Treasuries Climbed, Stocks Stumbled

When the Federal Reserve raised interest rates by a quarter point after last week’s Federal Open Market Committee meeting, investors seemed okay. Stocks traded in the green for four consecutive days, notching their best day in 16 months.

However, after Fed Chairman Jerome Powell made it clear that the bank would stamp out aggressive inflation, investors expressed a change of heart today. 💡 The country’s “money man” insinuated that he would support 0.50% interest rate hikes in the event that inflation’s impact on the economy wasn’t arrested quickly.

The market heard that message loud-and-clear: Treasury yields surged on the news and stocks went lower. Perhaps investors got a little too comfortable thinking the Fed wouldn’t sacrifice financial markets to reach employment/economic growth goals. If they weren’t before, investors are more cautious now.

The markets moved down today, but didn’t erase much of last week’s bullish progress. Only time will tell how investors interpret the Fed’s latest stance — given newfound concerns about recession risk, Americans could choose to play more carefully in coming days and weeks as inflation climbs (considering the events of this month and rising oil prices, investors will probably play it safe.)

Nike stock climbed 6% in AH after posting earnings which boosted investors’ confidence. ✨

Revenue: $10.87 billion, +5% YoY (vs. $10.59 billion estimated)
Adj. earnings per share: $0.87 (vs. $0.71/share estimated)

The company’s revenues were lifted by double-digit growth in their NIKE Direct and NIKE Brand Digital businesses. Independently, those two things might not make any sense because, well, it’s hard to know why NIKE named them that. 🤷 However, as you’ve probably figured out by now — this is accountant/marketing-language for physical retail and e-commerce retail.

Physical (direct) retail growth grew as COVID measures subsided. Direct-to-consumer (brand digital) continued to outperform, which is no surprise given the enormous success brands have had by pivoting to e-commerce throughout the pandemic. 📈

Increased sales in most regions (except China) contributed to Nike’s D2C/e-commerce success in its latest quarter. However, these figures grew even as Nike (which has become less reliant on wholesalers) saw its wholesale revenue drop 1%.

Overall, the biggest problem for Nike this quarter has been supply chain problems. That was a given though, seeing as Nike indicated it had over $7.7 billion worth of inventory on its balance sheet. That figure was up 15% YoY.

Investors were willing to overlook the ongoing supply chain problems today. The stock rose on the positive news, and even though sales in China fell, investors didn’t seem to mind. 🤷

You can hop on the Stocktwits stream for $NKE here. Or, if you’re feeling spicy, you can read the rest of the report here. 🔥

Warren Buffett’s Berkshire Hathaway announced that it would acquire Alleghany Corp., an insurer, for $11.6 billion. Berkshire already has a strong insurance biz (Geico included), so the Alleghany acquisition will make a nice addition to the conglomerate’s robust portfolio. 💪

The Alleghany deal is also Warren Buffet’s biggest deal to close in six years — Buffet’s conglomerate is paying cash for each share of the insurer, $848.02/share. 💰 💰 Last Friday, shares of Alleghany closed at $676.75. This means Berkshire’s deal will offer the company a +23% premium per share. 

The Berkshire/Alleghany deal could close in Q4 of this year. Buffet commented “Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years.” Alleghany is involved in specialty insurance, property/casualty insurance, and reinsurance. 

Overall, Berkshire and Alleghany shareholders alike seemed enthusiastic about the news. Alleghany shares saw a 25% boost during Monday’s session and Berkshire’s class A stock increased +2.3%.