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February 21, 2023

Warren Buffett is missing out on this year’s market comeback

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

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—

Warren Buffett is arguably the most legendary investor of all time. But the Oracle of Omaha has missed out on this year’s stock market rally. So far, at least.

Shares of Buffett’s Berkshire Hathaway

(BRKB) conglomerate, a company that owns businesses ranging from Geico and the Burlington Northern Santa Fe railroad to consumer brands like Dairy Queen, Duracell and Fruit of the Loom, are down slightly this year — lagging the market, as the S&P 500 is up 6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. (The Nasdaq has done even better, surging 12{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.)

Berkshire Hathaway also has a giant stock portfolio that Buffett helps run. Apple

(AAPL) is now by far the top holding for Berkshire, which also has big stakes in Bank of America

(BAC), Chevron

(CVX), American Express

(AXP) and Coca-Cola

(KO).

So is Berkshire’s portfolio, dare we say it, a little too boring? After all, if you want exposure to the big blue chips he owns, you could just buy an S&P 500 index fund.

Buffett, in fact, has promoted that idea to investors many times, arguing that most individual stock pickers will not be able to beat the market. The 92-year-old Buffett, who has a net worth of more than $100 billion according to Forbes, even said that he wants the trustee in charge of his will to put 90{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of his wife’s inheritance in index funds.

Still, investors pay extremely close attention to Buffett every time he speaks. So traders will be poring over every word in his annual shareholder letter, which will be released the morning of Saturday, February 25, along with Berkshire’s latest earnings report.

Don’t expect any major surprises. Buffett will probably continue to extol the virtues of a long-term, patient approach to investing and give a bullish outlook for the US economy. And to his credit, that usually pays dividends: Berkshire stock was up 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} last year in a down market.

But market watchers are looking to see what Buffett says about the current inflationary scourge that has had a big impact on consumers and investors. He has lived through a couple of bouts of high inflation, after all.

“I would like to hear Buffett address what’s going on with interest rates and inflation up as much they are,” said Steve Check, president of Check Capital Management, an investment firm that owns Berkshire shares. “He talked a lot about how concerned he was in the 1970s and 1980s.”

Buffett has made numerous comments about inflation over the past few decades. And he was particularly nervous during the late 1970s and early 1980s, when soaring oil prices created an inflationary shock that severely hurt the economy.

“High rates of inflation create a tax on capital that makes much corporate investment unwise,” Buffett said in his 1980 shareholder letter to Berkshire investors. Buffett also described inflation as a gigantic parasitic “tapeworm” for businesses in 1981.

Buffett may also need to address how top-heavy and concentrated his portfolio has become. Berkshire’s five largest holdings make up about 75{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of the company’s stock investments.

“The portfolio is significantly overweight [in] technology, energy, consumer staples, and financials relative to the S&P 500,” said Bill Stone, chief investment officer with The Glenview Trust Company, another Berkshire shareholder, in a report. Stone noted that Berkshire also has big stakes in Kraft Heinz

(KHC) and oil company Occidental Petroleum

(OXY).

Investors also want to hear more about what Buffett plans to do with Berkshire’s massive pile of cash. The company has more than $100 billion on its balance sheet. Are more acquisitions coming?

Buffett has talked for the past few years about how he’s longing to do an “elephant-sized” deal with Berkshire’s cash. Its most recent big deal was last year’s purchase of insurer Alleghany for $11.6 billion.

Still, the recent sluggish performance of Berkshire’s stock is unlikely to deter the faithful Buffett fans, many of whom are expected to make the annual pilgrimage to Omaha on May 6 for the company’s shareholder meeting.

Berkshire vice chairman Charlie Munger will likely be on stage with Buffett. So will Greg Abel, the chairman and CEO of Berkshire Hathaway Energy who Buffett has handpicked to eventually succeed him as Berkshire Hathaway CEO.

Buffett’s faith in the US economy is well founded. American consumers have proven to be remarkably resilient despite rampant inflation. The surprisingly strong retail sales gains for January is further proof of that.

Investors will get several more clues about consumer spending this week when several top retailers report earnings.

Dow components Walmart

(WMT) and Home Depot

(HD) are the highlights. Walmart

(WMT), which has a massive grocery business, should shed some light on how shoppers are coping with surging grocery prices.

