People walk by a CitiBank location in Manhattan on March 01, 2024 in New York City.
Spencer Platt | Getty Images
LONDON — British regulators on Wednesday dished out a combined £61.6 million ($79 million) in fines to U.S. investment bank Citi for failings in its trading systems and controls.
The fines were issued by the Prudential Regulation Authority and the Financial Conduct Authority, whose investigation focused on the period between April 1, 2018, and May 31, 2022. Citi qualified for a 30% reduction in the amount of the penalty after agreeing to resolve the matter.
“Firms involved in trading must have effective controls in place in order to manage the risks involved. CGML [Citigroup Global Markets Limited] failed to meet the standards we expect in this area, resulting in today’s fine,” Sam Woods, deputy governor for prudential regulation and the chief executive officer of the PRA, said in a statement Wednesday.
The regulators said that certain system and control issues persisted during the probe period and led to trading incidents, such as so-called fat-finger trading blunders. The main incident highlighted took place on May 2. 2022, when an experienced trader incorrectly inputted an order, which resulted in $1.4 billion “inadvertently being executed on European exchanges.”
“Deficiencies in CGML’s trading controls contributed to this incident, in particular the absence of certain preventative hard blocks and the inappropriate calibration of other controls,” the statement read.
In a statement to CNBC, a Citi spokesperson said that the bank was pleased to resolve the matter from more than two years ago, “which arose from an individual error that was identified and corrected within minutes.”
“We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.” the spokesperson said.
Traders work on the floor of the New York Stock Exchange during morning trading on May 17, 2024 in New York City.
Angela Weiss | AFP | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Rate cuts several months away Federal Reserve Governor Christopher Waller said he does not think further rate increases are necessary, but he will need convincing before backing any rate cuts. “I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy,” Waller said. According to the CME Group’s FedWatch Tool, the first rate cut could come as early as September.
Gasoline reserve release The Biden administration will release 1 million barrels of gasoline from reserves to reduce prices at the pump ahead of the Fourth of July holiday. OPEC production cuts and fears the Israel-Hamas war could engulf the wider Middle East sent U.S. gasoline futures soaring 19%. “By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state [region] and northeast at a time hardworking Americans need it the most,” Energy Secretary Jennifer Granholm said.
Pixar job cuts Pixar Animation Studios will lay off about 175 employees,or around 14% of its workforce, a spokesperson for parent company Walt Disney told CNBC. CEO Bob Iger wants Pixar to focus on box office releases and not on short series for Disney+. Pixar and Walt Disney Animation have struggled to generate more than $480 million at the global box office since 2019. Before the pandemic, “Coco” generated $796 million globally, while “Incredibles 2″ tallied $1.24 billion, and “Toy Story 4” snared $1.07 billion worldwide.
[PRO] When Nvidia rises CNBC’s Ganesh Rao takes a look at six artificial intelligence-related stocks that have historically reacted positively to Nvidia’s quarterly earnings. Five listed in the United States and one in Japan have risen between 6% and 33% in the past after Nvidia revealed bumper earnings.
Few CEOs are strong-willed and have the vision or audacity to redefine their industries. Steve Jobs revolutionized mobile phones with the iPhone, Elon Musk challenged gas-guzzling Detroit's dominance with electric vehicles, and Jamie Dimon, CEO of JPMorgan Chase, has done the same for the often-criticized grey banking industry.
Dimon might seem like an unusual addition to this list of innovators. Yet, he took a bank ranked eighth on Wall Street in 2006 and propelled it to the top spot within five years, surpassing giants like Goldman Sachs, Deutsche Bank, and Citi.
However, Dimon's inclusion here isn't solely due to his bank's impressive growth. Like his peers, he isn't afraid to stand up to his big institutional investors. This was evident at a recent investor day, where the headline revolved around his potential retirement in the next five years.
When pressed on when the bank would repurchase its own shares, Dimon's response was unequivocal: "I want to make it really clear, OK? We're not going to buy back a lot of stock at these prices."
He went on to say, "Buying back stock of a financial company greatly in excess of two times tangible book is a mistake. We aren't going to do it."CNBC's Hugh Son covered this exchange in detail, providing further insight into the share buyback debate.
Unlike CEOs of companies like Apple, Alphabet, and Meta, who have succumbed to pressure and used their vast cash reserves for share buybacks, Dimon resists this trend. Share buybacks primarily benefit large investors by inflating the value of their holdings.
Dimon could have easily agreed, considering his estimated $2.2 billion net worth, largely tied to his bank holdings. Critics might argue it's easy for him to forego additional wealth, given his substantial $36 million compensation package in 2023.
However, it's undeniable that Dimon has successfully navigated nearly two decades of banking crises, recessions, and a volatile political climate. He has built JPMorgan Chase into the largest bank in the United States by assets, with a market capitalization approaching $600 billion, and at 68 he's still going strong.
— CNBC's Jeff Cox, Hakyung Kim, Alex Harring, Sophie Kinderlin, Leslie Josephs, Hugh Son, Spencer Kimball and Sarah Whitton contributed to this report.
Traders work on the floor of the New York Stock Exchange during morning trading on May 17, 2024 in New York City.
Angela Weiss | AFP | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Rate cuts several months away Federal Reserve Governor Christopher Waller said he does not think further rate increases are necessary, but he will need convincing before backing any rate cuts. “I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy,” Waller said. According to the CME Group’s FedWatch Tool, the first rate cut could come as early as September.
Gasoline reserve release The Biden administration will release 1 million barrels of gasoline from reserves to reduce prices at the pump ahead of the Fourth of July holiday. OPEC production cuts and fears the Israel-Hamas war could engulf the wider Middle East sent U.S. gasoline futures soaring 19%. “By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state [region] and northeast at a time hardworking Americans need it the most,” Energy Secretary Jennifer Granholm said.
Pixar job cuts Pixar Animation Studios will lay off about 175 employees,or around 14% of its workforce, a spokesperson for parent company Walt Disney told CNBC. CEO Bob Iger wants Pixar to focus on box office releases and not on short series for Disney+. Pixar and Walt Disney Animation have struggled to generate more than $480 million at the global box office since 2019. Before the pandemic, “Coco” generated $796 million globally, while “Incredibles 2″ tallied $1.24 billion, and “Toy Story 4” snared $1.07 billion worldwide.
Singapore Airlines: one dead, 30 injured One person died and 30 people were injured aboard a Singapore Airlines flight that was hit by severe turbulence and forced to land in Thailand. Singapore Airlines Flight 321 encountered “sudden, severe turbulence” about 10 hours into a flight from London to Singapore, the airline said. The Boeing 777-300ER plane was carrying 211 passengers and 18 crew members.
[PRO] Stubborn bear With the S&P 500 index up more than 11% so far this year, Wall Street strategists have been revising their previously pessimistic outlooks for the benchmark. Against this backdrop, CNBC’s Jesse Pound explores why JPMorgan’s Marko Kolanovic is maintaining his negative outlook for stocks.
