- China Replaces Top Markets Regulator as Xi Tries to End Rout
- A China-U.S. Decoupling? You Ain’t Seen Nothing Yet
- How Russia Benefits From Libya’s $5 Billion Fuel-Smuggling Trade
- ECB Must Be Patient With Rate Cuts, Schnabel Tells FT
- NYCB Is Cut to Junk by Moody’s
- Joe Lewis’ $7.6 Billion Global Empire Weathers His Biggest Test
- Why Americans Are So Down on a Strong Economy
- Adam Neumann Crashes Into WeWork’s High-Wire Revival Act
- Snap Doesn’t Get Its Meta-Moment
- Snap Shares Plummet After First-Quarter Guidance Disappoints
- Uber Posts First Annual Profit Since Its IPO
- How Ford’s F-150 Lightning, Once in Hot Demand, Lost Its Luster
- Alibaba Boosts Stock Buybacks as Profit Slumps
- CVS Health Cuts 2024 Guidance, Citing ‘Potential Implications’ of Higher Medical Costs
- Hospital CIOs Weigh 5G as Digitized Medicine Pushes Wi-Fi to Its Limits
- Vestas Beats Profit, Revenue Views After Record Order Intake
- Target Weighs Paid Membership Program Similar to Amazon Prime
- Brazil Mogul Wants to Sell the World’s Best ESG Chocolate
- ESPN, Fox and Warner Bros. Join for Sports Streaming Service
- China Tightens Some Trading Restrictions for Domestic and Offshore Investors
- China Stocks Post More Wild Swings After Beijing Stability Vow
- China Real-Estate Projects Set to Receive Loans Under ‘Whitelist’ Program
- Top U.S. Treasury Officials to Visit Beijing for Economic Talks
- Gold Prices to Hit $2,200 and a ‘Dramatic’ Outperformance Awaits Silver in 2024, Says UBS
- Powell Tells ‘60 Minutes’ Fed Is Wary of Cutting Rates Too Soon
- Why Are Americans Wary While the Economy Is Healthy? Look at Nevada
- How Nevada Is Pushing to Generate Jobs Beyond the Casinos
- Morgan Stanley and Goldman Spoil Private Credit’s Record Deal
- Why NYC Apartment Buildings Are on Sale Now for 50% Off
- What Business Leaders Are Saying About the Red Sea Attacks
- McDonald’s Sales Growth Slows as Mideast War Hurts Results
- Big Oil’s Optimism Faces Reality Check in Tech-Obsessed Market
- Why Is Big Tech Still Cutting Jobs?
- Merck to Buy Elanco’s Aqua Business for $1.3 Billion
- Apple Vision Pro’s First Test: Will People Wear It in Public?
- Google and Yahoo Are Cracking Down on Inbox Spam. Don’t Expect Less Email Marketing
- Samsung’s Leader Acquitted in Stock and Accounting Fraud Case
- Yandex Owner to Sever Ties to Russia With $5.2 Billion Sale
- Wegovy Maker to Boost Production Capacity With Multibillion-Dollar Deal
- Team Cow or Team Soy: The Milk Wars Roiling America
- How Much for Thin Mints? Some Girl Scouts Raise Cookie Prices
- What Happens to Chinatown When the Sports Teams Leave
- World Cup 2026 Final Goes to NYC-Area in Victory Over Dallas and LA
- N.F.L.’s Rapid Embrace of Gambling Creates Mixed Signals
Open Interest Changes
The warnings have been coming since the Fed started its aggressive rate-hiking cycle two years ago, but worries are piling up about the health of commercial real estate properties and the bank loans that support them. According to the St. Louis Fed, two-thirds of CRE loans are held by community or regional banks, meaning if things go sour, the sector can fall under immense pressure. As a result, financial regulators are keeping a close eye on the industry, but as in the case of Silicon Valley Bank (OTC:SIVBQ), it may be hard to take "sufficient steps" in time despite many supervisory warnings.
Quote: "I do have a concern about commercial real estate," Treasury Secretary Janet Yellen said in her testimony before the House Financial Services Committee. "I believe it's manageable although there may be some institutions that are quite stressed by this problem. The higher interest rate environment, and in some cases, particularly the case in office building shifts due to the pandemic, coupled with many commercial real estate loans coming due and needing to be refinanced in a context where vacancy rates in some cities are quite high, is going to put a lot of stress on the owners of these properties. And so the banking agencies are very focused on the banks managing through these situations. They're, in some cases, working to make sure that loan loss reserves are built up to cover losses, that dividend policies are appropriate, that liquidity is adequate."
