Aug 04, 2022
TradeUP Thursday
Latest news and bulletin updates
Market Trends
Dow Jones  up
S&P 500  up
(Opening price as of 08/04/2022 compared to last close)
Weekly Highlights
#1 Broad agreement amongst Fed Chiefs for more rate hikes
#2 PCE Index, Fed’s primary inflation measure, reaches 40-year high
#3 Pinterest stock balloons as company receives new investment
#4 Airbnb stock down despite second best-ever financial performance
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WTI oil fell below $90 for the first time in over 6 months

WTI oil prices fell to $88 this morning, the first time since February. As the Russia-Ukraine war has entered its 6th month, the two countries are currently in a stalemate. According to NYT’s report, the Russian army is in shortage of military personnel and weapons, and the Ukraine army is also suffering from heavy losses in combat. While there seems to be no end to the war in the short term, oil prices continuously fell over the past weeks. The chart below shows prices of WTI crude (white) and Brent crude (blue) in the past 12 months.

On the supply side:
Two of the 3 largest oil production countries, the US and Russia, have not updated their supply data since the beginning of the Russia-Ukraine war. According to data from Bloomberg, the US and OPEC have not significantly increased oil supply in the past 6 months. The chart below shows crude oil supply in the US (white) and in OPEC (blue). Hence the minor rise in output is not the reason for oil price decrease in the past weeks. 

On the demand side:
According to data from Bloomberg, the five largest oil import countries in the world are China, the US, India, South Korea, and Japan, which account for 60% of total crude oil import. The chart below shows the trend for oil import in the 5 countries above.

At the end of this February, import quantity hit bottom for the 5 countries (marked by the green circle). However, all parties significantly increased the quantity of oil imports in March in response to supply shortage concerns due to the Russia-Ukraine war. In May and June, the 5 countries reduced their oil import quantities and oil prices hit a recent record high on June 8th. 
Oil price fluctuations have peaked and are stabilizing. The increase in oil prices in the beginning was driven by increased import demand due to fear over an oil shortage caused by the Russia-Ukraine war, but prices are now readjusting since countries already have sufficient supply. This change in demand is the main factor for decreasing oil prices, rather than weaking consumer demand.

Currently, US inflation has hit a 40-year high and is mainly driven by oil prices.

Do you think inflation will peak in 2 months?
A.Yes B.No C.Hard to tell
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Inside Scoop

#1. Broad agreement amongst Fed Chiefs for more rate hikes

• Fed district presidents are in consensus on need for further interest rate hikes to combat against persistent inflation. Current targets point towards 3.5% by end of year, while presently rates sit at 2.25%-2.50%. 

• According to Cleveland head Lorretta Mester, “several months” of declining inflation would be needed for a policy reversal. San Francisco head Mary Daly said Fed’s efforts to slow consumer demand were “nowhere near done.” St. Louis’s James Louis expected another 1.5 percentage points ahead and no US recession.

#2. PCE Index, Fed’s primary inflation measure, reaches 40-year high

• The personal consumer expenditure price index rose by 6.8% in June, up from 5.8% the month prior. Core PCE, which excludes volatile food and energy, increased to 4.8% year-over-year.

• Consecutive months of high inflation are hurting consumers. In June, inflation-adjusted spending rose by just 0.1%, while inflation-adjusted disposable income fell by 0.3%.

#3. Pinterest stock balloons as company receives new investment

• While Pinterest released a disappointing earnings report, its stock surged almost 20% aftermarket Monday after activist investment group Elliot Management announced it had acquired the biggest single stake in the company.

• Additionally, Pinterest lost fewer users than analysts’ expectations. The company blames poor advertising demand for missing its financial guidance.

#4. Airbnb stock down despite second best-ever financial performance

• Despite revenue increasing 58% year-over-year and declaring its second most profitable quarter to date, Airbnb shares slumped 9% in aftermarket trading Tuesday. The company also announced a $2B stock buyback program.

• Investors may have been disappointed by the company missing its revenue guidance and its slowing Covid recovery — revenue grew by 70% year-over-year in Q1.

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