Good morning. Happy Friday.
The Asian/Pacific markets did well. China, Japan, India, Taiwan and New Zealand led. Europe, Africa and the Middle East currently lean down. Poland, France, Turkey, Greece, Spain, Italy and the Czech Republic are down the most. Futures in the States point towards a down open for the cash market.
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The dollar is down. Oil is up; copper is flat. Gold and silver are down. Bonds are up.
Stories/News from Seeking Alpha…
Is it here yet?
Recession talk is all the rage, but the U.S. economy managed to eke out another gain in Q1, with GDP growth expanding by an annualized rate of 1.1%. That severely missed estimates of 2.0% growth and was slower than the 2.6% growth seen in Q4, but investors were excited nonetheless. In fact, the Dow (DJI) and S&P 500 (SP500) on Thursday notched their biggest gains since January, while the Nasdaq Composite (COMP.IND) scored its best winning session since March.
What’s going on? Many analysts and economists had predicted that a recession would already come in Q1, and while the U.S. economy is clearly shifting into a lower gear, the latest data may suggest that it also might be able to escape one in 2023. The numbers also support the case for the Fed to begin pausing its aggressive rate hike cycle, while consumer demand is still holding strong despite lower private inventories and residential fixed investment. Robust job growth has additionally outpaced layoffs, with the unemployment rate still at multi-decade lows, suggesting that Americans might be well-positioned to deal with inflation and economic uncertainty.
“The ‘R Word’ that one should use when discussing the economy over the past two years should be resilient, not recession,” wrote RSM chief economist Joseph Brusuelas. “The shocks of inflation and interest rate increases and a tightening in lending that are now affecting small and midsize businesses have yet to put a material dent in consumption. That strength is what is propping up overall economic activity as businesses have pulled back on both inventory accumulation and fixed investment.”
Outlook: Some contend that a rolling recession has been happening to different sectors of the economy, and could support a soft landing, while others are doubling down on a mild to moderate recession coming in the latter half of 2023. “The principal problem of inflation is the same as it has been since it was being dismissed as ‘transitory’ by Fed and Treasury officials: there is too much money in the economy,” writes SA author J.G. Collins, giving separate portfolio advice to younger and older investors. Also keep an eye out today for personal consumption expenditures, the Fed’s favorite inflation gauge. (130 comments)
Tech is back
Most of the Big Tech earnings are now in, and WSB subscribers were correct in forecasting big gains for Microsoft (MSFT), which rose 8.5% after the bell on Tuesday. The biggest surprise was Meta Platforms (META), however, which eclipsed the advance of the Windows maker with a nearly 12% jump of its own during the following session. One of the big takeaways from the movement is just how much the industry has bolstered the market this year, with Wall Street indices yesterday recording their best day in months as tech stocks continue to dominate the landscape. Two months ago, we also asked WSB subscribers which S&P 500 sector will walk away with the biggest gain in 2023. So far, it seems like they were also right by a large margin. (10 comments)
The Outlier
Soaring nearly 12% AH on Thursday, Amazon (NASDAQ:AMZN) gave up all of its gains, and then some, with the stock ending the session down 2%. Triggering the initial move higher were strong quarterly profits, cost cuts and robust sales, but worries set in on the post-earnings conference call as executives gave somewhat of a cloudy outlook. While AWS only accounts for around 17% of Amazon’s (AMZN) total revenue, the cloud segment is the engine driving its profitability, with the company’s retail operations losing cash during each of the past six quarters. “There’s no revenue problem here,” writes SA contributor Bill Maurer, while Investing Group Leader Michael Wiggins De Oliveira says AWS is struggling to live up to expectations. (115 comments)
Weekend announcement?
The U.S. government is “coordinating urgent talks” to save First Republic Bank (NYSE:FRC) as “private-sector efforts led by the bank’s advisers have yet to reach a deal.” That’s according to Reuters, which said the FDIC, Treasury Department and Federal Reserve are all involved, and seems to echo similar comments made by White House Press Secretary Karine Jean-Pierre. While the efforts may help bring more parties such as banks and private equity firms to the negotiating table, it’s still unclear whether the U.S. government will ultimately participate in the rescue. On Monday, First Republic (FRC) revealed that deposit outflows totaled $70B in Q1, and put the spotlight on Wall Street institutions that deposited $30B at the bank on March 16 to stave off a regional banking crisis. (21 comments)
Today’s Economic Calendar
8:30 Personal Income and Outlays
8:30 Employment Cost Index
9:45 Chicago PMI
10:00 Consumer Sentiment
1:00 PM Baker Hughes Rig Count
3:00 PM Farm Prices
What else is happening…
Four companies indirectly owned by Berkshire (BRK.B) file for bankruptcy.
