💨 Passing Gas

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Results: Last week we asked if you think Ukraine will be an independent nation or under Russian control one year from now. 45% said it will be an independent country, while 55% said it would be under Russian control.

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REVIEW

US stocks fell Friday as investors remain uncertain of what lies ahead amid Russia’s ongoing invasion of Ukraine, and the resulting increase in commodity prices. News reports from Eastern Europe indicated Russian President Vladimir Putin felt peace talks took a positive turn to close out the week, while Ukrainian President Volodymyr Zelenskyy said his country had reached a “strategic turning point” in the armed conflict. All the while, President Joe Biden has called for Russia to be removed from preferred trade partner status, and Congress is sending $14 billion in aid to Ukraine. Since Russia’s invasion in late February oil prices have been spiking, and the upward trend in price continued Friday. Both US benchmark West Texas Intermediate crude and world standard Brent Crude moved higher, although each fell from 10-year highs seen earlier in the week. Sanctions and production disruptions have roiled commodity markets, including assets like metals and agricultural goods. In economic data, the University of Michigan’s monthly survey showed inflation and rising fuel prices have put a dent in consumer sentiment. The university’s year-ahead inflation expectations are now the highest since 1981. In company-specific news, shares of electric car maker Rivian fell after the company missed analyst expectations for the fourth-quarter on both the top and bottom lines. Regulatory authorities in the UK and EU have opened antitrust probes into Google and Meta in regards to a 2018 advertising deal. Officials allege the two companies conspired to rig auctions for online ads and illegally control prices, in what’s been called the “Jedi Blue” agreement. Meanwhile, pandemic darling DocuSign has lost the share price gains it made since COVID-19 hit, with its latest earnings report delivering downbeat guidance for the new fiscal year. For the week as a whole, the Dow Jones Industrial Average lost 2%. The S&P 500 fell 2.9 % and the Nasdaq Composite slid 3.5 %.

PREVIEW

Tomorrow, 1-year and 3-year inflation expectations are published.

On Tuesday, February’s producer price index is due. The PPI measures how selling prices change on average over time, in terms of domestic producer’s output. In January the number rose by 1% on a monthly basis, and 9.7% on an annual basis — not far from the highest rate ever recorded. The Empire State Manufacturing Index for March is also due, which is a survey taken by the Federal Reserve Bank of New York in an attempt to gauge the performance of New York’s manufacturing sector.

Wednesday, the Federal Open Market Committee kicks off its two-day meeting. The central bank is expected to enact the first of several potential interest rate hikes, which would be aimed at cooling off the economy amid rampant inflation. Specifically, the FOMC will make an announcement regarding any change to the Fed’s target rate, which is how banks and depository institutions determine what to charge when lending each other money. After that, Fed Chair Jerome Powell will give a press conference. There’s plenty more set for release on Wednesday, including the NAHB homebuilders’ index for March along with February retail sales and import price index and January’s revised business inventories.

Thursday, weekly jobless claims are due, after the latest data showed initial unemployment claims jumped by 11,000 to 227,000. Job openings are at record highs and layoffs are at record lows, amid what some economists have dubbed the “Great Resignation.” February’s seasonally adjusted building permits and housing starts are something to watch for in terms of what’s going on in the tight housing market. The Federal Reserve Bank of Philadelphia’s regional manufacturing survey for March is due along with the industrial production index and capacity utilization rate for February.

Friday, more housing market data is on the way in the form of February’s seasonally adjusted existing home sales, while the Conference Board’s February index of leading economic indicators will also be published. The privately run company’s report showed a 0.3% decline in January, which analysts blamed on the Omicron variant’s impact.

