Raphael Stevens

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    S&P Dow Jones is removing Russia stocks from indexes, stripping country of emerging market status

    An employee looks at a stock price index graph showing plunging stock prices on an electronic information screen at the headquarters of the Micex-RTS Moscow Exchange.
    Andrey Rudakov | Bloomberg | Getty Images

    Index giant S&P Dow Jones Indices said Friday it is removing all stocks listed and/or domiciled in Russia from its benchmarks in light of the country’s invasion of Ukraine, further isolating the nation from the global economy.
    The removal, effective before the open next Wednesday, also affects Russian American depositary receipts (ADRs), S&P Dow Jones Indices said.

    The firm, which is the keeper of the Dow Jones Industrial Average and the S&P 500, also said it will declassify Russia as an emerging market and categorize it as a standalone group.
    The move came as Russian forces attacked Europe’s largest nuclear power plant in Ukraine early Friday morning, causing a fire to break out at an adjacent training facility. The U.S. Embassy in Kyiv called the attack a war crime.
    Earlier Friday, the NYSE halted trading in three Russian ETFs — Franklin FTSE Russia ETF (FLRU), iShares MSCI Russia ETF (ERUS) and Direxion Daily Russia Bull 2X Shares (RUSL). The exchange cited “regulatory concerns” for these halts.
    Exchange-traded funds tracking Russian stocks have been in a tailspin since the geopolitical tensions escalated. The iShares MSCI Russia ETF tumbled 33.4% for its worst day Tuesday since the fund’s inception in 2010, and after losing 27.9% on Monday.
    Meanwhile, shares of the VanEck Russia ETF ended February down 54.9%, closing out its worst month ever.

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    Russia's invasion of Ukraine is driving up air cargo costs

    Flight restrictions and more expensive fuel resulting from Russia’s Ukraine invasion are driving up airfreight prices.
    It could mean even costlier goods for consumers, who are already grappling with high inflation.
    Cargo and passenger airlines have rerouted planes around Russian and Ukrainian airspace or canceled flights altogether.

    A Boeing 747-8F operated by AirBridgeCargo takes off from Leipzig/Halle Airport.
    Jan Woitas | Picture Alliance | Getty Images

    The cost of transporting goods by air has surged since Russia’s invasion of Ukraine last week, just as consumers are already grappling with the fastest pace of inflation in nearly 40 years.
    Carriers, including KLM Royal Dutch Airlines and United Parcel Service, are filling their planes with pricier fuel for longer Asia routes to avoid Russia due to airspace closures. Jet fuel prices in the United States this week hit the highest in more than a decade.

    The U.S. on Tuesday joined Canada and much of Europe in barring Russian aircraft from its airspace. In January, more than 2,500 flights that departed the U.S. used Russian airspace, while 493 flights from Russia used U.S. airspace, according to aviation data firm Cirium.
    “With the uncertainty of Russian airspace restrictions to civilian aircraft, UPS decided on Mar. 1 to avoid use of Russian airspace for our Northern Pacific (NOPAC) operations until further notice,” UPS’ pilots union told aviators Wednesday.
    Higher transportation costs are likely to get passed along to consumers as it gets pricier to ship everything from manufacturing components to perishables like imported cheese and fruit. Commodity prices from wheat to aluminum are already spiking.
    The U.S. ban of Russian aircraft included cargo giant Volga-Dnepr, which flies large aircraft pieces like wing parts for some Boeing jets.
    “We work closely with our wide range of supply chain and logistics partners to manage through any potential impacts,” the aircraft manufacturer said in a statement.

