The Federal Reserves favorite gauge of inflation the Personal Consumption Expenditures Index excluding food and energy rose 5.4% to its highest annual level since 1983.  Including gas and groceries, the PCE measure jumped 6.4%, the fastest pace since January 1982.  This certainly clears the deck for the Fed to continue raising interest rates.
Oil prices dropped sharply this morning after reports that U.S. President Joe Biden is considering the release of up to 180 million barrels from the country’s strategic petroleum reserve.  Biden is set to give remarks later today, with multiple outlets reporting that the plan to cool soaring crude prices will involve the release of around 1 million barrels of oil per day for several months.
Initial unemployment claims rose modestly after reaching a 50-year low as employers continue to show reluctance in reducing their workforces in the current competitive labor market.  The Labor Department reported that 202,000 Americans filed for unemployment claims last week.

Global Stocks are set to close their first negative quarter in 2 years.  It could have been a lot worse if stocks didn’t stage a comeback in March.
 

The payroll company ADP reported private payrolls expanded by 455,000 in March which was the lowest since August of 2021. ADP’s report for March indicated that hiring was spread evenly around sectors, with leisure and hospitality adding 161,000 to lead the way.

There are now a record 5 million more job openings than unemployed people in the U.S.  An increasing number of Americans quit their jobs in February, while the gap between available positions and the unemployed grew even wider, according to the Bureau of Labor Statistics.  The Job Opening and Labor Survey showed that 4.35 million workers left in February, an increase of 94,000 from the previous month. The elevated level of quits is part of what some term the “Great Resignation,” in which workers have been able to leave their current positions for better opportunities.

The bond market is sending a signal that we are headed for a recession.  The yield between the 10 Year Treasury Bond and the 2 Year Treasury Bond inverted yesterday.  The last 9 times that has happened the US economy headed into a recession 12 months later. 
 

Consumer sentiment slumped again in March, hitting its lowest level since August 2011, according to the University of Michigan.  High inflation, volatile oil prices, geopolitical unrest and now rising interest rates, have left consumers with a bitter taste about the state of the US economy.  Consumers are battling the highest inflation since 1982 and with it, a barrage of rising costs: Mortgage rates increased again this week, adding an average of $300 a month for homebuyers. Gas prices are still at record highs in parts of the country, and the latest Consumer Price Index showed most essential goods are up by 7.9% year on year. 32% of all American consumers expected their overall financial position to worsen in the year ahead, the highest recorded level since the surveys started in the mid-1940s.

After cooling off ever so slightly toward the end of last year, home price gains reaccelerated in January.  Home prices nationally rose 19.2% year-over-year in January, up from 18.9% in December, according to the S&P CoreLogic Case-Shiller Index.  Phoenix, Tampa and Miami saw the biggest annual gains at 32%, 31% and 28%. Sixteen of the 20 cities reported higher price increases in the year ending January 2022 versus the year ending December 2021.  Washington, D.C., Minneapolis and Chicago saw the smallest annual gain, although they were all still up double digits from a year ago.  Tight supply and strong demand appear to be outweighing rising mortgage rates, which would usually take some of the heat out of housing.
 

Pending home sales slid 4.1% in February, according to the monthly index released by the National Association of Realtors. The index reflects transactions where the contract has been signed for an existing-home sale, but the sale has not yet closed. Economists view it as an indicator for the direction of existing-home sales in subsequent months.  With February’s decline, the index has fallen to the lowest level in nearly two years.  Compared to a year ago, pending home sales were down 5.4%. February was the fourth consecutive month in which pending sales declined on a monthly basis and the ninth consecutive month in which contract signings were down year-over-year. Lawrence Yun, chief economist for the National Association of Realtors, attributed the index’s decrease in February to the low supply of homes listed for sale.

Another headwind for the housing market is the average rate on the 30-year fixed mortgage shot significantly higher Friday, rising 24 basis points to 4.95%, according to Mortgage News Daily.  The rate surged as the yield on the 10 Year Treasury Bond also took off. Mortgage rates follow that yield loosely, but not entirely. Mortgage rates are also influenced by demand for mortgage-backed bonds. The Federal Reserve is scaling back their holdings of these assets. With both rates and prices considerably higher, the median mortgage payment is now more than 20% higher than it was a year ago.

25 Oscar nominees received a gift bag last night containing gifts worth $137,000.  But don’t feel too jealous as the recipients will have to pay taxes up to 50% on that gift.

