Connect with us

CNBC

Millions in Texas still without power as grid falters

West Texas Intermediate oil prices rose 2% in morning trade, while gasoline futures were up nearly 3%.

Published

on

People line up to fill their empty propane tanks Tuesday, Feb. 16, 2021, in Houston. Temperatures stayed below freezing Tuesday, and many residents were without electricity.

Brett Coomer | Houston Chronicle | AP

Millions in Texas faced power outages for a third straight day on Wednesday as the deadly storm that brought snow and ice to the region wreaks havoc on the state’s energy infrastructure.

An estimated three million barrels per day of oil production remains offline. Power production from natural gas to coal to renewables has been impacted, just as consumers turn up their thermostats amid the frigid temperatures.

“A significant amount of capacity remains offline,” noted Morris Greenberg, senior manager at S&P Global Platts Analytics.

West Texas Intermediate crude futures prices rose as much as 2% to trade at $61.25 per barrel, before easing off that level. International benchmark Brent crude was slightly higher at $63.51 per barrel. Gasoline futures were up nearly 1% though natural gas edged lower after jumping on Tuesday. Heating oil futures were higher.

With “oil wells and refineries offline, we could be facing a significant shortfall for a number of days, further tightening supply at a time when it has already been restricted and demand is expected to return,” wrote Craig Erlam senior market analyst at OANDA.

Wholesale power prices in Texas have surged as contractual obligations forced companies to buy at any price. And some of the heightened cost could end up on Texas consumers’ utility bills. Some companies like Griddy, which gives consumers access to wholesale electricity prices, outlined ways for its users to switch power providers in an effort to shield them from volatile price swings.

“Real-time power prices in Texas hit the $9,000/[megawatt hour] mark multiple times across the state, with day-ahead on-peak prices averaging more than $7,000/MWh in all four zones in the Electric Reliability Council of Texas region,” noted Citi analysts. The normal price would be around $70/MWh.

The unusually harsh winter storms left more than 3 million in Texas without power, along with nearly 100,000 in Kentucky and more than 70,000 in West Virginia, according to PowerOutage.us.

The power outages raised questions about the stability of the electric grid, pushing some members of Congress to call for hearings on why the system failed.

“Ultimately, those responsible for the operation and management of our energy grid will have to answer for the glaring collapse of our energy infrastructure and inadequate communication to the public,” Rep. Van Taylor, R-Texas, said in a statement.

The energy sector advanced more than 1% on Wednesday. Devon Energy gained 3%, while Exxon, Chevron and Apache were all up more than 1%. The sector gained 2.26% on Tuesday, making it the best-performing S&P group.

“A significant amount of capacity remains offline,” noted Morris Greenberg, senior manager at S&P Global Platts Analytics.

Source: https://www.cnbc.com/2021/02/17/energy-prices-climb-again-as-deep-freeze-holds-grip-on-the-south.html

millions-in-texas-still-without-power-as-grid-falters

CNBC

Explaining the volatile stock and bond market moves this week following the Fed’s update

The Fed unleashed a huge repositioning in markets, as investor reacted to a world where the central bank no longer guarantees its policies will remain easy.

Published

on

The Federal Reserve unleashed a huge repositioning in global financial markets, as investors reacted to a world where the U.S. central bank is no longer guaranteeing its policies will be dovish — or easy.

The dollar surged the most in a year over a two-day period against a basket of currencies.

Stocks were mixed around the world on Thursday, as were bond markets. Many commodities sold off. The Nasdaq Composite was higher, while the S&P 500 and Dow Jones Industrial Average slid. Tech gained, and cyclical stocks fell.

The central bank delivered a strong message Wednesday when Fed Chairman Jerome Powell said officials have discussed tapering bond buying and would at some point decide to begin the process of slowing the purchases. At the same time, Fed officials added two rate hikes to their 2023 forecast, where there were none before.

“It’s the end of peak dovishness,” Bleakley Global Advisors chief investment officer Peter Boockvar said. “It’s not going hawkish. It’s just we’re past peak dovishness. This market response is as if they were already tapering.”

