Finance

IN RESPONSE to Russia’s invasion of Ukraine, the West launched an economic war. America banned the sale of a wide range of goods to Russia; big companies pulled out by the dozen; and a number of countries together froze 60% of the central bank’s international reserves. The idea was to send Russia’s economy into free fall, punishing President Vladimir Putin for his aggression. In the week after the invasion the rouble fell by a third against the dollar, and the share prices of many Russian companies collapsed.Is the West’s strategy still going to plan? The chaos in Russian markets seems to have subsided. Since its low in early March the rouble has jumped, and is now approaching its pre-war level (see chart 1). The main benchmark of Russian stocks plunged by a third, but has since recovered a chunk of its losses. The government and most firms are making payments on foreign-currency bonds. A run on banks that saw nearly 3trn roubles ($31bn) withdrawn came to an end, with Russians returning much of the cash to their accounts.A battery of policies has helped stabilise the markets. Some are orthodox. The central bank has raised interest rates from 9.5% to 20%, encouraging people to hold interest-bearing Russian assets. Other policies are less conventional. The government has decreed that exporters must convert 80% of their foreign-exchange proceeds into roubles. Trading on the Moscow stock exchange has become, to use the central bank’s euphemism, “negotiated”. Short-selling is banned, and non-residents cannot offload stocks until April 1st. The real economy, though, is in some ways the mirror image of the financial one: healthier than it seems at first glance. A weekly measure of consumer prices shows that they have risen by more than 5% since the beginning of March alone. Many foreign firms have pulled out, cutting the supply of goods, while a weaker currency and sanctions have made imports more expensive. But not everything is surging in price. Vodka, largely produced domestically, costs only a bit more than it did before the war. Petrol costs about the same. And though it is early days, there is little evidence yet of a big hit to economic activity.According to an estimate using internet-search data produced by the OECD, a rich-country think-tank, Russia’s GDP in the week to March 26th was about 5% higher than the year before (see chart 2). Other “real-time” data gathered by The Economist, such as electricity consumption and railway loadings of goods, are holding up. A spending tracker produced by Sberbank, Russia’s largest lender, is slightly up year on year. Part of this reflects people stockpiling goods before prices rise: spending on home appliances is especially strong. But spending on services has fallen only a bit, and remains far healthier than it was during much of the pandemic. Russia still seems sure to enter a recession this year. But whether it ends up faring as badly as most economists predict—the wonks are pencilling in a GDP decline of 10-15%—depends on three factors. The first is whether ordinary Russians start worrying about the economy as the war drags on, and reduce spending—as happened in 2014, when Russia invaded Crimea. The second is whether production eventually grinds to a halt as sanctions block firms’ access to imports from the West. Russia’s aviation sector looks particularly vulnerable, as does the car industry. Yet many big businesses that started during Soviet times are used to operating without imports. If any economy could come close to coping with being cut off from the world, it would be Russia’s. The third and most important factor relates to Russia’s fossil-fuel exports. Despite the sheer number of sanctions imposed on it, Russia is still selling about $10bn-worth of oil a month to foreign buyers, equivalent to a quarter of its pre-war exports; revenues from the sale of natural gas and other petroleum products are still flowing in, too. This provides a valuable source of foreign currency with which it can buy some consumer goods and parts from neutral or friendly countries. Unless that changes, the Russian economy may stumble on for some time yet. ■Read more of our recent coverage of the Ukraine crisis More

U.S. equities futures dipped slightly Tuesday evening after stocks extended their rally in the previous session, even as fears of an inverted yield curve sparked recession concerns and investors continued watching developments play out in Ukraine.
Futures tied to the Dow Jones Industrial Average slipped by 27 points, or 0.08%. S&P 500 futures fell 0.1% and Nasdaq Composite futures lost 0.1%.

In regular trading, the Dow added 338 points, or 0.97%, and the S&P 500 rose 1.23% – both for their fourth straight day of gains. The Nasdaq Composite climbed 1.84%, and now sits less than 10% from its record.
“The market’s now up almost 10% in the last 10 days, so we’ve had a pretty incredible rally in a very short time with not a whole lot of news change except that we actually have more rate hikes priced into the market,” Stephanie Lang, chief investment officer at Homrich Berg, told CNBC.
“This has been a nice ride,” she added. “But I wouldn’t get too comfortable for the rest of this year, because I think we’re going to continue to see a lot of volatility.”
All eyes were on the bond market Tuesday as the U.S. 5-year and 30-year Treasury yields inverted Monday for the first time since 2016. Historically, this inversion has been a sign of a coming recession, though it hasn’t been a good indicator of when the recession would come. Still, investors largely shrugged off the event.
On Tuesday, the main yield spread traders watch, that between the 2-year and the 10-year rate, came close to inverting but stayed positive.

