Coffee With Greta: Stocks Rebound
DJIA Futures: +214 (+0.7%) SPX Futures: +31 (+0.8%) NASDAQ Futures: +106 (+0.8%) Good morning friends! Futures are rising as traders attempt to shake off Tuesday’s loss. Let’s get right to it! Fed Governor Barr Testimony Federal Reserve Governor Michael Barr will appear in the House Financial Services Committee today for his second day of testimony about the Silicon Valley Bank collapse and broader banking crisis. Barr testified in the Senate Banking Committee on Tuesday. He told the committee that $100 billion of withdrawals were scheduled for March 10, the day the bank was shut down. That rush came after customers withdrew $42 billion from the bank the day before. He said, “They were not able to actually meet their obligations to pay their depositors over the course of that day and they were shut down.” Barr blamed the collapse on mismanagement by bank executives and said banks with more than $100 billion of assets may need stricter regulations moving forward. He said the Fed began warning SVB’s management about the risk of higher interest rates to its balance sheet in November 2021 but the bank “failed to address” those concerns in a timely way. Micron Shakes Off Weak Fiscal Q2 Micron Technology (MU) shares are up 2.6% ahead of the open despite reporting weaker fiscal Q2 results than expected. Here’s how the chipmaker’s results compared to analysts’ expectations: Adjusted loss per share: $1.91 vs $0.86 expected Revenue: $3.69 billion vs $3.7 billion expected Revenue plunged 53% year over year and dropped 10% from Q1. Micron announced plans to increase its staff cuts to 15% vs 10% previously as part of its cost-reduction program. The CEO said, “Customer inventories are getting better, and we expect gradual improvements to the industry’s supply-demand balance. We remain confident in long-term demand and are investing prudently to preserve our technology and product portfolio competitiveness.” Micron expects fiscal Q3 revenue of $3.7 billion, in line with expectations. Lululemon Jumps After Earnings Beat Lululemon (LULU) shares are rallying 16.7% in premarket trade after beating Q4 expectations on the top and bottom line. Here’s how the company’s results compared to analysts’ expectations: Adjusted EPS: $4.40 vs $4.26 expected Revenue: $2.8 billion vs $2.7 billion expected Sales jumped 30% but gross margins declined more than expected. Gross margins were down 3% to 55.1% last quarter, worse than the company’s guidance for a 0.9% to 1.1% decline. Lululemon forecast Q1 EPS between $1.93 and $2 vs analysts’ expectations of $1.64. For the full year, the company expects net revenue to range between $9.3 billion and $9.41 billion vs $9.1 billion expected. Mortgage Demand Rises Mortgage demand jumped last week as the banking crisis pushed rates lower. The Mortgage Bankers Association reported total application volume rose 2.9% from the week before. Purchase applications increased 2% weekly but were 35% lower year over year. Refinance applications rose 5% weekly and were down 61% annually. The average 30-year fixed contract rate fell to 6.45% from 6.48%. But rates have since jumped sharply, rising more than 20 basis points at the start of this week. Coming Up: Pending Home Sales The National Association of Realtors reports pending home sales for February at 10:00 a.m. ET. The number of contracts signed to purchase a home last month is expected to fall 3% monthly. Pending sales are a forward-looking indicator for the housing market as they represent contracts signed during the month with sales expected to close in 30 to 60 days. In Case You Missed It Consumer confidence rose unexpectedly in March. The Conference Board’s consumer confidence index rose to 104.2 from 103.2 in February. The 6-month expectations index also improved to 73 from 70.4. But that remains the key 80 level which is considered a recession warning sign. U.S. home prices cooled for the seventh straight month in January. The S&P Case-Shiller National Home Price Index fell 1.8% monthly and was up 3.8% year over year. Four cities saw year-over-year decreases in prices – San Francisco, Seattle, San Diego, and Portland.
