Inflation, Ukraine affect Business Alabama’s yearly stock index

Ripples of pandemic also had effect

Inflation and the war between Russia and Ukraine were the major battering rams in the economy this year, though ripples of the pandemic — supply chain snarls, production and manufacturing hassles — are still being felt throughout the U.S. and the world. Unemployment virtually vanished as the post-pandemic economy struggled to fit into an older structure. 

In our year-over-year recap from May 2021 through May 2022, both indexes stumbled into the red. Local stocks fell 235.44 points, or 9.08%, and closed at 2,356.92. Declining issues easily outpaced advancing issues by an 11-to-5 count. The Comprehensive Index dropped 232.81 points, or 10.38%, and ended at 2,010.62. Declining issues dominated advancing issues by a 41-to-15 count.

April 2021 was the best month of 2021, but market choppiness began in earnest in May 2021, pressured by fears of inflation and supply chain slowdowns. That was the beginning point of this year’s annual recap, and turbulence continued throughout the rest of 2021; the rest of this year shows us heading into a bear market. 

Though we don’t have monthly
Business Alabama indexes, U.S. indices show similar monthly arcs: Wall Street see-sawing through December 2021 and then tumbling as inflation made inroads and as the Russia-Ukraine conflict moved from drums rumbling to invasion. April and May of this year were the lowest points for the national indices, with the Nasdaq Composite taking a deeper hit in May.

The labor market shifted this year as people returned to work, but also quit jobs in record numbers. For an indication, as February 2022 began, the Labor Department’s monthly jobs report indicated that employers added 467,000 jobs in January, three times what economists had forecast; 678,000 jobs were added in February. The Labor Department said that employers searching for workers posted 10.9 million requests in December, up 1.4% from November; 11.3 million jobs were posted in January.

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In April, the Labor Department said that employers added 428,000 jobs, with strong hiring across a broad industrial spectrum. The Bureau of Labor Statistics reported that employers posted 11.5 million job openings in March, a record, and that there are now two job openings for everyone unemployed. A record 4.5 million people quit their jobs in March 2022. The Labor Department said in the second week in May, the total number of people receiving unemployment benefits fell by 44,000 to 1,343,000. That is the smallest figure reported since January 3, 1970. 

Demand for goods remains high even though production issues teamed up with supply chain problems to bog down the system, thus pushing prices even higher. The Labor Department reported that wholesale prices — the Producer Price Index — jumped 11% in April from the year before. It was up 0.5% month over month. Even so, the Consumer Price Index slipped a bit in April, to 8.3% compared to an 8.5% jump the month before. 

Although consumer confidence numbers were tempered by the strong labor market, inflation still made a dent in Americans’ pocketbooks and confidence. The Conference Board’s June 2021 index was 128.9; it tumbled to 109.8 in September, then rose to another high in December of 115.2, then fell again to 105.7 in February 2022, before leveling out at 107.3 in April and dipping to 106.4 in May 2022.

Despite the well-publicized and continuing supply chain tie-ups throughout the year, manufacturing and industrial production, two measurements from the Institute for Supply Management (ISM) and the Federal Reserve, respectively, showed modest changes, and demand was high as people emerged from their pandemic enclaves, with pent-up demand and strong savings fueling enthusiasm — and inflation. The ISM manufacturing index began our yearly session at 61.2 and closed for May 2022 at 56.1, though a reading of only 54.5 was expected. Even though the numbers are lower for May 2022, any figure above 50 indicates expansion, and this year’s May reading posted the 24th month of growth in the ISM index. Industrial production, provided by the Federal Reserve, includes figures from mining, utilities and manufacturing. The rough numbers showed distinct improvements from a pandemic low of 84 in April 2020. In May 2021, that figure was 100, and moved slowly ahead through March’s 104 and the April 2022 reading of 106.

The Federal Reserve increased short-term interest rates from 0% in March 2022 by a quarter point, the first increase since December 2018. In an effort to slow inflation, the Fed increased the rate in May by a half point, with expectations of more increases through the rest of 2022. 

The housing industry, pressured on one side by skyrocketing prices and the other by increasing interest rates, was severely hobbled; add to that, high demand and a dearth of housing stock to meet that need. Although there are many figures to reflect these stresses, they are summed up by the National Association of Homebuilder’s/Wells Fargo builder sentiment index. May 2021 began with a reading of 83, dipped to a low of 75 in August, then rose back to 83 in January 2022. Sentiment slipped to 81 in February, 77 by March, tumbling to a low of 69 in May 2022. 

“We’re not convinced that we’re completely out of the woods here,” said Philip Orlando, chief equity market strategist at Federated Hermes. “The Fed’s got to be really aggressive here and job number one is to stuff the inflation genie back in the bottle, and I don’t believe the market has fully priced that in.” 

What changes a year can bring. As always, Alabama companies are in the spotlight in our annual recap, and Hibbett Sports, which was our number one gainer last year, is now our top dollar loser. The headwinds are bleak for Hibbett, though it powered through the year ended Jan. 2022 solidly in the black with stronger revenue and earnings than the year before. HIBB posted net income of $174.3 million, or $11.63 per basic share. This compares to net income of $74.3 million, or $4.36 last year. Sales were $1.69 billion, versus $1.42 billion a year ago. For fiscal 2023, Hibbett said it expects flat sales and mentioned supply chain problems, no more stimulus payments and unemployment benefits, a more cautious consumer and inflation. Hibbett tumbled 34.01 points, or 40.13%, and closed at 50.75. 

The top-gaining spot this year, both in dollars and percentage, is Warrior Met Coal, after swinging from a loss to a profit this year. For its 2021 annual report, HCC posted net income of $150.9 million, or $2.93 per share, compared to a loss of $35.8 million, or $0.70 per share, the previous year. Revenue was $1.06 billion, versus $782.7 million in 2020. Warrior CEO Walt Scheller cited demand and favorable pricing and noted the “current strong market for high quality premium met coal, which has been strengthened by robust economic growth.” HCC jumped 15.32 points, or 83.72%, and ended at 33.62.

Cullman Bancorp fell 22.15 points, or 66.62%. For 2021, CULL posted net interest income of $1.75 million, or $0.25 per share, versus net interest income of $3.5 million, or $0.52 per share, in 2020. Interest income was $11.6 million this year, compared to last year’s $11.3 million. Cullman closed at 11.10 and was the top percentage loser this year.

Margot Crabtree covers stocks for Business Alabama, under contract with her company, Trade Trends.

This story originally appeared in the August 2022 issue of Business Alabama magazine.

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