“The big talk right now is that at any given point in time, recession can be on the horizon,” Lang said. “Typically, you won’t see a recession for an average of 17 months once a yield curve inverts. Our antennas are up that recession risk is heightened; that doesn’t necessarily mean that there’ll be one this year, though next year is more of a concern for us.”

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Investors also continued to monitor the war in Ukraine. Hope for a potential ceasefire helped investor sentiment, after Russian Deputy Defense Minister Alexander Fomin said the country will “drastically” reduce military activity near the Ukrainian capital Kyiv.
West Texas Intermediate, the U.S. oil benchmark, briefly fell below $100 per barrel before rebounding.
Investors will be watching economic data scheduled to be released Wednesday, including economic growth data, home sales data and ADP’s national employment report.
Esther George, president of the Federal Reserve Bank of Kansas City, will speak to the Economic Club of New York.
BioNTech and Five Below will report earnings before the opening bell.

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The headquarters building of Micron Technology Inc. stands in Boise, Idaho, U.S.
Matthew Staver | Bloomberg | Getty Images

Check out the companies making headlines in extended trading.
Micron — Shares of the chip maker advanced more than 4% after hours, after the company reported financial results for its most recent quarter. Micron beat Wall Street estimates on both quarterly earnings and revenue. It also gave positive revenue and adjusted earnings guidance for its third quarter.

Lululemon — The athleisure apparel maker’s share jumped about 7% following the company’s quarterly earnings report. Lululemon reported earnings that were about 9 cents higher than analysts estimated, although it reported a revenue miss. It also announced a $1 billion stock buyback program.
RH — The home furnishings retailer saw shares decline by more than 5% following its quarterly results. While RH reported an earnings beat for the most recent quarter, it also reported revenue of $901.5 million, compared to estimates of $931.8 million. The company also announced a three-for-one stock split that will take place in the spring.
Chewy — The pet supply company tumbled after hours after reporting a wider than expected quarterly loss of 15 cents per share, versus the estimate of 8 cents, and a revenue miss. It also issued weak revenue guidance for the first quarter and the full year.

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A screen displays the logo and trading information for GameStop on the floor of the New York Stock Exchange (NYSE) March 29, 2022.
Brendan McDermid | Reuters

Check out the companies making headlines in midday trading.
GameStop — Shares of the video game retailer dropped 5.1% on huge trading volume. More than 8 million shares traded through 10:50 a.m. ET, already doubling its 30-day average full-day volume of 4.6 million. There were some large block trades of GameStop in early trading on the NYSE.

Nielsen Holdings – Shares spiked 20.3% following news that a group of private equity investors led by Brookfield Business Partners will acquire the ratings company for $16 billion. The company had previously rejected a $9 billion offer from the same group.
NortonLifeLock — Shares for the cybersecurity company dropped 3.9% in midday trading. On Tuesday, Morgan Stanley downgraded NortonLifeLock’s stock to equal-weight, saying the firm sees “limited catalysts” for the cybersecurity company. A regulatory probe in the United Kingdom into NortonLifeLock’s $8.6 billion deal with Avast and higher inflation costs is weighing on the stock.
FedEx – FedEx shares gained 3.7% on news that CEO Fred Smith will step down on June 1. Smith, who founded the package and delivery company more than 50 years ago, will serve as executive chairman. President and Chief Operating Officer Raj Subramaniam will replace him as CEO.
Uber — Shares rose 6% as the ride-hailing company is close to a deal to include San Francisco taxis to its app, The New York Times reported. The report comes after Uber last week announced an agreement to offer New York City taxi rides on its platform.
Dave & Buster’s — Shares of the arcade company soared 14.9% despite missing on the top and bottom lines of its quarterly results. Dave & Buster’s said that business “strengthened” in the first eight weeks of the first quarter with same-store sales up 5.4% over the same period in 2019.

Reynolds Consumer Products — Shares of the maker of consumer products fell 0.9% in midday trading after Goldman Sachs double downgraded the stock to sell from buy. The Wall Street firm said consensus estimates are too high for Reynolds.
Stellantis — Shares of the automaker rose 7.3% in midday trading despite news that it is laying off an undisclosed number of workers at its Illinois Jeep plant in an effort to “operate the plant in a more sustainable manner.”
Jefferies — Shares of Jefferies popped 4.4% in midday trading after reporting better than expected quarterly profit and revenue.  Jefferies earned $1.23 per share, well above the 89 cent consensus estimate, according to Refinitiv.
UnitedHealth Group — Health care giant UnitedHealth Group announced a deal to buy LHC Group for $170 per share. LHC Group rose 1% in midday trading while UnitedHealth Group was about flat.
— with reporting from CNBC’s Samantha Subin, Sarah Min, Hannah Miao, Tanaya Macheel and Yun Li.