Continue Reading -->Coffee With Greta: Stocks Under Pressure
DJIA Futures: -35 (-0.1%) SPX Futures: -7 (-0.2%) NASDAQ Futures: -22 (-0.2%) Good morning friends! Futures are falling as higher rates put pressure on the market. Let’s get right to it! Treasury Yields Pop U.S. Treasury yields are rising this morning with the 2-year yield pushing back above 4%. Currently, the 2-year yield is up 4 basis points at 4.0% while the 10-year yield is up 1 basis point to 3.54%. The recovery in yields comes as fears over the banking crisis ease. Fed Governor Michael Barr is set to testify in Congress about the failure of Silicon Valley Bank today and tomorrow. In prepared remarks released on Monday, Barr called that failure a “textbook case of mismanagement” and said the Fed will investigate it risk testing and assessment processes. Alibaba Splitting Up Alibaba (BABA) shares are rallying 9.8% ahead of the open after the Chinese e-commerce giant announced it will split its company into six separate business groups. Each of those groups will be able to go public on its own and will be managed by its own CEO and board of directors. Alibaba said the move is “designed to unlock shareholder value and foster market competitiveness.” These are the new business groups: Cloud Intelligence Group Taobao Tmall Commerce Group Local Services Group Cainiao Smart Logistics Global Digital Commerce Group Digital Media and Entertainment Group Alibaba’s current CEO Daniel Zhang will be the head of the Cloud Intelligence Group. Lyft Co-Founders Step Down, Company Names New CEO Lyft (LYFT) shares are up 5% in premarket trade after the company named a new CEO on Thursday. The company’s co-founders are stepping back from their roles as CEO and President. Lyft announced that former Amazon retail executive David Risher will take over as CEO on April 17. Risher said, “I am honored to step into the CEO role at such an important moment in the company’s history, and am prepared to take this business to new levels of success.” Walgreens Earnings Top Expectations Walgreens Boots Alliance (WBA) shares are up 1.2% ahead of the open after beating fiscal Q2 expectations on the top and bottom line. Here’s how the drug store chain’s results compared to analysts’ expectations: Adjusted EPS: $1.16 vs $1.10 expected Revenue: $34.86 billion vs $33.53 billion expected Walgreens reiterated its full-year guidance for EPS of $4.45 to $4.65. Coming Up: Home Prices, Consumer Confidence Today’s upcoming economic data focuses on the housing market and the U.S. consumer. Both the S&P Case-Shiller and Federal Housing Finance Agency’s home price indexes for January will be released momentarily. The S&P Case-Shiller index is expected to rise 2.5% vs the 4.6% gain in December. Then the Conference Board releases its March consumer confidence index at 10:00 a.m. ET. That index is expected to fall to 101.3 from 102.9 in February. In Case You Missed It Coinbase (COIN) shares tumbled 7.8% on Monday after the Commodity Futures and Trading Commission filed a complaint against crypto exchange Binance. That filing alleges Binance violated provisions of the Commodity Exchange Act to solicit U.S. users more millions of dollars in revenue. Binance’s CEO and former compliance officer were both named in the complaint. Disney (DIS) shares rose 1.6% Monday as the company is set to begin the first of three rounds of layoffs. In an internal memo, CEO Bob Iger said they will begin notifying impacted employees this week. The layoffs will total around 7,000 job cuts and are part of a broader effort to cut corporate spending and boost Disney’s free cash flow.
