Aurelia Butler

U.S. President Joe Biden said there was every indication Russia was planning to invade Ukraine in the next few days and was preparing a pretext to justify it, after Ukrainian forces and pro-Moscow rebels traded fire in eastern Ukraine. [.N] The Dow Jones Industrial Average fell 622.24 points, or 1.78%, to 34,312.03, the S&P 500 lost 94.75 points, or 2.12%, to 4,380.26 and the Nasdaq Composite dropped 407.38 points, or 2.88%, to 13,716.72.The yield on the benchmark U.S. 10-year Treasury note fell more than 7 basis points as investors bought U.S. government debt, considered among the most secure assets. Gold, another traditional safe-haven, went up 1.6%, having topped $1,900 an ounce for the first time since June. COMMENTS FROM MARKET PROFESSIONALS:MICHAEL JAMES, MANAGING DIRECTOR, EQUITY TRADING, WEDBUSH SECURITIES, LOS ANGELES“There’s a lot of nervousness out there and as we approach the weekend nothing’s been settled between Russia and Ukraine.””The continued weakness, especially in the growth names, is indicative of elevated nervousness and sellers continuing to swamp buyers in just about every stock.”PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK“It’s obviously all about the Ukraine-Russia situation. There seems to be solid evidence on the part of the West that Russia has not really pulled out of the Ukraine but has increased troops along the border.”“The market is basically under pressure due to the geopolitical situation.”“The Fed is taking a back seat at the moment.”PHIL ORLANDO, CHIEF EQUITY STRATEGIST, FEDERATED HERMES, NEW YORK”You look at the history of this country and our adversaries love to test us during periods of leadership transition and it could very well end ugly, we don’t think it will, but it certainly could.” “Based upon the timing of what is going on with the Federal Reserve, what is going on with inflation, what is going on with the geopolitical risk, we felt the first two to three quarters of the year were going to be very choppy as the market digests that.” JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON”Safe havens are outperforming as today’s geopolitical development dampened hopes for a diplomatic deal to avert military action around Ukraine.” More

Benefits from easing COVID-19 Delta infections were short-lived for Shake Shack (NYSE:SHAK) as the Omicron wave that soon followed dissuaded customers from venturing out, infected staff and set back the recovery of urban-centric restaurants.”Drivers of our business such as office returns, events, travelers and the general gathering of people that contribute to Shake Shack’s best results (turned) downward,” Chief Executive Officer Randy Garutti said during an earnings call.Shake Shack forecast first-quarter revenue of $196 million to $201.4 million, compared with analysts’ average estimate of $210.9 million, according to Refinitiv IBES.”We saw a more acute impact on SHAK sales from Omicron than its more geographically diversified peers … expectations were just too optimistic and underestimated the Omicron impact,” M Science analyst Matthew Goodman said.Rising paper and food expenses as well as labor costs have also put a squeeze on Shake Shack’s margins. Credit Suisse (SIX:CSGN) analysts noted the company’s margin forecast was also below consensus estimates.To protect its margins, Shake Shack will jack up prices in March and increase its third-party delivery menu prices, Garutti said. The company in October raised prices by 3% to 3.5%.Nearly every U.S. restaurant, including Chipotle Mexican Grill (NYSE:CMG) and McDonald’s (NYSE:MCD), has also raised prices.In the fourth quarter ended Dec. 29, same-store sales in Shake Shack’s urban restaurants, which account for over half of its topline, declined 4% as many city dwellers moved to suburbs during the pandemic.However, that helped comparable sales at suburban restaurants gain 9%.Shake Shack also pointed to a sales improvement in recent days, with monthly comparable sales through Feb. 15 jumping 13%, versus a 2% rise last month. More