Not an immediate shock, but volatility ahead

Strategists say the Fed’s slight step toward tightening policy didn’t shock markets Wednesday, but it will likely make them volatile going forward. The Fed, in essence, is acknowledging the door is now open to future rate hikes.

It is expected to make a fuller declaration about the bond program later this year, and then within several months start the slow process of bringing $120 billion a month in purchases down to zero.

The yields of shorter-duration Treasurys, like the 2-year note, rose. Longer duration yields, such as the benchmark 10-year, fell. That so-called “flattening” is a go-to trade when interest rates rise. The logic is that longer yields fall since the economy may not do as well in the future with higher interest rates, and short-end yields rise to reflect expectations of the Fed raising rates.

U.S. longer-dated Treasurys, like the 10-year, have been lower than many strategists had expected lately. That’s in part because they are highly attractive to foreign buyers due to negative rates in other parts of the world and liquidity in the U.S. markets. The 10-year yield shot to 1.59% after the Fed news, but was back down at 1.5% Thursday afternoon. Yields move opposite price.

Commodities-related stocks, like energy names and materials shares, were down sharply Thursday afternoon. Energy was the worst-performing S&P 500 sector, falling 3.5%. Materials lost 2.2%.

“It’s a massive flattening of the yield curve. It’s an interest rate trade, and it’s the belief the Fed is going to slow growth,” Boockvar said. “So sell commodities, sell cyclicals… and in a slow growing economy people want to buy growth. It’s all happening in two days. It’s just a lot of rewinds.”

Boockvar said the curve flattening has been happening swiftly, too. For instance, the spread between the 5-year yield and 30-year bond yield quickly compressed, moving from 140 basis points to 118 basis points within two days.

“You’re watching an incredible unwind of positioning in the bond market. I don’t think people thought the Fed would do it,” BlackRock CIO of global fixed income Rick Rieder said.

“We thought the flattening trade was the right move when we saw some of the news out of the Fed. That was something we jumped on pretty quickly. I have to say we’re letting some Treasurys go into this rally,” Rieder told CNBC.

For stock investors, the shift in cyclical stocks goes against a trade that has been popular as the economy reopened. Financial stocks fell on the flatter yield curve, but REITs were slightly higher. Technology stocks rose 1.2%, and health care gained 0.8%.

“The implication is higher stock market volatility, which I think we’re going to have and going to continue to have,” BTIG head of equity and derivatives strategy Julian Emanuel said. “Yesterday changed things. This whole idea of data dependency — the market is going to trade it like crazy, particularly given the fact that the public participation remains very elevated and the stocks the public is most interested in are high multiple growth stocks that have been leading the last several weeks as the bond market remained range bound.”

Even as Powell acknowledged inflation was higher than the Fed expected, the central bank also pressed its message that inflationary pressures could be temporary. The Fed’s boosted its forecast for core inflation to 3% for this year but was at just 2.1% for next year, in its latest projections. Powell used the example of the rise and fall of lumber prices to illustrate his view that inflation will not be long lasting.

But Emanuel said it will be difficult to tell whether inflation is fleeting , and the economy’s emergence from the pandemic has been difficult to predict. “Whether it’s the Fed or paid economists on the sell side, or paid economists on the buy side, the ability to measure what’s going on in the economy is really nothing more than … educated guess work at this point because the statistics are just all over the place,” Emanuel said, adding inflation readings have all been hotter than expected.

He expects the market will trade in a range for now, with the bottom at 4,050 on the S&P 500 and the top at 4,250. The S&P 500 closed at 4,221 on Thursday, down just 1 point. The Dow was of by 0.6% at 33,823, and the Nasdaq rose by 0.9% at 14,161.

The late-July Fed meeting now looms large. That could add even more volatility as investors wait to see if the Fed will provide more details on tapering after that meeting. Many economists expect the Fed to use its annual Jackson Hole symposium in late August as a forum to lay out its plan for the bond program.

