Good morning. Happy Friday.
The Asian/Pacific markets did great. Japan, China, Hong Kong, South Korea, Taiwan, Malaysia, Indonesia, Singpore, Thailand and the Philippines posted solid gains. Europe, Africa and the Middle East are mostly down. The UAE, Russia and Hungary are doing well, but the UK, France, Turkey, Germany, Finland, Switzerland, Spain, Italy, Portugal and Sweden are down. Futures in the States point to a moderate gap down open for the cash market.
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The dollar is down. Oil is down; copper is up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Another bank rescue
The banking space sees another rescue deal in just a matter of days, with the nation’s biggest banks agreeing to deposit around $30 billion with troubled First Republic Bank (FRC). The big banks -including JPMorgan (JPM), Bank of America (BAC), Citi (C) and Wells Fargo (WFC) – will contribute $5 billion of deposits each. Goldman Sachs (GS) and Morgan Stanley (MS) will provide $2.5 billion each. PNC Financial (PNC), BNY Mellon (BK), Truist (TFC), U.S. Bancorp (USB) and State Street (STT) will each contribute $1 billion.
Market reaction: While investors initially cheered the news, First Republic’s shares reversed course after the lender said it was suspending its dividend. It said it is “focused on reducing borrowings and evaluating the composition and size of its balance sheet going forward.” Billionaire investor Bill Ackman denounced the rescue deal, saying, “Spreading the risk of financial contagion to achieve a false sense of confidence in FRB is bad policy.”
Background: First Republic is exploring strategic options to improve its liquidity, including a potential sale, amid significant deposit outflows following the collapse of Silicon Valley Bank (SIVB). Ratings agency S&P cut the bank’s rating to junk on outflow risks and net interest margin pressures.
SA commentary: Contributor Yannick Frey believes the sharp decline in the regional banking sector presents a prime buying opportunity, but only for investors who can handle the strong price volatility. As for First Republic, its “risk management is favorable because it does not invest in exotic derivatives, does not invest in junk bonds, does not issue credit cards or auto loans, and has no negative repayment loans.” (294 comments)
25-bp hike most likely
Market expectations have skewed firmly towards a 25-basis point rate hike by the Federal Reserve at its monetary policy meeting next week. The shift has been spurred by recent turmoil in the financial sector and the European Central Bank’s decision to hike rates by 50 basis points yesterday. The ECB’s move came amid calls for central banks on both sides of the Atlantic to dial back on policy tightening in light of the banking crisis. Ahead of the release of the ECB’s decision, markets were pricing in a 56.8% probability of a 25-basis point hike by the Fed next week, according to the CME FedWatch Tool. The probability of no hike was at 43.2%. Today, the probability of a 25-basis point hike stood at 79%, with 21% probability of no hike. “The larger issue of protecting the banking system and the economy takes center stage. The Fed will have to fine-tune between fighting inflation and over-tightening,” said SA contributor Fountainhead. (25 comments)
One step closer
Microsoft (MSFT) submitted remedies to the European antitrust regulator for its planned $69 billion acquisition of videogame giant Activision (ATVI) as it tries to win the regulator’s approval. The European Union deadline to rule on the Activision deal has now been extended to May 22 after the concession offer was made on Thursday, according to the EU regulator’s website. Details of what remedies were offered weren’t provided. Microsoft is expected to secure EU approval, thanks to its offers to license videogames to its competitors. However, most investors are focused on the U.K.’s antitrust authority’s decision as the deal has faced backlash in the country. SA contributor Bohdan Kucheriavyi called the Activision deal a gamechanger, but flagged the risk of the acquisition being blocked by regulators.
