Market Wrap: Powell Sticks to Rate Hike, Ford Announces EV Move, AutoZone Soars

Investors are preparing for what appears to be a drawn-out conflict between Russia and Ukraine. ADP’s February report showed that private-sector jobs jumped more than anticipated last month.

Federal Reserve President Jerome Powell told Congress while the Fed still plans to hike interest rates to combat inflation, the economic impact from the invasion of Ukraine remains “highly uncertain,” and policymakers will need to be “nimble” in responding to new information.

Solid economic and corporate news is edging stocks higher. All three major indices are up more than 1%, clawing back some of yesterday’s losses.

Almost all of the stocks in the Dow are rising. Shares of Chevron Corp. (CVX) and other energy companies are higher as the fighting in Ukraine increases concerns about disruptions in oil supplies. Oil futures reached the highest level in more than a decade, with crude passing $112 a barrel. Financial company shares are bouncing back from yesterday’s big losses as the yield on the 10-year Treasury note is jumping 12 basis points (BPS) to 1.83%.

Salesforce.com Inc. (CRM) shares are falling after an analyst cut his price target. Shares of Netflix Inc. (NFLX) are lower after it said it is buying mobile game maker Next Games for approximately $72 million. 

The recent rally in Bitcoin continues, with the price up 2%. The euro’s decline against the dollar steepened while commodities like wheat and corn rose.

Ford’s EV Move

Shares of Ford Motor Co. (F) are advancing after the carmaker announced plans to split into separate gas and electric vehicle businesses. Shares of Hewlett Packard Enterprise Co. (HPE) and AutoZone Inc. (AZO) are gaining on the companies’ better-than-expected earnings reports. 

Quick Hits: Editor’s Picks

State of the Union Address Zeros in on Russia and Inflation

Federal Reserve Reports on Monetary Policy to Congress

Treasury Department Targets Crypto Used to Bypass Russian Sanctions

Nvidia Suffers Leak of Company, Employee Information in Cyberattack

Consumer Finance Agency Estimates $88 Billion in Medical Bills on Credit Reports

Chart of the Day: Job Jump

Private sector job creation rose more than expected in February, and a revision to January’s total showed a major positive turnaround. 

Payroll provider ADP reported private sector employers added 475,000 positions last month, well above the 378,000 to 400,000 estimated by economists. In addition, ADP now says 509,000 jobs were created in January after initially reporting a 301,000 decline.

ADP Chief Economist Nela Richardson noted that last month hiring at large businesses (500+ employees) soared 552,000, while small businesses (1-49 employees) actually had a decline of 96,000. She attributed that to the ability of bigger companies to attract workers by increasing wages and benefits, while smaller firms had a difficult time affording talent.  

The services sector had the bulk of the job gains, rising by 417,000. The biggest advance came in the leisure and hospitality industry, up 170,000 positions. Other large increases came in travel, transportation, and utilities, and professional and business services. Manufacturing added 30,000 jobs, while construction jobs rose by 26,000. 

Labor Department Report Friday

The Labor Department’s February nonfarm payroll report is set to be released Friday, with economists forecasting a rise of 400,000, with the unemployment rate falling to 3.9%.

Stock of the Day: AutoZone (AZO)

Soaring prices for new and used vehicles have led more consumers to keep and repair vehicles they already own instead of buying, and that helped AutoZone to better-than-expected profit and sales in its fiscal second quarter. The largest auto parts retailer also said it’s optimistic growth will continue. 

AutoZone reported revenue rose 15.8% to $3.4 billion, with earnings per share of $22.30. Both beat analysts’ forecasts. U.S. same store sales increased 13.8%. 

The company noted commercial sales were up 32.1%, while retail sales gained more than 10%. AutoZone also opened 26 stores in the U.S., three in Mexico and two in Brazil during the period. It closed one domestic location. The company now has a total of 6,815 stores, up from 6,625 the year before. 

Higher Prices

AutoZone benefited from higher prices, with CFO Jamere Jackson explaining “inflation has been our friend.” He noted that because of the high cost to buy a vehicle, customers are maintaining theirs longer, and he sees that trend continuing. Jackson predicted sales for the auto parts industry as a whole will keep expanding and not return to pre-pandemic levels.  

Shares of AutoZone are 3% higher today. They’re up 60% in the past year.