PUBLISHED TUE, APR 19 20228:50 AM EDT

• U.S. homebuilding unexpectedly rose in March, but starts for single-family housing tumbled amid rising mortgage rates.
• Housing starts increased 0.3% to a seasonally adjusted annual rate of 1.793 million units last month, the Commerce Department said.
• Economists polled by Reuters had forecast starts slipping to a rate of 1.745 million units.
• Permits for future homebuilding increased 0.4% to a rate of 1.873 million units last month.

U.S. homebuilding unexpectedly rose in March, but starts for single-family housing tumbled amid rising mortgage rates.

Housing starts increased 0.3% to a seasonally adjusted annual rate of 1.793 million units last month, the Commerce Department said on Tuesday. Data for February was revised higher to a rate of 1.788 million units from the previously reported 1.769 million units.

Economists polled by Reuters had forecast starts slipping to a rate of 1.745 million units. Permits for future homebuilding increased 0.4% to a rate of 1.873 million units last month.

The 30-year fixed-rate mortgage averaged 5.0% during the week ended April 14, the highest since February 2011, up from 4.72% in the prior week, according to data from mortgage finance agency Freddie Mac. Further increases are likely with the Federal Reserve adopting an aggressive monetary policy posture as it battles sky-high inflation.

The Fed in March raised its policy interest rate by 25 basis points, the first hike in more than three years. Economists expect the U.S. central bank will hike rates by 50 basis points next month, and soon start trimming its asset portfolio.

Rising borrowing costs are combining with higher home prices to reduce housing affordability for first-time buyers. The National Association of Home Builders/Wells Fargo Housing Market index dropped to a seven-month low in April, with builders blaming the “jump in mortgage rates and persistent supply chain disruptions.”

Still, record low housing supply should continue to underpin homebuilding this year. There is a record backlog of houses approved for construction that are yet to be started.

Goldman Sachs estimates that housing starts will increase 5% to 1.7 million this year, arguing that “when housing markets are tight, like they are today, homebuilders are likely to keep building because they should have little fear that homes will sit vacant after completion.”

Single-family housing starts, which account for the biggest share of homebuilding, dropped 1.7% to a rate of 1.200 million units in March.

Bay Street Seen Opening Lower On Weak Commodity Prices, Global Cues

Lower futures amid falling commodity prices, weak global cues and looming interest rate hikes are set to weigh down Canadian stocks Friday morning.

Data on Canadian retail sales for the month of February is due at 8:30 AM ET. Retail sales in Canada likely declined by 0.5% month-over-month in February of 2022, preliminary estimates showed.

In January, retail sales rose 3.2% over a month earlier, as against preliminary estimates of a 2.4% increase and compared to an upwardly revised 2% fall in December.

A report on industrial produce prices and raw materials prices in Canada for the month of March is also due at 8:30 AM ET.

The Canadian market ended sharply lower on Thursday, weighed down by sharp losses in materials, energy and technology sectors.

Rising inflation, slowing growth and tighter monetary policy rendered the mood bearish. The benchmark S&P/TSX Composite Index ended with a loss of 347.97 points or 1.58% at 21,650.41.

Canadian retail sales edged up 0.1%

Statistics Canada says retail sales rose 0.1 per cent to $59.9-billion in February as gains in sales at clothing and clothing accessories stores and gasoline stations were offset by lower sales at motor vehicle and parts dealers.

The agency says core retail sales – which exclude sales at gasoline stations and motor vehicle and parts dealers – rose 1.4 per cent.

Sales at clothing and clothing accessories stores gained 15.1 per cent for the month, while building material and garden equipment and supplies dealers rose 5.6 per cent. Sales at gasoline stations added 6.2 per cent.

Meanwhile, sales at motor vehicle and parts dealers fell 5.1 per cent, the largest drop for the group since a 6.2 per cent drop in December 2020.

In volume terms, retail sales were down 0.4 per cent in February.

Looking ahead, Statistics Canada says its initial estimate for retail sales in March suggests a gain of 1.4 per cent for the month, but cautioned the figure will be revised.

Stock futures advance as investors digest earnings, await speech from Fed’s Powell

Stock futures rose in morning trading Thursday as investors digested more quarterly reports from the likes of Tesla and United Airlines and awaited a policy speech from Federal Reserve Chairman Jerome Powell.

