BEIJING — Asian stock markets sank Monday after Wall Street ended with a loss for the week amid anxiety about Federal Reserve plans for more interest rate hikes to cool inflation.
Hong Kong’s benchmark fell more than than 2%. Shanghai, Seoul and Sydney also retreated, while Tokyo was little-changed. Oil prices declined.
U.S. stock indexes ended with a weekly loss after a Fed official, James Bullard, rattled investors by suggesting the central bank’s base lending rate might have to be raised to as much as almost double its already elevated level.
“Bullard dimmed the light on rallies,” said Tan Boon Heng of Mizuho Bank in a report.
The Hang Seng in Hong Kong was off 2.1% at 17,616.06 after the territory’s leader, John Lee, tested positive for the coronavirus after returning from an Asia-Pacific meeting in Bangkok.
The Shanghai Composite Index lost 0.8% to 2,072.08 and the Nikkei 225 in Tokyo lost less than 0.1% to 27,904.69.
The Kospi in South Korea fell 1.2% to 2,414.20 and Sydney’s S&P-ASX 200 lost 0.1% to 7,141.50.
India’s Sensex opened down 0.7% at 61.212.75. New Zealand gained while Southeast Asian markets declined.
On Friday, Wall Street’s benchmark S&P 500 index rose 0.5% to 3,965.34. The Dow Jones Industrial Average added 0.6% to 33,745.69. The Nasdaq composite lost less than 0.1% to 11,146.06.
All the major U.S. indexes ended with a loss for the week after Bullard, president of the St. Louis Federal Reserve Bank, gave a presentation that indicated the Fed’s benchmark rate might have to rise to between 5% and 7%. That would be up from its current level of 3.75% to 4% following four hikes of 0.75 percentage points, three times the Fed’s usual margin.
Investors worry repeated rate hikes by the Fed and central banks in Asia and Europe this year to cool surging inflation might tip the global economy into recession.
Traders hope signs economic activity is slowing and inflation pressures are easing might prompt the Fed to ease off its plans. Fed officials including chair Jerome Powell have warned rates might need to stay high for an extended period to extinguish inflation.
Traders expect the Fed to raise its key rate again at its December meeting but by a smaller margin of 0.5 percentage points.
Big U.S. retailers gained after they reported strong quarterly results and gave investors encouraging financial forecasts. Discount retailer Ross Stores surged 9.9% for the biggest gain among S&P 500 stocks. Shoe seller Foot Locker climbed 8.7% after raising its profit and revenue forecast for the year.
U.S. retail sales rose 1.3% in October in a sign of consumer confidence ahead of Christmas shopping. Still, with inflation high, major retailers say Americans are holding out for sales and refusing to pay full price.
Health care and financial stocks also gained. UnitedHealth Group rose 2.9% and Charles Schwab added 2.5%.
Energy and communications companies declined. Marathon Oil fell 1.6% amid a broad pullback in energy prices. U.S. crude oil settled 1.9% lower. Live Nation, an entertainment promoter and venue operator, slumped 7.8%.
In energy markets, benchmark U.S. crude lost 61 cents to $79.50 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.56 to $80.08 on Friday. Brent crude, the price basis for international oil trading, sank 79 cents to $86.83 per barrel in London. It slumped $2.16 to $87.62 the previous session.
The dollar rose to 140.41 yen from Friday’s 140.36 yen. The euro fell to $1.0283 from $1.0331.
BEIJING — Asian stock markets sank Monday after Wall Street ended with a loss for the week amid anxiety about Federal Reserve plans for more interest rate hikes to cool inflation.
Hong Kong’s benchmark fell more than than 3%. Shanghai, Tokyo and Sydney also retreated. Oil prices declined.
All the major U.S. stock indexes ended with a weekly loss after a Fed official, James Bullard, rattled investors by suggesting the U.S. central bank’s base lending rate might have to be raised to as much as almost double its already elevated level.
“Bullard dimmed the light on rallies,” said Tan Boon Heng of Mizuho Bank in a report.
The Hang Seng in Hong Kong dropped 3.02% to 17,448.64 after the territory’s leader, John Lee, tested positive for the coronavirus after returning from an Asia-Pacific meeting in Bangkok.
The Shanghai Composite Index lost 0.7% to 3,074.26 and the Nikkei 225 in Tokyo shed 0.1% to 27,873.19.
The Kospi in South Korea fell 1.3% to 2,413.36 and Sydney’s S&P-ASX 200 lost 0.1% to 7,143.50.
New Zealand, Bangkok and Indonesia gained while Singapore retreated.
On Friday, Wall Street’s benchmark S&P 500 index rose 0.5% to 3,965.34. The Dow Jones Industrial Average added 0.6% to 33,745.69. The Nasdaq composite lost less than 0.1% to 11,146.06.
All the major U.S. indexes ended with a loss for the week after Bullard, president of the St. Louis Federal Reserve Bank, gave a presentation that indicated the Fed’s benchmark rate might have to rise to between 5% and 7%. That would be up from its current level of 3.75% to 4% following four hikes of 0.75 percentage points, three times the Fed’s usual margin.
Investors worry repeated rate hikes by the Fed and central banks in Asia and Europe this year to cool surging inflation might tip the global economy into recession.
Traders hope signs economic activity is slowing and inflation pressures easing might prompt the Fed to ease off its plans. Fed officials including chair Jerome Powell have warned rates might need to stay high for an extended period to extinguish inflation.
Traders expect the Fed to raise its key rate again at its December meeting but by a smaller margin of 0.5 percentage points.
Big U.S. retailers gained after they reported strong quarterly results and gave investors encouraging financial forecasts. Discount retailer Ross Stores surged 9.9% for the biggest gain among S&P 500 stocks. Shoe seller Foot Locker climbed 8.7% after raising its profit and revenue forecast for the year.
U.S. retail sales rose 1.3% in October in a sign of consumer confidence ahead of Christmas shopping. Still, with inflation high, major retailers say Americans are holding out for sales and refusing to pay full price.
Health care and financial stocks also gained. UnitedHealth Group rose 2.9% and Charles Schwab added 2.5%.
Energy and communications companies declined. Marathon Oil fell 1.6% amid a broad pullback in energy prices. U.S. crude oil settled 1.9% lower. Live Nation, an entertainment promoter and venue operator, slumped 7.8%.
In energy markets, benchmark U.S. crude lost 74 cents to $79.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.56 to $80.08 on Friday. Brent crude, the price basis for international oil trading, sank 90 cents to $86.72 per barrel in London. It slumped $2.16 to $87.62 the previous session.
The dollar rose to 140.42 yen from Friday’s 140.36 yen. The euro fell to $1.0295 from $1.0331.
For the first time ever, rich nations, including a top-polluting U.S., will pay for the climate-change damage inflicted upon poorer nations.
These smaller economies are often the source of the fossil fuels CL00, +0.19%,
minerals PICK, -0.20%
and other raw materials behind the developed world’s modern conveniences and technologicial advancement, including many practices responsible for the Earth-warming emisisons. And yet the developing world shoulders the worst of the droughts, deadly heat, ruined crops and eroding coastlines that take lives and eat into economic growth.
The deal, called “loss and damage” in summit shorthand, was struck as the U.N.’s Conference of Parties, or COP27, gaveled to a close near dawn Sunday in Egypt. Official talks ended Friday, but negotiations extended into the weekend.
It was a big win for poorer nations which have long sought money — sometimes viewed as reparations — because they are often the victims of climate-worsened floods, famines and storms despite contributing little directly to the pollution that heats up the globe. It took last-minute, pre-summit negotiations to even get the topic on the official agenda.
“Three long decades and we have finally delivered climate justice,” said Seve Paeniu, the finance minister of island nation Tuvalu, according to the Associated Press. “We have finally responded to the call of hundreds of millions of people across the world to help them address loss and damage.”
“ ‘Three long decades and we have finally delivered climate justice.’ ”
— Seve Paeniu, finance minister for Tuvalu
Pakistan’s environment minister, Sherry Rehman, said the establishment of the fund “is not about dispensing charity.” Pakistan, hit by devastating drought and more, dominated climate-change headlines this year.
“It is clearly a down payment on the longer investment in our joint futures,” she said, speaking for a coalition of the world’s poorest nations.
How does COP27 ‘loss and damage’ work? And where’s China?
According to the agreement, the fund would initially draw on contributions from developed countries and other private and public sources such as international financial institutions, including the World Bank and the International Monetary Fund.
While major emerging economies such as China wouldn’t automatically have to contribute, that option remains on the table. This is a key demand by the European Union and the U.S., who argue that China and other large polluters currently classified as “developing” countries have the financial clout and responsibility to pay their way.
The fund would be largely aimed at the most vulnerable nations, though there would be room for middle-income countries that are severely battered by climate disasters to get aid.
Getting serious about methane
Attention on methane, a more-potent but shorter-lasting greenhouse gas than carbon, was considered a major win at the summit. Some 150 countries have now signed on to the voluntary Global Methane Pledge, an official effort to cap the release of the GHG whose reduction presents perhaps the easiest way to reduce the global warming.