Continue Reading -->7 Tech Names to Watch
We have mixed-to-mostly green markets to start the week. News that SVB assets are being bought is lifting regional banks and some majors. In Europe, the DAX is +1.3% with the CAC +1.2% and FTSE +0.9%. Asia is mixed. On Friday, the SPX reclaimed 3909 to close well to get some to cover shorts and balance things out with a few longs. There’s a big down trendline in the SPX. If it can get and stay above 4010ish with authority this week, perhaps it opens the door for a surprise rally. Tech has a lot of constructive patterns. We’ll see if the sector stays special to buy dips if the QQQ’s hold the 8 day like Friday. Some are long vs. $306 and others are waiting for a high-volume close above $313-$315. Friday’s high is $311. Now let’s dig into some individual names: AAPL was a big focus of ours from $153 to $162+. I bought some back into Friday’s weakness. I’ll stay in vs. the $157 area and see if it can rebuild to see $162+ in time. MSFT has had go-to status since the Red Dog Reversal buy around the $247.60 pivot on March 21. It peaked at $283. It seems like it’s been setting up again for more upside. I’m long vs. $275 and might add if it can get and stay above $283. It could go towards $294. META has led tech the past few months. It hit a new 2023 high of $207.88. Buying dips vs. the 8 day continues to work. Some are long vs. $203ish. Others are waiting for a high-volume move to clear $207.88. Be careful because it’s a little choppy up here. TSLA didn’t lead this past tech move but it gave opportunities. I did sell mine above $200 from the $178 area. On Friday it held the $187 area. See if it can stay above $192.36 to get a little better today. GOOGL started acting better as it gave a few entries like $89.42 and then $97ish. Some are long vs. the $103 area. Others are waiting for it to show some power by clearing and holding $106.60, then $108. ADBE has a nice bull flag if tech wants leaders. Some are long vs. $360. Others are waiting for a high-volume move and hold above $377.40. CRM continues to act better than most names. Some are long vs. $186. Others are waiting for a high-volume move and close above $191, then $194. Scott Redler Positions Disclosure as of 2023-03-27 at 7.02.04 AM
Continue Reading -->Coffee With Greta: Banks Bounce Back
DJIA Futures: +226 (+0.7%) SPX Futures: +26 (+0.7%) NASDAQ Futures: +41 (+0.3%) Good morning friends! Futures are rising as regional bank stocks rebound. Let’s get right to it! First Citizens To Buy Silicon Valley Bank Assets First Citizens Bancshares (FCNCA) shares are surging 49% ahead of the open after reaching a deal to buy Silicon Valley Bank’s deposits and loans. The bank will purchase around $72 billion of SVB assets at a discount of $16.5 billion from regulators. Another $90 billion in securities and other assets will remain “in receivership for disposition by the FDIC”. The FDIC said it “received equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million.” The 17 former SVB branches that were opened as bridge banks after the collapse will open as “First-Citizens Bank & Trusty Company” today. Regional Banks Bounce First Republic Bank (FRC) shares are rallying 31.9% in premarket trade, leading the rebound in regional banks. The SPDR S&P Regional Banking ETF (KRE) is up 4%. The jump comes after several positive developments for regional banks over the weekend. Bloomberg reported on Saturday that U.S. officials are considering expanding the federal programs that provide more liquidity to banks. That’s reportedly meant to help First Republic while it continues to search for a buyer. CNBC reported that the deposit inflows to large banks from smaller regional banks has also slowed significantly. Minneapolis Fed President On Banking Crisis Minneapolis Fed President Neel Kashkari commented on the banking crisis in an interview with CBS’ Face The Nation on Sunday, saying “it definitely brings us closer” to a recession. Kashkari said, “What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. And then that credit crunch, just as you said, would then slow down the economy.” But he also expressed confidence in the strength of the banking system saying, “The banking system has a strong capital position and a lot of liquidity and has the full support of the Federal Reserve and other regulators standing behind it.” Kashkari said it’s too early to predict how this will impact the next interest rate decision in May. CME Group’s FedWatch Tool shows 61.3% of traders expect the bank to keep rates unchanged while 38.7% expect another 25 basis point hike. The Fed’s preferred inflation gauge for February will be released this Friday.
