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Tag: securities

  • SEC charges Tron founder Justin Sun with fraud, Lindsay Lohan with illegally touting crypto securities

    SEC charges Tron founder Justin Sun with fraud, Lindsay Lohan with illegally touting crypto securities

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    The nation’s top security regulator announced charges against Justin Sun, founder of the crypto platform Tron, alleging that he sold unregistered crypto securities and fraudulently manipulated the secondary market for Tronix
    TRXUSD,
    +4.54%    ,
    the platform’s native token.

    The Securities and Exchange Commission unveiled the charges against Sun and eight celebrities whom it alleges illegally touted Tronix and another token BitTorrent, including actress Lindsay Lohan, social media personality Jake Paul, porn star Kendra Lust, and musicians Lil Yachty, Austin Mahone, Soulja Boy, Ne-Yo and Akon.

    With the exception of Soulja Boy and Mahone, the six other celebrities settled with the SEC, agreeing to pay a total of $400,000 in disgorgement, interest and penalties, without admitting or denying the regulator’s findings.

    The SEC’s complaint alleges Sun orchestrated a plan to sell Tronix tokens and another crypto security BitTorrent
    BTTUSD,

    without registering with the SEC and directing his company’s employees to conduct wash trades in these securities to “create the artificial appearance of legitimate investor interest and keep TRX’s price afloat.”

    “This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” said SEC Chairman Gary Gensler, in a statement, adding that Sun “generated millions in illegal proceeds at the expense of investors.”

    Sun, a Chinese national who received a graduate degree from the University of Pennsylvania and, according to the SEC, is believed to be living in Singapore or Hong Kong. He currently serves as the Permanent Representative of Grenada to the World Trade Organization.

    The SEC alleges that he misrepresented the truth about about the celebrity touting campaign, saying that celebrities that promote TRON were required to disclose that fact, their social media posts did not in fact disclose these payments.

    Sun began promoting the Tron ecosystem in 2017, with the publication of a white paper that advertised the purported advantages of Tron relative to the bitcoin
    BTCUSD,
    +1.26%
    and ethereum
    ETHUSD,
    +1.15%
    blockchains.

    In 2018, Sun acquired BitTorrent Inc., a peer-to-peer file sharing protocol and incorporated it into the Tron blockchain ecosystem, with the goal of building a decentralized content distribution platform.

    Sun made headlines in 2019 when he bid $4.5 million at a charity auction to have lunch with billionaire cryptocurrency skeptic Warren Buffett, which he then postponed. The dinner ultimately took place in January of 2020, with the proceeds going to benefit the San-Francisco based Glide Foundation.

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  • S&P 500 pushes above 4,010 level, stocks turn higher after Fed raises rates by 25 basis points

    S&P 500 pushes above 4,010 level, stocks turn higher after Fed raises rates by 25 basis points

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    U.S. stocks turned higher, shaking off earlier weakness, after the Federal Reserve on Wednesday raised its policy rate as expected by 25 basis points to help fight inflation. The increase in interest rates comes despite recent weakness in the banking system after the collapse earlier in March of Silicon Valley Bank. The S&P 500 index
    SPX,
    -0.55%
    was up 14 points, or 0.4%, to about 4,016, at last check, while the Dow Jones Industrial Average
    DJIA,
    -0.68%
    was up 0.2% near 32,609 and the Nasdaq Composite Index was 0.7% higher. The Fed also said the U.S. banking system remains resilient, in its policy statement. The 10-year Treasury rate
    TMUBMUSD10Y,
    3.507%
    was lower at 3.52%.

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  • How First Republic stock’s tailspin started and why it hasn’t stopped

    How First Republic stock’s tailspin started and why it hasn’t stopped

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    Shortly after Silicon Valley Bank disclosed on March 8 that it was running short of cash and needed to raise capital, First Republic Bank’s epic stock slide began.

    The stock
    FRC,
    -15.47%
    has lost 90% of its value in less than two weeks, hitting an all-time low of $12.18 a share on Monday.

    Supportive comments from Treasury Secretary Janet Yellen helped it snap back on Tuesday, but it’s hovering between positive and negative territory on Wednesday as investors await a key Federal Reserve decision on interest rates.

    First Republic finds itself in a tough spot with a low share price and fresh debt downgrades and not even efforts to inject $30 billion into the company’s deposits in a scheme backed by JPMorgan Chase & Co.
    JPM,
    -2.58%
    and a backstop from the U.S. Federal Reserve seem to be helping.