With the pledge, countries representing 45% of global methane emissions have vowed to reduce their emissions by 30% by 2030. If methane-reduction pledges are met, the result would be equivalent to eliminating the GHG emissions from all of the world’s cars, trucks, buses and all two- and three-wheeled vehicles, according to the International Energy Agency.
COP27 talks wrapped without concrete progress on the contentious issue of shifting an overall 1.5 degrees Celsius temperature limit from a voluntary marker to an established requirement of nations. Most voluntary pacts among nations and private entities, including a vow by Amazon.com AMZN, -0.75%,
Ford Motor F, +0.58%,
Apple AAPL, +0.38%
and others signing on to a “First Movers” pledge, loosly use the 1.5-degree limit set in 2015 when talks took place in Paris.
Private banks, insurers and institutional investors representing $130 trillion said they would align their investments with the goal of keeping global warming to 1.5 degrees Celsius, toward a pledge to net-zero emissions economy-wide by 2050. Advocacy groups cheer the pledge and its expanding roster but are also keeping up pressure on the signatories to speed up progress toward this goal and to stop undermining the pledge with fossil-fuel investment.
The Egypt pact was also void of firmer language on emissions cutting and the desire by some officials to target all fossil fuels NG00, +1.16%
for a phase-down.
Natural gas, which is relatively cheaper to produce than other fossil fuels, has been the major alternative to more-polluting coal in electricity generation. Still, it has its own emissions risk.
In the U.S., for example, electricity is the most common energy source used for cooking — electricity often powered by gas. Still, about 38% of U.S. households use natural gas directly for cooking, according to the U.S. Energy Information Administration.
Natural gas providers also own an established pipeline infrastructure that may serve alternative energy, and is pushed by the industry as a viable alternative alongside solar, wind ICLN, -0.15%
and other means. The industry also promotes its efforts to cap methane leaks.
“ ‘It is more than frustrating to see overdue steps on mitigation and the phase-out of fossil energies being stonewalled by a number of large emitters and oil producers.’”
— Germany’s Foreign Minister Annalena Baerbock
With fossil fuels in their sight, the European Union and other nations fought back at what they considered backsliding in the Egyptian presidency’s overarching cover agreement and threatened to scuttle the rest of the process, while advancing their own draft. The package was revised again, removing most of the elements Europeans had objected to but adding none of the heightened ambition they were hoping for, the AP said.
Egypt has played a unique role as host, representative of Africa, which sits at the front lines of those hurt by climate change and yet, remaining loyal to its own fossil-fuel ambitions and those of OPEC nations.
Germany’s Foreign Minister Annalena Baerbock voiced frustration.
“It is more than frustrating to see overdue steps on mitigation and the phase-out of fossil energies being stonewalled by a number of large emitters and oil producers XOM, -0.87%
The agreement includes a veiled reference to the benefits of natural gas as low- emission energy, despite many nations calling for a phase down of natural gas, which does contribute to climate change.
Fossil-fuel industry’s presence
At least 636 representatives of the fossil fuel industry registered to attend the summit, a 25% increase over the industry’s presence last year, according to an analysis released by three advocacy groups.
More fossil fuel lobbyists are on the roster than any single national delegation, besides the UAE who has registered 1,070 delegates compared to 176 last year, according to a report from Corporate Accountability, Corporate Europe Observatory (CEO) and Global Witness (GW).
Frances Colón, senior director for International Climate Policy at the Center for American Progress, found plenty of fault with this round of talks.
“The final text reflects the outsized and corrupting presence of fossil fuel and big agricultural lobbyists at COP27, compounded by a lack of ambition from key, high-emitting countries,” she said, in a statement. “The agreement makes only a passing reference to the 1.5-degree Celsius warming goal and does not include any new language on phasing down or phasing out all fossil fuels RB00, -0.09%
— the only way to reach emissions reduction goals and secure a livable future.”
Colón also worried that the official statement did not adequately advance efforts. World leaders failed to reference the twin, interlocking crises of nature loss and climate change, and declined to link COP27 to next month’s U.N. biodiversity summit in Montreal.
“ ‘The agreement makes only a passing reference to the 1.5-degree Celsius warming goal and does not include any new language on phasing down or phasing out all fossil fuels — the only way to reach emissions reduction goals and secure a livable future.’”
— Frances Colón of the Center for American Progress
While the new agreement doesn’t ratchet up calls for reducing emissions, it does retain language to keep alive the voluntary global goal of limiting warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit). The Egyptian presidency kept offering proposals that harkened back to 2015 Paris language which also mentioned a looser goal of 2 degrees.
This year’s pact also neglected to toughen the main sticking point from the previous COP, in Glasgow last year. At that time, China and India united to dig in unless coal language was softened. Nations this year did not expand on last year’s call to phase down global use of “unabated coal” even though India and other countries pushed to include oil and natural gas in language from Glasgow.
“We joined with many parties to propose a number of measures that would have contributed to this emissions peaking before 2025, as the science tells us is necessary. Not in this text,” the United Kingdom’s Alok Sharma said.
Climate campaigners are concerned that pushing for strong action to end fossil fuel use will be even harder at next year’s meeting, which will be hosted in Dubai, located in the oil-rich United Arab Emirates.
NEW YORK — Stocks wavered in afternoon trading on Wall Street Friday and are heading for losses for the week after several days of bumpy trading.
The S&P 500 fell 0.2% as of 12:26 p.m. Eastern. The benchmark index had traded as high as 0.8% earlier in the day. The Dow Jones Industrial Average rose 42 points, or 0.1%, to 33,593 and the Nasdaq fell 0.6%.
Small company stocks did better than the the rest of the market. The Russell 2000 rose 0.2%.
Major indexes are all on track for weekly losses.
Health care and financial companies were among the biggest gainers. UnitedHealth Group rose 2.9% and Charles Schwab rose 2%.
Energy stocks fell along with sliding energy prices. U.S. crude oil fell 2.8% and Exxon Mobil fell 1.4%.
Retailers made solid gains after several companies reported strong financial results and gave investors encouraging financial forecasts. Discount retailer Ross Stores surged 10.3% and clothing retailer Gap rose 7.8% after beating analysts’ expectations. Foot Locker rose 2.9% after raising its profit and revenue forecast for the year.
The solid earnings from retailers cap off a shaky week for Wall Street as investors try to get a better sense of inflation’s path and its impact on consumers and businesses. Investors have been particularly anxious about the Federal Reserve’s fight against inflation and have been looking for signs that might allow the central bank to shift to less aggressive interest rate increases. That anxiety was heightened on Thursday after a Fed official suggested U.S. interest rates might have to be raised higher than expected to cool inflation.
“It’s all been the same story for a year,” said Keith Buchanan, portfolio manager at Globalt Investments. “It’s about what inflation is doing, how the Fed responds, and from there how does the consumer respond.”
The central bank has already warned that the main lending rate may have to rise to a more painful level than anybody had anticipated, possibly between 5% and 7%. The Fed’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March.
The Fed is trying to tame the hottest inflation in decades by making borrowing more difficult and curtailing spending. Several big measures of inflation have shown that prices are easing a bit, but other economic indicators show that consumers remain resilient, as does the jobs market.
The Fed’s strategy risks sending the economy into a recession if it hits the brakes too hard on economic growth. The latest mix of inflation and economic data has Wall Street trying to gauge whether the Fed needs to keep pushing along with interest rate increases and whether it can achieve its goal without severely crimping consumer spending or employment.
The U.S. reported this week that retail sales rose 1.3% in October as Americans increase their spending at stores, restaurants, and auto dealers, a sign of consumer resilience as the holiday shopping season begins. That’s not to say consumer behavior hasn’t been affected by inflation. Major retailers say Americans are holding out for sales, refusing to pay full price, with the cost of gasoline, rent, food and almost everything else much higher than it was last year.
European markets were higher and Asian markets closed mixed overnight.
Bond yields rose. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.82% from 3.77%.
———
Joe McDonald and Matt Ott contributed to this report.
ANKARA, Turkey — A wartime agreement that unblocked grain shipments from Ukraine and helped temper rising global food prices will be extended by four months, the United Nations and other parties to the deal said Thursday, preventing a price shock to some of the world’s most vulnerable countries where many are struggling with hunger.
Ukrainian President Volodymyr Zelenskyy called the 120-day extension a “key decision in the global fight against the food crisis.” Struck during Russia’s war in Ukraine, the initiative established a safe shipping corridor in the Black Sea and inspection procedures to address concerns that cargo vessels might carry weapons or launch attacks.
The deal that Ukraine and Russia signed in separate agreements with the U.N. and Turkey on July 22 was due to expire Saturday. Russia confirmed the extension but said it expected progress on removing obstacles to the export of Russian food and fertilizers.
Ukraine and Russia are key global suppliers of wheat, barley, sunflower oil and other food to countries in Africa, the Middle East and parts of Asia where millions of impoverished people lack enough to eat. Russia was also the world’s top exporter of fertilizer before the war. A loss of those supplies following Russia’s Feb. 24 invasion of Ukraine had pushed up global food prices and fueled concerns of a hunger crisis in poorer countries.
While the extension prevents a price shock in developing nations that spend far more on food and energy than richer countries, threats persist from droughts in places like Somalia and the weakening of currencies around the world, which makes buying imported grain more expensive.