Intel (INTC) Q2 guidance suggests PC downturn is near end.
Costs weigh on Pinterest (PINS) as investors focus on forecast.
No better luck at Snap (SNAP) as revenue slumps worse than expected.
Fed’s Powell reportedly had call with Russians who posed as Zelenskyy.
Industrials: Caterpillar’s (CAT) reverses after reporting Q1 results.
Comcast (CMCSA) beats estimates, Peacock subscriber base up 60%.
Next layoffs: Dropbox (DBX) to cut global workforce by 16%.
Cannabis stocks jump as bipartisan SAFE banking bill reintroduced.
Big Oil on tap: Exxon (XOM) and Chevron (CVX) set to report.
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Good morning. Happy Thursday.
The Asian/Pacific markets were mostly up. Japan, China, Hong Kong, South Korea, India, Indonesia and the Philippines did well while Singapore and Thailand were weak. Europe, Africa and the Middle East lean to the upside. Denmark, Poland, the UAE, Hungary, Portugal and Sweden are leading. Futures in the States point towards a moderate gap up open for the cash market.
————— Masterclass Overview –>> here —————
The dollar is up. Oil is up; copper is down. Gold is flat; silver is up. Bonds are down.
Stories/News from Seeking Alpha…
Another rescue?
Fighting back
Walt Disney (DIS) has filed suit against Florida Gov. Ron DeSantis, saying it’s “forced to defend itself against a state weaponizing its power to inflict political punishment.” The company alleges violations of the Contracts Clause, Takings Clause, Due Process Clause and the First Amendment. It’s asking the court to declare Florida’s new Legislative Declaration “unlawful and unenforceable” and that its contracts remain in effect. The move quickly followed a vote at a board appointed by DeSantis to nullify agreements made by the company to maintain significant control over expansion at Walt Disney World. Within minutes, Disney sued DeSantis, the five-member board, and other state officials, accusing them of a “targeted campaign of government retaliation”.
Background: DeSantis has been at war with Disney in a conflict that ramped up as the company took a position against the state’s Parental Rights in Education Act, the so-called “Don’t Say Gay” law, under previous CEO Bob Chapek. That led to a broad effort by DeSantis to end decades-long special treatment that Disney received through the Reedy Creek Improvement District, established in 1967 and allowing Disney to oversee land use and provide municipal-type services like electricity and emergency fire and medical services. “The corporate kingdom finally comes to an end,” DeSantis said after signing a bill in February giving the state control over Reedy Creek. He wasn’t aware at the time that Disney reached a deal with the district’s outgoing board returning power to the company. DeSantis promised to nullify that action, calling the deal “defective.”
