[ad_1]
In the wake of the collapse of Silicon Valley Bank, conventional wisdom has been that banks will cut lending, known as a credit crunch, that will damage the economy.
On Thursday, St. Louis Federal Reserve President James Bullard said he was “less enamored’ with this forecast.
“Only about 20% of lending is going through the banking system…
[ad_2]
[ad_1]
U.S. stocks closed mixed on Wednesday as weaker economic data weighed on equities and focus among investors returned to recession concerns. The Dow Jones Industrial Average
DJIA,
gained about 80 points, or 0.2%, ending near 33,482, according to preliminary FactSet data, but the S&P 500 index
SPX,
and Nasdaq Composite Index
COMP,
fell 0.3% and 1.1%, respectively. That left the S&P 500 down for two straight days and the Nasdaq lower for a third day in a row. Investors were focused on an ADP report showing that private-sector employers added 145,000 jobs in March, well below the 210,000 expected by economists surveyed by The Wall Street Journal. Also, the bellwether Institute for Supply Management’s service sector activity index showed business conditions at U.S. companies fell to a three-month low of 51.2% in March.
[ad_2]
[ad_1]
If you invest in dividend stocks, you are probably looking for long-term growth to go with the income. Otherwise you might be content to hold one-month U.S. Treasury bills, which yield 4.5% or park your money in an online savings account for a yield close to 4%.
Below is screen of stocks with current dividend yields ranging from 4.14% to 8.46%. What sets these apart from other stocks with high dividend yields is that their payout increases are expected to accelerate in 2023 and 2024 from those in 2022.
On Tuesday, S&P Dow Jones Indices said in a press release that it expected dividend payments by publicly traded U.S. companies to continue to hit record levels in 2023. But Howard Silverblatt, a senior index analyst with the firm, said that the pace of dividend increases in the first quarter had slowed and that he expected this year’s increases to be “at half the pace of the double-digit 2022 growth.”
Silverblatt also said current events in the banking industry were “expected to negatively impact future spending from both consumers and companies, which in turn may curtail corporate dividend growth.”
For many banks, there’s another big item on the table. A focus on share buybacks in recent years is very likely to end — this is a use of cash that can raise earnings per share if the share count is reduced, but there can be consequences, especially after a year of rising interest rates that pushed down the market value of banks’ investments in bonds.
In a note to clients on March 16, Dick Bove, a senior research analyst with Odeon Capital, predicted that stock repurchases in the banking industry would be “meaningfully cut back if not flat out eliminated.” He made three general points about buybacks in the banking industry:
A company might find it much easier to curtail or stop buying back shares to preserve cash than it is to cut regular dividends. Preserving and increasing the dividend over time has been correlated with good performance for stocks over time. These articles provide examples of how dividend compounding is correlated with long-term growth as income streams build up:
The S&P Dow Jones Indices report raises the question of which stocks might buck the trend.
Starting with the S&P 500
SPX,
there are 71 companies stocks with current dividend yields of at least 4.00% indicated by annual payout rates. Among these companies, 68 increased dividends during 2022, according to data provided by FactSet.
Then we looked at the pace of dividend increases in 2022 and the consensus estimates for dividends paid during 2023 and 2024, among analysts polled by FactSet. Among the remaining 68 companies, there are 29 for which the estimated 2023 dividend increase is higher than the 2022 dividend increase. Narrowing further, there are 14 for which the estimated 2024 dividend increases are higher than the estimated 2023 dividend increases.
Here are the 14 stocks that passed the screen, sorted by current dividend yield:
| Company | Ticker | Dividend yield | Dividend increase – 2022 | Expected dividend increase in 2023 | Expected dividend increase in 2024 |
| Altria Group Inc. |
MO, |
8.46% | 4.5% | 4.7% | 4.9% |
| Newell Brands Inc. |
NWL, |
7.55% | 0.0% | 0.1% | 0.6% |
| Boston Properties Inc. |
BXP, |
7.42% | 0.0% | 0.7% | 1.0% |
| KeyCorp |
KEY, |
6.99% | 5.3% | 6.7% | 6.8% |
| Prudential Financial Inc. |
PRU, |
6.08% | 4.3% | 4.7% | 4.8% |
| ONEOK Inc. |
OKE, |
5.87% | 0.0% | 2.2% | 2.4% |
| Healthpeak Properties Inc. |
PEAK, |
5.54% | 0.0% | 2.1% | 2.2% |
| Dow Inc. |
DOW, |
5.16% | 0.0% | 1.1% | 2.2% |
| Iron Mountain Inc. |
IRM, |
4.70% | 0.0% | 1.8% | 5.4% |
| NRG Energy Inc. |
NRG, |
4.50% | 7.7% | 7.9% | 7.9% |
| Franklin Resources Inc. |
BEN, |
4.50% | 3.6% | 4.3% | 5.7% |
| Federal Realty Investment Trust |
FRT, |
4.38% | 0.9% | 1.7% | 2.1% |
| Ventas Inc. |
VTR, |
4.26% | 0.0% | 3.3% | 5.5% |
| Kraft Heinz Co. |
KHC, |
4.14% | 0.0% | 0.7% | 0.8% |
| Source: FactSet | |||||
Click on the ticker for more about each company.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Any stock screen is limited, but can be useful as a starting point or supplement to your own research. If you see any companies of interest, do some research to form your own opinion of how likely they are to remain competitive over the next decade, at least.