Few CEOs are strong-willed and have the vision or audacity to redefine their industries. Steve Jobs revolutionized mobile phones with the iPhone, Elon Musk challenged gas-guzzling Detroit's dominance with electric vehicles, and Jamie Dimon, CEO of JPMorgan Chase, has done the same for the often-criticized grey banking industry.
Dimon might seem like an unusual addition to this list of innovators. Yet, he took a bank ranked eighth on Wall Street in 2006 and propelled it to the top spot within five years, surpassing giants like Goldman Sachs, Deutsche Bank, and Citi.
However, Dimon's inclusion here isn't solely due to his bank's impressive growth. Like his peers, he isn't afraid to stand up to his big institutional investors. This was evident at a recent investor day, where the headline revolved around his potential retirement in the next five years.
When pressed on when the bank would repurchase its own shares, Dimon's response was unequivocal: "I want to make it really clear, OK? We're not going to buy back a lot of stock at these prices."
He went on to say, "Buying back stock of a financial company greatly in excess of two times tangible book is a mistake. We aren't going to do it."CNBC's Hugh Son covered this exchange in detail, providing further insight into the share buyback debate.
Unlike CEOs of companies like Apple, Alphabet, and Meta, who have succumbed to pressure and used their vast cash reserves for share buybacks, Dimon resists this trend. Share buybacks primarily benefit large investors by inflating the value of their holdings.
Dimon could have easily agreed, considering his estimated $2.2 billion net worth, largely tied to his bank holdings. Critics might argue it's easy for him to forego additional wealth, given his substantial $36 million compensation package in 2023.
However, it's undeniable that Dimon has successfully navigated nearly two decades of banking crises, recessions, and a volatile political climate. He has built JPMorgan Chase into the largest bank in the United States by assets, with a market capitalization approaching $600 billion, and at 68 he's still going strong.
— CNBC's Jeff Cox, Hakyung Kim, Alex Harring, Sophie Kinderlin, Leslie Josephs, Hugh Son, Spencer Kimball and Sarah Whitton contributed to this report.
Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled Annual Oversight of Wall Street Firms, in the Hart Building on Dec. 6, 2023.
That was the message the bank’s longtime CEO gave analysts Monday during JPMorgan’s annual investor meeting. When pressed about the timing of a potential boost to the bank’s share repurchase program, Dimon did not mince words.
“I want to make it really clear, OK? We’re not going to buy back a lot of stock at these prices,” Dimon said.
JPMorgan, the biggest U.S. bank by assets, has seen its shares surge 40% over the past year, reaching a 52-week high of $205.88 on Monday before Dimon’s comments dinged the stock. That 12-month performance beats other banks, especially smaller firms recovering from the 2023 regional banking crisis.
It also makes the stock relatively pricey as measured by price to tangible book value, a commonly used industry metric. JPMorgan shares traded recently for around 2.4 times book value.
“Buying back stock of a financial company greatly in excess of two times tangible book is a mistake,” Dimon said. “We aren’t going to do it.”
Dimon’s comments about his company’s stock, as well as an acknowledgement that he may be nearing retirement, sent the bank’s shares down 4.5% Monday.
To be clear, JPMorgan has been repurchasing its stock under a previously authorized buyback plan. The bank resumed buybacks early last year after taking a pause to build up capital under new expected guidelines.
Dimon’s guidance simply means it is unlikely the program will be boosted anytime soon. JPMorgan is likely to purchase shares at a $2 billion to $2.5 billion quarterly clip, Portales Partners analyst Charles Peabody wrote in a March research note.
The JPMorgan CEO has often resisted pressure from investors and analysts that he deemed short-sighted. When interest rates were low, Dimon kept relatively high levels of cash, rather than plowing funds into low-yielding, long-term bonds. That helped JPMorgan outperform other lenders, including Bank of America, when interest rates jumped higher.
Dimon’s desire to hoard cash is not just because of impending capital rules. On multiple occasions Monday, he said he was “cautiously pessimistic” about economic risks, including those tied to inflation, interest rates, geopolitics and the reversal of the Federal Reserve’s bond-buying programs.
Markets are currently underappreciating those risks, Dimon said. For instance, prices of high-quality corporate bonds do not adequately reflect the potential for financial stress, Dimon said.
“The investment grade credit spread, which is almost the lowest it’s ever been, will be dead wrong,” Dimon said. “It’s just a matter of time.”
Since 2022, Dimon has warned of an economic “hurricane” set off by geopolitical risks and quantitative tightening. While the continued strength of the economy has surprised many on Wall Street, including Dimon, his concerns have informed his decision-making process ever since.
“We’ve been very, very consistent — if the stock goes up, we’ll buy less,” he said Monday. “When it comes down, we’ll buy more.”
Jamie Dimon, chief executive officer of JPMorgan Chase & Co., at the UK Global Investment Summit at Hampton Court Palace in London, UK, on Monday, Nov. 27, 2023.
In a response to a question Monday about the bank’s succession planning, Dimon indicated that his expected tenure is less than five more years. That’s a key change from Dimon’s previous responses to succession questions, in which his standard answer had been that retirement was perpetually five years away.
“The timetable isn’t five years, anymore,” Dimon said at the New York-based bank’s annual investor meeting.
The ambiguity of Dimon’s plans has made succession timing at JPMorgan one of the persistent questions for the bank’s investors and analysts. Over nearly two decades, Dimon, 68, has made his lender the largest in America by assets, market capitalization and a number of other measures.
Still, Dimon added Monday that he still has “the energy that I’ve always had” in managing the sprawling company.
The decision of when he moves on will ultimately be up to JPMorgan’s board, Dimon said, and he exhorted investors and analysts to examine the executives who could take his place.
Atop the short list of candidates is Marianne Lake, CEO of JPMorgan’s consumer bank, and Jennifer Piepszak, who co-leads its commercial and investment bank; the executives were given their latest assignments in January.
“We’re on the way, we’re moving people around,” Dimon said.
Even when he steps down as CEO, however, it’s likely he will stay on as the bank’s chairman, JPMorgan has said.
Traders work on the floor of the New York Stock Exchange during morning trading on May 17, 2024 in New York City.
Angela Weiss | AFP | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Asia markets rise Mainland China’s CSI 300 index rose 0.2% and Hong Kong’s Hang Seng climbed 0.5% as China kept its one- and five-year loan prime rates on hold. It comes after Beijing on Friday laid out measures to boost the property market.. Elsewhere in the Asia-Pacific region, Japan’s Nikkei 225 was the biggest mover, up 1%, while South Korea’s Kospi added 0.5% ahead of an interest rate decision on Thursday. Australia’s S&P/ASX 200 gained 0.6%.
Iran’s president killed in helicopter crash Iranian President Ebrahim Raisi died in a helicopter crash along with Foreign Minister Hossein Amirabdollahian, state media reported Monday. “All the passengers of the helicopter carrying the Iranian president and foreign minister were martyred,” semi-official news agency Mehr News reported. Raisi was returning after inaugurating a dam on Iran’s common border with the Azerbaijan Republic, when his helicopter crashed on landing in northern Iran’s Varzaqan region.