“I was deeply moved to know that in Istanbul, Turkey, Ukraine, Russia and the U.N. had come to an agreement for the rollover of the Black Sea Grain Initiative, allowing for the free exports of Ukrainian grains,” U.N. Secretary-General Antonio Guterres said.
The Turkish Defense Ministry said the decision to extend the deal came after two days of talks in Istanbul between delegations from Turkey, Russia, Ukraine and the U.N. that were held in a “positive and constructive” atmosphere.
Russia had voiced dissatisfaction with the deal facilitating exports of Russian grain and fertilizer, hinting that it might not approve an extension and even briefly suspending its part of the deal late last month. It cited risks to its ships following what it alleged was a Ukrainian drone attack on Russia’s Black Sea Fleet.
Although Western sanctions against Russia for its invasion of Ukraine did not target food exports, many shipping and insurance companies were reluctant to deal with Moscow, either refusing to do so or greatly increasing the price.
Guterres said the U.N. was “fully committed” to removing hurdles to shipping food and fertilizer from Russia.
The United Nations has been working to overcome issues related to insurance, access to ports, financial transactions and shipping for Russian vessels, according to a U.N. official who was not authorize to speak publicly and spoke on condition of anonymity. The official said the insurance issue has mainly been resolved in recent days.
Russia has offered to donate 260,000 metric tons of fertilizer stored in European ports to farmers in the developing world who have been priced out of the fertilizer market because of shortages, and the official said the first ship is slated to leave the Netherlands on Monday for Mozambique, where the fertilizer will go by land to Malawi. Further shipments are expected from Belgium and Estonia, the official said.
The Russian Foreign Ministry said Moscow had allowed the extension to take effect “without any changes in terms and scope.” It said Russia noted the “intensification” of U.N. efforts to hasten Russian exports.
“All these issues must be resolved within 120 days for which the ‘package deal’ is extended,” the ministry said.
During talks on the extension, the sides discussed possible additional measures to “deliver more grain to those in real need,” the ministry added, apparently to address Russian complaints that most of the grain has ended up in richer nations.
Turkish President Recep Tayyip Erdogan suggested Thursday that wheat from Russia could be turned into flour in Turkey and shipped to African nations in need.
U.N. humanitarian chief Martin Griffiths said last month that 23% of the exports from Ukraine under the grain deal have gone to lower- or lower-middle-income countries and 49% of all wheat shipments have gone to such nations.
Markets were pleasantly surprised by the extension, said Ian Mitchell, co-director of the Europe program at the Center for Global Development who specializes in agriculture and food security. Following the announcement, wheat futures prices dropped 2.6% in Chicago.
“Ukraine and Russia are such important grain exporters that the rest of the market can’t fully substitute for the complete absence of Ukrainian grain,” he said. “So that deal is going to matter to food prices significantly, even if the volumes are not what they were before the invasion.”
He said, however, that uncertainty is “unhelpful in this deal.” Toward the end of the four-month extension, markets will “price in the risk that it wasn’t extended, and prices will rise a little bit again.”
Arnaud Petit, executive director of the International Grains Council, said the Black Sea region produces some of the world’s cheapest wheat and securing those supplies prevents a price shock to developing nations.
There have been good harvests in the region, contributing to an expected 10 million more tons of wheat worldwide compared with last year, he said. The extension means that Ukrainian farmers can plan to plant.
Petit called the extension a building block in “an unstable region where things can change on a daily basis.”
However, when it comes to food prices, trade movement isn’t as important as currencies around the world weakening against a strong U.S. dollar, which commodities like wheat and other grain are priced in, Petit said.
The council calculated that for Ghana, which mainly imports its wheat from Canada, the price of wheat in dollars from Canada has been largely stable for two years. But changing into local currency translated to a 70% price hike.
Global food prices declined about 15% from their March peak after the grain initiative was adopted in July.
“With the delivery of more than 11 million tons of grains and foodstuffs to those in need via approximately 500 ships over the past four months, the significance and benefits of this agreement for the food supply and security of the world have become evident,” Turkey’s Erdogan said.
———
Bonnell reported from London. Associated Press writers Jamey Keaten in Geneva and Edith M. Lederer at the United Nations contributed.
———
Follow AP’s coverage of the food crisis at https://apnews.com/hub/food-crisis and war in Ukraine at https://apnews.com/hub/russia-ukraine
The European Union’s ban on seaborne imports of Russian oil, along with the Group of Seven’s plan to cap prices of oil from Russia early next month won’t guarantee that prices for the commodity will see a lasting rally, or that supplies will tighten further in the days ahead.
“In isolation, the sanctions on Russia should be bullish for prices,” says Matt Smith, lead oil analyst, Americas, at Kpler. However, they may have a limited effect, as Russian barrels get “rerouted and not taken off the market,” while a price cap still has so much uncertainty surrounding it that its impact may be “muted due to workarounds or may simply be ineffective.”
NEW YORK — Stocks fell in afternoon trading on Wall Street Wednesday as investors reviewed a dismal financial report from Target and a broader update on the retail sector from the government.
The S&P 500 fell 0.5% as of 12:01 p.m. Eastern. The Dow Jones Industrial Average rose 56 points, or 0.2%, to 33,645 and the Nasdaq fell 1.2%.
Retailers weighed heavily on the market. Target slumped 11.8% after cutting its forecasts for the holiday season following a surprisingly big drop in its third-quarter profits. Auto parts retailer Advance Auto Parts fell 17.4% after reporting weak financial results.
Macy’s, which reports its financial results on Thursday, fell 8.2%.
Big technology companies also fell. Chipmaker Micron slipped 5.6% after announcing some production cuts because of weak demand. Nvidia fell 3.1%.
Wall Street has been closely watching the latest economic updates, including reports that consumer and wholesale prices continue to cool. Much of the market’s prior rally was due to hopes inflation is easing, which could portend less aggressive hikes for interest rates from the Federal Reserve.
The Fed has been raising interest rates in an effort to slow the economy and tame the hottest inflation in decades. Wall Street is worried that it could hit the brakes too hard on economic growth and bring on a recession.
The latest government report on retail sales for October shows that consumer spending remains strong, though it’s unclear whether that’s because of more purchases or higher prices.
Strong consumer spending is typically a good sign for the economy, but it could make the Fed’s strategy of cooling the economy more difficult. The central bank has already hiked its key overnight rate up to a range of 3.75% to 4% from virtually zero earlier this year. It has said it still plans to hike rates further and then to hold them at that high rate for a while in order to grind down inflation.
“The better-than-expected retail sales results don’t bolster the case that the Fed” can ease up on its campaign to slow the economy with high interest rates, said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management.
He said resilient consumer spending could improve the possibility that the Fed manages to pull off a so-called “soft landing” with its strategy. That would involve taming inflation without throwing the economy into a recession, or at least avoiding a damaging recession.
Bond yields were mixed. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.73% from 3.78% from late Tuesday. The yield on the two-year Treasury rose to 4.37% from 4.35% from late Tuesday.
Wall Street is also closely watching developments in Russia’s war against Ukraine. Tensions appear to have receded slightly after NATO member Poland and the head of the military alliance both said Wednesday there is “no indication” that a missile that came down in Polish farmland, killing two people, was an intentional attack. Air defenses in neighboring Ukraine likely launched the Soviet-era projectile to fend off a Russian assault that savaged its power grid, they said.
“There is nothing, absolutely nothing, to suggest that it was an intentional attack on Poland,” said Polish President Andrzej Duda.
Markets in Europe fell.
The conflict is hanging over the energy market. A worsening war in Ukraine could cause spikes in prices for oil, gas and other commodities that the region produces. U.S. crude oil prices rose 2.7%.
———
Yuri Kageyama and Matt Ott contributed to this report.
More than 1 million barrels a day of Russian oil exports are set to be upended by Western sanctions expected to come into force within weeks, shipments Moscow will struggle to redirect elsewhere which threatens to further tighten global energy markets, the International Energy Agency said Tuesday.
Russian crude oil exports, including to the European Union, were largely unchanged last month, despite the prospect of an imminent EU ban on Russian crude oil imports and a separate plan to cap prices for Russian crude oil sales, the Paris-based agency said in a monthly report.
Russian exports to the EU were 1.5 million barrels a day in October, of which 1.1 million barrels a day will be halted when the bloc’s ban comes into effect on December 5, the IEA said.
It was unclear how much of those supplies Russia would be able to redirect to customers elsewhere in the world, the IEA said. India, China and Turkey have snapped up discounted Russian crude shipments, but buying from those nations has stabilized in recent months, the IEA said. Meanwhile, the volume would be too large for the remaining nations to absorb, the agency said.
The warning comes as the IEA predicted additional demand this year and next would come from China as the nation slowly eases its Covid-19 lockdown measures–though global demand growth will be sluggish as economies are expected to struggle.
The agency upped its 2022 global oil demand forecasts by 170,000 barrels a day to 99.8 million barrels a day. For 2023, the IEA raised its oil demand forecasts by 130,000 barrels a day to 101.4 million barrels a day.