$35 insulin cap
Sanofi (SNY) slashed prices for Lantus, its widely-prescribed insulin, in the U.S. by 78%, effective from January 1, 2024. It will also establish a $35 cap on out-of-pocket costs for Lantus for all patients with commercial insurance. The move follows other drugmakers that reduced prices for their insulin products, bowing to widespread pressure over the costliness of the critical diabetic therapy. Novo Nordisk (NVO) will slash the U.S. list prices of several insulin products by up to 75%. Eli Lilly (LLY) is cutting the prices of its insulin drugs by 70% and introducing a program that will cap out-of-pocket expenses at $35 per month. Earlier this month, U.S. Senator Bernie Sanders unveiled a bill that would limit the list price of insulin at no more than $20 per vial. (8 comments)
Today’s Economic Calendar
9:15 Industrial Production
10:00 Consumer Sentiment
10:00 Leading Indicators
1:00 PM Baker-Hughes Rig Count
What else is happening…
U.S. banking system remains sound, Janet Yellen assures Senate panel.
Former Wells Fargo (WFC) exec pleads guilty in fake-account scandal probe.
Google (GOOG) (GOOGL) to lift YouTube TV price amid rising content costs.
American Airlines (AAL) loses EU challenge over Delta Air Lines’ (DAL) landing slots.
Shares of FedEx (FDX) fly higher as cost-saving efforts bear fruit.
British American Tobacco (BTI) under pressure to explore U.S. listing.
National CineMedia (NCMI) to cede control to lenders, prepping for bankruptcy filing.
Rocket Lab (RKLB) gains before the bell after second successful U.S. rocket launch.
Amgen (AMGN) deepens job cuts amid pressure on drug prices and inflation woes.
Sarepta (SRPT) slides on FDA advisory meeting for muscular dystrophy gene therapy.
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Good morning. Happy Thursday.
The Asian/Pacific markets were weak. Japan, China, Hong Kong, Taiwan, Australia, Malaysia, Indonesia and the Philippines led to the downside. Europe, Africa and the Middle East are mixed. The UK, France, Turkey, Switzerland, Spain and the Czech Republic are up; Denmark, Poland, Russia and Hungary are down. Futures in the States point to a down open for the cash market.
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The dollar is down. Oil is flat; copper is up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Credit Suisse’s $54B lifeline
Credit Suisse (CS) will borrow as much as 50 billion francs ($54 billion) from the Swiss National Bank liquidity facility. The troubled Swiss bank also announced public tender offers by Credit Suisse International to repurchase certain OpCo senior debt securities for cash of up to ~3 billion francs. The news sent its Swiss shares over 32% higher today in morning trade, while its U.S.-listed shares gained 9% before the bell.
Backdrop: Credit Suisse shares plunged almost 25% in Switzerland yesterday after the bank’s top shareholder – Saudi National Bank Chairman Ammar Al Khudairy – ruled out offering further financial assistance. And on Tuesday, Credit Suisse disclosed a “material weakness” in its reporting procedures and was developing a remediation plan to address the same. However, it said its 2022 results released last month were not impacted by the material weakness.
Market jitters: Yesterday’s rout pushed Credit Suisse to request a public show of support from the Swiss National Bank and Swiss regulator FINMA. In an effort to calm markets, the Swiss central bank and FINMA said Credit Suisse meets capital requirements. The authorities also assured investors that problems of certain U.S. banks “do not pose a direct risk of contagion for the Swiss financial markets.”
SA commentary: Contributor Dhierin Bechai said the bank is not blowing up, “but it’s often not a scandal that directly causes a collapse, it’s the reaction from clients and shareholders causing it.” The stock may gain a bit in the coming days after the recent selloff, he said. “The reality, however, is that the company has built itself a bad financial reputation.” (81 comments)
Strategic review
First Republic Bank (FRC) is evaluating strategic options, including a potential sale, which initially sent its stock 4% higher after the bell yesterday. However, the stock has since erased those gains, and sank more than 23% before the bell today. The bank, whose shares have plunged 80% in the past week in the wake of the failure of Silicon Valley Bank (SIVB), is also weighing options to improve its liquidity. The lender is likely to garner takeover interest from larger rivals. Earlier yesterday, S&P cut First Republic Bank’s rating to Junk on high outflow risk. On the other hand, SA contributor The Asian Investor said the bank is well managed and has a significant deposit base. “Investors can earn significant returns here by leaning into the fear and buying the bloodbath.” (127 comments)
New deadline
The FDIC has set tomorrow as the deadline for banks interested in acquiring Silicon Valley Bank (SIVB) or Signature Bank (SBNY) to submit bids. Only bidders that have an existing bank charter will be permitted to take a look at a bank’s books before submitting their offer. One condition that has been set is that an acquirer must surrender the bank’s cryptocurrency business. Meanwhile, bigger banks appear hesitant to make an offer for SVB. JPMorgan Chase (JPM) and Bank of America (BAC) turned down opportunities to acquire the bank before it was seized last week. SVB is currently conducting a strategic review, and is exploring filing for bankruptcy protection. Take a look at SA contributor BeanKounter Capital’s analysis of stocks on their watchlist after SVB’s implosion. (10 comments)
Sinking ship?