Tesla layoffs continue Tesla is cutting approximately 600 more employees across its manufacturing facilities and engineering offices in California. Elon Musk’s electric vehicle venture is facing increased competition and has already warned employees of plans to cut 10% of its workforce. Musk recently fired his Supercharger team before reportedly rehiring some members, a move reminiscent of the job cuts at Twitter after he acquired the company and later rebranded it as X.
GameStop tanks GameStop shares dropped nearly 20% after announcing plans to sell additional shares. The company warned it expects a first-quarter net loss of up to $37 million and a significant drop in sales. The brick-and-mortar games retailer, which is grappling with e-commerce-based competitors, was taking advantage of rally in GameStop’s stock fueled by the return of “Roaring Kitty” on social media. Wedbush analyst Michael Pachter said GameStop is not in a position to be profitable.
[PRO] Can Nvidia deliver? Wall Street has crashed through one milestone after another and it has done it without the help of the so-called Magnificent Seven tech stocks in the last three months. But all that could change this week when Nvidia releases its earnings. CNBC’s Sarah Min tells us what to expect from the AI darling and how high it could go if it gives the right message to investors.
Let's be honest — we've all thought about it. Quitting work and telling your boss he's a worse manager than Michael Scott or David Brent. More often than not, you're just happy to be moving on. But while they were just shuffling paper, Jan Leike was confronting what could be an existential threat.
Leike was part of OpenAI's safety leadership team. In his departing X post, he said the Microsoft-backed startup's "safety culture and processes have taken a backseat to shiny products," adding, "We urgently need to figure out how to steer and control AI systems much smarter than us."
What OpenAI demonstrated at the start of the week was a huge step in human-computer interaction. The AI agent, with uncanny realism, easily translated from Italian to English. Sal Khan, CEO of Khan Academy, used the bot to guide his son through a math problem. Later on CNBC, Khan said he was introducing a teaching bot, Khanmigo, for all U.S. teachers, funded by Microsoft.
A teacher looking at that demonstration would, rightly, be alarmed at the pace of development and deployment. It is an existential threat to their jobs and to possibly all jobs. Goldman Sachs estimated 300 million jobs could be affected by generative AI, the IMF believes 60% of jobs in advanced economies are exposed to machine learning, about half negatively, and ResumeBuilder says AI-related job losses are on the rise.
Khan believes there is a happy balance between teaching and AI developments. While some are concerned students are getting ChatGPT, Gemini, and Claude to write their essays, the teaching profession is coming up with solutions. Rather than pupils writing essays, they can critique essays written by bots. Khanmigo is said to offer an environment for pupils to work on essays with students, and the AI reports progress to the teacher.
The impact will not only be felt in the classroom — every aspect of a company's workflow needs a reappraisal. ServiceNow CEO Bill McDermott says we are in the midst of a generative AI transformation of the $7 trillion industrial complex. No job will go untouched. According to Goldman Sachs, generative AI could boost global GDP by up to 7% annually over the next decade.
But as Leike wrote, "Building smarter-than-human machines is an inherently dangerous endeavor. OpenAI is shouldering an enormous responsibility on behalf of all of humanity." He added, "OpenAI must become a safety-first AGI company," referring to artificial general intelligence.
Sam Altman, OpenAI's CEO, responded to Leike's thread on X, "He's right, we have a lot more to do; we are committed to doing it."
All this wouldn't be possible without Nvidia — its powerful graphics chips are what's needed to provide the computational capacity to drive these AI models — and it reports earnings on Wednesday after the bell. If Wall Street struggles for momentum, this $2.3 trillion behemoth will be closely watched to see how much demand there is for more of its powerful chips and if generative AI is more than just another dotcom bubble.
— CNBC's Sarah Min, Haden Field, Lisa Kailai Han, Alex Harring, Yun Li, Lora Kolodny, Jordan Novet, Lim Hui Jie and Lee Ying Shan contributed to this report.
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Tesla layoffs continue Tesla is cutting approximately 600 more employees across its manufacturing facilities and engineering offices in California. Elon Musk’s electric vehicle venture is facing increased competition and has already warned employees of plans to cut 10% of its workforce. Musk recently fired his Supercharger team before reportedly rehiring some members, a move reminiscent of the job cuts at Twitter after he acquired the company and later rebranded it as X.
AI start-up raises billions CoreWeave, an AI infrastructure startup powered by Nvidia’s chips, raised $7.5 billion in debt financing led by Blackstone, following a recent $1.1 billion equity round. The funds will be used to expand its cloud data centers and meet the soaring demand for AI infrastructure. With a limited supply of Nvidia chips, Microsoft is relying on CoreWeave to supply OpenAI with computing power. It’s also competing with Amazon and Google.
GameStop tanks GameStop shares dropped nearly 20% after announcing plans to sell additional shares. The company warned it expects a first-quarter net loss of up to $37 million and a significant drop in sales. The brick-and-mortar games retailer, which is grappling with e-commerce-based competitors, was taking advantage of rally in GameStop’s stock fueled by the return of “Roaring Kitty” on social media. Wedbush analyst Michael Pachter said GameStop is not in a position to be profitable.
Iran’s president in helicopter ‘crash landing’ A helicopter carrying Iranian President Ebrahim Raisi has suffered a “crash landing,” state media reported on Sunday. Iran’s Vice President Mohsen Mansouri reported that two people from the helicopter flight had made contact with the rescue team but Raisi’s condition was unclear, according to state media. The helicopter came down in Northern Iran as it was crossing mountain terrain in heavy fog.
[PRO] Can Nvidia deliver? Wall Street has crashed through one milestone after another and it has done it without the help of the so-called Magnificent Seven tech stocks in the last three months. But all that could change this week when Nvidia releases its earnings. CNBC’s Sarah Min tells us what to expect from the AI darling and how high it could go if it gives the right message to investors.
Let's be honest — we've all thought about it. Quitting work and telling your boss he's a worse manager than Michael Scott or David Brent. More often than not, you're just happy to be moving on. But while they were just shuffling paper, Jan Leike was confronting what could be an existential threat.
Leike was part of OpenAI's safety leadership team. In his departing X post, he said the Microsoft-backed startup's "safety culture and processes have taken a backseat to shiny products," adding, "We urgently need to figure out how to steer and control AI systems much smarter than us."
What OpenAI demonstrated at the start of the week was a huge step in human-computer interaction. The AI agent, with uncanny realism, easily translated from Italian to English. Sal Khan, CEO of Khan Academy, used the bot to guide his son through a math problem. Later on CNBC, Khan said he was introducing a teaching bot, Khanmigo, for all U.S. teachers, funded by Microsoft.
A teacher looking at that demonstration would, rightly, be alarmed at the pace of development and deployment. It is an existential threat to their jobs and to possibly all jobs. Goldman Sachs estimated 300 million jobs could be affected by generative AI, the IMF believes 60% of jobs in advanced economies are exposed to machine learning, about half negatively, and ResumeBuilder says AI-related job losses are on the rise.
