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Tag: private banking

  • Credit Suisse, UBS, First Republic, and More Stock Market Movers

    Credit Suisse, UBS, First Republic, and More Stock Market Movers


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  • What’s Going on With First Republic Bank?

    What’s Going on With First Republic Bank?

    First Republic Bank shares have been hit hard over the past week following the failures of two large U.S. regional banks,

    Silicon Valley Bank and Signature Bank. On Thursday, shares of the bank and many other financial firms rallied after the biggest banks in the U.S. swooped in to rescue the San Francisco lender. Under the plan, 11 banks including JPMorgan Chase & Co. placed $30 billion in deposits at First Republic, using their own funds, confirming an earlier report by The Wall Street Journal. 

    But Friday, shares of First Republic dropped anew, sinking more than 30% and leaving analysts to wonder whether it has a future as a stand-alone bank.

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  • First Republic Bank’s debt cut to junk by Moody’s

    First Republic Bank’s debt cut to junk by Moody’s

    Moody’s Investors Service downgraded its credit rating on First Republic Bank to junk late Friday, citing a “deterioration in the bank’s financial profile.”

    First Republic’s
    FRC,
    -32.80%

    debt rating was cut to B2 from Baa1, Moody’s said. Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s debt earlier this week.

    The downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces over the medium term in light of its increased reliance on short-term and higher cost wholesale funding due to deposit outflows,” Moody’s analysts said in a release.

    They cited various recent developments with First Republic, including the company’s Thursday disclosure that over the previous week its Federal Reserve borrowings ranged from $20 billion to $109 billion. Also Thursday, the bank received a $30 billion deposit infusion from 11 major U.S. banks.

    “Moody’s believes the high cost of these borrowings, combined with the high proportion of fixed rate assets at the bank, is likely to have a large negative impact on First Republic’s core profitability in coming quarters,” the analysts said. “In addition, the rating agency noted that while the news of the banking consortium’s deposits is positive in the short-run, the longer-run path for the bank back to sustained profitability remains uncertain.”

    First Republic is reportedly looking to raise money from other banks or private-equity firms by selling additional shares, according to the New York Times.

    Shares of the company have plunged 80% from the close of trading on March 8, just before Silicon Valley Bank spooked investors with an update on its business and a planned stock sale. First Republic lost 33% in Friday’s session despite the deposit arrangement with the large banks. Shares were down another 6% in the extended session Friday.

    Moody’s said its outlook was maintained at “rating under review.” That review for downgrade, it said, “reflects the continuing challenges to the bank’s medium-term credit profile in light of its significantly eroded deposit base, increased reliance on short-term wholesale funding and sizeable volume of unrealized losses on its investment securities.”

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  • First Republic gets $30 billion in deposits from 11 major U.S. banks, but stock resumes slide as it suspends dividend

    First Republic gets $30 billion in deposits from 11 major U.S. banks, but stock resumes slide as it suspends dividend

    Bank of America BAC, Citigroup C, JPMorgan Chase JPM and Wells Fargo WFC said Thursday that they are each making $5 billion in uninsured deposits into First Republic Bank FRC as part of a $30 billion backstop by 11 banks against the ravaged banking landscape of the past week.

    However, First Republic stock fell 14.7% in after-hours trading after the bank said it would suspend its dividend to conserve cash. The bank last paid a quarterly dividend of 27 cents a share on Feb. 9 to shareholders of record as of Jan. 26.

    It…

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  • U.S. bank stocks end with solid gains as 11 banks pledge $30 billon to First Republic

    U.S. bank stocks end with solid gains as 11 banks pledge $30 billon to First Republic

    U.S. bank stocks ended regular trading with solid gains on Thursday, as banks announced a $30 billion deposit capital infusion for First Republic Bank and as Treasury Secretary Janet Yellen cited the strength of the financial system.

    The 11 banks confirmed a report from the Wall Street Journal and others about providing financial support for First Republic Bank FRC.

    U.S….

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  • Western Alliance and First Republic clobbered as regional bank jitters persist despite Fed backstops

    Western Alliance and First Republic clobbered as regional bank jitters persist despite Fed backstops

    Trading in shares of First Republic Bank and Western Alliance Bancorp ended sharply lower in a tough day of trading for regional banks as fears over bank solvency persisted following the failures of Silicon Valley Bank, Signature Bank and Silvergate Capital.