Here’s what's in store for this week’s earnings reports: 

Monday, Vail Resorts (MTN) will report its latest quarterly results. The Colorado-based company most recently posted earnings in December of last year, beating Wall Street expectations for profit but coming up short on revenue. Tuesday, Volkswagen (VWAGY) is set to publish its earnings for 2021 as a whole, in addition to its data for the most recent quarter. Analysts predict the company will report increased revenue compared to 2020. Wednesday, fellow European automaker BMW (BMWYY) will hand in its most recent report card. The company joined Volkswagen in halting production as a result of Russia’s invasion, although some of that suspended activity resumed last week. Thursday, shipping giant FedEx (FDX) posts earnings for its most recent three-month period. FedEx joined a rapidly growing list of companies last week when it decided to suspend operations in Russia. Friday, the Eastern Company (EML) is scheduled to release its earnings data for the fourth quarter of 2021 and the last fiscal year as a whole. Headquartered in Connecticut, the Eastern Company provides security and metal products, as well as industrial hardware.

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The world is opening up, and travel restrictions are coming down! It may have been some time since you last traveled, so here’s a perfect opportunity to update your luggage.

Each suitcase in Joyway’s 3-piece luggage set comes with a TSA lock and they’re all extremely lightweight. They also feature multi-direction 8-wheel spinners that make your suitcase a breeze to handle. 

Durably built, you can be confident that these pieces will last. You also have the added benefit of a 2-year warranty against defects in materials and workmanship.

The set comes in four different colors, including black, orange, red, and gold. The gold set is also available for 30% off! Take to the friendly skies with your new luggage!

Passing Gas

Natural Gas Demand is Surging At Home and Abroad

With Russian gas being shunned by the West as the invasion of Ukraine stretches into its third week, natural gas producers in the US may stand to benefit.

Natural gas prices in the US are cheap when compared to the rest of the world. That’s even with them doubling over the past year. As it stands, natural gas customers in the US pay just one-tenth of what they do in Europe.

During the first month of the year, US gas exports to Europe surpassed Russian pipeline volumes for the first time. By 2027, US gas exports to Europe are forecast to double. Meanwhile, Stateside, gas demand is expected to increase 10% over the next three years. Here are a few companies at the forefront of this shift. 

EQT, Chesapeake, Coterra May Stand to Benefit

Sure, the US was oversupplied with natural gas for nearly a decade, which put downward pressure on gas prices. That was then, as they say. Now, companies operating in the space have gotten more disciplined with their capital and are facing growing demand outside the US. This bodes well for the stocks of natural gas producers including EQT (EQT), Chesapeake Energy (CHK), and Coterra Energy (CTRA), among others. The stocks are attractive to investors given they have solid free cash flow, robust balance sheets, and strong capital returns.

EQT’s stock has been punished because the company hedged most of its 2021 output and 65% of this year’s output well below where prices are currently. The company is only about 40% hedged for 2023, however, which could help its share price. It also began paying out an annual dividend that yields 2%. On Friday, EQT closed the week at $27 flat. Josh Silverstein, an energy analyst at Wolfe Research, thinks the stock will end up trading around $35 per share.

Dividends Don’t Hurt

On the dividend front, Coterra is particularly attractive to some investors given it pays both a base dividend and a variable dividend that changes in response to earnings. Combined, Coterra’s dividend is yielding about 8.7%. Meanwhile, Chesapeake, which emerged from bankruptcy in 2021, has a base and variable dividend which yields 9%. Other potential beneficiaries include Antero Resources (AR), Southwestern Energy (SWN), Range Resources (RRC), and Tourmaline Oil (TRMLF). The latter is the largest natural gas producer in Canada.

After a decade of oversupply and questionable capital management, US natural gas producers are getting more focused. It comes at a time when demand for their products is growing at home and abroad, which bodes well for their stocks and shareholders.

Can the Canuck's Outperform?

Oh, Looking North for Returns, Eh?

With interest rates set to rise and commodity prices soaring, the Canadian stock market is outperforming the rest of the world. Why? Well, Canada has a lot of exposure to the financial and energy markets, both of which benefit in the current environment. 

It’s the reason the iShares MSCI Canada ETF (EWC) is flat so far in 2022. That compares with the S&P 500 which is down 12% since the beginning of the year and the Nasdaq’s 18% decline. Outside of the US, Canadian stocks are doing better than the iShares Core MSCI Europe ETF (IEUR) which is about 15% lower in 2022.