SA commentary: Seeking Alpha contributor Juxtaposed Ideas believes the impact of lost privilege on Disney could be massive, given that it would lose the autonomy of management within its properties with the supposed reduced tax advantages moving forward. “Despite the upside potential, we expect the uncertainties to cause further sideways activities for Disney stock, before recovering upon more clarity on the situation,” they said. Eugenio Catone is on the sidelines on Disney, saying there is a real risk that it may be “way ahead of what the current sentiment is on the theme of inclusion and diversity.” (596 comments)
Meta’s AI flex
Meta Platforms (META) jumped 10% after hours yesterday following first-quarter earnings where it easily beat expectations on top and bottom lines, thanks to a better-than-expected ad recovery at its flagship Facebook platform. Facebook daily active users rose 4% to a better-than-expected 2.04B, and monthly active users were 2.99B, roughly in line with expectations. For the wider “family of apps” (including Instagram and WhatsApp), daily active people rose 5% year-over-year to 3.02B and monthly active people rose 5% to 3.81B, both beating consensus. Meta’s guiding to Q2 revenue of $29.5B-$32B, on the high side of consensus for $29.5B. Meta CEO Mark Zuckerberg expounded on AI in the earnings call, saying AI work is improving monetization. Investing Group leader Jonathan Weber lauded Meta’s results, but believes it doesn’t have a bargain valuation. “While Meta does not look unreasonably expensive, it also isn’t a pound-the-table buy like it was a couple of months ago,” he said. Michael Wiggins De Oliveira said the earnings report showed that Meta is listening to investors and tempering its investment into the metaverse, while seeking to embrace the AI wave. (85 comments)
Curbing competition
Activision (ATVI) shares ended nearly 12% lower yesterday after the U.K.’s regulator blocked Microsoft’s (MSFT) proposed deal to buy the video game publisher for almost $69B, citing concerns about cloud gaming. The Competition and Markets Authority said Microsoft already has “strong advantages” in cloud gaming, as it owns Windows, Azure cloud platform and xCloud, along with its Xbox gaming base. “We concluded that combining Activision’s strong portfolio of games with Microsoft’s current multiple cloud gaming strengths would enable Microsoft to harm current and emerging cloud gaming competitors by withholding Activision games from them,” the CMA said. Microsoft’s President Brad Smith said the company remains “fully committed” to the deal and will appeal the CMA’s decision. Wall Street analysts were surprised by the move. Jefferies was particularly surprised that the U.K. used cloud-based gaming as its main reason for blocking the deal. Investing Group leader Bram de Haas believes the deal may still go through, but the odds have been significantly hurt by the CMA’s move, making it 60%-80% likely to be blocked. (92 comments)
Time to pause?
The plunge in shares of First Republic (FRC) brought out some betting that the Fed could think twice on a rate hike next week. First Republic sank 30% yesterday as it looked to get larger banks to buy long-dated securities above market value to shore up its balance sheet. That took the odds of a Fed pause on May 3, based on Fed Funds futures contracts, above 30% at their peak. The move indicates there is “still concern among market participants that the turmoil we saw last month could flare back up again” and speaks “to the fact that any financial turmoil could stop the Fed in its tracks,” said Jim Reid, Deutsche Bank’s head of global credit strategy. But FRC looks to have stabilized and is up 5% premarket today, while the iShares U.S. Regional Banks ETF (IAT) closed higher yesterday, indicating little fear of contagion. The odds of a Fed pause have retreated to 25% and there is a near-90% chance priced in for a cut by the end of the year. “We expect the Fed to walk a tightrope, providing as much money as the banking system needs while increasing or maintaining the price of credit that the system is extending to its customers,” said William Blair global strategist Olga Bitel. (14 comments)
Today’s Economic Calendar
8:30 GDP Q1
8:30 Initial Jobless Claims
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $35B, 7-Year Note Auction
4:30 PM Fed Balance Sheet
What else is happening…
Amazon (AMZN) starts previously announced layoffs in white collar divisions.
First Republic’s (FRC) access to Fed facilities likely to be limited if ratings cut.
Bank stress makes Fed interest rate hike in May a little less likely, analysts say.
Druckenmiller bets against U.S. dollar amid highly uncertain economic outlook.
Democratic senators introduce bill to enhance CMS drug price negotiations.
Eli Lilly’s (LLY) weight loss therapy shows ~16% weight loss in Phase 3 trial.
Tucker Carlson speaks after exit from Fox News, slams political debates on TV.
TotalEnergies (TTE) to sell Canada oil sands assets to Suncor (SU) in $4.1B deal.
Oil prices slump to April lows as demand worries erase gains from OPEC output cut.
Schlumberger (SLB), Halliburton (HAL) say customer in Mexico owes more than $1B.
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Good morning. Happy Wednesday.
The Asian/Pacific markets leaned down. Hong Kong and Indonesia did well; Japan, New Zealand, Malaysia and the Philippines were weak. Europe, Africa and the Middle East are currently mostly down. Denmark, France, Turkey, Germany, Greece, Switzerland, the Netherlands, Italy and Sweden are down the most. Futures in the States point towards a flat open for the S&P and a moderate gap up open for the Nasdaq.
————— BLOG: Update of Breadth Readings —————
The dollar is down. Oil is down; copper is up. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
Another rescue?
