1 big thing: Economic fallout

2. Companies scramble to adapt health benefits

Illustration of a briefcase with the lock in the shape of the female symbol

3. Catch up quick

4. Charted: Dr. Copper takes a turn

5. What bear market? 

Illustration of a bear knocking over bars of a graph like dominos.

Emily starts us out with a report on the potential economic fallout from the U.S. Supreme Court's decision to overturn Roe v. Wade.

And I — it's Matt, by the way — bring up the rear with a few updates from my beloved financial markets. It was a big week for stocks, though you may have missed it with all the other headlines. 

Today's newsletter, edited by Kate Marino, is 1,234 words, 5 minutes.

🎧 1 thing Matt loves: Memorizing musical intervals. I'm about as amateur a musician as there is. But I've finally gotten around to learning a bit of theory. And I can't tell you how satisfying it is to know that the dreadful two-note leitmotif from "Jaws" is the minor second. Or the first two notes of "Here Comes the Bride" is the perfect fourth. The start of the main sequence of the "Star Wars" theme? It's the perfect fifth. Anyway, if you're interested in ear training at all, I highly recommend "Echo Drills" an incredibly useful podcast.  

National

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Stay on top of the latest market trends and economic insights

Axios Markets

1 big thing: Stalemate, for now 

Illustrations of two oil barrels facing off on a chessboard 

2. Blowback 

Bonus chart: Ruble ricochet 

4. How Russia skirts sanctions on energy

5. A tale of 3 bond defaults

Illustration of a ruble symbol over a dollar

🚨 Since Russia invaded Ukraine in February, financial markets have emerged as a major theater of the war. 

So today we're taking a time out from our usual day-to-day report to offer the latest on "the economic war," which could be just as crucial to the future of Ukraine — and the world — as the tank and infantry battles now underway.

This newsletter, edited by Kate Marino, is 1,210 words, 5 minutes. 

🍸 1 thing Felix loves: an elegant corporate rebrand. Take the March 4 press release in which Stolichnaya (now Stoli), the world-famous Russian vodka, declared that it had been Latvian for decades.

1 big thing: White House targets gas prices

Illustration of a gas pump with the hose forming a descending stock trend line. 

2. Charted: Massive margins for oil refiners

4. Power shift 

5. 💬 Quoted: Powell just says "no"

Elizabeth Warren exchange with Jerome Powell over gas and food prices

⛽️ Good morning, everyone. Hope you're properly caffeinated because today we're all about power — from the $$$ gas that fuels our cars to the leverage we have with the boss. 

Oh, and Matt goes deep on what he's dubbed, "one of the most unsightly financial terms of our time:" crack spreads. 

Today's newsletter, edited by Kate Marino, is 1,141 words, 4.5 minutes.

📖 1 book Emily loves: "The Outsiders," S.E. Hinton's 1967 novel about the class struggles of a group of boys growing up in Tulsa, Oklahoma — the poor greasers battle with the snotty and rich "Socs." 

It's where I learned the Robert Frost quote I used above. I must've reread her book — incredibly Hinton wrote it when she was still in high school — approximately one-bajillion times growing up. I haven't picked it up since, but it still holds a place in my heart. 

Readers, did you have a favorite book growing up? Have you read it as an adult? Reply to this email and let me know.

1 big thing: Now we have too much stuff

2. Catch up quick

3. Big landlords in the hot seat (sort of)

Illustration of houses made out of dollar bills

4. For small biz owners, things are "weird"

5. 💬 Quoted: "turn the tables"

Bonus chart: Can someone check on Elon?

Hiya. Remember when everybody wanted stuff? It was COVID. We were bored. So we bought all the things ... bigger TVs, trampolines for the kids, patio furniture. Quite literally couldn't get enough of it! Well, things seem to have changed. Read on.

Today's newsletter, edited by Kate Marino, is 1,187 words, 4.5 minutes.

1 big thing: Revlon's meme bankruptcy

Animated illustration of a tube of lipstick rolling up to reveal a hundred dollar bill. 

2. Charted: Birth of a meme

4. Farewell to the pre-COVID supply chain

Illustration of shipping containers sacked like Jenga blocks with a hand removing one

5. 💬 Quoted: "It's going to drive prices up" 

Friday. We made it. Matt here ... Kate Marino's starting us off with a glimpse of the restructuring drama surrounding Revlon and the bizarre fact that its shares have become the new hot plaything for the meme stock crowd.  

Today's newsletter is 819 words, 3.5 minutes. 