    Seasonal slump no more

    Some carriers are canceling flights altogether, and Russian airlines have been hobbled by airspace bans. The reduced capacity is driving up rates during what is normally a seasonal lull for shipping in the months after year-end holidays.
    Air cargo rates from China to Europe jumped 80% this week from last to $11.36 a kilogram, the highest since October, according to freight booking and data platform Freightos.
    FedEx on Thursday said it its Express unit is increasing surcharges for international packages and freight. Some peak surcharges will more than double – such as the rate for shipping from Hong Kong to Europe, Africa and the Middle East, which the company will raise from 55 cents a pound to $1.20 a pound, according to a notice on its website.
    “As we come up on the two-year anniversary of COVID-19, the industry is still reeling from the capacity and pricing ramifications of the Pandemic,” Stifel logistics analyst Bruce Chan said in a note this week. “As a result, subsequent supply shocks will be felt more acutely, as there is less of a capacity buffer to absorb them.”
    Air cargo demand and prices have soared over the past two years. Carriers reaped the rewards of customers who paid a premium to fly over port snarls and make up for other supply chain backups, getting goods to factories and consumers faster.
    Stronger e-commerce demand in the pandemic and limited aircraft belly capacity as international passenger travel plunged has kept rates firm, even before Russia’s invasion.
    Now costs are going up even more, testing how much customers are willing to pay air cargo haulers and how much consumers will shell out at retailers.

    Surging fuel costs

    U.S. benchmark jet fuel on Friday was going for more than $3.882 a gallon, the highest since September 2008. Matthew Kohlman, associate director for refined products pricing at S&P Global Commodity Insights, called price jumps this week “hurricane-level” because they haven’t been so steep since Hurricane Ike slammed into Texas that month.
    Benchmark jet fuel in Asia this week hit a more than eight-year high while Europe’s benchmark rose to the highest since August 2008, according to S&P data.
    Freightos said ocean shipping rates could also continue to rise as a result of the war in Ukraine. The Asia-to-U.S. West Coast price on Thursday was $16,155 per 40-foot equivalent container, more than triple the rate from the same time last year.
    New port backups could drive even higher demand for airfreight.
    “A lot of the time it’s, ‘I need these goods to keep my supply line open,'” said Jason Seidl, managing director and airfreight and surface transportation analyst at Cowen & Co. “The cost of it not being there is very high.”

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    Stocks making the biggest moves midday: Costco, Rivian, Signature Bank, Sweetgreen and more

    Shoppers wearing face masks leave a Costco wholesale store in Washington, D.C.
    Ting Shen | Xinhua News Agency | Getty Images

    Check out the companies making headlines in midday trading.
    Costco — The stock dipped 1.4% despite a better-than-expected quarterly report. The retailer reported earnings of $2.92 per share on revenue of $51.9 billion. Analysts had expected earnings of $2.74 on revenue of $51.47 billion, according to Refinitiv.

    Broadcom — Shares of the chipmaker jumped 3% after the company reported record revenue in the fiscal first quarter that exceeded analysts’ expectations. Broadcom reported adjusted earnings of $8.39 per share, higher than the $8.23 per share analysts were looking for per FactSet estimates. Meanwhile, its revenue jumped 16% year over year to $7.7 billion, also topping estimates.
    Signature Bank — Shares of crypto-friendly Signature Bank fell 7.1% despite Goldman Sachs saying Friday it’s keeping its buy rating on the stock and is bullish on the company’s growth outlook after a recent meeting with management.
    Kroger — The grocery chain added 6.9% after it provided a business update Friday including its digital push to drive 2022 sales and a commitment to shareholder returns of 8% to 11% over time. The increase follows a boost in shares Thursday after it reported strong earnings.
    Splunk — The cloud company’s shares rose 5.9% after Daiwa upgraded the stock to outperform from neutral, saying it sees an “uptick” in security demand as a result of concerns about Russia.
    Best Buy — Shares fell 3.6% after Raymond James downgraded Best Buy to market perform from outperform. “We are placing our stock recommendation in ‘sleep mode’ for now,” analysts said. The call comes after Best Buy on Thursday reported underwhelming quarterly results that just matched Wall Street expectations.

