Finance

Billionaire investor Bill Gross listens during the Milken Institute Global Conference in Beverly Hills, California, U.S., May 3, 2017.
Lucy Nicholson | Reuters

Bill Gross, the one-time so-called bond king who co-founded fixed income giant Pimco, said he sees the possibility of stagflation in the economy and he wouldn’t buy stocks aggressively now.
The 77-year-old investor believes that although the Federal Reserve is aiming to combat surging inflationary pressures, it also fears that too many rate hikes could put too much downward pressure on asset prices, causing turmoil in financial markets.

“I think they’re sort of handcuffed in terms of what they can do, they went so low. And inflation now is so high on a historical basis that it’s going to be difficult raising interest rates too much,” Gross said Thursday on CNBC’s “Worldwide Exchange” in an interview with Brian Sullivan.
“And I say that simply from the standpoint of a realistic assumption that the stock market was driven, in part, perhaps 30% to 40%, by lower interest rates, and especially lower real interest rates. And to the extent that you now raise them even by 50, to 100 to 150 basis points … there’s a significant impact on financial assets, stocks especially, because the interest rate discount, the forward stream of earnings. So I think they have to be very careful,” he said.
If global central banks are stuck in a low interest rate world, that could result in persistent inflation combined with a global economic slowdown, an environment dubbed stagflation, Gross said.
“It perhaps means stagflation. And, you know, inflation above 3% to 4% for some time now,” he said.
Consumer prices increased 7.5% from a year ago in January, and the Fed’s preferred inflation gauge showed its biggest 12-month increase since 1983.

Fed Chairman Jerome Powell said Wednesday that he still sees a series of quarter-percentage point increases coming, but noted the Russia-Ukraine war has injected uncertainty into the outlook.
Markets have fully priced in a rate increase at the March 15-16 meeting but have decreased expectations for the rest of the year since the Ukraine conflict began, according to CME Group data.
Traders are now pricing in five quarter-percentage point increases that would take the benchmark federal funds rate from its current range of 0%-0.25% to 1.25%-1.5%.
Gross said he chooses to be a cautious stock picker, adding that he holds interests in oil pipelines, partnerships that are tax-free.
“I wouldn’t be a buyer of stocks here. I’d simply be a cautious investor,” Gross said. “There are ways around this in terms of earning a decent return without buying stocks and taking that outright risk, or selling bonds, which we found in the last few weeks involves significant risk as well.”
Gross on Thursday released his memoir “I’m Still Standing: Bond King Bill Gross and the PIMCO Express.” The investor managed Pimco’s Total Return Fund before leaving to join Janus Henderson in 2014.

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Check out the companies making headlines in after-hours trading:
Snowflake — Snowflake shares dropped 25% in extended trading after the company showed the slowest revenue growth during the fourth quarter since at least 2019. The company reported $383.8 million in revenue, compared with the $372.6 million analysts surveyed by Refinitiv were expecting.

American Eagle Outfitters — Shares of the retailer declined 7% during extended trading after American Eagle’s quarter was in-line with estimates. The company earned 35 cents per share, excluding items, on $1.51 billion in revenue.
Box Inc. — Shares of Box gained 6% after the company beat top- and bottom-line estimates during the fourth quarter. The company earned 24 cents per share excluding items on $233 million in revenue. Analysts surveyed by Refinitiv were expecting the company to earn 23 cents on $229 million in revenue.
Pure Storage — Pure Storage shares jumped 11% following the company’s fourth-quarter earnings. Pure Storage earned 36 cents per share on $708.6 million in revenue. Analysts surveyed by StreetAccount were expecting the company to earn 26 cents per share on $630.9 million in revenue.
Correction: This story has been updated to reflect Pure Storage’s fourth-quarter results.

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U.S. stock index futures were modestly lower during overnight trading Wednesday, after the major averages finished the day higher despite escalating tensions between Russia and Ukraine.
Futures contracts tied to the Dow Jones Industrial Average declined 28 points. S&P 500 futures shed 0.11%, while Nasdaq 100 futures dipped 0.2%.