Futures on the Dow Jones Industrial Average added 184 points, or 0.52%. S&P 500 futures ticked up 0.69% and Nasdaq 100 futures gained 0.95%.

First-quarter reports drove premarket moves. Tesla rose nearly 7% after better-than-expected earnings, while United added 7.5% after the airline forecasted a profit in 2022.

Investors were looking to a speech from Powell, who will talk at 1 p.m. ET during the International Monetary Fund Debate on the Global Economy. The discussion will be moderated by CNBC’s Sara Eisen.

Despite market expectations for a series of aggressive interest rate increases, Fed officials in recent days have talked down making any dramatic moves.

Regional presidents Mary Daly of San Francisco, Charles Evans of Chicago and Raphael Bostic of Atlanta all have said that while they see the need to hike rates to tame inflation, they don’t want to do anything that would halt the expansion. Daly did concede that tighter policy could trigger a mild recession but she said that’s not her most likely case.

St. Louis Fed President James Bullard has been the outlier, saying earlier in the week that he’s open to a 0.75 percentage point increase at the May meeting to help temper inflation running at a more than 40-year high.

Stocks are coming off a mixed session Wednesday. The Dow rose 280 points, or 0.8%, boosted by strong earnings from Procter & Gamble, while the technology-heavy Nasdaq Composite was dragged down 1% by Netflix’s post-report plunge. The S&P 500 finished flat.

Netflix shares on Wednesday posted the biggest one-day decline since 2004 after the streamer reported its first subscriber loss in more than a decade. Other streaming companies like Disney and Roku also fell, and other tech stocks were lower.

“It continues to be a pretty bifurcated market,” said Dave Grecsek, managing director in investment strategy and research at wealth management firm Aspiriant. “Some of the more defensive, value-style companies are enjoying good returns. The flipside is some of those more growth-style tech names are going to be struggling.”

Investors are awaiting quarterly reports from companies like AT&T, American Airlines and Snap on Thursday.

Weekly jobless claims are also slated for release Thursday morning.

Inflation rate shatters expectations, hits 31-year high

Canada’s inflation rate hit a new three-decade high in March and blew past expectations on Bay Street, an unwelcome development for central bankers trying to slow the acceleration.

The Consumer Price Index rose 6.7 per cent in March from a year earlier, a percentage point higher than February’s rate, 5.7 per cent, Statistics Canada said on Wednesday. Financial analysts were expecting an inflation rate of 6.1 per cent. It was the highest rate since January, 1991, when the federal goods and services tax took effect.

Steeper inflation is getting tougher for Canadians to avoid. Around two-thirds of CPI items are experiencing annual price gains of more than 3 per cent, such as gasoline (39.8 per cent), shelter (6.8 per cent) and household appliances (9.4 per cent).

Several factors are driving the inflation run-up, including persistent supply chain disruptions and the Russia-Ukraine war, which has pushed up commodity prices. Moreover, as public-health restrictions ease, people are unleashing their pandemic savings in service industries such as travel, and the increase in demand is contributing to the price surge.

Inflation has now exceeded the Bank of Canada’s target range of 1 per cent to 3 per cent for a full year, and that streak should last a while longer: The central bank expects inflation to average more than 5 per cent in 2022.

The Bank of Canada has been moving aggressively to rein in runaway price growth. The bank raised its benchmark interest rate by half a percentage point last week to 1 per cent – the largest increase at a single decision since 2000. It usually raises rates by a quarter-point.

After the outsized inflation reading, several analysts said the Bank of Canada would raise rates by another half-point at its next decision on June 1.

“The longer we’re stuck in this high-inflation regime, the more people start to think that it’s here forever,” said Jimmy Jean, chief economist at Desjardins Securities. “That’s why [the Bank of Canada] needs to act as swiftly as possible to preserve their credibility.”

Gas prices had a big impact on Wednesday’s report, jumping 11.8 per cent in a single month. The cost of groceries rose 8.7 per cent, the largest annual increase since 2009. Pasta products climbed nearly 18 per cent, butter by 16 per cent and fresh milk by 7.7 per cent.

The average of the Bank of Canada’s core measures of annual inflation – which strip out volatile price swings, such as with gas – rose to 3.8 per cent from 3.5 per cent in February.