    Rivian Automotive — The electric truck maker’s shares lost 6.9% after Baird lowered its price target on the stock to $100 per share from $150. Baird did, however, reiterate Rivian as an outperform and said it’s still bullish long-term, despite several recent missteps by company management.
    Roblox — Shares of the gaming platform fell 6.5% after Bank of America said investors should expect the stock to remain volatile for the foreseeable future. It also said that a positive surprise on February bookings growth could lead to a short rally but warned that launches “must be successful before the bear thesis is disproven.”
    Sweetgreen — Sweetgreen shares soared 25.4% after the salad chain reported strong sales growth in its first quarterly report since going public in November. The company also issued a positive sales outlook for 2022, although it doesn’t expect to turn a profit yet.
    Gap — The apparel retailer saw its shares fall about 2% before turning slightly positive, after it reported a narrower-than-expected loss for the fourth quarter and issued strong earnings guidance. Gap posted a loss of 2 cents per share, versus the 14 cents forecast by Refinitiv analysts.
     — CNBC’s Samantha Subin, Yun Li, Hannah Miao and Michael Bloom contributed reporting

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    Kroger, Impossible Foods partner to create meat substitutes; Beyond Meat shares fall

    Kroger announced Friday that it has partnered with Impossible Foods to create meat substitutes for its private label business.
    Shares of Impossible’s rival, Beyond Meat, tumbled in afternoon trading.
    Credit Suisse analyst Robert Moskow wrote in a note to clients that the partnership could be a threat to Beyond.

    Impossible Pork Char Siu Buns are sampled during an Impossible Foods press event for CES 2020 at the Mandalay Bay Convention Center on January 6, 2020 in Las Vegas, Nevada.
    David Becker | Getty Images News

    Kroger announced Friday at an investor event that it has partnered with Impossible Foods to create meat substitutes for its private label business.
    Shares of Impossible’s rival, Beyond Meat, tumbled more than 7% in afternoon trading; the stock has plunged 68% in the last 12 months, dragging its market value down to $2.72 billion.

    Credit Suisse analyst Robert Moskow wrote in a Friday note to clients that the Kroger-Impossible Foods tie-up could be a threat to Beyond.
    “We view this test as a threat to Beyond Meat because it demonstrates the willingness of a big competitor to ‘margin down’ into co-branded private label products in order to maximize the reach of its products,” he wrote.
    Moskow compared the test to the co-branding strategy that Costco’s Kirkland line uses for fresh meat with large suppliers like Tyson Foods. Those products have both Kirkland’s and Tyson’s logos on their packaging.
    The partnership could introduce meat alternatives to more consumers, particularly those who are more price sensitive. Both Beyond and Impossible are pushing to achieve price parity with animal meat, which could attract more shoppers to switch to their products. Rising costs for meat in recent months have helped both companies draw closer to that goal.
    Kroger has already dabbled in private label plant-based meat. The retailer, which is the largest U.S. supermarket chain, released a beef alternative in 2020 under its Simple Truth brand. It has since released meatless turkey slices, plant-based chicken patties and other meat substitutes.

    A representative for Impossible confirmed the partnership but declined to share further details.
    Impossible is privately held, so it doesn’t have to share its financial results publicly. However, Reuters reported nearly a year ago that the start-up was exploring listing through an initial public offering or a special purpose acquisition company within the next year.

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    The IRS has sent nearly 30 million refunds. This is the average payment

    Despite ongoing challenges, the IRS has sent nearly 30 million tax refunds, worth about $103.2 billion.
    The average payment is currently $3,473 as of Feb. 25, which is $658 larger than last year’s payment of $2,815.

    Cabania | iStock | Getty Images Plus

    Despite ongoing challenges, the IRS has sent nearly 30 million tax refunds, worth about $103.2 billion, the agency reported Friday.
    While 29% of Americans worry about a smaller refund, according to a Bankrate survey, the average is currently $3,473 through Feb. 25, which is $658 larger than last year’s payment of $2,815.

    Of course, the average refund may change as millions of Americans file just ahead of the April 18 deadline. The IRS has received about 45.4 million returns so far.
    More from Personal Finance:Here’s what every taxpayer needs to know this seasonIRS unveils Taxpayer Experience Office to improve customer serviceHere’s why your tax return may be flagged by the IRS
    The latest filing season statistics come amid a tough period for the IRS, which is still digging out from millions of unprocessed individual returns from last year.  
    While the agency issues most refunds within 21 days, several factors may cause delays, including paper-filed returns, payments by mail, errors or returns affected by identity theft.
    “We urge extra attention to those who received an economic impact payment or an advance child tax credit last year,” IRS Commissioner Chuck Rettig said in a statement. “People should make sure they report the correct amount on their tax return to avoid delays.”