Russia’s declining oil output will drag on global supplies which will grow at an anemic rate next year, failing to keep pace with growing oil demand. The IEA said global oil supplies would rise to 100.7 million barrels a day in 2023, 100,000 barrels a day more than it was forecasting last month, but still 700,000 barrels a day short of the world’s expected appetite for oil CL.1, -0.85%
TOKYO — Asian shares were mixed in Monday trading as momentum faded from last week’s rally on Wall Street amid varied sentiments about coronavirus restrictions easing in China and global interest rate increases.
Benchmarks fell in Japan and South Korea, while rising in China. Analysts say some investors are being cheered by signs inflation is abating in the U.S. earlier than initially thought, while they warn factors remain that could refuel inflation, including geopolitical risks.
“But it is far too hasty to declare a decisive conclusion to inflation risks,” said Venkateswaran Lavanya at Mizuho Bank.
Japan’s benchmark Nikkei 225 slipped 0.8% in morning trading to 28,047.58. Australia’s S&P/ASX 200 was little changed, inching up less than 0.1% to 7,163.10. South Korea’s Kospi lost 0.2% to 2,479.52. Hong Kong’s Hang Seng jumped 2.1% to 17,688.84, while the Shanghai Composite rose 0.4% to 3,099.19.
“We also have the Democrats holding the Senate while the Republicans look likely to control the House. Policy paralysis at a time of economic crisis is not a good look for what may lay ahead over the next two years. The current stock rally may have only days to run,” said Clifford Bennett, chief economist at ACY Securities, referring to the U.S. midterm election results.
Wall Street closed last week with a rally, amid hopes inflation pressures had eased. That would make the Federal Reserve less likely to keep raising interest rates. But some analysts said the Wall Street rally was overdone.
The S&P 500 rose 36.56 points, or 5.5%, for its best day in more than two years, to 3,992.93. Its 5.9% gain for the week was its third in the last four and its biggest since June.
The Dow rose 32.49, or 0.1%, to 33,747.86, and the Nasdaq climbed 209.18, or 1.9%, to 11.323.33. Both also notched hefty gains for the week.
Markets are getting a boost from China’s relaxing some of its strict anti-COVID measures, which have been hurting the world’s second-largest economy. Easing of restrictions translates to potentially more growth in China, a definite plus for the Asian region.
A report last week showed inflation in the United States slowed by more than expected last month. The Fed has already lifted its key overnight interest rate to a range of 3.75% to 4%, up from basically zero in March. The likely scenario is still for further hikes into next year.
In energy trading, benchmark U.S. crude gained 22 cents to $89.18 a barrel. U.S. crude gaining 2.9% to $88.96 per barrel Friday. Brent crude, the international standard, added 29 cents to $96.28 a barrel.
In currency trading, the U.S. dollar rose to 139.20 Japanese yen from 138.76 yen. The euro cost $1.0391, down from $1.0356.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
TOKYO — Asian stocks were mixed Tuesday ahead of the U.S. midterm elections with trading likely to stay bumpy in a week that brings new inflation data and other events that could shake markets.
Tokyo’s Nikkei 225 gained 1.3% to 27,876.20 on strong earnings reports. The Kospi in Seoul advanced 1.1% to 2,397.41 and Australia’s S&P/AXS 200 gained 0.4% to 6,958.90.
Hong Kong’s Hang Seng sank 0.6% to 16,488.44, while the Shanghai Composite index shed 0.8% to 3,052.93. Thailand’s SET gained 0.7%. India’s markets were closed for a holiday.
The week is full of potentially market-moving events, including U.S. inflation data and the election, which could leave the U.S. government split between Democrats and Republicans.
For Tuesday, at least, “Look for markets to trade political headline spin rather than substance,” Stephen Innes of SPI Asset Management said in a commentary.
Every seat in the U.S. House of Representatives is up for election this year, along with about a third of the U.S. Senate. On the line is control of both houses of Congress, currently under Democratic leadership.
Voters are also electing governors in most of the states this year. They’ll be in office in 2024 when the next presidential election happens and could affect election laws or vote certifications. Many state legislative and local authorities also are on the ballot.
A divided government would likely bring gridlock rather than big, sweeping policy changes that could upset tax and spending plans. Historically, when a Democratic White House has shared power with a split or Republican Congress, stocks have seen stronger gains than usual.
On Monday, the benchmark S&P 500 rose 1% to 3,806.80 while the Dow Jones Industrial Average gained 1.3% to 32,827.00 and the Nasdaq composite added 0.9% to 10,564.52.
Analysts say a strong performance by Democrats in the elections could lead to increased spending to help the economy that might fuel inflation and leave the Federal Reserve obliged to continue to hike interest rates to get prices under control.
It may take a while to get clarity because of the process to count votes that came in through the mail.
Economists expect a report Thursday to show the consumer price index rose 8% in October from a year earlier, slightly lower than September’s 8.2% inflation rate.
Regardless of the outcome of Tuesday’s vote, “It is still all about inflation and while this report might not be as hot as the last few, it still should show that rents and the core-service sector part of the economy are still hot,” Edward Moya of Oanda said in a report.
Higher rates put the brakes on the economy by making it more expensive to buy a house, car or anything else on credit, though they take time to take effect. Rate hikes could bring a recession, and they tend to drag on prices for stocks and other investments.
A fourth straight month of moderating inflation from June’s 9.1% rate could afford the Federal Reserve leeway to loosen up a bit. The Fed has said that it may soon dial down the size of its increases to half a percentage point, after pushing through four straight mega increases of three-quarters of a point.
Monday’s gains for Wall Street came despite a shaky showing for its most influential stock. Apple rose 0.4% after dropping earlier in the day. It had warned customers they’ll have to wait longer to get the latest iPhones after anti-COVID restrictions were imposed on a contractor’s factory in China.
Earnings reports are also causing share prices to swing.
The reporting season for summertime profits is roughly 85% done, and S&P 500 companies are on track to deliver growth of a little more than 2%. Analysts are forecasting a drop in S&P 500 profits for the final three months of the year, of nearly 1.5%. They had been forecasting growth of 4% at the end of September.
In other trading, U.S. benchmark crude oil lost 50 cents to $91.29 per barrel in electronic trading on the New York Mercantile Exchange. It lost 82 cents to $91.79 per barrel on Monday.
Brent crude, the international pricing standard, gave up 45 cents to $97.47 per barrel.
The U.S. dollar was unchanged at 146.63 yen. The euro slipped to $1.0008 to $1.0016.
Oil hasn’t yet climbed back to $100 per barrel, but options traders are increasingly setting their sights on another target—$200. The most actively traded
Brent crude
options contract on Thursday was an option to buy Brent at $200 in March 2023.
About half of the contracts to buy oil at that price appeared to be placed by one buyer who spent about $810,000 on the options, according to Robert Yawger, the director of energy futures at Mizuho Securities USA. But that buyer isn’t the only person making a bet that oil prices will hit $200, along with other bullish bets on where oil goes in 2023. “There have been people dipping their toes into those higher [options strike prices] over the last couple of days,” Yawger said.
TOKYO — Asian stocks advanced Monday as investors weighed uncertainties such as the U.S. mid-term elections and China‘s possible moves to ease coronavirus restrictions.
Oil prices fell and U.S. futures edged lower.
China reported its trade shrank in October as global demand weakened and anti-virus controls weighed on domestic consumer spending. Exports declined 0.3% from a year earlier, down from September’s 5.7% growth, the customs agency reported Monday. Imports fell 0.7%, compared with the previous month’s 0.3% expansion.
Speculation about a possible relaxation of China’s zero-COVID strategy has had a huge impact on markets. On Monday, Hong Kong’s Hang Seng index gained 2.8% to 16,612.61 and the Shanghai Composite rose 0.2% to 3,077.85.
There has been no official confirmation in China of a major change.
“Over the weekend, Beijing has dashed hopes of China re-opening in the horizon, by reasserting of zero-COVID policies. And this could induce fresh caution,” Tan Boon Heng at Mizuho Bank in Singapore said in a report.
In the U.S., Tuesday’s election will decide control of Congress and key governorships. History suggests the party in power may suffer significant losses in the midterms, and decades-high inflation has become a significant issue for the Democrats.
Analysts say regional markets may take a wait-and-see approach ahead of the U.S. mid-term vote.
Japan’s benchmark Nikkei 225 jumped 1.2% to finish at 27,527.64. Australia’s S&P/ASX 200 gained 0.6% to 6,933.70. South Korea’s Kospi gained nearly 1.0% to 2,371.79.
Shares rose in Taiwan and but edged lower in India.
Wall Street stocks ended last week with a rally but only after yo-yoing several times. Market watchers had data on the U.S. jobs market to digest, considering what it might mean for interest rates and the odds of a recession.
The S&P 500 recorded its first weekly loss in the last three, despite Friday’s gain 1.4% to 3,770.55. The Dow rose 1.3% to 32,403.22, and the Nasdaq climbed 1.3% to 10,475.25. Both also finished with losses for the week.
The unemployment rate ticked higher in October, employers added fewer jobs than they had a month earlier and gains for workers’ wages slowed a touch. The slowdown was still more modest than economists expected. And so the Fed is expected to keep hiking rates.
Fed Chair Jerome Powell has called out a still-hot jobs market as one of the reasons the central bank may ultimately have to raise rates higher than earlier thought. Such moves could cause a recession.