Khan believes there is a happy balance between teaching and AI developments. While some are concerned students are getting ChatGPT, Gemini, and Claude to write their essays, the teaching profession is coming up with solutions. Rather than pupils writing essays, they can critique essays written by bots. Khanmigo is said to offer an environment for pupils to work on essays with students, and the AI reports progress to the teacher.
The impact will not only be felt in the classroom — every aspect of a company's workflow needs a reappraisal. ServiceNow CEO Bill McDermott says we are in the midst of a generative AI transformation of the $7 trillion industrial complex. No job will go untouched. According to Goldman Sachs, generative AI could boost global GDP by up to 7% annually over the next decade.
But as Leike wrote, "Building smarter-than-human machines is an inherently dangerous endeavor. OpenAI is shouldering an enormous responsibility on behalf of all of humanity." He added, "OpenAI must become a safety-first AGI company," referring to artificial general intelligence.
Sam Altman, OpenAI's CEO, responded to Leike's thread on X, "He's right, we have a lot more to do; we are committed to doing it."
All this wouldn't be possible without Nvidia — its powerful graphics chips are what's needed to provide the computational capacity to drive these AI models — and it reports earnings on Wednesday after the bell. If Wall Street struggles for momentum, this $2.3 trillion behemoth will be closely watched to see how much demand there is for more of its powerful chips and if generative AI is more than just another dotcom bubble.
— CNBC's Sarah Min, Haden Field, Lisa Kailai Han, Alex Harring, Yun Li, Lora Kolodny and Jordan Novet contributed to this report.
The Charging Bull is seen on an empty Wall Street on April 20, 2020 in New York City.
Eduardo MunozAlvarez | View Press | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Wall Street hits record high The S&P 500 and the Nasdaq rose to record highs after inflation data came in lower than expected. The Dow Jones Industrial Average jumped 350 points as investors bet the Federal Reserve may cut rates in September. All three major indexes closed at record highs. Tech heavyweights, Nvidia, Apple and Microsoft, all rose. Yields on the benchmark U.S. 10-year Treasury and 2-year Treasury dipped. Oil prices also fell.
Inflation eases April consumer price index rose 0.3%, slightly less than expected, while on a 12-month basis, inflation increased 3.4% in line with economists’ forecasts. It’s the first time this year that the data did not come in hotter than expected, increasing the prospect of a Fed rate cut sometime later this year, although inflation remains above its 2% target.
Meme stock rally fizzles Shares of GameStop and AMCslumped more than 18% each amid signs of the meme frenzy petering out. The craze was reignited Monday by the reappearance of “Roaring Kitty” on social media. Before Wednesday, GameStop and AMC were up 179% and 135% this week, respectively. Chart analysts are predicting the “short squeeze” could end badly.
Buffett reveals Chubb stake Warren Buffett‘s Berkshire Hathaway bought a $6.7 billion stake in Chubb, the Zurich-based insurer, finally revealing its mystery stake in a regulatory filing. As of the end of March, the property and casualty insurer became the ninth-largest holding for Berkshire, which had been keeping this purchase secret for three consecutive quarters.
Asia up, Japan’s GDP shrinks Asia-Pacific markets rose on Thursday after Wall Street hit record highs. Hong Kong’s Hang Seng was the biggest gainer, up 1.6%, as property stocks climbed after a report said the government planned to buy unsold homes from distressed developers. Chinese tech giant Tencent rose 4% after posting better-than-expected earnings. Japan’s Nikkei 225 index jumped 1% as hopes of an interest rate hike faded after the economy contracted in the first quarter.
[PRO] Trade tension winners As the Biden administration ratchets up tariffs on $18 billion worth of Chinese imports, analysts at Morgan Stanley have picked a handful of U.S. stocks that could benefit from U.S.-China trade tensions.
For the first time this year, inflation cooled more than expected, propelling stocks to record highs. Notably, the S&P 500 achieved this feat in just 48 days, compared to 746 days previously. And that was despite an ugly April, which had sent the Dow, S&P 500 and Nasdaq down more than 4% each.
Well, the latest data, including April's flat retail sales data, fueled immediate speculation about when the Federal Reserve might lower interest rates.
Current market sentiment, reflected in Fed Funds Futures trading, now suggests a 75.3% probability of a rate cut at the September Fed meeting, according to the CME FedWatch Tool. This marks an increase from the 44.9% probability indicated on Tuesday.
However, Meghan Shue, head of investment strategy at Wilmington Trust, predicts three rate cuts this year, starting in July. Excluding lagging components from the Consumer Price Index, such as housing, auto insurance, and medical insurance, Shue argues that inflation is "running at below 2%," the Fed's target.
"We think this gives the Fed cover to start cutting rates earlier than the market expects," Shue explained to CNBC's "Money Movers." "We think the first cut will come in July and three cuts this year. That plays in nicely for small caps, which are more rate-sensitive, but just in case we are wrong we are also in U.S. large-caps, which to some degree is a little bit of a hedge."
Despite these expectations, Fed Chair Jerome Powell has reiterated the need for patience, emphasizing that inflation is falling slower than anticipated and that the central bank will maintain its current rates for a longer period.
Skyler Weinand, Chief Investment Officer at Regan Capital, agrees that a September rate cut is possible but believes the Fed is likely seeking more evidence before making a decision.
"We're still a far cry from the Fed's desired 2% inflation level, and the economy remains strong, so we'll need a few more weak inflation prints to give the Fed the green light on lowering rates," Weinand stated. "The Federal Reserve is not out of the woods yet."
— CNBC's Jeff Cox, Pia Singh, Alex Harring, Lisa Kailai Han, Yun Li, Vicky McKeever, Samantha Subin, Scott Schnipper and Hakyung Kim contributed to this report.
A trader works during the closing bell at the New York Stock Exchange (NYSE) on March 17, 2020 at Wall Street in New York City.
Johannes Eisele | Afp | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Wall Street hits record high The S&P 500 and the Nasdaqrose to record highs after inflation data came in lower than expected. The Dow Jones Industrial Average jumped 350 points as investors bet the Federal Reserve may cut rates in September. All three major indexes closed at record highs. Tech heavyweights, Nvidia, Apple and Microsoft, all rose. Yields on the benchmark U.S. 10-year Treasury and 2-year Treasury dipped. Oil prices also fell.
Inflation eases April’s consumer price index rose 0.3%, slightly less than expected, while on a 12-month basis, inflation increased 3.4% in line with economists’ forecasts. It’s the first time this year that the data did not come in hotter than expected, increasing the prospect of a Fed rate cut sometime later this year, although inflation remains above its 2% target.
Unsustainable debt CEO of JPMorgan Chase Jamie Dimon warned growing U.S. fiscal deficit is unsustainable and could lead to problems in the future if it is not addressed. “America has spent a lot of money. During Covid and after Covid, our deficit is at 6% now. That’s a lot, but obviously that drives growth,” Dimon told Sky News. The federal government has spent $855 billion more than it has collected so far this year, according to the U.S. Treasury Department.
