2024-03-01 21:14
NEW YORK, March 1 (Reuters) - As fervor for artificial intelligence sweeps Wall Street, some investors are seeking bargains in more conventional areas of the stock market. Value stocks, typically defined as companies trading at a discount on metrics such as book value or price-to-earnings, have largely been left behind as AI put a charge into their growth-focused peers. However, gains in some value-heavy sectors such as industrials and materials have accelerated lately. Proponents believe that's a sign that the rally in the benchmark S&P 500 index (.SPX) , opens new tab is broadening beyond a handful of tech and growth names. “There’s clearly an investment case for value stocks over the long term,” said Que Nguyen, chief investment officer of equities at Research Affiliates. “These companies are still very, very cheap and many of them have already gone through the difficult process of restructuring their businesses and balance sheets.” The S&P 500 is up 7.7% in 2024 and stands at a record high. The S&P 500 Value Index (.IVX) , opens new tab is up 3.3% year-to-date, lagging the 11.6% gain in the S&P 500 Growth Index (.IGX) , opens new tab. Yet some value-heavy sector have shown signs of life in recent weeks. The S&P 500 industrial sector (.SPLRCI) , opens new tab rose 7.1% last month, driven by rallies in General Electric (GE.N) , opens new tab and Howmet Aerospace (HWM.N) , opens new tab. The broader index gained 5.8% in that period. The materials sector (.SPLRCM) , opens new tab gained 6.7% in February, led by Vulcan Materials (VMC.N) , opens new tab and Ecolab (ECL.N) , opens new tab . Consumer discretionary (.SPLRCD) , opens new tab, home of recent gainers such as Chiptole Mexican Grill (CMG.N) , opens new tab and Ralph Lauren (RL.N) , opens new tab, rose nearly 9%. One major draw: value stocks are relatively cheap compared to the rest of the market. The health care sector trades at 18.9 times forward earnings with energy trading at a 12.2 multiple, much less than the 20.8 forward earnings for the S&P 500 after a rally lifted the benchmark 42% from its October 2022 lows. Michael Hunstad, Northern Trust Asset Management’s deputy chief investment officer and head of global equities, believes multiples have grown too steep for the S&P 500 and the so-called Magnificent Seven group of growth and technology stocks that have led its rally. Tesla's (TSLA.O) , opens new tab drop of nearly 20% this year illustrates how quickly such stocks can reverse, he said. "We expect to see more risk to the downside for multiples, particularly among the Mag 7," said Hunstad, who has been increasing his positions in value-focused sectors such as healthcare and energy. Hunstad also believes value stocks could better weather a prolonged period of elevated interest rates than growth names, as their cash flows are shorter-term and less sensitive to borrowing costs. While investors still expect the Fed to cut rates this year, they have reduced expectations for how quickly and deeply the central bank will cut rates, as a stronger-than-expected economy could reignite inflation if monetary policy eases too soon. Next week’s congressional testimony from Fed Chairman Jerome Powell could shed light on policymakers’ views. Investors are also awaiting U.S. employment data next Friday. Betting against growth stocks has been dangerous over the last decade, when searing rallies in shares of companies such as Apple (AAPL.O) , opens new tab, Google-parent Alphabet (GOOGL.O) , opens new tab and Meta Platforms (META.O) , opens new tab led markets higher. The S&P 500 Value index is up about 110% over the last 10 years, compared with a nearly 235% gain in the S&P 500 Growth index. Broader sentiment toward value has waned, by some measures. A net 13% of fund managers polled by BofA Global Research expect growth stocks to outperform value names over the next year, the highest conviction level since May 2020. Still, some strategists argue the productivity gains promised by AI could lift all boats long-term, benefiting value stocks as well as growth shares. Robert Robotti, chief investment officer of Robotti & Company, believes value stocks are likely to see the largest efficiency gains from adopting AI, bolstering their margins and pushing up valuations. He has increased his stake in industrial and healthcare stocks as a result. "The application of AI is going to be across the entire company and that’s not limited to the guy selling the chip," Robotti said. "It’s the guy buying the chip and increasing his efficiency who is going to benefit.” https://www.reuters.com/markets/us/wall-st-week-ahead-us-value-stocks-draw-bargain-hunters-while-ai-fever-rages-2024-03-01/
2024-03-01 21:13