    Stocks were periodically halted or paused for trading amid the bank stock bloodbath, which saw many suffering percentage declines well into the double digits. Typically, bank stocks are stable compared with sectors such as technology, with daily moves above 5% being relatively…

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  • Tesla is a ‘soft landing’ stock, says Goldman Sachs. Here are its picks for a gentle economic landing and stocks for a recession.

    Tesla is a ‘soft landing’ stock, says Goldman Sachs. Here are its picks for a gentle economic landing and stocks for a recession.

    Pour one out for the beleaguered economists, who for once got an important indicator, the consumer price index, right on the nose, after CPI fell 0.1% in December, while core prices rose 0.3%.

    “The 2021 surge in durable goods demand normalized, and the resulting collapse in durable goods price inflation was stunningly fast,” says Paul Donovan, chief economist of UBS Global Wealth Management.

    “The commodity wave of inflation is fading, and that leaves the profit margin expansion in focus,” he adds. What a good time for earnings season to be upon us, and what do you know, it is, kicking off with the banking sector on Friday before broadening out next week.

    Strategists at Goldman Sachs have a new note out, saying that the market is pricing in a soft landing even though the trend of earnings revisions points to a hard landing.

    They’re not that optimistic — even in the soft-landing scenario, the team led by David Kostin say the S&P 500
    SPX,
    +0.40%

    will end the year right around current levels, at 4,000. But they identify 46 stocks that could benefit — profitable, cyclical companies that are trading at price-to-earnings valuations below their 10-year median, among other factors.

    One name jumps out: Tesla
    TSLA,
    -0.94%
    ,
    which trades at 22 times forward earnings versus the 10-year median of 117 times. But the other 45 names are less flashy, ranging from Capital One
    COF,
    +1.81%

    and Carlyle Group
    CG,
    +0.54%
    ,
    to a host of industrials including 3M
    MMM,
    +0.12%
    ,
    Parker-Hannifan
    PH,
    +0.73%

    and Otis Worldwide
    OTIS,
    +0.42%
    .
    As a whole, these typically $10 billion companies are trading at 12 times earnings, versus 17 times usually.

    In the hard landing scenario, S&P 500 profit margins would shrink by 125 basis points, to 10.9% — about in line with the median peak-to-trough decline during the eight recessions since 1970, which has been 132 basis points. Consensus expectations are for a 26 basis-point margin decline.

    The Goldman team also have a 36 stock screen for a hard landing — profitable companies in defensive industries with a positive dividend yield. They’re typically food, beverage and tobacco companies as well as software and services companies — including Costco Wholesale
    COST,
    +0.58%
    ,
    Kroger
    KR,
    -0.99%
    ,
    Altria
    MO,
    +0.48%
    ,
    Tyson Foods
    TSN,
    +0.23%
    ,
    Microsoft
    MSFT,
    +0.30%
    ,
    MasterCard
    MA,
    -1.13%

    and Visa
    V,
    -0.25%
    .
    As a whole, these $37 billion companies are trading at 22 times earnings vs. a historical 24 times.

    The market

    After a 2.3% advance for the S&P 500
    SPX,
    +0.40%

    over the last three sessions, U.S. stock futures
    ES00,
    +0.39%

    NQ00,
    +0.58%

    declined on Friday.

    The yield on the Japanese 10-year bond
    TMBMKJP-10Y,
    0.511%

    exceeded 0.5%, the Bank of Japan’s yield cap, ahead of next week’s rate decision , prompting a second day of aggressive bond purchases from the central bank.

    For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

    The buzz

    Fourth-quarter earnings were rolling out from Bank of America
    BAC,
    +2.20%
    ,
    JPMorgan Chase
    JPM,
    +2.52%
    ,
    Citigroup
    C,
    +1.69%

    and Wells Fargo
    WFC,
    +3.25%
    ,
    and outside of banks, Delta Air Lines
    DAL,
    -3.54%
    ,
    BlackRock
    BLK,
    +0.00%

    and UnitedHealth
    UNH,
    -1.23%
    .

    JPMorgan shares slumped after forecast-beating earnings, though investment bank revenue came in light of estimates. Delta shares also declined after topping earnings estimates.

    Tesla
    TSLA,
    -0.94%

    cut prices of Model 3 and Model Y vehicles in the U.S. and elsewhere by up to 20%. The electric vehicle maker stock dropped 6%.

    Virgin Galactic
    SPCE,
    +12.34%

    surged after saying it’s on track to launch space-tourism flights in the second quarter.

