- China Sets Aside Push to Spread Wealth in Pivotal Year for Xi
- Inflation Hits Fastest Pace Since 1981, at 8.5% Through March
- Why There Are Growing Fears the U.S. Is Headed to a Recession
- Stagflation Risk Has Investors Sinking Billions Into Hedges
- London’s $2 Trillion Rainmaker Has No Plans to Slow Down or Sell Out
- ‘Please Don’t Tell’: Essex Boys’ Texts Spur Judge to Allow Lawsuit
- U.S. Mortgage Interest Rates Top 5%, Buyers Look to Lock In Rates
- Grocers Push Through Inflation, Passing Higher Prices to Shoppers
- Nexo and Mastercard Launch ‘World First’ Crypto-Backed Payment Card
- How Jack Dorsey Quit Twitter to Become Bitcoin’s Spiritual Leader
- How Chris Dixon’s Dive Down The Crypto Rabbit Hole Made Him The World’s Top Venture Capitalist
- War Sidelines Crucial Ukraine-Made Fleet of Cargo Megaplanes
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Investors will digest a slew of bank results over the next several sessions, with JPMorgan (JPM) kicking off the Q1 earnings season this morning. Keep an eye on where the strong and weak spots are in the financial system, as well as the knock-on effects of escalating geopolitical tensions. Another wild card is trading activity, which could benefit or suffer in the current volatile environment.
Upside: Consumer and business banking should provide some lift as consumers continued to spend despite red-hot inflation. Banks are also expecting to see some improvements on the loan front, as interest rates began climbing in the quarter despite a Fed that has only started to embark on a tightening cycle. "Fundamentals are holding up well near term with better loan growth, rising net interest margins (NIMs), and continued strong credit quality," J.P. Morgan analyst Vivek Juneja wrote in a note.
Downside: The good old days of serious deal-making are no longer, with banks blaming Russia's invasion of Ukraine and related instability dampening appetite for transactions. A steep drop in investment banking fees will likely be seen due to the pace of new deals slowing significantly, bringing an end to the pandemic boom seen on Wall Street. In fact, the number of M&A deals in North America fell 16.7% Y/Y in February and the value of those deals fell 30% in the same month, according to S&P Global Market Intelligence data.
On watch: When the economy outperforms, banks do as well, so the biggest item to watch will be the sector's outlook for 2022. Many are already fearing slowing economic growth in the quarters ahead as the risk of a potential recession rises in the U.S. Banks have also waited a long time for the Federal Reserve to start hiking interest rates, so keep an eye on figures the lenders tout regarding how much they expect to earn from their loans. (30 comments)
The Pentagon is set to host a meeting today with eight of the largest U.S. defense contractors, including Lockheed Martin (NYSE:LMT), Raytheon (NYSE:RTX) and L3Harris Technologies (NYSE:LHX). According to Reuters, the gathering will center on the industry's capacity to meet Ukraine's weapons needs if a war with Russia turns into a years-long protracted conflict. The U.S. has already provided Kyiv with more than $2.4B in military assistance since Biden took office, of which more than $1.7B was delivered following the start of Russian invasion on Feb. 24.
Snapshot: Hundreds of millions of dollars of the assistance has been approved under "presidential drawdown authority," which allows President Biden to transfer equipment from U.S. stocks without congressional approval or budgetary appropriations. The orders are permitted to respond to unforeseen emergencies that include peacekeeping operations and anti-terrorism assistance. As the name implies, drawdowns are taken out of existing American inventories, meaning the government is not going to market to purchase new items.
The U.S. had already sent over 5,000, or about a third, of its Javelin anti-tank missiles to Ukraine, which would take three or four years to replace, according to the Center for Strategic and International Studies. It has also given over more than 1,400, or about a quarter, of its Stinger anti-aircraft missiles, which would take at least five years to replenish at current production levels. Raytheon and Lockheed Martin jointly produce the Javelin, while Raytheon is the sole supplier of the Stinger.