As wheat and corn futures continue to surge, and fertilizer prices ride the commodity boom, some investors are reaping big gains. Compared with the nearly 6% YTD loss of the S&P 500, shares of the top three U.S.-listed fertilizer producers are having a great year. Mosaic is up a staggering 70%, CF Industries is ahead by 50%, while Nutrien is up 40% - and the first quarter is not even finished yet.  With close to 13% of global calories removed from the food chain beginning next year, expect social unrest in some developing nations.   

Cannabis stocks lit up yesterday on news that the U.S. House of Representatives was preparing to vote on the federal legalization of marijuana next week. A hearing on the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act - will be held on Monday, the final step before consideration on the floor. The bill aims to de-schedule cannabis from the list of federally controlled substances.

The US will aim to deliver at least 15bn cubic meters of additional liquefied natural gas to the European market this year as Washington works with the EU to reduce its dependency on Russian energy. The pledge also included a US commitment to export 50bn cubic meters of LNG to the EU in the future and a promise from Germany to end its dependency on Russian oil and gas by mid-2024.
 

The energy war between Russia and the West is heating up after President Vladimir Putin demanded that natural gas sold to "unfriendly" countries be paid for in rubles. The Russian currency gained 7% against the dollar immediately after the announcement, paring its year-to-date loss to gas futures, while European gas futures are in the midst of reigniting a wild rally. "Unfriendly" nations accounted for 70%, or around $69B, of Gazprom's export revenue in 2021.

Applications for U.S. state unemployment insurance fell last week to the lowest since 1969 as employers desperately try to hang onto workers amid near-record job openings and depressed labor-force participation.  Initial unemployment claims decreased by 28,000 to 187,000 in the week ended March 19, Labor Department data showed this morning.  The level of claims is the lowest of the pandemic period, reflecting a jobs market that Federal Reserve Chair Jerome Powell described as being at a “tight to an unhealthy level” last week.

Orders at U.S. factories for long-lasting goods fell more than expected in February, snapping a months-long streak of increases and business investment as manufacturers confronted a worsening supply-chain crisis.  Bookings for all durable goods – products that are intended to last at least three years – fell 2.2%, the first decline in five months, the government reported.
 

A bond selloff is deepening after yesterday's comments from Jerome Powell, which said the Fed is prepared to act even more aggressively to tackle inflation. The yield on the 10-year Treasury has soared 1/5% basis points to 2.32% since the remarks, leading to the worst month for the asset class since 2016.

Shares of Nike rose 5.5% in after-hours trading on Monday as the sneaker giant posted a set of impressive results. Revenues climbed 5% Y/Y to $10.9B during the holiday quarter (beating estimates of $10.6B).  Given the strong results, Nike was quick to flag that its direct-to-consumer model was working. The strategy was rolled out in 2017, but recently saw Nike even move away from retailers like Foot Locker in favor of its own apps, website, and stores.

Supply shortages fueled by the Ukraine-Russia conflict, along with a host of pre-existing factors, have driven fertilizer prices to record highs. Prices for raw materials that constitute the fertilizer market — ammonia, nitrogen, nitrates, phosphates, potash and sulphates — are up 30% since the turn of the year and now exceed those seen during the food and energy crisis in 200

The S&P 500 has gained for three consecutive days this week, up 4.9%, on track for its best week since November 2020. The blue-chip Dow is coming off a four-day winning streak, rising 4.7% for the week so far, and is also on pace for its biggest weekly gain since November 2020. The tech-heavy Nasdaq Composite is up 6% this week, headed for its best week since February 2021.

Russian oil exports to India have quadrupled this month in a sign of the vast reshaping of global energy flows since Russia’s invasion of Ukraine. India, the world’s third-largest energy consuming country, and the world’s largest democracy, has snapped up multiple cargoes of Russian oil from traders as buyers in Europe shunned the country’s vast commodities market following western sanctions on Moscow. Russia has exported 360,000 barrels a day of oil to India in March so far, nearly four times the 2021 average.

In earnings news, transportation bellwether FedEx missed earnings estimates by 5 cents, though the delivery service’s revenue beat analyst forecasts. FedEx’s bottom line was impacted by worker shortages. FedEx shares are 3% lower on the news.  
 

