Reads
- Consumers Foot the Bill for Traders ‘Manipulating’ UK Power Market
- Bank of England to Weigh a Rate Increase After a Jump in Inflation
- Swiss Central Bank Lifts Key Rate, Declares End to Bank Crisis
- China’s Rise Relied on Ties to the West, Which Xi Is Now Loosening
- China Is Starting to Act Like a Global Power
- China Voices Strong Opposition to Any Forced Sale of TikTok
- TikTok CEO Seeks to Convince Congress App Isn’t Security Threat
- Double-Barreled Economic Threat Puts Congress on Edge
- Fed Walks Tightrope Between Inflation, Bank Turmoil—but for How Long?
- Powell’s Own Guide to Recessions Shows Rate Cuts Are Coming
- Citi CEO Fraser Warns Mobile Money is ‘Game Changer’ for Bank Runs
- Banks Are Risky. Silicon Valley Bank’s Risk Officer Was AWOL.
- Wall Street Eases Hiring Freeze in Grab for Credit Suisse Talent
- What Does ‘Made in America’ Mean? In Green Energy, Billions Hinge on the Answer
- Twitter Isn’t Making Money. Here’s Why Musk Thinks It Could Soon
- Is Working From Home Really Working?
- GM to Stop Making Iconic Chevrolet Camaro Following Sales Slump
- California Could Ban Skittles Due to Concerns Over Health Impacts
- US government could back First Republic (FRC) rescue deal. Bloomberg
- Ericsson (ERIC) pleaded guilty in bribery case. Bloomberg
- Marvel (MRVL) to eliminate 4% of workforce. Bloomberg
- SEC decides to postpone vote on private equity rule (BX, CG). WSJ
- Lazard (LAZ) is helping First Republic (FRC) with options. WSJ
- China approves first messenger RNA vaccine for COVID (PFE, BNTX, MRNA, NVAX, JNJ). Reuters
Todays Open Interest Change
PREMIUM
PREPPER
Policymakers at the Fed are treading a tightrope as they seek to balance their role as providers of stable prices and financial stability. The FOMC voted unanimously yesterday to raise the target for the federal funds rate by a quarter percentage point to a range of 4.75% to 5%, seeking a compromise between pausing its rate hike cycle due to the current banking crisis and prior expectations of 50 bps to counter stubbornly high inflation. It marked the ninth straight meeting that the central bank raised rates, though it's far from clear what may lie ahead despite a press conference from Fed Chair Jerome Powell.
The transcript: "It's possible that this [banking crisis] will turn out to have very modest effects - these events will turn out to be very modest effects on the economy, in which case - and inflation will continue to be strong, in which case, you know, the path will look - might look different. It's also possible that this potential tightening will contribute to significant tightening in credit conditions over time, and in principle, if that - that means that monetary policy may have less work to do. We simply don't know."
Powell also reiterated that there continues to be "so much uncertainty," though the 2023 dot plot was unchanged, predicting a year-end peak around 5.1%. Since "rate cuts are not in our base case," that would suggest the Fed is only planning one more rate hike this year, which is unchanged from the last estimate in December. Language of "some additional policy firming" was used instead of "ongoing increases," but the uncertainty factor hit equity markets, and further comments from Treasury Secretary Janet Yellen about uninsured bank deposits didn't help the situation.
SA commentary: "The combined effect of Powell's and Yellen's remarks was to increase the concerns of market participants about the risk of a U.S. recession later in 2023," wrote James Kostohryz, Investing Group author of Successful Portfolio Strategy. However, "there is a striking dissonance in financial markets' pricing," noted SA contributor Franklin Templeton Investments. "The prediction of sharp Fed rate cuts would suggest a deep recession, perhaps precipitated by a credit crunch or a more extensive banking crisis." (258 comments)
Hungry for a bread bowl, but forgot your wallet at home? Panera Bread has you covered. The café chain is piloting Amazon's (NASDAQ:AMZN) palm-scanning technology in St. Louis, and hopes to expand the trial to a dozen or more locations over the next few months. Called Amazon One, the biometric scanners will be linked to Panera loyalty program accounts, and are already in use at Amazon-owned Whole Foods and Amazon Go stores, as well as some stadiums and arenas. When Amazon rolled out palm-scanning in 2020, it began partnering with Visa (V) to test out transactions, and discussed the project with Mastercard (MA), JPMorgan Chase (JPM), Wells Fargo (WFC) and Synchrony Financial (SYF).
Bond investors were outraged this week after the shotgun wedding between Credit Suisse (NYSE:CS) and UBS (NYSE:UBS) wiped out $17B worth of so-called AT1 debt. The complaint was that while they were completely annihilated, equity shareholders - while they also lost a ton of money - received payouts at the stock's takeover value, apparently in contradiction to the hierarchy of restitution. "The AT1 instruments issued by Credit Suisse contractually provide that they will be completely written down in a 'viability event,' in particular if extraordinary government support is granted," Swiss regulator FINMA declared in a statement, though that clause of the prospectus was apparently left unnoticed by some of the most sophisticated players on Wall Street. U.S. bond investors are still preparing to sue the Swiss government over the debacle (PIMCO, for instance, reportedly lost some $340M as a result of the debt write-off). (4 comments)
The SEC's crypto crackdown looks set to continue after Coinbase (COIN) revealed it had received a Wells Notice from the agency. Potential charges were not specified, but an enforcement action alleging violations of securities laws is expected, which may relate to the exchange's spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet. Shares of Coinbase slid 14% AH on Wednesday following the news, but with the stock doubling this year, does it represent a buying opportunity? Check out the latest article from SA contributor Josh Arnold, author of Investing Group Timely Trader. (93 comments)
Today's Markets
In Asia, Japan -0.2%. Hong Kong +2.3%. China +0.6%. India -0.5%.
In Europe, at midday, London -1.1%. Paris -0.6%. Frankfurt -0.8%.
Futures at 6:30, Dow +0.1%. S&P +0.4%. Nasdaq +0.9%. Crude -1.1% to $70.15. Gold +1.6% to $1979.90. Bitcoin -1.7% to $27,710.
Ten-year Treasury Yield -3 bps to 3.47%
Today's Economic Calendar
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
8:30 Current Account
10:00 New Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Fed Balance Sheet
Companies reporting earnings today »
What else is happening...
Deadly fungal infection sweeps across U.S.: What stocks may benefit?
Moderna (MRNA) CEO says COVID vaccine price hikes are appropriate.
New chapter? Toshiba (OTCPK:TOSBF) accepts $15B buyout proposal.
Bidders expected to table increased offers for Manchester United (MANU).
Norfolk Southern (NSC) grilling: Should rails investors be worried?
Starbucks (SBUX) changing of the guard has not quieted labor disputes.
Brazil President Lula says Petrobras (PBR) should suspend asset sales.
BOE decision on tap after Swiss National Bank raises rates by 50 bps.
Wells Fargo updates bank plays in Signature Picks portfolio.
Boston Beer (SAM) subject of Heineken (OTCQX:HEINY) takeover speculation.