Inflation is also picking up in pandemic-hit sectors. The cost of restaurant meals rose 5.4 per cent over the past year, up from 4.7 per cent in February. Traveller accommodation prices soared 24.4 per cent on an annual basis, while air transportation jumped 8.3 per cent in March alone.

“Strong demand for domestic travel and trips to the United States during the March break contributed to higher prices this month,” Statscan said.

Several economists said on Wednesday that Canada’s annual inflation rate may have peaked in March, or will soon. For one, gas prices have eased somewhat in April thus far. And the inflation rate could benefit from base effects – that is, comparisons to the accelerating CPI of a year earlier, which could dampen the annual percentage change.

“Hitting a peak is just one milestone, but you’re looking at inflation at 6.7 per cent, and you have to bring it down to 2 per cent,” said Mr. Jean, referring to the Bank of Canada’s target. “That’s going to take a long, long time.”

Some financial analysts have said that central bankers, in Canada and elsewhere, were slow to recognize and react to the inflationary threat. During the pandemic recovery, the Bank of Canada has continually raised its inflation forecast. It recently projected that CPI growth would average 5.3 per cent this year, up from a forecast of 4.2 per cent in January and 3.4 per cent in October.

The central bank does not see inflation returning to 2 per cent until 2024.

A key concern among economists is that Canadian consumers and businesses – who negotiate wages and set prices, respectively – expect inflation to remain high for the next two years, according to Bank of Canada surveys, which could keep CPI on an elevated path for some time.

The stakes are high for the central bank, which is looking to keep inflation expectations in check and guard its reputation as steward of low and stable inflation.

“We have a full-on inflation issue, and the central banks need to play catch-up, with haste,” Bank of Montreal chief economist Doug Porter wrote to clients.

To that end, Bank of Canada Governor Tiff Macklem has said more hikes in interest rates are on the way, setting up the quickest cycle of monetary policy tightening in decades. Already, borrowing rates for mortgages and other loans are rising quickly, a source of potential stress for households carrying debt.

“By making borrowing more expensive and increasing the return on saving, a higher policy interest rate dampens spending, reducing overall demand in the economy,” Mr. Macklem said last week in prepared remarks alongside the rate decision. “And with demand starting to run ahead of the economy’s supply capacity, we need that to happen to bring the economy into balance and cool domestic inflation.”

Stock futures gain on earnings optimism, jobless claims on tap

https://www.foxbusiness.com/markets/stock-futures-4-21-2022

West Fraser Cutting Pulp Production At Alberta Mill, Changing Type Of Pulp Output

The Canadian Press – Canadian Press – Tue Apr 5, 5:43PM CDT

VANCOUVER — West Fraser Timber Co. Ltd. says it will cut production capacity and jobs at an Alberta pulp mill and change the type of pulp output.

The Vancouver-based forest products company says it will permanently reduce capacity at its pulp mill in Hinton, Alta., by the end of the year.

One of Hinton Pulp’s two production lines will shut, and the remaining line will produce unbleached kraft pulp — used to make cardboard packaging, grocery bags, fibre-cement board and specialty products — rather than northern bleached softwood kraft pulp.

CEO Ray Ferris says changes to the mill, which has been in operation since 1956, are needed to simplify operations, reduce capital requirements and greenhouse gas emissions and better align with consumer expectations.

Staff levels will move to 270 from 345 with West Fraser expecting to mitigate the impact through attrition, retirements and employment opportunities at its other operations.

West Fraser says it will record a US$13-million impairment charge in the first quarter as a result of the writedown of decommissioned equipment.

The company says cutting one production line will result in an estimated 35 per cent reduction in greenhouse gas emissions, which is equivalent to taking about 19,900 cars off the road per year.

This report by The Canadian Press was first published April 5, 2022.

Companies in this story: (TSX:WFG)

https://apnews.com/article/technology-science-business-michigan-lake-f977350c21788d2dcd62f7cef5b7c280

LUDINGTON, Mich. (AP) — Sprawled like a gigantic swimming pool atop a bluff overlooking Lake Michigan is an asphalt-and-clay pond holding enough water to produce electricity for 1.6 million households.

It’s part of the Ludington Pumped Storage Plant, which uses simple technology: Water is piped from a lower reservoir — the lake, in this case — to an upper one, then released downhill through supersized turbines.