Meme stock rally fizzles Shares of GameStop and AMC slumpedmore than 18% each amid signs of the meme frenzy petering out. The craze was reignited Monday by the reappearance of “Roaring Kitty” on social media. Before Wednesday, GameStop and AMC were up 179% and 135% this week, respectively. Chart analysts are predicting the “short squeeze” could end badly.
12-second crypto heist The Department of Justice indicted two brothers for allegedly stealing $25 million in cryptocurrency within roughly 12 seconds, raising concerns about the “integrity of the blockchain.” Anton Peraire-Bueno, 24, and James Peraire-Bueno, 28, brothers who attended MIT,were arrested on Tuesday for charges of wire fraud and money laundering.
[PRO] Trade tension winners As the Biden administration ratchets up tariffs on $18 billion worth of Chinese imports, analysts at Morgan Stanley have picked a handful of U.S. stocks that could benefit from U.S.-China trade tensions.
For the first time this year, inflation cooled more than expected, propelling stocks to record highs. Notably, the S&P 500 achieved this feat in just 48 days, compared to 746 days previously. And that was despite an ugly April, which had sent the Dow, S&P 500 and Nasdaq down more than 4% each.
Well, the latest data, including April's flat retail sales data, fueled immediate speculation about when the Federal Reserve might lower interest rates.
Current market sentiment, reflected in Fed Funds Futures trading, now suggests a 75.3% probability of a rate cut at the September Fed meeting, according to the CME FedWatch Tool. This marks an increase from the 44.9% probability indicated on Tuesday.
However, Meghan Shue, head of investment strategy at Wilmington Trust, predicts three rate cuts this year, starting in July. Excluding lagging components from the Consumer Price Index, such as housing, auto insurance, and medical insurance, Shue argues that inflation is "running at below 2%," the Fed's target.
"We think this gives the Fed cover to start cutting rates earlier than the market expects," Shue explained to CNBC's "Money Movers." "We think the first cut will come in July and three cuts this year. That plays in nicely for small caps, which are more rate-sensitive, but just in case we are wrong we are also in U.S. large-caps, which to some degree is a little bit of a hedge."
Despite these expectations, Fed Chair Jerome Powell has reiterated the need for patience, emphasizing that inflation is falling slower than anticipated and that the central bank will maintain its current rates for a longer period.
Skyler Weinand, Chief Investment Officer at Regan Capital, agrees that a September rate cut is possible but believes the Fed is likely seeking more evidence before making a decision.
"We're still a far cry from the Fed's desired 2% inflation level, and the economy remains strong, so we'll need a few more weak inflation prints to give the Fed the green light on lowering rates," Weinand stated. "The Federal Reserve is not out of the woods yet."
— CNBC's Jeff Cox, Pia Singh, Alex Harring, Lisa Kailai Han, Yun Li, Vicky McKeever, Samantha Subin, Scott Schnipper and Hakyung Kim contributed to this report.
We’re selling 100 shares of Morgan Stanley at roughly $100.56 each. Following Wednesday’s trade, Jim Cramer’s Charitable Trust will own 1,150 shares of MS, decreasing its weighting in the portfolio to 3.62% from 3.93%. We’re raising cash Wednesday into the stock market’s post-consumer price index gains to stay disciplined with a very overbought signal from the S & P 500 Short Range Oscillator . This technical tool, which Jim and the Club have relied on over the years, entered the session at plus 7.6% — its most overbought level since late December. Trying to anticipate what the Oscillator will do next is difficult, but we can only imagine the market will be even more overbought after Wednesday’s gains. Overbought doesn’t always equal sell —much like oversold doesn’t always mean buy — but we strive to be disciplined investors who take profits as stocks move up. So, when the Oscillator says the market is very overbought, it acts as our wake-up call to scrutinize positions and take some stock off the table. MS 5Y mountain Morgan Stanley 5 years Bank stocks have been on a tear lately, and Morgan Stanley has broken out to a new one-year high since our last small trim on May 6 , gaining roughly 7% compared to the 2% move in the S & P 500 over that stretch. Even though we like the bank for its still-solid 3.4% annual dividend yield and healthy buyback, we are trimming the position Wednesday because these have been hard-fought gains that we don’t want to give back in case the rebound in IPO activity and M & A losses steam. We’re a little confused to see Games Global withdraw its planned initial public offering the other day, citing market conditions, given Wall Street’s run back to new highs. This is probably a one-off situation and don’t think this will be the start of a larger trend in IPOs. However, it’s something worth monitoring. We’ll realize a gain of 12% on Wednesday’s Morgan Stanley trim on stock purchased in July 2021. (Jim Cramer’s Charitable Trust is long MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Check out the companies making headlines after the bell : Boot Barn — The western apparel and footwear stock slid 7% after issuing light revenue and earnings guidance for the full year. Boot Barn said it expects earnings for the year to range between $4.55 and $4.85 a share, behind a FactSet estimate of $5.16 per share. The company topped quarterly estimates on the top and bottom lines. Nextracker — The solar technology stock popped 8%. Nextracker posted $737 million in revenue for the fiscal fourth quarter, topping an LSEG estimate of $682 million. The company issued full-year revenue that was roughly in line with estimates. Nu Holdings — Nu Holdings inched roughly 1% higher. The Brazil-based digital banking platform reported first-quarter adjusted net income and revenue that beat estimates. Revenue came in at $2.7 billion and ahead of a FactSet consensus estimate of $2.16 billion. dLocal — The Uruguayan financial tech company sank more than 18% on disappointing quarterly results. DLocal reported earnings of 6 cents per share on $184.4 million revenue. Analysts polled by FactSet had expected earnings per share of 12 cents on $189.8 million in revenue. Prestige Consumer Healthcare – The maker of Dramamine and Clear Eyes fell 7% after the company issued weak guidance. Prestige is calling for full-year earnings to range between $4.40 and $4.46 per share, while analysts polled by FactSet anticipated $4.65 per share. Fiscal fourth-quarter adjusted earnings and revenue also came in below consensus estimates.
GameStop shares rallied dramatically on Monday after “Roaring Kitty,” the man who inspired the epic short squeeze of 2021, posted online for the first time in roughly three years.
The post, a picture on X of a video gamer leaning forward on their chair as if to indicate he’s taking the game seriously, marked Roaring Kitty’s first post on the platform — or on Reddit— since 2021. The post has garnered 63,000 likes in 13 hours.
GameStop last traded up 70% after soaring as much as 110%. Trading in GameStop was halted multiple times due to volatility. AMC, another meme stock, jumped 22% Monday, while Reddit traded 13% higher.
Roaring Kitty, whose legal name is Keith Gill, is a former marketer for Massachusetts Mutual Life Insurance. Also known as DeepF——Value on Reddit, Gill drew an army of day traders who cheered each other on and piled into the brick-and-mortar video game stock, and GameStop call options, between 2020 and 2021.
The “meme stock” frenzy involved individual investors taking aim at short sellers and hedge funds who were pessimistic about the outlook for GameStop and other companies, forcing them to cover their short positions and drive up the price of the target stocks. Currently, the short position in GameStop shares amounts to more than 24% of all its shares that are freely available to trade, also known as the float.