The yield on the two-year Treasury fell to 4.68% from 4.72% late Thursday. The 10-year yield, which helps dictate rates for mortgages and other loans, edged higher to 4.16% from 4.15%.
In energy trading, benchmark U.S. crude fell $1.26 to $91.54 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost $1.18 cents in London to $97.39 a barrel.
In currency trading, the U.S. dollar edged up to 147.29 Japanese yen from 146.92 yen. The euro rose to 99.43 cents from 99.15 cents.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
Vicki Hollub’s Occidental Petroleum controls the biggest piece of the most important area for oil production in the United States. Not so long ago, an oilman in a position like that—and it would’ve been a man, before Hollub came along—would have gone for broke, turning up production to its physical limits.
Not Hollub. Occidental produces on average the equivalent of about 1.15 million barrels of oil a day, and that’s more than enough to turn a profit. The company can make money as long as oil prices are above $40 a barrel. They’ve been above $80 for almost all of this year, as the war in Ukraine takes a toll on global markets and the Saudi-led oil cartel OPEC now slashes production.
“We don’t feel like we’re in a national crisis right now,” Hollub told MarketWatch in an interview. And that means Hollub can keep executing on her plans: making shareholders happy by paying down debt and buying back shares. “When you have such a low break-even, to me there’s no pressure to increase production right now, when we have these other two ways that we can increase shareholder value,” Hollub said.
That market-focused logic puts her at odds with President Biden, who is acting like there is a national energy crisis ongoingprecisely because of what oil CEOs like Hollub are doing. The size of oil companies’ profits is outrageous, Biden said Monday. They’re raking in cash not because of innovation or investment but as a windfall from the war in Ukraine, Biden said. “Rather than increasing their investments in America or giving American consumers a break, their excess profits are going back to their shareholders and to buying back their stock, so the executive pay is — are going to skyrocket,” Biden said. He has ordered releases from the Strategic Petroleum Reserve to keep down gas prices and asked Congress to tax oil-company profits.
But Hollub is single-mindedly focused on seizing the moment to improve the company’s financial position. Occidental still has significant debt left over from a challenging acquisition Hollub spearheaded before the pandemic. In the second quarter alone, the company used its windfall to repay $4.8 billion in debt. If Biden called, she’d listen, but she hasn’t spoken to him one-on-one. Hollub said she’d spoken to the administration through Energy Secretary Jennifer Granholm. (“She doesn’t know the industry very well right now, but it’s because she hasn’t been in her job very long,” Hollub said.) The White House and the Department of Energy did not return requests for comment.
Hollub says she’s just following the market. “If demand goes down, we reduce production, if it goes up, we increase.” Oil prices have fluctuated rapidly over the year, and with a recession widely anticipated in the near future, demand could drop, Hollub said. Biden’s releases of oil from the SPR, she added, may have reduced gasoline prices, but at a cost to national security. “The SPR should be reserved for emergency situations, and you never know when those might come,” Hollub said.
Hollub’s message may not be politically convenient, but it’s exactly what her shareholders want to hear. Occidental OXY, -2.29%
is America’s hottest stock and has returned 150% this year, making it the top-performing company in the S&P 500 SPX, -0.65%.
Investors who bought shares of Occidental in January and held them through today would have more than doubled their money, even as the broader market has crashed. Warren Buffett’s Berkshire Hathaway has gone on a buying spree this year, and now owns more than 20% of Occidental’s shares. How Hollub got here constitutes America’s greatest corporate saga in recent years, from her 2019 debt-fueled decision to buy bigger rival Anadarko Petroleum over the vocal objections of activist investor Carl Icahn, to the pandemic-induced collapse in oil prices that almost bankrupted Occidental, and Buffett’s extension, removal, and re-extension of support.
With Occidental now on solid financial footing, Hollub is continuing to leave a mark on the oil industry and the world, landing her on the MarketWatch 50 list of the most influential people in markets. Hollub’s tangles with the wise men of Wall Street have left her savvier about how to manage her business. Stung by previous boom-and-bust cycles, Hollub has helped lead America’s oil frackers away from being “swing producers” that could counter the war-driven increase in energy prices, as she paid down debt and returned cash to shareholders through dividends and stock buybacks instead of plowing some of that money into shale oil fields. She is also pushing investment into Occidental’s massive new carbon-capture effort.
More than anything, Hollub is focused on guys like Bill Smead, founder of Smead Capital Management, who is a long-term investor in Occidental and a Hollub fan. “She’s somebody that we have a great deal of respect for and appreciate all the money she’s making us,” he said.
With that kind of backing, Hollub is planning to put Occidental in the driver’s seat of the massive national economic transition induced by climate change. She is positioning Occidental to be the company of the energy transition, one geared not to the free-for-all economy of the last century or some carbonless vision of the next, but the oil company for right now. She might even stop drilling new oil wells entirely.
“Now we feel like we control our own destiny,” Hollub said.
For the chief executive of a company that’s having a banner year on Wall Street while investors choke down generational losses, Hollub seems to constantly be on the alert for threats. Talking through the company’s prospects, she repeats a certain phrase: “I know that this will ultimately get me in trouble, but…”
Trouble? Hollub and Occidental have known their share.
The drama surrounding Occidental’s 2019 acquisition of Anadarko would make for a good boardroom thriller—or at least a lively business-school case study. Anadarko had big assets in the crucial Permian Basin region of Texas and New Mexico, where horizontal drilling in shale rock had reinvigorated an aging oil field into the nation’s biggest production zone.
Hollub and her team made an offer to buy Anadarko after months of research. She thought she had a deal locked, only to hear on the radio that Anadarko had announced plans to combine with Chevron. She nearly drove off the road, Texas Monthly recounts.
Hollub turned to Buffett for help. He agreed to what was effectively a $10 billion loan at 8% interest, in the form of preferred shares, along with warrants that allow Berkshire Hathaway, Buffett’s company, to buy more common stock. That got Hollub what she wanted, but many on Wall Street hated it. “The Buffett deal was like taking candy from a baby and amazingly she even thanked him publicly for it!” Icahn wrote in a letter to his fellow shareholders. Icahn had bought a slug of Occidental’s shares and, in the ensuing months, the billionaire investor led a shareholder campaign against Hollub, insisting that she needed stronger board oversight. Icahn allies were made Occidental directors.
In 2020, as COVID-19 flattened the global economy, deeply indebted Occidental was forced to cut its dividend for the first time in decades. Buffett sold his stock. At Icahn’s urging, the company issued 113 million warrants to its shareholders, allowing them to buy shares at $22, at a time when the stock was trading at $17. Gary Hu, one of the Icahn directors on Occidental’s board, pointed to those warrants as evidence of their success. “Our involvement in Occidental represented activism at its finest,” said Hu.
Hollub flatly disagrees. Icahn saw an opportunity to make an easy profit in derailing the Anadarko deal, Hollub said. “And what he expected is that we would lose and he would benefit from that. Since that didn’t happen, he managed to maneuver his way onto the board.” Icahn’s representatives on the board came to Hollub with a number of plans, including the warrants. She felt that one wouldn’t do any harm. “So that’s what we agreed to, but yeah, the other 10 or so weird things, we didn’t do.”
““She’s somebody that we have a great deal of respect for and appreciate all the money she’s making us.””
— Bill Smead, founder of Smead Capital Management
Former Occidental CEO Stephen Chazen returned to chair the board at Icahn’s insistence. Icahn and Occidental ultimately reached a settlement. His board members left, and the activist sold his common shares earlier this year. Chazen passed away in September. The experience embittered both sides, but there is one point of agreement: Hollub will do as she sees fit. “We were clearly wrong about the board’s ability to restrain Vicki’s ambitions,” Hu said.
Icahn made a $1.5 billion profit. At a MarketWatch event in September, Icahn said he still holds the warrants. But he hasn’t let go of the issues that motivated him to push into Occidental in the first place, though he insists he has no problem with Hollub personally. He likened her to a kid who got lucky gambling in Vegas. “The system allowed her to do it. And she’s just one small example of what is wrong with corporate governance.”
But as Icahn has himself shown, the system of corporate money in America is malleable. Its players can learn the rules of the game and adapt. Quarter after quarter since the dark days of the pandemic, Hollub turned up on corporate earnings calls pledging to keep cash flows strong, to invest in the highest-returning assets, and not to fall into the trap of overinvesting in debt-fueled or expensive production capacity, as so many failed shale producers have done in the past. She’s driven the company’s debt from nearly $40 billion following the Anadarko acquisition to less than $20 billion today. She increased the company’s dividend earlier this year. Along the way she transformed from market pariah to textbook CEO.
Hollub and other CEOs who run America’s biggest shale-oil producers have learned from the industry’s past mistakes. After proving a decade ago they could successfully extract shale oil, many U.S. oil producers were cheered on by growth and momentum stock investors as they borrowed billions to ramp up production, only to have those same investors abandon them after Saudi Arabia induced a plunge in oil prices. In the years that followed, U.S. shale-oil producers cultivated a new set of more value-oriented shareholders by promising they would share in profits through dividends and stock buybacks. Hollub and many of those other CEOs are not interested in chasing unrestrained growth again.