Walmart could still benefit from its reputation as a place for bargains, though. That could even attract more affluent shoppers looking to save a buck.

“With inflation remaining elevated in the U.S., we expect Walmart to see continued trade-down benefits…particularly from higher-income customers,” said Arun Sundaram, an analyst at CFRA Research, in a report.

And investors will be looking for clues about the health of the housing market when Home Depot reports. Placer.ai, a research firm that measures foot traffic at top retailers, said in a recent report that consumers are returning to Home Depot and rival Lowe’s at almost pre-pandemic levels — even despite the housing slowdown.

One reason? Current homeowners may decide to spend more on renovations if they now plan to stick in their current house longer instead of looking to sell.

“Although the hot home-buying market is cooling off…foot traffic remains close to pre-pandemic levels due to a shift towards projects aimed at sprucing up a current living space,” said Placer.ai’s Ezra Carmel in a report. “It appears that projects that enhance the prospect of staying in place also have the ability to drive visits.”

Investors will be keeping close tabs on several other retailers set to report earnings this week, including TJX

(TJX) — the owner of TJ Maxx, Marshalls and HomeGoods — as well as online retailers eBay

(EBAY), Etsy

(ETSY), Overstock

(OSTK), Wayfair

(W) and China’s Alibaba

(BABA).

The US government is also set to release personal spending figures for January on Friday, another data point that will give a glimpse of consumers’ financial health.

Monday: US stock and bond markets closed for Presidents’ Day

Tuesday: US existing home sales; Eurozone and UK PMI; earnings from Walmart, Home Depot, Medtronic

(MDT), Fluor

(FLR), Molson Coors

(TAP), Caesars Entertainment

(CZR), Diamondback Energy

(FANG), Chesapeake Energy

(CHK), Palo Alto Networks

(PANW), Coinbase, La-Z-Boy

(LZB) and Hostess Brands

(TWNK)

Wednesday: Weekly crude oil inventories; earnings from Stellantis, Baidu

(BIDU), TJX, Garmin

(GRMN), Overstock, Wingstop

(WING), Nvidia

(NVDA), eBay, Etsy and Bumble

Thursday: US weekly jobless claims; US Q4 GDP (second estimate); Eurozone inflation; Turkey interest rate decision; earnings from Alibaba, Netease

(NTES), Keurig Dr Pepper

(KDP), Wayfair, Newmont, Domino’s

(DPZ), Papa John’s

(PZZA), Yeti

(YETI), Nikola, CNN owner Warner Bros. Discovery, Block

(SQ), Booking Holdings

(BKNG), Live Nation

(LYV), Carvana

(CVNA), Intuit

(INTU) and Beyond Meat

(BYND)

Friday: US personal income and spending; US PCE inflation figures; US new home sales; Japan inflation; Germany Q4 GDP; earnings from CIBC

(CM), Scripps

(SSP) and Cinemark

(CNK)

Saturday: Berkshire Hathaway earnings and Warren Buffett annual shareholder letter

May 17, 2022

Stocks jump ahead of Powell remarks as markets attempt comeback

U.S. stocks charged forward Tuesday as the indexes attempt to swing back from intense selling last week amid worries around persistent levels of inflation and the prospect of an economic slowdown.

Investors are bracing for more Fedspeak this afternoon, with central bank chief Jerome Powell scheduled to give remarks at a conference hosted by the Wall Street Journal.

The S&P 500 jumped 1.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, and the Dow Jones Industrial Average climbed 375 points, or 1.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. The tech-heavy Nasdaq Composite gained 1.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. The moves follow six straight weeks of declines for the S&P 500, its longest span of losses in more than a decade, and seven consecutive down weeks for the Dow Jones Industrial Average, the index’s widest period of weekly losses since 2001.

Uncertainty around the pace and magnitude of the Federal Reserve’s rate hiking cycle has stoked pressure across markets that has persisted throughout the year. In 2022 so far, the S&P 500 is roughly 17{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} below its all-time high on Jan. 3, while the Dow is down about 13{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} over the same period and the Nasdaq has fallen deeper into a bear market – well over 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} below its record closing price in November.