The bond purchases, or quantitative easing, were launched last year as a way to provide liquidity to markets during the economic downturn that started last year. The Fed purchases $80 billion in Treasurys and $40 billion in mortgage securities each month. Rieder expects the Fed could slow purchases by $20 billion a month once it starts the tapering. Once the Fed gets to zero, it could then consider when to raise interest rates.

The market expectations for rate hikes have moved forward, and the euro-dollar futures market now sees four rate hikes by the end of 2023, according to Marc Chandler of Bannockburn Global Forex. Prior to the Fed’s announcement Wednesday, futures showed expectations for about 2.5 rate hikes.

Strategist expect some of the Fed reaction is just temporary, and reflects investors who were too far offsides in some positions. “I’m still a commodities bull,” Boockvar said. Commodities had already begun falling ahead of the Fed announcement, after China announced plans to release metals reserves.

“The Fed needed to reign in the inflation story. They did it only very very slightly, but at least they accomplished it, and they’ve squeezed out inflation expectations and they’ve seen a pullback,” he said. “The question is can they through. To raise rates in two years or baby step tapering is not going to do it, but at least for two days they’ve succeeded in calming things down.”

The dollar index jumped 0.8% on Thursday afternoon, about the same as Wednesday’s move.

Chandler said the dollar move could also be a temporary adjustment and not part of a much bigger move. The dollar index’s gain largely reflect the dollar’s move against the euro, weaker as the European Central Bank continues to sound dovish.

“Norway signaled [Thursday] that they are going to hike rates in September and yet the dollar rallied against Norway. I think what happened yesterday set off a new wave of positioning in the currencies. … If it’s not done it’s nearly done,” he said.

The biggest component of the dollar index basket is the euro. “The correction is long in the tooth. It began in late May. That’s when the euro put in its last high,” said Chandler.

Source: https://www.cnbc.com/2021/06/18/explaining-the-volatile-stock-and-bond-market-moves-this-week-following-the-feds-update.html

explaining-the-volatile-stock-and-bond-market-moves-this-week-following-the-fed's-update

Continue Reading

CNBC

The Fed moves up its timeline for rate hikes as inflation rises

However, the central bank gave no indication as to when it will begin cutting back on its aggressive bond-buying program.

Published

on

The Federal Reserve on Wednesday considerably raised its expectations for inflation this year and brought forward the time frame on when it will next raise interest rates.

However, the central bank gave no indication as to when it will begin cutting back on its aggressive bond-buying program, though Fed Chairman Jerome Powell acknowledged that officials discussed the issue at the meeting.

“You can think of this meeting that we had as the ‘talking about talking about’ meeting,” Powell said in a phrase that recalled a statement he made a year ago that the Fed wasn’t “thinking about thinking about raising rates.”

As expected, the policymaking Federal Open Market Committee unanimously left its benchmark short-term borrowing rate anchored near zero. But officials indicated that rate hikes could come as soon as 2023, after saying in March that it saw no increases until at least 2024. The so-called dot plot of individual member expectations pointed to two hikes in 2023.

Though the Fed raised its headline inflation expectation to 3.4%, a full percentage point higher than the March projection, the post-meeting statement continued to say that inflation pressures are “transitory.” The raised expectations come amid the biggest rise in consumer prices in about 13 years.

“This is not what the market expected,” said James McCann, deputy chief economist at Aberdeen Standard Investments. “The Fed is now signaling that rates will need to rise sooner and faster, with their forecast suggesting two hikes in 2023. This change in stance jars a little with the Fed’s recent claims that the recent spike in inflation is temporary.”

Markets reacted to the Fed news, with stocks falling and government bond yields higher as investors anticipated tighter Fed policy ahead, including the likelihood that the bond purchases will slow as soon as this year.

“If you’re going to get two rate hikes in 2023, you have to start tapering fairly soon to reach that goal,” said Kathy Jones, head of fixed income at Charles Schwab. “It takes maybe 10 months to a year to taper at a moderate pace. Then you’re looking at we need to start tapering maybe later this year, and if the economy continues to run a little bit hot, rate hikes sooner rather than later.”

