WSJ : Italy Seizes Russian Oligarchs’ Yachts and Villas

Italy Seizes Russian Oligarchs’ Yachts and Villas
Move to seize vessels in Imperia and Sanremo, and villas on Lake Como and Sardinia, comes after French seizure earlier in the week

ROME—Italian police said they seized a number of yachts and villas scattered around the country from wealthy Russian individuals targeted by European Union sanctions following Russia’s invasion of Ukraine.

Authorities valued the seized assets at around €140 million, equivalent to around $153 million. Raids started Friday night and went on in the early hours of Saturday, officials said. Western governments have started a push to seize or freeze assets belonging to dozens of sanctioned individuals they say are close to Russian President Vladimir Putin.

“Sanctions will hurt Putin. This is the only way to make him see reason,” Italy’s Foreign Minister Luigi Di Maio said late Friday, as police started to identify some of the sanctioned individuals’ Italy-based assets.
The sanctions on individuals are just one part of a multifront effort to hit Moscow economically after Mr. Putin’s invasion of Ukraine. Western capitals have sanctioned banks and companies, and targeted Russia’s central bank. Earlier this week, French authorities seized a yacht they said belonged to Igor Sechin, chief executive of Russian oil producer Rosneft.

Italian authorities said the most valuable asset seized in the swoop was the yacht Lady M, estimated to be worth some €65 million, which authorities said belongs to Alexey Alexandrovits Mordaschov, the sanctioned chairman and main shareholder of Russian steel conglomerate Severstal. The yacht was seized in the port of Imperia, in northwestern Italy.

In the nearby port of Sanremo, authorities seized another yacht, Lena, valued at about €50 million, which Italian authorities said belongs to Gennady Nikolayevich Timchenko, the sanctioned owner of investment firm Volga Group. The three men weren’t immediately reachable for comment.

The list of seized assets also included luxury properties in glamorous Italian tourist locations. Police said they seized two villas on Lake Como, near actor George Clooney’s residence, worth some €8 million, from Vladimir Soloviev, a presenter on Russian state television. Mr. Soloviev, who was sanctioned by the EU, has said previously it was unfair for his assets to be tied up by the sanctions.

“I bought it, paid crazy amounts of taxes…and suddenly somebody makes a decision that this journalist is now on the list of sanctions,” Mr. Soloviev said on a TV program earlier this week, after finding out he was placed on the sanctions list.

Italian authorities said they also seized a luxury villa on the Emerald Coast in Northern Sardinia, worth an estimated €17 million, which they said belonged to Alisher Usmanov, a sanctioned Russian mining magnate. They also seized the 17th century Villa Lazzareschi in the Tuscan countryside near Lucca, which they said was owned by sanctioned billionaire Oleg Savchenko. The three men couldn’t be reached immediately for comment.

FT : Russia demands US guarantees over revival of Iran nuclear accord

Russia demands US guarantees over revival of Iran nuclear accord
Moscow seeks to ensure that sanctions imposed over Ukraine invasion do not impede its trade with Tehran

Russia is seeking written guarantees from Washington that US sanctions imposed on the country do not impede its ability to trade with Iran, a move that risks complicating efforts to revive the 2015 nuclear accord.

Moscow made the demand as western officials say they are close to a deal with Iran that would bring the US back into the agreement that Tehran signed with world powers. This would mean the Islamic republic limiting its nuclear activity in return for sanctions relief.

Russia, a signatory to the accord along with the UK, France, Germany and China, has been involved in the negotiations in Vienna aimed at saving the deal.

Sergei Lavrov, Russian foreign minister, told reporters on Saturday that Moscow wanted the US guarantees to ensure sanctions on Russia did not damage “our right to free and full trade, economic and investment co-operation and military-technical co-operation with the Islamic republic”.

“It would have all been fine, but the avalanche of aggressive sanctions that has erupted from the west . . . demand additional understanding,” he was quoted as saying by Interfax, the Russian news agency. “We need guarantees that these very sanctions won’t affect the regime of trade-economic and investment ties embedded in the [nuclear deal].”

