Here are five things you must know for Thursday, April 7:
1. -- Stock Futures Edge Higher As Markets Digest Fed Minutes Impact
U.S. equity futures edged higher Thursday, while the dollar advanced to a fresh two-year high against its global peers and Treasury bond yields eased, as investors picked through details of minutes from the Federal Reserve's last policy meeting and geared-up for the start of the first quarter earnings season early next week.
Fed Governors essentially agreed to reduce the central bank's $9 trillion balance sheet by $1 trillion a year, selling $95 billion in assets to the market each month, while moving to 'expeditiously' raise interest rates in order to arrest the fastest domestic inflation rates in forty years.
The hawkish tone of the minutes -- including a reference to the fact that, but for the disruption of Russia's invasion of Ukraine on global markets, the Fed would have raised rates by 50 basis points last month -- cemented the case for faster and deeper rate hikes over the next three policy meetings, with the odds of a 50 basis point move in May now pegged at 78.8%.
"As the Fed reduces bond holdings, the Treasury will need more private buyers of government bonds to roll over the federal debt and finance incremental borrowing," said Bill Adams, chief economist at Comerica Bank in Toledo, Ohio. "All things equal, more bond supply on the open market will tend to push bond prices lower and bond yields higher."
"This will drain some liquidity from financial markets where the Fed has been worried about exuberant valuations recently, including both traditional asset classes as well as crypto and NFTs," he added.
Curiously, even after the aggressively-worded Fed minutes, U.S. Treasury bond yields eased in overnight trading, taking 10-year notes to 2.57% and pegging the gap between 2-yeat notes yields at +13 basis points, a stark reversal to the inversion traders were pricing-in just a few sessions ago.
That move might be explained by the fact that, with the March jobs reports and ECB minutes behind it, the market can now shift focus to the start of earnings season next week, with analysts looking for collective S&P 500 profits to rise 6.4% from last year to a share-weighted $407.4 billion.
Heading into the start of the Thursday session on Wall Street, however, futures contacts tied to the Dow Jones Industrial Average indicating a modest 38 point opening bell decline while those linked the S&P 500, which is down 5.06% for the year, are priced for a 12 point bump to the upside. Futures linked to the tech-focused Nasdaq are looking at an 80 point opening bell gain.
2. -- Russia Nears Bond Default As Dollar Payments Frozen
Russia appeared to skirt towards technical default on billions of its dollar-denominated debts Thursday as creditors refused to process payment in greenbacks frozen by sanctions linked to its invasion of Ukraine.
The U.S. has denied Russia access to around $600 billion in currency reserves held in U.S. financial institutions, while the Treasury has restricted its use of international payment systems as part of far-reaching penalties designed to starve Moscow's war efforts.
The impact is now seeping into the Russia's foreign-owned debt, estimated at around $80 billion, as its central bank is unable to pay dollar-denominated coupons or maturities.
Russia has offered to pay in rubles -- a move that was quickly rejected by payment processers -- putting it in so-called technical default that allows for a 30-day grace period to satisfy its creditors.
3. -- HP Shares Surge After Warren Buffett Reveals $4.2 Billion Stake
HP Inc. (HPQ) shares surged in pre-market trading after Securities and Exchange Commission filings revealed that billionaire investor Warren Buffett has built a $4.2 billion stake in the printer and PC maker.
SEC filings published late Wednesday showed that Berkshire Hathaway (BRK.A) investment group now owns an 11.4% stake in the Palo Alto, California-based group, a move that adds to Buffett's recent buying spree following new stakes in oil major Occidental Petroleum (OXY) and the $11.6 billion takeover of Alleghany Corp late last month.
HP, which beat-back a $35 billion hostile takeover bid from Xerox (XRX) in the spring of 2020, added audio and video devices maker Poly to its stable last month in a deal valued at $3.3 billion, including debt.
HP shares were marked 11.2% higher in pre-market trading to indicate and opening bell price of $38.82 each.
4. -- Samsung Sees Record Q1 Sales As Chip Demand Offsets Handset Uncertainty
Samsung Electronics forecast its strongest first profit in four years as surging chip demand offset uncertainties in the global smartphone market.
Samsung, which provides preliminary results a few weeks prior to its full earnings report, said operating profits would likely rise 50% from last year to around $11.6 billion, topping the Street consensus forecast but the highest since 2018. Group revenues, Samsung said, will likely rise 18% from last year to a record $63.35 billion.
"Despite macro uncertainties and one-time costs for bonuses, we assume its memory business drove strong earnings in 1Q22," said Daiwa Capital Markets analyst SK Kim. "We also expect upside to earnings for OLED, but weaker earnings for mobile in 1Q22."
Samsung shares closed 0.7% lower in Thursday trading in Seoul at 68,000 Korean won each, a move that extends the stock's year-to-date decline to around 13.15%, compared to a 3.23% decline for its main U.S. rival Apple (AAPL).
5. -- Levis Shares Surge After Q1 Earnings Beat
Levi Strauss (LEVI) shares surged in pre-market trading after the iconic clothing maker posted stronger-than-expected first quarter earnings thanks in part to higher pricing and lower marketing costs.
Levi's said adjusted earnings for the three months ending in February, its fiscal first quarter, rose 35.3% from last year to 46 cents per share, while revenues popped 22% to $1.6 billion as customer traffic accelerated in the wake of pandemic era restrictions on business and travel.
"Even as we have raised prices, consumer demand has continued to grow and Levi's brand unit volume has now returned to 2019 levels," Levi's CEO Chip Bergh told investors on a conference call late Wednesday. "We took select pricing actions last year as well as early this fiscal year and we believe there remains additional headroom to raise prices in parts of our portfolio through the balance of this year and beyond as we continue to innovate and lead trends."
Levi Strauss shares were marked 5.5% higher in pre-market trading to indicate an opening bell price of $20.47 each.
