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Stocks could take their cue from oil, inflation and interest rates in the week ahead

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Traders on the floor of the NYSE, Feb. 24, 2022.

Source: NYSE

March’s employment report is coming up in the week ahead, but developments in Ukraine, the price of oil and an inflation report are likely to steer the market.

Stocks notched gains for the week, while interest rates ripped higher and oil prices jumped. Energy was the top-performing sector, up more than 7%, as West Texas Intermediate crude futures closed nearly 9% higher for the week. The closely watched 10-year Treasury yield was on a tear, reaching 2.5% Friday, its highest level since May 2019, from 2.14% just a week earlier.

Traders are also watching the rise in interest rates to see if they will stall the market’s gains. The S&P 500 was up nearly 1.8% for the week, ending Friday at 4,543.06.

“Since the war started, on the ten days that were up, the S&P 500 was up at least 1%,” said Art Hogan, chief market strategist at National Securities. “I don’t think next week is going to be any different. We’re going to be headline driven, whether it’s economic data, news out of Ukraine or crude oil futures.”

The market has chopped around but is higher for the month of March so far. The S&P was up nearly 3.9% for the month-to-date on Friday.

Katie Stockton, founder of Fairlead Strategies, said stock charts look promising for the near term but are less clear longer term.

“We should take advantage of this short-term momentum. I feel pretty good about it short-term. I mean several weeks,” she said. “We’ve also seen some nice short-term breakouts … names getting above their 50-day moving averages.”

She said 58% of the S&P 500 companies are now above their 50-day moving averages, a positive sign for momentum. The 50-day is simply the average closing price over the past 50 sessions, and a move above it can signal more upside.

Stocks such as Tesla, Microsoft, Apple and Alphabet have all regained their 50-day moving averages, she said. Stockton noted that some high-growth tech names have also done so. She pointed to CLOU, the Global X Cloud Computing ETF.

As for yields, she said the 10-year looks set to consolidate now that it has touched 2.50%. Her next target is 2.55%. “If we get above 2.55%, the next hurdle is 3.25%,” she said.

Jobs and inflation

There is a busy economic calendar in the week ahead, highlighted by the March jobs report and personal consumption expenditures data.

Consumer confidence and home price data will be released Tuesday.

PCE includes an inflation measure that is closely watched by the Fed. Economists expect to see core PCE inflation up by 5.5% year-over-year when it is reported Thursday, according to Dow Jones.

There is also the ISM manufacturing survey reported Friday. The key nonfarm payrolls report will also run that day.

Economists expect 460,000 jobs were added in March and the unemployment rate fell to 3.7%, according to Dow Jones. That compares to the 678,000 nonfarm payrolls added in February and an unemployment rate of 3.8%.

“I definitely think at this point that inflation data is much more meaningful than employment, in terms of the path of the economy,” said Ben Jeffery, vice president of U.S. rates strategy at BMO. Jobs will still matter, but the Federal Reserve has pivoted to focus more on combating inflation, while the economy is reaching maximum employment.

Fed Chair Jerome Powell made that point when he spoke to economists Monday, saying the central bank would be willing to be more aggressive raising interest rates to battle inflation. Stocks initially sold off on his comments, amid fears the Fed could slow the economy or even bring on a recession.

Since then, stocks moved higher, but interest rates have been galloping higher. The fed funds futures market has been pricing in 50-basis-point rate hikes — or 0.5% — in both May and June.

“[Nonfarm payrolls] will matter … I do think it’s probably going to be more a story of just how far the market is willing to press the 50-basis-point rate hike narrative, which is likely to be more pressing next week,” said Jeffery. “The excitement that once surrounded jobs is definitely less so at this point in the cycle.”

In the bond market, Jeffery said investors will be watching Treasury auctions Monday and Tuesday, when the government issues $151 billion in two-year, five-year and seven-year notes.

Rising oil prices have been driving inflation expectations higher, and the bond market is closely watching crude prices, as is the stock market. West Texas Intermediate crude futures settled up 8.8% for the week, at $113.90 per barrel Friday.