March 1 (Reuters) - Up to 12 feet (3.66 m) of snow is forecast to fall in California's Sierra Nevada mountains through the weekend, as a one-two punch of dual brutal cold fronts slams into the Pacific Northwest, the National Weather Service said. Rich Bann, a meteorologist with the NWS, said the western slope of the Sierras will see the heaviest snow, with wind gusts of 100 mph (161 kph) or more likely as the storm crashes over the mountain ridges. "There could be widespread power outages," Bann said. "This is going to be a really big disruption to life until it tapers off on Sunday." Blizzard warnings were issued through Sunday for several regions, including the greater Lake Tahoe area, which in the winter is a magnet for ski tourism. The NWS forecast that life-threatening whiteout conditions could persist through the weekend in the area. The NWS said on Thursday that strong winds had already produced damage around the Lake Tahoe area, and that even stronger winds with gusts up to 80 mph were expected on Friday. The cold fronts could bring heavy rains at lower elevations in the foothills of the Sierras and across northwestern California, a state that has been soaked by heavy rains this winter. The additional rains on was "increasing the risk of isolated flash flooding," the NWS said. The storm will also produce heavy snowfall in the Cascade Range mountains in Oregon and Washington, and deeper into the northern Rocky Mountains in Idaho, Montana and Wyoming, the NWS said. https://www.reuters.com/world/us/californias-sierra-nevada-mountains-could-see-12-feet-snow-through-weekend-2024-03-01/
2024-03-01 20:55
March 1 (Reuters) - A U.S. appeals court on Friday narrowly ruled that the federal government may give away thousands of acres in Arizona to Rio Tinto (RIO.AX) , opens new tab(RIO.L) , opens new tab for a copper mine, upholding a previous ruling and rejecting an argument from Native Americans that the land should be preserved for its religious and cultural value. The 6-5 ruling from the San Francisco-based 9th U.S. Circuit Court of Appeals essentially defers to a 2014 decision made by the U.S. Congress and then-President Barack Obama to give the land to Rio and minority partner BHP (BHP.AX) , opens new tab for the Resolution Copper project. The decision comes amid the U.S. presidential election season, in which former President Donald Trump, who supports the mine, is likely to face off against President Joe Biden, who narrowly won Arizona in the 2020 election thanks to Native American votes. The move is the latest blow to the Apache Stronghold, a nonprofit group comprised of the San Carlos Apache tribe and others who have long opposed the mine, which would destroy a site where Indigenous ceremonies have been held for generations but would, if developed, supply more than a quarter of U.S. copper demand for the renewable energy transition. Three members of the Appeals Court had ruled for Rio and the land swap in 2022. All 11 members of the appeals court then said they would decide the case in what is known as an en banc hearing, held last March. "This ruling is illogical and it's unjust," said Luke Goodrich, a Becket Law attorney who represents Apache Stronghold. The group intends to appeal to the Supreme Court and feels it has a strong case given how closely divided the appeals court was, Goodrich added. The dispute centers on a federally owned land parcel in eastern Arizona known as Oak Flat, which some Apache consider home to deities and which sits atop a reserve of more than 40 billion pounds of copper, a crucial component of electric vehicles. If a mine is built, it would create a crater 2 miles (3 km) wide and 1,000 feet (304 m) deep that would destroy that worship site. RELIGIOUS TENSION In their 253-page ruling, the judges spared over whether a land transfer by the government could prevent some from exercising their religious beliefs. The majority ruled that the land transfer would not be a "substantial burden" on the San Carlos Apache's religious rights because it would not reflect the government forcing the tribe to stop worshiping their deities. The five dissenters argued that it would be impossible for the Apache to practice their religion if the place where they worship is destroyed. The 2014 law that approved the land swap required an environmental report to be published in order for the land swap occurred, which Trump did shortly before leaving office. Biden unpublished that report in March 2021, though he was not able to permanently block the mine. Meanwhile, Apache Stronghold sued to prevent the land transfer. It has now lost in three consecutive court hearings. For the land transfer to occur, Biden would need to republish that environmental report. The White House was not immediately available to comment. Vicky Peacey, who runs the Resolution project for Rio, said the company welcomed the decision and would continue to talk with tribes "as we seek to understand and address the concerns that have been raised." Representatives for the San Carlos Apache, Apache Stronghold and BHP did not immediately return requests for comment. The six judges in the majority were appointed by Republican presidents, including five appointed by Trump. Four of the five dissenting judges were appointed by Democratic presidents. https://www.reuters.com/markets/commodities/us-appeals-court-rejects-bid-block-land-swap-rios-arizona-copper-mine-2024-03-01/