    The bank’s troubles stem from its overlap both in clientele and parts of its balance sheet with doomed Silicon Valley Bank, which is being sold off this week by the Federal Deposit Insurance Corp. after it officially failed on Friday, March 10. Silicon Valley Bank suffered a classic run on a bank, when depositors, nervous that it needed to raise capital, yanked their deposits.

    First Republic has suffered the same deposit flight.

    As a San Francisco bank with a focus on serving high-end clients, First Republic has acted as wealth manager for the greater Silicon Valley region of executives, managing directors and startup CEOs, as well as their counterparts on the East Coast.

    The list incudes Facebook
    META,
    -1.16%
    Founder Mark Zuckerberg, who has a large mortgage courtesy of First Republic, as the Wall Street Journal has reported. Few of its loans ever sour — it had $213 billion in assets at the end of 2022 and $176 billion in deposits.

    With its sophisticated lending products and access to the technology startup world, Silicon Valley Bank was also known for its a customer base from the venture capital and private equity world. 

    Also Read: 24 bank stocks that contrarian bottom-feeders can feast on now

    Those well-heeled clients of both banks started running into problems as interest rates rose last year, pundits warned of an economic slowdown and investors switched to a risk-off strategy of conserving cash and containing costs.

    The collapse of FTX and strain in the crypto world also fed the need for cold, hard government-backed currency. Rising interest rates made it more expensive to borrow and put a chill on the deal-making environment.

    All of this and other factors led to a drain on deposits at Silicon Valley Bank and others as it faced “elevated client cash burn” at a rate that was double pre-2021 levels, even as venture capital and private equity funds were slowing down their capital raising activities, the company said in an ill-fated mid-quarter report.

    On March 8 after the market close, Silicon Valley Bank said it planned to sell $2.25 billion in common stock and a type of preferred stock, with one of its major clients, private equity firm General Atlantic, in line to buy $500 million worth. Goldman Sachs Group Inc.
    GS,
    -1.14%
    was handling the deal.

    The company also disclosed that it had lost $1.8 billion on the sale of $21 billion in available-for-sale securities on its balance sheet to cover deposit withdrawals.

    It was this last part that caused big trouble for First Republic. Not only did its clientele overlap with Silicon Valley Bank, its holdings included some of the same securities that Silicon Valley Bank sold at a loss.

    Wall Street investors quickly started bidding down shares of First Republic and other regional banks and the credit rating agencies moved in, cutting the bank’s rating from investment grade deep into junk in just a few days.

    None of this helped First Republic hold on to its deposits.  

    As one longtime banking official said recently, money from Silicon Valley types typically comes in the form of uninsured deposits, which means they’re in excess of the $250,000 that the FDIC will guarantee if a bank goes out of business. This so called hot-money is great for banks when times are good, but can move away quickly if the environment changes.

    “When hot money gets nervous, it runs,” former FDIC chairman Bill Isaac told MarketWatch recently.

    While an unprecedented effort on March 16 by 11 banks to inject $30 billion into First Republic’s deposits temporarily provided a lift to its stock, the move apparently wasn’t enough.

    First Republic said last Thursday that it had borrowed between $20 billion and $109 billion from the Federal Reserve during that week. It also increased short-term borrowing from the Federal Home Loan Bank by $10 billion at a rate of 5.09%.

    Jefferies analyst Ken Usdin said the numbers revealed that First Republic’s total deposits had dropped by up to $89 billion in the week ended March 17 past week—or about three times more than the $30 billion injection from the bank.

    “With [First Republic’s] earnings profile clearly impaired, the new deposits effectively bridge the estimated $30.5 billion of uninsured deposits still on [the bank’s] balance sheet, providing time for [it] to likely explore a sale,” Usdin said.

    Janney Montgomery Scott analyst Tim Coffey said First Republic’s stock drop in recent days reflects uncertainty around what a potential second bailout would look like, or how the bank’s balance sheet is faring after a steep run in deposits and the falling value of its long-dated securities.

    Another unknown is the company’s latest Tier 1 capital Ratio, a key measure of a bank’s balance sheet strength.

    Like Silicon Valley Bank, First Republic’s balance sheet has had more than the usual exposure to long-dated securities, which have been falling in value as interest rates rise. 

    A typical mix for a bank of comparable size is to hold about 72% of securities as available for sale. The remaining 28% are held to maturity. First Republic’s mix is reversed with 12% available for sale and 88% held to maturity.

    The bank’s mix of longer-dated assets now commands a lower market value, given where interest rates are. The bank’s emphasis on long-dated securities provided a better return when interest rates were near zero, but they have been a liability in the current environment.

    “They’ve had duration risk where the value of their securities started going down as interest rates rose,” Coffey told MarketWatch.

