Before the Open (Apr 10-14)

Good morning. Happy Friday.

The Asian/Pacific markets did well. Japan, China, Hong Kong, South Korea, Taiwan, Australia, Indonesia and the Philippines posted solid gains; New Zealand was weak. Europe, Africa and the Middle East are currently doing well. The UK, Denmark, Poland, France, Germany, Greece, South Africa, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Austria, Sweden and the Czech Republic are all doing well. Futures in the States point towards a down open for the cash market.

————— VIDEO: Day Trading the NQ and ES with MACD and Stochastic —————

The dollar is up. Oil and copper are up. Gold is up; silver is down. Bonds are down.

Stories/News from Seeking Alpha…

Tightening the belt

“If you owe the bank $100, that’s your problem. If you owe the bank $100M, that’s the bank’s problem.” It’s a famous quote attributed to industrialist John Paul Getty, but has been applied to many scenarios and across many sectors. China is the latest to find itself in a similar predicament after lending nearly a trillion dollars to developing countries under the Belt and Road Initiative, which President Xi Jinping dubbed the “project of the century” when unveiling his signature foreign policy in 2013.

Bigger picture: Many have described the lending effort that funds infrastructure projects as a “debt trap,” designed to create political goodwill and cement Chinese influence on the world stage. China, in turn, refers to it as a public good, or an equivalent of the Marshall Plan, with 151 countries so far listed as having signed up to the BRI. The initiative was even incorporated into the Constitution of China in 2018, but a series of crises are threatening to push the project off the road, including the aftermath of the pandemic, inflation challenges, slowing global growth, and major loan repayments that are coming in a high-interest rate environment.

In fact, as of last year, 60% of China’s overseas lending portfolio supported debtors in distress, up from just 5% a decade earlier. Nations like Zambia and Ghana, as well as Ethiopia and Kenya, are all trying to find their way out of a default, while Sri Lanka and Pakistan have similar debt problems with Beijing becoming their largest bilateral creditor. In the past, emergency rescue lending and writedowns were explored, but China is taking a heavier hand this time around, complicating sovereign debt restructurings and the situation in emerging markets.

Go deeper: Debt risks and debt crises have the attention of G20 finance ministers who are meeting in Washington, and were on display earlier this week during the “Global Sovereign Debt Roundtable” that was co-chaired by the heads of the IMF and World Bank. China softened its stance following the gatherings, saying it was willing to drop a demand that multilateral lenders share some of the pain and would work through the G20 Common Framework for Debt Treatments, but only time will tell how things will play out. “The response of China will reveal much about its position in the 21st century international financial system,” SA contributor The Angry Bear declared in an article entitled, China And The Debt Crisis.

Bank earnings

JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) will kick off the Q1 earnings season this morning, giving investors a look into the sector for the first time since the banking crisis last month. Note that the crisis mainly impacted U.S. regional banks, like SVB (OTC:SIVBQ) and Signature Bank (OTC:SBNY), and not too-big-too-fail players that are due to report today (with the exception of Credit Suisse (CS) which was ailing for years). The full effects of the crisis may not show up until the next earnings quarter, though investors will be paying attention to any comments on the macro and consumer landscape, as well as the likelihood of a recession (especially during the conference call of JPMorgan CEO Jamie Dimon). SA Investing Groups Leader JR Research calls out Citi ahead of the earnings show, calling it the cheapest among its leading G-SIB banking peers in the U.S. (28 comments)

Very shiny

Gold is now within $10 of its all-time high as a number of drivers propel the precious metal and its peers toward new records. Catalysts include economic worries and fears about a recession, as well as lower U.S. Treasury yields and a weaker dollar. Shares of precious metals miners have ridden gold’s advance, with YTD gainers including Agnico Eagle Mines (AEM) +11%, AngloGold Ashanti (AU) +39%, Barrick Gold (GOLD) +13%, Franco-Nevada (FNV) +14%, Gold Fields (GFI) +45%, Harmony Gold (HMY) +34% and Kinross Gold (KGC) +25%. “There has been a sudden, unexpected shift in investor sentiment to the broad belief gold is going higher. This is always cause for caution,” Michael James McDonald writes in a new SA analysis that explores options activity. (35 comments)