📖 1 thing Matt loves: “An Engine, not a Camera,” which might be the single best book on finance I’ve ever come across.

In it, sociologist Donald MacKenzie lays out something I’ve always suspected — that abstruse finance theories don’t so much tell you how the markets work, but determine the way markets work. 

The heart of the book explores how the Black-Scholes model, developed by academics in the late 1960s to price options, was actually a pretty poor predictor of prices at first but grew more accurate as traders came to rely on it. 

In other words, the theory became part of the conventional wisdom on Wall Street. The more people relied on it because they thought it worked, the more it worked. Until it suddenly didn’t. (See the stock market crash of 1987.) 

The sense of shock-and-awe surrounding heavy sanctions on Russia early in the war has been overtaken by the reality that the economic battle — like the military assault — will be a slog. 

The big picture: "Right now neither side is winning the economic war, if the goal of the economic war in the short-and-medium term is to induce political concessions from your adversary," Chris Miller, a professor at Tufts University's Fletcher School of Law and Diplomacy, tells Axios. "Neither side is getting ready to offer concessions. So in that sense, it's a stalemate." 

Driving the news: Group of Seven leaders this weekend prepared a plan to cap the price of Russian oil, another effort to weaken the keystone of Russia's financial durability: oil money.

Why it matters: The G7's continued escalation is a tacit admission that efforts to isolate Russia economically have been insufficient to cut the flow of cash helping to finance President Vladimir Putin's war.

Despite some efforts to curtail purchases of Russian energy exports, soaring oil and gas prices — themselves, a reaction to the invasion — have poured funds into Russian state coffers.

Russia's current account surplus — the broadest measure of a country's international trade — tripled to more than $110 billion so far this year, putting it on track for record. 

The income boom has propped up the country's currency and stabilized inflation. That, in turn, allowed the central bank to scale back the emergency interest rate hikes it implemented at the beginning of the war.  

That's doesn't mean the Russian economy is strong. Economists expect it to shrink by a massive 10% this year, largely driven by a collapse in consumer spending.  

In other words, continued oil sales are helping Russia pay for the war. But the Russian people's standard of living is falling fast.

But, but, but: Russians aren't the only ones feeling the impact of the economic war. Ukraine's main backers in Europe and the U.S. now face soaring energy and food prices — linked to fallout from the war and more specifically, the West's sanctions. That's soured the public mood and eroded support for leaders. 

In Britain, Prime Minister Boris Johnson — a hawk on Russia — is in a perilous political position after being weakened by multiple scandals and a cost-of-living crisis. 

The government of Germany's new Chancellor Olaf Scholz has begun preparing the German population for rationing of natural gas — Russia is its top supplier — amid the risk supplies run out this winter. Its approval ratings are plunging. 

In the U.S., President Joe Biden is contending with record low consumer sentiment — the mirror image of record-high gasoline prices and a stock market meltdown — which could spell disaster for the Democrats in the coming mid-term elections. Biden's approval rating is at a record low. 

The big question: Can the big democracies of the world — already riven with internal divisions — create a unified front to push back on Putin regardless of which party holds power?

It seems fair to consider it an open question. If only because the U.S. intelligence community found that Russia intervened in the 2016 U.S. election in order to help former President Donald Trump win, and he remains the presumed front-runner for the 2024 GOP nomination.  

The leader of France's far right party, Marine Le Pen, has not only praised Putin, but received financing from Russian-linked banks. Italy's right — which just performed well in local elections — has also taken heat for an odd coziness with Moscow. 

But even if there was no Russian influence at play, a politician might simply decide that anything to cut the cost of oil, even coming to an accord with Russia at the expense of Ukraine, would make political sense.

The bottom line: Analysts, like Gerard DiPippo at the Center for Strategic & International Studies, say that if the allies can maintain their support for Ukraine in the face of inflation, they clearly have the upper hand. 

"In the long run, Russia's position is dire," DiPippo tells Axios. In the short-to-medium term, he adds, Putin "might have the ability to fracture the alliance, particularly if prices go higher. But in general, Russia is in a slow bleed mode."

The West’s economic war with Russia is at a stalemate

Russia’s economy is expected to contract by 10% this year — but in the West, high energy and food prices have eroded support for leaders.

Russian invasion of Ukraine

Economy & Business

Note: Data not inflation-adjusted; Data: FactSet; Chart: Axios Visuals

After two-plus years of on-again, off-again supply chain snarls, American warehouses and store shelves are filling up with stuff — perhaps too much.