    Another problem for First Republic is that many of those long-dated securities are in the mortgage business, which has been ailing as interest rates rise.

    Plenty of questions remain about First Republic’s situation and whether it could have been avoided. The challenges facing First Republic as well as the demise of Silicon Valley Bank and Signature Bank will be the focus of hearings on Capitol Hill next week.

    Wall Street is also awaiting comments from the U.S. Federal Reserve when it updates its interest rate policy later on Wednesday.

    And JPMorgan Chase continues to work with First Republic on a potential bailout, even as the bank has reportedly hired Lazard
    LAZ,
    -2.17%
    to weigh strategic alternatives.

    All of these factors add to the uncertainty swirling around First Republic, giving investors little reason to go long on the stock for now.

    Also Read: 24 bank stocks that contrarian bottom-feeders can feast on now

    Related: Senate Banking Chair Sherrod Brown sees bipartisan support for changes to deposit insurance

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  • AMC, Bed Bath & Beyond stocks get a big lift as ‘meme’ peer GameStop shares soar

    AMC, Bed Bath & Beyond stocks get a big lift as ‘meme’ peer GameStop shares soar

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    Shares of AMC Entertainment Holdings Inc.
    AMC,
    +3.28%
    and Bed Bath & Beyond Inc.
    BBBY,
    +0.98%
    soared in premarket trading Wednesday, as fellow “meme” stock GameStop Corp.
    GME,
    +4.62%
    skyrocketed after the consumer electronics and video games seller reported a surprise fiscal fourth-quarter profit. Bed Bath’s stock shot up 11.4%, after bouncing 1.0% Tuesday off Monday’s record-low close of 81 cents, but was still headed for a sub-$1 open. AMC’s stock climbed 10.2%, after having tumbled 38.2% month to date through Tuesday. And AMC’s preferred equity units
    APE,
    +8.82%    ,
    known as APEs, jumped 10.8% ahead of the open, after they rallied 13.8% over the past two sessions, but were still down 28.5% month to date through Tuesday. Meanwhile, GameStop shares ran up 42.8% premarket, putting them on track to open at a 3 1/2-month high.

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  • First Republic stock tumbles after hours as bank reportedly hires more advisers

    First Republic stock tumbles after hours as bank reportedly hires more advisers

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    Shares of First Republic Bank dropped about 15% in the extended session Tuesday after news that the troubled bank reportedly has hired advisers to review its options and manage the crisis.

    First Republic
    FRC,
    +29.47%
    stock rallied 30% in the regular trading day Tuesday, buoyed by reports that JPMorgan Chase & Co.
    JPM,
    +2.68%
    was working to help bolster the bank’s capital.

    The Wall Street Journal reported late Tuesday that First Republic had tapped Lazard to help it review its options, and consultant McKinsey for post-crisis planning, citing people familiar with the matter. Options on the table include a sale, a capital infusion and asset sales, the sources said, according to the Journal.

    Separately, Reuters reported Tuesday that the bank could downsize if a capital raise fails, and Bloomberg reported First Republic may rely on government backing to facilitate a deal to shore it up.

    The bank issued “a message to our clients” late Tuesday, as its stock was falling in after-hours trading, that noted recent “unprecedented events,” and promised an update.

    “Our commitment to client service is unchanged, and we remain well-positioned to continue to manage deposit activity,” the statement reads. “Today, as every day, we are processing transactions, opening accounts, funding loans, answering questions, and serving clients’ overall banking and wealth management needs.”

    First Republic stock has swung wildly in recent days, ending Monday’s session at a record low, and several trade halts plagued it during the day.

    San Francisco-based First Republic last week got $30 billion in deposits from 11 major U.S. banks, but the stock promptly resumed its slide as it suspended its dividend to preserve cash.

    That followed the collapse of Silicon Valley Bank and Signature Bank earlier this month and contagion fears that have rocked bank stocks.

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  • U.S. stocks end higher, kicking week off with gains ahead of Fed policy meeting

    U.S. stocks end higher, kicking week off with gains ahead of Fed policy meeting

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    U.S. stocks ended higher Monday, kicking the week off with gains led by the blue-chip gauge Dow Jones Industrial Average ahead of the Federal Reserve’s meeting this week. The Dow Jones Industrial Average
    DJIA,
    +1.20%
    rose more than 350 points to close 1.2% higher, while the S&P 500
    SPX,
    +0.89%
    gained 0.9% and the technology-heavy Nasdaq Composite
    COMP,
    +0.39%
    climbed 0.4%, according to preliminary data from FactSet. The Fed’s two-day policy meeting begins Tuesday, with many investors expecting the central bank to announce on Wednesday that it’s lifting its benchmark interest rate by a quarter of a percentage point to a target range of 4.75% to 5% in an effort to bring down high inflation. Fed-funds futures on Monday afternoon indicated a 73.1% chance of such a rate hike, according to the CME FedWatch Tool, at last check. Odds of the Fed deciding to pause its rate hikes after recent emergency steps to bolster the banking system were at 26.9% based on fed-fund futures trading.