Don’t miss: This stock ETF keeps beating the S&P 500 by selecting for quality
[ad_2]
[ad_1]
Be careful what you wish for. U.S. job openings dropped below 10 million, a symbolic sign that the Federal Reserve’s efforts to combat inflation by sapping labor-market demand was working — and U.S. stocks promptly fell. Perhaps the bigger issue is that investors were not willing to push stocks out of the 3,800 to 4,200 range the S&P 500
SPX,
has been trading in for months.
It might not be the most obvious time to be discussing a commodity supercycle, with recession talk growing, but then that’s what makes this call more interesting. Strategists at Wells Fargo investment Institute argue it’s year three of a commodity supercycle, which they say has plenty more room to run.
John LaForge, head of real asset strategy, and Mason Mendez, investment strategy analyst, say commodities are like black holes, in that escaping the gravity of a supercycle is difficult for any individual commodity. They point to this chart, looking at commodity momentum since 1800, plotted in 10-year moving averages, which shows that food, energy and the commodity complex as a whole tend to follow each other around.
Right now nearly all the signs, both technical and fundamental, point to a commodity bull market, they say. The early signs are mostly shifting prices and technical indicators, and the latter signs are more fundamental in nature, like restrained supplies. “The bottom line is that the key early technical indicators are confirming to us that a new supercycle likely began in 2020.”
The analysts went further into depth on what they call washed-out sentiment. They say the process goes something like this: near the end of a commodity bull supercycle, prices go so high that oversupplies become rampant and need to be worked off, which results in investment stopping to flow into production. They say that in both corn
C00,
and gold
GC00,
— not commodities with much in common — supply growth rates have turned negative in recent years. Both showed similar conditions at the start of the last supercycle, in 1999.
They advise using commodities as portfolio diversifiers, which certainly would have helped last year, when both stocks and bonds fell but the Bloomberg commodity index rose nearly 16%. They highlight commodity prices typically move differently than stocks or bonds over the long run. And they say that supercycles have historically lasted a decade or longer, and the shortest commodity bull market on record was nine years.
One caveat: the speed of technology advances. Sometimes technology can help fuel demand, but conversely, to the extent technology can make commodities easier to extract, it can also buoy supplies. The obvious example here, not pointed out in the note, is the shale-oil revolution. There’s an interesting article in The Economist (subscription required), how copper has yet to be the beneficiary of a technology boost.
U.S. stock futures
ES00,
NQ00,
edged lower. Oil prices
CL.1,
fell but held over $80 per barrel. The yield on the 10-year Treasury
TMUBMUSD10Y,
turned lower after the latest jobs data.
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
ADP reported a slowdown in private-payrolls growth to 145,000 jobs in March, as well as a slowing pace of pay growth. Shortly after the open comes the the Institute for Supply Management’s services index. Cleveland Fed President Loretta Mester said interest rates would need to be increased “somewhat” from here.
Overseas, New Zealand’s central bank made a larger-than-expected 50 basis point rate hike, while a joint forecast of Germany’s leading institutes upgraded its view on the eurozone’s largest economy, now expecting a 0.3% advance.
Walmart
WMT,
forecast earnings in a range of $5.90 to $6.05 per share for its fiscal year, below the FactSet-compiled analyst estimate of $6.11.
Johnson & Johnson
JNJ,
proposed to pay up to $8.9 billion over 25 years to settle claims connected with cosmetic-talc litigation.
Alphabet’s
GOOGL,
Google says its chips are faster and more power efficient than comparable chips from Nvidia
NVDA,
Western Alliance Bancorp
WAL,
shares fell in premarket trade after the regional lender detailed the latest losses in its portfolio of loans and securities.
Brandon Johnson was elected mayor of Chicago, the country’s third-largest city. Former President Donald Trump was defiant in a speech to supporters after his indictment.
A popular Fed program is draining funds from the banking system.
Instant videos could be the next leap in artificial-intelligence technology.
OpenAI, the tech company backed by Microsoft
MSFT,
is facing what is believed to be its first defamation lawsuit over a claim by its ChatGPT chatbot that an Australian mayor served time in prison for bribery.
