Daily News Snapshots
Microsoft Cuts Earnings and Revenue Guidance, Citing a Stronger U.S. Dollar https://www.wsj.com/articles/microsoft-cuts-earnings-revenue-guidance-citing-foreign-exchange-11654176285?mod=hp_lead_pos3
The software giant said in a securities filing Thursday that it now expects fiscal fourth-quarter sales of between $51.94 billion and $52.74 billion, down from its prior guidance of $52.4 billion to $53.2 billion. The quarter ends June 30.
Earnings are expected to be between $2.24 a share and $2.32 a share, down from prior guidance of $2.28 a share to $2.35 a share.
Microsoft shares fell 2.6% in early trading to $265.31. They are down around 21% year to date.
Economic weakness in other parts of the world has helped propel the U.S. dollar to multidecade highs against its trading partners, which comes as U.S. inflation is at or near its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is up more than 6% so far this year and hit its highest level since 2002 last month. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling.
Fed’s Lael Brainard Says Too Soon to Say If Pace of Rate Increases Can Slow https://www.wsj.com/articles/feds-lael-brainard-says-too-soon-to-say-if-inflation-has-peaked-11654180926
Federal Reserve Vice Chairwoman Lael Brainard said she supported plans to raise interest rates by a half-percentage point at a meeting later this month and again in July and batted down speculation that the central bank would take a break from raising rates after that.
“Right now, it’s very hard to see the case for a pause” in September, said Ms. Brainard in an interview Thursday on CNBC. “We’ve still got a lot of work to do to get inflation down to our 2% target.” Ms. Brainard also said it was premature to conclude that inflation had peaked.
With officials largely united on the need for half-point increases at the Fed’s June and July policy meetings, the debate has shifted to what should occur after that.
Ms. Brainard, who serves as an influential member of the Fed’s policy leadership team, said the next several months of data on price pressures and economic activity would be important in determining whether the Fed continued to raise rates in September by a half percentage point or by the more traditional quarter-point increment.
Federal Reserve’s Portfolio Runoff Has Begun https://www.wsj.com/articles/how-the-feds-portfolio-runoff-will-work-11654122439
Tiger Global’s Hedge Fund Lost 52% for the Year Through May https://www.wsj.com/articles/tiger-global-s-hedge-fund-lost-52-for-the-year-through-may-11654190073?mod=hp_lista_pos3
Tiger Global Management’s brutal year is getting even tougher, with losses at the firm’s high-profile hedge fund ballooning to 52% through May.
Tiger reported the drop, which extends a 44% loss recorded through April, in a note to its investors Thursday. The firm’s long-only fund lost 20.6% in May, bringing its losses for the year to 61.7%. The losses prompted Tiger to cut its management fee by 0.5% through December 2023 in both its hedge fund and long-only fund.
Tiger also said that starting in June, it would pay out investors exiting from those funds with both cash and shares in a new side pocket it would create containing stakes in private companies that would be paid out as those investments are realized. Tiger, which manages about $75 billion across its public and private-equity funds, said the value of its private investments had become a far larger proportion of its funds as its portfolio of public stocks continued to lose money.
Biden Says No Short-Term Fix to High Energy, Grocery Prices https://www.wsj.com/articles/treasury-secretary-yellen-says-she-was-wrong-about-inflation-11654089503?mod=hp_major_pos1#cxrecs_s
President Biden warned there was little the administration can do in the short term to lower high energy and food prices as the White House struggles to contain the fallout of sky-high inflation.
Soaring prices have become a major liability for the president and Democratic Party as they seek to bolster their standing with voters ahead of November’s midterm elections.
“There’s a lot going on right now, but the idea we’re going to be able to, you know, click a switch, bring down the cost of gasoline, is not likely in the near term, nor is it with regard to food,” Mr. Biden said Wednesday.
Gasoline prices hit a record-high $4.67 for a gallon of regular on Wednesday, according to AAA. Meanwhile, annual inflation is trending above 8%, a four-decade high, according to the Labor Department’s consumer-price index.
U.S. Jobless Benefits Fell Last Week, Extending Stretch of Low Filings https://www.wsj.com/articles/u-s-jobless-benefits-fell-last-week-extending-stretch-of-low-filings-to-four-months-11654174339?mod=hp_major_pos2#cxrecs_s
New applications for unemployment benefits dropped last week, marking four months of historically low claims in a tight U.S. labor market.
Initial jobless claims, a proxy for layoffs, fell to 200,000 last week from the previous week’s revised level of 211,000, the Labor Department said Thursday.
The weekly tally of new unemployment claims has remained near its lowest levels ever for months as employers hold on to workers and try to hire more, with the gap between job openings and unemployed workers seeking jobs remaining historically large. The four-week average for claims, which smooths out volatility in the weekly figures, dipped to 206,500 last week from 207,000 the previous week.
Calendar Events Today:
8:30am Nonfarm payrolls
8:30am unemployment rate
8:30am labor force participation
9:45am S&P global U.S. service PMI
Commentary:
Economics Calendar:
For economic calendar, we have nonfarm payrolls today. Consensus expects the employment number to underperform last months at 328,000 vs. 428,000, consistent with the decline of private payroll announced earlier.
Lael Brainard will speak today. If Brainard speaks of potentially pausing rate hike or see risks of recessions contrasting from her statement last week, market recovery could overshoot. I’ll probably be selling into the rip.
Equity Market:
Market continues to recover rapidly. $NDX close at 12,892. Market on trailing six months basis however remain in “bear” zone. Last rally topped at ~15,000. At current momentum however, we could see the rally extend to breezes through a resistance level of 13,300. And hold between said resistance and 14,500.
Rates Market:
I think 2s have room to run until the carry vs. deposits breakeven at 3%. And 10y2y spread continue to widen. If negative spread signals unhealthy economy, positive spread could imply the opposite. I see that not only the 10y2y spread continue to widen, but trend is also sustaining positively. It briefly paused at resistance level at 2.65% but continued its upward trend. Also, feds are rolling off of some matured debts. They could be looking to sell sometime to adjust their portfolio composition as well. This could potentially put another 25-50bps on the 10s.