Financial, Energy Exposure Gives Canada an Edge 

Roughly 40% of the MSCI Canada index is made up of Canadian banks including Royal Bank of Canada (RY), Toronto Dominion (TD), and Bank of Nova Scotia (BNS). Bank stocks tend to benefit in a rising interest rate environment. Lending profits increase when rates rise. All three stocks are higher this year. It doesn’t hurt that they pay a dividend yield of close to 3%, which makes them attractive to income-seeking investors. 

Then there’s the ETF’s 28% exposure to energy and commodities. Oil and natural gas prices have skyrocketed amid Russia’s invasion of Ukraine. Even before that, energy prices were elevated. Energy buyers are shifting their focus to non-Russian gas-producing countries, which benefits Canada.

Value Back in Vogue 

Canada is also a value play which is in vogue in a rising rate environment. With the stock market weighted toward industrials, energy, and banks, it has been able to outperform growth stocks. The Russell 1000 Value index is off 6% in 2022. The Russell 1000 Growth Index is down 18%. 

Canada’s stock market is outperforming for now but it's not clear if the run is sustainable. For one thing, rising interest rates can boost profits at banks, but if they rise too much it may slow demand for mortgages and other loans. If the war in Ukraine is resolved quickly it could bring oil prices back down. For now, however, it does provide investors with a place to grab a Timmy Hortons and ride out the volatility. 

POWERED BY JOYFUL

Calling All Globetrotters and Jetsetters

The world is opening up, and travel restrictions are coming down! It may have been some time since you last traveled, so here’s a perfect opportunity to update your luggage.

Each suitcase in Joyway’s 3-piece luggage set comes with a TSA lock and they’re all extremely lightweight. They also feature multi-direction 8-wheel spinners that make your suitcase a breeze to handle. 

Durably built, you can be confident that these pieces will last. You also have the added benefit of a 2-year warranty against defects in materials and workmanship.

The set comes in four different colors, including black, orange, red, and gold. The gold set is also available for 30% off! Take to the friendly skies with your new luggage!

Nordstrom Holds Its Own During Pandemic, Beyond

Nordstrom’s Online Presence Lifts Prospects 

Physical retailers were having a lot of problems before the pandemic and even more since then. Amazon (AMZN) started to change the way we shopped and COVID-19 cemented it. Some retailers, including Nordstrom (JWN), have been able to weather the storm, nonetheless, thanks in large part to their ability to embrace the internet as a real and sustainable sales channel. 

Prior to the pandemic, the world wasn’t shopping online en masse. During lockdowns this changed and it looks like this shift could be permanent. That puts Nordstrom in a good position given about 40% of its sales come from digital channels. It also has close to 400 retail locations. Nordstrom’s ability to meld both physical and online stores is serving the retailer well. 

Shorts Watch Out 

Investors appear to be giving Nordstrom a nod of approval. The S&P 500 is down about 12% so far this year and the SPDR S&P Retail ETF (XRT) is off 19%. Nordstrom’s shares are up about 2% in the same time frame, faring better than both indexes. Earlier this month the retailer reported fiscal fourth-quarter earnings which blew past expectations for profit and sales, sending the stock soaring 35%.

Nordstrom also provided an upbeat outlook for the year, even as inflation soars. It pointed to improvements at Nordstrom Rack, its discount chain, as a driver of growth. That earnings report put pressure on shorts. The company is one of the most heavily shorted stocks.

More Online Push Needed 

To boost Nordstrom’s bottom line, some industry watchers say the retailer has to keep pushing its online presence. Nordstrom still carries clout with brands but increasingly many brands are trying to sell directly to consumers. As a result, Nordstrom has to identify more ways to bring customers into stores and online to keep brands clamoring to be sold at the retailer. That may not be a sure bet. Digital sales fell 1% in its fiscal fourth quarter compared to the same period in 2020. Online sales are up 23% on a two-year basis.

Also potentially helping is Nordstrom’s focus on increasing profitability, improving the supply chain, and boosting inventory flow. Nordstrom is no Amazon but it’s holding its own. For how long remains to be seen.

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