Outlook: While Javelins and Stingers were effective in protecting Kyiv, Ukraine will likely need a more sophisticated mix of equipment to hold back the coming Russian offensive in the Donbas. As a result, the Biden administration is preparing another military assistance package of around $750M, which may include longer-range anti-aircraft systems or heavy ground artillery systems. Other top American weapons makers include Boeing (BA), General Dynamics (GD) and Northrop Grumman (NOC). (8 comments)
Following a successful pilot program in 2021, Lululemon (LULU) will debut its "Like New" program later this month. The service allows consumers to trade in "pre-loved" LULU clothing in exchange for an e-gift card at one of the more than 390 participating U.S. stores. They can also buy from a selection of used gear on a separate page located on the company's website.
Backdrop: Lululemon dipped into resale in May of last year, testing its so-called re-commerce platform across Texas and California. "Lululemon is actively working to help create a healthier future," CEO Calvin McDonald declared at the time. The new expansion of the program is said to include a "robust" assortment of gently used Lululemon items, ranging from leggings, tops, shorts and jackets, with new items added every day.
"We'll refresh your gently worn pieces for someone else to make active again," Lululemon said in a statement. "We're not accepting items with visible wear (no damage, pilling, rips, or discoloration) or accessories, yoga props, intimates, collaborations, swimsuits, ivivva, and self-care products."
Go deeper: The nationwide debut comes as consumers see higher prices on everything, including items in the clothing and apparel sector. Sites like Poshmark (POSH) and Depop are taking notice, while retailers like Levi Strauss (LEVI) and Nike (NKE) have previously announced buyback programs. Others that have dipped into the secondhand market include Gap (GPS), Macy’s (M), and Nordstrom (JWN), which have partnered with marketplaces like ThredUp (TDUP). (2 comments)
Remember the Freedom Convoys at the start of 2022? Well, the border disruption are back, but this time for a different reason. Since Monday, Mexican truckers have been blocking the Pharr-Reynosa International Bridge in protest of Texas Governor Greg Abbott's enhanced security operation targeting "illicit contraband and smuggling people across our southern border." The order requires extra inspections of commercial trucks, which have slowed the crossing times for freight dramatically, even as much as a third of normal levels.
Bigger picture: More than $440B in trade flow through the Texas-Mexico border each year, with the Pharr crossing serving as one of the most important ports of entry (an estimated 3,000 trucks cross the bridge on a normal day). It's also the largest land port for produce, including avocados, tomatoes and leafy green vegetables. An estimated $30M of fresh produce has not been able to reach the U.S. side since Friday, according to the Texas International Produce Association.
The delays are also spreading beyond Texas as border officials confirmed another blockade at the Santa Teresa port of entry in southern New Mexico. "Everybody down here is on a just-in-time inventory system," said Jerry Pacheco, President of the Border Industrial Association. "It's going to affect all of us, all of in the United States. Your car parts are going to be delivered late, your computer- if you order a Dell (DELL) or HP (HPQ) tablet - those are going to be disrupted."
At play? Abbott has made the border operation a cornerstone of his administration as he seeks a third term as governor in the November elections. Democratic nominee Beto O'Rourke, who will run against him, has said the inspections will do nothing to stop the flow of illegal immigration, but will rather worsen existing supply chain problems.
In Asia, Japan +1.9%. Hong Kong +0.3%. China -0.8%. India -0.4%.
In Europe, at midday, London flat. Paris -0.5%. Frankfurt -1%.
Futures at 6:20, Dow +0.3%. S&P +0.4%. Nasdaq +0.4%. Crude +1.3% to $101.91. Gold +0.3% to $1982.20. Bitcoin -0.7% to $39,842.
Ten-year Treasury Yield +1 bps to 2.74%
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Producer Price Index
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
12:30 PM Fed's Barkin: “Economic and Regulatory Outlook”
1:00 PM Results of $20B, 30-Year Note Auction
What else is happening...
Inflation soars by the most since 1981, increasing 8.5% Y/Y in March.
Looking to ease prices, Biden waives 10% ethanol blending cap on gasoline.
DoubleLine's Gundlach: Inflation is peaking, Fed rate target is 'laughable.'
ETF talk: Fidelity is the latest asset manager to enter the metaverse.