The US, EU and UK have imposed sweeping sanctions on Russia since its invasion of Ukraine, including those aimed at freezing the assets of President Vladimir Putin and Lavrov.

Iran transferred enriched uranium to Russia after the 2015 nuclear accord was signed and would have to reduce its stockpiles again if a new deal was sealed.

Ali Vaez, an Iran expert at the Crisis Group think-tank, said Moscow’s demands were a “sign that the commingling of the two issues [the Russian invasion and the Iran talks] has started”. He also said the US could issue waivers for work related to the transfer of excess fissile material to Russia.

Iran has ramped up its nuclear activity since then US president Donald Trump’s decision in 2018 to unilaterally abandon the accord and impose waves of crippling sanctions on the Islamic republic.

President Joe Biden’s administration has pledged to rejoin the deal and lift many sanctions if Tehran falls back into compliance with the original accord. It has been holding indirect talks with Iranian negotiators, mediated by the EU, in Vienna.

Western officials said this week they were close to securing a deal, but cautioned there were still outstanding issues that needed to be resolved.

Rafael Grossi, head of the International Atomic Energy Agency, held talks with Iranian officials in Tehran on Saturday to discuss one of the points holding up progress at the talks: a dispute over a stalled probe by the UN’s nuclear watchdog into traces of uranium found at old, undeclared sites.

Tehran wants the probe concluded, but Grossi said this week that “people cannot foresee a return” to the nuclear accord if there were unresolved issues with the IAEA. He said on Saturday he had a “very fruitful and intensive exchange” with Iran’s nuclear chief.

Other key sticking points include Tehran’s demands that the Biden administration provides guarantees that no future US president can again unilaterally abandon the deal.

Diplomats and analysts say it is virtually impossible for Biden to offer the guarantees that Tehran is seeking, but negotiators have been working on some sort of assurances. There is also disagreement over which US sanctions would be lifted if Iran agreed to limits on its nuclear activity.

Tehran wants all Trump-era sanctions lifted, including those related to alleged human rights abuses and terrorism allegations, not just economic measures.

Trump imposed sanctions on dozens of senior Iranian officials, including President Ebrahim Raisi before he came to power last year, and the office of Ayatollah Ali Khamenei, the supreme leader. He also designated the elite Revolutionary Guard a terrorist organisation.

Barrons : Stagflation Is Here. Is Recession Next? Real Wages Hold the Key.

Stagflation Is Here. Is Recession Next? Real Wages Hold the Key.

Since Russia’s invasion of Ukraine, stagflation concerns have taken hold. February’s jobs report may appear to throw cold water on worries over simultaneously rising prices and slowing growth, but any relief over the state of the economy should be fleeting.

Wall Street’s take on the latest employment report was largely positive, and for some good reasons. U.S. employers added 678,000 jobs last month, considerably more than economists expected and reflecting the best hiring since July. The labor-force participation rate ticked up, if only by a tenth of a percentage point, while the unemployment rate of 3.8% is closing in on the prepandemic half-century low. That is as wage growth stalled, flat from a month earlier and far below economists’ projections for another big 0.5% increase.

On the surface, the jobs data might make stagflation concerns seem overdone. Employment is sizzling, says Grant Thornton chief economist Diane Swonk, and the lack of another sizable increase in average hourly earnings undermines growing concerns of a wage-price spiral, where employee pay and consumer prices chase each other higher in a way that characterized the 1970s.

But these are February data points, all the more outdated by raging geopolitical turmoil and surging prices of food and energy commodities. The improvement in the American labor market is now in the rearview mirror, says RSM chief economist Joe Brusuelas, calling the proliferation of risks linked to geopolitical tensions the worst since 1962 and the oil market dynamics reminiscent of the ’70s.