The big picture: Fresh government numbers out Tuesday showed wholesale and retail stockpiles continue to mount, even as the ferocious consumer appetite for stuff — toys, clothes, furniture, packaged goods — that emerged as a feature of the pandemic economy may be ebbing.

Context: A disappointing reading on retail sales a couple of weeks ago reinforced the view among some that surging inflation is unnerving American shoppers, and may change the buying patterns that developed during the COVID crisis.

Recent profit warnings from Walmart and Target, along with disappointing results from Amazon, made a similar point.

Retailers conceded to Wall Street that they may have misjudged the kind of goods American households would want to buy as inflation strained their budgets.

Target, for instance, said it ordered way too many televisions and home appliances that it'll have to put on sale.

Our thought bubble: This is yet another example of one of our favorite themes ... "The stock market is not the economy." Let's just call it TSMINTE for short.

If you are a shareholder in Target, it's kind of a bummer that the company screwed up and now has to put a bunch of stuff on sale at lower prices. This means your profit margins are likely to fall. (That's why when Target happened to mention this problem, its share price fell the most in a single day since the 1987 market crash.)

But if you're a shopper: score. Maybe that massive flat-screen you want is on sale. (Also, if you're Federal Reserve chair Jerome Powell, whose job is to pull inflation down to earth, it's good to get word that some prices are going to be discounted.)

In other words, something that is kind of bad for the stock market is actually kind of good for the economy. This is the essence of TSMINTE!

Yes, but: Of course, there are limits to this kind of logic. If everybody makes huge inventory screw-ups and builds massive stockpiles of products for which there is no demand, that could conceivably be a bad thing. Companies could go out of business and people could lose their jobs.

The bottom line: But for now, the surge in inventories, just as demand seems to be slowing down, is exactly what the U.S. economy needs to get a break from the inflation that's driving everybody crazy. And, you know, keep your eyes peeled for sales.

Rising retail inventories point to discounts ahead

Wholesale and retail stockpiles continue to mount just as demand seems to be slowing.

Retail

A sale sign in the window of a store in San Francisco.

After two-plus years of on-again, off-again supply chain snarls, American warehouses and store shelves are filling up with stuff — <a class="gtmContentClick" data-vars-link-text="perhaps too much" data-vars-click-url="https://www.axios.com/2022/06/17/target-inventory-sale-clearance-discount" data-vars-item="in_content_link" href="https://www.axios.com/2022/06/17/target-inventory-sale-clearance-discount" target="_self">perhaps too much</a>.The big picture: Fresh government numbers out Tuesday showed wholesale and retail stockpiles continue to mount, even as the ferocious consumer appetite for stuff — toys, clothes, furniture, packaged goods — that emerged as a feature of the pandemic economy may be ebbing.

Stocks last week posted their second-best showing of the last 12 months, leaving investors to puzzle over whether it was just a colossal bear-market bounce or a sign that the worst of the market meltdown is over.

The Russell 2000 small-cap index rose 6%.  

Why it matters: The upswing is a welcome change for investors in 2022, which had been the worst first half for the S&P 500 since the Kennedy Slide of 1962. (This was not one of the era's nifty dance crazes.)

The big picture: Investors seemed to feel slightly more optimistic about several of the issues that have been bedeviled shareholders this year.

Interest rates: Rising rates have killed stocks this year. But last week they went the other way, as signs of economic slowdown make people think the Fed might not hike as hard as they had thought just a couple of weeks ago.

Interest-rate-sensitive stocks — often tech companies with super high valuations and no profits — soared last week, supercharging the Nasdaq.  

COVID: Virus deaths continued to remain low, relatively speaking. And shots for the youngest Americans are now available, suggesting, at least to some, that we're effectively nearing the end of the pandemic era. 

Share prices of airlines, hotels, casinos, cruise lines, retailers and restaurants — the most exposed to virus-related issues — went gaga. For instance, airlines in the S&P 500 rose roughly 5%, the best weekly showing this month.   

China: Indications that China's gradual easing of lockdowns coaxed some investors into shares of firms with significant sales and/or supply chains in China. 

Goldman Sachs' custom baskets of stocks of companies with large customer or supply chains in China were up roughly 7% and 6%, respectively, last week. 

The bottom line: While it's nice to get a bit of a bounce, bear markets are notorious for short-lived rallies. And remember, the S&P 500 is still down 18% this year.  