Cue the controversy

Cancel culture is meeting the stock market again as many debate the direction of Anheuser-Busch (BUD) shares following Bud Light’s marketing deal with transgender social media influencer Dylan Mulvaney. While analysts have expressed various perspectives, like stinging suppliers to the “backlash is overdone,” the stock is only down about 3% since the Instagram video first surfaced on April 1. A week earlier, VP of Bud Light Alissa Heinerscheid commented that there would be no future for the “declining brand” if it didn’t evolve to attract younger drinkers by shifting the tone to inclusivity. “Blowing Up Bud Light Cans Doesn’t Change The Company’s Bottom Line,” writes SA contributor Pinxter Analytics, though Investing Groups author Jonathan Weber calls it a “Risky And Failed Marketing Campaign.” (695 comments)

Today’s Economic Calendar
8:30 Retail Sales
8:30 Import/Export Prices
8:45 Fed’s Waller Speech
9:15 Industrial Production
10:00 Business Inventories
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

What else is happening…

Cooler-than-expected Producer Price Index follows CPI data.

Boeing (BA) skids on warning of 737 delays from supplier issue.

Delta Air Lines (DAL) profit figure fails to meet analyst expectations.

French protesters storm HQ of LVMH (OTCPK:LVMHF), with stock at record high.

Big discount: Express (EXPR) buys Bonobos from Walmart (WMT).

Apple Glasses (AAPL) not likely to be seen for several more years.

Gene editing stocks rally as Wall Street turns bullish.

Biden still no friend of fossil fuels despite Alaska OK – Conoco (COP).

BP (BP) starts oil production at new Gulf of Mexico offshore platform.

Amazon (AMZN) boosted by Jassy letter and new AWS tools aimed at AI.

Bitcoin (BTC-USD) surges 81% YTD: Is the rally for real or just FOMO?

—————

Good morning. Happy Thursday.

The Asian/Pacific markets were split and little changed. Japan and Hong Kong did well; China and Taiwan were weak. Europe, Africa and the Middle East currently lean up. Denmark, Poland, France, Greece and South Africa are up; Hungary is weak. Futures in the States point towards a positive open for the cash market.

————— VIDEO: Day Trading the NQ and ES with MACD and Stochastic —————

The dollar is down. Oil is down; copper is up. Gold and silver are up. Bonds are up.

Stories/News from Seeking Alpha…

More work to do?

It’s only 20 days until the next FOMC meeting, and a little over a week before the latest Fed blackout period kicks in, meaning any data or commentary that can provide a clearer view of what may happen is going under the microscope. Bets are increasing that the central bank will go for another 25 basis points on May 3, bringing the Fed Funds Rate above 5% for the first time since the lead up to the Global Financial Crisis. Equity traders don’t seem to be panicked this time around, with the S&P 500 (SP500) up nearly 7% YTD (and it’s only April), as they see the hike as a finale to an aggressive rate hiking cycle that has rocked markets for much of the past year.

Snapshot: A key measure of U.S. inflation published yesterday showed signs of moderating in March, with the Consumer Price Index climbing 5% compared to last year, slowing from an annual pace of 6% seen in February. However, core CPI, which excludes volatile food and energy prices, rose 5.6% Y/Y, in-line with expectations and higher than the 5.5% increase seen the previous month. Fed staff also projected a “mild recession” starting later this year, but many are still sizing up whether the CPI metric accurately reflects underlying inflation that is being driven by demand, rather than other disruptions and distortions.

“In short, our national inflation nightmare is over,” writes SA contributor Calafia Beach Pundit, citing the Owners’ Equivalent Rent component that makes up about one-third of the CPI and growth in the M2 money supply. “To paraphrase Wayne Gretzky, the Fed should be focused on where CPI is going, not on where it has been.” Commenters like Ray West are in agreement, saying that “so many are oblivious of this, not even mentioning high inflation months rolling off the YoY figures in the coming months.”

Outlook from the Fed: “While the full impact of this policy tightening is still making its way through the system, the strength of the economy and the elevated readings on inflation suggest that there is more work to do,” San Francisco Fed President Mary Daly said during a speech yesterday in Salt Lake City. While she’s not a voting member this year on the FOMC committee, New York Fed President John Williams (who is) said raising rates only one more time would be a “reasonable starting place” and is the “median we saw from my colleagues.” Meanwhile, new FOMC voting member, Chicago Fed President Austan Goolsbee, is encouraging patience on raising rates further, citing a need to assess the “potential impact of financial stress (i.e. the recent banking crisis) on the real economy.” (441 comments)

