LIVE MARKETS Tech titans suddenly sweet on stock splits

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  • Major U.S. indexes fall 1%-2%; chips weak, transports green
  • Tech weakest major S&P 500 sector; energy leads gainers
  • Euro STOXX 600 index ends down ~1.7%
  • Dollar, gold up; crude reverses, now negative; bitcoin slides
  • U.S. 10-Year Treasury yield rises to ~2.01%

March 10 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

TECH TITANS SUDDENLY SWEET ON STOCK SPLITS (1207 EST/1707 GMT)

Amazon.com is bucking market weakness on Thursday, rallying more than 5%, after announcing a 20-1 stock split and new buyback plan.

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Nicholas Colas, co-founder of DataTrek Research, is out with some thoughts on this, while noting that Alphabet (GOOGL.O) announced its own 20-1 split in early February.

"That leaves Tesla as the only stock above $500/share that also has at least a 1 percent weighting in the S&P 500 (counting Berkshire’s B stock). We assume TSLA will announce a split soon, although Elon Musk does have a habit of going his own way."

In any event, Colas offers three ideas on why some tech titans may suddenly be so interested in "no-comma stock prices," since stock splits do not fundamentally alter the value of the company.

First off, Colas says that individual shareholders are also potential and existing customers. He says that the surge in retail stock trading since the pandemic has given birth to a new cohort of investors, and many of them, in their prime earning and spending years, see stock ownership as a direct relationship between themselves and the company.

From this perspective, Colas says it makes sense that Amazon and Google are splitting their stocks now even if they had no interest in doing so pre-pandemic.

Secondly, there is the Dow Jones Industrial Average (.DJI). Colas recalls that Apple (AAPL.O) split its stock 7-1 in June 2014, and it joined the Dow less than a year later.

Colas notes that very little capital is indexed to the DJI, but, if, by chance, Google or Amazon’s managements were to care about becoming Dow stocks like Apple, "all we – and they – know for sure is that your stock has to be less than $500 before you can be in the Dow."

Finally, Colas says the splits can signal corporate confidence.

"Amazon and Google are run by disciplined and thoughtful managers, so seeing both companies announce stock splits within weeks of each says something new is happening in capital markets. Millennial investors may be small investors, but the rest of their wallet is large and growing."

(Terence Gabriel)

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WALL STREET INDEXES DOWN MORE THAN 1%; TECH, SEMIS WEIGH (1105 EST/1605 GMT)

The major U.S. stock indexes are down more than 1% each in late morning trading Thursday after data showing U.S. consumer prices jumped in February.

Technology (.SPLRCT) is the biggest loser of the day among major S&P 500 (.SPX) sectors, while energy (.SPNY) is leading gainers.

The Philadelphia semiconductor index (.SOX) is down about 3.8%.

Consumer prices were boosted by higher energy prices.

Energy shares rose along with oil prices after the United Arab Emirates backtracked on statements saying that OPEC and its allies might increase output to help to plug the gap in exports from Russia. read more

Here is the late morning market snapshot:

for march 10

(Caroline Valetkevitch)

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CPI, JOBLESS CLAIMS: STOP ME IF YOU'VE HEARD THIS (1015 EST/1515 GMT)

Data released on Thursday was kicked right between the goal posts, delivering further evidence of what we already knew: inflation is hot and the labor market's tight.

To begin with, consumer prices accelerated as expected in February.

The Labor Department's consumer price index (CPI) (USCPI=ECI), which tracks prices urban consumers pay for a basket of goods, jumped by 0.8%, hotter than January's 0.6% increase and nailing consensus on the head. read more

Year-on-year, headline CPI shows a 7.9% increase, the largest annual jump in four decades.

And many analysts believe we've yet to plant a flag on the summit.

"Headline inflation dodged the 8% bullet in February, but only by a tenth, and it will break that barrier quite comfortably in March, hitting 8.2-to-8.4%," says Ian Shepherdson, chief economist at Pantheon Macroeconomics. "That will be the peak, though, and we expect the rate to be down to 5.5% by September."

Line-by-line, energy prices were the clear culprit. Gasoline surged 6.6%, airfares jumped 5.2%.

Stripped of volatile food and energy prices, so called "core CPI" rose by 0.5% on the month and 6.4% on an annual basis.

"Bottom line is inflation is elevated and there’s more to come," says Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "I was looking for inflation to peak in the second quarter but now that depends on oil."

"Perhaps we won't see any relief until the end of the year," Cardillo adds.

Indeed, last month's CPI print does not reflect the recent surge in oil prices due to the Russian invasion of Ukraine, which sparked supply concerns.

The print will likely have little to no effect on the Federal Reserve's stated intent to hike key interest rates by 25 basis points at its upcoming monetary policy meeting in an effort to curb this decidedly un-transitory price wave.

The graphic below shows core CPI along with other indicators. They all continue to soar well above Powell & Co's average annual 2% inflation target:

Inflation

The busy Labor Department also revealed, in a separate report, the number of U.S. workers filing first time applications for unemployment benefits (USJOB=ECI) rose last week by 11,000 to 227,000, a tad higher than the 216,000 economist forecast.

While the number remains within the lower end of the range associated with healthy labor market churn, it still reflects a tight labor market in which job openings hover near all-time highs, the participation rate remains well below its pre-pandemic level and employers are loathe to hand out pink slips.

"We expect labor shortages to ease over coming months on a combination of factors, including high wages, diminishing savings as well as an absence of fiscal support," writes Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Ongoing claims (USJOBN=ECI), reported on a one-week lag, unexpectedly increased to 1.494 million. Still they remain well below the pre-COVID level of about 1.7 million.

Jobless claims

Wall Street seemed intent on following its best day in months by resuming its sell-off.

While off earlier lows, the major indexes are well within negative territory, with rising crude prices again pushing energy shares (.SPNY) into the green.

(Stephen Culp)

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U.S. EQUITY INDEX FUTURES POINT TO LOWER OPEN (0900 EST/1400 GMT)

U.S. equity index futures are under pressure after U.S. consumer inflation data that was in-line with estimates:

CPI03102022

Initial jobless claims came in at 227k vs a 217k estimate.

Meanwhile, talks between Russia and Ukraine's foreign ministers on Thursday made no apparent progress toward a ceasefire in the two-week-old conflict. read more

With this, NYMEX crude futures are popping back up, and the U.S. 10-year Treasury yield is rising to press 2%.

Regarding the CPI data, Brian Jacobsen, senior investment strategist at Allspring Global Investments, said, "This inflation report might be just a prelude to an even uglier report when we get the March data. Gasoline prices are up 20% since the beginning of the month. Food costs are up. Goods excluding food and energy downshifted to a slower gear in February, but food and energy will keep inflation looking really hot for at least another month."

Jacobsen added, "The Fed can't bring peace to Ukraine and Russia, so there's little that monetary policy can do to tame food and energy inflation. It may have to just say that it is serious about fighting inflation, but it is also seriously hamstrung in what it can do right now.”

Here is your premarket snapshot:

Premarket03102022

(Terence Gabriel, Chuck Mikolajczak)

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Terence Gabriel is a Reuters market analyst. The views expressed are his own

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