These were the most active stock-market tickers as of 6 a.m. Eastern.
| Ticker | Security name |
|
TSLA, |
Tesla |
|
AMC, |
AMC Entertainment |
|
BBBY, |
Bed Bath & Beyond |
|
GME, |
GameStop |
|
BUD, |
Anheuser-Busch InBev |
|
APE, |
AMC Entertainment preferreds |
|
MULN, |
Mullen Automotive |
|
NIO, |
Nio |
|
AAPL, |
Apple |
|
AI, |
C3.ai |
Sure, higher gasoline prices naturally drive demand for electric vehicles. But at what point do high electricity prices make it more cost-effective to buy old gas guzzlers? This chart from Barclays breaks it down — roughly, 10 cents per kilowatt hour equates to $1 per gallon. Right now it’s cheaper to fill a car at the pump than recharge at peak hours.
Easter means the annual production of a 15,000-egg omelette.
This man was successful in his marriage proposal, at the cost of a one-year ban from Dodger Stadium.
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.
[ad_2]
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/stock-market-movers-88cae2de
[ad_2]
[ad_1]
Major U.S. stock indexes fell on Tuesday, with the Dow and S&P 500 both snapping a 4-session win streak, as economic data showed more signs of a sputtering U.S. economy. The Dow Jones Industrial Average
DJIA,
fell about 198 points, or 0.6%, ending near 33,403, while the S&P 500 index
SPX,
shed 0.6% and the Nasdaq Composite Index
COMP,
fell 0.5%, according to preliminary FactSet data. Investors were eyeing less robust economic data out Tuesday. The number of U.S. job openings in February fell to a 21-month low, while orders for manufactured goods fell for the third time in the past four months. Gold prices
GC00,
were flirting with a return to record territory, trading above $2,000 an ounce. The 2-year Treasury rate
TMUBMUSD02Y,
stayed below 4% at 3.84%.
[ad_2]
[ad_1]
The Dow and S&P 500 both closed higher on Monday to kick off April with a 4th straight session of gains, after a group of major global oil nations on Sunday announced surprise production cuts. The Dow Jones Industrial Average
DJIA,
climbed about 326 points, or 1% on Monday, to end near 33,600, according to preliminary FactSet data. The S&P 500 index
SPX,
gained 0.4%, while its energy component outperformed with a 4.9% climb. The Nasdaq Composite Index
COMP,
shed 0.3%. Investors piled into energy stocks after the Organization of the Petroleum Exporting Countries and its allies said Sunday they would in May cut production by more than 1 million barrels a day in an effort to support oil-market stability, including with Saudi Arabia slashing its output by 500,000 barrels a day. May WTI oil future contract
CLK23,
climbed more than 6% to trade above $80 a barrel, the biggest daily gain in more than a year. The Energy Select Sector SPDR Fund
XLE,
rose 4.6%. The 2-year Treasury yield
TMUBMUSD02Y,
slumped below 4%, while the 10-year Treasury
TMUBMUSD10Y,
rate fell to 3.43%, as traders anticipated that higher oil prices could potentially act as a wretch in the Federal Reserve’s plans to bring inflation down to its 2% annual target.
[ad_2]
[ad_1]
The U.S. stock market has been flashing an important signal that suggests concerns about the banking sector have dissipated after the sudden collapse of Silicon Valley Bank earlier in March.
The Cboe Volatility Index
VIX,
a gauge of expected volatility in the S&P 500 index, dropped below the 20 level last week for the first time since March 8, suggesting a return to a lower risk environment that prevailed before Silicon Valley Bank first announced it had to sell securities to strengthen its deteriorating financial position.
The index, often referred to as Wall Street’s “fear gauge,” was down 1.7% at 18.70 on Friday after rising above 30 on March 13, the first trading day after regulators announced emergency measures to stem fallout from Silicon Valley Bank’s failure.
“It’s not a normal volatility environment,” said Johan Grahn, head ETF market strategist at AllianzIM. “We’ve spent 95% of trading days in the past 12 months above 20, while we were above 20 only 15% of the time in the 8-year period before the pandemic-driven volatility started in February of 2020.”
He also noted the VIX topped 30 in one of five days over the past 12 months on average, but only one in 100 days over the same 8-year period before the pandemic.
“Now we’re living in those periods as if it’s normal, but it’s not normal based on that history,” Grahn said.
Other market analysts also said investors should beware of what comes next.
The three major U.S. stock indexes ended the month on a positive note with the S&P 500
SPX,
gaining 3.5% and the Dow Jones Industrial Average
DJIA,
up 1.9%, according to Dow Jones Market Data. The Nasdaq Composite
COMP,
advanced 6.7% as volatility in banking-sector stocks ignited a rush into the technology sector.
See: Are tech stocks becoming a haven again? ‘It’s a mistake,’ say market analysts.
For the quarter, the Nasdaq Composite rose 16.8%, its best quarterly gain since at least the fourth quarter of 2020, according to Dow Jones Market Data. The S&P 500, meanwhile, rose 7%, and the Dow advanced 0.4% in the first three months of 2023.
“Those worst fears have been taken off the table, at least for the time being. I think you’re just seeing a reflection in the markets of that fact,” Grahn told MarketWatch via phone.