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  • The Fed will either pause or hike interest rates by 25 basis points. What are the pros and cons of each approach?

    The Fed will either pause or hike interest rates by 25 basis points. What are the pros and cons of each approach?

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    The Federal Reserve will meet on Wednesday and, for once, the outcome is unclear.

    This is the most uncertain Fed meeting since 2008, said Jim Bianco, president of Bianco Research.

    Fed officials, starting with former chair Ben Bernanke, have perfected the art of having the market price in what the central bank will do — at least regarding interest rates — at each upcoming meeting. That has happened 100% of the time, Bianco said on Twitter.

    The Fed’s meeting this week is different because it follows the sudden collapse of confidence in the U.S. banking system following the government takeover of Silicon Valley Bank as well as the tremors around the world that have led to the shotgun wedding of Swiss banking giant Credit Suisse and its longtime rival, UBS.

    At the moment, the market probabilities are 73% for a quarter-percentage-point move and 27% for no move, according to the CME FedWatch tool. The market seems to be growing in confidence of a hike, analysts said, based on movements on the front end of the curve.

    The Fed’s decision will come on Wednesday at 2 p.m. Eastern and will be followed by a press conference from Fed Chair Jerome Powell.

    “Depending on your perspective, the Fed’s decision will be seen as either capitulation to the markets or ivory-tower isolation from the markets,” said Ian Katz, a financial sector analyst with Capital Alpha Partners.

    Here are the pros and cons for both a pause and a 25-basis-point hike.

    The case for and against a pause

    The main rationale for a pause is that the banking system is under stress.

    “While policymakers have responded aggressively to shore up the financial system, markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient. We think Fed officials will therefore share our view that stress in the banking system remains the most immediate concern for now,” said Jan Hatzius, chief economist at Goldman Sachs, in a note to clients Monday morning.

    Former New York Fed President William Dudley said he would recommend a pause. “The case for zero is ‘do no harm,’” he said.

    The case against a pause is that it could spark more worries about the banking system.

    “I think if they pause, they are going to have to explain exactly what they are seeing, what is giving them more concern. I am not sure a pause is comforting,” said former Fed Vice Chair Roger Ferguson in a television interview on Monday

    The case for and against a 25-basis-point hike

    The main reason for a quarter-percentage-point rate increase, to a range of 4.75%-5%, is that it could project confidence.

    “What you need from policymakers is steady hands, steady ship,” said Max Kettner, chief multi-asset strategist at HSBC. “You don’t need overaction … flip-flopping around in projections or opinions.”

    The Fed should say that it has managed to contain confidence so far and that “we can press ahead with the inflation fight,” he added.

    Oren Klachkin, lead U.S. economist at Oxford Economics, said he didn’t think “the recent bank failures pose systemic risks to the broad financial system and economy.”

    He noted that “inflation is still running hot” and the Fed has better ways to alleviate banking-sector stress than interest rates.

    The case against hiking is that doing so could further exacerbate concerns about the stability of the banking sector.

    “A rate hike now might have to be quickly reversed to deal with a deeper, less contained recession and disinflation. Why would the Fed raise rates when it may be forced to cut rates so much sooner than previously hoped?” asked Diane Swonk, chief economist at KPMG.

    Gregory Daco, chief economist at EY, said he thinks economic activity is slowing, which gives the Fed time.

    “There is no rush to hike. We are not going to see hyperinflation as a result,” he said.

    Stocks
    DJIA,
    +1.20%

    SPX,
    +0.89%
    rose Monday. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.485%
    inched up to 3.46%, still well below the 4% level seen prior to the banking crisis.

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

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

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    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-a86267f

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  • Norway’s Oil Fund Has Roughly 1.49% Stake in Credit Suisse, No AT1 Bond Exposure

    Norway’s Oil Fund Has Roughly 1.49% Stake in Credit Suisse, No AT1 Bond Exposure

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    By Dominic Chopping

    Norway’s sovereign wealth fund had a 1.49% stake in Credit Suisse Group AG at the end of 2022 and a 3.31% stake in UBS Group AG, holdings that remain “approximately unchanged,” it said Monday.
    

    UBS yesterday agreed to take over Swiss rival Credit Suisse for more than $3 billion as regulators pushed for the deal in an effort to calm declining confidence in the global banking system.
    