    The IRS sent about 7.4 million “math error” notices for stimulus payment mistakes from Jan. 1 through July 15, 2021, delaying refunds, and many are still waiting for a resolution.

    Your refund status

    While the IRS couldn’t issue refunds for the earned income tax credit or the additional child tax credit by law until mid-February, those payments should have reached filers by March 1, according to the agency.     
    You can check your refund status with the “Where’s My Refund?” online tool or through the IRS2Go app. You may see an update 24 hours after the IRS has received your electronic filing or four weeks after sending a paper return.

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    Big raises may be coming back down to earth

    Workers saw average pay grow by 5.1% in the past year, to $31.58 an hour, according to the February jobs report issued Friday by the U.S. Department of Labor. Rank-and-file workers saw a 6.7% bump.
    However, hourly earnings grew by just $0.01 from January, much less than the big increases in recent months.
    The slowdown suggests employers are having an easier time hiring and don’t need to raise wages as much to compete.

    A ‘help wanted’ sign is posted in front of restaurant on Feb. 4, 2022 in Los Angeles.
    Frederic J. Brown | AFP | Getty Images

    The big raises that many Americans got over the past year are starting to get smaller.
    Workers in the private sector saw average wages grow by 5.1% in the past year, to $31.58 an hour, according to the February jobs report issued Friday by the U.S. Department of Labor. Rank-and-file workers saw a higher bump, of 6.7%, to $26.94 an hour in February.

    Employers have paid bigger paychecks to compete for workers in a competitive hiring market.

    While February’s annual wage growth is high by historical standards, there are signs that it’s tempering. Hourly earnings for all workers rose by just 1 cent (or, by 0.03%) last month relative to January, a weak gain relative to prior months.
    “What we’re seeing is the sign that, in aggregate, wage growth is slowing down a little bit,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab.

    For context, workers had gotten roughly 3.5% annual raises prepandemic, which at the time was considered robust, Bunker said.
    “Even if wages don’t continue to accelerate, but they’re 4% or 5%, that’s still quite strong,” he said. But it wouldn’t be the same “gangbusters” growth from early 2021, he said.

    Demand for workers

    Workers enjoyed greater bargaining power as the U.S. economy started emerging from its pandemic hibernation.
    Employers’ demand for workers rose at the same time that Covid-related factors (like health fears, child care duties, early retirements and a bigger cash buffer) were limiting their supply.

    Job openings surged to record levels. Businesses raised pay to attract scarce talent. Workers started quitting their jobs at record levels, many enticed by higher pay elsewhere, part of a trend dubbed the “Great Resignation.”
    More from Personal Finance:When buy now, pay later comes back to bite youHow to tackle medical debt before it’s a long-lasting problemHow the Ukraine-Russia conflict may push up prices for Americans
    However, workers are reentering the labor force, increasing their availability and making it easier for employers to hire. Wages, in turn, may come down, and workers may lose some of their bargaining power.
    The labor force grew by 304,000 people in February, according to the Labor Department. (It remains 592,000 people shy of its February 2020 level.) The U.S. economy added 678,000 new jobs in February, the most since July and a continuation of recent strong growth.

    Better pay is attracting workers off the sidelines, Bunker said. Jobs, especially in-person ones, may also be more palatable as risks posed by the Covid omicron virus variant recede.

    Inflation

    Despite higher pay, average wages haven’t kept pace with inflation. Consumer prices rose by 7.5% in January relative to a year earlier, a 40-year high. Annual inflation outstripped February’s 5.1% average pay increase.
    When a household’s wages rise at a slower pace than inflation, it means they have less purchasing power. Their paychecks don’t go as far at the grocery store and at the gas pump, for example.

    “Will inflation similarly slow down, and will it slow at the same pace or more?” Bunker asked of consumer prices relative to average wage growth.
    The Federal Reserve is expected to start raising interest rates this month to cool down the economy and reduce inflation.
    Workers’ raises have been much stronger than average in certain sectors of the economy, especially lower-paying, in-person jobs.