“Fed Chairman Jerome Powell came out and started flexing his dovish wings a little bit by taking the banking issues into consideration and now leading the market to believe that maybe he will slow down what previously was communicated as more aggressive rate increases,” he said.
Stress in the banking sector and a possible credit squeeze has led markets to reprice expectations of future monetary tightening by the Federal Reserve. Traders’ bets are tilted toward a pause in interest rate increases in May, with odds of a 25-basis-point increase at 49%, according to CME FedWatch tool.
However, Grahn thinks if investors expect rate cuts will happen later this year, that could suggest the economy will tank “very soon” and in a “very painful way.”
Investors are effectively saying “there will be so much pain coming through the system so that the Fed cannot make an argument that holds water for why they want to keep the rates high,” said Grahn. “The risk sensitivity between what the market is pricing in terms of rate increases and where the Fed is telling the market that they’re going to be is way too wide. And the way that the market can be right is if we have a disastrous couple of months ahead of us.”
See: 2023 has been bad for the bears. Here are 5 reasons why it’s going to get even worse.
David Waddell, CEO and chief investment strategist at Waddell & Associates, said it has been past bailout reassurances that have stabilized financial markets, because they neutralize the threat of banking stress.
“Once the Fed turned on the ‘liquidity spigot’ and softened their rhetoric, the market took off, because while crises may destroy investor capital, bailouts create even more,” Waddell told MarketWatch in a phone interview.
It also bolsters the case for a shallow recession, he said, because the Fed has shown a tendency to over medicate. “The ‘patient’ will be fine,” Waddell said.
After Silicon Valley Bank failed earlier this month, U.S. Treasury Secretary Janet Yellen ruled out a return to broadscale federal bailouts for banks and emphasized the situation was very different from the 2008 financial crisis, which resulted in unprecedented measures to rescue the nation’s biggest banks.
See: Two-year Treasury yields sees biggest monthly drop since 2008 after bank turmoil
U.S. Treasury yields tumbled in March with two-year rates
TMUBMUSD02Y,
posting their biggest monthly yield drop since January 2008. The yield on the two-year Treasury note traded at 4.06% on Friday, down 73.5 basis points in March, according to Dow Jones Market Data.
“So far, equities are holding up and economic data has not materially faltered, but I can say with confidence that moves of this magnitude in the Treasury market are not typically signals of smooth sailing ahead,” said Liz Young, head of investment strategy at SoFi.
The ICE BofA MOVE Index, which measures the implied volatility of the U.S. Treasury markets rallied to 198.71 in mid-March, its highest level since 2008, according to FactSet data.
“At the very least, they’re indicating that the uncertainty around Fed policy has risen. Not only due to the recent fears in the banking system — but to the unclear end to the Fed’s hiking cycle.”
Waddell said investors shouldn’t rely too heavily on a few week’s gains in U.S. stocks, but thinks market sentiment could improve in April due to surprise in the “resilience of earnings and the robustness of them in the recovery.”
However, John Butters, senior earnings analyst at FactSet, said there has been larger cuts than average to EPS estimates for S&P 500 companies for the first quarter of 2023, given the continuing concerns in the market about bank liquidity and a possible broader economic recession.
The estimated earnings decline for the index is 6.6% for the quarter. If that is the actual decline, it will mark the largest earnings decline reported by the index since the second quarter of 2020, Butters said in a Friday note.
Several Federal Reserve speakers are on deck for next week, but the other big thing to watch will be the monthly jobs report for March from the U.S. Labor Department on Friday.
[ad_2]
[ad_1]
U.S. stocks rallied on Friday to end a rocky month higher, while the Nasdaq Composite also posted its best quarterly gain since 2020. The Dow Jones Industrial Average
DJIA,
jumped about 414 points, or 1.3%, ending near 33,273 on Friday and up 1.9% for the month, according to preliminary FactSet figures. The S&P 500 index
SPX,
and Nasdaq Composite Index
COMP,
posted higher daily gains of 1.4% and 1.7%, respectively, which elevated their monthly gains to 3.5% and 6.7%. Investors in stocks largely looked past turbulence earlier in March after the Federal Reserve acted to calm markets following the sudden collapse of Silicon Valley Bank and Signature Banks. The Fed opened a new facility for banks to tap for liquidity with the aim of preventing forced asset sales, if other banks experience sharp deposit outflows. Friday also marked the end of the quarter, with the Dow and S&P 500 both posting back-to-back quarterly gains. The Nasdaq booked a 16.8% quarterly gain, the best quarter since the 2020, according to Dow Jones Market Data.
[ad_2]
[ad_1]
Wall Street bonuses fell 26% in 2022, the largest drop since the collapse of Lehman Brothers in 2008, as New York state and city officials dial back their expectations for the economic impact of the securities industry.
While many people bemoan the salaries commanded by the Big Apple’s white-shoe bankers, the financial sector provides an economic boost to city and state budgets, helping to find public services that touch the lives of residents.