Virgin Orbit (VORB) plummeted 40% in premarket trade today as the satellite launch company furloughed almost all of its employees and paused work for a week as it seeks funding to stay afloat. At an all-hands meeting, executives informed employees that they will get an unpaid furlough. The firm will provide “an update on go-forward operations in the coming weeks.” The latest news comes after a Virgin Orbit launch failure in January from the U.K., when a rocket suffered an anomaly that prevented the mission from reaching orbit. SA contributor Dhierin Bechai believes the bigger risk to Virgin Orbit remains its overall launch schedule requirements.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
8:30 Housing Starts and Permits
8:30 Import/Export Prices
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
What else is happening…
UBS Wealth executive believes solvency fears on banks are overdone.
Bond market volatility now at ‘dangerous’ levels, says Societe Generale.
BofA (BAC) gets over $15B in new deposits as trust in small banks weakens.
Federal Reserve to launch its instant digital payment service FedNow in July.
Warren Buffett’s Berkshire Hathaway (BRK.A) boosts Occidental (OXY) stake to 23.1%.
Apple (AAPL) supplier Foxconn (OTCPK:HNHAF) to make AirPods in Indian plant.
Shares of Snap (SNAP) and Meta (META) climb as U.S. threatens TikTok ban.
FTX transferred over $3.2B to key employees, including Sam Bankman-Fried.
Dollar General (DG) posts mixed Q4 earnings report, reaffirms 2023 guidance.
Biogen (BIIB) gets EU court ruling in favor of blocking Tecfidera generic entry.
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Good morning. Happy Wednesday.
The Asian/Pacific markets did well. Japan, Hong Kong, South Korea, Australia, Malaysia, Singapore, Thailand and the Philippines posted solid gains. Europe, Africa and the Middle East are currently down big. The UK, Poland, France, Germany, Greece, South Africa, Finland, Switzerland, Norway, Spain, the Netherlands, Italy, Austria, Sweden and the Czech Republic are down more than 2%. Futures in the States point to a huge gap down open for the cash market.
————— VIDEO: This is a Fantastic Time to Learn Trading —————
The dollar is up. Oil and copper are down. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
Trump-era law to go?
A group of Democrats led by Sen. Elizabeth Warren (D-MA) and Rep. Katie Porter (D-CA) proposed a bill to restore bank regulations that were undone by former President Donald Trump. The proposed bill seeks to repeal a law passed on a bipartisan basis in 2018 that eased Dodd-Frank regulations on midsized banks by increasing the “too big to fail” threshold to $250B in assets from $50B. The Warren-Porter bill would roll back the threshold pertaining to enhanced capital requirements.
Scrutiny heats up: The Federal Reserve is evaluating tougher rules for midsized banks after the failures of Silicon Valley Bank (SIVB) and Signature Bank (SBNY). It is looking at tougher capital and liquidity requirements, and could beef up annual “stress tests” that assess banks’ ability to weather a potential recession. Meanwhile, U.S. regulators are investigating the failure of SVB, including potential misconduct by officers over insider stock sales. No one at the bank has been accused of wrongdoing and it’s possible that no one will be charged. In addition, DOJ investigators had been investigating Signature Bank’s work with cryptocurrency-related clients before the bank was shuttered.