2024-03-01 20:35
March 1 (Reuters) - U.S. President Joe Biden has signed into law a short-term stopgap spending bill to avert a partial government shutdown, the White House said on Friday. The bill was approved by the Democratic-majority U.S. Senate on Thursday after the Republican-controlled House of Representatives backed it with less than 36 hours before funding would have begun to run out. https://www.reuters.com/world/us/biden-signs-stopgap-spending-bill-avert-government-shutdown-white-house-says-2024-03-01/
2024-03-01 20:05
March 1 (Reuters) - Boeing (BA.N) , opens new tab is in talks to buy its struggling former subsidiary Spirit AeroSystems (SPR.N) , opens new tab, as both companies try to solve persistent quality problems and contain costs related to 737 MAX production, an industry source familiar with the matter said on Friday. A merger would bring Spirit back under the umbrella of Boeing, which spun it off in 2005 and in recent years has struggled with cost pressures and problems that have slowed aircraft deliveries and thinned its balance sheet. Spirit has hired bankers to explore strategic options and has had preliminary discussions with Boeing, the Journal reported earlier on Friday, citing people familiar with the matter. Boeing and Spirit declined to comment. An industry source confirmed the move to Reuters. Boeing had previously considered the prospect of buying Spirit AeroSystems back since divesting it, but the optics of buying at a higher price were among the factors that discouraged such a move, according to a second industry source. Shares of Spirit jumped over 13% on Friday, while those of Boeing fell more than 1%. Both Boeing and Spirit have been under fire since a Jan. 5 incident when a door plug blew off a 737 MAX plane in mid-flight, exposing frightened passengers to the outside air. Reuters reported last month that years of decentralization of Boeing's planemaking capacity - along with an exodus of experienced workers and aggressive cost-cutting - has affected quality. Bringing Spirit back into the fold could address some of those quality issues as it would give Boeing more control over manufacturing. Such a move would also help Boeing lower Spirit production costs through economies of scale, the second industry source said. "Clearly Spirit is in a world of pain at the moment, and the ongoing regulatory risk on its largest program – the 737 – makes things worse," said Vertical Research Partners analyst Robert Stallard. "For Boeing, this does give them the opportunity to bring Spirit in-house and fix its problems, but Boeing of course has its own issues and has hardly covered itself with glory when it comes to execution of late." Spirit, one of the industry's major manufacturers of large aircraft structures, has struggled with cash flow problems over the past few quarters and quality issues surrounding the fuselages it makes for Boeing's 737 narrowbody jets. Spirit's shares have lost more than 70% of their value over the last five years, according to LSEG data. Spirit is also exploring selling operations in Ireland that make parts for Airbus (AIR.PA) , opens new tab. Spirit's market capitalisation stood at $3.3 billion as of Thursday's close. The U.S. Federal Aviation Administration has barred Boeing from expanding production of its cash-cow 737 MAX family of jets after the Jan. 5 Alaska Airlines incident. On Feb. 12, FAA head Mike Whitaker visited Boeing's Renton, Washington, factory, where the 737 MAX line is produced, and expressed concerns about some things he saw on the tour to CEO Dave Calhoun earlier this week, two people briefed on the matter told Reuters. Investigators are still trying to definitively sort out responsibility for the incident. Spirit made the panel, but Boeing removed it to fix rivet damage nearby and then put it back, according to a preliminary report by U.S. investigators who found pictures showing the panel at Boeing apparently missing key bolts. Wichita, Kansas-based Spirit in October named former Boeing and Pentagon official Patrick Shanahan as its interim CEO, replacing Tom Gentile. In the same month, Spirit reached an agreement with Boeing under which the supplier received immediate funding from the planemaker and revised prices for 737 and 787 production. https://www.reuters.com/markets/deals/boeing-talks-buy-spirit-aero-wsj-reports-2024-03-01/