#Fintwit

There were three avenues towards monetization that Elon Musk outlined when taking the reins of Twitter last October, and the company seems to be making progress on all the fronts. In an interview this week with the BBC, Musk declared that “almost all” of the advertisers who abandoned Twitter after his $44B acquisition have returned, while the messaging app has doubled down on paid subscriptions from Twitter Blue and could even become profitable as soon as this quarter. The bigger trophy is turning Twitter into an “everything app,” which would handle everything from messaging and payments to shopping and financial services. Steps are being taken in that direction with Twitter Inc. officially merging into X Corp., while a partnership was just inked with eToro to let users trade stocks and crypto. Brokerages are watching or might explore dealmaking of their own, while others are eyeing a list of potential candidates that might replace Musk as head of Twitter. (11 comments)

Granholm speaks

WTI crude prices have popped above $83/bbl after Secretary of Energy Jennifer Granholm said the U.S. government could begin buying oil later this year to replenish the Strategic Petroleum Reserve “if it is advantageous to taxpayers.” The comments at an energy conference in New York contrasted with her remarks to Congress last month, when she said it would be “difficult for us to take advantage of this low price.” The U.S. Energy Information Administration still forecasts that global crude supply will top demand over the next two years despite a surprise cut from OPEC+, which some said was motivated in part by Granholm’s initial comments. Helping to trim oil demand might be a set of new ambitious vehicle emissions standards from the EPA that could provide a boost for electric vehicles. (61 comments)

Whale watch

Alibaba (BABA) was already under pressure from Beijing’s AI control proposals, but the sentiment was dented further as SoftBank (OTCPK:SFTBY) continues to sell down its stake in the e-commerce giant. A newly surfaced analysis of regulatory filings and prepaid forward contracts reveals that SoftBank intends to slash its Alibaba holdings to just 3.8% as it continues to pare down its exposure to China and limit its tech investment. Softbank had amassed a whopping 34% stake in Alibaba after its U.S. IPO in 2014 – which accounted for nearly 60% of its assets – but its Alibaba ownership slipped to 25% by the end of 2019, and fell to 14.6% as of last year. The “defensive” move follows plans by Alibaba to split into six units, and comes before an expected Nasdaq listing deal for its chip design unit ARM Holdings (ARMHF). (18 comments)

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Producer Price Index
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet

What else is happening…

Top 10 high dividend yielding stocks, as ranked by SA Quant Ratings.

Every weekday: JPMorgan (JPM) orders managing directors back to the office.

China reports world’s first human death due to H3N8 bird flu.

IBM (IBM) explores sale of weather business in streamlining push.

Cirrus Logic (CRUS) plunges 12% on Apple (AAPL) iPhone worries.

In automation boost, Emerson Electric (EMR) to buy NI (NATI) for $8.2B.

Permian Basin has not hit peak oil production – Occidental (OXY).

So long, HBO name: Warner Bros. Discovery (WBD) goes for ‘Max’ power.

Bankrupt crypto exchange FTX recovers $7.3B in assets.

Underage vaping: Philip Morris (PM)-backed Juul pays $462M settlement.

Appeals court permits limited access to abortion pill, blocks part of Texas ruling.

—————

Good morning. Happy Wednesday.

The Asian/Pacific markets were mixed. Japan and India did well; Hong Kong was weak. Europe, Africa and the Middle East are currently doing well. The UK, Poland, France, Turkey, Germany, the UAE, Norway, Spain, Italy, Sweden and Saudi Arabia are up; Hungary is down. Futures in the States point towards a moderate-to-big open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are up.

Stories/News from Seeking Alpha…

Inflation watch

The closely-watched Consumer Price Index is seen easing further in March, but not nearly enough to meet the Federal Reserve’s price stability mandate. The inflation data due later today will offer a signal as to whether the Fed will raise rates or pause hikes in May – one of the biggest debates on Wall Street. Economists expect March’s headline CPI to rise 0.2% sequentially, lower than the 0.4% pace recorded in February. On a year-over-year basis, headline inflation is expected to climb 5.2%, compared with 6% in February. Stripping out the volatile food and energy sectors, core CPI is expected to advance 0.4% M/M vs. the 0.5% February reading, and 5.6% Y/Y vs. 5.5% in February.