SA commentary: Courage & Conviction Investing said the SVB blow-up is a good prompt for retirees, who are invested in high dividend-yielding stocks, to re-examine the amount of risk they are taking. Contributor Ian Bezek said the collapse shows the issue of putting too many eggs in one basket, with respect to fixed income securities. Read his advice on what depositors can do to safeguard funds and potentially earn more interest. (104 comments)
SVB updates
SVB Financial (SIVB) confirmed that Silicon Valley Bank sold a portfolio of securities with a book value of $23.97B to Goldman Sachs (GS) last week before the bank was shut down by the FDIC. The sale of the portfolio resulted in a net loss for Silicon Valley Bank of about $1.8B. The portfolio was sold to Goldman at a negotiated price. Meanwhile, Apollo Global (APO), Blackstone (BX) and KKR (KKR) are looking at purchasing loans held by Silicon Valley Bank. The defunct bank had $73.6B of loans as of the end of last year. In other news, KPMG is standing by its audits of SVB and Signature, even as questions are being raised on why the auditor missed signs of impending financial issues. SA contributor believes most big banks aren’t at risk of contagion. (19 comments)
Record low
Credit Suisse (CS) shares plunged 18% premarket to a record low today after the bank’s top shareholder ruled out offering further financial assistance to the lender. Saudi National Bank Chairman Ammar Al Khudairy cited regulatory concerns as the reason behind not being open to injecting more capital into the bank. Credit Suisse disclosed a material weakness in its reporting procedures yesterday, which led to concerns over the bank’s internal controls. Read why SA Quant believes Credit Suisse is at high risk of cutting its dividend. (4 comments)
TikTok mulls spinoff
TikTok management is considering splitting itself from parent company ByteDance (BDNCE) if it can’t reach an agreement with the U.S. to address national security concerns. A TikTok divestiture may include a sale or an initial public offer, but these options would be the last resort if national security fears aren’t allayed. The Chinese government would still need to bless such a plan. Last week, Senate Intelligence Committee Chairman Mark Warner introduced bipartisan legislation aimed at policing the threat of technology from “adversarial” nations, a move lately pointed at a potential ban of TikTok. (9 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
10:00 Business Inventories
10:00 NAHB Housing Market Index
10:00 Atlanta Fed’s Business Inflation Expectations
10:30 EIA Petroleum Inventories
4:00 PM Treasury International Capital
What else is happening…
Wells Fargo (WFC) filed for a $9.5B mixed shelf offering.
Moody’s revised U.S. banking sector outlook to negative on SVB fallout.
Apple (AAPL) is delaying some bonuses and may freeze hiring to streamline costs.
Samsung (OTCPK:SSNLF) to invest $230B to build five chip plants in South Korea.
OpenAI said new GPT-4 AI language model can beat most people’s SAT scores.
Rite Aid’s (RAD) debt burden could hinder its ability to settle a DOJ opioid lawsuit.
Senators urge pharmacy chains to ensure access to abortion pill amid legal threats.
Boxed (BOXD) is evaluating a potential bankruptcy filing, among other options.
Morgan Stanley highlights margin concerns for Rivian (RIVN) owing to inefficiencies.
AMC (AMC) investors approved 1-for-10 reverse split and share conversion.
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Good morning. Happy Tuesday.
The Asian/Pacific suffered big losses. Japan, China, Hong Kong, South Korea, Taiwan, Australia, , Indonesia, Thailand and the Philippines got hit hard. Europe, Africa and the Middle East currently lean to the upside. Denmark, France, Germany, Finland, Spain, Italy, Portugal and Sweden are up; Turkey, the UAE, South Africa and Saudi Arabia are down. Futures in the States point to a moderate gap up open for the cash market.
————— VIDEO: The Most Important Element of Trading —————
The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Inflation in focus
Investors await the latest inflation data, which will be released later in the day, for clues on the Federal Reserve’s future monetary policy and progress so far on the disinflation process. February consumer prices are expected to rise 0.4% M/M and 6% Y/Y, which would mark the smallest increase since October 2021.