Supporters call these systems “the world’s largest batteries” because they hold vast amounts of potential energy for use when needed for the power grid.

The hydropower industry considers pumped storage the best answer to a question hovering over the transition from fossil fuels to renewable energy to address climate change: where to get power when the sun isn’t shining or the wind isn’t blowing.

“I wish we could build 10 more of these. I love ’em,” Eric Gustad, community affairs manager for Consumers Energy, said during a tour of the Ludington facility.

But the utility based in Jackson, Michigan, has no such plans. Environmental and logistical challenges and potential costs in the billions led Consumers to sell another would-be site near the lake years ago. It’s now upgrading the existing plant with co-owner DTE Energy.SCIENCEEnergy shift creates opening for ‘world’s largest batteries’Hollywood missing the drama in climate change, group saysNASA moon rocket faces more flight delays as repairs mountBirth of endangered Hawaiian monk seal caught on camera

Constructing a new one “doesn’t make financial sense,” Gustad said. “Unless we get some help from the state or federal government, I don’t see it happening any time soon.”

STUCK IN NEUTRAL

The company’s decision illustrates the challenges facing pumped storage in the U.S., where these systems account for about 93% of utility-scale energy in reserve. While analysts foresee soaring demand for power storage, the industry’s growth has lagged.

The nation has 43 pumped storage facilities with a combined capacity of 22 gigawatts, the output of that many nuclear plants. Yet just one small operation has been added since 1995 — and it’s unknown how many of more than 90 planned can overcome economic, regulatory and logistical barriers that force long delays.

Three projects have obtained licenses from the Federal Energy Regulatory Commission, but none are being built. Developers of a long-planned Oregon facility expect work to begin in 2023. A Montana company that got a license five years ago needs a utility to operate the plant and buy its storage capacity before construction starts.

By contrast, more than 60 are being built worldwide, mostly in Europe, India, China and Japan.

“The permitting process is crazy,” Malcolm Woolf, president of the National Hydropower Association, complained during a January hearing of the Senate Energy and Natural Resources Committee, saying it involves too many agencies.

Although FERC permits new facilities and relicenses existing ones, other federal, state and tribal offices have roles, spokesperson Celeste Miller said. “Every project is unique. All have various case-specific issues,” she said.

The industry is lobbying for an investment tax credit similar to what solar and wind get. President Joe Biden’s Build Back Better plan includes the tax break but is stuck in Congress.

Pumped storage dates from the early 1930s. But most systems were built decades later to warehouse excess electricity from nuclear plants and release it when needed.

The storage facilities also serve as a safety net in sudden power interruptions. When a New England nuclear unit tripped offline in 2020, Woolf said, “the lights in Boston didn’t flicker” because two pumped storage stations provided backup power.

While nuclear, coal and natural gas plants can operate continuously, wind and solar can’t — so the market for reserve power likely will grow. National Renewable Energy Laboratory models show U.S. storage capacity may rise fivefold by 2050.

“We’re going to bring hundreds of gigawatts of clean energy onto the grid over the next few years and we need to be able to use that energy wherever and whenever it’s needed,” Energy Secretary Jennifer Granholm said last year.

LOCATION, LOCATION, LOCATION

Using computer mapping, Australian National University engineers identified more than 600,000 “potentially feasible” pumped storage sites worldwide — including 32,000 in the U.S. — that could store 100 times the energy needed to support a global renewable electricity network.

But the study didn’t examine whether sites would meet environmental or cultural protection standards or be commercially viable. Its website acknowledged, “Many or even most … may prove to be unsuitable.”

Environmentalists are cool toward pumped storage because reservoirs typically are formed by hydropower dams, which block fish pathways, damage water quality and emit methane, a potent greenhouse gas. Also, most plants continuously draw water from rivers.

But recent designs envision “closed-loop” systems that tap a surface or underground supply, then repeatedly cycle that water between reservoirs. Water would be added only to make up for evaporation or leaks.

The Hydropower Reform Coalition, representing conservation groups, says it might support such projects under “very limited circumstances.”

Yet some are drawing resistance, including the Goldendale Energy Storage Project in Washington state. It would pipe water between two 60-acre (24.3-hectare) reservoirs on opposite sides of a hill.