Bigger picture: While the headline print would mark the slowest annual increase since May 2021, it would still be more than double the Fed’s 2% inflation objective. The monthly increases in CPI for January and February also do not “inspire confidence that 2% is just around the corner,” said Greg McBride, chief financial analyst, Bankrate. That gap means another 25-basis point rate hike will likely take hold at the Fed’s May meeting, which fed funds futures are largely pricing in, bringing the policy rate target range to 5%-5.25%. Markets are expecting the Fed to pause rate hikes in June. “To feel good about where inflation is headed, we need to see more than just moderation in headline and core inflation,” said McBride. “We need to see moderation in price pressures across staples of the household budget: shelter, food, electricity, vehicle insurance, apparel, and household furnishings.” Note that the Fed will release the minutes of its March meeting in the afternoon, which will be closely watched for clues on how policymakers assessed the rate path in the wake of the banking crisis.

SA commentary: Of note, Y/Y core CPI is expected to run hotter than the headline number for the first time, said Michael Kramer, leader of Investing Group ‘Reading The Markets’, in a move that “could shift how investors think about inflation, transitioning away from the volatile headline CPI and instead focusing more on the sticky core CPI metric.” Mott Capital’s Kramer said the “already overvalued stock market” is not pricing in the potential for a rate shock stemming from a stronger than feared CPI report, based on levels of implied volatility. Seeking Alpha contributor Damir Tokic reckoned that core CPI bottomed in February, implying that the disinflationary trend that Fed Chair Jerome Powell has touted is potentially short-lived, or a nonlinear event at the very least. That, in turn, suggests higher-for-longer rates, which would bode poorly for big tech stocks. (54 comments)

Bearish call

Wells Fargo issued a near-term bearish call on the U.S. stock market Tuesday, arguing that Wall Street should anticipate a market correction over the next 3-6 months. The firm said the S&P 500 (SP500) could fall as far as 10% during that period, which would send the index to a level near 3,700 points. “We are maintaining our 2023 SPX price target of 4,200, but believe the risk/reward over the next six months is skewed to the downside,” Wells Fargo said. “Over the next 3-6 months, we expect to see a 10% correction, with the SPX trading down to 3,700.” The rationale behind the call includes: the Federal Reserve’s aggressive tightening, potential liquidity problems brought on by the bank crisis, and concerns over consumers being increasingly more dependent on credit to sustain spending. Eric Basmajian, leader of Investing Group ‘EPB Macro Research’, believes current data implies that a recession is underway or imminent. “Policy should be easing already, but the Fed is still raising rates targeting lagging economic indicators. Monetary policy has never been this opposed to the business cycle signals in the last 50 years.” (56 comments)

Downplaying risks

U.S. Treasury Secretary Janet Yellen downplayed the greater risks associated with recent banking stresses that the International Monetary Fund raised as a serious concern. When asked about the IMF trimming its 2023 global growth forecast, Yellen said, “I wouldn’t overdo the negativism about the global economy. The U.S. banking system remains sound,” she said. She noted that the global financial system remains resilient due to significant reforms implemented after the financial crisis. Yellen remains vigilant to the downside risks surrounding the world economy in the wake of the Ukraine war and banking pressures. “I’m not anticipating a downturn in the economy, although that remains a risk,” she said. The IMF dimmed its outlook slightly for global growth to 2.8%, but said gradual disinflation is expected in all major economies. Pierre-Olivier Gourinchas, economic counselor at IMF, raised concerns over sharp policy tightening that impacted the financial sector. He stressed that a full-blown financial crisis is “not where we are, even if more financial tremors are bound to occur.” (12 comments)

Boosting reserves

Several major U.S. banks, which contributed a significant portion of the $30B in deposits to aid First Republic Bank (FRC), are now planning to bolster their reserves by setting aside around $100M each. The group includes JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C) and Bank of America (BAC). The decision to boost their reserves is driven by accounting regulations that require provisions to be set aside for potential losses across various assets. Last month, 11 of the biggest lenders in the U.S. pledged to deposit around $30B with First Republic. Ahead of earnings reports by major banks, Chuck Walston, leader of Investing Group ‘The Dividend Kings’, compared Bank of America and Wells Fargo to see which is a better buy. “I view the banking crisis as a prime buying opportunity for stronger banking stocks. I prefer WFC over BAC, given its smaller CRE loan portfolio, more favorable deposit beta, and the stock’s lower one-year and five-year PEG ratios.” (18 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
9:10 Fed’s Barkin Speech
10:00 Atlanta Fed’s Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $32B, 10-Year Note Auction
2:00 PM FOMC Minutes
2:00 PM Treasury Statement

What else is happening…

Biden signs bill to end COVID national emergency after bipartisan support.