The world’s most famous value investor is now also on board. For Buffett, an earnings call Hollub led in February was the turning point. “I read every word, and said this is exactly what I would be doing. She’s running the company the right way,” Buffett told CNBC. Berkshire Hathaway BRK.A, +0.15%
started buying Occidental stock soon after. In August, federal regulators gave Buffett’s company permission to buy up to half of the company. (Asked for comment, a representative of Berkshire Hathaway asked for questions by email but did not respond to them.)
The markets are rife with speculation that Buffett will go all the way and purchase the entire company, though neither Hollub nor Berkshire have said as much. Hollub said simply that Buffett is bullish on oil, so she expects him to invest for the long haul. A Buffett buyout wouldn’t necessarily be a win for the investors who’ve hung on as Occidental’s stock price has recovered. “I’d probably make more money if he doesn’t buy it,” said Smead.
Warren Buffett is back to betting on Hollub and bought 20% of Occidental’s stock this year.
Johannes Eisele/Agence France-Presse/Getty Images
Where Hollub might cause real trouble is in the fight to keep carbon dioxide out of the earth’s atmosphere. That’s not because she’s a climate-denier. Far from it. Like many of her fellow oil-and-gas CEOs in recent years, Hollub has come to see climate change not as a threat to the business, but as an opportunity to be managed.
“I know some people don’t want oil to be produced for very long, but it’s going to be,” Hollub said. For that to change, people have to start using less oil. “It’s not that the more supply we generate, then the more that people are gonna use. It’s all driven by demand,” she said. And even with an electric vehicle in every driveway, we’d still need to extract oil to produce plastics and to create airplane fuel, among other projects that fall under the category of hard-to-abate emissions.
Hollub’s plan for Occidental is to wrap the company around that lingering stream of demand for hydrocarbons. She says Occidental is now in the business of carbon management, a euphemism that glides over the messiness of the climate transition and companies’ role in it. Companies need to show anxious shareholders that they’re serious about reducing their carbon emissions, but they also need to keep operating in an economy that is still seriously short on meaningful alternatives to fossil fuels. Occidental is here to help, spurred along by a series of state and federal incentives that the company lobbied for over years, culminating in the passage this year of the Inflation Reduction Act.
Climate advocates have for years tried to make the use of fossil fuels reflect their full cost on the environment. That has put them deeply at odds with oil-and-gas executives like Hollub, who opposes carbon taxes. It’s also left U.S. climate policy stalled as the planet warms. But the IRA tries something else. “I do not see the IRA as a handout to the energy industry,” said Sasha Mackler, executive director of the energy program at the Bipartisan Policy Center, a D.C. think tank. Rather than making dirty energy more expensive, the IRA tries to make clean energy cheaper, Mackler said. And that’s something Hollub can get on board with. She’s selling the idea that a barrel of oil can be clean.
Getting to a net-zero barrel of oil, as Hollub calls it, involves literally rerouting the route carbon dioxide takes through the world. For companies like Occidental, CO2 isn’t just a planet-destroying waste product. It’s a critical input to the process of oil production. Engineers can use CO2 to essentially juice aging oil wells by pumping it underground to displace hydrocarbons. The process is called enhanced oil recovery, or EOR. Occidental is the industry leader, producing the equivalent of 130,000 barrels per day of EOR oil and gas as of 2020. And that oil can, in theory, be less impactful on the climate. “We have it documented that it takes more CO2 injected into the reservoir than what the incremental barrels from that CO2 that are produced will emit when they’re used,” she said.
The trick is where that injected CO2 comes from. The Permian is crisscrossed with thousands of miles of pipelines that bring CO2 to oil fields from as far away as Colorado. At the moment, the vast majority comes from naturally occurring reservoirs or as a byproduct of the production of methane. One of the strangest ironies of modern oil production is that companies like Occidental don’t actually have enough CO2. “There’s two billion barrels of resources remaining to be developed in our conventional reservoirs using CO2,” Hollub said.
So she and her team went out looking for more. Eventually they hit on the idea that’s encapsulated in the IRA. Instead of pulling CO2 out of the ground only to put it back, Occidental could divert some of the CO2 that’s being produced by so-called industrial sources, companies that would otherwise be dumping it into the atmosphere because, of course, there’s no business reason not to.
Finding companies that wanted to do the right thing with their waste CO2 turned out to be harder than Hollub thought. “We knocked on the doors of a lot of emitters,” Hollub said. They found one taker—a Texas ethanol producer that was willing to try a pilot. It was a decent start but not enough to unlock all those buried barrels.
That may soon change, driven by the IRA. The law puts new financial incentives behind those conversations Occidental was having with CO2 emitters. The IRA significantly beefed up the so-called 45Q tax incentive for companies to put CO2 permanently in the ground. Occidental can get $60 a ton in tax credits if the CO2 is stored in the process of pumping more oil for EOR, or $85 if the company just buries it.
There’s also a higher tier of incentives if companies obtain that CO2 using an experimental technology called direct air capture. Occidental is spending $1 billion to build what would be the world’s largest direct-air-capture facility in Texas, which you can loosely think of as a giant fan to suck ambient CO2 directly out of the atmosphere. Hollub plans to build as many as 70 by 2035.
The problem some see with this plan, and with Hollub and others’ efforts to shape legislation around it, is it tightens the economy’s dependence on fossil fuels rather than loosening it. Americans will now effectively pay Occidental to pursue more enhanced oil recovery. Those net-zero barrels of oil—should they materialize—might be better in climate terms than a traditional barrel. But that’s not the only alternative. Dollar for dollar, public money would be better spent on solar energy and other low-carbon options than on EOR, said Kurt House, who knows as much because he’s tried it. House got a Ph.D. at Harvard in the science of carbon capture and storage more than a decade ago and co-founded a company to put the idea into practice. “It is bad, bad economics,” he said. “If you pay people a million dollars a ton of CO2 sequestering, they will sequester a lot of CO2. But it’ll cost us. It’ll make solving global warming much, much, much, much, much more expensive.”
But Hollub isn’t likely to change course. “I would say to those who don’t like what we’re doing, who do they want to do this? Tell me who have they gotten to, that will commit to take CO2 out of the atmosphere?” she said. “This climate transition cannot happen as fast as some people want it to happen because the world can’t afford it,” Hollub said. “We’re looking at, you know, $100 to $200 trillion for this climate transition. We cannot spend that kind of money to make this transition happen without help from diverting some of the CO2 to enhanced oil recovery, which enables then the technology to be developed and to be built at a faster pace.” And in the meantime, Occidental can sell carbon offsets to companies like United Airlines, which is supporting the direct-air-capture facility.
Those companies can choose whether they want the CO2 Occidental is capturing to be buried, full stop, or used for more oil production. But it’s clear Hollub thinks EOR is a big part of the future for Occidental. She has often said that the last barrel of oil should come from EOR. “I think there could be a world where we do stop drilling new wells,” she said. “To increase recovery from the remaining conventional reservoirs is something that’s kind of like a best kept secret for the United States. Nobody very much realizes that, but that is there. And that gives us that longevity beyond what some people are forecasting,” Hollub said.
Hollub is well-aware of her critics. Perhaps that’s why she keeps looking around for signs of trouble. But even if it finds her, she doesn’t plan to change much. “I have no regrets,” she said.
NEW YORK — Stocks gave up early gains and ended lower on Wall Street after an unexpectedly strong report on the job market raised concerns that the Federal Reserve will need to keep the pressure on inflation with aggressive interest rate increases. Those high rates are intended to slow the economy, and the fear is the Fed may go too far and cause a recession. Several companies rose after reporting solid earnings or outlooks, including Pfizer and Uber. The S&P 500 fell 0.4% Tuesday. Long-term Treasury yields reversed course from an early slide and rose back near multiyear highs.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
Stocks on Wall Street gave up early gains and turned lower in afternoon trading Tuesday after an unexpectedly strong report on the job market raised concerns that the Federal Reserve will need to keep the pressure on inflation with aggressive interest rate increases.
The S&P 500 fell 0.4% as of 3:31 p.m. Eastern. It had been up as much as 1% shortly after trading opened. The Dow Jones Industrial Average fell 72 points, or 0.2%, to 32,660 and the Nasdaq fell 0.8%.
Big technology stocks were the biggest weights on the market. The companies, with their big valuations, have more heft in pushing the broader market up or down. Also, rising interest rates tend to make the sector look less attractive because of its those high valuations. Apple fell 1.6%.
Small company stocks held up better than the rest of the market. The Russell 2000 rose 0.4%.
The Labor Department reported that U.S. job openings rose unexpectedly in September, suggesting that the labor market is not cooling as fast as the Fed hoped for as it tries to slow economic growth.
The latest jobs data, which comes ahead of a broader employment report on Friday, is disappointing for investors who are looking for signs that inflation is easing and that the Fed might consider tempering its interest rate increases.
“That really fuels the expectation that the Fed has to do more hiking,” said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management. “The labor market is still too tight for the Fed.”
Wall Street is concerned that the central bank is being too aggressive in slowing the economy, running the risk that it could bring on a recession.
Long-term Treasury yields turned higher after the report in job openings came out and rose back near multiyear highs. Those high rates have helped push mortgage rates above 7% this year.
The yield on the 10-year Treasury rose to 4.06% from 3.93% earlier in the morning.