During regular trading on Wednesday the Dow advanced nearly 600 points, or 1.79%, snapping a two-day losing streak. The S&P 500 gained 1.86%, while the Nasdaq Composite added 1.62%. It was the tech-heavy index’s fourth positive session in the last five.
Wednesday’s rally was broad based, with all eleven S&P 500 sectors advancing. Visa was the sole Dow component to decline, with the other 29 stocks in the benchmark index finishing the day in the green. Caterpillar was the top gainer, rising more than 5%.
Markets have been volatile in recent sessions as investors assess risks to the U.S. economy fueled by Russia’s war in Ukraine.
“The situation is very fluid on the ground in Ukraine. …We don’t know where the ultimate bottom in the market may be, but we continue to believe the U.S. economy will have above-average growth this year,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.
Despite Wednesday’s advance all three major averages are down more than 4% over the last month, with the Nasdaq Composite still in correction territory. Ed Moya, senior market analyst at Oanda, said that volatility is likely here to stay.

“Risk appetite will struggle to fully return until a true end in the war in Ukraine is in sight,” he said. “Wall Street wants to take a break from the defensive playbook and hold off overloading on utilities, healthcare and consumer staples stocks,” Moya added.

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Wednesday’s broad market strength came despite the continued jump in oil prices, which is contributing to inflation fears across the economy. West Texas Intermediate crude futures, the U.S. oil benchmark, topped $112 per barrel during Wednesday session, a price last seen in May 2011.
Amid rampant inflation Federal Reserve Chairman Jerome Powell said that he remains committed to easing cost pressures through rate hikes, despite the uncertainty unfolding in Ukraine.
“We’re going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment,” he said under questioning from House Financial Services Committee members.
“To the extent that inflation comes in higher or is more persistently high than that, we would be prepared to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings,” he added. Powell will testify again tomorrow before the Senate Banking Committee.
The yield on the benchmark U.S. 10-year Treasury advanced Wednesday to about 1.9%, after dipping below 1.7% during the prior session.
A strong private payrolls report on Wednesday also boosted sentiment on Wall Street. On Thursday weekly jobless claims will be posted, with economists calling for a print of 225,000, according to estimates from Dow Jones.
The reading comes ahead of February’s highly-anticipated jobs report, which will be released Friday. Economists are expecting 440,000 jobs to have been added during the month. January’s report showed an increase of 467,000.
Services PMI and ISM Services readings will also be released Thursday morning.
On the earnings front several retailers are set to post results ahead of the opening bell, including Big Lots, BJ’s Wholesale, Burlington Stores and Kroger. Broadcom, Costco and Gap are on deck for after the market closes.

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Pedestrians walk past a Nordstrom Inc. store.
Ben Nelms | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Nordstrom — Shares of the department store rallied a whopping 37.8% after the company reported better-than-expected profits and sales for the holiday quarter. The strong results also prompted Nordstrom to offer an optimistic outlook for the coming year. Meanwhile, the retailer called out improvements in its off-price business, Nordstrom Rack, amid a report that the company has been reviewing a potential spin-off.

Salesforce — Salesforce shares gained nearly 1% after the company reported an earnings beat. The software giant issued upbeat guidance after beating expectations in its fourth quarter on its top and bottom lines. The company posted adjusted earnings of 84 cents per share on revenue of $7.33 billion. Analysts expected a profit of 74 cents per share on revenue of $7.24 billion, according to Refinitiv.
Ford — Shares of Ford jumped 8.3% after the company said it plans to separate its electric vehicle and legacy businesses. The move is expected to streamline the company’s growing electric vehicle business and maximize profits. The automaker plans to breakout financial results for both units, and its Ford+ business, by 2023.
SoFi — Shares of SoFi rose 3.3% following its better-than-expected quarterly results. The fintech company reported a loss of 15 cents per share, versus analysts’ prediction for a loss of 17 cents per share. SoFi also reported reaching all-time highs in members added, ending 2021 with about 3.5 million members, up 87% from the start of the year.
Ross Stores — Ross shares jumped 6% following a fourth-quarter earnings beat. The off-price retail giant reported earnings of $1.04 per share on revenue of $5.02 billion. Analysts expected earnings of 87 cents per share on revenue of $4.96 billion.
Hewlett Packard Enterprise — Shares of Hewlett Packard jumped 10.2% after the company topped earnings expectations for its most recent quarter. Hewlett Packard posted earnings of 53 cents per share for the quarter, beating analysts’ estimates by 7 cents. Revenue came in shy of the Refinitiv consensus estimate.