Justice Dept. calls on appeals court to block Texas judge’s abortion pill ruling.

Moderna (MRNA) stock dips after flu shot fails to meet early success threshold.

Walmart (WMT) to close four underperforming Chicago stores amid mounting losses.

Apple (AAPL) may face antitrust probe in France over changes to app tracking policies.

Elon Musk says Twitter is now roughly breaking even, has about 1,500 employees.

Intel (INTC) led chips higher as CEO Gelsinger met with China to discuss industry.

Deutsche Bank (DB) said to be winding down its technology centers in Russia.

Emerson (EMR) nears deal to buy National Instruments (NATI) for $60/share.

Diamondback Energy (FANG) to explore sale of west Permian Basin assets.

—————

Good morning. Happy Tuesday.

The Asian/Pacific markets did well. Japan, Hong Kong, South Korea, India, Australia, Malaysia and Indonesia posted solid gains. Europe, Africa and the Middle East are currently mostly up. Poland, France, Turkey, the UAE, Greece, Russia, South Africa, Finland, Italy, Austria, Sweden and the Czech Republic are up; Spain and Saudi Arabia are down. Futures in the States point towards a flat open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is down. Oil is flat; copper is up. Gold and silver are up. Bonds are up.

Stories/News from Seeking Alpha…

U.S. officials are scrambling to track the source of a major leak of classified documents, which included details on Ukraine’s defense plans and intelligence on diplomatic allies, and are reviewing how they share secrets internally. These documents appeared on social media sites in recent weeks, some of which were meant to be seen only by those with the highest security clearance levels. The leak, said to be one of the largest in the U.S. military’s history and the most damaging since WikiLeaks in 2013, is currently being investigated by the Department of Defense.

Dig deeper: U.S. officials said the documents originated in the government, but some may have been altered. The documents were reportedly changed to understate estimates of Russian casualties and overstate those of Ukrainian forces. The documents also showed that the Biden administration is of the view that Ukraine could run out of ammunition for its air defenses by May. The government also appears to be pessimistic about Ukraine’s prospects in retaking territories captured by Russian forces. Officials and national security experts suspect the leak may have been caused by an American, although pro-Russian actors have not been ruled out.

Bigger picture: While foreign allies of the U.S. are largely silent on the matter, the leak has ruffled feathers and is being closely watched. South Korea has spoken to U.S. Defense Secretary Lloyd Austin about the incident, and Australia has sought further information. The U.S. definitely has some work to do to rebuild the trust of its allies. However, some experts believe the impact from the leak will be short term, while long-term shared interests will remain strong.

SA commentary: Seeking Alpha contributor Mike Lipper said the Ukraine war and growing tensions with China have pushed the U.S. to review where they will get their critical products and services. “I believe we will be involved with Ukraine for many years, possibly generations. The unhappy reason for such a fearful statement comes to us from logistics management.” (13 comments)

$30,000 breached

Bitcoin (BTC-USD) has crossed $30,000 for the first time in 10 months today, as investors are increasingly betting on the Federal Reserve ending its monetary tightening policy ahead of the release of key inflation data tomorrow. The top cryptocurrency jumped to $30.3K, its highest level since June 2022. Ethereum (ETH-USD) rose 2%, inching closer to $2K. “Overall, the trend is up, indicating a bullish market for cryptocurrencies,” Matrixport tweeted. “Crypto has been driven by alpha factors, which is positive.” More than 87% of all BTC future trades liquidated in the past 24 hours were short, or bets against a rise in prices, CoinDesk reported. Losses from these trades amounted to some $145 million in the process. Knox Ridley, Investing Groups leader of ‘Tech Insider Network’, said now that bitcoin (BTC-USD) has risen nearly 90% from its November low, “we must conclude that this appears to be more than just a bear market bounce.” (14 comments)

More vaccines?

