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What’s Moving Markets: Amazon Chatter, Walmart Earnings, and Ukraine Bubbles

February 17, 2022

If an activist investor is believed, Amazon may be on the verge of a split. However, it is still a long way off. Meanwhile, the e-commerce behemoth has settled its spat with Visa over interconnection costs. Walmart results are expected a day after a solid retail sales report for January. The latest Federal Reserve minutes fueled speculation about rising interest rates. Still, oil is falling amid signs of demand destruction from high US prices. 

Amazon being urged in the path of dissolution?

Amazon may be on the approach of being forced to split up. At the very least, that is the logical consequence of statements made by activist investor Dan Loeb. During a conference call, he allegedly told clients that he saw another trillion dollars of latent value in the firm. 

This likely stems from the reality that Amazon’s core companies have wildly disparate profit characteristics. Amazon made virtually all of its money in the past quarter by hosting Cloud services and selling advertising. Its e-commerce company, on the other hand, lost money due to mounting cost pressures in the United States and is still far from profitable outside the country.

Amazon was also in the headlines overnight for settling its spat with Visa over credit card fees. The agreement means that Amazon customers in the United Kingdom will use Visa cards as usual. In addition, other levies imposed in Australia and Singapore last year will be lifted. 

Alphabet and Meta Platforms, Amazon’s Big Tech rivals, will also be in the limelight later when Google said it would suspend cross-app monitoring, a blow to Facebook and other social media networks’ ability to sell tailored advertisements.

Unemployment claims and housing starts

The weekly labor market data is scheduled for 8:30 a.m. ET, with experts expecting initial jobless claims to remain in the previous range of slightly over 200,000. 

The figures are released simultaneously as January statistics on house starts and building permits, which are likely to be somewhat lower than in December. Housing starts haven’t maintained the present level of activity since the subprime mortgage bubble in 2006. Still, they’ve defied rising mortgage rates so far. 

The Philly Fed business survey is the day’s other central data point.

Stocks are expected to open lower; Walmart profits are expected to be lower as well.

The release of the Federal Reserve’s latest policy meeting minutes provided a stark reminder of the central bank’s pressure to increase interest rates and sell off its asset holdings, prompting stock markets in the United States to open lower. 

Dow Jones futures dropped down 174 points, or 0.5 percent, at 6:15 a.m. ET, while S& P 500 lots were down a similar amount and Nasdaq 100 futures were down 0.7 percent.

Walmart profits, expected for early release, will be the day’s big corporate news, coming a day after official retail sales figures for January indicated a dramatic rise in spending. The prediction for consumption from the country’s largest brick-and-mortar retailer will provide a viewpoint that official statistics may not reflect due to flaws in the regular seasonal adjustment procedure.

Nvidia, which is down in premarket after releasing guidance that wasn’t as explosively upbeat as many expected, and DoorDash, whose record sales in the past quarter defied expectations that the reopening of physical eateries would hurt its company, will also be scrutinized.

Ukraine’s tensions remain high, with separatists firing over the border.

Tensions on the Ukrainian border remain high, as Kyiv and NATO reiterate that no significant evacuation of Russian soldiers from advanced positions might be used as a launchpad for an attack. 

Local media stated that Russian-backed rebels in eastern Ukraine fired artillery at targets in the government-held settlement of Stanytsia Luhanska and that government forces failed to respond, fearing a provocation that would serve as a pretext for a Russian invasion. 

European natural gas prices jumped as much as 8% in early trading before retracing to roughly 5% by lunchtime. Meanwhile, the Russian ruble plummeted by almost 1% versus the US dollar.

Crude prices fall more as US inventories surge.

Crude oil prices dropped back around $91 per barrel as evidence of sluggish demand in the United States contributed to the factors making further increases difficult at such high levels. 

On Wednesday, the Energy Information Administration said that oil stockpiles in the United States increased by 1.1 million barrels last week, contrary to the American Petroleum Institute’s estimate of a slight reduction. On the other hand, gasoline inventories appeared to be tighter, decreasing by 1.3 million barrels. 

By 6:25 a.m. ET, US oil futures were down 2.4 percent to $91.42 per barrel, while Brent crude was 2.1 percent to $92.77 per barrel.

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