Coffee With Greta: Is The Fed Done?
DJIA Futures: +102 (+0.3%)
SPX Futures: +25 (+0.6%)
NASDAQ Futures: +133 (+1.0%)
Good morning friends!
Futures are rising as traders bet the Fed is ready to pause rate hikes.
Let’s get right to it!
Fed Recap
The Federal Reserve hiked the federal funds rate by 25 basis points as expected on Wednesday.
That put the rate in a range of 4.75% to 5%.
The FOMC statement removed language about “ongoing increases” being appropriate instead saying, “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”
The statement also addressed the recent banking crisis saying, “The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”
The Fed forecast it will enact one more 25 basis point hike this year, putting the terminal rate at 5.1%.
CME Group’s FedWatch Tool shows traders expecting one more hike and three rate cuts this year.
But in his press conference, Fed Chair Jerome Powell said, “Participants don't see rate cuts this year… that's not our baseline expectation.”
Powell said the costs of bringing inflation down to the bank’s 2% target are high but “the costs of failing are higher.”
He said the banking crisis will likely cause tighter credit conditions which will aid in bringing down demand and inflation.
Weekly Jobless Claims Dip
Weekly jobless claims dipped to a fresh 3-week low last week as the labor market maintains strength.
The Labor Department reported 191,000 Americans filed initial unemployment claims, down by 1,000 from the previous week.
That was better than expectations for claims to rise to 198,000.
Continuing claims rose by 4,000 to 1.694 million in the week ending March 18.
Coinbase Sinks After SEC Warning
Coinbase (COIN) shares are dropping 15.4% ahead of the open after the company disclosed it had received a Wells notice from the SEC.
In a blog post, the crypto exchange said, “We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead. 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.”
The company says the warning from regulators and potential charges relate to its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
Coinbase said the investigation is “still at a very early stage” and it has turned in documents and provided two witnesses.
The company maintains that the entities under investigation are not securities.
Carvana Jumps On Q1 Guidance
Carvana (CVNA) shares are up 5.4% in premarket trade after issuing preliminary Q1 guidance.
The used car retailer said it expects a first-quarter loss of $50 million to $100 million.
That would be an improvement from the $348 million loss it reported in Q1 2022.
The company also announced a debt restructuring.
An SEC filing shows unsecured noteholders will have the option to exchange those notes at a premium to current trading prices for new secured notes.
The company said that move will provide noteholders with “collateral while reducing Carvana’s cash interest expense and maintaining significant flexibility.”
The restructuring could reduce the face value of Carvana’s unsecured bond debt by $1.3 billion and its annual cash interest bill by $100 million.
Block Plunges After Hindenburg Research Takes Short Position
Block (SQ) shares are plunging 19.7% ahead of the open after short-seller Hindenburg Research announced it was its news short position.
Hindenburg said, “Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping.”
The report claims Block’s Cash App facilitates fraud and does not have strong compliance controls.
To test its theory, Hindenburg says it opened accounts in the names of Donald Trump and Elon Musk.
It says it then opened a Cash App card under the “obviously fake Donald Trump account” and that card arrived “promptly” in the mail.
The report said, “Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.”