Continue Reading -->Coffee With Greta: More Bank Worries
DJIA Futures: -323 (-1.0%) SPX Futures: -34 (-0.9%) NASDAQ Futures: -70 (-0.5%) Good morning friends! Futures are dropping due to renewed worry about the global banking system. Let’s get right to it! Banks Fall Again Bank stocks are falling again today amid fresh concerns about the global banking system. The SPDR S&P Regional Banking ETF (KRE) is down 2.0% ahead of the open with the Financial Select Sector SPDR ETF (XLF) falling 1.8%. The fresh concern was prompted by a spike in credit default swaps at German lender Deutsche Bank overnight. Deutsche Bank’s (DB) U.S. shares are down 10.1%. Credit default swaps are a form of insurance for a company’s bondholders against its default. Those jumped to 173 basis points Thursday night from 142 basis points on Wednesday. Treasury Yields Fall On Bank Concerns U.S. Treasury yields are falling as investors buy up bonds amid the latest developments in the banking sector. The 2-year yield is down 25 basis points to 3.60% while the 10-year yield is down 11 basis points to 3.31%. Investors are also weighing the impact of the Fed’s interest rate policy on the economy. CME Group’s FedWatch Tool shows traders betting the central bank is done hiking rates with over 98% predicting a pause at the next meeting. Oil Prices, Energy Stocks Slide Oil prices are sliding this morning on concerns about potential oversupply. West Texas Intermediate crude futures are down 3.7% to $67.37 bbl while Brent crude futures are down 3.4% to $73.33 bbl. Energy stocks are sliding amid the drop in oil prices with the Energy Select Sector SPDR ETF (XLE) down 1.8% in premarket trade. The U.S. Energy Secretary told lawmakers on Thursday it may take several years to refill the U.S. Strategic Petroleum Reserve. The stockpile is at the lowest level since 1983 but she said it will be difficult to take advantage of the low oil prices this year. But the White House said in October that it would buy back oil for the SPR when prices were at or below $67-$72 per barrel. With the U.S. not currently buying oil, prices are expected to slide further due to oversupply. Durable Goods Orders Fall Durable goods orders fell more than expected in February due to lower demand for passenger planes and cars. The Commerce Department reported orders fell 1% last month vs expectations for a 0.3% decline. Orders were up 2.3% year over year, the smallest increase since 2020. Airplane orders dropped 6.6% while new car orders fell 1%. Durable goods orders excluding transportation were unchanged. But business investment rose for the second month in a row, with core orders up 0.2%. That shows the industrial sector is still expanding but at a slower pace. In Case You Missed It New home sales rose in February as buyers took advantage of a dip in mortgage rates. The Census Bureau reported Thursday that new home sales jumped 1.1% to a seasonally adjusted annual rate of 640,000 units last month. That was basically in line with expectations and January’s data was revised lower to an SAAR of 630,000 units from 670,000 previously. New sales were still down 19% year over year. The number of new homes for sale at the end of February slipped 1.1% from January but still represented an 8-month supply at the current sales pace.
Continue Reading -->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.”
Continue Reading -->Coffee With Greta: Key Fed Decision Day
DJIA Futures: +4 (+0.01%) SPX Futures: -2 (-0.04%) NASDAQ Futures: -14 (-0.1%) Good morning friends! Futures are flat as traders await today’s Fed decision. Let’s get right to it! Yields Rise Ahead of Fed Decision Treasury yields are rising ahead of the Fed decision today. The 2-year yield is up 5 basis points to 4.21% while the 10-year yield is up 2 basis points to 3.63%. The FOMC will release its meeting statement and rate decision at 2:00 p.m. ET today. CME Group’s FedWatch Tool shows nearly 88% of traders expecting a 25 basis point hike today. Fed Chair Jerome Powell will then hold a press conference at 2:30 p.m. GameStop Surges On Surprise Profit GameStop (GME) shares are surging 55% ahead of the open after reporting a surprise profit in the latest quarter. Here’s how the video game retailer’s fiscal Q4 results compared to analysts’ expectations: EPS: $0.16 vs $0.13 adjusted loss per share expected Revenue: $2.23 billion vs $2.18 billion expected It was GameStop’s first quarterly profit in two years as the company has been working to steer itself back to profitability. Total expenses