Abercrombie & Fitch — The retail stock sunk 13% after reporting weaker-than-expected quarterly results. Abercrombie & Fitch posted a profit of $1.14 per share, below analysts’ estimates of $1.27 per share. Revenue was $1.16 billion, missing analysts’ estimates of $1.18 billion.
First Solar — Shares of First Solar tumbled about 8% after the company missed revenue expectations for the fourth quarter. The solar-panel manufacturer also issued weak full-year guidance.
Booking Holdings — Shares of the travel booking site operator gained 4.4% after Evercore ISI upgraded the stock to outperform from in line. The firm said it sees a “more rapid” leisure-travel recovery.
DraftKings — Shares of DraftKings dipped 1.4% despite Morgan Stanley naming the sports-betting stock a top pick. “We expect the US online sports betting/iGaming market to be very large, with a few market share winners, including DKNG,” Morgan Stanley said.
 — CNBC’s Samantha Subin, Hannah Miao, Yun Li and Sarah Min contributed reporting.

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A summer wheat harvest in Chernihiv, Ukraine, on Thursday, Aug. 10, 2017.
Vincent Mundy | Bloomberg | Getty Images

Wheat futures reached new multiyear highs Wednesday, as war between major exporters Russia and Ukraine continued to raise concerns about the global supply of the commodity.
The moves in the commodity market come amid reports that Russian forces have surrounded two key cities in southern Ukraine.

Wheat futures on Wednesday settled at $10.59 per bushel, up 7.62%, the highest level since wheat traded at $10.9125 on March 26, 2008.
For a second consecutive day, wheat was at “limit up,” meaning it reached the highest amount the price of a commodity is allowed to increase in a single day.
“Look at what’s happening to wheat prices right now. We could be talking about a major food inflation story,” Helima Croft, RBC Capital Markets’ head of global commodity strategy, told CNBC’s “Worldwide Exchange” on Wednesday morning.

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Russia is the largest exporter of wheat and Ukraine is among the four biggest exporters of the commodity, according to JPMorgan. Of the 207 million ton international wheat trade, 17% comes from Russia and 12% comes from Ukraine, according to Bank of America.
The price of corn, also a major agricultural product of the two countries, hit $7.4775 per bushel at its highs Wednesday, its highest level since reaching $7.5275 on Dec. 7, 2012. Corn futures settled at $7.27 per bushel.

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Everyday investors in mutual funds and exchange-traded funds likely have limited exposure to Russian debt and stock.
However, some stock funds allocate at least 10% of their assets to Russia, according to Morningstar. Bond funds are relatively more subdued, allocating at most about 4.5% to 8% to Russian debt, the firm said.
Some funds have seen big losses in recent days. The West has targeted sanctions at Russia after it invaded Ukraine.

Nitat Termmee | Moment | Getty Images

Americans who invest in mutual funds and exchange-traded funds have largely been insulated from financial exposure to Russia amid its conflict with Ukraine.
The reasons are twofold: First, fund managers who buy Russian debt or Russian company stock generally do so in small quantities; second, funds that buy these securities (which are generally focused on the developing world) are often a fringe part of investors’ overall portfolios.

“The reality is most people in a 401(k) might have a really tiny exposure to Russian stocks and/or bonds, probably under 1%,” said Karin Anderson, director of North American fixed income strategies at Morningstar, which tracks data on mutual funds and ETFs.
However, there are a handful of stock and bond funds with much bigger stakes in Russia, according to data provided by Morningstar Direct. Some took a big hit in recent days, due to Western sanctions aimed at crippling Russia’s economy that may be ratcheted up even further.

The 10 stock funds with the biggest exposure allocate at least 9% of their assets to Russia, according to Morningstar data. The two largest — the iShares MSCI Russia ETF and the VanEck Russia ETF — hold 95% and 94% of their assets in Russian companies, respectively, according to Morningstar.
The most-exposed bond funds allocate to Russia in much smaller shares than stock funds. The top 10 hold roughly 4.5% to 8% of their total assets in Russian debt, according to Morningstar. The Western Asset Macro Opportunities mutual fund has the largest allocation, about 8.4%, it said.
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The stock and bond funds are a mix of actively managed and index funds. The latter try to replicate a particular stock or bond benchmark, whereas fund managers in the former category have more latitude to select securities according to a particular fund strategy.
Importantly, the Morningstar data reflects the most recent publicly available data on fund holdings (as of Dec. 31 or Jan. 31, depending on the fund). Active fund managers may have since altered their holdings in Russian stock and debt given the invasion and resulting economic sanctions.