Now, with the banking sector absorbing the impact of the collapse of Silicon Valley Bank and Signature Bank in recent weeks and of a lack of investment bank deal-making, 2023 isn’t looking particularly strong. The current malaise may signal what’s in store for bonuses and employment in the coming year.
Rahul Jain, state deputy comptroller, said state and city official are baking in conservative projections for a decline in Wall Street profits and bonuses in 2023 partly because much remains unknown such as when the Fed will pause its interest rate hikes or possibly cut them.
“What we can’t tell is what the Fed will do with interest rates,” Jain told MarketWatch. “It doesn’t seem like we’ll return to the levels of 2020 and 2021, but there’s hope that 2023 will level off near 2022.”
While Wall Street and the banking sector is challenged, the overall economy remains relatively healthy, as other sectors such as travel make up for weakness in the securities industry in the New York area.
“The broad economy still matters and it’s still resilient,” he said. “People still want to do things.”
Like the FDIC and other regulators, the comptroller’s office is keeping an eye on the commercial real estate market, which will hinge on how much credit is available for loan refinancings.
“Any kind of credit crunch would make the situation worse,” Jain said.
The average Wall Street banker’s bonus dropped by $63,700 in 2022, to $176,700, the New York State Comptroller’s Office reported Thursday. That figure does not include regular salary.
Even with the cut, the bonus alone eclipses average U.S. wages. Full-time employees in management, professional and related occupations have the highest median weekly earnings reported by the Bureau of Labor Statistics, and the median income for this group across the U.S. was $1,729 a week, or $89,908 a year, in the fourth quarter of 2022 for men, and $1,316 per week, or $68,432 per year, for women.
Wall Street banker bonuses jumped by 28% in 2020 and grew by another 12% in 2021, only to fall 26% in 2022. That is the largest drop since the 43% fall in 2008, the year Lehman Brothers collapsed and triggered a global financial crisis.
At the same time, employment in the securities industry climbed to 190,800 by the end of 2022, the highest level in at least 20 years and surpassing the previous 20-year high of 188,900 in 2007.
Collectively, Wall Street firms generated $25.8 billion in profits in 2022, less than half the $58.4 billion produced in 2021 as the impact of inflation, the war in Ukraine and supply constraints bit into deal-making.
The securities industry accounted for about $22.9 billion in state tax revenue, or 22% of the state’s tax collections in fiscal 2021-’22, and $5.4 billion in city tax revenue, or 8% of total tax collections over the same period.
New York State Comptroller Thomas P. DiNapoli estimated a drop of $457 million in 2022 tax income for the state and of $208 million for New York City, when measured against the lucrative year of 2021.
With recession in the headlines and markets selling off in 2022, however, policy makers have already adjusted their expectations for tax income.
New York Gov. Kathy Hochul’s proposed budget assumes that bonuses in the broader finance and insurance sector will drop by 25.2% in 2022-’23, while the city’s 2023 financial plan assumes a decrease of 35.6% for the securities industry.
“While lower bonuses affect income tax revenues for the state and city, our economic recovery does not depend solely on Wall Street,” DiNapoli said in a statement. “Employment in leisure and hospitality, retail, restaurants and construction must continue to improve for the city and state to fully recover.”
The fate of Wall Street’s bonuses in 2023 remains tied up in what markets and interest rates do for the balance of the year. Based on the storm clouds over the banking sector now, it’s possible bonuses could fall again.
In one positive sign, the equities market has managed to post gains so far in 2023 after bruising losses in 2022. At last check, the S&P 500
SPX,
is up 5.6% in 2023, while the Nasdaq
COMP,
has risen 14.9%. The Financial Select Sector SPDR exchange-traded fund
XLF,
is down 6.6% so far in 2023.
After Wall Street bonuses fell 43% in 2008, they rebounded by 39% in 2009. Such a rapid recovery may not be in the cards for the coming year, however.
Member firms at the New York Stock Exchange generated profits of $13.5 billion in the first half of 2022, down by more than half from year-ago levels, according to an October report on the securities industry in New York by the comptroller’s office.
Revenue on trading, underwriting and securities offerings dropped about 48% over the same time period, while global debt offerings dropped by 17%.
At the same time, interest-rate expenses tripled as the U.S. Federal Reserve boosted interest rates.
“Despite this uncertainty, the city’s latest forecast predicts annual profits to average $21 billion over the next five years, comparable to the 10-year pre-pandemic average of $20.3 billion,” the study said.
The bonus pool of $33.7 billion in 2022 fell 21% from 2021’s record of $42.7 billion, the largest drop since the Great Recession.
Also read: Jobs added at Morgan Stanley, Bank of America, Citi and JPMorgan but cut at Wells Fargo and Goldman
[ad_2]
[ad_1]
Block
stock rose Thursday after the payments group responded to some of a short seller’s allegations.
Last week, Hindenburg Research disclosed a short position in the company, alleging that Block (ticker: SQ) had inflated user metrics and didn’t rein in illicit activity by users on its Cash App platform. A short position is a bet that a stock will fall: Traders who try it borrow shares of a company and then sell them, hoping to buy them back later at a lower price.