NEW YORK (Reuters) -Wall Street’s biggest banks sounded a warning over the year ahead on Thursday, citing high inflation, credit concerns, asset price depreciation and companies postponing deals due to market uncertainty.U.S. banks reported a mixed bag of fourth quarter earnings last month as trading revenue fell after the Federal Reserve scaled back its asset purchases. They are now grappling with high inflation and the likelihood of multiple rate hikes.Several top executives commented on market conditions at the Credit Suisse (SIX:CSGN) Financial Services Forum in Florida.Bank of America (NYSE:BAC) is concerned enough about inflation to stress test its portfolio for the possibility that Fed policymakers are unable to control it and prevent the country going into recession, Chief Executive Brian Moynihan said. “We have to run those scenarios,” he said. “What will hurt the industry generally will be if they have to create a recession. And that’s not their goal for sure. They’ll hopefully do a great job handling it. We stress test that and we’re fine.”Goldman Sachs (NYSE:GS)’ Chief Executive David Solomon warned that rampant inflation could be a headwind to growth.”We’re moving from an environment of very easy money and below trend inflation to an environment of tighter money and above trend inflation. The economic environment is different and there will be consequences to that,” he said. Solomon added that “everybody is used to asset appreciation and we might have a period of time where there’s less asset appreciation.”Mike Santomassimo, chief financial officer at Wells Fargo (NYSE:WFC) & Co, the fourth-largest U.S. bank, noted that credit spreads had been widening and “that’s an area to watch to see if there are any cracks that start to emerge”. High inflation and expectations of more aggressive rate hikes from the Fed have whipsawed markets this year, sending the S&P 500 down 7% year-to-date while bond yields have jumped and the yield curve flattened. Bank shares declined Thursday with the S&P500 banking index down 3%. The S&P 500 was down 2%. Morgan Stanley (NYSE:MS) Chief Financial Officer Sharon Yeshaya said the bank had seen “a lot of uncertainty in the marketplace over the past couple of weeks” leading to companies putting off transactions. “We have seen some of the pipelines, which are still healthy, being pushed out,” she said. “At this point it doesn’t feel like the first quarter of 2022 is going to be the same as the first quarter of 2021.”Trading and investment banking activity had slowed since 2021 but was still healthy, Solomon said.Bank of America’s Moynihan took a similar tone, saying the bank’s capital markets business “is down” so far in 2022, even though it continues to see a strong pipeline of customer activity.Wells’ Santomassimo noted that while the bank’s consumer and real estate portfolios continue to perform, there had been “a little bit of noise” in auto loans.However, he said that rising rates would help the bank’s ultimate goal to reach a 15% return on tangible equity. When interest rates are higher, banks make more money by taking advantage of the difference between the interest banks pay to customers and the interest they can earn by investing.”The question will be where rates go and then what impact that has on the economy and the environment we’re in,” Santomassimo said. More

MEXICO CITY (Reuters) -The expectation that the Federal Reserve will start hiking interest rate soon has put limits on Mexico’s monetary policy, Bank of Mexico Deputy Governor Jonathan Heath said on Thursday.Due to the close relationship between the U.S. and Mexican economies, the Bank of Mexico’s monetary policy decisions could not counter those of the Federal Reserve, he said during a virtual appearance before a Mexican business summit.”We cannot have a monetary policy that is independent or countercyclical to the Federal Reserve,” he said. “If the Federal Reserve begins to raise in March, well, I think that practically sets a ceiling for us.”Heath added that Mexico’s central bank was at a difficult “crossroads” due to stubbornly high inflation, especially core inflation, which strips out some volatile items.Mexico’s core inflation surged to 6.21% in the year through January, a level not seen since 2001, while headline inflation eased slightly to 7.07%. That is still more than twice as high as the Bank of Mexico’s 3% inflation target rate.Heath underscored that the Bank of Mexico’s monetary policy actions need to balance the issues of high inflation, adverse cyclical economic conditions in Mexico and the Fed’s expected interest rate hike cycle.He said the Bank of Mexico’s monetary policy stance will need to be consistent with the inflationary problems Latin America’s second-largest economy is facing, while avoiding being too restrictive towards the end of year when inflation is expected to converge near the target.At its last monetary policy meeting on Feb. 10, Mexico’s central bank raised its benchmark interest rate as expected by 50 basis points to 6.00%, a sixth straight rate increase, as policymakers sought to keep high inflation in check.Heath noted that Mexico is currently seeing low levels of private investment, hampering its economic recovery.”We don’t really have any (economic) growth engine” for 2022, he said. More