“Markets lead the economy,” Citi Private Bank Chief Investment Officer David Bailin told Yahoo Finance. “The fact that markets are lower at this point means that the consumer is slowing, and the global economy is slowing.”

Equity markets have endured “severe technical damage” in recent months, with the S&P 500 falling below the important 4,000 level last Monday before testing bear market levels near 3,850 last Thursday, Comerica Wealth Management Chief Investment Officer John Lynch pointed out in an emailed note.

“Curiously, comments from Fed Chair Jerome Powell indicating the likelihood of economic pain in order to achieve the central bank’s objectives of lowering inflation may have been the catalyst for the S&P 500’s rally beginning Thursday afternoon and lasting through Friday’s close,” Lynch wrote. “Nevertheless, we caution investors that the severe technical damage suffered these past several months will take longer than a few good days to repair.”

Investors will have more Fedspeak to mull in the coming days, including Powell’s remarks slated for Tuesday afternoon, and speaking engagements from other central bank officials slated to take place through Friday.

“The inconvenient truth is the Fed is going to need to raise rates more quickly and to a higher level than many were hoping,” Independent Advisor Alliance Chief Investment Officer Chris Zaccarelli said recently in an emailed note. “There will be at least four 50 bps rate hikes this year and not three or less and we will continue to be cautious with risk assets.”

—

9:44 a.m. ET: Retail sales rise 0.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in April underscoring strength of US consumers

U.S. retail sales rose at a solid pace in April, pointing to continued strength in the U.S. economy, with consumers spending still holding up despite persistently high inflation.

The Commerce Department said Tuesday that U.S. retail sales rose 0.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in April, buoyed by increased sales of cars, electronics, and at spending restaurants. Economists had anticipated an advance of 1.0{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, according to Bloomberg consensus data.

“The desire to spend is strong among US consumers,” Harris Financial Group managing partner Jamie Cox said in a note. “Americans have broken the shackles of covid and aren’t going back. Numbers like this call into question any forecasts of a 2022 recession in the United States.”

—

9:30 a.m. ET: Stocks attempt comeback from heavy selling last week

Here’s where the major indexes were trading at market open Tuesday:

S&P 500 (^GSPC): +62.72 (+1.56{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,070.73
Dow (^DJI): +450.12 (+1.40{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 32,673.54
Nasdaq (^IXIC): +240.94 (+2.07{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 11,903.73
Crude (CL=F): -$0.02 (-0.02{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $114.18 a barrel
Gold (GC=F): +$11.30 (+0.62{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,825.30 per ounce
10-year Treasury (^TNX): +8.7 bps to yield 2.9640{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

—

7:16 a.m. ET: Walmart Q1 earnings miss estimates while sales grow more than expected

Walmart (WMT) reported mixed first-quarter results, with still-solid consumer spending helping buoy the retail giant’s sales while earnings fell short of expectations.

Shares declined by more than 6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in pre-market trading.

The world’s largest retailer reported adjusted earnings per share of $1.30 compared to $1.48 expected by analysts, according to Bloomberg consensus estimates. Revenue came in at $141.57 billion versus $139.09 expected.

Walmart has seen sales growth decelerate from a peak rate during the height of the pandemic domestically, when a surge in pantry-stocking and stimulus checks helped boost results. Still, the company has maintained revenue growth as demand remained resilient for the company’s array of products, even as consumer prices have climbed across the country.

“Bottom-line results were unexpected and reflect the unusual environment,” Walmart’s president and CEO Doug McMillon said in a statement. “U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected. We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future.”

—

7:11 a.m. ET: Stock futures climb as investors digest retail earnings

Here were the main moves in early trading ahead of Tuesday’s open:

S&P 500 futures (ES=F): +63.00 (+1.57{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,067.75
Dow futures (YM=F): +406.00 (+1.26{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 32,565.00
Nasdaq futures (NQ=F): +232.74 (+1.90{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 12,477.50
Crude (CL=F): +$0.68 (+0.60{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $114.88
Gold (GC=F): +$11.50 (+0.63{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,825.50 per ounce
10-year Treasury (^TNX): 0.00 bps to yield 2.8770{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

—

7:03 a.m. ET: Home Depot climbs 4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} on heels of strong quarterly results

Shares of home improvement retailer Home Depot (HD) bounced in early trading Tuesday after the company unveiled first-quarter financial results that beat analyst estimates and raised its full-year outlook.