Gill later posted a few videos with scenes from popular TV shows and movies, but there’s no clear indication of what they mean.
The poster child was hedge fund Melvin Capital, which was heavily shorting GameStop and became a target of the army of amateur traders, suffering huge losses that prompted Ken Griffin’s Citadel, as well as Point72, to backstop Melvin’s finances with close to $3 billion in support.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in expectations that the market value will fall below that level when it’s time to pay for the borrowed shares.
The GameStop mania that drove its stock above $120 a share, split-adjusted, in early 2021 from as little as $3 in the space of three months, forced brokerages including Robinhood to limit trading in heavily shorted stocks. In response, one Robinhood user filed a class-action lawsuit after the app’s decision to restrict GameStop trading on its platform. The suit was dismissed in August 2023.
Another class-action lawsuit brought against Gill alleged he pretended to be a novice trader despite being a licensed professional.
The volatility spawned a series of congressional hearings around brokers’ practices and gamifying retail trading, and testimony from leaders of Robinhood, Melvin Capital, Reddit and Citadel, as well as Gill. The entire episode finally inspired the 2023 movie “Dumb Money,” in which Paul Dano played Gill.
GME 5-year chart
In January 2021, GameStop shares hit an all-time high of $120.75 intraday, adjusted for a subsequent 4-for-1 stock split in the summer of 2022. But as interest from individual investors eventually faded, the stock collapsed along with other meme stocks such as AMC Entertainment Holdings. GameStop last month hit a three-year low of $9.95.
Recently, the stock has started to move higher, which may have rekindled Gill’s interest, along with the enormous amount of short interest in the name. GameStop has soared 57% so far in May, closing Friday at $17.46.
But the fundamental business at GameStop, evidenced by its most recent earnings report, shows a discouraging picture at the video game company. In late March, GameStop said it had cut an unspecified number of jobs to reduce costs, and reported lower fourth-quarter revenue amid rising competition from e-commerce-based competitors.
GameStop posted revenue of $1.79 billion for the fiscal fourth quarter, compared with $2.23 billion in the same quarter a year earlier.
Rohit Chopra, director of the Consumer Financial Protection Bureau, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., Dec. 15, 2022.
Ting Shen | Bloomberg | Getty Images
The U.S. banking industry won a key victory in its effort to block the implementation of a Consumer Financial Protection Bureau rule that would’ve drastically limited the fees that credit card companies can charge for late payment.
A federal court on late Friday approved the industry’s last-minute legal effort to pause the implementation of a regulation that was announced in March and set to go into effect on Tuesday.
In his order, Judge Mark Pittman of the Northern District of Texas sided with plaintiffs including the U.S. Chamber of Commerce in their suit against the CFPB, saying they cleared hurdles in arguing for a preliminary injunction to freeze the rule.
The outcome preserves, at least for now, a key revenue stream for the U.S. card industry. The CFPB estimates that the rule would’ve saved American families $10 billion a year in fees paid by those who fall behind on their bills. It would’ve capped late fees that are typically $32 per incident to $8 each and limited the industry’s ability to hike the fees.
It is now unclear when, or if, the new regulation will go into effect.
“Consumers will shoulder $800 million in late fees every month that the rule is delayed — money that pads the profit margins of the largest credit card issuers,” a CFPB spokesman told CNBC on Friday.
The industry’s lawsuit is an effort to block a regulation “in order to continue making tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual costs,” the spokesman said.
The CFPB has said the industry profits off borrowers with low credit scores by charging them ever higher late penalties over the past decade, while trade groups have argued that the fee caps are a misguided effort that redistributes costs to those who pay their bills on time.
The Consumer Bankers Association, which is one of the groups that sued the CFPB, said it was “pleased with the District Court’s decision to grant a preliminary injunction to stop the CFPB’s credit card late fee rule from going into effect next week.”
The CBA said it will continue to press its case in the courts on why the CFPB rule should be “thrown out entirely.”
Led by the U.S. Chamber of Commerce, the card industry in March sued the CFPB in federal court to prevent the new rule from taking effect.
That effort, which bounced between venues in Texas and Washington, D.C., for weeks, is now about to reach a milestone: a judge in the Northern District of Texas is expected to announce by Friday evening whether the court will grant the industry’s request for a freeze.
That could hold up the regulation, which would slash what most banks can charge in late fees to $8 per incident, just days before it was to take effect on Tuesday.
“We should get some clarity soon about whether the rule is going to be allowed to go into effect,” said Tobin Marcus, lead policy analyst at Wolfe Research.
The credit card regulation is part of President Joe Biden’s broader election-year war against what he deems junk fees.
Big card issuers have steadily raised the cost of late fees since 2010, profiting off users with low credit scores who rack up $138 in fees annually per card on average, according to CFPB Director Rohit Chopra.
As expected, the industry has mounted a campaign to derail the regulations, deeming them a misguided effort that redistributes costs to those who pay their bills on time, and ultimately harms those it purports to benefit by making it more likely for users to fall behind.
Up for grabs is the $10 billion in fees per year that the CFPB estimates the rule would save American families by pushing down late penalties to $8 from a typical $32 per incident.
Card issuers including Capital One and Synchrony have already talked about efforts to offset the revenue hit they would face if the rule takes effect. They could do so by raising interest rates, adding new fees for things like paper statements, or changing who they choose to lend to.
Capital One CEO Richard Fairbank said last month that, if implemented, the CFPB rule would impact his bank’s revenue for a “couple of years” as the company takes “mitigating actions” to raise revenue elsewhere.
“Some of these mitigating actions have already been implemented and are underway,” Fairbank told analysts during the company’s first-quarter earnings call. “We are planning on additional actions once we learn more about where the litigation settles out.”
Like some other observers, Wolfe Research’s Marcus believes the Chamber of Commerce is likely to prevail in its efforts to hold off the rule, either via the Northern District of Texas or through the 5th Circuit Court of Appeals. If granted, a preliminary injunction could hold up the rule until the dispute is settled, possibly through a lengthy trial.
The industry group, which includes Washington, D.C.-based trade associations like the American Bankers Association and the Consumer Bankers Association, filed its lawsuit in Texas because it is widely viewed as a friendlier venue for corporations, Marcus said.
“I would be very surprised if [Texas Judge Mark T.] Pittman denies that injunction on the merits,” he said. “One way or another, I think implementation is going to be blocked before the rule is supposed to go into effect.”
The CFPB declined to comment, and the Chamber of Commerce didn’t immediately respond to a request for comment.
Hundreds of Palestinians, including women and children living in east part of Rafah, migrate to the west part of the Khan Yunis with their few belongings loaded on vehicles following the Israel’s announcement on the evacuation of neighborhoods, in Khan Yunis, Gaza on May 6, 2024.
Ashraf Amra | Anadolu | Getty Images
Crude oil futures were little changed Tuesday as the U.S. moved to replenish the strategic petroleum reserve and a potential cease-fire in Gaza remained uncertain.