    Apple
    AAPL,
    +1.01%

    says CEO Tim Cook requested, and received, a pay cut after investor criticism.

    The University of Michigan’s consumer-sentiment index is due at 10 a.m. Eastern, and Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker are due to speak.

    Tyler Winklevoss said charges by the Securities and Exchange Commission brought about Gemini Trust for allegedly offering unregistered securities were “super lame” as it seeks to unfreeze $900 million in investor assets.

    Best of the web

    There’s a bull market in swearing on corporate earnings calls.

    The West is now preparing to send tanks to Ukraine in what could be another escalation of its conflict with Russia, which on Friday claimed victory in the eastern town of Soledar.

    A look back at photos of Lisa Marie Presley, who died at age 54.

    Top tickers

    Here were the most active stock-market tickers as of 6 a.m. Eastern.

    Ticker

    Security name

    BBBY,
    -30.15%
    Bed Bath & Beyond

    TSLA,
    -0.94%
    Tesla

    GME,
    -0.68%
    GameStop

    AMC,
    +0.80%
    AMC Entertainment

    MULN,
    -8.59%
    Mullen Automotive

    NIO,
    -0.08%
    Nio

    APE,
    -2.56%
    AMC Entertainment preferreds

    AAPL,
    +1.01%
    Apple

    SPCE,
    +12.34%
    Virgin Galactic

    AMZN,
    +2.99%
    Amazon.com

    Random reads

    Like a scene out of “Stranger Things” — there’s uproar after new restrictions on the Hasbro
    HAS,
    +0.21%

    game Dungeons & Dragons.

    Starting next month, Starbucks
    SBUX,
    +1.30%

    rewards will be less generous for most items, though iced coffee will be easier to get.

    Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

    Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.

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  • Credit Suisse shares tumble after flagging $1.6 billion 4Q loss amid strain for wealth management comes

    Credit Suisse shares tumble after flagging $1.6 billion 4Q loss amid strain for wealth management comes

    Credit Suisse Group AG shares tumbled in Wednesday morning trading after the bank said asset outflows at its wealth-management business would lead to a fifth consecutive quarterly loss.

    Shares
    CS,
    -1.45%

    CSGN,
    -4.64%

    at 0830 GMT were down 4.9% to CHF3.66.

    The Swiss lender said it expects to post a loss before taxes of around 1.5 billion Swiss francs ($1.58 billion) in the fourth quarter, after lower deposits and assets under management led to reduced commissions and fees.

    The bank, Switzerland’s second-largest by assets, said that it net-asset outflows in the quarter to Nov. 11 were around 6%, or $88.3 billion of its total $1.47 trillion assets under management.

    At the bank’s wealth-management arm, its key business serving the world’s rich, customers removed $66.7 billion.

    It came after the Zurich-based company experienced deposit and net-asset outflows in the first two weeks of October, it said, after social-media reports and a spike in credit-default swaps caused a frenzy over the bank’s financial position.

    The bank said the outflows led its liquidity to fall below some local-level legal requirements, but it maintained its required group-level liquidity and funding ratios at all times.

    Write to Ed Frankl at edward.frankl@dowjones.com

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  • What could the roll-out for instant payments mean for Switzerland? Three evolutions to consider – Banking blog

    What could the roll-out for instant payments mean for Switzerland? Three evolutions to consider – Banking blog

    The wide-scale rollout of instant payments planned for August 2024 will require financial institutions to upgrade their payments systems, and the market participants may see fundamentals shift. Here we look at three evolutions and their impact on payments in Switzerland.

    In August 2024, SIX SIC (Swiss Interbank Clearing) Phase 5 will roll out instant payments (IP). Banks will be required to upgrade their payments systems to allow for real-time settlement, fraud detection, and liquidity management. IP will reduce operational costs via automation and capture additional revenue from corporate clients and customers with high payments value and volume. As a result, greater customer satisfaction, economic benefits, and new service offerings are expected.

    We look at three evolutions in which IP can change the payments landscape in Switzerland.

    This blogpost is the first in our series dedicated to “The future of payments in Switzerland – strategic outlook for financial and payments services executives”.  

    3 phases on how IP can change the payments landscape in Switzerland

    Evolution 1: IP becoming the norm in Switzerland – Banks upgrade their operating models and increase automation

    In the current system, inter-bank payments take at least one business day. The new IP system will enable immediate settlement, including payments of bills and large-value transactions. This will require banks to manage their liquidity in real-time and process related payments instantaneously, including exception handling, fraud detection, and regulatory compliance with AML regulations.