Industry players are also taking notice. Moody's Investors Services downgraded New York Community Bancorp's (NYCB) credit rating to "junk" late Tuesday (just after Yellen's testimony), citing "financial, risk-management and governance challenges." Shares of the lender, which has been in the spotlight, plunged 16.7% to $3.50 in AH trading after tanking 22.2% during the regular session. It was only a week ago that the stock was changing hands near the $10 level, but a surprise quarterly loss and provisions for credit losses set off alarm bells, while commercial real estate worries didn't help the situation.
Whatever it takes? There are those that are concerned about broader stability or systematic risks, especially if disruptions spread to financial markets and the real economy. Interest rates are also likely to remain high with the Fed taking a March cut off the table, while the long inversion of the yield curve isn't helpful for banks that borrow short to lend long. A full contagion and CRE crisis could see thousands of banks fail under a worst-case scenario, according to SA Investing Group Leader Avi Gilburt, who explores non–owner–occupied property loans, office building vacancies and default rates in a recent Seeking Alpha article. (12 comments)
New sports app
Walt Disney (DIS), Fox (FOX) and Warner Bros. Discovery (WBD) are teaming up on a joint venture to produce a streaming platform that would share sports assets. The companies would each own a third of the platform, which would combine their interests and provide scale negotiating power as the price of sports rights continues to arc ever higher. Shares of Fox and Warner Bros. continued to rise in premarket trading on the news, climbing 5.2% and 3%, respectively, while Disney slipped 1.1%. Activist investor Nelson Peltz was reportedly planning to push for bundling ESPN+ with a larger streaming player, perhaps Netflix (NFLX). (77 comments)
Adam Neumann, who co-founded WeWork (OTC:WEWKQ) and was ousted when its planned IPO flopped in 2019, is teaming up with capital providers in an attempt to buy the co-working space provider out of bankruptcy. Dan Loeb's Third Point and Neumann have been seeking information from WeWork since December to put together a bid for the company. "We continue to believe that the work we are currently doing - addressing our unsustainable rent expenses and restructuring our business - will ensure WeWork is best positioned as an independent, valuable, financially strong and sustainable company long into the future," WeWork said in a statement, adding that it receives expressions of interest "on a regular basis." (1 comment)
That was quick
Less than a month into the recommendation, traders at J.P. Morgan have issued a mea culpa on their cautious call on U.S. stocks, with the trade desk now saying it is "tactically bullish." That stands in contrast to the global strategy team, headed by Marko Kolanovic, which has consistently warned about stretched valuations in tech names and the all-in attitude of the market on a U.S. soft landing. The trade desk team says the big change is megacap tech earnings decoupling from bond yields. If investors are also looking to go beyond Overweight on a group, now may be the time to do that with the Magnificent 7 and some hedges. (6 comments)
In Asia, Japan -0.1%. Hong Kong -0.3%. China +1.4%. India -0.1%.
In Europe, at midday, London -0.4%. Paris -0.2%. Frankfurt -0.3%.
Futures at 7:00, Dow -0.1%. S&P -0.1%. Nasdaq +0.1%. Crude +0.8% to $73.88. Gold -0.1% to $2,049.60. Bitcoin +0.4% to $42,915.
Ten-year Treasury Yield +4 bps to 4.13%.
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 International Trade in Goods and Services
10:30 EIA Petroleum Inventories
11:00 Fed's Kugler Speech
11:30 Fed's Collins Speech
12:00 PM Fed's Barkin Speech
1:00 PM Results of $42B, 10-Year Note Auction
2:00 PM Fed's Bowman Speech
3:00 PM Consumer Credit
Companies reporting earnings today »
What else is happening...
Snap (SNAP) slides 30% as revenue shortfall overshadows user growth.
Boeing 737 Max was missing bolts in Alaska Airlines (ALK) midair blowout.
Higher traffic at Chipotle (CMG) drives comparable sales, margin beat.
Increase in credit card delinquencies signal 'financial stress' - New York Fed.
$250M deal: Spotify (SPOT) prefers to lose money over losing Joe Rogan.
Buffett's Berkshire (BRK.B) snaps up more Occidental Petroleum (OXY).
Cannabis stocks on watch ahead of decision on rescheduling marijuana.
Better-than-expected Q4 profit at BP (BP) and more stock buybacks.
Woodside (WDS), Santos end talks to create $52B Australian LNG giant.
Four- and five-star rated 'Dividend Aristocrat' stocks for 2024 by CFRA.