Coffee With Greta: Will the Fed Cause a Recession?


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DJIA Futures: +28 (+0.1%)

SPX Futures: +5 (+0.1%)

NASDAQ Futures: +30 (+0.2%)

Good morning friends!

Futures are flat after markets rebounded on the first trading day of May.

Let’s get right to it!

Recession Fears Loom as Fed Meeting Begins

The Federal Reserve kicks off its two-day policy meeting today with the bank expected to enact a 0.5% rate hike on Wednesday. 

The bank now has to act aggressively to get inflation under control, after getting behind the curve on prices. 

One former Fed official thinks a recession is “almost inevitable”.

Former Fed vice chair Roger Ferguson told CNBC Monday, “It’s a witch’s brew, and the probability of a recession I think is unfortunately very, very high because their tool is crude and all they can control is aggregate demand.”

Treasury yields are rising ahead of the meeting. 

The 10-year Treasury yield is up 8 basis points to 2.97%, that yield briefly hit 3% for the first time since late 2018 on Monday.

Pfizer Slashes Outlook

Pfizer (PFE) shares are down 1.1% ahead of the open after cutting its full-year outlook.

The pharmaceutical giant reported adjusted earnings of $1.62 per share on $25.66 billion in revenue. 

That topped analysts’ expectations for adjusted EPS of $1.47 on $23.86 billion in revenue. 

$13.2 billion of that revenue came from Covid vaccine sales.

Pfizer sold $1.5 billion worth of its oral Covid treatment Paxlovid after it was authorized in December.

The company reaffirmed its guidance for $32 billion in Covid vaccine sales and $22 billion in Paxlovid sales this year. 

But Pfizer cut its full-year earnings guidance to between $6.25 and $6.45 per share, down from the previous $6.35 to $6.55 per share. 

Overall, the company is expecting $98 billion to $102 billion in sales this year. 

BP Crushes Q1 Expectations

BP (BP) shares are 5.1% higher in premarket trade after crushing Q1 expectations. 

The oil giant’s Q1 underlying replacement cost profit came in at $6.2 billion. 

That was the highest level in more than a decade and sharply beat expectations for $4.5 billion. 

But BP had a headline loss of $20.4 billion last quarter caused by pre-tax charges of $24 billion and $1.5 billion related to ditching its stake in Russian oil company Rosneft. 

BP announced $2.5 billion more in share buybacks for the year.

Oil Continues to Slip

Oil prices are falling further this morning after tumbling Monday on Chinese demand concerns. 

West Texas Intermediate crude futures are down 0.6% to under $105 bbl while Brent crude futures are down 0.6% to under $107 bbl.

Beijing is reporting dozens of new Covid cases per day but has so far avoided a lockdown by mass-testing residents. 

But restaurants in the city have been closed for dining in and some apartment blocks have been sealed shut.

The possible EU ban of Russian oil is preventing prices from falling further. 

The European Commission is expected to finalize work on its next sanctions package against Russia today.

The American Petroleum Institute issues its inventory report today followed by the Energy Information Administration Wednesday.

JOLTS Preview

The Labor Department releases its Job Openings and Labor Turnover Survey (JOLTS) for March at 10:00 a.m. ET. 

That report is expected to show the number of job openings in the U.S. dipped to 11.2 million in March from 11.3 million in February. 

There has been a major shortage of available workers in the U.S. labor market in recent months. 

There were just 6 million unemployed workers in March. 

March Factory Orders

The Census Bureau reports factory orders for March at 10:00 a.m. ET. 

Economists expect that report to show orders rose 1.0% compared to February. 

Orders declined unexpectedly in February following nine straight months of increases. 

In Case You Missed It

  • The U.S. manufacturing sector expanded at the slowest pace in 18 months in April. The Institute for Supply Management’s Manufacturing PMI fell 1.7% to 55.4% last month. That sharply missed expectations for the index to rise to 57.8%. Respondents to the survey highlighted rising costs, labor shortages, and supply chain disruptions as their biggest struggles in April. 
  • U.S. construction spending rose less than expected in March. The Commerce Department reported construction spending rose 0.1% vs 0.5% in February. That missed economists’ expectations for a 0.8% increase. Spending on residential construction projects rose 1% while nonresidential construction spending fell 0.8%.

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