The company reported net income was $4.23 billion, or $4.09 per share, in the three months ended March 31, compared to $4.15 billion, or $3.86 per share in the same period last year. Home Depot also notched $38.9 billion in net sales for the first quarter of fiscal 2022, marking an increase of $1.4 billion, or 3.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from a year ago. Analysts had anticipated adjusted earnings of $3.71 per share on revenue of $36.83 billion, according to Bloomberg consensus estimates.

“The solid performance in the quarter is even more impressive as we were comparing against last year’s historic growth and faced a slower start to spring this year,” Chief Executive Officer and president Ted Decker said in a statement.

The company also raised its full-year guidance, with sales growth expected to come in at 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and earnings per share growth projected to come in at mid-single digits.

—

6:17 p.m. ET Monday: Stock futures little changed following narrow recovery in markets

Here’s where stock futures were in extended trading ahead of the overnight session Monday:

S&P 500 futures (ES=F): -1.00 (-0.02{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,003.75
Dow futures (YM=F): -4.00 (-0.01{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 32,155.00
Nasdaq futures (NQ=F): +4.50 (+0.04{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 12,249.25
Crude (CL=F): -$0.51 (-0.45{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $113.69
Gold (GC=F): +$10.20 (+0.56{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,824.20 per ounce
10-year Treasury (^TNX): -5.8 bps to yield 2.8770{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

NEW YORK, NEW YORK - MAY 12: Traders work on the floor of the New York Stock Exchange (NYSE) on May 12, 2022 in New York City. The Dow Jones Industrial Average fell in morning trading as investors continue to worry about inflation and other global issues. (Photo by Spencer Platt/Getty Images) — NEW YORK, NEW YORK – MAY 12: Traders work on the floor of the New York Stock Exchange (NYSE) on May 12, 2022 in New York City. The Dow Jones Industrial Average fell in morning trading as investors continue to worry about inflation and other global issues. (Photo by Spencer Platt/Getty Images)

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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December 1, 2021

Omicron Unravels Travel Industry’s Plans for a Comeback | Business News

By DAVID KOENIG and YURI KAGEYAMA, Associated Press

Tourism businesses that were just finding their footing after nearly two years of devastation wrought by the COVID-19 pandemic are being rattled again as countries throw up new barriers to travel in an effort to contain the omicron variant.

From shopping districts in Japan and tour guides in the Holy Land to ski resorts in the Alps and airlines the world over, a familiar dread is rising about the renewed restrictions.

Meanwhile, travelers eager to get out there have been thrown back into the old routine of reading up on new requirements and postponing trips.

Abby Moore, a librarian and associate professor at the University of North Carolina, Charlotte, was scheduled to leave for Prague on Wednesday. But the day before her flight, she started having doubts when she saw that Prague had closed its Christmas markets and imposed a city-wide curfew.

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“I wasn’t really concerned about my trip until the Czech Republic started what looked like a mini-lockdown process,” said Moore, who decided to reschedule her travel to March.

Less than a month after significantly easing restrictions for inbound international travel, the U.S. government has banned most foreign nationals who have recently been in any of eight southern African countries. A similar boomerang was seen in Japan and Israel, both of which tightened restrictions shortly after relaxing them.

While it is not clear where the variant emerged, South African scientists identified it last week, and many places have restricted travel from the wider region, including the European Union and Canada.

For all the alarm, little is known about omicron, including whether it is more contagious, causes more serious illness or can evade vaccines.

Still, governments that were slow to react to the first wave of COVID-19 are eager to avoid past mistakes. The World Health Organization says, however, that travel bans are of limited value and will “place a heavy burden on lives and livelihoods.” Other experts say travel restrictions won’t keep variants out but might give countries more time to get people vaccinated.

London-based airline easyJet said Tuesday that renewed travel restrictions already appear to be hurting winter bookings, although CEO Johan Lundgren said the damage is not yet as severe as during previous waves. The CEO of SAS Scandinavian Airlines said winter demand was looking up, but now we “need to figure out what the new variants may mean.”

