Here are five things you need to know this morning:
U.S. inflation declines on monthly basis for first time since 2020: Forget P/E ratios, GDP, government deficits and even exit poll data; we got the latest look at the most important number for markets and the global economy this morning in the form of the U.S. Consumer Price Index. The headline U.S. inflation rate cooled to three per cent in May from 3.3 per cent previously. That’s below the 3.1 per cent that economists were expecting. The rate declined on a monthly basis by 0.1 per cent. That’s the first time that’s happened since the onset of the pandemic in February 2020. Even better news, the so-called core rate that strips out volatile items and is thus given more credence by central bank policy makers also eased, to 3.3 per cent from 3.4 previously. That’s the lowest core inflation rate in three years, which is good news for anyone hoping for a rate cut from the U.S. Federal Reserve any time soon. Richard Flynn, managing director at Charles Schwab, said the inflation report is “the cherry on top of the cake for both the Fed and investors who are eager to see rates slashed at long last.”
Hard landing for Delta shares: Delta shares are selling off sharply this morning after the airline updated its outlook premarket, and the numbers disappointed investors. Adjusted earnings at the Atlanta-based carrier will come in between US$1.70 and $2 a share in the third quarter. That’s below the $2.04 that analysts were forecasting. Revenue is expected to rise by as much as four per cent, but that too is below the 5.3 per cent that analysts were hoping to see. The airline also says it expects its costs to rise next quarter by $500 million due to a pay raise for most employees as of June 1, in addition to an extra $350 million on maintenance. Delta said strong competition from discount carriers is eating into its profits. “Excess supply has led to heavy discounting,” Delta CEO Ed Bastian told Bloomberg. That’s great news if you’re looking for a deal on a last minute vacation, but not so much if you’re a Delta investor, which is why the stock is doing what it is.
Sales at food court operator MTY decline but beat forecasts: Earnings at TSX-listed food court operator MTY Group were also released premarket this morning, and the performance at the owner of chains like Manchu Wok, Mr. Sub and Mucho Burrito was a mix of good and bad. First, the bad: there was a broad decline in sales across virtually all of the company’s chains, as consumers cut back on spending due to persistent inflationary pressures. The good: the decline was not as bad as analysts were forecasting. Total revenue came in at just over $303 million, ahead of the $294 million forecast, and earnings per share came in at $1.13. That’s well ahead of the $1.01 expected.
Strathcona plans $2B spend on carbon capture: TSX-listed energy firm Strathcona Resources is planning to spend as much as $2 billion on projects to capture carbon dioxide emissions from its oilsands operations. Strathcona will own and operate the facilities, but it will split the upfront capital costs with a Canadian government fund known as the Canada Growth Fund, and repay the government’s share of the cost over time with cash flows from the carbon credits generated. The driller says the facilities could capture as much as 2 million metric tons of carbon dioxide every year. CEO Adam Waterous said a successful carbon capture operation could take his company’s oilsands production from being about twice as carbon-intensive as other typical oil operations around the world to only one-fifth as carbon intensive.
RBC shakes up leadership team, splits P&C unit into 2: The most valuable public company in Canada is shuffling its leadership ranks, splitting its biggest division into two distinct units. RBC is moving Neil McLaughlin, head of the personal and commercial division, into a new role as head of wealth management. His old portfolio will be split in two with Erica Neilsen taking over the personal side, and Sean Amato-Gauci leading the commercial. It’s the biggest change to RBC’s leadership ranks in the nearly decade-long tenure of CEO Dave McKay.