[ad_2]
[ad_1]
U.S. stocks finished higher on Wednesday as investors waited on an update on inflation due Friday that could help inform how many more rate hikes to expect from the Federal Reserve.
The S&P 500 index SPX rose about 56 points, or 1.4%, ending near 4,027, according to preliminary FactSet data, the highest close since March 6. That was only days before the collapse of Silicon Valley Bank put a spotlight on risks in the U.S. banking system after the Fed’s yearlong stretch of quick rate hikes.
The…
[ad_2]
[ad_1]
Sam Bankman-Fried, the founder and former chief executive of bankrupt crypto exchange FTX, is facing new charges for bribery, according to an indictment on March 28.
It claims Bankman-Fried in 2021 transferred over $40 million worth of cryptocurrency to Chinese government officials. The founder allegedly made the transfer to “influence and induce them to unfreeze the accounts” of Alameda Research, which contained over $1 billion in cryptocurrency that Beijing had frozen, according to the document.
The indictment contains 12 charges that Bankman-Fried previously was facing, plus the additional one for conspiracy to violate the Foreign Corrupt Practices Act, bringing the new tally to a 13-count indictment.
Bankman-Fried’s lawyer didn’t immediately respond to a MarketWatch request for comment.
Bankman-Fried has been restricted from using messaging apps, but prosecutors and Bankman-Fried’s attorneys have asked U.S. District Judge Lewis Kaplan to approve a new set of proposed restrictions that would limit his access to electronic devices and the internet.
He has pleaded not guilty to eight counts over the collapse of FTX and is currently under house arrest with his parents in Palo Alto, Calif.
U.S. District Judge Lewis Kaplan set a new hearing for Thursday.
[ad_2]
[ad_1]
U.S. stocks closed mostly higher Monday, as bank shares climbed after First Citizens BancShares Inc.
FCNCA,
agreed to buy failed Silicon Valley Bank’s deposits and loans. The Dow Jones Industrial Average
DJIA,
finished 0.6% higher, while the S&P 500
SPX,
gained 0.2% and the technology-heavy Nasdaq Composite
COMP,
slipped 0.5%, according to preliminary data from FactSet. Regional and big banks helped buoy the S&P 500, with First Republic Bank
FRC,
among the index’s top-performing stocks, FactSet data show. Shares of major Wall Street banks such as Bank of America Corp.
BAC,
Citigroup Inc.
C,
Wells Fargo & Co.
WFC,
and JPMorgan Chase & Co.
JPM,
also saw sharp gains in Monday’s trading session.
[ad_2]
[ad_1]
U.S. stocks ended a volatile week higher on Friday, a week that saw the Federal Reserve raise rates another 25 basis points and risks in the U.S. and European banking sectors remain in key focus. The Dow Jones Industrial Average
DJIA,
rose about 132 points, or 0.4%, ending near 32,238, Friday, boosting its weekly gain to 1.2%, according to preliminary FactSet data. The S&P 500 index
SPX,
climbed 0.6% Friday and 1.4% for the week, while the Nasdaq Composite Index
COMP,
closed up 0.3% for a 1.7% weekly gain. Investors have been concerned about a potential credit crunch and its likely toll on the economy, after the failure earlier in March of Silicon Valley Bank and Signature Bank. Fed Chairman Jerome Powell on Wednesday said he expected credit conditions to tightening further, doing some of the central bank’s work for it, in terms of bringing down inflation. One worry is that high rates and tighter credit could lead to a wave of defaults. Goldman Sachs this week raised its default forecast for the U.S. high-yield, or junk-bond, market to 4% from 2.8% for 2023. The junk-bond market is considered an earlier harbinger of potential stress in credit markets since it finances companies already considered at an elevated risk of buckling. European banks also were in focus, including on Friday as shares of Deutsche Bank
DB,
came under pressure after costs of insuring it against a credit default jumped. Still, the S&P 500 and Nasdaq posted back-to-back weekly gains, according to Dow Jones Market Data. Before Friday, the Dow had two weekly declines in a row.
[ad_2]
[ad_1]
Deutsche Bank shares slumped on Friday, putting the health of another globally systemic important bank in the spotlight heading into the weekend.
The German lender’s shares
DBK,
fell 10% in Frankfurt trade, and the Euro Stoxx bank index
SX7E,
fell 5%.
Deutsche Bank’s 5-year credit-default swaps widened on Thursday, in what Reuters reported was the largest one-day rise in its history. And on Friday, they widened again.
It should be noted that Deutsche Bank’s 5-year credit-default swap, which was 215 on Friday, is nowhere near the peak for Credit Suisse, which was 1,194, according to S&P Global data. The higher the value of the CDS, the more likely the market sees the issuer defaulting.
