $0.56 on $576 million in revenue.
But Etsy’s Q2 forecast was weak, with the company citing high inflation as a top issue.
Etsy expects revenue to fall to between $540 million and $590 million this quarter vs analysts’ expectations for $627 million.
Musk Secures More Funding for Twitter Deal
Twitter (TWTR) shares are rising 2.8% ahead of the open after Elon Musk secured more funding for his $44 billion takeover of the company.
A new SEC filing shows Oracle (ORCL) co-founder Larry Ellison, venture capital firm Sequoia, and crypto exchange Binance are investors in the deal.
Musk has secured $7.14 billion in total.
Ellison is contributing $1 billion, making him the biggest backer.
Sequoia is contributing $800 million and Binance committed $500 million.
The new funding will allow Musk to cut the margin loan against his Tesla (TSLA) stock down to $6.25 billion from $12.5 billion.
Meta Platforms Slips After Announcing Plan to Slow Hiring
Meta Platforms (FB) shares are down 1.7% in premarket trade after the company confirmed it is slowing the pace of hiring.
In an email to CNBC Wednesday, a Meta spokesperson said “We regularly re-evaluate our talent pipeline according to our business needs and in light of the expense guidance given for this earnings period, we are slowing its growth accordingly”.
The company plans to stop or slow hiring for mid-level and senior-level jobs.
Meta already paused hiring entry-level engineers in recent weeks.
In Case You Missed It
- The U.S. services sector expanded less than expected in April. The ISM Services PMI slipped to 57.1% last month from 58.3% in March. That missed economists’ expectations for the index to rise to 58.5%. Business owners raised concerns about inflation, as the prices index hit an all-time high at 84.6%.