Oil heats up

“It seems like oil north of $100 has some staying power,” BMO’s Jeffery said.

Michael Arone, chief investment strategist at State Street Global Advisors, said the pattern between stocks and oil will continue to be important. When oil has spiked recently, stocks have weakened, he said. Meanwhile, when crude falls, stocks have been able to rally,

“It seems like this week it was a bit more pronounced again when oil prices were rising pretty aggressively,” Arone said. “It’s got this interconnectedness to a few things — sentiment about the Ukraine conflict, how’s that going, inflation and ultimately how hawkish or dovish the Fed is going to be. I think it’s emerged as one of those binary proxies for these other elements in the market.”

“It’s just a barometer for those other things — the Ukraine conflict, inflation and the Fed,” he said.

Arone said as investors anticipate some sort of resolution that will end the conflict in Ukraine, but it’s not clear when. “The headlines coming out of Ukraine will continue to cause volatility,” he said. “At the margin, investors are gaining comfort with the likely outcome.”

Arone said stock market fundamentals are better than some investors expect. When inflation rises, topline revenues can also go higher.

“Everyone knows multiples have contracted, stocks have gotten cheaper, but one thing that’s gotten lost on investors is top-line revenues have this correlation with inflation,” he said. “Corporate profits and CPI [the consumer price index] are kind of connected. You have multiples contracting but earnings estimates are rising.”

Arone said stocks are reasonably positioned and investors are getting more comfortable that there will be a favorable resolution to the war.

“If we can get past the Ukraine conflict and some of the fears about the Fed and inflation, I think the fundamentals are okay,” he said.

Week ahead calendar

Monday 

8:30 a.m. Advance economic indicators 

Tuesday 

9:00 a.m. S&P/Case-Shiller home prices

9:00 a.m. FHFA home prices

9:00 a.m. New York Fed President John Williams

9:30 a.m. Atlanta Fed President Raphael Bostic

10:00 a.m. Consumer confidence

10:00 a.m. JOLTS 

10:30 a.m. Philadelphia Fed President Patrick Harker

Wednesday 

8:15 a.m. ADP employment

8:30 a.m. Real GDP 

9:15 a.m. Richmond Fed President Tom Barkin

1:00 p.m. Kansas City Fed President Esther George

Thursday 

8:30 a.m. Initial claims

8:30 a.m. Personal income

8:30 a.m. PCE deflator

9:00 a.m. New York Fed’s Williams

9:45 a.m. Chicago PMI 

Friday 

Monthly vehicle sales

8:30 a.m. Employment

9:05 a.m. Chicago Fed President Charles Evans

9:45 a.m. Manufacturing PMI

10:00 a.m. ISM manufacturing

10:00 a.m. Construction spending



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Porsche shares rise in landmark Frankfurt debut

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Antlitz: IPO will strengthen investment in digitalisation and electrification

Porsche shares rose in their stock market debut Thursday, in one of the biggest public offerings in Europe ever.

Shares of the iconic sports car brand initially traded at 84 euros ($81) on Thursday morning after they had been priced at the top end of their range late Wednesday, at 82.50 euros. It values the company at roughly 75 billion euros.

By 9:30 a.m. London time Thursday shares had steadied at 84.50 euros. Parent company Volkswagen is offering 911 million shares, a reference to Porsche’s famous 911 model.

“Today is a great day for Porsche and a great day for Volkswagen,” Arno Antlitz, Volkswagen’s chief financial officer told CNBC’s “Squawk Box Europe” Thursday.

The organization knew the IPO would be successful, according to Antlitz, citing “strong financials” and “a very convincing strategy for the future.”

“We were convinced despite the challenging environment this IPO would prove successful, and we were right,” he told CNBC’s Annette Weisbach.

Jefferies: Porsche is half the Ferrari business

Before trading started reactions were positive, with cornerstone investors having already claimed around 40% of the shares on offer, according to Reuters. Until now the sole owner of Porsche AG, Volkswagen is reducing its stake in the sports car firm, with a 12.5% slice being listed.