Stocks rally to second best performance of the last year

Investors seemed to feel slightly more optimistic about several of the issues that have been bedeviled shareholders this year.

Gif of the bear market rocking a bar graph

Stock market

An illustration of a bear pushing a line in a bar graph

Stocks last week posted their second-best showing of the last 12 months, leaving investors to puzzle over whether it was just a colossal bear-market bounce or a sign that the worst of the market meltdown is over.Driving the news: Last week&#x27;s rally!

Data: U.S. Department of Energy, FactSet; Chart: Axios Visuals 

Crack spreads — a proxy for the profits oil refiners pocket — have soared this year as gasoline demand outstrips supply, 

The big picture: These spreads measure the gap between the cost of crude oil and the prices of refined products like gasoline — and are a key contributor to both profits at oil refiners and to the prices we pay at the pump. 

Crack spreads could come under pressure as the Biden administration does everything in its power to push gas prices lower.

State of play: Shares for major oil refiners got clobbered yesterday, ahead of a meeting between Energy Secretary Jennifer Granholm and top industry executives at the White House Thursday. 

Marathon Oil fell 7%, Phillips 66 dropped 6%, and ConocoPhillips tumbled 6%. Chevron and Exxon both fell about 4%. 

President Biden publicly urged an increase in gas production, saying bluntly, "I'm calling on the industry to refine more oil into gasoline and to bring down gas prices."

Yes, but: Earlier this year, as crack spreads soared, so did the stock prices of major American refining companies. They're up an astonishing 38% since January, even as the overall market entered bear territory. 

The chart above shows the so-called 3:2:1 crack spread, thought to be the best benchmark of margins at refineries (it assumes three barrels of crude are turned into 2 barrels of gasoline and one barrel of diesel, or jet fuel). 

The intrigue: While surging margins for gasoline makers opens the industry up to charges of gouging, industry officials argue that they are producing as much gas as possible. 

Industry capacity utilization is running at roughly 94% currently, the highest since 2018 when it hit 97%.   

A recent government report also showed overall refining capacity has fallen in the last two years. In fact, it's now back down to where it was in 2014, meaning that supply would remain strained even if refineries were running at 100%.  

The bottom line: With little chance of bringing new sources of gasoline online anytime soon, the administration's best chance to lower prices will likely come from leaning on refiners to accept smaller profit margins.

That's an unpleasant prospect for shareholders and the source of some consternation for investors in oil companies.

Oil refiner execs head to White House amid soaring profits, record gas prices

Surging margins expose the industry to charges of gouging, but officials say they’re producing as much gas as possible.

Crack spreads — a proxy for the profits oil refiners pocket — have soared this year as gasoline demand outstrips supply, The big picture: These spreads measure the gap between the cost of crude oil and the prices of refined products like gasoline — and are a key contributor to both profits at oil refiners and to the prices we pay at the pump.

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

Copper prices are down sharply this month, yet another sign that the outlook for global growth is softening, especially in China.

Futures prices for the metal — used in the wires in everything from cars to houses to electronics — are down roughly 13% this month.

Why it matters: Copper prices are widely seen as offering a useful reading on the health of global industry, especially China's factory and construction-heavy domestic economy. Lower prices are traditionally viewed as a sign of softness.

The downturn in copper confirms other indicators of weakness in the world's second-largest economy, which has been hard hit by COVID-related lockdowns in massive economic centers like Shanghai and Shenzhen.

Let's nerd out: Markets geeks sometimes refer to the metal as "Dr. Copper," in reference to its supposed acumen at calling economic turning points, something actual Ph.D. economists are notoriously bad at.

The bottom line: The global economy seems to be slowing, which could take some of the pressure off of supply chains — and by extension prices, such as those of copper.

Copper prices down sharply this month

Lower prices are traditionally viewed as a sign of softness.

Commodities

A chart showing U.S. copper futures, daily from June 24, 2020, to June 24, 2022

Copper prices are down sharply this month, yet another sign that the outlook for global growth is softening, especially in China.<ul><li>Futures prices for the metal — used in the wires in everything from cars to houses to electronics — are down roughly 13% this month.</li></ul>

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Stories

Rising retail inventories point to discounts ahead

The West’s economic war with Russia is at a stalemate

Stocks rally to second best performance of the last year

Copper prices down sharply this month

Oil refiner execs head to White House amid soaring profits, record gas prices

Newsletter editions

📊 Stockpiles are back

🌎 The economic war

🔮 Fallout

💄 Meme bankruptcy

🛢 Cracked