The U.S. government is launching a $5B-plus program to accelerate the development of new COVID-19 vaccines and treatments, officials from the Biden administration and the Department of Health and Human Services confirmed yesterday. An HHS official said “Project Next Gen” will encourage public-private collaborations, similar to the “Operation Warp Speed” program that helped develop and distribute COVID vaccines under former President Donald Trump in 2020. “We’ve begun surveying the landscape out there – assessing what vaccine candidates are available, [and] moving through what exciting technologies are there,” said Dawn O’Connell, assistant secretary for preparedness and response at the HHS. O’Connell said the government has started efforts to search for private sector partners. Leading COVID vaccine developers in the U.S. include Pfizer (PFE)/BioNTech (BNTX) and Moderna (MRNA). Last week, Dr. Tedros Adhanom Ghebreyesus, head of the World Health Organization, said the global body could announce an end to the emergency status of COVID this year. The U.S. is expected to lift the public health emergency in May, which will likely result in vaccine sales declining by $10B between 2021 and 2028. (62 comments)

Fees for returns

Amazon (AMZN) has instituted a new fee for some returns at UPS stores in order to compensate for return costs. The e-commerce giant introduced a charge if return options at Whole Foods, Kohl’s or Amazon Fresh locations are closer or just as far than a UPS Store return location. The new fee for returns at UPS stores supplements existing charges for delivery driver pick up of returns. An Amazon spokesperson confirmed the changes in an email to Seeking Alpha. The representative characterized the fee as small, noting that Amazon continues to “offer convenient, easy returns to customers, with one or more options for label-free, box-free returns at no cost.” The company has been on a cost-cutting spree, announcing layoffs of close to 30,000 employees and halting construction of its second headquarters in Virginia. SA contributor Tradevestor noted that the recent moves towards efficiency are more than welcome. “Before we give Amazon way too much credit, let’s remember that it is merely undoing some of its recent self-inflicted and collateral damages,” they cautioned.

What else is happening…

Tesla (TSLA) could continue cutting prices, analysts advise.

Google (GOOG) (GOOGL) fined $32M for blocking rival’s video games.

Global PC shipments fall 29% in first quarter, growth expected after 2023.

Alibaba (BABA) unveils ChatGPT-like service to be integrated across all products.

Petrobras (PBR) plans to honor signed contracts, while stopping pending asset sales.

Newmont (NEM) sweetens bid for Newcrest (OTCPK:NCMGF), valuing it at ~$19.5B.

FTC seeks court order to block ICE’s (ICE) acquisition of Black Knight (BKI) for $11.7B.

Hexo (HEXO) sinks as Tilray Brands (TLRY) confirms acquisition at a 24% discount.

Syneos Health (SYNH) stock gains on report of interest from private equity companies.

Cineworld (OTCPK:CNNWQ) finalizes reorganization plan to emerge from bankruptcy.

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Good morning. Happy Monday. Hope you had a good weekend.

The Asian/Pacific markets leaned up. Japan, South Korea and Thailand did well; China was weak. Most of Europe, Africa and the Middle East are closed. Turkey and Russia are up; Saudi Arabia is down. Futures in the States point towards a moderate down open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is up. Oil and copper are down. Gold is down; silver is up. Bonds are up.

Stories/News from Seeking Alpha…

Grim outlook

Kristalina Georgieva, managing director of the International Monetary Fund, projected global growth to remain around 3% over the next five years, marking the weakest medium-term growth projection since 1990 and well below the 3.8% average from the past two decades. “With rising geopolitical tensions and still-high inflation, a robust recovery remains elusive,” Georgieva said in a recent speech in Washington. That’s on top of the recent pressures in the banking sector that have made the global inflation fight that much more complex, she added.

Dig deeper: The sub-3% growth this year is generally consistent with the 2.9% estimated in January and the 2.7% estimate in October. Advanced economies are expected to weigh the most on global growth, particularly in the U.S. and Europe where rising borrowing costs have hampered demand. The IMF sees some 90% of advanced economies posting a decline in their growth rate in 2023. By contrast, emerging economies are a “bright spot” as India and China together are expected to account for 50% of this year’s global growth.

Inflation fight: Georgieva took note of central banks’ inflation fight in the wake of global banking issues, imploring them to “stay the course” in lowering inflation as long as financial pressures stay limited. While she implied that central banks should keep monetary policy restrictive until price stability is achieved, she urged them to “address financial stability risks when they emerge through appropriate provision of liquidity”. However, if turmoil in the banking system worsened, she said central banks may have to outright cut rates.

Fed watch: Friday’s payrolls report indicated that jobs growth rate is cooling, but the unemployment rate showed a tighter labor market. Traders believe the report locks in a 25-basis point rate hike by the Federal Reserve in May. Fed funds futures are now pricing in ~67% chance of a 25-basis point increase, compared with ~50% probability before the report.