The facility could power nearly 500,000 homes for up to 12 hours, according to Rye Development, spearheading the project. It’s seeking FERC licensing and is scheduled to go online in 2028 but still needs a state water quality permit.

Environmental groups fear harm to wetlands and wildlife habitat, while tribes say the project would encroach on a sacred site.

“What are we willing to sacrifice to get this technology online?” said Bridget Moran, an associate director of American Rivers.

Developers say the project would include cleanup of the polluted lower reservoir area.

The U.S. Department of Energy has launched a web-based tool to help developers find the best locations.

A recent Michigan Technological University study identified hundreds of abandoned U.S. mines that could host pumped storage, with upper reservoirs at or near the surface and lower ones below ground.

They are close enough to transmission and distribution infrastructure and to solar and wind generating facilities, the report says.

“All these holes in the ground are ready to go,” said study co-leader Roman Sidortsov, an energy policy associate professor.

But while some decommissioned mines might be better for the environment, a project in New York’s Essex County stalled over water pollution concerns.

COMPETITIVE FUTURE

As the market for stored energy grows, new technologies are emerging.

Texas-based Quidnet Energy has developed a pumped storage offshoot that forces water underground, holds it amid rock layers and releases it to power turbines. The company announced a project in March with San Antonio’s municipal utility.

Energy Vault, a Swiss startup, devised a crane powered by renewable energy to lift and stack 35-ton bricks. When energy is needed, the bricks are lowered by cables that spin a generator.

For now, batteries are the leading competitor to pumped storage plants, which can generate power for eight to 16 hours. Lithium-ion batteries typically last up to four hours but longer-duration ones are in the works.

“Are we going to get to the point where an eight-hour battery is cheaper than a pumped storage plant? That’s the billion-dollar question,” said Paul Denholm, an analyst with the National Renewable Energy Laboratory.

A 2016 Energy Department report said the U.S. network has a potential for 36 gigawatts of new pumped storage capacity.

“We don’t think pumped storage is the be-all, end-all but it’s a vital part of our storage future,” said Cameron Schilling, vice president of markets for the hydropower association. “You can’t decarbonize the system without it.”https://interactives.ap.org/worlds-largest-batteries

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April 20, 2022 AM

EQUITIES Wall Street futures steadied early Wednesday with Netflix shares under pressure after the streaming giant’s lasts subscriber numbers disappointed. Major European markets firmed as the session progressed. TSX futures were modestly lower despite a gains in crude prices.

Futures linked to the big U.S. indexes were all in the red in the early premarket period but recouped some losses as the North American open neared. A day earlier, all three finished up with the Nasdaq adding more than 2 per cent. The S&P/TSX Composite Index added 0.6 per cent with consumer discretionary sector, tech and industrial stocks among the day’s winners.

On Wednesday, Netflix stock will be in focus after weak subscriber numbers sent the shares into a tailspin after the close of trading. In the early premarket period, Netflix shares were down more than 25 per cent.

In the latest quarter, the company posted its first loss in worldwide subscribes in its history. The company’s customer base fell by 200,000 subscribers during the January-March period. Analysts were looking for a gain of 2.5 million subscribers.

“The biggest challenge going forward will not just be a more intensive landscape competition wise, but also the rising cost of living, as well as starting to hit critical mass in some of its key markets,” CMC Markets chief market analyst Michael Hewson said.

“This in turn will prompt a sharp reassessment of future subscriber growth estimates, across the sector, with Disney, Apple TV+ and Amazon Prime expected to come under similar scrutiny in the days ahead, although at least on their part at least they have other revenue streams to fall back on.”

Investors were also keeping a close eye on bond yields, with the yield on the U.S. 10-year note holding just below 3 per cent on Tuesday. Canadian bond yields tracked U.S. yields higher, with the five-year bond yield – which has a significant influence on fixed mortgage rates – hitting a fresh 11-year high of more than 2.7 per cent. By early Wednesday morning, the yield on the U.S. 10-year note was down at 2.872 per cent.

In this country, investors got results from Rogers Communications before the start of trading. The telecom company reported a 4-per-cent increase in fourth quarter revenue to $3.62-billion in the quarter ended March 31, compared with analysts’ average estimates of $3.63-billion, according to IBES data from Refinitiv.