The next few days are expected to be crucial for the fate of First Republic Bank (FRC), as the White House, Federal Reserve and Treasury are evaluating plans to save the troubled regional lender under an “open bank” rescue. One scenario under consideration is to create a special purpose entity, with the big banks that earlier supported First Republic with $30B in deposits purchasing its underwater loans on its balance sheet above where they would be marked. If this occurs, First Republic may go out and raise new equity.
More restructuring: The lender is also considering divesting $50B-$100B of long-dated securities and mortgages as part of a larger restructuring plan. Any sales would help address the bank’s asset-liability mismatch. First Republic may offer warrants or preferred equity as an incentive to buy assets above their market value. The bank is striving to strengthen its balance sheet to avert a takeover by regulators and to allow for a possible capital raise. It has been working on cutting costs, with plans to reduce its workforce by 20%-25% in Q2 and condense corporate office space. First Republic, which has been struggling with customers fleeing the bank, reported net deposit outflows of $72 billion during its first quarter, despite support from 11 of the biggest lenders in the U.S.
SA commentary: SA contributor Eugenio Catone noted that in just three months, First Republic’s deposit structure has completely changed. “Despite continued Fed support, I don’t see how FRC can recover. Even if it does, to believe that the stock price will return close to the levels of three months ago is totally misplaced,” he warned. Investing Group leader Stone Fox Capital believes First Republic’s stock won’t rally until the bank’s flawed business model is fixed. (102 comments)
Big Tech beats
Alphabet (GOOG) (GOOGL) rose 4% after hours yesterday as its first-quarter earnings cleared Street expectations as a result of strong performance in its search and cloud businesses. Alphabet posted $69.8B in revenues, up 3% year-over-year and up 6% in constant currency, while EPS was $1.17. The company also expanded its stock buyback plan by an additional $70B. Investing Group leader Jonathan Weber believes Alphabet’s pressured margins could improve once cost-cutting efforts pay off in Q2 and beyond. However, prior to the earnings, Danil Sereda raised concerns over increased competition, tightening credit conditions and the resulting weakening of its customer base. In other news, Microsoft (MSFT) also surged 9% yesterday as its third-quarter results surpassed estimates, indicating growing strength in its AI and cloud businesses. The software giant earned $2.45 a share, on revenue of $52.9B, compared to a profit of $2.22 a share, on $49.4B in sales in the year-ago period. Investing Group leader Livy Investment Research believes MSFT shares remain well positioned for further upside potential, buoyed by expectations for a stronger second half. However, Ahan Vashi believes the risk/reward on offer is highly unfavorable. (120 comments)
All things equal
The Big Tech earnings bonanza this week shines a light on how much influence a handful of stocks have on the broader market. Just four names reporting this week account for 14% of the S&P 500 (SP500) (SPY) (VOO) (IVV), as Deutsche Bank notes. And there may be a case for avoiding that kind of huge weighting, given the performance of the Invesco S&P 500 Equal Weight ETF (RSP). It’s up nearly 470% in the 20 years since its inception. Note that the ETF contains an equal weight of each of the S&P 500 (SP500) holdings within the fund. Read more to see how it matches up against the major S&P-indexed ETFs. (30 comments)
Targeting drugmakers
Sens. Bernie Sanders (I-Vt.) and Bill Cassidy (R-La.) said yesterday that a bipartisan deal has been reached to advance legislation that will lower prescription drug prices and reform pharmacy benefit managers. The Senate Committee on Health, Education, Labor and Pensions will hold a markup on four bills on May 2. The pieces of legislation are: S.1067, Ensuring Timely Access to Generics Act of 2023; S.1114, Expanding Access to Low-Cost Generics Act of 2023; S.1214, Retaining Access and Restoring Exclusivity Act; and the Pharmacy Benefit Manager Reform Act. S.1067 is designed to stop pharma companies filing petitions to delay generics from hitting the market, while S.1114 makes changes to the 180-day exclusivity for generic filers that are the first to challenge a brand-name drug’s patents and meet regulatory requirements. The RARE Act seeks to clarify a law following a 2021 court decision. Last month, Sens. Maggie Hassan (D-N.H.) and Mike Braun (R-Ind.) reintroduced legislation aimed at ending a loophole that at least one pharma company has used to block competition. (46 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Durable Goods
8:30 International Trade in Goods (Advance)
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
11:30 Results of $24B, 2-Year FRN Auction
1:00 PM Results of $43B, 5-Year Note Auction
What else is happening…
Bipartisan bill set to block children under 13 from accessing social media.