2024-03-01 20:01
CANADIAN, Texas, March 1 (Reuters) - Fire crews in the Texas Panhandle on Friday were battling to get a tighter grip on the state's largest wildfire on record, hoping to capitalize on a lull in incessant wind gusts that have fanned an inferno that has devastated the cattle-ranching region. The deadly wildfire, dubbed the Smokehouse Creek Fire, has scorched more than 1 million acres (404,685 hectares), according to the latest figures from the Texas A&M Forest Service, provided on Thursday. "Terrible is not strong enough of a word," said Terrill Bartlett, owner of a family-run lumber company who serves as mayor of Canadian, Texas, the epicenter of the sprawling blaze. "The ground is just black in all directions." Since Monday, the fire has spread eastward across the Panhandle, pushing across the state's border with Oklahoma. In its wake it has left at least two people dead, dozens of torched homes and hundreds of square miles of scorched grazing land. While firefighters have gained a measure of control over the blaze, the danger has not passed, with the wind expected to pick up over the weekend, said Sean Dugan, a spokesperson for the Texas A&M Forest Service. "We're looking at the next few hot, dry days that will be windy," he said. "Those heavy fuels will come back alive with dry and windy weather, kicking up embers and ... carry them over into unburned fuel." Between 400 and 500 structures have been destroyed so far, based on a "premature assessment" that would likely change, Texas Governor Gregg Abbott said at a news briefing on Friday. "We face enormous potential fire dangers as we head into this weekend," Abbott said. "No one can let down their guard." Earlier, Canadian's fire chief, Scott Brewster, said 109 homes were destroyed in the town and surrounding Hemphill County, as well as an unspecified number of other structures. W. Nim Kidd, chief of the Texas Division of Emergency Management, said at the briefing that it was difficult to assess full damages with the fire still smoldering. Kidd did not update the number of acres burned and the level of containment achieved by fire crews, saying he did not want to give people false confidence. Earlier on Friday, Texas A&M's Dugan said containment was conservatively estimated at 5%, up from 3% on Thursday. SCENES OF DEVASTATION The once-fertile grasslands around Canadian looked more like a war zone on Friday, with thousands of cattle corpses littering the charred fields, according to Wes Avent, who owns a local ranch supply store. Avent turned his store into a makeshift station for distributing donated feed, fencing and other supplies to ranchers. "Right now our biggest chore is to get feed to the cattle that survived," he said. "We've got to get feed and hay out to these guys as fast as we can." A miles-long line of tractor trailers snaked along the highway into Canadian on Friday, waiting to deliver bales of cattle feed and other supplies to desperate ranchers. The two people killed in the wildfire included a woman who succumbed to her injuries on Thursday, her family said on GoFundMe.com. She was rushed to a burn center in Oklahoma City after she was overcome with smoke and flames while driving her truck in Pampa, Texas, on Tuesday, local news reported. An 83-year-old woman in Hutchinson County, northeast of Amarillo, was also killed in the fire, according to local media. "As far as cattle, I don't think anyone knows yet," said Brewster, the fire chief. "I talked to one rancher and he said he lost 700 cattle. And that's just one guy. There's no telling what the tally will be, but it'll be up there." Over the weekend, the weather forecast for the Texas Panhandle calls for no rain and winds of up to 45 miles (72 km) per hour, said Bob Oravec, a meteorologist with the National Weather Service's Weather Prediction Center in College Park, Maryland. "These are ingredients for more fire," Oravec said. "The winds have no moisture content coming from the southwest. It dries out the stuff that burns." According to the latest Texas A&M Forest Service numbers, the Smokehouse Creek Fire has now burned through 1.08 million acres (437,060 hectares), or nearly 1,700 square miles, an area larger than New York's Long Island. That replaced a 2006 fire that charred about 900,000 acres (364,220 hectares) as the most expansive in state history. Several smaller wildfires were burning in other parts of the Panhandle. The next largest, the Windy Deuce fire, has burned 142,000 acres (57,470 hectares) and was 50% contained on Friday, according to Texas A&M. https://www.reuters.com/world/us/texas-panhandle-firefighters-battle-blaze-before-wind-gusts-return-2024-03-01/