Deutsche Bank’s AT1 bonds have tumbled in value after Switzerland wiped out Credit Suisse’s
CSGN,
securities in the deal for it to be taken over by UBS
UBSG,
The Invesco AT1 Capital Bond UCITS ETF
AT1,
which invests in these convertible bonds, has dropped 18% this month as investors lose faith in the securities. European and other banking regulators across the globe have insisted they will not follow Switzerland’s precedent, and first let bank equity fall to zero before wiping out the convertible securities in the event of a failure.
“It is doubtful that banks will be able to issue new AT1 anytime soon, increasing the likelihood of outstanding AT1 notes being extended. We consider that the recent events in the banking sector have resulted in substantially increased uncertainty, which is likely to continue to be reflected as substantial short-term volatility in credit markets,” said analysts at ING.
UBS
UBS,
also is feeling the stress in a deal that the banks say might not complete this year. UBS shares dropped 6%.
Related: Analysts say UBS will face revenue pressure before it can cut Credit Suisse costs.
Analysts also noted that a foreign institution tapped a Fed facility for $60 billion, according to data released by the U.S. central bank on Thursday. The Fed does not identify the counterparties. Major central banks do have access to swap lines for dollar borrowing from the Fed, meaning that either it was an institution that does not have that capability, or it was one that wanted to do so anonymously.
Furthermore, Bloomberg News reported the U.S. government was investigating banks including Credit Suisse and UBS for allegedly helping Russians evade U.S. sanctions.
[ad_2]
[ad_1]
Despite quick action by regulators and policy makers, there’s a rising risk that banking-system stress will spill over into other sectors and the U.S. economy, “unleashing greater financial and economic damage than we anticipated,” said Moody’s Investors Service, one of the Big Three credit-ratings firms.
Simply put, the risk is that officials “will be unable to curtail the current turmoil without longer-lasting and potentially severe repercussions within and beyond the banking sector,” Atsi Sheth, Moody’s managing director of credit strategy, and others wrote in a note distributed on Thursday. Still, the agency’s baseline view is that U.S. officials will “broadly succeed.”
Moody’s warning came as Treasury Secretary Janet Yellen indicated that the U.S. could take additional actions if needed to stabilize the banking system, and after Federal Reserve Chairman Jerome Powell assured Americans on Wednesday that the central bank would use its tools to protect depositors.
Read: Regional banks get the attention, but worries are more widespread, says ex-FDIC chief Bair and Debate over expanding deposit insurance weighs on bank stocks. Here’s what to know.
Beneath the surface, though, is lingering worry. Hedge-fund manager Bill Ackman, for example, is warning of an acceleration of deposit outflows from banks and the latest global fund manager survey from Bank of America
BAC,
found that 31% of 212 managers polled regard a systemic credit crunch as the biggest threat to markets.
Of the three ways in which banking-system troubles could spill over more broadly, one of them is potentially the “most potent,” according to Moody’s: That is a general aversion to risk by financial-market players and a decision by banks to retrench from providing credit. Such a scenario could lead to the “crystallization of risk in multiple pockets simultaneously,” the ratings agency said.
“Over the course of 2023, as financial conditions remain tight and growth slows, a range of sectors and entities with existing credit challenges will face risks to their credit profiles,” the Moody’s team wrote. Banks are not the only type of players with exposure to interest-rate shocks, and “market scrutiny will focus on those entities that are exposed to similar risks as the troubled banks.”
A second potential channel for spillover is through the direct and indirect exposure to troubled banks that private and public entities have — via deposits, loans, transactional facilities, essential services, or holdings in those banks’ bonds and stocks. And a third way in which banking problems could spread more broadly is through a misstep by policy makers, who have been focused on inflation and may not be able to respond effectively enough to evolving developments, Moody’s said.
On Thursday, U.S. stocks
DJIA,
COMP,
finished higher as investors continued to weigh the risks to the banking sector. The policy-sensitive 2-year Treasury yield
TMUBMUSD02Y,
fell to its lowest level this year, while gold futures settled at a more than one-year high.
Last week, Fitch Ratings said that nonbank financial institutions, insurers, and funds were experiencing a variety of “knock-on effects” as the result of the sudden deterioration of a few U.S. banks.
[ad_2]
[ad_1]
This year could mark the end of the affair — between Americans and their stockholdings.
That’s according to Goldman Sachs analysts who say due to the rise in bond yields since the start of 2022, and increased flows to bond and money-market funds, U.S. households could end up dumping up to $1.1 trillion of equity holdings this year.
“The current level of market yields clearly shows that the era of TINA (There is No Alternative) has ended and that now there are reasonable alternatives (TARA) to equities,” said a team of strategists led by Cormac Conners and David Kostin.
“Although equity demand remained resilient amid sharply rising rates in 2022, we believe the YTD [year-to-date] flows into money market and bond funds signal an escalating household shift away from equities and toward the alternatives.”
Their model of household equity demand is based on the 10-year U.S. Treasury yield and personal savings rate. The analysts say that higher yields and lower savings tend to be associated with a decrease in demand for equity among households.
