Daily Markets: Treasury Yields Rise on Recent St. Louis Fed Bullard Comments on Interest Rates, Recession

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session mixed on various reactions to China’s pledge to support Covid hit sectors of the economy, a persistently strong dollar and anticipation of an increasingly aggressive U.S. Federal Reserve. China’s Shanghai Composite ended the day almost flat, down 0.05% while India’s Sensex and Hong Kong’s Hang Seng closed off 1.23% and 2.28%, respectively. Taiwan’s TAIEX rose 0.56%, Australia’s ASX All Ordinaries gained 0.58%, Japan’s Nikkei advanced 0.69% and Korea’s KOSPI led the way closing 0.95% higher on the day. By mid-day trading, European equity indices are down across the board, and U.S. futures point to a soft market open later this morning as Treasury yields and oil prices inch higher yet again.

Helping this latest leg up in Treasury yields are comments from St. Louis Fed President James Bullard calling for interest rates to hit 3.5% by year-end. Yesterday, he reiterated his desire to see a 50 basis point hike in the upcoming May meeting but also stated that while “More than 50 basis points is not [his] base case” that he “would not rule it out.” Bullard downplayed near-term recession fears and sees the U.S. economy growing above its long-term trend (roughly 2%) through 2022 and 2023 and sees unemployment tightening to below 3%. 

As investors and traders puzzle through how the Fed will navigate a soft landing, we have a noticeable jump in the number of March quarter earnings reports today as the earnings season moves beyond financial companies, offering a broader look at how the first quarter of 2022 fared as well as prospects for the current one. When we listen to company earnings conference calls and review the corresponding transcripts, we suspect words like “inflation,” “cost pressure,” “price increase,” and “supply chain” will be used rather frequently. We’ll see how frequently those words are used and what it means for earnings expectations for the balance of 2022.

Data Download

International Economy

The World Bank has lowered its annual global growth forecast for 2022 by nearly a full percentage point, from 4.1% down to 3.2%, citing the pressure that Russia’s invasion of Ukraine has placed on the global economy.

Domestic Economy

8:30 AM ET will see the release of March U.S. Housing Starts & Building Permits, which are expected to drop slightly to 1.748 million from the previously reported 1.769 million in February. Similar to yesterday’s Housing Market Index meeting expectations would put this figure below the January 2022 release but aside from the post-2020 rebound in activity still represents a 10-year high.

 Markets

The S&P 500 closed little changed yesterday as investors contended with upward pressure in interest rates and oil prices as well as growth concerns attributed to the Fed, China's COVID restrictions, and the Ukraine-Russia situation. The Nasdaq Composite closed down modestly as did the Dow Jones Industrial Average while the small-cap Russell 2000 fell 0.7%. Five of the 11 S&P sectors finished in the green. Energy led the way, rising by 1.5%. Health Care was the biggest decliner on the session, dropping by 1.1%. Including yesterday’s moves, here’s how the major market indicators stack up so far in 2022:

• Dow Jones Industrial Average: -5.3%
• S&P 500: -7.9%
• Nasdaq Composite: -14.8% 
• Russell 2000: -11.4%
• Bitcoin (BTC-USD): -14.6%
• Ether (ETH-USD): -19.0%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Halliburton (HAL), Hasbro (HAS), Johnson & Johnson (JNJ), Lockheed Martin (LMT) and Truist (TFC) are expected to report their quarterly results. 

China Easter Airlines (CEA) reported its March passenger traffic volume (measured by revenue passenger-kilometres) decreased by 69.32% YoY amid the sharp increase in Omicron cases in many China provinces and cities. 

Reports suggest Apollo Global Management (APO) is considering backing a bid for Twitter (TWTR) by Elon Musk or another suitor.

Netgear (NTGR) issued downside guidance for its March quarter with revenue of $202-$212 million vs. its prior guidance of $225-$240 million and the $233.4 million consensus. According to the company, the U.S. consumer WiFi market, which exited 2021 at approximately 15% above 2019 levels, declined in the first quarter of 2022, ending roughly flat to 2019 levels. The supply of components to NetGear’s factories was severely disrupted in March due to COVID-induced lockdowns in Shenzhen, resulting in a meaningful lost opportunity to deliver higher SMB revenue in the quarter.

Equity LifeStyle Properties (ELS) increased its guidance for full-year 2022 after Q1 results beat the consensus estimate with core portfolio RV and marina rental income rising 21.4% and manufactured housing rental income increasing 5.4%.

Taiwan Semiconductor Manufacturing's (TSM) forecasted sales in the global semiconductor industry to climb between 11% to 13% in 2022.

BMW (BMWYY) shared it has resumed full production at its two plants in Shenyang in Liaoning after an almost month-long shutdown while Robert Bosch GmbH (BSWQY), the world’s biggest auto-parts maker, said its components factory in Jilin’s provincial capital Changchun reopened last week. Reports indicate Shanghai officials are encouraging some 600 companies to restart output after pandemic lockdowns confined a population of ~25 million to a virtual house or neighborhood isolation for weeks.

The Biden administration issued guidance to federal agencies yesterday requiring the material purchased for projects funded by the infrastructure spending package passed in 2021 must be produced within the U.S., while also setting up a process to waive the requirements in case there are not enough domestic producers or the material costs too much. Stocks of potentially related steel producers include US Steel (X), Cleveland-Cliffs (CLF), Nucor (NUE), Commercial Metals (CMC), and Steel Dynamics (STLD).

Plug Power (PLUG) announced an agreement with Walmart (WMT) for an option to deliver up to 20 tons per day of liquid green hydrogen to power material handling lift trucks across Walmart distribution and fulfillment centers in the U.S.

AppTech Payments (APCX) announced it will acquire Hothand Inc., a patent holding company that owns the intellectual property rights to a wide array of mobile credit/debit transaction technologies and mobile search, location, offer, and payment fields.

IPOs

No companies are expected to price their IPO offerings this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

IBM (IBM), Interactive Brokers (IBKR), and Netflix (NFLX) will be among the companies slated to report their latest quarterly results. Investors should remain on watch for companies that pre-announce their March quarter results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Wednesday, April 20

• Germany: PPI – March
• Eurozone: Trade Balance - February
• US: Weekly MBA Mortgage Applications 
• US: Existing Home Sales – March 
• US: Weekly EIA Crude Oil Inventories 

Thursday, April 21

• Eurozone: Consumer Price Index – March
• Eurozone: Consumer Confidence (Flash) - April
• US: Weekly Initial & Continuing Jobless Claims
• US: Philadelphia Fed Index – April
• US: Leading Indicators – March
• US: Weekly EIA Natural Gas Inventories 

Friday, April 22

• Japan: CPI – March
• Japan: Markit/JMMA PMI Manufacturing (Preliminary) – April
• UK: Retail Sales – March
• Eurozone: S&P Global Manufacturing & Services PMI (Preliminary) – April
• UK: CIPS Manufacturing & Services PMI (Preliminary) - April
• US: S&P Global Manufacturing & Services PMI (Preliminary) – April

Thought for the Day

“Thinking is difficult that’s why most people judge.” ~ Carl Jung

Disclosures

• Walmart (WMT), IBM (IBM) are constituents of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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