Alibaba (BABA) leads Chinese tech losses as senators call for cloud sanctions.
McDonald’s (MCD) shares reach all-time high as consumers lap up higher prices.
Chipotle (CMG) climbs 4% after comparable sales sizzle in Q1, margins improve.
GSK (GSK) revenue dragged by lower COVID product sales, FY outlook affirmed.
Visa (V) Q2 revenue and earnings top consensus amid strong cross-border volume.
PacWest (PACW) jumps 14% as Q1 earnings beat expectations, deposits stabilize.
Enphase Energy (ENPH) plunges 15% after guiding Q2 revenue below consensus.
SQM (SQM), Albemarle (ALB) hold talks on Chile’s lithium nationalization plan.
President Joe Biden touts construction jobs as re-election bid kicks off.
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Good morning. Happy Tuesday.
The Asian/Pacific markets were mostly weak. China, Hong Kong, South Korea, Taiwan, Singapore and Thailand led to the downside. Europe, Africa and the Middle East are currently weak. Saudi Arabia is up, but France, Turkey, Greece, Norway, Hungary, Spain, the Netherlands, Italy and Austria are down. Futures in the States point towards a moderate down open for the cash market.
————— Leavitt Brothers Overview –>> here —————
The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are up.
Stories/News from Seeking Alpha…
Big Week, Big Tech
Prepare for some volatility as investors head into the heart of earnings season, with Big Tech stepping up to the plate this afternoon. Alphabet (GOOG, GOOGL) and Microsoft (MSFT) are first in the batting order, but it remains to be seen whether they’ll manage a base hit, or if investors will send them back to the dugout. Today’s double-header results are not the only ones on deck, with the lineup followed by Meta Platforms (META) tomorrow, and Amazon (AMZN) batting cleanup after the bell on Thursday. “The post-Covid hangover continues, but this isn’t 2001-2002,” writes Brian Gilmartin, CFA, outlining expectations before the quarterly numbers from mega-cap tech.
Alphabet: While the advertising slowdown will be front and center for earnings watchers, they’ll also be seeking information about Google’s approach to the hot topic of artificial intelligence and how chatbots will change online search. Wall Street analysts expect Alphabet to post EPS of $1.07, on $68.8B in revenues (which would mark a meager 1.2% growth, similar to last quarter). The plan to cut 12,000 workers will also land on results as Alphabet expects to take charges of $1.9B-$2.3B, with most of that centering on the first quarter.
Microsoft: Wall Street is going to zero in on what the software giant has to say about its Azure cloud business, as well as its massive push into the AI arena via its multibillion-dollar investment in ChatGPT developer OpenAI. Another focus will be on the growth story at Microsoft Teams, which may contrast with the company’s personal computing segment that has seen cooling demand from pandemic-era highs. Analysts currently estimate that Microsoft will report a profit of $2.23 a share, on $51B in revenue for its fiscal third quarter (the Windows maker earned $2.22 a share, on $49.4B in sales, a year ago).
Strike zone: The latest Wall Street Breakfast survey is still open, with most subscribers betting that Microsoft (MSFT) and Alphabet (GOOG, GOOGL) will be the biggest gainers in the session following the tech titans’ batch of earnings. Cast your vote and see the full breakdown here. Over at Meta (META), investors will debate if the bases are still full in terms of monthly active users, ad product innovation and how metaverse expansion efforts will play out in the age of AI. SA contributors The Asian Investor and Simple Investing also go head-to-head over what lies in store for Amazon (AMZN) with AWS, top line growth, cost-saving measures, free cash flow and margins at a full count.