    To establish their business case for IP banks must factor in upgrades to their systems and operating model and implement the required automation of their payment processes.

    Savings are expected from reduced operating costs due to the enhanced automation of payment processes. To further support the business case, banks must analyse the pricing structure for their IP services and assess how to include them in retail account packages under predefined limits (in volume and value) while charging a convenience fee for transactions with higher volume or value. For corporate clients, additional sources of revenue can be found from use cases where IP packaged with cash management solutions can be sold at a higher value.

    Evolution 2: IP acting as an enabler for point of sale and online payments – POS and e-commerce IP-enabled solutions

    Retailers in Switzerland currently rely on card transactions and mobile payment methods such as TWINT for both point of sale and online transactions. The new IP technology will impact these payment methods: fintechs could be encouraged to build account to account payment offerings with IP charging lower fees. Switzerland’s payment processors (SIX and financial institutions) could respond to this threat by assessing whether combining a request to pay (R2P) service, such as eBill with IP should become a preferred solution, shifting payment at the point of sale to clients’ e-banking channels. To enable this a new solution for both online payments and point of sale (POS) systems would be designed.

    Banks could also benefit from gathering data from IP about customer behaviour through data analytics of anonymised aggregated data.

    Evolution 3: IP expediting new banking digital solutions – IP becomes an enabler for online offerings

    For the retail market, there are currently already several digital banking and investment services, operating in Switzerland. Using IP for these services customer onboarding attrition can be reduced, given the ability to onboard and instantly fund a new account online. Fintech banking platforms in the Swiss market such as Neon, Yapeal, Revolut, N26 should consider its implementation. Traditional banks, such as Credit Suisse’s CSX, UBS’s 4Key, Bank Cler’s Zak and Post Finance, will need to assess how fintech’s use of IP could compete with their own digital offerings. or N26 and investment management fintechs such as Kaspar& and traditional banks digital offerings, such as Credit Suisse’s CSX, UBS’s 4Key, Post Finance and Bank Cler’s Zak should study how to optimize their customer journeys with IP to enable instant onboarding.

    Similar evolution is expected on the corporate and private banking market: IP can enable solutions to be built by fintechs and banks to enable real-time cash management for corporates, funds, and high-net worth individuals powered by open banking platforms such as Swiss SIX’s bLink offering.

    Finally, the ongoing work on central bank digital currencies (CBDCs) by both the Swiss central bank (Project Helvetia) and the European central bank (Digital Euro) is a long-term driver for Banks to assess how best to implement their payments operations and architecture to future-proof themselves for upcoming CBDC release: IP functionalities are a required step in that journey.

    What now?

    Each of the three evolutions aims to provide a better customer experience, new offerings, and optimized costs. Still, their success depends on the strategic outlook of the payments’ stakeholders in the Swiss market for the following years. First-mover advantage and studying a long-term payments strategy will support navigating payments challenges successfully:

    • Future-proofing the payments system architecture and upgrading it to support IP
    • Digitalising operations with a focus on achieving fully digital front-to-back flows and
    • Using customer data to identify long-term trends and incorporating them into building innovative payments strategies/offerings
    Sergio cruz blog

    Sergio Cruz, Partner, Consulting

    Sergio is the lead Partner of Deloitte’s Business Operations practice in Zurich and has more than 25 year of experience in Consulting. He focuses on large scale front-to-back digitalisation programs in financial services and has worked on several large assignments both in Switzerland and abroad, covering the implementation of regulatory requirements and the definition as well as implementation of target operating models and process optimisations.

    Email | LinkedIn

    David Klidjian_3 (002)

    David Klidjian, Director, Consulting

    David is Deloitte Switzerland’s Core Business Operations Banking lead and a Director in the Consulting practice in Zurich, with global experience gained in consultancy and the banking industry. He has a macro view across banking products, services, regulations, and systems, as well as detailed knowledge of key processes in private banking, compliance and capital markets/sales and trading. He has advised clients through impactful, multi-year business transformation in top tier private and investment banks in Switzerland, the UK, the US, and APAC.