The U.S. Energy Department announced a bid for the purchase of 3.3 million barrels to help replenish the strategic petroleum reserve, lifting oil prices earlier in the session before they ultimately closed lower.
The oil market has grown tighter with global inventories declining by 300,000 barrels per day so far this year as OPEC+ has largely adhered to its production cuts, according to a report from the Energy Information Administration.
Here are Tuesday’s closing energy prices:
West Texas Intermediate June contract: $78.38 a barrel, down 10 cents, or 0.13%. Year to date, U.S. crude oil has gained about 9%.
Brent July contract: $83.16 a barrel, down 17 cents, or 0.20%. Year to date, the global benchmark has gained about 8%.
RBOB Gasoline June contract: $2.54 a gallon, down 1.73%. Year to date, gasoline futures have gained about 21%.
Natural Gas June contract: $2.21 per thousand cubic feet, up 0.55%. Year to date, gas has fallen about 12%.
WTI vs. Brent.
There remains significant uncertainty surrounding developments in the Middle East which could lead to a sharp increase in oil prices, according to the EIA.
Israel Prime Minister Benjamin Netanyahu said Tuesday the cease-fire proposal accepted by Hamas was “meant to sabotage the entry of our forces into Rafah,” according to the Times of Israel. Netanyahu said the cease-fire proposal was “very far from Israel’s vital demands.”
Oil prices have briefly made moves higher on geopolitical risk in the Middle East for months now before pulling back as no major disruption to supplies has occurred. U.S. crude oil and Brent are both down about 7% since April highs when traders bid up prices on fears that Israel and Iran were on the brink of war.
Oil Prices, Energy News and Analysis
Chevron CEO Mike Wirth said prices have remained in a relatively stable band but risk remains to the upside for oil due to the war’s proximity to the Strait of Hormuz — the most important global transit point for crude.
“A lot depends on the course of events here, we’re all hoping for an end to the conflict,” Wirth told CNBC at the Milken Institute’s Global Conference in Los Angeles on Monday.
OPEC+ currently has 4 million bpd of spare capacity that could be deployed to address any short-term disruption in supple, according to the EIA.
An Israeli delegation was due in Cairo to continue cease-fire negotiations “to exhaust the possibility of reaching an agreement under conditions acceptable to Israel,” according a statement from Netanyahu’s office.
A truce in the seven-month war remains elusive, said Tamas Varga, analyst at oil broker PVM. It is unclear whether a cease-fire would halt Houthi militant attacks on shipping in the Red Sea, the most material risk to oil so far, Varga said.
“And it would take a bold investor to bet on it,” Varga told clients in a note Tuesday.
Citigroup CEO Jane Fraser said Monday that consumer behavior has diverged as inflation for goods and services makes life harder for many Americans.
Fraser, who leads one of the largest U.S. credit card issuers, said she is seeing a “K-shaped consumer.” That means the affluent continue to spend, while lower-income Americans have become more cautious with their consumption.
“A lot of the growth in spending has been in the last few quarters with the affluent customer,” Fraser told CNBC’s Sara Eisen in an interview.
“We’re seeing a much more cautious low-income consumer,” Fraser said. “They’re feeling more of the pressure of the cost of living, which has been high and increased for them. So while there is employment for them, debt servicing levels are higher than they were before.”
The stock market has hinged on a single question this year: When will the Federal Reserve begin to ease interest rates after a run of 11 hikes? Strong employment figures and persistent inflation in some categories have complicated the picture, pushing back expectations for when easing will begin. That means Americans must live with higher rates for credit card debt, auto loans and mortgages for longer.
“I think, like everyone here, we’re hoping to see the economic conditions that will allow rates to come down sooner rather than later,” Fraser said.
“It’s hard to get a soft landing,” the CEO added, using a term for when higher rates reduce inflation without triggering an economic recession. “We’re hopeful, but it is always hard to get one.”
Warren Buffett walks the floor ahead of the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska on May 3, 2024.
David A. Grogen | CNBC
OMAHA, Nebraska — Warren Buffett’s Berkshire Hathaway cut its gigantic Apple stake in the first quarter as the “Oracle of Omaha” continued to downsize his one-time favorite bet.
In its first-quarter earnings report, Berkshire Hathaway reported that its Apple bet was worth $135.4 billion, implying around 790 million shares. That would mark a decline of around 13% in the stake. Apple was still Berkshire’s biggest holding by far at the end of the quarter.
This is the second quarter in a row that the Omaha-based conglomerate has trimmed the stake in the iPhone maker. It sold about 10 million Apple shares (just 1% of its massive stake) in the fourth quarter. This filing, when accounting for the change in Apple’s stock price, would imply Berkshire sold about 116 million shares.
Buffett became a big fan of Apple after one of his investing managers Ted Weschler or Todd Combs convinced him to buy the stock years ago. Buffett even called the tech giant his second-most important business after Berkshire’s cluster of insurers.
Apple
Many has speculated that the 93-year-old investing icon reduced his favorite stake due to valuation concerns. Apple’s stock gained a whopping 48% in 2023 as megacap tech shares led the market rally. At its peak, Apple ballooned in Berkshire’s equity portfolio, taking up 50% of it. The shares are trading at more than 27 times forward earnings.
Shares of the iPhone maker got a big boost in the past week after the firm announced that its board had authorized $110 billion in share repurchases, the largest in company history. However, Apple posted a decline in overall sales and in iPhone sales. The shares are down more than 4% so far this year amid concerns about how it will revive growth.
It’s not without precedent that the Berkshire CEO would adjust the Apple bet. He sold a bit of the stock in the fourth quarter of 2020, but Buffett admitted then that it was “probably a mistake.” Also it’s not usual for Buffett to trim a position that has grown so large.
Even with the sale, Berkshire is still Apple’s largest shareholder outside of exchange-traded fund providers.
The identity of the stock — or stocks — that Berkshire has been snapping up could be revealed Saturday at the company’s annual shareholder meeting in Omaha, Nebraska.
That’s because unless Berkshire has been granted confidential treatment on the investment for a third quarter in a row, the stake will be disclosed in filings later this month. So the 93-year-old Berkshire CEO may decide to explain his rationale to the thousands of investors flocking to the gathering.
The bet, shrouded in mystery, has captivated Berkshire investors since it first appeared in disclosures late last year. At a time when Buffett has been a net seller of stocks and lamented a dearth of opportunities capable of “truly moving the needle at Berkshire,” he has apparently found something he likes — and in the financial realm no less.
That’s an area he has dialed back on in recent years over concerns about rising loan defaults. High interest rates have taken a toll on some financial players like regional U.S. banks, while making the yield on Berkshire’s cash pile in instruments like T-bills suddenly attractive.
“When you are the GOAT of investing, people are interested in what you think is good,” said Glenview Trust Co. Chief Investment Officer Bill Stone, using an acronym for greatest of all time. “What makes it even more exciting is that banks are in his circle of competence.”