Listing shares should give Porsche a financial boost of 19.5 billion euros, giving the company more financial flexibility in terms of electric vehicles, according to Volkswagen.

The landmark listing comes at a time of market choppiness as the auto industry continues to feel the effects of the war in Ukraine, and valuations of other luxury carmakers including Aston Martin, Ferrari, BMW and Mercedes-Benz have all dropped in recent months.

“The Porsche AG has completely decoupled itself from the negative market trends,” one investor told Reuters, translated by CNBC. Companies are thought to be delaying going public because of current market conditions. 

Porsche may have a 'very good' debut, says former banker

The IPO isn’t set to be a trailblazer for other companies to follow suit however, as Porsche remains a particularly strong brand with a unique market position. Volkswagen initially announced its plans for Porsche to go public on Sept. 5.

Antlitz also addressed the ongoing semiconductor shortages, which will continue to be an issue this year.

“We expect a better supply in 2023, but we expect an easing of the shortage to kick in in 2024,” Antlitz told CNBC.

Smead Capital Management: Predictions of 25% return in equity for Porsche AG



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Amazon hikes pay for warehouse and delivery workers

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A worker sorts out parcels in the outbound dock at Amazon fulfillment center in Eastvale, California on Tuesday, Aug. 31, 2021.

Watchara Phomicinda | MediaNews Group | The Riverside Press-Enterprise via Getty Images

Amazon is raising its hourly wages for its warehouse and delivery workers, the company announced Wednesday.

Beginning in October, Amazon’s average starting pay for front-line employees in the U.S. will be bumped up to more than $19 per hour from $18 per hour, the company said.

Warehouse and delivery workers will earn between $16 and $26 per hour depending on their position, Amazon added. Amazon’s minimum wage for employees in the U.S. remains $15 an hour.

Amazon is spending roughly $1 billion on the pay hikes over the next year as it looks to attract and retain employees in a historically tight labor market. It’s also preparing to enter what’s known as “peak” season, the especially busy shopping period tied to the holidays.

Tensions have been growing between Amazon and its front-line workforce, particularly during the Covid-19 pandemic. Employees have called for wage increases, more paid time off and adjustments to productivity expectations.

Workers at several Amazon facilities have taken steps to organize, and earlier this year, workers at Amazon’s warehouse in Staten Island, New York, successfully voted to form the company’s first U.S. union. Amazon faces another union election at a site near Albany, New York, next month.

The company said earlier this month it planned to raise pay and benefits for drivers employed by members of its contracted delivery network, which handles a growing share of its last-mile deliveries to customers doorsteps.

Alongside the pay increase, Amazon said it’s also expanding a payday advance program for its employees that allows them to access up to 70% of their eligible earned pay whenever they choose and without fees, not just on a schedule, such as a biweekly basis.

WATCH: Amazon labor union wins — president breaks down future decisions

Amazon labor union wins — president breaks down future decisions



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DocuSign to cut workforce by 9% as part of restructuring plan

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The Docusign Inc. website on a laptop computer arranged in Dobbs Ferry, New York, U.S., on Thursday, April 1, 2021.

Tiffany Hagler-Geard | Bloomberg | Getty Images

DocuSign will lay off 9% of its workforce as part of a major restructuring plan, the company announced Wednesday.

The plan is designed to support the company’s growth and profitability objectives and improve its operating margin. As of January, DocuSign had 7,461 employees, and it said the restructuring plan will largely be complete by the end of fiscal year 2023.

Shares of DocuSign were up 5% as of 10:35 a.m. ET.

It expects to incur charges between $30 million and $40 million, largely in the third and fourth quarter of fiscal 2023, as part of the changes.

The electronic signature software maker enjoyed a wave of greater interest among investors during the Covid pandemic as consumers and corporate workers became more reliant on digital ways to sign documents. But the interest has died down, and shares have fallen 65% so far this year.

Several firms downgraded the company’s stock in June after first-quarter earnings fell short of analyst estimates. Dan Springer, the former CEO, stepped down later that month. DocuSign announced earlier this month that it hired an Alphabet executive, Allan Thygesen, as its next CEO. 



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