The yield on the two-year Treasury, which tends to reflect market expectations of future moves by the Federal Reserve, rose to 4.53% from 4.40%.
“The issue for investors is figuring out how long the hiking cycle will last,” Draho said. “(Fed Chair Jerome) Powell will want to leave all options on the table.”
Stocks are coming off a strong rally in October that resulted in big monthly gains for some of the major indexes. Even so, they remain in the red for the year, including the S&P 500, which is down 19%.
Several big companies made solid gains following encouraging earnings reports and forecasts.
Pfizer rose 3.3% after reporting strong results and raising its profit forecast for the year. Uber surged 12.4% after giving investors a strong forecast for future bookings. Rival Lyft rose 4.5%.
Earnings remain a big focus for investors this week. CVS reports its results on Wednesday and Starbucks reports earnings on Thursday.
Outside of earnings, Abiomed surged 50.1% after health care giant Johnson & Johnson said it will pay $16.6 billion for the heart pump maker. Johnson & Johnson fell 0.1%.
The Fed is beginning a two-day policy meeting that’s expected to result in its sixth interest rate increase of the year as the central bank fights the worst inflation in four decades. The widespread expectation is for the Fed to push through another increase that’s triple the usual size, or three-quarters of a percentage point.
For its final policy meeting of the year, in December, opinions are currently split among investors as to whether the Fed will make another three-quarters point move or dial back to a half-point increase.
“The big focus is not so much on what the rate hike is going to be, but really what the comments are coming out of this week’s meeting in terms of any indications of whether there’ll be a little bit of softening as we move into early next year,” said Greg Bassuk, CEO at AXS Investments.
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AP Business writers Joe McDonald, Elaine Kurtenbach and Matt Ott contributed to this report.
DUBAI, United Arab Emirates — Oil giant Saudi Aramco on Tuesday reported a $42.4 billion profit in the third quarter of this year, buoyed by the higher global energy prices that have filled the kingdom’s coffers but helped fuel inflation worldwide.
The oil firm’s profits will help fund the kingdom’s assertive Crown Prince Mohammed bin Salman’s plans for a futuristic city on the Red Sea coast, but also comes as the U.S. grows increasingly frustrated by higher prices at the pump chewing into American consumer’s wallets.
Those tensions yet again have chilled relations between Riyadh and Washington before the Nov. 8 midterm elections.
In a note to investors, the predominantly state-owned oil company said its average barrel of crude sold for $101.70 in the third quarter — up from $72.80 at the same point last year. It’s Aramco’s second-largest quarterly profit in its history, just before its second-quarter results this year saw a profit of $48.4 billion.
It put its profits so far in 2022 at $130.3 billion, compared to $77.6 billion in 2021.
“While global crude oil prices during this period were affected by continued economic uncertainty, our long-term view is that oil demand will continue to grow for the rest of the decade given the world’s need for more affordable and reliable energy,” Aramco CEO Amin H. Nasser said in a statement.
Aramco will keep its dividend this quarter at $18.8 billion, the world’s highest.
Benchmark Brent crude traded just shy of $95 a barrel Tuesday. The sliver of Aramco that the kingdom has put on Riyadh’s Tadawul stock market stood at $9.29 a share before trading Tuesday — putting its valuation at just over $2 trillion. Only Apple’s valuation, at $2.44 trillion, is higher.
OPEC and a loose confederation of other countries led by Russia agreed in early October to cut its production by 2 million barrels of oil a day, beginning in November.
OPEC, led by Saudi Arabia, has insisted its decision came from concerns about the global economy. Analysts in the U.S. and Europe warn a recession looms in the West from inflation and subsequent interest rate hikes, as well as food and oil supplies being affected by Russia’s war on Ukraine.
In Washington, anger has grown with Saudi Arabia, particularly from President Joe Biden, who traveled to the kingdom in July and shared a fist bump with Crown Prince Mohammed. Biden recently warned the kingdom that “there’s going to be some consequences for what they’ve done.”
Saudi Arabia lashed back, publicly claiming the Biden administration sought a one-month delay in the OPEC cuts that could have helped reduce the risk of a spike in gas prices ahead of the U.S. midterm elections.
Biden on Monday separately accused oil companies of “war profiteering” as he raised the possibility of imposing a windfall tax on American energy companies if they don’t boost domestic production.
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Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellAP.
NEW YORK — Wall Street notched more gains Tuesday, as major stock indexes rallied for the third day and Treasury yields fell again.
The S&P 500 rose 1.6%, with roughly 90% of stocks in the index notching gains. The benchmark index hadn’t been able to string together more than two gains in a row since mid-September.
The Dow Jones Industrial Average rose 1.1% and the Nasdaq closed 2.3% higher. Smaller company stocks outpaced the broader market, lifting the Russell 2000 index 2.7% higher.
The latest gains came as bond yields fell significantly, reflecting speculation among investors that the Federal Reserve may begin easing up on its aggressive pace of interest rate increases as soon as this year.
The yield on the 10-year Treasury, which impacts mortgage rates, slipped to 4.09% from 4.23% late Monday. The yield on the two-year Treasury, which tracks Federal Reserve action, fell to 4.45% from 4.50% late Monday.
“It seems like the market is saying that they think perhaps longer-term yields have peaked, and that’s providing some optimism to the (stock) market,” said Randy Frederick, managing director of trading & derivatives at Charles Schwab.
The S&P 500 rose 61.77 points to 3,859.11. The Dow added 337.12 points to close at 31,836.74. The Nasdaq gained 246.50 points at 11,199.12. The Russell 2000 picked up 47.76 points, closing at 1,796.16.
Technology stocks, retailers and communication companies were among the biggest drivers of Tuesday’s rally. Traders were sizing up a heavy round of earnings reports from big U.S. companies.
General Motors rose 3.6% after delivering solid results. United Parcel Service initially rose, but then slipped 0.3% after the package delivery service beat Wall Street’s third-quarter earnings and revenue forecasts. Paint maker Sherwin-Williams jumped 3.6% after also reporting solid financial results.
Packaging maker Crown Holdings fell 16.8% after its latest earnings fell short of estimates. Industrial conglomerate General Electric fell 0.5% after reporting weak third-quarter earnings.
Many other big names are on deck to report earnings throughout the week. Boeing, Ford and Facebook’s parent company will report results on Wednesday. Caterpillar, Apple and Amazon are among the big companies reporting results on Thursday.
Outside of earnings, barbecue grill maker Weber soared 30.4% after it said BDT Capital Partners is interested in buying the rest of the company. Adidas fell 2.4% after the German sportswear company ended its partnership with the rapper formerly known as Kanye West over his offensive and antisemitic remarks.
The latest round of earnings reports are particularly important for investors looking for indications of inflation’s impact on various industries. Prices on everything from clothing to food remain at their highest levels in four decades, putting pressure on companies to raise prices and cut costs, while squeezing consumers.
The Federal Reserve and central banks around the world have been raising interest rates to tame inflation. That has investors concerned about the central bank going too far in trying to slow the economy and instead causing a recession.
The Fed is expected to raise interest rates another three-quarters of a percentage point at its upcoming meeting in November. But traders have grown more confident that the Fed will dial down to a more modest increase of 0.50 percentage points in December, according to CME Group.
Markets have been looking for any sign that the central bank is ready to ease up on rate increases. That includes data that the economy is slowing.
A measure of home prices released on Tuesday showed that the housing market continues to cool. The S&P CoreLogic Case-Shiller Index, which tracks prices in major cities, fell more than expected in August. The Fed’s aggressive interest rate increases have been making borrowing more expensive, in turn driving mortgage rates higher and crimping the broader housing market.
The U.S. economy is already slowing down and actually contracted during the first half the year. The government will release its third-quarter gross domestic product report on Thursday.
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Elain Kurtenbach, Matt Ott and Joe McDonald contributed to this report.
Might the bear market’s losses at its recent low have gotten so bad that it was actually good news?
Some eager stock bulls I monitor are advancing this convoluted rationale. The outline of their argument is that when things get bad enough, good times must be just around the corner.
But their argument tells us more about market sentiment than its prospects.
At the market’s recent closing low, the S&P 500 SPX, +1.19%
had dropped to 25% below its early-January high. According to one version of this “so-bad-it’s-good” argument, the stock market in the past was a good buy whenever bear markets fell to that threshold. Following those prior occasions, they contend, the market was almost always higher in a year’s time.
This is not an argument you’d normally expect to see if the recent low represented the final low of the bear market. On the contrary, it fits squarely within the third of the five-stage progression of bear market grief, about which I have written before: denial, anger, bargaining, depression and acceptance.
With their argument, the bulls are trying to convince themselves that they can survive the bear market, rationalizing that the market will be higher in a year’s time. As Swiss-American psychiatrist Elisabeth Kübler-Ross put it when creating this five-stage scheme, the key feature of the bargaining stage is that it is a defense against feeling pain. It is far different than the depression and eventual acceptance that typically come later in a bear market.
Though not all bear markets progress through these five stages, most do, as I’ve written before. Odds are that we have two more stages to go through. That suggests that the market’s rally over the past couple of weeks does not represent the beginning of a major new bull market.