    

    Credit Suisse shareholders will receive one UBS share for every 22.48 Credit Suisse shares held, but holders of around $17.3 billion of additional tier 1 bonds, or AT1s, will receive nothing.
    

    Norges Bank Investment Management, the arm of Norway’s central bank that manages the sovereign-wealth fund, commonly known as the oil fund, said that it doesn’t hold any Credit Suisse AT1 bonds.
    

    Write to Dominic Chopping at dominic.chopping@wsj.com
    

    

    

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  • 
		
		
    
			
    U.S. stock-market futures edge higher after historic deal to rescue Credit Suisse
    
			
    U.S. stock-market futures edge higher after historic deal to rescue Credit Suisse
    
			
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    U.S. stock-index futures opened with modest gains Sunday evening as investors assessed a historic deal to rescue troubled Swiss lender Credit Suisse, the latest maneuver by authorities attempting to prevent a deeper loss of confidence in the global banking system. 
    

    Swiss bank UBS Group
    
        UBS,
    
        -5.50%
    
       agreed to buy rival Credit Suisse
    
        CS,
    
        -6.94%
    

            CSGN,
    
        -8.01%
    
       for more than $3 billion, a substantial discount to its Friday closing price, in a deal shepherded by Swiss regulators and closely watched by monetary and economic policy makers around the world.
    

    

    Don’t miss: Here’s why UBS’s deal to buy Credit Suisse matters to U.S. investors
    

    Also Sunday, the Federal Reserve and five other major central banks announced they were taking steps to ensure that U.S. dollars remained readily accessible throughout the global financial system. 
    

    Futures on the Dow Jones Industrial Average
    
        YM00,
    
        +0.64%
    
       rose 123 points, or 0.4%, while futures on the S&P 500
    
        ES00,
    
        +0.65%
    
       and Nasdaq-100
    
        NQ00,
    
        +0.42%
    
       were also up 0.4%, 
    

    Oil futures ticked higher after suffering their worst week of 2023 and ending Friday at their lowest since December 2021, with analysts tying the plunge largely to rising recession fears. April West Texas Intermediate crude
    
        CL.1,
    
        +0.55%
    

            CL00,
    
        +0.55%
    

            CLJ23,
    
        +0.55%
    
       rose 0.3% to $66.92 a barrel on the New York Mercantile Exchange, while May Brent crude
    
        BRN00,
    
        +0.52%    ,
    
       the global benchmark, ticked up 0.1% to $73.05 a barrel on ICE Futures Europe.
    

    The positive initial tone in markets late Sunday was reflected in a weaker tone for the Japanese yen, which has seen haven-related support this month on rising banking worries. The U.S. dollar was up 0.3% versus the Japanese currency
    
        USDJPY,
    
        +0.60%
    
       at 132.18 yen. The ICE U.S. Dollar Index
    
        DXY,
    
        +0.08%    ,
    
       a measure of the currency against a basket of six major rivals, was up 0.1%.
    

    Futures on U.S. Treasurys
    
        TY00,
    
        -0.82%    ,
    
       which also tend to serve as a haven during periods of crisis, were slightly lower. Treasurys rose sharply last week, dragging down yields, which move opposite to price, in volatile trading.
    

    Read: Why bond-market volatility is at its highest since the 2008 financial crisis amid rolling fallout from banks
    

    Credit Suisse’s 167-year run came to an end after a collapse in the value of its shares and bonds last week. Economists, investors and authorities worried that a collapse by Credit Suisse could amplify contagion fears in the global banking system after the demise earlier this month of California’s Silicon Valley Bank, or SVB.
    

    Economists expect U.S. banks to significantly tighten lending standards in response to the upheaval, raising the odds of the economy falling into recession. 
    

    The Tell: ‘Hard landing’ in store for U.S. economy as bank crisis intensifies: economist
    

    As a result, fed-funds futures traders abandon expectations for a return to a supersized 50-basis-point, or half-percentage-point, rise in the Fed’s benchmark interest rate when policy makers complete a two-day meeting on Wednesday. The market at the end of last week showed traders saw a nearly 75% chance of a 25-basis-point hike, and a roughly 25% chance the Fed would hold rates unchanged.
    

    Traders also priced in the potential for significant rate cuts by the end of the year, signaling rising recession expectations. Those shifting expectations helped drive the Treasury rally, particularly for the policy-sensitive 2-year note
    
        TMUBMUSD02Y,
    
        4.003%    .
      