Even with the raised forecast for this year, the committee still sees inflation trending to its 2% goal over the long run.

“Our expectation is these high inflation readings now will abate,” Powell said at his post-meeting news conference.

Powell also cautioned about reading too much into the dot-plot, saying it is “not a great forecaster of future rate moves. “Lift-off is well into the future,” he said.

Powell did note that some of the dynamics associated with the reopening are “raising the possibility that inflation could turn out to be higher and more persistent than we anticipate.”

Powell said progress toward the Fed’s dual employment and inflation goals was happening somewhat faster than anticipated. He particularly noted the sharp rebound in growth that now has the Fed seeing GDP 7% in 2021.

“Much of this rapid growth reflect the continued bounceback in activity from depressed levels, and the factors more affected by the pandemic remain weak but have shown improvement,” he said.

Officials raised their GDP expectations for this year to 7% from 6.5% previously. The unemployment estimate remained unchanged at 4.5%.

The statement tempered some of the language of previous statements since the Covid-19 crisis. Since last year, the FOMC had said the pandemic was “causing tremendous human and economic hardship across the United States and around the world.”

Wednesday’s statement instead noted the progress vaccinations had made against the disease, noting that “indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement.”

Investors were watching the meeting closely for statements about how Fed officials see an economy undergoing rapid expansion since the depths of the pandemic crisis in 2020.

Recent indicators show that in some respects the U.S. is expanding at the fastest rate since World War II. But that growth also has come with inflation, and the central bank has faced pressure from various sources to at least start curtailing the at least $120 billion in bond purchases it is making each month.

At his post-meeting news conference Chairman Jerome Powell noted that Fed officials “had discussions” on the progress made toward the inflation and employment goals relative to the asset purchases, and will continue do do so in the months ahead.

Markets had been looking for the possibility that the committee would address its open-market operations where it provides short-term funding for financial institutions. The so-called overnight repo operations, where banks exchange high-end collateral for reserves, have been seeing record demand lately as institutions look for any yield above the negative rates they are seeing in some markets.

The committee did raise the interest it pays on excess reserves by 5 basis points to 0.15%.

In a separate matter, the FOMC announced that it would extend dollar-swap lines with global central banks through the end of the year. The currency program is one of the last remaining Covid-era initiatives the Fed took to keep global markets flowing.

Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Sign up to start a free trial today.

“This is not what the market expected,” said James McCann, deputy chief economist at Aberdeen Standard Investments. “The Fed is now signaling that rates will need to rise sooner and faster, with their forecast suggesting two hikes in 2023. This change in stance jars a little with the Fed’s recent claims that the recent spike in inflation is temporary.”

Source: https://www.cnbc.com/2021/06/16/fed-holds-rates-steady-but-raises-inflation-expectations-sharply-and-makes-no-mention-of-taper.html

the-fed-moves-up-its-timeline-for-rate-hikes-as-inflation-rises

Continue Reading

CNBC

Oracle guidance misses expectations, stock drops

Oracle reported better-than-expected results and showed accelerating growth compared with the immediate impact of the coronavirus last year.

Published

on

Safra Catz, co-chief executive officer of Oracle Corp.

David Paul Morris | Bloomberg | Getty Images

Oracle shares fell 5% in extended trading on Tuesday after the company offered lower quarterly revenue guidance than expected as it plans to increase capital expenditures to support cloud computing workloads. The guidance came on Oracle’s earnings call after the enterprise software maker issued better-than-expected earnings and faster revenue growth than last quarter.

Here’s how the company did:

  • Earnings: $1.54 per share, adjusted, vs. $1.31 per share as expected by analysts, according to Refinitiv.
  • Revenue: $11.23 billion, vs. $11.04 billion as expected by analysts, according to Refinitiv.

With respect to guidance, Oracle CEO Safra Catz called for 94 cents to 98 cents in adjusted earnings per share and 3% to 5% revenue growth in the fiscal first quarter. Analysts polled by Refinitiv are expecting fiscal first-quarter adjusted earnings of $1.03 per share and the equivalent of 3% revenue growth.