The axe falls
Fox News and top host Tucker Carlson “have agreed to part ways” – a bombshell move that comes on the heels of a hefty $788M settlement over Dominion Voting Systems’ defamation suit against the network. Shares of Fox (FOX) closed down 3% on Monday after the announcement, and fell another 9% in premarket trade, while conservative-focused video platform Rumble (RUM) advanced with Tucker now a free agent. Across the aisle, CNN (WBD) fired star anchor Don Lemon, adding to a news-heavy session for the cable news space. He faced a backlash for on-air comments about women, and the news followed the departure of NBCUniversal (CMCSA) CEO Jeff Shell over an “inappropriate relationship.” (456 comments)
Retail army blues
Retail investor participation in the stock market is still historically high, near the 90th percentile, according to Morgan Stanley. But the buy/sell imbalance is positive on just one of the S&P sectors, while three others are seeing historically negative sentiment. Meanwhile, J.P. Morgan global strategist Marko Kolanovic is sounding a bullish siren on earnings season for two main reasons, but also recommends selling the resulting bounces. Elsewhere on Wall Street, Goldman Sachs upgraded its sector recommendations, giving its rationale for buying mining stocks. See all its sector calls here. (4 comments)
Running in 2024
President Biden officially launched his re-election campaign this morning, seeking a second term in office after defeating former President Donald Trump in 2020. A rematch between the two is highly likely, as Trump still commands a firm hand over the GOP, though there is an increasing list of Republican challengers that are seeking a primary win in 2024. On the economic front, Biden is likely to tout his handling of the COVID recovery and decades-low unemployment rate, as well as the passing of the CHIPS Act and climate-focused investment. However, inflation has heated up under his watch, and while things have eased in recent months, Americans may be reminded of the damaging price pressures if it ends up leading to a recession. (53 comments)
Today’s Economic Calendar
9:00 S&P CoreLogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 Consumer Confidence
10:00 New Home Sales
10:00 Richmond Fed Mfg.
1:00 PM Results of $42B, 2-Year Note Auction
1:00 PM Money Supply
What else is happening…
Coca-Cola (KO) gains after smashing organic sales expectations.
Disney (DIS) layoffs under way, to reach 4,000 by end of week.
Epic fight: Apple (AAPL) wins appeal backing its App Store policy.
Corn slumps to eight-month low after China cancels purchase.
Department of Energy to crack down on extensions for LNG projects.
Super Mario Bros. Movie (CMCSA) led box office for third straight weekend.
Coinbase (COIN) slides as crypto prices extend retreat.
Trillium proposes to acquire Getty Images (GETY) for $10 per share.
First Republic Bank (FRC) deposits sank by more than $70B in Q1.
These stocks are expected to be beneficiaries from Bed Bath (BBBY) bankruptcy.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets were mixed. India, New Zealand and the Philippines did well; China, Hong Kong and South Korea were weak. Europe, Africa and the Middle East are currently mixed. The UAE, Israel and Sweden are up; Greece, Hungary, Italy and Portugal are down. Futures in the States point towards a down open for the cash market.
————— Leavitt Brothers Overview –>> here —————
The dollar is down. Oil and copper are down. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Bed Bath & Bankruptcy
Long-struggling retailer Bed Bath & Beyond (NASDAQ:BBBY) has filed for Chapter 11 bankruptcy protection, but said it intends to keep the chain’s 480 stores open for the moment as it attempts to auction off assets through the restructuring process. That includes 360 Bed Bath shops and 120 buybuy Baby locations. In the meantime, the company has secured a commitment for some $240M in debtor-in-possession financing from Sixth Street Specialty Lending Inc., listing $5.2B of debts and $4.4B of assets in its bankruptcy filing.
Backdrop: The first Bed ‘n Bath store opened in 1971, but the firm went public under the BBBY ticker in 1992 and eventually added buybuy Baby, Cost Plus World Market, Christmas Tree Shops and other chains. At its peak, the company operated more than 1,500 U.S. and Canadian locations. Missing the boat on the internet, the firm began to falter in 2019, posting its first-ever annual loss even as activist investors began a push to remove then-CEO Steven Temares and restructure BBBY’s board. Store closures accelerated in 2020 during the COVID-19 pandemic, and Bed Bath began scaling back the use of the ubiquitous 20%-off coupons that it had regularly been mailing to millions of U.S. households.
