Worst quarter for stocks in two years, US data, Walgreens earnings, bitcoin lower

Equities fall on inflation jitters, Russia

Stocks finished the quarter on a down note as the latest economic data shows inflation is weighing on the consumer and as President Putin vows to halt gas supplies to Europe unless payments are made in roubles. The worst quarter in two years isn’t so bad as the S&P 500 index is roughly 5% away from record highs.  Wall Street will have a lot to debate over the next few months but a choppy stock market seems likely as no clear answers will be had on when peak inflation happens and how aggressive will the Fed be with tightening until geopolitical risks are resolved.

US Data

The consumer is definitely feeling the pinch in the pocketbook as inflation soars.  The February personal spending data showed a 0.2% increase, which was less than the 0.5% consensus estimate, and well below the upwardly revised 2.7% January reading.  Personal income rose as expected at 0.5% in February over the prior month, but is not keeping up with widespread price increases.

The Fed’s favorite inflation measure rose to the highest levels since 1982, which should completely support the case for a half-point rate increase at the May meeting. The headline personal consumption expenditure price index rose 0.6% from a month ago and 6.4% from February 2021.  The PCE Core deflator, which takes out food and energy prices, rose 5.4% from a year ago.

Chicago PMI came in better-than-expected at 62.9, a beat of the 57.0 estimate and 56.3 prior reading. The Chicago PMI was a nice rebound and provides some optimism away from all the doom and gloom from slowdowns and runaway inflation. Prices paid rose at a slower pace, while demand remains strong.

US mortgage rates continue to go up, hitting 4.67%, the highest since late 2018. The 30-year fixed rate went from 4.42% a week ago to 4.67% today.  The housing market is still hot as inventories remain low, but this will definitely start to cool it.

Walgreens

Walgreens delivered strong earnings, affirmed full-year EPS guidance, and noted the expanded Transformational Cost Management Program is on track to deliver USD 3.3 billion in annual cost savings by fiscal 2024.  Second-quarter adjusted EPS impressed at USD 1.59, a decent beat of the USD 1.37 consensus estimate, while sales rose to USD 33.76 billion, better than the USD 33.32 billion analysts’ forecast.  Walgreens added that they are continuing with their strategic review of the Boots business.

Walgreens shares initially popped higher on the strong beats with the top and bottom line, but that quickly faded.

Bitcoin

The Bitcoin rally has run out of steam and today’s risk-off session on Wall Street could keep the pressure on cryptos.  Bitcoin long-term options bets are growing, but it looks like we might have to wait a while until a new catalyst emerges to take out the recent highs.

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