    

    Analysts said the Fed may be reluctant to hold off on a rate hike this week given still-elevated inflation readings and data so far that that shows the job market remains tight. Some economists see the Fed echoing the European Central Bank’s lead from last week, when it followed through with an earlier pledge to hike rates by 50 basis points while making clear that further rate moves would depend on future developments and data.
    

    Don’t miss: What’s at stake for stocks, bonds as Federal Reserve weighs bank chaos against inflation fight
    

    “While the Fed is obviously wary of contagion risks, it still views the banking sector as being well-capitalized, and it will want to stress that the inflation battle is not won, and it remains too high, so a 25-bps hike seems very likely, though like the ECB it will likely stress a high level of uncertainty, and offer no guidance, and emphasize data and financial conditions dependency,” said Marc Ostwald, London-based chief economist and global strategist at ADM Investor Services, in a note.
    

    Despite efforts by the Fed and other U.S. regulators to ringfence SVB and a pair of other collapsed banks while moving to backstop deposits, other regional banks have faced significant pressure. While all depositors at those banks were made whole, calls have increased for the U.S. to formally remove a $250,000 cap on insured deposits.
    

    Meanwhile, First Republic Bank
    
        FRC,
    
        -32.80%
    
       saw its credit rating downgraded further into junk territory by S&P Global Ratings, news reports said. The ratings firm cut the bank’s credit rating three notches to B-plus from BB-plus and warned further downgrades were possible, according to Reuters.
    

    First Republic has been a top concern for investors and regulators following the collapse of SVB. Last week a group of 11 large banks agreed to provide a combined $30 billion in deposits to First Republic in an effort to shore up confidence in the lender. Shares of First Republic have plunged more than 80% so far in March.
    

    U.S. stocks ended lower Friday amid banking sector fears, with the Dow
    
        DJIA,
    
        -1.19%
    
       booking back-to-back weekly losses. 
    

    The S&P 500 
    
        SPX,
    
        -1.10%
    
       rose 1.4% last week, while the technology-heavy Nasdaq Composite 
    
        COMP,
    
        -0.74%
    
       climbed 4.4% in its biggest weekly percentage gain since January, according to Dow Jones Market Data.
    

    

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  • 
		
		
    
			
    Here’s why UBS’s deal to buy Credit Suisse matters to U.S. investors
    
			
    Here’s why UBS’s deal to buy Credit Suisse matters to U.S. investors
    
			
     [ad_1]
    

    Thousands of miles away from U.S. shores last Wednesday, a headline began working its way across Europe, then Wall Street, sparking fresh panic as it dawned on investors that they may be facing yet another banking crisis. 
    

    Shares of Credit Suisse
    
        CS,
    
        -6.94%
    

            CSGN,
    
        -8.01%
    
       would eventually sink 25% last week to a fresh record low, unable to find footing days after the head of top shareholder Saudi National Bank said they won’t invest any more in the bank. By Sunday, the struggling Swiss bank had a new owner, leaving investors to wonder if at least one chapter in a current roller coaster of global banking stress can be closed. 
    

    

    Swiss authorities steered rival UBS AG
    
        UBS,
    
        -5.50%
    
       to an all-stock deal worth 3 billion francs ($3.25 billion), or 0.76 francs per share, a not-so-slight discount to the 1.86 franc close on Friday of Credit Suisse. So important was the agreement, it was announced by Switzerland’s President Alain Berset, with both banks and the chairman of the Swiss National Bank on either side of him.
    

    “With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the SNB said in a statement.
    

    The Swiss National Bank said either Swiss bank can borrow up to 100 billion francs in a liquidity assistance loan, and Credit Suisse will get a liquidity assistance loan of up to 100 billion francs, backed by a federal default guarantee. The U.S. Federal Reserve had worked with its Swiss counterpart on the deal as well.
    

    “We welcome the announcements by the Swiss authorities today to support financial stability. The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient,” said a statement Sunday by Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell. 
    

    European Central Bank President Christine Lagarde also praised Swiss authorities for “restoring orderly market conditions and ensuring financial stability,” while reiterating the “resilience” of the euro-area banking sector. She said the ECB stands ready to provide liquidity if needed.
    

    Her comment comes days after the the ECB pulled the trigger Thursday on a 50-basis-point rate hike, as it warned “inflation is projected to remain too high for too long.” 
    

    The deal for Credit Suisse comes in the wake of stress on the U.S. banking sector, triggered by the collapse of Silvergate Bank, Silicon Valley Bank and Signature Bank, all within the space of a week. 
    

    “Virtually everyone at this high-level Swiss press conference — government officials, regulator, central bank governor, and executives of the two banks — blamed the US banking sector turmoil for being the catalyst for the financial turmoil in #Switzerland,” tweeted Mohamed A. El-Erian, chief economic adviser at Allianz, of the press conference Sunday with Swiss authorities to announce the deal.
    