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Bill Ackman, founder and CEO of Pershing Square Capital Management.
Adam Jeffery | CNBC

Investor Bill Ackman said Tuesday that he will no longer take part in vocal activist short selling campaigns, a practice he engaged in that led to one of the most colorful battles in Wall Street history.
“Despite our limited participation in this investment strategy, it has generated enormous media attention for Pershing Square. In addition to massive amounts of media hits, our two short activist investments managed to inspire a book and a movie,” Ackman said in his annual letter. “Fortunately for all of us, and as importantly for our reputation as a supportive constructive owner, we have permanently retired from this line of work.”

The decision came years after his five-year battle against Herbalife ended with massive losses in 2018. The founder and CEO of Pershing Square Capital Management had placed a big bet against the nutritional supplement maker he accused of running a pyramid scheme.
“We exited because we believed that the capital could better be deployed in other opportunities, particularly when one considered the opportunity cost of our time,” Ackman said in the letter. “The aphorism that you ‘don’t need to make it back the way you lost it’ has always resonated with us.”
At the height of his fight against Herbalife, Ackman famously engaged in an on-air verbal brawl with Carl Icahn on CBNC. The battle inspired Scott Wapner’s book “When the Wolves Bite: Two Billionaires, One Company, and an Epic Wall Street Battle.”
Ackman also shorted mortgage loan companies FannieMae and FreddieMac in 2007 before the great financial crisis, which turned out to be successful bets.

Pershing Square 3.0

Entering the 19th year of Pershing Square, Ackman said he’s ready to take his firm to the next era to focus on long-term, “quieter” bets.

“We have had the opportunity to get to know many boards and management teams, and we have built a reputation as a constructive, long-term, and helpful owner,” Ackman said. “The result is that all of our interactions with companies over the last five years have been cordial, constructive, and productive. We intend to keep it that way as it makes our job easier and more fun, and our quality of life better. So, if it is helpful to call this quieter approach Pershing Square 3.0, let it hereby be so anointed.”
In January, Ackman bought over 3 million shares of Netflix to become a top 20 shareholder. More recently, he built a new stake in Canadian Pacific Railway, a company that the activist investor helped overhaul years ago.
Ackman said about 30% of our equity portfolio is invested in music and video streaming — UMG and Netflix, while 26% in restaurants and restaurant franchising — Chipotle, Restaurant Brands and Domino’s. He also owns sizable stakes in Lowe’s, Howard Hughes and Hilton.
“We expect that each of these companies will grow their revenues and profitability over the long term, regardless of recent events and the various other challenges that the world will face over the short, intermediate, and long-term,” Ackman said in the letter.

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Goldman Sachs has agreed to acquire NextCapital, a Chicago-based fintech firm that provides automated advice to corporate retirement plan participants.
The bank said Tuesday in a release that the deal, the terms of which were not disclosed, will be completed in the second half of this year. The acquisition ranks among the top five asset management deals New York-based Goldman has done, according to the Financial Times.
Goldman and rivals are jockeying to deepen relationships with key cohorts like corporate employees and diversify revenue by bulking up in money management, which is typically a steadier revenue source than trading and other Wall Street activities.

A sign is displayed in the reception area of Goldman Sachs in Sydney, Australia.
David Gray | Reuters

Goldman Sachs has agreed to acquire NextCapital, a Chicago-based fintech firm that provides automated advice to corporate retirement plan participants.
The bank said Tuesday in a release that the deal, the terms of which were not disclosed, will be completed in the second half of this year. The acquisition ranks among the top five asset management deals New York-based Goldman has done, according to the Financial Times, which first reported the move.

Goldman and rivals including Morgan Stanley and JPMorgan Chase have amped up their acquisitions in both fintech and asset management in recent years. The banks are jockeying to deepen relationships with key cohorts like corporate employees and diversify revenue by bulking up in money management, which is typically a steadier revenue source than trading and other Wall Street activities.
“This acquisition furthers our strategic objective of building compelling client solutions in asset management and accelerating our investment in technology to serve the growing defined contribution market,” Goldman CEO David Solomon said in the release.
NextCapital was founded in 2014 and most recently raised venture funds in 2020, when it said it had a total of $85 million in funding.
The deal gives Goldman another tool to offer clients ways for employees to improve retirement outcomes. The bank, known for its Ayco personal financial management offering, said it already has about $350 billion in assets under supervision for defined benefit and defined contribution plans.
“Employers are looking to provide their employees tailored solutions and customizable advice that can better support individual saving and investing needs,” said Luke Sarsfield, global co-head of Goldman’s asset management division. “We believe personalization represents the future of retirement savings and will drive the next wave of innovative retirement solutions.”