Meanwhile, the Globe’s Alexandra Posadzki and Andrew Willis report that Rogers Communications Inc. has presented the federal government with a deal that would see rural internet provider Xplornet Communications Inc. acquire wireless carrier Freedom Mobile in an attempt to win approval for Rogers’s $26-billion takeover of Shaw Communications Inc., according to sources.

Canadian investors will also get a fresh reading on inflation Wednesday morning with the release of March consumer price index figures from Statistics Canada. Economists are expecting to see consumer prices spike above 6 per cent for the year, marking a three-decade high. The annual rate of inflation hit 5.7 per cent in February.

“Soaring gasoline prices are expected to account for almost a quarter of the increase — and half of the price rise from February as energy surged higher on the Russian invasion of Ukraine,” RBC chief currency strategist Adam Cole said.

On Wall Street, earnings continue to roll in with results due from Tesla Inc. after the close of trading.

Overseas, the pan-European STOXX 600 rose 0.51 per cent in morning trading. Britain’s FTSE 100 gained 0.28 per cent. Germany’s DAX and France’s CAC 40 advanced 0.51 per cent and 0.90 per cent, respectively.

In Asia, Japan’s Nikkei rose 0.86 per cent. Hong Kong’s Hang Seng fell 0.40 per cent.

Commodities

Crude prices recouped some of the previous session’s sharp losses in early going helped by continued supply concerns amid the Russia-Ukraine war and fresh U.S. figures showing a decline in weekly U.S. inventories.

The day range on Brent is US$106.96 to US$108.81. The range on West Texas Intermediate is US$102.53 to US$104.

Both bench marks fell more than 5 per cent on Tuesday after the International Monetary Fund cut its global growth outlook for the year.

“There remain plenty of upside risks to the oil price, even at these levels, which makes [Tuesday’s] large declines all the more interesting,” OANDA senior analyst Craig Erlam said.

“Protests in Libya have knocked out around half a million barrels per day of output which contributed to Monday’s rally. While this is only a temporary hit, it comes at a bad time as far as global supply is concerned.”

Prices drew some support early Wednesday from new data from the American Petroleum Institute showing that U.S. crude stocks fell by 4.5 million barrels last week. Analysts had been expecting to see an increase in inventories.

More official numbers are due later in the morning from the U.S. Energy Information Administration.

In other commodities, gold prices fell to a two-week low, hit by a strong U.S. dollar and rising Treasury yields.

Spot gold was down 0.4 per cent at US$1,941.40 per ounce by early Wednesday morning, after hitting its lowest since April 8. U.S. gold futures fell 0.7 per cent to US$1,944.80.

Currencies

The Canadian dollar was higher in early trading while its U.S. counterpart held near its best level in two years against a basket of global currencies.

The day range on the loonie is 79.21 US cents to 79.66 US cents.

Canadian investors get new inflation figures before the start of trading, which are expected to show the annual rate of inflation topped 6 per cent in March.

“Headline inflation is set to rise from 5.7 per cent to 6.1 per cent, with the core measures also set to increase due to second round effects,” Jay Zhao-Murray, FX market analyst with Monex Canada, said.

“A slight miss in the inflation data will spell trouble for CAD bulls, however, as markets will begin to price out expectations of a successive 50bp hike by the Bank of Canada in June.”

On world markets, the U.S. dollar index, which measures the currency against six major peers including the yen, early in the day matched Tuesday’s high at 101.03 – a level not seen since March 2020 – before easing to 100.76, down 0.3 per cent in the day, according to Reuters.

Japan’s yen, meanwhile, hit a two-decade low against the greenback. The U.S. dollar reached 129.43 yen for the first time since April 2002 in Asian trading before easing to last trade 0.21 per cent lower at 128.615, the news agency reported.

More company news

Lululemon Inc. says it aims to double its revenue to US$6.25-billion by 2026 under a new five-year growth plan. The Vancouver-based yoga-wear maker said it expects significant growth across key pillars including product innovation, guest experience, and market expansion.

Economic news

(8:30 a.m. ET) Canadian CPI for March.

(8:30 a.m. ET) Canada’s new housing price index for March.

(10 a.m. ET) U.S. existing home sales for March.

(2 p.m. ET) U.S. Beige Book released.

Also: G20 finance ministers and central bank governors meet in Washington.