Bigger picture: Markets are now pricing in a 73.1% chance of a 25-bp hike at the Fed meeting next week, and 26.9% probability of no hike at all, according to the CME FedWatch Tool. Just a week earlier, markets were seeing a 69.8% chance of a 50-bp hike and 30.2% probability of a 25-bp hike. The shift in expectations comes amid a moderating job growth rate and contagion fears over recent failures in the banking sector.
SA commentary: Investors should pay particular attention to the number for CPI services, excluding housing, said SA contributor James Kostohryz. “Under current conditions of distress in the U.S. banking system, if the CPI numbers come in higher than expected, the Fed would be placed in an extremely difficult predicament,” he said.
Outlook: In his testimony to Congress, Powell said no decision was made on the pace of rate hikes at next week’s meeting as Fed officials await more economic data to see if inflation was nearing its 2% target. UBS economist Jonathan Pingle said if the latest CPI report restores confidence in inflation’s downward trajectory, the Fed will deliver a 25-bp hike. (6 comments)
‘Material weakness’ flagged
Credit Suisse (CS) identified “material weakness” in its reporting procedures for FY22 and FY21, the bank said on Tuesday in its annual report, and is developing a remediation plan to address the same. The material weakness refers to the bank’s failure to maintain an effective assessment process to identify material misstatement risks in its financial statements. Credit Suisse is developing a remediation plan to address the issue, including strengthening its risk and control framework. The bank delayed releasing its 2022 annual report due to last-minute questions from the U.S. SEC. SA contributor IP Banking Research turned bearish on the bank owing to regulatory scrutiny, saying they “completely lost trust” in its management. (11 comments)
$10B in back taxes
A pension fund has filed a class action suit against Amgen (AMGN), accusing the biotech giant of owing more than $10B in back taxes and interest, and withholding this information from investors. The suit accused Amgen of violating securities laws by making false and/or misleading statements and/or failing to disclose the tax liabilities. It alleged that the IRS told the company in 2017 that it owed $3.6B in back taxes covering 2010 to 2012. In 2020, the agency said it owed another $5.1B for the 2013-2015 period. The suit alleged that the $5.1B tax hook wasn’t disclosed to investors until April 2022, and by that time, the IRS had proposed a $2B penalty for nonpayment. SA author The Value Investor earlier raised concerns over high leverage, especially if the IRS issue escalates. (2 comments)
Win for ride-sharing apps
Ride-sharing and delivery apps can now continue to treat their drivers as independent contractors after California court reversed a lower-court decision yesterday, marking a win for companies including Uber (UBER), Lyft (LYFT) and DoorDash (DASH). The ruling mostly upholds Proposition 22, approved by California voters in 2020, that said drivers for such companies are independent contractors and are not entitled to benefits. However, the Service Employees International Union can still appeal the decision to the California Supreme Court. (5 comments)
Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
8:30 Consumer Price Index
10:00 Quarterly Services Report
What else is happening…
WSB poll: SA readers pick Wall Street film ‘The Big Short’ to win Oscar for Best Picture.
FDIC is planning another auction of SVB (SIVB) assets as no suitors have emerged.
SA Quant flashed red on SVB (SIVB) & Signature Bank (SBNY) as early as July 28.
Bunge (BG) will replace Signature Bank (SBNY) in the S&P 500 index.
Netflix (NFLX) is considering alternatives for its advertising operations.
Meta Platforms (META) plans to begin second round of job cuts tomorrow.
Newcrest (OTCPK:NCMGF) and Newmont (NEM) end impasse over deal talks.
Pfizer’s (PFE) Seagen (SGEN) buy unlikely to be hindered by antitrust concerns.
Novartis (NVS) has started the sale process of some of its ophthalmology assets.
United Airlines (UAL) stock tumbled after the bell yesterday on pessimistic forecast.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets were split. China, Hong Kong and South Korea did great, while Japan, India, Singapore and Thailand were weak. Europe, Africa and the Middle East are currently posting big losses. The UK, Denmark, Poland, France, Turkey, Germany, Greece, South Africa, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Austria, Sweden and the Czech Republic are down 1-4%. Futures in the States, which were up big overnight, are now down big.