The Federal Reserve on Wednesday approved its first interest rate increase in more than three years, an incremental salvo to address spiraling inflation without torpedoing economic growth.  That will bring the rate now into a range of 0.25%-0.5%. The move will correspond with a hike in the prime rate and immediately send financing costs higher for many forms of consumer borrowing and credit.  Along with the rate hikes, the committee also penciled in increases at each of the six remaining meetings this year, pointing to a rate of 1.9% by year’s end. That is a full percentage point higher than indicated in December. The committee sees three more hikes in 2023 then none the following year.
Warren Buffet’s coveted Berkshire Hathaway class A shares closed above half a million dollars apiece for the first time on Wednesday. The shares touched as high as $506,028.97 and closed at $504,036.00, up 1.2% for the day.  The company  holds a diverse collection of businesses from Dairy Queen fast-food restaurants to Geico auto insurance to Precision Castparts aerospace components now has a market cap of $736B.

Russia’s finance ministry said on Thursday it made $117mn in interest payments due on its dollar-denominated bonds to Citigroup in London, but it was not clear whether the payment would be able to reach investors and allow Russia to avoid defaulting on its $38.5bn of foreign debt.

All eyes will be on the Federal Reserve today as they face the monumental challenge of starting to undo their massive economic stimulus at a time when conditions are far from ideal.  Later today the Fed will announce whether they are raising the Fed Funds rate by 25 or 50 basis points.  Markets are expecting a 25 basis point hike so if they raise 50 expect downside volatility.

Retail sales in February rose .3% after rising by 4.9% in January.  Retail sales are a big part of consumer spending and offer clues on the strength of the U.S. economy. Households are still buying plenty of goods and services to keep the economic recovery going, but in most cases consumers are just paying more.  In February, the cost of living rose a sharp 0.8%, according to the consumer price index.

Another surge in energy prices pushed wholesale inflation to it’s biggest one-month jump on record in February.  Final demand prices for goods jumped 2.4% for the month, the largest move ever in data going back to December 2009.  That pushed the headline producer price index up 0.8% on the month, which actually was slightly lower than the 0.9% Dow Jones estimate.  On a year-over-year basis, headline PPI rose 10%, the same as January and tied for the biggest 12-month move ever.

In a pivotal moment for Democrats in the 50-50 Senate, Sen. Joe Manchin (D-WV) has revealed that he couldn't support the nomination of Sarah Bloom Raskin, citing her views on incorporating climate change policy into the Federal Reserve. The delay not only affects Raskin, but prolongs the confirmation process for Jerome Powell's second term, as well as Lisa Cook and Philip Jefferson for Fed governor seats. Democrats had hoped to confirm all of them as a package, but Manchin's decision could push the Biden administration to ditch Raskin.

JPMorgan Chase’s is discontinuing a policy of hiring only vaccinated people and has ended mandatory mask wearing and testing for employees as cases fall and pandemic concerns ease. The move by the largest US bank underscores the desire by corporate America to return to some sort of normality following two years of masking, testing and remote work.

For much of recent history, a rise in bond yields signaled that a stronger economy was ahead. Yesterday, the yield on the 10-year U.S. Treasury note reached the highest it has been since 2019, and about four times higher than its pandemic low point in 2020.

That could be a good sign for the Fed, which begins a two-day policy meeting today. The Fed chairman, Jay Powell, has all but promised that the central bank will announce “liftoff” tomorrow by raising interest rates by a quarter point, the first in a series of increases. The Fed is worried about inflation, which is the highest it has been in decades, and Powell has pointed to Paul Volcker, the former Fed chair who is revered for taming the high inflation of the 1970s and early 1980s by aggressively raising interest rates, as an intellectual hero.
 

The rout in Treasuries is picking up speed as inflationary fears spur forecasts for an abrupt shift towards aggressive interest rate increases. The 10-year yield climbed 9 basis points overnight to 2.1%, touching a level last seen in July 2019. That's ahead of start of the FOMC's March meeting tomorrow, where interest rates are expected to rise by 1/4 point, and Jay Powell will be drilled on the pace of the coming tightening cycle.

Russia is due to make a key interest rate payment on its foreign debt on Wednesday, but with sanctions strangling its economy, Moscow is threatening to repay international bondholders in rubles. The Russian finance minister pointed to measures that have frozen nearly half of Russia's $643B in foreign reserves, as well as the heavy strain on its financial system. Moscow is specifically set to make a combined $117M in interest payments on two dollar-denominated bonds.  Russia last defaulted in 1998.  