    And for U.S. investors who have had quite enough anxiety lately,  a logical question would be to ask if the deal that brings together the two Swiss banking giants will now remove one layer of stress from global markets, and hence Wall Street. 
    

    For that reason, many will be watching how Asian and U.S. equity futures trade later on Sunday, as well as Europe’s opening reaction on Monday.
    

    The Credit Suisse news may only go so far to assuage investors, with some raising an eyebrow over Powell and Yellen’s Sunday statement about the Swiss deal. “Seriously, if everyone truly believed the ‘The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient’ … Would they have to tell us? Are these words enough?” said Jim Bianco, president of Bianco Research, on Twitter. “Or do investors want to see Warren Buffett writing checks to regional banks in the next two hours (before Asia opens)?” 
    

    Fox News and other media outlets reported over the weekend that the Berkshire Hathaway
    
        BRK.A,
    
        -2.76%
    

            BRK.B,
    
        -2.81%
    
       chairman and CEO had been talking to President Joe Biden’s administration in recent days over possible investments in the battered regional bank sector, and offering his advice. 
    

    The billionaire investor was responsible for a capital injection to Bank of America
    
        BAC,
    
        -3.97%
    
       in 2011 as its shares tumbled due to subprime mortgages, as well as $5 billion to Goldman Sachs
    
        GS,
    
        -3.67%
    
       amid the 2008 financial crisis.
    

    Some had said ahead of the deal last week that global-market stability depended on the Swiss first getting their house in order. 
    

    “I don’t think there are any direct consequences for U.S. investors, but it’s extremely negative for sentiment if a major Swiss bank fails, hot on the heels of SVB/SBNY,” Simon Ree, the founder of Tao of Trading options academy school and author of the book by the same name, told MarketWatch last week. 
    

    “The market will be (temporarily) wondering who’s next. It could start to have the optics of a global banking crisis, rather than an idiosyncratic failure of a niche U.S. regional bank,” said Ree. 
    

    Credit Suisse’s troubles came amid a revamp and five straight money-losing quarters, following a painful legacy that included billions worth of exposure to the collapsed Archegos family office and $10 billion worth of funds tied to Greensil Capital it had to freeze.
    

    Read: In its delayed annual report, Credit Suisse admitted to financial control weaknesses
    

    “The SNB and the Swiss government are fully aware that the failure of Credit Suisse or even any losses by deposit holders would destroy Switzerland’s reputation as a financial center,” said Otavio Marenzi, CEO  of Opimas, a management consulting firm focused on global capital markets, in a note to clients last week.
    

    The bank’s plummeting stock price and soaring bond yields was “mimicking Silicon Valley Bank’s recent collapse in a frightening way. In terms of the outflow of deposits, Credit Suisse’s position looks even worse,”  said Marenzi.
    

    Over there?
    

    As far as some are concerned, the market may have more stress ahead of it. 
    

    “The SVB failure highlights the potential for other skeletons to be hidden in closets and the market will spend the next few weeks/months hunting them out. Even just the extreme volatility we’ve seen on bond markets the last five days renders any attempt to ascribe a value to other asset classes redundant,” said Ree. 
    

    Plus: Here’s what’s really protecting your bank deposits
    

    His view is shared by many analysts, who in part point to increasing uncertainty around how the Federal Reserve will react going forward as it tries to balance market and economic risks. Some now see full percentage rate cuts by year-end, amid banking stress.
    

    Samantha LaDuc, the founder of LaDucTrading.com who specializes in timing major market inflections, said she stands by her advice (that she shared with MarketWatch in February) that investors are being “paid to wait,” by staying in cash.
    

    Read: Looking for a place for your cash? Grab these 5% CDs while you still can.
    

    “I have been literally recommending and tweeting to clients that we are PAID TO WAIT in T-bills at 5% until [the] bond market can figure out if we have recession or not. All that happened last week pulled forward recession risk,” she told MarketWatch. 
    

    Prior to the SVB crisis, she had been recommending clients short reflation trades, such as banks
    
        XLF,
    
        -3.22%
    

            KRE,
    
        -5.99%    ,
    
       energy
    
        XLE,
    
        -1.57%
    
       and metals and mining
    
        XME,
    
        -0.78%
    

            COPX,
    
        +0.63%
    

            SLX,
    
        -1.96%    ,
    
       and has been saying she sees “unattractive risk-reward for either stocks or bonds.” 
    

