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Global oil benchmark tops $90 for the first time since 2014

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Brent crude futures, the international oil benchmark, topped $90 on Wednesday for the first time since 2014, adding to oil’s blistering recovery since its pandemic-era lows in April 2020.

The threshold breakthrough comes amid growing geopolitical tensions between Russia and Ukraine, and as supply remains tight amid a rebound in demand.

The contract added more than 2% at one point to hit a high of $90.47 per barrel for the first time since October 2014. However, Brent pulled back slightly in afternoon trading, ultimately settling 2% higher at $89.96 per barrel.

West Texas Intermediate crude futures, the U.S. oil benchmark, settled 2.04% higher at $87.35 per barrel. During the session the contract hit a high of $87.95, a price last seen in October 2014.

CIBC Private Wealth’s Rebecca Babin said potential sanctions on Russia, which would be triggered by a Ukraine invasion, would be a catalyst for higher crude prices.

“Each day that passes without a de-escalation, we could see more of a supporting bid to crude,” she said.

Goldman Sachs said Wednesday the firm’s base case is that supply disruptions are unlikely to occur, but that there could be upside for energy prices given an already tight market.

“Commodity markets are increasingly vulnerable to disruptions, after a couple years of historically low outages following the initial Covid shock,” the firm wrote in a note to clients.

“Against the backdrop of the tightest inventory levels in decades, low spare capacity and a much less elastic shale sector, this points to the skew of large energy price moves shifting to the upside, reinforcing the case for a rising allocating to commodities in portfolios.”

Earlier this month, Goldman Sachs said that Brent can reach $100 per barrel by the third quarter, adding to a number of Wall Street firms calling for triple-digit oil.

Barclays noted that while prices may be reacting in part to a “geopolitical premium,” the underlying fundamentals are fueling the push higher.

OPEC and its oil-producing allies have been returning crude to the market, but the group’s been unable to ramp up production to hit its targets. Meanwhile, U.S. shale oil growth has slowed, and omicron hasn’t been the demand hit that was initially expected. Additionally, inventory levels remain depleted.

The Energy Information Administration said Wednesday that crude oil inventories rose by 2.4 million barrels during the week ended Jan. 21. The Street was expecting an increase of just 150,000 barrels, according to estimates compiled by FactSet.

“Immediately it becomes a question how long we’ll be waiting for triple figures,” said Oanda’s Craig Erlam. “It’s still unlikely that oil and gas will be used as a weapon anytime soon but if it was, it could lead to a serious surge in prices given how tight the markets are.”

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BUSINESS

Stock futures rise after Dow falls for 8th-straight week in relentless sell-off

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Stock futures rose early on Monday after the Dow Jones Industrial Average fell for its 8th straight week amid a broader market sell-off.

Futures on the Dow Industrial Average gained 245 points, or 0.78%. S&P 500 futures added 1.07% and Nasdaq 100 futures rose 1.19%.

The moves came after the S&P 500 on Friday dipped into bear market territory on an intraday basis. While the benchmark was down 20% at one point, it did not close in a bear market after a late-day comeback.

In Friday’s regular trading session, the S&P 500 closed 0.01% higher at 3,901.36 after falling as much as 2.3% earlier in the session. The Dow added 8.77 points at 31,261.90 after sinking as much as 600 points and the Nasdaq inched 0.3% lower.

The S&P 500 currently sits 19% off its record high while the Dow is down 15.4%. The Nasdaq is already deep in bear market territory, down 30% from its high.

Last week marked the Dow’s first eight-week losing streak since 1923, while the S&P 500 capped a seven-week losing streak, its worst since 2001.

The Nasdaq saw its seventh negative week in a row for the first time since March 2001. The tech-heavy index also saw its lowest intraday level since November 2020 on Friday.

Eight of 11 sectors ended the week in the red, led by consumer staples, which dipped 8.63% and had its worst weekly performance since March 2020. Energy finished the week on top, rising 1.09%. Consumer discretionary and communication services also finished the week more than 32% off their 52-week highs.

“Investors are trying to come to grips with what exactly is happening and always try to guess what the outcome is,” said Susan Schmidt of Aviva Investors. “Investors hate, and the markets hate uncertainty, and this is a period where they don’t have any clear indication on what’s going to happen with this push-pull between inflation and the economy.”

Investors are looking ahead to a new batch of earnings this week, including an array of big retail names. Zoom Video is set to report results Monday followed by Costco, Nvidia, Dollar General, Nordstrom and Macy’s later in the week.

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US stocks suffer biggest daily drop in almost two years

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US stocks posted the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.

The selloff sent the S&P 500 down 4%, with the plunge in consumer shares surpassing 6%. Target Corp. tumbled more than 20% in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft. The Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple Inc. and Amazon.com Inc. slid at least 5%.

Treasuries rose across the board, sending the 10- and 30-year Treasury yields down as much as 11 basis points. The dollar rose against all of its Group-of-10 counterparts, except the yen and Swiss franc. Gold caught bids in the move into havens.

The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns.

In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. Chicago Fed President Charles Evans said Wednesday he sees a half-point rate increase at next month’s meeting and “probably thereafter.”

In Europe, new-vehicle sales shrank for a 10th month in a row as the industry remains mired in supply-chain crises, while euro-area inflation plateaued at a record high. Meanwhile, UK inflation rose to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and central bank.

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Netflix lays off 150 employees due to slow revenue growth and business needs

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Netflix is reportedly laying off nearly 150 employees in the coming days due to disappointing earnings and slow revenue growth.

According to a Variety report, the Amazon Prime Video rival might also terminate its contract with contractual contributors.

The layoffs are about 2 per cent of Netflix’s US workforce. “As we explained [in reporting Q1] earnings, our slowing revenue growth means we are also having to slow our cost growth as a company. So sadly, we are letting around 150 employees go today, mostly U.S.-based,” a Netflix spokesperson said.

The statement further revealed that the decision was primarily driven by business needs rather than individual performance. Netflix reported $7.87 billion in Q1, which was short of Wall Street’s estimates of $7.93 billion.

The report further reveals that nearly 70 part-time employees in Netflix’s animation studio will have to pack up and leave. A report by The Verge stated that about 26 contractors working on Netflix’s fan-focused Tudum website might see a termination.

“A number of agency contractors have also been impacted by the news announced this morning. We are grateful for their contributions to Netflix,” the company said.

Netflix, in its recent earnings call, revealed that it lost thousands of subscribers, which is a first for the company in over a decade.

The company expects to lose an additional 2 million in the next quarter due to the ongoing war between Russia and Ukraine. Netflix has shut shop in Russia following the country’s invasion of Ukraine.

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