Consider other data over the past week, which prompted the Federal Reserve Bank of Atlanta to cut its first-quarter gross domestic product forecast to zero. When it reported a surprise drop in its February services index, to the lowest level in a year, the Institute for Supply Management said supply-chain disruptions, capacity constraints, inflation, and labor shortages affected businesses’ ability to meet demand, leading to a cooling in business activity and economic growth. “If Webster’s dictionary updated its 1970s’ definition of stagflation, this would be the entry,” says Peter Boockvar, chief investment officer at Bleakley Advisory Group, of the ISM’s characterization. And that was before the invasion.

Those data come as economists at Goldman Sachs say their index of company price announcements—read: price increases—are at the highest level since the bank started tracking them in 2010. They note the breadth of inflation has widened substantially in recent months, with their in-house version of the personal consumption index sans food and energy showing that two-thirds of the consumer-price index has increased by at least 4% annualized over the past six months.

In the immediate term, then, the debate over stagflation may be beside the point. “Could we have stagflation? Absolutely,” says Jim Paulsen, chief investment strategist at the Leuthold Group. “In fact, we’re already in it.” The data corroborate that view. He notes that stagflation, at least by its textbook definition, is more common than many realize, with most recoveries ending with the combination of rising prices and slowing growth. In other words, stagflation is often simply a stepping stone to recession.

Looking ahead, the more consequential question for investors is whether the Fed will allow higher prices for longer in order to protect growth, or combat inflation at the expense of growth. Plenty of economists are expressing rising concerns over a policy error in one direction or the other.

To predict where things go from here, as the war in Ukraine unleashes more inflation in the places that tend to hurt consumers most and as the Fed begins raising interest rates this month, one particular metric may bear watching. Real, or inflation-adjusted, wages will reflect how households—whose spending makes up about two-thirds of GDP—are holding up to rising prices and when so-called demand destruction kicks in.

The wage data in February’s jobs report suggest consumers are falling further behind inflation, even before accounting for the 20% rise in oil this past week. If the February CPI, due March 10, rises as Wall Street expects, then real wages will have dropped 2.8% last month. Some economists say the flat February wage print was a fluke; that seems a good bet given Target ’s (ticker: TGT) move to lift starting pay to up to $24 an hour. But what matters is how a probable resumption in wage growth stands up to rising prices. That is the key for the economy, and how it interplays with monetary policy.

Some economists say we are a ways off from demand destruction. Wells Fargo Investment Institute, for example, pegs the demand-impairing prices of oil and gasoline at $132.72 a barrel and $4.67 a gallon, respectively. That implies significant increases from current levels are needed to choke demand.

Others are more skeptical. Every $1 increase in the price of gasoline translates to an extra $100 billion of household energy consumption, says Joe LaVorgna, chief economist for the Americas at Natixis, adding that such an increase functions like a tax and means there is less disposable income to spend elsewhere. That’s why recessions are usually preceded by oil-price spikes, LaVorgna says. He thinks the Fed will be lucky to raise rates to 0.75% this year—far less than the 2% or higher much of Wall Street expects.

Despite increasingly aggressive rate hike predictions, markets seem to be betting that demand destruction is going to make for relatively easier interest-rate policy. What happens to real wages may help investors determine who is right.

Barrons : How High Can Oil Go? And for How Long? What Investors Need to Know.

How High Can Oil Go? And for How Long? What Investors Need to Know.

An oil chief tells me he doesn’t plan to produce more barrels this year, even with Texas crude recently shooting above $110. His reasoning in a moment. Plus, a global commodities strategist says armchair explanations for why we’re in this price jam are mostly off. And a pair of Wall Street banks ponder $200-a-barrel oil.

I took breaks this past week between rage-scrolling Russian convoy pics on Twitter and hollering questionable takes on NATO at the television to ask around about energy, because it’s pivotal for investors now. Russia is a capital markets featherweight that previously had a smaller stock weighting in emerging markets than Thailand. And its imports to the U.S. are near squat. But one of them has outsize importance for price-setting: sour crude.