    In some cases, they’ve far surpassed the rate of inflation. For example, rank-and-file workers in leisure and hospitality jobs (such as bars, restaurants and hotels) have seen pay increase over 14% in the past year, to $17.22 an hour. (That equates to about $36,000 a year before tax.)
    Their pay growth is slowing down, too, when looking over shorter periods of time. Low-wage workers saw earnings increase by an average 7.6% in the three months through January, relative to 11.4% in the three months through August 2021, according to an Indeed analysis of federal data. (Low-wage industries include department stores, food services and drinking places, and child day care services.)
    Lower-income households have also felt inflation more acutely than higher-income ones, because more of their household budgets are earmarked for energy and transportation, which are among the categories that have seen prices rise fastest.

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    Chicago Fed's Charles Evans cautions on inflation's hit to small businesses

    Chicago Fed President Charles Evans warned Friday that small businesses could take a particularly hard hit from surging inflation.
    He repeated his position that current Fed policy on interest rates is “wrong-footed” and will need to adapt.

    Small businesses will be facing growing challenges from inflation and higher wages, Chicago Federal Reserve President Charles Evans said Friday.
    Even with average earnings flattening out in February, Evans told CNBC, he hears from smaller companies in his district about the challenges from cost increases.

    “I think there are a lot of business models, especially for small businesses, that are going to be challenged for the future,” the central bank official told CNBC’s Steve Liesman during a “Squawk Box” interview. “They’re going to be asked to pay higher wages, and you know if inflation is going up, it’s the real wage that’s going to equate demand and supply.”
    Evans spoke just after the Labor Department’s Bureau of Labor Statistics reported that the economy added 678,000 nonfarm jobs in February, which is considerably higher than expected. The count also indicated that wages rose little over the month and were up 5.1% from a year ago, though that was less than the Wall Street estimate.
    Still, even that yearly level is well ahead of anything the economy experienced prior to the Covid pandemic, and Evans said it will exert pressure. The Fed’s preferred inflation gauge shows that inflation, even excluding food and energy prices, is running at its fastest pace since the early 1980s.
    “Wages are going to go up. If rents are going up, gas is going up, food costs are going up, and there are a lot of businesses where margins are very thin,” he said. “Can they really survive that?”
    Though Evans generally favors less-restrictive Fed policy, he said inflation has rendered the current stance, in which benchmark short-term rates are being held near zero, as “wrong-footed.”

    As such, he likely will be among the majority of members this month to vote to raise rates a quarter-percentage point and continue to do so.
    “Obviously, we need to be moving toward a more neutral monetary policy certainly by the end of the year, so that we’re within striking distance of taking a position that would deal more forcefully with inflation,” Evans said. “I have said ‘wrong-footed’ [on policy], and I think that’s the right term. It happened very quickly.”
    Markets currently expect six 25-basis-point rate hikes this year. Evans said he’s not sure the Fed needs to be that aggressive and the central bank will have a better idea of where it needs to be by the end of the year.

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    The metaverse stole the show at the world's biggest mobile event — and things got weird

    Mobile World Congress

    “Metaverse” was the term on everyone’s lips at this year’s Mobile World Congress, which is the world’s biggest mobile trade show.
    It’s a hazy concept, but “metaverse” is broadly used to describe vast digital worlds in which users can work, play games or even party.
    And things seemed to get even less clear at MWC. But analysts believe it’s here to stay.

    SK Telecom’s “4D Metaverse” ride at Mobile World Congress 2022 in Barcelona, Spain.
    Ryan Browne | CNBC

    BARCELONA — Mobile World Congress made a big comeback this year — but the term on everyone’s lips wasn’t “smartphones” or “5G.”
    Instead, it was the “metaverse,” a vague concept used to describe vast digital worlds in which users can work, play games or even party.

    The term has been the talk of the tech world ever since Facebook changed its name to Meta, a rebrand largely aimed at drumming up hype for Mark Zuckerberg’s vision for the virtual universe.
    And at MWC, the world’s biggest trade show for the mobile phone industry, the word was repeatedly dropped into keynote speeches and splashed across exhibition stands.
    “The metaverse is the buzzword of the moment,” CCS Insight Chief Analyst Ben Wood told CNBC at the show, stressing that it’s still quite a nebulous term.