    Email  | LinkedIn

    David frei

    David Frei, Director, Consulting

    David is Deloitte Switzerland’s Payments Lead and a Director in the Business Operations Consulting practice in Zurich, with global experience gained in Consultancy and the Banking industry. He has vast experience and a macro view across retail and banking payments, financial service products, consumer, payments costs, regulations and systems as well as detailed knowledge of key processes in Acquiring, PSP and omni-channel/e-commerce payments. He has advised large clients through impactful payments transformation and digital payments projects in Switzerland and Europe.

    Email| LinkedIn 

    Lena Woodward

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  • ‘Material risk’ looms over stocks as investors face bear market’s ‘second act,’ warns Morgan Stanley

    ‘Material risk’ looms over stocks as investors face bear market’s ‘second act,’ warns Morgan Stanley

    Stock-market investors have been adjusting to the jump in interest rates amid high inflation, but they have yet to cope with profit headwinds faced by the S&P 500, according to Morgan Stanley Wealth Management.

    “While a rate peak may solidify estimates for the equity risk premium and valuation multiples, equity investors still face the bear market’s second act — the earnings outlook,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in a note Monday. 

    “They have been slow to recognize that pricing power and operating margins, which hit all-time highs in the past two years, are unsustainable,” she said. “Even without a recession, the mean reversion of profits in 2023 translates to a 10%-to-15% decline from current estimates.”


    MORGAN STANLEY WEALTH MANAGEMENT NOTE DATED OCT. 17 2022

    Unprecedented monetary and fiscal stimulus during the throes of the pandemic had led to the largest U.S. companies booking record operating margins that were 150 to 200 basis points above norms seen in the past decade, according to Shalett. 

    See: Stock market’s wild gyrations put earnings in focus as inflation crushes Fed ‘pivot’ hopes

    She said that company profits may now be imperiled by slowing growth, with “demand skewing toward services” after pulling forward toward goods earlier in the pandemic, and a likely reversal in “extremely strong” pricing power as the Fed fights surging inflation with interest-rate hikes.

    “Such risks are not discounted in 2023 consensus yet, constituting a material risk to stocks for the remainder of the year,” Shalett said.

    While many sectors have discounted the potential drop in 2023 profits from current estimates that could stir headwinds even with no recession, “the megacap secular growth stocks that dominate market-cap indexes have not,” she warned. “And those indexes are where risk gets repriced in the bear market’s final stages.”

    Morgan Stanley’s chief U.S. equity strategist Mike Wilson estimates as much as 11% downside from consensus estimates, with his base-case, earnings-per-share forecast for the S&P 500 for 2023 being $212, according to Shalett’s note. 

    U.S. stocks were bouncing Monday, with major stock benchmarks trading sharply higher in the afternoon, after sinking Friday amid inflation concerns as earnings season got under way. The S&P 500
    SPX,
    +2.65%

    was up 2.7% in afternoon trading, while the Dow Jones Industrial Average
    DJIA,
    +1.86%

    gained 1.9% and the technology-heavy Nasdaq Composite surged 3.5%, FactSet data show, last check. 

    In the bond market, Treasury rates were trading slightly lower Monday afternoon, after the 2-year yield hit a 15-year high and the 10-year yield notched a 14-year high on Friday, according to Dow Jones Market Data. Two-year yields ended last week at 4.507%, the highest level since August 8, 2007 based on 3 p.m. Eastern time levels, while the 10-year rate climbed to 4.005% for its highest rate since Oct. 15, 2008.

    The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.992%

    was down about 1 basis point Monday afternoon at around 4%, while two-year yields
    TMUBMUSD02Y,
    4.439%

    fell about five basis points to around 4.45%, FactSet data show, at last check.

    Meanwhile, as investors capitulated to higher inflation, “peak policy rates moved up aggressively in the fed funds futures market, with the terminal rate now at nearly 5%, an aggressive stance that smacks of ‘peak hawkishness,’” according to the Morgan Stanley note.

    “Critically, although the market is still pricing 1.5 cuts in 2023, the January 2024 fed-funds rate is estimated at 4.5%, a comfortable 100 basis points above our forecast” for core inflation measured by the consumer-price index, Shalett wrote.

    “Consider locking in solid short-term yields in bonds and shoring up positions in high growth, dividend-paying stocks,” she said. “Short-duration Treasuries look attractive, especially because the yield is more than 2.5 times that of the dividend yield on the S&P 500.”

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  • Is Cord-Blood Banking Worth It?

    Is Cord-Blood Banking Worth It?

