Powell warns about inflation, unemployment report, Broadcom and Costoco report earnings and Senate Takes Step in Passing $1.9 Trillion Relief Bill.
1. Powell Warns About Inflation
On Thursday, Federal Reserve chair Jerome Powell warned that inflation will pick up in the coming months, but that it will be temporary and not enough to change the Fed’s record-low interest rate policies. Markets were expecting Powell to maintain the consistent approach the Fed has taken recently where they downplay inflationary fears, but he failed to do that during his Q&A session. Stocks immediately sold off to session lows after the comments, while yields spiked. Powell indicated he does not believe inflation will be long lasting and downplayed the expected inflation and stated that he expected changes in price as “base effect” meaning prices the next couple months or so will be high, but only in comparison to what they have been in the last year, in the middle of a pandemic. Powell has said even if inflation does rise like expected himself and other Fed officials are content to let it rise above their 2% target until the jobs market shows a full recovery. It was a change in tone from recent Fed commentary where most Fed officials have dismissed inflation entirely.
2. Unemployment Report
The United States added the most jobs the country had in four months this February as +379,000 jobs were added, blowing away the 200,000 expected. The unemployment rate unexpectedly improved during also, coming in at 6.2%, slightly better than the 6.3% expected and improving greatly from the 14.8% unemployment rate America saw during the peak of the pandemic, but still below from the all-time low of 3.5% from a year ago. Hiring has accelerated as many restaurants and other business have began to open back up. Even with signs of the pandemic beginning to slow and hiring beginning to pick up, the U.S. still has 9.5M more jobs this time last year.
3. Broadcom Earnings
Broadcom (AGO) stock is slightly down in early trading hours Friday after reporting their earnings of $6.61 EPS and revenue of $6.7B. The software solutions company beat consensus estimates of $6.55 and revenue of $6.6B. The company saw revenue grow 13.6% on a year-over-year basis. CEO and and President Hock Tan praised the crucial role Broadcom’s technology franchises have played in accelerating digital transformation. Broadcom’s chip revenue also saw a 17% growth to $4.91B, still falling short of the consensus of $4.93B. The company’s stock overall has rose 55% in the past year. In early trading Friday, the stock was down -2%.
4. Costco Earnings
Costco reported a mixed bag on Friday after posting a miss on EPS and a slight revenue beat. The Wholesale Corporation latest earnings report saw earnings of $2.14 EPS and revenue of $44.8B, missing on consensus estimates of $2.42 EPS and revenue of $43.8B. The warehouse club has saw revenue grow 14.6% on a year-over-year basis and total revenue rise to $44.8B compared to $39.07B. The company’s online revenue was up 75% from a year ago. Costco’s shares have been under pressure through all of 2021, down -15% Year to Date and -10% in the last month.
5. Senate Takes Step in Passing $1.9 Trillion Relief Bill
On Thursday, the Senate took a big step in passing President Biden’s $1.9T relief bill as the chamber voted to start debating on the package, making it possible for it to be approved as soon as this weekend. Vice President Harris had the final vote to break a 50-50 tie in the Senate. The Democrats sense of urgency to get the bill approved is due to the lawmakers trying to beat a deadline to stop unemployment aid from expiring. The chamber began reconvening this morning to finish debating the bill. This afternoon, the Senate will hold votes on a number of amendments to the bill. After the Senate passes their part of the plan, the House plans to approve it by the middle of next week and on President Biden’s desk by March 14th.