SA commentary: Mott Capital Management, leader of Investing Group ‘Reading The Markets’, said the jobs data eliminated the odds of a rate cut in June. “The data that the Fed is focused on, such as jobs and inflation data, does not support the Fed’s rate-hiking cycle being over or for rate cuts,” he said. “On the other hand, survey data supports that the Fed is done with rate hikes and suggests a substantial economic slowdown is occurring.” (22 comments)

Antitrust concerns

Sen. Elizabeth Warren (D-MA) and three Democrat lawmakers request that the U.S. Dept. of Justice investigate the Warner Bros. Discovery (WBD) merger over alleged anticompetitive behavior a year after it was completed. “Antitrust laws seek to promote consumer choice, product variety, and industry innovation,” Warren – along with Joaquin Castro (D-TX), David Cicilline (D-RI) and Pramila Jayapal (D-WA) – wrote in a letter to the DOJ on Friday. “Accordingly, if a consummated merger results in dramatically less available content and discourages innovation, the merger should be reassessed.” The representatives claim the Warner Bros. Discovery deal has reduced consumer choice and harmed workers in affected labor markets. The company was created a year ago when Discovery combined with AT&T’s (T) WarnerMedia unit. Seeking Alpha contributor Eric Sprague believes Warner Bros. Discovery’s stock is reasonably valued. “WBD has rightsized content investments after recognizing that not all content should be treated equally. Forward-looking investors should tune in for the April 12 press event that will showcase the new product offering for streaming.” (260 comments)

Megapack factory

Tesla (TSLA) plans to build a new factory in Shanghai to produce its Megapack large-scale energy unit. The electric vehicle maker made the announcement at a signing ceremony for the project in Shanghai yesterday. The new factory will be able to produce 10K Megapacks a year. Tesla CEO Elon Musk tweeted that the new Shanghai factory will supplement output of the Megapack plant in California. Construction on the new Shanghai factory is expected to start in the third quarter and production will begin in the second quarter of 2024. The factory will be the automaker’s second in Shanghai as it already has a facility where it manufactures its EVs. Tesla cut prices on all U.S. models late Thursday. The prices of Model 3 and Model Y were trimmed by at least $1,000, while prices of Model S and Model X were cut by $5,000 or more. Citi believes Tesla’s price cuts will put even greater emphasis on its gross margins for Q1. Danil Sereda, Investing Group leader of ‘Beyond the Wall Investing’, thinks Tesla’s latest delivery numbers show overproduction problems and demand side will likely get weaker in the foreseeable future. (85 comments)

Dissent over legality

The battle over the abortion pill is likely headed to the U.S. Supreme Court after two federal judges on Friday offered differing opinions in the legality of the drug. First, Texas-based U.S. District Judge Matthew Kacsmaryk on Friday suspended the Food and Drug Administration’s approval of mifepristone. His decision is essentially an injunction preventing sales of the drug while a case before him, brought by anti-abortion groups, on the approval of the drug continues. However, a matter of hours after the Texas ruling, Washington State District Judge Thomas Rice ruled that the FDA needs to continue “the status quo” with respect to access to mifepristone. Kacsmaryk gave the Biden administration a week to appeal the decision, during which the suspension will be delayed. In his ruling, Kacsmaryk said the FDA had made legal errors in its approval. Mifepristone, approved in 2000, also goes by the brand name Mifeprex. (147 comments)

Today’s Economic Calendar
10:00 Wholesale Inventories (Preliminary)
12:30 PM Investor Movement Index

What else is happening…

Exxon (XOM) holds informal talks with Pioneer Natural (PXD) on potential mega-deal.

Aramco (ARMCO) maintains crude supply to Asian refiners despite production cut.

Teck (TECK) reiterates benefits of planned split, gets entrepreneur Lassonde’s backing.

Ahead of Biden visit, Sunak says more work needed to restore Northern Ireland govt.

Premier cancer research event AACR kicks off this week, here’s what to expect.

Apple (AAPL) slips as IDC says Mac shipments fell 40% amid PC weakness.

Emirates Telecom to pick up 50% stake in Uber’s (UBER) Careem for $400M.

Baidu (BIDU) sues Apple (AAPL), app developers over bogus Ernie bot apps.

Tupperware Brands (TUP) stock tumbles on delisting risk, advisor engagement.

Netflix (NFLX) scores streaming eyeballs with ‘You’, Chris Rock comedy special.

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