“Customers have trusted us through the most important milestones in their lives – from going to college to getting married, settling into a new home to having a baby,” CEO Sue Gove said in a company statement. “We deeply appreciate our associates, customers, partners and the communities we serve, and we remain steadfastly determined to serve them throughout this process. We will continue working diligently to maximize value for the benefit of all stakeholders.”
Possible failure: By early this year, the company issued a “going concern” statement, warning that management had “substantial doubt” the firm could remain in business without a restructuring or asset sale. However, Bed Bath & Beyond enjoyed several brief, double-digit percentage rallies since then, as some speculators bet that the firm could survive and several meme rallies took hold. Shares even soared in percentage terms as recently as this past week after BBBY sold $48.5M of new stock.
What’s next? BBBY’s share price – which topped $80 intraday in 2014 – fell to as low as $0.23 earlier this month, and is now down 40% to $0.18 in premarket trading. “Some remnants may survive, but they will likely be small and will leave common shareholders wiped out,” writes Investing Groups Leader Daniel Jones in SA article “The Last Nail In The Coffin.” Contributor WYCO Researcher also explores why Bed Bath had to file for bankruptcy now, while Henrik Alex tells investors to move on given the absolute priority rule. (162 comments)
Playing with debt
An unprecedented dislocation between short Treasury maturities is continuing as traders move cash away from the 3-month bill, which is likely to be most impacted by a debt ceiling fight in Washington. The spread was already the highest it’s ever been, but the 3-month yield (US3M) jumped 12 basis points to 5.23% overnight, while the 1-month yield (US1M) rose 2 basis points to 3.36%, bringing the spread to 187 bps. Lower-than-expected tax revenue collections have brought forward expectations of when the U.S. could face a default question, though there’s likely only a 2% chance that the U.S. defaults on its debt despite growing fearmongering. Last week, House Speaker Kevin McCarthy introduced a bill that would raise the $31.4T debt ceiling by $1.5T along with limiting federal spending, which would be enough to avert a default until at least April 2024. (7 comments)
Serious outflows
Credit Suisse (NYSE:CS) has revealed more details about what happened to the troubled bank before regulators worked out a deal for the institution to be swallowed by Swiss rival UBS (NYSE:UBS). Worries of a global banking crisis saw the lender suffer $68.6B of asset outflows in the first quarter, according to its Q1 earnings report, and while the outflows have since stabilized to much lower levels, they “had not yet reversed as of April 24, 2023.” In a weird string of banking math, Credit Suisse posted a one-off $14B profit for the quarter due to the $17B writeoff of AT1 bonds in its controversial emergency rescue. Without it, the bank would have lost more than $2B. Rumor also has it that Santander (NYSE:SAN) is in talks to poach several of Credit Suisse’s most senior investment bankers as SA analyst Anna Sokolidou cautions that the UBS merger is not without consequences. (11 comments)
Stuck in the mud
The S&P (SP500) (SPY) is more stuck in the mud than bulletproof, with countervailing fundamental forces split between positive and negative, Goldman Sachs’ head of global hedge fund trading said on the bank’s new podcast. Tony Pasquariello outlines those forces and why the VIX (VIX) has tumbled. SA’s head of quant, Steve Cress also dug into those issues on the Investing Experts Podcast, as well as the chances of a soft landing, and why Fastly (FSLY) is one of his top five picks for earnings season. Hear the episode and see the other stocks that get top earnings revisions grades here. (11 comments)
Today’s Economic Calendar
8:30 Chicago Fed National Activity Index
10:30 Dallas Fed Manufacturing Survey
What else is happening…
IPO comeback? J&J (JNJ) to launch roadshow for consumer health unit.
Deeper dive: What is behind the biotech M&A resurgence?
NBCUniversal (CMCSA) CEO departs after ‘inappropriate relationship.’
Boston Beer (SAM) unlikely takeover target for Heineken (OTCQX:HEINY).
EPA set to propose restrictions on power plant greenhouse gases.
Ad controversy: Bud Light (BUD) marketing exec takes leave of absence.
Is Tesla (TSLA) preparing to ship cars to North America from China?
C3.ai (AI) slips after being cut to underperform at Wolfe Research.
TV usage drops again, but cable gets a basketball bounce.
Apple (AAPL) said to be working on app for mental, physical health.
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