The U.S. buys Russian oil for technical reasons that are related to grade, refining profitability, and geography. One of them is that although Houston can launch men to the moon, it can’t easily ship crude to Los Angeles or New York because of maritime restrictions in the Jones Act, passed in the petro predawn of 1920. There’s a thoughtful case for allowing Russian oil imports that has to do with avoiding economic self-harm, and a more satisfying case for banning them that involves unprintable words and impolite gestures. It could go either way.

There were three oil spikes bigger than the current one—two in the 1970s, and one in 2008—and all were followed by recessions. A recession can mean the difference between a stock market correction, which the U.S. has already had this year, and a more painful bear market, which it has so far avoided.

The oil market was tight even before Russia invaded Ukraine. Now, even without oil sanctions, some major producers and tankers have gone on a buyer’s strike to cut reputational and business risk, says Helima Croft, global head of commodity strategy at RBC Capital Markets. What about the recent release of strategic reserves? Markets shrugged it off. That basically “gets you through lunchtime in terms of our daily demand,” Croft says. How about shale drillers? “The U.S. is not the country you call on when you have an immediate and sizable supply disruption,” she says.

A year and a half ago, shale drillers were struggling for survival. Then travel picked up, and oil rebounded from pandemic lows, but drillers have remained chaste on production. Regular readers will recall that in January, Rick Muncrief, the CEO of Devon Energy (ticker: DVN), whose stock shot 178% higher last year, told us he’s capping production growth at 5% this year. “We’ve had some head fakes,” he said at the time of past rallies that were killed by overproduction or demand downturns.

I went back to Muncrief to see if he had found any wiggle room, given recent events. “The plan is the same,” he says, and he reminded me that 5% growth is the cap—his production is more likely to be flat this year versus last year. It can take three months to drill a new rig, and Devon uses what are called multiwell pads, each with three to six wells, so if the company goes after more barrels today, it might produce them in nine to 12 months. Drillers are dealing with inflation of their own. Muncrief says he has to pay 15% to 20% more for rigs today than a year ago.

Then there’s the matter of “super-backwardation”—what traders call the unusually sharp drop-off in the oil futures curve. The market expects oil prices to fall to $85 or so from $110 over the coming year, whether from pandemic kinks passing or oil buyers finding workarounds for the Russian supply disruption. Futures could be wrong, of course. But for now, production growth is expected to come mainly from private shale drillers that don’t answer to shareholders. “For investors to get excited about adding barrels, the shape of the curve has to change,” Muncrief says.

Have environmentalist investors pushed too hard and left supplies dry? “The biggest factor by far still is the fact that shale producers were seen as destroying a lot of capital,” says Croft at RBC. Greens and oil champions, ironically, have been fighting for the same thing at board meetings: holding the line on production.

How about President Biden canceling the Keystone XL pipeline or not issuing permits for drilling on federal lands? I have a doctor’s note excusing me from politics, so I’ll leave arguments for and against these things to others. But they aren’t especially related to the immediate oil shock. Oil is still coming in from Canada by rail and the original Keystone pipeline.

And for now, there are ample permitted but idle reserves. Side note: Croft says the Biden administration has been less clear than the Obama one about whether it supports liquefied natural-gas exports, and will green light new terminals.

The main culprit for current oil prices is slashed shale production meeting rebounding demand, and of course, a war waged by a country that produces 10% of the world’s barrels. It doesn’t help that some OPEC members, like Nigeria and Angola, are having difficulty meeting production quotas. There are just four countries with immediate spare capacity: Iraq, Kuwait, the United Arab Emirates, and most important, Saudi Arabia.

If high oil prices are supposed to cure themselves, but new supply will take time, how about falling demand? The problem is that the 2008 spike didn’t cause demand destruction until prices were in the $140s, Croft says. That’s the equivalent of around $200 today, adjusted for inflation, which is the price that investment bank Stifel estimates oil would have to see if Russia were pushed out of the market entirely. That won’t happen, they conclude. In a separate analysis, BofA Securities calculates that $200 oil would slice two percentage points off U.S. economic growth.