    In the fall of 1988, Matthew Farrow, a 5-year-old boy with a rare blood disorder, received the world’s first transplant of umbilical-cord blood from a newborn sibling. It worked: Farrow was cured. This miraculous outcome broke open a whole new field in medicine—and, not long after, a whole new industry aimed at getting expecting parents to bank their baby’s umbilical-cord blood, just in case.

    These days, in fact, being pregnant means being bombarded at the doctor’s office and on Instagram with ads touting cord blood as too precious to waste. For several hundred dollars upfront, plus a storage fee of $100 to $200 every year, the banks’ ads proclaim, you could save your child’s life. Cord-blood banking has been likened to a “biological insurance policy.”

    In the U.S., the two biggest private cord blood banks are Cord Blood Registry and ViaCord. Together, they have collected more than 1 million units. But only a few hundred units of this privately banked cord blood have ever been used in transplant, the great majority by families who chose to bank because they already had a child with a specific and rare disorder treatable with transplant. For everyone else, the odds of using privately banked cord blood are minuscule—so minuscule that the American Academy of Pediatrics (AAP) recommends against private banking. It does make an exception for families with that disease history. “But that’s a rare circumstance,” says Steve Joffe, a pediatric oncologist and ethicist at the University of Pennsylvania, “and not one that anybody is going to build a successful business model around.”

    ViaCord and Cord Blood Registry do offer free services for families in which someone has already been diagnosed with a condition treatable with cord blood. In general, the companies reiterated to me, cord blood does save lives and they are simply providing an option for families who want it.

    But the marketing also gives the impression of much more expansive uses for cord blood. The private banks’ websites list nearly 80 diseases treatable with transplant—an impressive number, though many are extremely uncommon or closely related to one another. (For example: refractory anemia, refractory anemia with ringed sideroblasts, refractory anemia with excess blasts, refractory anemia with excess blasts in transformation.) They have also recently taken to highlighting the promise of still-unproven treatments: Temporary infusions of cord blood, they say, could eventually treat more common conditions such as cerebral palsy and autism. Video testimonials feature parents talking excitedly about the potential of cord blood for their children. But the evidence isn’t there yet—and may never appear. Nonetheless, says Paul Knoepfler, a stem-cell scientist at UC Davis, “the cord-blood companies seem to be trying to expand their base of potential customers.”


    The initial exuberance around cord blood came from a real place. The blood left over in umbilical cords is replete with cells that have the special ability to turn into any kind of blood, including red blood cells, which carry oxygen, and white blood cells, which make up the immune system. Adults have stem cells in their bone marrow and blood—which can also be used for transplant—but those in a baby’s umbilical cord are more immunologically naive. That means they are less likely to go awry and attack a recipient’s body. “They don’t cause as much havoc,” says Karen Ballen, an oncologist at the University of Virginia. This allows doctors to use cord blood that matches only four out of six immunological markers.

    Because cord blood is so valuable, publicly run banks have been collecting donations since the 1990s. Despite amassing fewer units overall, public banks worldwide have provided 30 times as many units of blood for treatment—and saved more lives—than private ones, because they are accessible by any patient in need. Although the AAP recommends against private banking, it does recommend donating to public banks.

    One appeal of private banking, though, as the companies highlight, is that the cells in a baby’s umbilical cord are a perfect match for them in later childhood or adulthood. But this is usually irrelevant: In most of the diseases that can be cured by a cord-blood transplant, doctors would, for medical reasons, not use the patient’s own cells. In cases of inherited disorders such as sickle cell anemia, for example, a child’s own cord-blood stems have the same problematic mutation. For children with one of many types of leukemia, the concern is that cord blood could contain leukemia-precursor cells that cause the cancer to reappear; in addition, donor blood-stem cells are better because they can mop up remaining leukemia cells. Doctors would “never” use banked cord blood from a child with these types of leukemia, says Joanne Kurtzberg, a pediatrician and cord-blood pioneer at Duke University, who helped treat Farrow when he was a young boy.

    When privately banked cord blood is used in transplants, it is more likely to go to a sibling. Genetically, siblings have about a 25 percent chance of being perfect matches for each other. The chances of finding a suitable match among unrelated bone-marrow or cord-blood donors from a public bank, on the other hand, range from 29 to 79 percent, depending on one’s ethnic background. (The majority of donors are white, so it’s highest for white patients.) In any case, not banking a matched sibling’s cord blood doesn’t foreclose the possibility of a transplant, because that sibling can still donate bone marrow. “I often encounter families who have some guilt around not storing the cord blood, and I will point out, ‘Well, your donor child that matches our patient is still here,’” says Ann Haight, a pediatric hematologist and oncologist at Emory University.