In their base case, they estimate net selling of $750 billion this year, alongside their forecast for the yield on the 10-year Treasury note
TMUBMUSD10Y,
to rise from around 3.6% currently to 4.2% by the end of this year, and the personal savings rate will rise to 5.3% from 4.5%. Conners and the team said such stock selling would reverse six previous quarters of household equity demand.
Should bond yields tilt lower, and the savings rate move higher, Goldman sees that estimate nearly halved to $400 billion in equity sales. In a worst-case scenario, where yields push even higher and the savings rate lower, household selling would reach $1.1 trillion, they cautioned.
As for the idea that there are now reasonable alternatives to equities (TARA), Goldman said households tend to buy fixed income products during years in which they sell stocks. They pointed to data showing $51 billion has flowed out of U.S. equity mutual funds and exchange-traded funds, year to date, while $282 billion has poured into U.S. money-market funds and $137 billion into U.S. bond funds.
Read: Money-market funds swell to record $5.4 trillion as savers pull money from bank deposits
Picking up some of the slack left by U.S. investors, the Goldman team predict foreign investors and corporations will be net stock buyers of $550 billion and $350 billion, respectively.
“We expect buyback and cash M&A activity will slow but remain relatively robust this year, driving corporations to be net buyers of U.S. stocks – though a potential [second-half] recovery in equity issuance presents one risk to this forecast. A weaker dollar should drive foreign investors to be net buyers of U.S. stocks in 2023. Pension funds will also be net buyers of $200 billion in equities in 2023,” said the strategists.
The pace of household buying has been slowing, they noted. Citing the Federal Reserve’s Financial Accounts data, Goldman said households are estimated to own 38% of the total equity market. From the start of 2020 through mid-2022, they bought $1.7 trillion in equities, but in 2022 demand for those assets fell 40% to $480 billion.
“Adjusting the Fed’s household demand series for our estimate of hedge fund net equity demand (which is included in the household category by default), implies households were net buyers of just $209 billion in equities in 2022, a 78% decline from 2021,” they said.
Up 2% so far this year, the S&P 500
SPX,
lost 19% in 2022, the worst year for the index since the global financial crisis of 2008, as a war in Europe added to inflationary pressures across the globe, driving central banks such as the Federal Reserve to raise interest rates sharply. Wednesday’s 25-basis point Fed rate hike marked the ninth rise since March 2022.
From under 1.5% at the start of 2022, the yield on the 10-year Treasury note
TY00,
has climbed to around 3.468%, levels not seen since the 2008 crisis.
[ad_2]
[ad_1]
Shares of Coinbase Global Inc. dropped 15.8% in the extended session Wednesday after the crypto exchange disclosed a warning from regulators that it may have broken securities laws.
Coinbase
COIN,
said it received a Wells notice from the Securities and Exchange Commission, which could lead to formal charges.
“We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead,” Coinbase said in a blog post detailing the action. “Rest assured, Coinbase products and services continue to operate as usual — today’s news does not require any changes to our current products or services.”
Based on discussions with the SEC, Coinbase said that the potential charges relate to the company’s spot market, its staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet.
The crypto exchange said it asked the regulators to detail which assets in its platforms the SEC believes may be securities, but the SEC declined to do so. Coinbase called it a “cursory investigation.”
SEC representatives declined to comment Wednesday.
The company said that the investigation is “still at a very early stage,” and that it has turned in documents and provided two witnesses for testimony, “one on the basic aspects of our staking services and one on the basic operation of our trading platform.”
Coinbase has said that its staking services are not securities.
Regulators have doubled down on efforts to increase oversight of the crypto industry, shutting down crypto exchange Kraken’s staking program in February and issuing a Wells notice to warn stablecoin issuer Paxos.
Staking allows users to earn rewards by using their existing holdings of tokens to verify transactions.
Shares of Coinbase ended the regular trading day down 8.2%.
[ad_2]
[ad_1]
U.S. stocks closed sharply lower on Wednesday, giving up earlier gains, after the Federal Reserve raises interest rates by 25 basis points as expected, but talked down the possibility of cuts to rates this year. The Dow Jones Industrial Average
DJIA,
tumbled 531 points, or 1.6%, ending near 32,028, while the S&P 500 index
SPX,
shed 1.7% and the Nasdaq Composite Index
COMP,
closed down 1.6%, according to preliminary FactSet figures. Fed Chairman Jerome Powell said the U.S. banking system remained resilient after it and regulators rolled out liquidity measures to help shore up confidence in the banking system after the collapse of Silicon Valley Bank and Signature Bank earlier in March. Powell also said that tighter credit conditions for consumers, following the bank failures, would likely work like rate hikes in terms of lowering inflation. It will be a key area of focus for the Fed in the coming weeks and months, he said. The 10-year Treasury rate
TMUBMUSD10Y,
fell Wednesday to 3.46%, a sign that investors in the bond market think growth will be slower.
[ad_2]