Here’s hoping for peace, new barrels, a future of falling oil dependence, and a management change in Moscow. Meantime, I’ve got some cable news shows to shout over.

Barrons : Russia’s Economy Will Get Even Worse. 50-50 Odds on a Russian Bond Def

Russia’s Economy Will Get Even Worse. 50-50 Odds on a Russian Bond Default.

The West wanted to keep oil and gas sales out of its unprecedented economic sanctions on Russia. It’s not working.

Energy exports were meant to keep flowing, even as the U.S. and European Union cut off seven Russian banks from the Swift global payments system, and froze most of the Russian central bank’s foreign reserves. Traders and consumers of those exports aren’t sure they can thread this needle. “More than half the hydrocarbons originating in Russia are not settling,” says Mike Edwards, deputy chief investment officer at Weiss Multi-Strategy Advisors. “Buyers don’t know what the consequence is.”

That’s bad news for Moscow, and the rest of a world that was already battling decades-high inflation. The price of Brent crude oil has soared 20%, to $110 a barrel, in the week since Vladimir Putin’s forces invaded Ukraine.

Brokers that are settling Russian hydrocarbons want compensation for the risk. Russia’s Urals crude is trading at a 16% discount to Brent, says Simon Harvey, head of FX analysis at currency broker Monex Europe. The spread was less than 2% before Putin’s war.

Moscow further clouded the trade picture with a nuclear sanction of its own: forbidding private citizens, and maybe corporate entities (no one is sure yet), from transferring hard currency out of the country. That’s nixed the fat dividends that investors were counting on from Russian oil and gas stocks, and turned the ruble into a phantom currency, unanchored by real world transactions. “I see a price on the screen, but I’m not sure I can actually trade at that price,” says Aaron Hurd, senior currency portfolio manager at State Street Global Advisors.

The Russian central bank’s official fixing plunged 20% after the freeze on reserves was announced on Feb. 28, and has hovered since then at about 110 to the dollar.

The economic war beneath this fog bears an eerie symmetry to the deadly armed conflict in Ukraine. Russia’s central bank, like Ukraine’s resistance, withstood the initial blow by essentially freezing hard-currency deposits and doubling the interest on ruble savings to 20%. That seems to have convinced enough savers to keep their money in banks, rather than driving runs on those institutions.

But worse has yet to come for Russia’s economy. And its natural ally China, like Ukraine’s NATO supporters, has circumscribed its involvement. “China is keeping Russia at arm’s length,” Monex’s Harvey says. “It’s not stepping up as a sole purchaser of Russian exports.” In fact, the Beijing-based Asia Infrastructure Investment Bank froze lending to Russia and Belarus on March 3.

Russia is well-positioned for a financial siege, provided it finds some purchaser for those exports. Moscow retains enough reserves for eight months of imports, and energy sales abroad should bring in another $20 billion a month, says Viktor Szabo, an investment director for emerging markets debt at abrdn, an asset-management firm. “Purely on the capital accounts and payments side, they should be fine,” he says.

The broader market is less confident as “self-sanctioning” from would-be Russian oil buyers goes viral. Credit default swaps are pricing a 50-50 chance of a Russian sovereign debt default, State Street’s Hurd says.

The best that ordinary Russians can hope for could be rampaging inflation, a deep recession, and a vanished way of life for a middle class accustomed to vacations abroad and imported comforts, from cars to wine and cheese, at home.

“Some resolution in Ukraine during the next few months could stave off a full-blown crisis,” Hurd says. The 50-50 odds on such a resolution seem about right.

Barrons : This Airline Has Exposure to Russia and Ukraine. The Case for Buying S

This Airline Has Exposure to Russia and Ukraine. The Case for Buying Shares.

The composition of European airspace has dramatically changed in the past week. Ukraine is a no-fly zone for commercial aircraft, and Russia has banned airlines from 36 countries, including all 27 European Union member nations, from using its airspace in retaliation for Western sanctions.