Uber is the first to add a "temporary fuel surcharge" to fares across the country, which will be in effect "for the next 60 days." The fees will go directly to drivers and couriers, who are responsible for paying for the gas they use. The new pricing is set to begin Wednesday, though Uber will "continue to monitor gas prices and may make additional changes."
 

U.S. household wealth rose to a record $150 trillion in the final quarter of last year according to the Federal Reserve.  That financial cushion may keep consumers spending and limit the economic damage from Russia's invasion of Ukraine. The figures, coupled with a hot labor market, indicated Americans were in relatively healthy shape ahead of the war, which has caused the cost of commodities to surge at a time when U.S. inflation is already at a 40-year high.

Shares of Amazon higher after the company said their board of directors has approved a 20-for-1 stock split, telling investors that they’ll receive 20 shares for each share they currently own. The board also approved a $10 billion share buyback program.

With inflation running at 40 year highs Mortgage rates are rising again. The 30-year fixed-rate mortgage averaged 3.85% in the week ending March 10, up from 3.76% the week before, according to Freddie Mac.  At today's rate, the buyer of a median-priced home in the US is facing a mortgage payment that is more than $290 per month higher than a year ago.

The consumer price index, which measures a wide-ranging basket of goods and services, increased 7.9% over the past 12 months, a fresh 40-year high for the closely followed gauge, according to the Labor Department’s Bureau of Labor Statistics.  February’s inflation was the fastest pace since January 1982, back when the U.S. economy confronted the twin threat of higher inflation and reduced economic growth.

U.S. job openings hovered at a historically high level in February as labor shortages and firm worker demand carrying over into the beginning of this year.  Job vacancies totaled 11.26 million according to the Labor. This is a record in data going back to 2001.   By industry, some of the largest decreases in job openings were seen in accommodation and food services, where vacancies fell by 288,000 to reach just under 1.5 million. Openings across the economy have totaled than more 10 million for eight consecutive months, coming in well above pre-pandemic averages to highlight the strain employers across industries have found in seeking enough workers to keep pace with demand. Job openings were coming in around 7 million per month throughout 2019.

If you need any more proof of the crazy level of home price appreciation in 2021, here it is: The total number of cities in the US where the typical home is priced above $1 million is now 481 which is a record, according to research from Zillow.
 

Gasoline prices have surged to the highest level since 2008, as crude oil supply fears stemming from Russia’s war on Ukraine increase the impact on consumers at the pump.  The national average for a gallon of gas hit just over $4.009 on Sunday, according to AAA, which is the highest since July 2008. Prices have been rising at a fast clip. Consumers are paying 40 cents more than a week ago, and 57 cents more than a month ago.  In some places, consumers are paying much more. California’s average is now $5.288 per gallon.

The quarter ends with S&P 500 EPS growth of 31.4% and revenue growth of 16.1%. Profit growth leaders included Energy, Materials and Industrials, while Financials, Consumer Staples and Utilities lagged. After enjoying four consecutive quarters of double digit earnings growth above 30%, investors are grappling with the reality that expectations for the first half of 2022 are in the single digits for year over year growth.

The US dollar serves as the backbone of the global economy and is considered the safest currency to hold. So in times of uncertainty, investors like to stock up.  The dollar rose to its highest level since spring 2020.  One reason for its sharp rise: Investors decided they didn't want to hold euros anymore given Europe's proximity to the conflict. They dumped the bloc's common currency and bought dollars instead. Plus, the dollar got a boost after Federal Reserve Chair Jerome Powell said that the central bank aims to start raising interest rates later this month. Higher interest rates should help attract capital from abroad, especially if policymakers in Europe are forced to delay their own hikes for longer.
 

According to the Labor Department the US economy added 678,000 jobs and the unemployment rate was 3.8% in February. In a sign that inflation could be cooling, wages barely rose for the month, up just 1 cent an hour. For the labor market broadly, the report brought the level of employed Americans closer to pre-pandemic levels, though still short by 1.1 million jobs.

Mortgage rates are sinking, and that means home prices are likely to continue surging.  The average rate on the popular 30-year fixed mortgage had risen close to a full percentage point from the start of this year up until last Friday, when it hit 4.18%. It then fell to 3.9%. That is the largest two-day drop since March 2020, the start of the pandemic.  This will give homebuyers more purchasing power as the historically busy spring season kicks off. It will also keep record high home prices continuing on their run higher. Prices in January were 19.1% higher year over year. That level of growth is the highest in 45 years.