    Even if a baby’s cord blood is banked, there’s no guarantee that it will contain enough cells for transplant. In fact, most may not: Public banks only keep 5 to 40 percent of their donations, as the rest don’t meet their standards. Private banks will save much smaller samples, which they argue serve a different purpose. Whereas public banks are looking for large samples that are mostly likely to be used for transplant, says Kate Giradi, the director of medical and scientific affairs at ViaCord, “when families are banking with us, this is that child’s only cord, so our threshold is way lower.”

    Another reason to bank these smaller samples, a spokesperson for Cord Blood Registry pointed out, is that they can still be used for experimental infusions treating conditions such as cerebral palsy and autism. (About 80 percent of units released by CBR have been used this way, as have about half from ViaCord.) The private banks partner with researchers, such as Kurtzberg at Duke, who are running clinical trials to test these treatments. The theory goes that cells from cord blood can make it to the brain, where they might have some neuroprotective role—but the mechanism remains unknown, and the effects are not entirely clear. As Kurtzberg told me, “The therapy is not proven.”

    The current state of cord-blood science might be summed up thus: Proven uses are very uncommon, and unproven uses are, well, unproven. Of course, a future discovery could lead to a real breakthrough in the use of stem cells from cord blood—an idea private banks trade on. Who knows what might be in store for cord blood later, when your baby is 30, 50, 70 years old? In a recent Cord Blood Registry survey of new parents, a spokesperson told me by email, 45 percent named “belief in future treatments” as the primary reason for banking their child’s cord blood and tissue. Knoepfler, the stem-cell scientist, notes that scientists have been excited for decades about the promise of stem cells. But translating interesting results in the lab to a doctor’s office, he says, “​​is really much harder than many of us realized. I include myself in that.”

    Medical discoveries have actually changed the ways cord blood is used over years, but they have so far resulted in less use of cord blood. In the past several years, doctors have refined a protocol to use half-matched donors in transplants. Doctors generally get more cells from these donors than from an infant’s banked cord blood, which means the transplants “take” more quickly and the patient spends less time in the hospital. For this reason, cord blood has been falling out of favor. Public banks have started scaling down their collections; the New York Blood Center, which had launched the world’s first public bank, recently stopped collecting new donations. How cord blood gets used in the future is still unknown.


    More than 30 years ago after Kurtzberg first treated Farrow, she is still in touch with him. He’s 39 now, and doing well. Having watched cord banking grow and evolve over the years, she remains a proponent of public banking and the possibilities ahead. When it comes to private banks, however, she says, “I don’t think it’s a necessity. I think it’s nice to have if you can do it.” There isn’t much harm in private banking, after all, as long as parents can afford the several thousand dollars over their child’s lifetime.

    Afford might be the key word here. The ads for cord-blood banking feel a lot like those for any number of “nice to have” baby products aimed at anxious parents, be they organic diapers or BPA-free wooden toys tailored to your child’s age and cognitive development. If anything, the stakes of cord-blood banking are higher than anything else you might choose to buy. The opportunity only comes around “once in a lifetime,” and it could literally save your child’s life—even if the chances of that are very, very small. “It’s playing to parental guilt and the desire for parents to have healthy children and do whatever they can for their kids,” says Timothy Caulfield, a health-law professor at the University of Alberta who has studied cord-blood banks. “There’s a huge market based on exactly that.”

    It’s telling, perhaps, that Cord Blood Registry ran a giveaway of $20,000 worth of baby products this summer. The curated package of luxury “baby essentials” resembled the registry of parents who want the best for their kid, and can afford it. Included were a Snoo smart bassinet ($1,695), an Uppababy stroller and car seat ($1,400), Coterie diapers ($100 for a month’s supply, guaranteed to be “free of fragrance, lotion, latex, rubber, dyes, alcohol, heavy metals, parabens, phthalates, chlorine bleaching, VOCs, and optical brighteners”), and, of course, a lifetime of cord-blood and tissue banking ($11,860).

