Utilities Are Hot Right Now

MARKET MOVERS

The pandemic boom in home sales is over. Mortgage rates soar to the highest level since 2009 as the Fed pressures the housing market. Now that the Fed will be shrinking its balance sheet of bonds, including these securities, there could be an impact on liquidity in the mortgage market. Lenders would need to make up the difference by raising rates. The affordability challenges has cooled demand among home buyers.
US economy adds a better-than-expected 428,000 jobs in April. It topped the market forecast of 391,000, according to the Bureau of Labor Statistics (BLS). Employment in leisure and hospitality advanced by 78,000, the manufacturing sector created 55,000 new positions, and transportation and warehousing swelled by 52,000. Professional and business services maintained their upward trend by adding 41,000 jobs. Read more here.

DoorDash revenue rose 35% last quarter as consumers continued to order in. The value of orders placed on its platform grew 25% to $12.35 billion during the quarter, beating analysts’ forecast of $11.7 billion. Order value more than tripled in the same period a year ago. Consumers stuck to getting food and household essentials delivered even as more restaurants and stores reopened.
OPEC+ agrees to another modest production increase after EU outlines Russian oil ban. The energy alliance decided to raise production targets by 432,000 barrels per day for next month, sticking to gradually unwinding record supply cuts. OPEC+ will hold its next meeting on June 2. OPEC+ is unlikely to supply additional oil into the market to resolve any market tightness, as they are very happy with prices remaining above $100/bb. Read more here.
E-commerce is flatlining in the first quarter. Basically, every major online retailer reporting earnings since Amazon reported earnings has shown signs of a clicking cooldown and reported lower sales. Higher prices, longer delivery times, and the fact that in-person stores often smell better than the living room are all playing a part in the Q1 e-commerce bust.

Dollar soars amid Bank of England’s grim recession forecast. The BOE delivered a headline-grabbing 2023 growth forecast of minus 0.25% fueled by higher energy prices and supply-chain disruptions on the back of Russia’s invasion of Ukraine. The forecast gave investors reason to sell off Treasurys and US stocks as 5-, 10- and 30-year inflation-adjusted yields turned either more positive or less negative on Thursday. Read more here.

Utilities are hot right now and Morgan Stanley sees further upside. The firm believes all the key components of power markets – tightening supply/ demand… persistently higher gas prices, structurally higher carbon prices, and energy policy – imply a stronger for longer outlook. It expects power prices to continue to remain elevated for the next five years. Read more here.

Elon Musk will serve as temporary Twitter CEO following the takeover. This means that he will be the one to execute changes in the company like layoffs should they occur. This is also a subtle announcement that Parag Agrawal is already on the way out. Jason Calacanis thinks that this is the right direction to take. Elon is investing a lot of money in this takeover so he should also be the one to navigate the next direction the company will take. Source(1:06:30)

Peloton explores stake sale as it attempts a turnaround. The connected fitness company is sounding out potential investors, including industry players and private-equity firms, that could buy a stake of around 15% to 20%. Peloton seeks to turn around its performance and reverse a decline in its share price. Talks are at an early stage and there is no certainty Peloton will find a willing buyer or agree to a deal.

Ex-Fed vice-chair Clarida says rates must rise to at least 3.5%. Expeditiously ‘getting to neutral’ will not be enough to return inflation over the forecast horizon back to the 2% longer-run goal, he said in remarks prepared for delivery to a Hoover Institution conference. He believes the funds rate ultimately needs to be raised well into restrictive territory, by at least a percentage point above the estimated nominal neutral rate of 2.5%.