Under Buffett, Berkshire has trounced the S&P 500 over nearly six decades with a 19.8% compounded annual gain, compared with the 10.2% yearly rise of the index.
Coverage note: The annual meeting will be exclusively broadcast on CNBC and livestreamed on CNBC.com. Our special coverage will begin Saturday at 9:30 a.m. ET.
Berkshire requested anonymity for the trades because if the stock was known before the conglomerate finished building its position, others would plow into the stock as well, driving up the price, according to David Kass, a finance professor at the University of Maryland.
Buffett is said to control roughly 90% of Berkshire’s massive stock portfolio, leaving his deputies Todd Combs and Ted Weschler the rest, Kass said.
While investment disclosures give no clue as to what the stock could be, Stone, Kass and other Buffett watchers believe it is a multibillion-dollar wager on a financial name.
That’s because the cost basis of banks, insurers and finance stocks owned by the company jumped by $3.59 billion in the second half of last year, the only category to increase, according to separate Berkshire filings.
At the same time, Berkshire exited financial names by dumping insurers Markel and Globe Life, leading investors to estimate that the wager could be as large as $4 billion or $5 billion through the end of 2023. It’s unknown whether that bet was on one company or spread over multiple firms in an industry.
If it were a classic Buffett bet — a big stake in a single company — that stock would have to be a large one, with perhaps a $100 billion market capitalization. Holdings of at least 5% in publicly traded American companies trigger disclosure requirements.
Investors have been speculating for months about what the stock could be. Finance covers all manner of companies, from retail lenders to Wall Street brokers, payments companies and various sectors of insurance.
“Schwab was beaten down during the regional banking crisis last year, they had an issue where retail investors were trading out of cash into higher-yielding investments,” Shanahan said. “Nobody wanted to own that name last year, so Buffett could’ve bought as much as he wanted.”
Other names that have been circulated — JPMorgan Chase or BlackRock, for example, are possible, but may make less sense given valuations or business mix. Truist and other higher-quality regional banks might also fit Buffett’s parameters, as well as insurer AIG, Shanahan said, though their market capitalizations are smaller.
Berkshire has owned financial names for decades, and Buffett has stepped in to inject capital — and confidence — into the industry on multiple occasions.
Buffett served as CEO of a scandal-stricken Salomon Brothers in the early 1990s to help turn the company around. He pumped $5 billion into Goldman Sachs in 2008 and another $5 billion into Bank of America in 2011, ultimately becoming the latter’s largest shareholder.
But after loading up on lenders in 2018, from universal banks like JPMorgan to regional lenders like PNC Financial and U.S. Bank, he deeply pared his exposure to the sector in 2020 on concerns that the coronavirus pandemic would punish the industry.
Since then, he and his deputies have mostly avoided adding to his finance stakes, besides modest positions in Citigroup and Capital One.
Last May, Buffett told shareholders to expect more turbulence in banking. He said Berkshire could deploy more capital in the industry, if needed.
“The situation in banking is very similar to what it’s always been in banking, which is that fear is contagious,” Buffett said. “Historically, sometimes the fear was justified, sometimes it wasn’t.”
Wherever he placed his bet, the move will be seen as a boost to the company, perhaps even the sector, given Buffett’s track record of identifying value.
It’s unclear how long regulators will allow Berkshire to shield its moves.
“I’m hopeful he’ll reveal the name and talk about the strategy behind it,” Shanahan said. “The SEC’s patience can wear out, at some point it’ll look like Berkshire’s getting favorable treatment.”
French bank Societe Generale reported second quarter results for 2023.
Chesnot | Getty Images News | Getty Images
French bank Societe Generale reported a smaller-than-expected 22% slide in first-quarter net income on Friday, as profits on equity derivative sales offset more weakness at its retail bank and in fixed-income trading.
France’s third-biggest listed lender, whose CEO Slawomir Krupa is seeking to end several years of lackluster performance and trim costs, said group net income over the first three months of the year was 680 million euros ($729.30 million).
This was down 22% from a year earlier but still beat the 463 million-euro average of 15 analyst estimates compiled by the company.
Sales slipped 0.4% to 6.65 billion euros, above the 6.46 billion-euro analyst average estimate.
Helped by euro zone interest rates remaining higher for longer than expected, many European banks have beaten expectations for the first-quarter, and some have raised profit targets for the year.
French banks including SocGen have not benefited as much from the rise in rates because of the high cost of deposits in the country. Their shares have underperformed, although analysts expect the lenders to do better when rates fall.
SocGen’s investment banking division saw its earnings jump 26.4% to 690 million euros, beating forecasts, while revenues weakened 5.1% to 2.62 billion euros for the quarter.
Equity derivatives sales, an area where SocGen has historically been strong, did well, the bank said, as did corporate financing services and its advisory business.
This offset a 17% fall in sales from trading in fixed income and currencies, underperforming the average of Wall Street firms and French rival BNP Paribas. Deutsche Bank delivered a 7% rise in fixed income and currencies trading revenue.
SocGen said it continued to suffer from a costly hedging policy aimed at protecting the bank against low rates but which backfired. It cost SocGen 300 million euros in the first quarter, on top of 1.6 billion euros in 2023.
The bank no longer reports numbers for its French retail activities, more crucial to its earnings than for BNP Paribas, as a standalone business.
SocGen said the transfer from sight deposits to regulated savings account with a fixed interest rate weighed on its results.
According to a recent study by UBS, French deposits were the most expensive in Europe when rates were negative. But they increased in cost just as quickly as the European average when rates and inflation rose.
SocGen stock price evolution has trailed peers over the last three years, with shares up 9%, compared with a rise of 26% for BNP and 13.5% for Credit Agricole. The basket of STOXX Europe 600 banks has risen by 55% over the period.
Krupa, who took over just a year ago, disappointed investors last September by putting off a key profitability target by a year, amid stagnating sales, until 2026.
He has pledged to revive shares by trimming costs and delivering on targets, while selling non-core assets and investing to deploy its online bank BoursoBank and its expanded car-leasing listed group Ayvens.
A view of the Exxon Mobil refinery in Baytown, Texas.
Jessica Rinaldi | Reuters
The Federal Trade Commission will wave through Exxon Mobil‘s roughly $60 billion acquisition of Pioneer Natural Resources after reaching an agreement with the energy giant, a source familiar with the matter told CNBC.
The FTC will not block the deal now that the regulator and Exxon have reached a consent agreement, the source said. The agreement will bar Pioneer’s former CEO Scott Sheffield from joining the Exxon board.
The push to remove Sheffield was due to concerns about his prior discussions with OPEC, according to the source.
Exxon and the FTC both declined to comment. The agreement was first reported by Bloomberg News.
Exxon first announced the deal for Pioneer in October, in an all-stock transaction valued at $59.5 billion. Exxon said the acquisition would more than double its production in the Permian Basin.
“Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge. The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis,” Exxon chairman and CEO Darren Woods said in a press release at the time.
Shares of Exxon and Pioneer were both little changed in extended trading Wednesday.
— CNBC’s Pippa Stevens and Mary Catherine Wellons contributed reporting.