    Opimas’ Marenzi said the threat to Wall Street from Credit Suisse was simple:
    

    “You mean what do American investors who do not own any non-American stocks and do not own a passport and could not find Switzerland on a map and who think that anyone who speaks any language other than English is a bit weird have to worry about? Not a lot, other than the contagion spreading back into the US banking system and causing a meltdown,” he told MarketWatch.
    

    

    

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    Latest News – MarketWatch
    
			
    Latest News – MarketWatch
    
			
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    So-called AT1 bonds of Credit Suisse will be entirely written down – regulator
    

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    What’s Going on With First Republic Bank?
    
			
    What’s Going on With First Republic Bank?
    
			
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    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
    
			
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    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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    U.S. stocks finish lower but cling to weekly gains as Nasdaq beats Dow by widest margin since 2020
    
			
    U.S. stocks finish lower but cling to weekly gains as Nasdaq beats Dow by widest margin since 2020
    
			
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    U.S. stocks finished lower on Friday as worries about banking-sector stability reemerged. But Friday’s pullback wasn’t large enough to stop both the S&P 500 and Nasdaq Composite from finishing the week in the green, while the Dow was the only major U.S. equity benchmark to finish lower. The S&P 500
    
        SPX,
    
        -1.10%
    
       shed 43.69 points, or 1.1%, to finish Friday at 3,916.59 according to preliminary closing data, reducing its weekly gain to 1.4%.  The Dow Jones Industrial Average
    
        DJIA,
    
        -1.19%
    
       fell by 384.43 points, or 1.2%, to 31,862.12, for a weekly drop of 0.2%. The Nasdaq Composite
    
        COMP,
    
        -0.74%
    
       declined by 86.76 points, or 0.7%, to 11,630.51, but still clinched a weekly gain of 4.4%. The Nasdaq managed to outperform the Dow by 4.6%, its widest weekly outperformance since the week ended March 20, 2020, according to Dow Jones Market Data. 
    

    

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    Dow falls 200 points on losses in shares of JPMorgan Chase, Goldman Sachs
    
			
    Dow falls 200 points on losses in shares of JPMorgan Chase, Goldman Sachs
    
			
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    Shares of JPMorgan Chase and Goldman Sachs are retreating Friday morning, sending the Dow Jones Industrial Average into negative territory. The Dow
    
        DJIA,
    
        -1.19%
    
       was most recently trading 199 points (0.6%) lower, as shares of JPMorgan Chase
    
        JPM,
    
        -3.78%
    
       and Goldman Sachs
    
        GS,
    
        -3.67%
    
       have contributed to the index’s intraday decline. JPMorgan Chase’s shares are off $3.52, or 2.7%, while those of Goldman Sachs have dropped $8.17, or 2.6%, combining for an approximately 77-point drag on the Dow. Other components contributing significantly to the decline include American Express
    
        AXP,
    
        -2.62%    ,
    
       Travelers
    
        TRV,
    
        -4.17%    ,
    
       and Caterpillar
    
        CAT,
    
        -1.69%    .
    
       A $1 move in any one of the 30 components of the index equates to a 6.59-point swing.
    

    

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    U.S. stocks finish sharply higher as First Republic gets rescue from banks
    
			
    U.S. stocks finish sharply higher as First Republic gets rescue from banks
    
			
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    CORRECTION: An earlier version of this pulse said stocks finished higher on Friday. U.S. stocks finished sharply higher on Thursday, erasing losses from earlier in the session, as a group of big banks deposited $30 billion with troubled lender First Republic Bank. The S&P 500 SPX gained 68.36, or 1.8%, to close at 3,960.28, according to preliminary closing data from FactSet. The Dow Jones Industrial Average DJIA rose 371.98 points, or 1.2%, to 32,246.55. The Nasdaq Composite COMP gained 283.22 points, or 2.5%, to 11,717.28. 
    

    …
    
    

    

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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
    
			
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    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
    
			
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    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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    Dow drops almost 300 points as stocks close mostly lower amid bank fears
    
			
    Dow drops almost 300 points as stocks close mostly lower amid bank fears
    
			
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    U.S. stocks ended lower Wednesday, with the Dow Jones Industrial Average falling almost 300 points, as concerns over troubled Credit Suisse Group CS added to worries about the banking system. The Dow DJIA closed 0.9% lower, while the S&P 500 SPX shed 0.7% and the technology-heavy Nasdaq Composite COMP edged up around 0.1%, according to preliminary data from FactSet. The Swiss National Bank said Wednesday that it will provide liquidity to Credit Suisse “if necessary.” The S&P 500’s financial sector slumped 2.8% Wednesday, one of the index’s worst performing sectors along with energy and materials and industrials.
    

    …
    
    

    

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