The airline sector’s recovery has hit multiple bouts of turbulence in the past year. The industry was looking optimistically toward the spring and summer months—until Russia invaded Ukraine. Despite the obvious risks and uncertainties, the steep stock declines of the past month may tempt investors to take a closer look at some of Europe’s best carriers.

Hungarian low-cost airline Wizz Air Holdings (ticker: WIZZ.U.K.), a rapidly expanding dominant player in Central and Eastern Europe, has been among the worst affected carriers. The stock has fallen almost 40% since its 2022 high on Feb. 10.

In many ways, that isn’t surprising—the carrier has the greatest exposure to Russia and Ukraine, which together account for 9.5% of its first half of 2022 capacity, Raymond James analysts say. The next highest is low-cost rival Ryanair Holdings (RYA.Ireland), at 2.4%.

Wizz Air is also more exposed than others to higher oil prices, after adopting a “no hedge” policy last year to prioritize a strong cash balance. For those reasons, it’s a riskier call than other carriers, but there’s more potential upside. Peel Hunt analyst Alex Paterson says the stock could be in line for a “peace dividend.” The airline announced a major expansion into Ukraine only in October, planning for significant growth in the summer.

“Peace would present an opportunity to expand, potentially more than initially planned, as others have exited and may not return quickly,” says Paterson, who has a Hold rating but says he would be more positive if peace prevails.

Wizz Air flies more than 700 routes across Europe and beyond, operating at 151 airports in 44 different countries. It carried 40 million passengers in the year ended March 2020, before the pandemic took hold. Analysts expect Wizz Air revenue to reach 3.7 billion euros ($4.1 billion) in the year ending March 2023, up from an estimated €1.7 billion in the year to March 2022, as its expansion continues.

Morningstar analyst Joachim Kotze says the impact of the Russia-Ukraine crisis on Wizz Air “may be mitigated through the redeployment of capacity to other growing markets.” Kotze has a Buy rating and a 68 pounds sterling ($91) price target, implying a 125% upside to Thursday’s closing price.

CEO József Váradi said in a statement Wednesday that Wizz Air is working through “operational challenges arising from the crisis in Ukraine, and we are redistributing capacity to routes and bases where we can drive demand” as a low-cost carrier.

AlphaValue analyst Yi Zhong has a price target of £38.38, implying a 27% upside to Thursday’s close. He tells Barron’s that the company’s revenue could be hurt by the suspension of some routes and a reduced willingness to travel.

For those less optimistic about the prospect of peace, or with not quite as strong a stomach, Ryanair may be worth a look. Raymond James analyst Savanthi Syth says that with higher fuel prices, Ryanair and International Consolidated Airlines Group (IAG.U.K.), which owns British Airways, “stand out as relatively better positioned among scheduled service airlines,” due to a mix of hedges, pricing power, and stronger balance sheets.

Ryanair’s stock has also been hit in recent weeks, falling 23% since Feb. 10. Analysts are bullish—83% have a Buy rating, according to FactSet data, with an average target price of €19.72, or 36% upside.

>>> US Close Dow -0.53% S&P -0.79% Nasdaq -1.66% Russell -1.55% VIX 31.98 +4.92%

Closing Stock Market Summary

The S&P 500 fell 0.8% on Friday, as risk sentiment was undercut by Russia's takeover of a nuclear power plant in Ukraine and by a 7% increase in oil prices ($115.27, +7.46, +6.9%).

The Nasdaq Composite (-1.7%) and Russell 2000 (-1.6%) each declined by more than 1.5% while the Dow Jones Industrial Average (-0.5%) outperformed on a relative basis with a 0.5% decline.

Startling images of a fire at the nuclear plant, which is the largest in Europe and supplies a quarter of Ukraine's power, catalyzed the negative bias overnight. Fortunately, there wasn't a radiation leakage at the plant, and authorities reported that radiation levels were normal.