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Health savings account assets eclipsed $100 billion in January, according to Devenir.
HSAs are available to consumers with a high-deductible health insurance plan. They carry a triple tax break.
Just 7% of accounts have at least some portion of the funds invested in mutual funds or other investments.

Morsa Images | Digitalvision | Getty Images

Health savings accounts eclipsed $100 billion by the end of January, according to Devenir, an HSA investment consultant, as more consumers use the tax-advantaged accounts to save for future health costs.
The firm forecasts HSA funds will hit $150 billion by the end of 2024.

“The growth is really accelerating in HSA assets,” said Jon Robb, senior VP of research and technology at Devenir.
Consumers had about 32 million total HSAs by the end of 2021, an annual increase of 8%, according to a semiannual study published by the consulting firm.

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Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

Assets had grown to $98 billion as of Dec. 31, 2021, up 19% from the prior year, and hit $100.7 billion as of Jan. 31.
Federal law established HSAs in 2003.
The accounts are available to consumers with a high-deductible health plan and allow for savings in a bank-like account or investments in order to fund future health-care expenses.

Companies began adopting high-deductible health insurance plans for their workers more regularly over the past decade, Robb said. They help organizations save money by shifting more costs onto employees. These plans carry a lower monthly premium for consumers, but leave them on the hook for larger out-of-pocket bills before cost-sharing components kick in.

HSAs carry a triple tax advantage for consumers: Contributions aren’t taxed going in, the money grows tax-free and withdrawals don’t incur income tax if used for qualifying medical expenses. Consumers’ balances roll over each year.
By comparison, 401(k) plans offer a two-tier tax break: on investment growth and, depending on the type of 401(k), on funds either going in or coming out of the account.
Financial experts generally recommend paying for current health costs out of pocket and investing HSA funds, if possible. That gives time for the money to grow to cover likely higher health costs in retirement age. Consumers can even use HSA money to reimburse themselves later for out-of-pocket health-care bills, if they keep the receipts as proof.

However, just 7% of all accounts have some of their money invested in mutual funds or other investments — suggesting most consumers use HSAs as a spending rather than savings account.
“A lot of people don’t have the ability to pay for things out of pocket and hold onto the receipt,” Robb said.
“It’s still a small percentage that are investing,” he added. “That number has been growing rapidly over the last few years.” More

Robinhood said Tuesday it now provides trading from 7 a.m. to 8 p.m. ET.
Until Tuesday, Robinhood offered trading 30 minutes before the open and 2 hours after the close.
“Our customers often tell us they’re working or preoccupied during regular market hours, limiting their ability to invest on their own schedule or evaluate and react to important market news,” Robinhood said in a blog post on Tuesday.

Vlad Tenev, co-founder and CEO of Robinhood rings the opening bell at the Nasdaq on July 29th, 2021.
Source: The Nasdaq

As some Robinhood clients head back to the office following the pandemic, the stock trading app — which has experienced a slowdown in volume this year — is now offering extra hours in the morning and evening for its investors.
Robinhood said Tuesday it is adding four extra hours to the trading day. In a push to eventually provide 24/7 equities trading, Robinhood said it will be available from 7 a.m. to 8 p.m. ET.

Until Tuesday, Robinhood offered trading 30 minutes before the open and 2 hours after the close.
The U.S. stock market opens at 9:30 a.m. ET and closes at 4:00 p.m. as part of its regular session. Extended trading is allowed as early as 4 a.m. and goes as late as 8 p.m. and some electronic brokers do offer that extended access.
“Our customers often tell us they’re working or preoccupied during regular market hours, limiting their ability to invest on their own schedule or evaluate and react to important market news,” Robinhood said in a blog post on Tuesday. “Our new extended trading hours for equities will give them more opportunities to manage their portfolio at a convenient time for them, whether that’s in the early morning or in the evening.”
Rival brokerages Charles Schwab, Interactive Brokers and Fidelity also offer extended trading from 7 a.m. to 8 p.m.
Robinhood did not need approval from the Securities and Exchange Commission to extend trading hours.

Robinhood’s stock has been crushed this year as business on the trading app slows and it looks for new ways to drive growth. Shares are off by about 28% in 2022, giving it a market value of $11.12 billion.
Robinhood ended 2021 with 22.7 million net cumulative funded accounts, with more than 10 million of the accounts being added in last year alone. However, the company gave a weak revenue forecast for the first quarter.

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