Stocks reversed on Tuesday after a choppy session yesterday that saw all three major indexes close lower following hawkish remarks from Federal Reserve Chair Jerome Powell. Meanwhile, the benchmark 10-year Treasury yield climbed to 2.372%, the highest level in over 12 months while the price of crude oil remained above $100 per barrel. 

Energy and commodity prices spiked again amid the latest developments in Russia’s war in Ukraine. As of Monday, Ukraine refused to surrender its heavily attacked port city of Mariupol to Russian forces. Russian forces, facing stiff resistance, have sought to gain control of major cities but have so been unsuccessful. The Kremlin says its “special operation” is going as planned. But a senior Pentagon official, who spoke on condition of anonymity Monday, told Reuters Russian President Vladimir Putin has not achieved his goals and is relying on bombing raids in cities like Mariupol in a “near-desperate” effort to gain momentum. 

https://www.barrons.com/news/russia-ramps-up-air-naval-activity-in-ukraine-war-pentagon-01647884707

Markets Today

  • S&P 500 (SPY): +1.16%
  • Nasdaq (QQQ): +1.97%
  • Dow Jones (DIA): +0.77%
  • Russell 2000 (IWM): +0.94%
  • Volatility Index (VIX): -2.97%
  • Tesla (TSLA): +7.91%
  • Gamestop (GME): +30.72%
  • AMC: +15.13%
  • Shopify (SHOP): +6.37%
  • Cloudflare (NET): +9.97%
  • Alibaba (BABA): +10.58%
  • Pinduoduo (PDD): +18.90%

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Yesterday, in prepared remarks to the National Association for Business Economics, Fed Chair Jerome Powell reiterated his commitment to fighting inflation, which he says can jeopardize an otherwise strong economic recovery. His comments sparked off a mid-day sell-off in the market, that was quickly bought up. 

Powell said, “We will take the necessary steps to ensure a return to price stability. In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

Moreover, Powell said of supply-chain disruptions, “It continues to seem likely that hoped-for supply-side healing will come over time as the world ultimately settles into some new normal, but the timing and scope of that relief are highly uncertain. In the meantime, as we set policy, we will be looking to actual progress on these issues and not assuming significant near-term supply-side relief.”

Powell’s remarks come the week after the Federal Reserve raised the interest rate for the first time in over two years.  by 0.25 basis points in order to fight the fastest pace of inflation in over 40 years. 

Remember, last month’s CPI did not take into account the spike in oil, natural gas, and metal prices stemming from Russia’s war in Ukraine. It’s very likely March CPI numbers (due April 12) are likely to be even worse. 

Acknowledging that inflation will likely stay higher for longer, policymakers have revised their forecasts higher. Inflation (as measured by core PCE) is expected to be at 4.1% this year, up from a 2.7% projection in December. By 2023, inflation is estimated at 2.6%, up from an earlier forecast of 2.3%. 

Highlights

  • Shares of Tesla (TSLA) rocketed more than 7% higher after the company delivered the first set of cars built at the newly opened Berlin Gigafactory. The factory is expected to eventually produce 500,000 vehicles annually and employ 12,000 workers.
  • In its investor day conference, NVIDIA unveiled the next generation of GPU called H100, which are radically more powerful than the already industry-leading GA100 and RTX 3090. The GPU contains some 80 billion transistors. To put that number in scale, GA100 is “just” 54 billion, and the GA102 GPU in the RTX 3090 is a measly 28.3 billion. Personally, NVDA is my largest holding so I am thrilled. 
  • NVIDIA also debuted its latest self-driving car technology platform, called Drive Hyperion 9 that EV makers Lucid Motors (LCID) and China’s BYD will use. 
  • Japanese cryptocurrency exchange Coincheck Inc. announced it will go public in the United States by merging with blank-check firm Thunder Bridge Capital Partners IV Inc. in a deal valued at $1.25 billion.
  • Carnival Cruise (CCL) badly missed Wall Street expectations during earnings, hampered by the rise in COVID due to the spike in Omicron last quarter.
  •  Warren Buffett’s Berkshire Hathaway Inc on Monday struck an agreement to buy insurance company Alleghany (Y) for $11.6 billion
  • Alibaba (BABA) shares gapped up after the company announced it had raised its share buyback program from $15 to $25 billion. This could spark a series of share buyback programs across Chinese equities. 
  •  Sandbox AQ, which has long-term goals to help clients use quantum computing, announced on Tuesday that it has spun off from Alphabet Inc, raised “nine figures” of funding and signed several clients for its cybersecurity services.
  •  The U.S. Federal Trade Commission has sought additional data from Activision Blizzard Inc and Microsoft Corp related to the antitrust review of their deal

“Keep smiling, because life is a beautiful thing and there’s so much to smile about.” -Marilyn Monroe