    Sarah Zhang

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  • Dow books 630-point drop after strong jobs data rattles investors, but stocks cement weekly gains

    Dow books 630-point drop after strong jobs data rattles investors, but stocks cement weekly gains

    U.S. stocks finished sharply lower Friday, but still booked their best weekly gains in a month, after September jobs data showed an unexpected fall in the unemployment rate that’s anticipated to reinforce the Federal Reserve’s resolve to keep tightening monetary policy.

    Investors also weighed a profit warning at a leading microchip maker ahead of next week’s increase in quarterly earnings results.

    What happened
    • The Dow Jones Industrial Average
      DJIA,
      -2.11%

      fell 630.15 points, or 2.1%, ending at 29,296.79, but off the session low of 29,142.66.

    • The S&P 500
      SPX,
      -2.80%

      dropped 104.86 points, or 2.8%, closing at 3,639.66.

    • The Nasdaq Composite
      COMP,
      -3.80%

      shed 420.91 points, or 3.8%, to finish at 10,652.40.

    Stocks posted back-to-back losses, trimming weekly gains, but recorded their best weekly gains since Sept. 9, according to Dow Jones Market Data.

    Read: Will the stock market be open on Columbus Day?

    What drove markets

    Stocks recorded sharp losses Friday after the Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.

    Still, a powerful rally earlier in the week boosted all three major stock indexes to weekly gains, a departure from three straight weekly losses, according to Dow Jones Market Data.

    “It’s manic. We are all on edge,” said Kent Engelke, chief economic strategist at Capitol Securities Management, of the sharp market swings.

    “Any piece of good news is a cause for an explosive rally,” Engelke said by phone. On the flip side, he pegged technology-based trading “in an illiquid and emotional market” as exacerbating Friday’s selloff.

    “It’s a reflection that people have re-entered the mind-set that the Fed is going to be raising rates at a rapid clip, probably for longer than what they might have suspected at the start of the week,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, by phone.

    Pavlik expects the Fed to keep tightening financial conditions to try to head off inflation. “But once we turn the corner, and the economy slows down, the Fed probably will be more aggressive in cutting rates on the way down.”

    In addition, the Fed has been “draining liquidity from the system at a remarkable pace,” wrote Rick Rieder, BlackRock’s chief investment officer of global fixed income, in a Friday client note, while pointing to an astounding $1.3 trillion decline in the central bank’s balance sheet since the December 2021 peak.

    Pavlik at Dakota Wealth said he anticipates the Fed will start slowing interest rate hikes by mid-next year, which likely means continued pressure for the stock market, particularly with a backdrop of big oil-price
    CL00,
    +5.37%

    gains this week after global crude producers voted to cut monthly production and with the U.S. dollar’s
    DXY,
    +0.44%

    surge this year against a basket of rival currencies.

    U.S. crude oil prices climbed for a fifth day in a row on Friday to settle at $92.64 a barrel, while booking at 16.5% weekly gain.

    New York Fed President John Williams said Friday that benchmark interest rates likely need to hit 4.5% over time. The Fed’s policy rate now sits in a 3%-3.25% range, up from a zero-0.25% range a year ago.

    The benchmark 10-year Treasury rate
    TMUBMUSD10Y,
    3.889%

    climbed to 3.883% Friday, as the key metric used to gauge the affordability of credit for businesses, household and the economy posted 10 straight weeks of gains, according to Dow Jones Market Data.

    Read: Bond markets facing historic losses grow anxious of Fed that ‘isn’t blinking yet’

    Investors continued to hope for relief on the inflation front and will be monitoring next week’s release of the September consumer-price index, as well as corporate earnings season as it picks up.

    Companies in focus
    • Twitter Inc.
      TWTR,
      -0.43%

      shares fell 0.4% Friday after a judge delayed a looming trial between the company and Elon Musk to allow the Tesla Inc.
      TSLA,
      -6.32%

      CEO more time to close his $44 billion acquisition of the social media platform.

    • Besides the jobs report, investors weighed a profit warning from microchip maker Advanced Micro Devices Inc. AMD, which said the PC market weakened significantly during the quarter. AMD shares fell 13.9%, and rivals including Nvidia Corp. NVDA and Intel Corp. INTC also closed lower.

    • U.S. cannabis stocks were choppy Friday, with the AdvisorShares Pure US Cannabis ETF
      MSOS,
      -2.80%

      ending lower, following steep gains earlier in the week after President Joe Biden said the U.S. would consider de-scheduling cannabis from its current position as a Schedule 1 narcotic under federal law.

    —Steven Goldstein contributed reporting to this article

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