Dow dropped 391, decliners over advancers 3-1 & NAZ was off 60. The MLP index sank 10 to the 205s & the REIT index pulled back 8+ to the 481s. Junk bond funds retreated & Treasuries were heavily bought while stocks were being sold (more below). Oil nosedived 5+ to the 96s & gold tumbled 36 to 1896.
AMJ (Alerian MLP index tracking fund)
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Treasury yields slumped, as fears of a potential slowdown in global economic growth loomed. The yield on the benchmark 10-year Treasury note dropped 12.8 basis points to 2.778% & the yield on the 30-year Treasury bond moved 8.1 basis points lower to 2.863%. Yields move inversely to prices & 1 basis point is equal to 0.01%. Treasury yields moved sharply lower today, after having spiked at the end of last week. Concerns about a Covid breakout in China marked the latest catalyst with Asian stock markets cratering on fears about a slowdown in the region because of lockdowns. Market participants continued to digest the latest Federal Reserve updates, with some worried the central bank's move to aggressively tighten monetary policy to address inflation could contract economic growth. Fed Chair Jerome Powell said that a 50-basis-point interest rate hike was “on the table” for the May policy meeting. The 5-year Treasury yield then topped 3% on Fri, surging above the interest rate on the 30-year gov bond. This is also known as a “yield curve inversion” & indicates a lack of investor confidence about the economy, given they are selling out of shorter-dated debt in favor of long-dated bonds. The 5-year yield slid more than 8 basis points to 2.861% today. Investor focus this week will likely be on the Mar personal consumption expenditures price index, as a key measure of inflation, which is slated to come out on Fri.
Treasury yields slump to start the week as fears of a Covid breakout in China grow
Coca-Cola (KO), a Dow stock & Dividend Aristocrat, reported quarterly earnings that topped expectations as
consumers drank more of its namesake soda, Powerade & Costa coffee. But CEO James Quincey said that despite the strong qtr, there are “storm clouds” on the
horizon. The company largely weathered inflationary challenges during Q1 & maintained its outlook. EPS attributable to shareholders was
64¢, up from 52¢ a year
earlier. Excluding items, EPS¢, beating the 58¢ expected. Net sales rose 16% to $10.5B,
topping expectations of $9.8B. Organic revenue,
which strips out the impact of acquisitions & divestitures, climbed
18%. Pricing & mix, which includes price increases across its portfolio, grew 7%
in the qtr, helped by strategies like bottling its drinks in smaller
packaging. As inflation puts pressure on profit margins &
shoppers’ wallets, the company said it's been expanding its lineup of
single-serving offerings at “affordable” prices. High demand &
shopping trends pushed many food & drink companies to focus on bulk
packaging, but smaller packaging has returned in recent months. Quincey said that consumers won't “swallow inflation endlessly.” The
company is seeing higher costs for key materials like high fructose corn
syrup, plastic & aluminum. Despite the suspension of its Russian business, the company reiterated
its full-year outlook of revenue growth of 7-8% & comparable EPS growth of 5-6%. For Q2, Coke is
expecting a 4% headwind due to foreign currency. The stock was off 16¢.
If you would like to learn more about KO click on this link:
club.ino.com/trend/analysis/stock/KO_aid=CD3289&a_bid=6ae5b6f
Coca-Cola earnings beat Wall Street estimates as revenue jumps 16%
Secretary of State Antony Blinken & Defense Secretary Lloyd Austin
visited Ukraine yesterday to discuss military aid with Ukraine's
Pres Volodymyr Zelenskyy. At the meeting in Kyiv — which was
shrouded in secrecy & the highest-level visit to Ukraine by US
officials since the invasion began — the US pledged just over $700M in military financing to help Ukraine & other allied countries
in central & eastern Europe involved in the war effort. Russia's
invasion of Ukraine entered its 3rd month on yesterday. The conflict
that has killed thousands & led to the worst refugee crisis Europe has
seen since World War II. The war will end only if Russian troops fully withdraw from the country, Ukrainian Prime Minister Denys Shmyhal said. Russia's Rosneft
failed to sell oil in a jumbo tender after demanding prepayment in
rubles, traders said today, meaning the country's top oil
company will need to find ways to divert more crude to buyers in Asia
via private deals. The failure of the tender highlights a growing
struggle by the Kremlin oil major to sell oil due to sweeping Western
sanctions on Russia for the invasion of Ukraine. Moscow, which
calls the invasion “a special operation,” has publicly acknowledged it
has faced some oil export problems since Mar due to sanctions but
pledged to boost cooperation with Asia to divert some oil sales from the
West. Western sanctions on Russian oil are part of a broader
effort to isolate Moscow politically & economically for the invasion
that includes discussion of an EU-wide oil embargo. The EU
also advised its members not to succumb to Russian Pres Vladimir
Putin's demand to pay rubles for gas from Russia.
This will be a very big earnings week & it started on a gloomy note. Many earnings statements will feature comments of headwinds between slower economic growth & high inflation. It's interesting that even safe haven gold is being sold heavily today. Not a good sign for investors.
Dow Jones Industrials
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