Still, the news stoked concerns of nuclear conflict and, in turn, contributed to early de-risking efforts. The market pared losses in the afternoon, though, leaving six of the 11 S&P 500 sectors in negative territory, including the heavily-weighted financials (-2.0%) and information technology (-1.8%) sectors at the bottom of the pack. 

The energy sector rose 2.9%, thanks to elevated oil prices, which gained momentum amid news that the White House was considering a ban on Russian oil imports. The utilities (+2.2%), real estate (+0.8%), health care (+0.5%), and consumer staples (+0.1%) sectors also closed higher amid some defensive positioning.

The geopolitical news overshadowed stronger-than-expected jobs growth displayed in the February employment report, which Chicago Fed President Evans (non-voter in FOMC) said will not change anything for the Fed's next meeting in a CNBC interview. Nonfarm payrolls increased by 678,000 ( consensus 400,000).

Arguably, the bigger story in the employment report was the flat month-over-month growth in average hourly earnings (consensus +0.5%). Stagnant wage growth in an inflationary environment, marred by $115-per-barrel oil prices, painted a gloomy picture for consumer spending.

The Treasury market remained a signpost for growth concerns and a place for investors to seek safety. The yield curve flattened with the 2-yr yield declining by five basis points to 1.49% and the 10-yr yield declining by 12 basis points to 1.72%. The U.S. Dollar Index rose 0.7% to 98.50.

Separately, Broadcom (AVGO 595.99, +17.39, +3.0%) was an individual standout, rising 3.0% on pleasing earnings results and guidance, while Costco (COST 525.50, -7.55, -1.4%) fell alongside the broader market despite reporting better-than-expected earnings results. 

Reviewing the employment report in more depth:

  • Hiring activity was strong in February, but wage increases were not. Nonfarm payrolls jumped by 678,000, yet average hourly earnings were unchanged. That left the year-over-year rate at 5.1%, down from 5.5% in January.
    • February nonfarm payrolls increased by 678,000 ( consensus 400,000). The 3-month average for total nonfarm payrolls rose to 582,000 from 572,000. January nonfarm payrolls revised to 481,000 from 467,000. December nonfarm payrolls revised to 588,000 from 510,000.
    • February private sector payrolls increased by 654,000 ( consensus 390,000). January private sector payrolls revised to 448,000 from 444,000. December private sector payrolls revised to 561,000 from 503,000.
    • February unemployment rate was 3.8% (consensus 3.9%), versus 4.0% in January. Persons unemployed for 27 weeks or more accounted for 26.7% of the unemployed versus 25.9% in January. The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 7.2%, versus 7.1% in January.
    • February average hourly earnings were unchanged ( consensus 0.5%) versus a downwardly revised 0.6% increase (from 0.7%) in January. Over the last 12 months, average hourly earnings have risen 5.1%, versus 5.5% for the 12 months ending in January.
    • The average workweek in February was 34.7 hours ( consensus 34.6), versus an upwardly revised 34.6 hours (from 34.5) in January. Manufacturing workweek increased 0.4 hours to 40.7 hours. Factory overtime increased 0.2 hours to 3.6 hours.
    • The labor force participation rate increased to 62.3% from 62.2% in January.
    • The employment-population ratio rose to 59.9% from 59.7% in January.
      • Some will paint the average hourly earnings figure as good news insomuch as it will temper some of the worries about inflation pressures broadening out due to rising wages and the Fed needing to take a more aggressive step toward removing its policy accommodation. However, it isn't truly good economic news.
      • The key takeaway from the report is that real average hourly earnings are negative and that is likely going to adversely impact consumer spending activity in the face of escalating inflation pressures, which will be acute at the gas pump and in the grocery aisles. This report, then, is good for now, yet it may not translate later into as good of things for the economy and corporate earnings.

Looking ahead, investors will receive the Consumer Credit report for January on Monday.

  • Dow Jones Industrial Average -7.5% YTD
  • S&P 500 -9.2% YTD
  • Russell 2000 -10.9% YTD
  • Nasdaq Composite -14.9% YTD