Coffee With Greta: Fed Officials Spook Traders
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DJIA Futures: -226 (-0.7%)
SPX Futures: -41 (-0.9%)
NASDAQ Futures: -225 (-1.5%)
Good morning friends!
Futures are lower as traders have their focus on the Fed as the bank is set to release the minutes of its March meeting this afternoon.
Let’s get right to it!
Fed Officials Spook Traders
The market is gearing up for the release of the Fed’s March meeting minutes at 2:00 p.m. ET.
This comes after Fed Governor Lael Brainard and San Francisco Fed President Mary Daly made headlines with their hawkish comments on Tuesday.
Speaking at the Minneapolis Fed, Brainard said, “inflation is much too high and is subject to upside risks”.
She said she expects the balance sheet reduction to be “rapid” and begin as early as the May meeting.
Daly reiterated that inflation is far too high, saying “inflation is as harmful as not having a job” in a speech Tuesday afternoon.
Those comments were specifically spooky for the market as both Brainard and Daly are typically dovish on monetary policy.
The market is looking ahead to this afternoon’s minutes to get more clarity on the Fed’s plans for the immediate future.
CME Groups FedWatch Tool shows 76.6% of traders expect a 0.5% rate hike at the May meeting.
10-Year Treasury Yield Spikes
The yield on the 10-year Treasury note spiked to the highest level since March 2019 following Brainard’s comments.
That yield hit a high of 2.67% this morning after topping out at 2.562% on Tuesday.
That put the 2-year/10-year Treasury yield curve back in positive territory after being inverted since last Thursday.
The 2-year Treasury yield is at 2.55%.
But the curve remains inverted between the 5-year and 30-year yields.
The 5-year yield is 2.76% while the 30-year yield is 2.66%.
Mortgage Rates Spike, Demand Tumbles
The spike in the 10-year yield also caused a spike in mortgage rates.
Mortgage News Daily shows the average 30-year contract mortgage rate standing at 5.02%.
It’s the first time rates have topped 5% since 2011.
And those surging rates are pushing more buyers out of the market.
The Mortgage Bankers Association says total mortgage application volume fell 6% last week and was down 41% year-over-year.
Refinance applications plunged 10% weekly and 62% annually.
New purchase applications were down 3% weekly and 9% lower year-over-year.
The average 30-year rate during that time rose to 4.90% from 4.80%, increasing for the fourth straight week.
Oil Rises Ahead of New Russia Sanctions
Oil prices are rising as the threat of new Russian sanctions outweighs demand concerns.
West Texas Intermediate crude futures are up 1.2% to over $103 per barrel while Brent crude futures are up 0.9% to over $107 per barrel.
NBC News reported the U.S. and its allies are set to impose new sanctions targeting Russian financial institutions, Kremlin officials, and their family members.
The sanctions package is in partnership with the EU and G7 member nations and will also ban new investment in Russia.
The EU sanctions would ban Russian coal imports and block Russian ships from entering EU ports.
The actions come in response to new allegations of Moscow committing war crimes against civilians in northern Ukraine.
Spirit to Consider JetBlue Buyout Offer
Spirit Airlines (SAVE) shares are down 2.8% ahead of the open following a $3.6 billion buyout offer from JetBlue Airways (JBLU).
Spirit said its board will consider the takeover offer.
SAVE shares originally soared after the New York Times report ahead of the close on Tuesday.
Trading was halted after shares spiked more than 22%.
JetBlue offered Spirit $33 per share or $3.6 billion total in cash.
This offer is a 40% premium to Spirit’s planned cash and share merger with Frontier Group (ULCC).
Spirit said the board will “pursue the course of action it determines to be in the best interests of Spirit and its stockholders.”
JBLU shares are down 4.6% in premarket trade.
Tilray Jumps on Surprise Profit
Tilray (TLRY) shares are up 8% ahead of the open after reporting an unexpected Q3 profit.
The company reported earnings of $0.09 per share on $151.9 million in revenue.
That profit beat analysts’ expectations for a loss of $0.08 per share but revenue was shy of the $156.2 million estimate.
Tilray reaffirmed its revenue guidance and said it is on track to achieve $4 billion in revenue by the end of fiscal 2024.
In Case You Missed It
- Carnival (CCL) shares rallied 2.3% Tuesday after reporting its busiest week of bookings ever. Carnival said the week between March 28 and April 3 set a new record for weekly bookings. The company saw a double-digit increase in bookings from the previous record week.
- Twitter (TWTR) shares rose 2% Tuesday after announcing Tesla (TSLA) CEO Elon Musk will join the company’s board of directors. Musk will serve as a Class II director with his term expiring in 2024. In a tweet, he said he is looking forward to making “significant improvements” to Twitter. Musk bought a 9.2% stake in Twitter on March 14.