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Prepper

Full disclosure

The proposal had been pitched for years, but the SEC has finally adopted new rules that will require many public companies to disclose climate-related risks in their financial statements and annual reports. Lively debates and legal threats have surrounded the updated framework, and there's still some confusion about the guidelines. On a basic level, the rules would provide "investors with consistent, comparable, decision-useful information, and issuers with clear reporting requirements," according to the agency, but not everyone is happy about the new requirements.

Quote: "The SEC is merit neutral. We're agnostic to climate risk itself, but we have a role to play in disclosures made by companies... and that they have proper controls around those disclosures," Chairman Gary Gensler declared. "It's about investors making investment decisions and what risks it poses to investors. It's grounded in materiality, a multi-decade old concept, that companies disclose that which a reasonable investor would consider amongst the total mix of information."

To translate, Gensler framed the new guidelines as more related to the risks that companies and investors may face from the effects of climate change versus the risks that corporate businesses might pose to the climate. However, some of the new rules in the framework do center around how companies contribute to climate change. Namely, Scope 1 emissions, or those that result from a company's operations, as well as Scope 2, which come from energy and power bought by a company. The most difficult greenhouse gases to calculate - Scope 3 - were left out of the final proposal, and refer to indirect emissions of a company's product, like those produced by its suppliers and customers.

Nearly half of all public U.S. companies registered with the SEC will be required to report Scope 1 and 2 emissions if they are considered material climate-related risks. Meanwhile, the controversy surrounding the new disclosures resulted in a close 3-2 vote at the SEC, with the two dissenting Republican Commissioners calling the framework "climate regulation promulgated under the Commission's seal" and stating it would "increase the typical external costs of being a public company by around 21%." A coalition of ten states also filed a legal challenge to vacate the new rules, referring to them as "illegal and unconstitutional."

Go deeper: "Climate-focused investment is more than just excluding companies that have risk to climate change. It really is taking advantage of those opportunities," AllianceBernstein writes in The Weather Is Changing For Climate-Focused Investors. "Capital flows in this area are not dependent upon economic growth and cycles. We're seeing secular growth here that shouldn't be vulnerable to economic slowdown." Also see Climate-Focused Investing: Two Approaches For Equity Portfolios.

KaPow!

While the Fed's restrictive monetary policy is putting pressure on economic activity and inflation, cutting interest rates too soon could cause damage. That's according to Jay Powell's testimony before the House Financial Services Committee, where he reiterated that there was no evidence the economy was falling into a recession. It may also be appropriate to "begin dialing back policy restraint at some point this year," but the central bank needs "greater confidence that inflation is moving sustainably toward 2%." SA Investing Group Leader Mott Capital Management said the Fed Chair pretty much stayed on script, though "he seemed to put some distance" around the dot plot from the FOMC's December meeting. (95 comments)

Equity infusion

There had been worries over real estate loans and internal controls, but New York Community Bancorp (NYCB) is raising more than $1B from an investor group led by the firm of former Treasury Secretary Steven Mnuchin. It'll come along with an executive shakeup, including for Alessandro DiNello, who was only named CEO last Thursday. The investment is "a positive endorsement of the turnaround that is underway," according to DiNello, adding that the bank now has a strong balance sheet and liquidity position. NYCB sank 42% on Wednesday before the news, and after a string of trading halts, shares resumed to end the session 7.5% higher. The stock is still down 66% YTD. (272 comments)

SOTU

President Biden will deliver his high-stakes State of the Union address at 9 PM ET, likely focusing on efforts to lower healthcare costs, as well as raising taxes on the rich and corporations. The speech will give Biden a wide platform to detail his economic priorities and provide contrasting views to that of Donald Trump, who is set to become the Republican presidential candidate. The address comes amid growing economic concerns, on account of a tight labor market and sticky inflation. The speech could also serve to "reassure markets that Biden still is up to the job," said Pangaea Policy founder Terry Haines, amid skepticism about the 81-year-old president’s ability to serve a second term. (15 comments)

Today's Markets

In Asia, Japan -1.2%. Hong Kong -1.3%. China -0.4%. India +0.1%.
In Europe, at midday, London -0.1%. Paris +0.2%. Frankfurt flat.
Futures at 7:00, Dow +0.1%. S&P +0.2%. Nasdaq +0.4%. Crude -0.9% to $78.40. Gold +0.2% to $2,162.80. Bitcoin -0.7% to $67,049.
Ten-year Treasury Yield unchanged at 4.10%.

Today's Economic Calendar

7:30 Challenger Job Cut Report
8:30 International Trade in Goods and Services
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:00 Jerome Powell Speech
10:30 EIA Natural Gas Inventory
11:30 Fed's Mester Speech
3:00 PM Consumer Credit
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

Nvidia (NVDA) within a whisker of adding $1T in market cap this year.

Dutch government striving to keep ASML (ASMLin Netherlands.

NTSB chief: Boeing (BA) still hasn't provided details about blowout.

Tesla (TSLA) falls as Morgan Stanley warns the bear case is in play.

Bayer (OTCPK:BAYZF) wins latest jury trial over Roundup weedkiller.

Enbridge sees Canadian pipelines maxing out capacity in 3-4 years.

Guyana dispute: Hess slips as Exxon (XOM) confirms arbitration filing.

Apple (AAPL) bans Fortnite maker Epic Games' developer account.

Victoria's Secret (VSCO) plummets on expectations of challenging Q1.

JOLTS report: Job openings roughly stable in January, quits rate slips.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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