Numbers don’t add up
Further support for this bearish assessment comes from the discovery that the bulls’ argument is not supported historically. Only in relatively recent decades was the market reliably higher in a year’s time following occasions in which a bear market had reached the 25% pain threshold. It’s not a good sign that the bulls are basing their optimism on such a flimsy foundation.
Consider what I found upon analyzing the 21 bear markets since 1900 in the Ned Davis Research calendar in which the Dow Jones Industrial Average DJIA, +1.34%
fell at least 25%. I measured the market’s one-year return subsequent to the day on which each of these 21 bear markets first fell to that loss threshold. In seven of the 21 cases, or 33%, the market was lower in a year’s time.
That’s the identical percentage that applies to all days in the stock market over the past century, regardless of whether those days came during bull or bear markets. So, based on the magnitude of the bear market’s losses to date, there’s no reason to believe that the market’s odds of rising are any higher now than at any other time.
This doesn’t mean that there aren’t good arguments for why the market might rise. But the 25%-loss concept isn’t one of them.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.
TOKYO — Global shares were mixed, while Hong Kong’s benchmark plunged 6.4% on Monday as dismay over a lack of fresh policy initiatives from a Chinese Communist Party congress overshadowed a report that the No. 2 economy grew at a faster pace in the last quarter.
The dollar rose to nearly 150 yen, a day after the Japanese central bank reportedly again moved to stem the yen’s decline.
Britain’s FTSE 100 slipped 0.7% to 6,918.15 after former Prime Minister Boris Johnson announced he will not run to lead the Conservative Party. Former Treasury chief Rishi Sunak is now the favorite to replace Liz Truss, who quit last week after her tax-cutting economic package caused turmoil in financial markets.
France’s CAC 40 rose nearly 0.6% in early trading to 6,068.71. Germany’s DAX added 0.6% to 12,807.23. The future for the Dow industrials was down 0.4% and that for the S&P 500 shed 0.5%.
Beijing’s report that the Chinese economy gained momentum in the last quarter was better than expected and up from the previous quarter’s 0.4%, but that was among the slowest expansions in decades as the country wrestled with repeated closures of cities to fight virus outbreaks.
There were no new market-boosting initiatives from the Communist Party congress, where Xi Jinping, the most powerful leader in decades, gained a free hand in setting policy. The ruling party named a seven-member Standing Committee made of Xi’s allies and dropped supporters of free enterprise like Premier Li Keqiang, the party’s No. 2 before the party’s once in five years congress.
Xi wants a bigger Communist Party role in business and technology development. That has prompted warnings tighter control of entrepreneurs who generate jobs and wealth will depress growth that already was in long-term decline.
The 6.4% plunge in Hong Kong’s Hang Seng index, to 15,180.69, took it to its lowest level since 2006.
The Shanghai Composite index shed 2.0% to 2,977.56.
Xi also gave no sign of plans to change the severe “zero-COVID” strategy that has crimped business and trade. He indicated no changes in policies straining relations with Washington and Asian neighbors.
Japan’s benchmark Nikkei 225 added 0.3% to finish at 26,974.90. Australia’s S&P/ASX 200 gained 1.5% to 6,779.40. South Korea’s Kospi gained 1.0% to 2,236.16.
Wall Street ended last week with a broad rally, with technology stocks, retailers and health care companies powering a big share of the gains.
The S&P 500 rose 2.4%, notching a weekly gain of 4.7%, its biggest such gain since June. The Dow climbed 2.5% and the Nasdaq composite added 2.3%. The Russell 2000 index rose 2.2%.
Investors have been focusing on corporate earnings as they search for clues about how inflation and rising interest rates are shaping global economies.
The Federal Reserve is expected to raise interest rates another three-quarters of a percentage point at its meeting in November. That’s triple the size of the Fed’s usual move.
In currency trading, the U.S. dollar rose to 149.28 Japanese yen from 147.65 yen. The Bank of Japan was reported to have intervened Friday to prop up the yen after the dollar rose above the 150 yen level. The dollar fell after the reported intervention but bounced back.
The euro cost 98.25 cents, down from 98.62 cents.
The dollar has gained in strength as the U.S. Federal Reserve has raised interest rates to fight inflation. Its growing strength against the yen and other currencies has added to inflationary pressures in those countries by pushing up the costs of imports and of debt repayments.
In energy trading, benchmark U.S. crude fell $1.32 to $83.73 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, declined to $1.29 to $92.21 a barrel.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
CHUBYNSKE, Ukraine — In the last, brief conversations Viktoria Skliar had with her detained boyfriend, the Ukrainian prisoner of war was making tentative plans for life after his release in an upcoming exchange with Russia.
The next time Skliar saw Oleksii Kisilishin, he was dead — one of several bodies in a photo of people local authorities said were killed when blasts ripped through a prison in a part of Ukraine’s Donetsk region controlled by Moscow-backed separatists.
For months, Skliar had held out hope she would reunite with her partner, who had been one of the defenders of the Azovstal steel plant, the last redoubt of Ukrainian fighters in the besieged city of Mariupol.
Now, she has retrained her focus on getting his body back. Against enormous odds, Ukraine has now received the remains of dozens of prisoners who were held at the prison in Olenivka. But with experts still needing months to identify all the bodies — and no guarantee Kisilishin is among them — Skliar’s quest is far from over.
That she even knows her boyfriend is dead is remarkable. She recognized his tattoos in a photo shared on social media following the July 29 blasts. It showed him laid out, semi-naked, on the ground in a line with eight other bodies.
“When I saw the photo, my eyes did not go beyond Oleksii’s body,” Skliar told The Associated Press. “I didn’t have time to cry. I cried all my tears when they were in Azovstal. My first thought was to get the body back somehow.”
Skliar said she contacted representatives with the International Committee of the Red Cross, told them about the photo and gave them his name in the hopes that they’d be able to arrange for him to be brought home. The humanitarian organization couldn’t tell her much — the group had to wait for official lists of prisoners and agreements from politicians before it could help repatriate any bodies.
While she waited for word, Skliar feared her loved one would end up in a mass grave.
Kisilishin, who died at 26, was called back to the Azov Regiment, part of the Ukrainian National Guard, where he’d served until 2016, two weeks before Russia’s invasion of Ukraine in February. The animal caregiver and activist had chosen to return to defend his hometown of Mariupol, rather than stay in Kyiv, where he’d met Skliar at an equestrian club a year before.
When Kisilishin was holed up at the Azovstal steel mill during a three-month siege of the city, they spoke every day until Russian forces encircled the plant.
In May, he was captured when the last Azovstal defenders were told by Ukraine’s military to turn themselves over to Russian forces.
From captivity, Skliar continued to have phone calls from him, though they never lasted longer than a minute. Her boyfriend said little about himself, responding only “it’s OK” or “bearable” when she asked him how he was.
Then, Skliar said she received a call from Kisilishin — and his voice was cheerful. “He said that they will be taken somewhere. He hoped for an exchange,” she said.
She believes he was taken to Olenivka that day or soon after. Later, she said she heard from the Red Cross that he would be part of an upcoming prisoner exchange. But three weeks after that, he was dead.
Authorities at the prison and Russian officials have said 53 Ukrainian POWs died in the blasts and another 75 were wounded. On a list of the victims released by Moscow and published in Russian media, Kisilishin was number 43.
What exactly happened in Olenivka remains unknown.
Russia claims Ukraine’s military hit the prison with rockets. The Ukrainian military denied launching any strikes and accused Russia of mining it. Kyiv alleges that the Kremlin’s forces tortured prisoners held in Olenivka — and that the blasts were meant to cover up any evidence of those crimes.
The Office of the United Nations High Commissioner for Human Rights raised concerns recently about reports that prisoners in Olenivka and elsewhere were subjected to beatings, electrocution and other abuse.
The Russian Defense Ministry did not respond to a request for comment on Ukrainian allegations of what happened in Olenivka.
Russia and Ukraine agreed in August to a U.N. fact-finding mission, but U.N. deputy spokesman Farhan Haq said just over a week ago that the “appropriate security guarantees” were not in place for the work to start.
When other Ukrainian POWs returned in September, the photos showed emaciated but smiling faces. Skliar believes Kisilishin was supposed to be among them.
Instead, he probably returned to Ukraine in a bag labeled “Olenivka” — with 62 other bodies that were exchanged on Oct. 11. Relatives of soldiers have given DNA samples, and experts are now working to identify the remains, said the representative of the Patronage Service of the Azov Regiment, Natalia Bahrii.
It’s not clear why there were more than 60 bodies in the exchange, even though authorities put the death toll from the blasts at just over 50.
Kisilishin’s father, Oleksandr — who himself was captured as a POW and released — has given a sample.
To honor his son, the father, working with the NGO UAnimals, plans to arrange grants for animal shelters — continuing the work that Kisilishin devoted his life to.
The older Kisilishin and Skliar don’t talk much about their loved one. “We can’t have him back anyway,” Skliar recounted the father once said to her.
Still, Skliar hopes she will one day be able to bury him.
“He fought for the free people of a free country; he defended his city, Mariupol,” Viktoria said. “He is a warrior. And he has the right to be buried in the land he defended.”
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Follow AP’s coverage of the war in Ukraine: https://apnews.com/hub/russia-ukraine