“In the past year, each new variant has brought a decline in bookings, but then an increase once the surge dissipates,” said Helane Becker, an analyst with financial services firm Cowen. “We expect the same pattern” this time.

Israel’s decision to close the country to foreign visitors is hitting the nation’s tourism industry as it geared up for the Hanukkah and Christmas holidays. The country only opened to tourists in November, after barring most foreign visitors since early last year.

Just over 30,000 tourists entered Israel in the first half of November, compared to 421,000 in November 2019, according to government figures.

Joel Haber, a Jerusalem-based guide, said during a typical Hanukkah holiday his calendar would be chock full of food tours through Jerusalem’s colorful Mahane Yehuda market. Instead, he has just one tour a day.

“Tour operators like me are the first to get hit and the last to emerge and are directly prevented from working by a government decision,” Haber said.

In the West Bank city of Bethlehem, revered by Christians as Jesus’ birthplace, local businesses expected a boost from Christmas tourism. The Bethlehem Hotel, one of the largest in the city, has operated at a fraction of capacity for the past 18 months.

“Everyone who had bookings over the next two weeks has canceled, while others are waiting to see what happens next,” said the hotel’s manager, Michael Mufdi. “I don’t know how much longer we can last, but we are doing our best.”

The pandemic already caused foreign tourism in Japan to shrink from 32 million visitors in 2019 to 4 million last year, a trend that has continued through this year.

As worries surfaced about omicron, Japan on Wednesday tightened its ban on foreign travelers, asking airlines to stop taking new reservations for all flights arriving in the country until the end of December. Prime Minister Fumio Kishida has pushed for avoiding “the worst-case scenario” and reversed a relaxation of travel restrictions that had been in effect just three weeks.

The crowds of Chinese shoppers who used to arrive in Tokyo’s glitzy Ginza district in a stream of buses to snap up luxury items have long disappeared. Restaurants and bars have been forced to restrict hours.

In Asakusa, a quaint part of town filled with souvenir shops, rickshaw drivers, and stalls selling traditional sweets, news of the omicron variant made little difference this week. Vendors say there hasn’t been any business for months except for a few local customers.

Boat charter operator Tokyo Water Taxi started on the city’s waterfront in 2015, when hopes were high for cashing in on the booming tourism trade. With the variant pushing the return of foreign visitors far into the future, the company is trying to look on the bright side.

“It’s growing popular with Tokyo residents, who have lost other ways to entertain themselves,” said company spokeswoman Yuha Inoue.

In Europe, Alpine ski resorts worry about how to keep up with requirements such as ensuring all skiers are vaccinated or recovered from infection and have tested negative for the virus.

Matthias Stauch, head of the German ski lift operators association VDS, said many are small family businesses that lack the staff to perform such checks. Meanwhile, the association is warning about “massive” economic damage to the tourism sector if there is another lockdown.

Travel executives argue that government decisions about restrictions should wait until more is known about omicron, but they admit it’s a difficult call.

“If you wait, by the time you have all the data it’s probably too late to stop community spread because (the virus) is already here,” said Robert Jordan, the incoming CEO at Southwest Airlines. “If you jump ahead, you run the risk of the measures being more impactful than the actual cases.”

About a month ago, Javier Barragan and his husband booked a visit to Paris for later this month. When news of omicron hit, they were concerned but decided to go ahead with the trip.

“The way that it was in the news, there’s a sense of ‘Oh, is this worse? Is this different?’” said Barragan, who lives in New York. France’s health protocols — the couple will have to submit vaccine cards to enter the country — made them feel more comfortable. Also, both got booster shots.

They did, however, buy travel insurance that will cover cancellation for most any reason.

Koenig reported from Dallas and Kageyama from Tokyo. Associated Press writers Mae Anderson and Tali Arbel in New York; Dee-Ann Durbin in Detroit; Tia Goldenberg in Tel Aviv, Israel; Jack Jeffery in Bethlehem, West Bank; Frank Jordans in Berlin; Pan Pylas in London; and Mogomotsi Magome in Johannesburg contributed.

Follow AP’s coverage of the coronavirus pandemic at https://apnews.com/hub/coronavirus-pandemic