For example, disclosures peg the GQG Partners Emerging Markets Equity Fund’s Russia stock allocation at more than 16% of holdings. However, the firm on Friday said it only had about 3.7% of assets exposed to Russian stock, according to Morningstar.
To a certain extent, a reduction in a fund’s Russia stake will occur naturally if the value of those holdings declines. (In other words, active decisions from fund managers may not be primary cause.)
Benchmarks that incorporate Russia may ultimately remove the country, effectively stripping country exposure from certain index funds. An official at index provider MSCI hinted at that eventuality on Monday, for example, citing an inability to transact in Russian securities.

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Federal Reserve Chairman Jerome Powell addresses the U.S. House Committee on Financial Services on Wednesday in the first of a two-day appearance on Capitol Hill.

The central bank leader delivers prepared remarks prior to a question-and-answer session that is part of congressionally mandated semiannual testimony on the state of monetary policy.
Powell noted in his testimony that the Ukraine war is posing “highly uncertain” circumstances for the economic outlook but said the Fed is still planning to raise interest rates to combat inflation running at 40-year highs.
In addition to the rate increases, he said the Fed also intends to start reducing the size of its asset holdings. That probably will come after rate hikes begin.
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Ukraine has started to accept dogecoin and other cryptocurrencies such as solana as donations toward its military as Russia’s invasion continues.
The Ukrainian government has raised $35 million, through more than 35,000 cryptoasset donations since the start of the Russian invasion, according to Elliptic, a blockchain analytics company.
Cryptocurrencies have become a prominent feature of the war between Russia and Ukraine.

Ukraine has expanded the number of cryptocurrencies it is accepting for donations toward its military as Russia’s invasion continues.
On Wednesday, Mykhailo Fedorov, vice prime minister of Ukraine, said people can send dogecoin as a donation. Dogecoin is a cryptocurrency which originally started off as a joke and has been talked up by Tesla founder Elon Musk.

It is often dubbed a “memecoin,” referring to popular internet jokes.
“Now even meme can support our army and save lives from Russian invaders,” Fedorov tweeted.
On Tuesday, Fedorov tweeted about a project called Aid For Ukraine. It is a collaboration between the Ukrainian government, Everstake and a cryptocurrency blockchain platform called Solana.
People can now donate solana cryptocurrency as well as any other digital tokens based upon Solana.
Ukraine is also accepting non-fungible tokens or NFTs as donations too. These are unique assets such as a piece of digital art stored using blockchain technology to verify and track each NFT.

Ukraine has started to accept dogecoin and a number of other cryptocurrencies as donations as Russia continues its invasion.
Nurphoto | Getty Images

Meanwhile, cryptocurrency exchange Uniswap has built a function that allows people to convert any Ethereum-based digital currencies into ether and send it to the Ukrainian government. Ethereum is a blockchain platform that developers can build apps on top of.
Fedorov also said that Gavin Wood, the co-founder of a blockchain platform called Polkadot, sent $5 million worth of the DOT cryptocurrency to Ukraine.
The Ukrainian government has raised $35 million, through more than 35,000 cryptoasset donations since the start of the Russian invasion, according to Elliptic, a blockchain analytics company.
On Feb. 26, Ukraine began accepting cryptocurrencies for donations and began with bitcoin, ether and a stablecoin called tether. Stablecoins are digital currencies tied to real-world assets such as fiat currency.
Now Ukraine is stepping up the number of cryptocurrencies that it will accept for donations. It comes as military experts expect Russia’s attacks to increase in ferocity and destructiveness.

While cryptocurrency donations are adding some money to Ukraine’s resistance effort, the country has raised more via war bonds, which have brought in about 8.14 billion Ukrainian hryvnia ($270 million).
On Wednesday, an official Ukraine government account tweeted that an “airdrop” is confirmed and would take place on Thursday. An airdrop is usually when an individual or entity gives away cryptocurrency for free. But details were scarce and it’s unclear what digital currency would be given away and to whom.
Cryptocurrencies have become a prominent feature of the war between Russia and Ukraine. There has been speculation that Russians could use cryptocurrencies to get their money out of the country to evade sanctions, though experts said this could be extremely difficult.
Last week, Fedorov called on major cryptocurrency exchanges to block the accounts of Russian users. Binance, the world’s biggest exchange, said it would block addresses of any users that had been sanctioned, but not accounts of all Russians.

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