————— VIDEO: The Most Important Element of Trading —————
The dollar is down. Oil and copper are down big. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Containing SVB mess
U.S. regulators have rushed to minimize the impact of the collapse of Silicon Valley Bank, owned by SVB Financial (SIVB), on the wider financial sector, thereby easing market jitters. Depositors of the shuttered bank will have access to all their funds today, regulators said. Additionally, the Federal Reserve said yesterday it will make additional funding available to eligible depository institutions to avoid damaging bank runs.
Latest updates: PNC Financial (PNC) and Royal Bank of Canada (RY) explored bidding for Silicon Valley Bank as the Federal Deposit Insurance Corp. rushes to find a buyer for the failed lender. However, interest from the two early suitors has since cooled. Meanwhile, HSBC’s (HSBC) ring-fenced subsidiary HSBC UK Bank acquired SVB’s British unit for £1. Germany’s financial regulator ordered a moratorium on SVB’s Frankfurt branch, citing risks to the fulfillment of obligations to creditors.
Bigger picture: SVB was shut down after withdrawal requests overwhelmed the lender, marking the second-largest bank failure in U.S. history after the 2008 collapse of Washington Mutual. Signature Bank (SBNY) was also closed, with regulators invoking a systemic risk exception.
Outlook: The failure of SVB and the Federal Reserve introducing a new type of quantitative easing to backstop the banking sector has traders increasingly betting on a forced Fed pause. U.S. Treasury Secretary Janet Yellen said the government will not bail out banks. Billionaire investor Bill Ackman said the government’s actions will boost depositors’ trust in the banking system, but he still expects other banks to fail. SA contributor Logan Kane also expects more banks to fail, with some big regional banks already under intense pressure likely to follow soon. (175 comments)
Liquidity support
First Republic Bank (FRC) enhanced and diversified its financial position through access to additional liquidity from the Federal Reserve Bank and JPMorgan Chase (JPM), bringing the San Francisco-based bank’s unused liquidity to fund operations to more than $70B. This excludes the additional liquidity First Republic is eligible to receive under the new Bank Term Funding Program announced by the Fed yesterday. SA contributor The Value Investor highlighted that First Republic operates aggressively with deposits, while having limited earnings power to increase rates paid on deposits. (148 comments)
‘Everything Everywhere’ sweeps Oscars
‘Everything Everywhere All at Once’ won Best Picture at the Oscars, logging another victory for not only traditional theatrical studios but indie studios. The film, from independent mini-major film studio A24, won seven Oscars – more awards than any other picture at the 95th Academy Awards. The wins outpace traditional movie studios and streaming companies that have thrown their weight around in recent Oscar ceremonies – notably Netflix (NFLX), which is still waiting for its Best Picture win despite a number of nominations. Netflix’s ‘All Quiet On the Western Front’ was among the most nominated pictures, with nine nominations, and won four awards. (10 comments)
Today’s Economic Calendar
No events scheduled
What else is happening…
Qualtrics (XM) will sell itself to Silver Lake and CPP Investment Board in $12.5B deal.
Qualcomm (QCOM) is heading back to Europe to overturn $258M antitrust fine.
Pfizer (PFE) will acquire cancer-focused biotech firm Seagen (SGEN) in $43B deal.
Biosimilars are expected to save $180B over the next five years.
Carl Icahn eyes nominating three directors for Illumina’s (ILMN) board in proxy fight.
Saudi Arabia’s Public Investment Fund nears deal for Boeing (BA) jets valued at $35B.
What does Silvergate’s (SI) shutdown mean for the cryptocurrency industry?
Cost estimate for Canada’s Trans Mountain Pipeline swelled to C$30.9B.
U.S. and E.U. will start talks on critical minerals used in electric vehicles.
ZIM Integrated (ZIM) stock climbed on Q4 earnings beat and positive outlook.
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