Russia’s top billionaires have lost more than $80 billion in wealth in recent weeks, with more to come as sanctions and seizures start to bite.  The economic turmoil surrounding President Putin has erased about a third of the wealth of Russia’s 20 richest billionaires in recent weeks, according to the Bloomberg Billionaires Index. The impact of sanctions on oligarchs, along with the collapse of the Russian ruble and economy and global outrage over Ukraine, have swiftly brought the end of an era for an entire class of Russian elites around the world.  Russian megayachts and mansions have already been 
 

According to the payroll company ADP, private sector job creation rose at a faster-than-expected clip in February.  Companies added 475,000 positions for the month, better than the Dow Jones estimate for 400,000.  Last month large companies showed they are well-poised to compete with higher wages and benefit offerings, and posted the strongest reading since the early days of the pandemic recovery.  Companies with 500 or more workers were responsible for almost all the hiring in the month, adding 552,000 positions. Firms with fewer than 50 employees recorded a loss of 96,000, while midsize businesses added just 18,000. By sector, leisure and hospitality posted the biggest gains, with an increase of 170,000.

In remarks prepared for dual appearances this week before House and Senate committees in Congress Federal Reserve Chairman Jerome Powell still sees interest rate hikes coming, but noted that the Russia-Ukraine war has injected uncertainty into the outlook.  Powell said he sees a series of quarter-percentage-point increases coming, though he left open the possibility of moving more aggressively should inflation persist.

Shares of Ford jumped 8.3% after the company said it plans to separate their electric and legacy gas powered businesses. The move is expected to streamline the company’s growing electric vehicle business and maximize profits. The automaker plans to breakout financial results for both units, and its Ford+ business, by 2023.
 

With Oil prices at 8 year highs well over $100/barrel all 31 member countries of the International Energy Agency have agreed to release 60 million barrels of oil from their strategic reserves — half of that from the United States — “to send a strong message to oil markets” that there will be “no shortfall in the oil supply.”

U.S. construction spending surged in January, boosted by strong outlays on single-family homebuilding and private nonresidential structures.  The Commerce Department said that construction spending increased 1.3%. Data for December was revised higher to show construction outlays rising 0.8% instead of 0.2% as previously reported.  Construction spending increased 8.2% on a year-on-year basis in January.  Despite January's jump, homebuilding remains constrained by higher prices for building materials, especially framing lumber.  The National Association of Homebuilders said last month that building material production bottlenecks were raising construction costs and delaying projects.

The Institute for Supply Management’s barometer of American factories rose slightly in February in a sign the economy partly rebounded after an omicron-induced lull toward the end of last year.  The increase in the manufacturing index was the first in four months.  The report, compiled by the Institute for Supply Management, is seen as a mirror of the health of the U.S. economy.  The receding wave of omicron cases and end of government restrictions is giving the economy a boost, but widespread shortages and high inflation are still restraining growth.
 

Defense stocks rose as the conflict between Russia and Ukraine continued and European countries pledged to spend more on defense.  Lockheed Martin, Northrop Grumman, Raytheon, and General Dynamics all rose between 3% and 8% on the news. 

Portland based industrial manufacturer Precision Castparts Corp. recorded just $6.5 billion in sales last year, down 11.6% and the weakest performance since 2011. That’s according to financial results released by its parent company, Berkshire Hathaway.  Pretax profits were up nearly 80%, because of “actions taken by management to resize, restructure and improve operations and to prepare for more normalized demand.”  Precision Castparts eliminated more than 13,000 jobs worldwide in 2020 as sales tanked.  Precision Castparts makes heavy metal components for aircraft, generators and other heavy industry. It was Oregon’s second-most-valuable company at the time of their $37 billion sale in 2016.

Superyachts owned by Russian billionaires who have ties to Putin are on the move as the United States and its allies prepare further sanctions on their property.  The property of targeted Russian executives is likely to take another hit, as the Biden administration recently announced the creation of a taskforce that will take aim at their lucrative assets, including yachts and mansions. France is also putting together a list of properties owned by Russian oligarchs, including cars and yachts, that could be seized under sanctions by the European Union.