    Things got weird

    But if the metaverse is already a hazy concept, things seemed to get even less clear at MWC.

    SK Telecom’s stand at Mobile World Congress 2022 in Barcelona, Spain.
    Ryan Browne

    South Korean firm SK Telecom had a “4D Metaverse” ride at its booth throughout the week. Attendees sat down on the ride and wore virtual reality headsets. They were then lifted up and carried around a digital representation of space.

    The catch? It was just another variation of the same “4D VR” rides companies like Samsung have showed off at MWC in previous years. In fact, many of the metaverse experiences at MWC were VR-based.
    At HTC’s stand, visitors were invited to put on the Taiwanese company’s Vive headsets and walk around a virtual museum. They could also walk around in a small pen while exploring a desert landscape in VR.
    Over on the Qualcomm booth, you could get cooking lessons or swat giant 3D insects. Orange was inviting people to climb the Notre-Dame Cathedral in VR with Meta’s Oculus Quest 2 headset.

    “There’s the weird, wacky and the wonderful on show here at MWC, all trying to jump on the bandwagon that is the metaverse” Paolo Pescatore, tech, telecom and media analyst at PP Foresight, told CNBC.
    “It still feels very much far fetched. And it does almost feel kind of ‘Wild West’ right now.”

    Baby steps

    Telecom companies have begun taking baby steps into the metaverse, with Spain’s Telefonica even appointing someone as its “chief metaverse officer.” Yaiza Rubio will lead a division aimed at bringing the carrier’s metaverse strategy to life, the company said. What that strategy will be is unclear.
    “We are thinking about [what] should be the role of a telco like Telefonica in this new evolution,” Chema Alonso, Telefonica’s chief digital officer, told attendees at MWC.
    “We don’t know yet. But for sure, we are going to be analyzing this very carefully … because we believe that this movement is unstoppable.”
    By contrast, BT said it hasn’t hired a “chief metaverse officer.”
    “At the moment, you can put the word metaverse in most things with job titles or initiatives and it sort of makes something that’s not yet that clear seem very modern and exciting,” Marc Allera, CEO of BT’s consumer brands, told CNBC.

    The Orange stand at Mobile World Congress 2022 in Barcelona, Spain.
    Ryan Browne

    Allera described the metaverse as a natural evolution of the internet, adding that some aspects of the metaverse already exist. “Mixed reality experiences are being created today and they will evolve” he said.

    Looking ahead

    Ironically, Facebook-parent Meta — which fired the starting gun on chatter about the metaverse — didn’t have much of a presence on the exhibition floor at MWC. But the company had a lot to say on its development.
    Zuckerberg put out a statement saying its metaverse ambitions won’t be possible unless there are drastic improvements in telecoms infrastructure. Dan Rabinovitsj, Meta’s vice president of connectivity, said today’s fixed-line and mobile networks aren’t yet ready.
    “We’re working closely with our colleagues to think about what’s the next step in terms of innovation,” Rabinovitsj told CNBC, adding that Meta is also working with telecoms firms.
    Another thing that will require more investment going forward is chips. Semiconductor giant Qualcomm, for example, says chips will need to get smaller, faster and less power-hungry if the metaverse is going to work.

    HTC’s Vive Focus 3 virtual reality headset on display at Mobile World Congress 2022 in Barcelona, Spain.
    Ryan Browne | CNBC

    “Pretty much everyone who is making a metaverse device at this point is using our chip,” Akash Palkhiwala, Qualcomm’s chief financial officer, told CNBC — including Meta.
    Whatever the metaverse does eventually end up looking like, analysts believe it’s here to stay.
    “We’re at the beginning of a long journey,” Wood said. “We’ve already had an interesting step in the right direction with the pandemic because we’re starting to live more blended lives.”
    “There will be elements of that which will lend themselves to a metaverse-like experience,” he added. “However, it’s going to be a long, long time.” More