“We expect to roughly double our cloud capex spend in FY 2022 to nearly $4 billion,” Catz said. “We are confident that the increased return in the cloud business more than justifies this increased investment, and our margins will expand over time.”

Revenue rose 8% year over year in Oracle’s fiscal fourth quarter, which ended on May 31, according to a statement. In the prior quarter revenue grew 3%. The accelerating growth benefited from a comparison against the quarter last year when the coronavirus arrived in the U.S. and Oracle’s revenue fell some 6%.

Oracle’s top segment by revenue, cloud services and license support, generated $7.39 billion, which was up 8% and above the FactSet consensus estimate of $7.32 billion in revenue. The company said revenue from its second-generation cloud infrastructure doubled in the quarter, but it did not provide the figure in dollars.

The cloud license and on-premises license segment contributed $2.14 billion in revenue, up 9% and more than the $2.05 billion consensus.

The company’s hardware revenue, at $882 million, was exactly in line with analysts’ estimates, declining 2%.

During the quarter Oracle announced new public-cloud computing options that draw on Arm-based chips, and the U.S. Supreme Court ruled on a longstanding case between Oracle and Google, declaring that Google’s copying of Java code was fair use.

Notwithstanding the after-hours move, Oracle stock is up 26% since the start of the year, while the S&P 500 index is up 13% over the same period.

In May, Barclays analysts lowered their rating on the stock to the equivalent of hold from the equivalent of buy after the price had moved upward as investors rotated out of growth and into value. “To see further relative outperformance a growth acceleration at Oracle is needed, and we don’t have enough tangible data points for this yet,” the analysts wrote.

WATCH: The great tech tug-o-war

Here’s how the company did:

Source: https://www.cnbc.com/2021/06/15/oracle-orcl-earnings-q4-2021.html

oracle-guidance-misses-expectations,-stock-drops

Continue Reading

Title

CNBC24 mins ago

Explaining the volatile stock and bond market moves this week following the Fed’s update

The Fed unleashed a huge repositioning in markets, as investor reacted to a world where the central bank no longer...

ZDNET3 hours ago

How to build business credit

Business credit is vital for businesses that need to borrow money to grow. Building business credit is not impossible; it...

Blockchain news6 hours ago

Global Financial Indexes Provider MSCI Plans to Launch Crypto Indexes

Global securities index publisher MSCI is considering launching cryptocurrency indexes. Yet, Henry Fernandez, CEO of the MSCI did not disclose...

Business insider17 hours ago

Artificial Organs Market | $ 10.90 billion growth expected during5 | Technavio

NEW YORK, June 18, 2021 /PRNewswire/ -- The artificial organs market is expected to grow by USD 10.90 billion during...

Crunchbase19 hours ago

Curate Brings In $1.25M Seed For Small Business Sales, Operations Platform

The company's platform provides back office functions so that small businesses can focus on building clientele and maximizing profits.

Entrepreneur22 hours ago

3 Simple Things You Can Do to Build a Healthy, Thriving Email List

Your list is only as good as the number of real people on it.

Techcrunch1 day ago

Tiger Global in talks to back BharatPe at $2.5 billion valuation – TechCrunch

Indian fintech startup BharatPe is in advanced stages of talks to raise about $250 million in a new financing round...

Reuters1 day ago

Largest Boeing 737 MAX model set for maiden flight -source

Boeing Co (BA.N) was readying the largest member of its 737 MAX family for its maiden flight on Friday, a...

Entrepreneur2 days ago

Free Webinar | June 22: How to Grow & Thrive in an Evolving Business Landscape

SurveyMonkey CEO, Zander Lurie, shares how he's embraced change over his 20-plus year career.

CNBC2 days ago

The Fed moves up its timeline for rate hikes as inflation rises

However, the central bank gave no indication as to when it will begin cutting back on its aggressive bond-buying program.

Review

    Select language

    Trending