fell to $453.4 million from $538.9 million in Q4 2021. GameStop did not provide guidance but the CEO said the company has plans to further cut excess costs this year. Nike Slips On Shrinking Margins Nike (NKE) shares are falling 1.8% in premarket trade despite beating Q3 expectations on the top and bottom line. Here’s how the company’s results compared to analysts’ expectations: EPS: $0.79 vs $0.56 expected Revenue: $12.4 billion vs $11.5 billion expected Sales rose 14% year over year. But Nike’s gross margin dropped 3.3% to 43.3% as elevated inventory levels caused aggressive discounts. Nike also dealt with unfavorable exchange rates and higher production and freight costs during the quarter. The company said it expects fiscal 2023 revenue growth in the high-single digit range, up from previous guidance for mid-single digit growth. Mortgage Demand Jumps Mortgage demand rose for the third straight week as rates dropped in response to the banking crisis. The Mortgage Bankers Association reported total application volume rose 3% last week from the previous week. Purchase applications rose 2% weekly and were 36% lower year over year. Refinance applications rose 5% weekly and were down 68% annually. The increase came as the average 30-year contract rate decreased to 6.48% from 6.71%. That was the lowest level in a month but still sharply higher than around 4.5% a year ago. Rates have since started rising again. In Case You Missed It Existing home sales surged in February. The National Association of Realtors reported existing sales jumped 14.5% from January to a seasonally adjusted annual rate of 4.58 million units. It was the first monthly gain in a year but sales were still down 22.6% year over year. The median price of an existing home sold last month was $363,000, down 0.2% from February 2022. That was the first annual decline in nearly 11 years. Supply remained tight with just 980,000 homes for sale at the end of February, representing a 2.6-month supply at the current sales pace.
Continue Reading -->Coffee With Greta: Fed Meeting Day 1, Regional Banks Pop
DJIA Futures: +308 (+1.0%) SPX Futures: +34 (+0.9%) NASDAQ Futures: +73 (+0.6%) Good morning friends! Futures are rising as the Fed meeting is set to begin and regional banks bounce back. Let’s get right to it! Fed Meeting Day 1 The Federal Reserve begins its two-day policy meeting today. The meeting comes in the wake of the banking crisis which has caused traders to shift their expectations to a smaller rate hike. CME Group’s FedWatch Tool shows over 83% of traders expecting a 25 basis point rate hike tomorrow. That’s a reversal from 3 weeks ago when the market was pricing in a larger 50 basis point move. But some investors are calling for the Fed to pause rate hikes or even cut rates this week. In a tweet on Monday, Pershing Square CEO Bill Ackman said, “The [Federal Reserve] should pause on Wednesday. We have had a number of major shocks to the system.” Tesla CEO Elon Musk responded to that tweet calling for a rate cut. Musk said, “Fed needs to drop the rate by at least 50bps on Wednesday.” Regional Banks Bounce Back First Republic Bank (FRC) shares are rallying 23.5% ahead of the open, leading the overall sector higher. The SPDR S&P Regional Banking ETF (KRE) is up 4.6% in premarket trade. The bounce back in regional banks comes after Treasury Secretary Janet Yellen said the government is ready to provide more support if the banking crisis worsens. In a speech at the American Bankers Association, Yellen said the government is could backstop more deposits like was done at Silicon Valley Bank. She said, “The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.” But she also expressed confidence in the banking system and the actions taken to support it so far. Yellen said, “The situation is stabilizing. And the U.S. banking system remains sound. The Fed facility and discount window lending are working as intended to provide liquidity to the banking system. Aggregate deposit outflows from regional banks have stabilized.” Coming Up: Existing Home Sales The National Association of Realtors reports February existing home sales at 10:00 a.m. ET. That report is expected to show the pace of sales accelerated last month to a seasonally adjusted annual rate of 4.2 million units from 4 million in January. The housing market saw a brief jump in demand at the start of the year as mortgage rates cooled slightly. In Case You Missed It Amazon (AMZN) shares dropped 1.3% on Monday after the company announced more layoffs. In a memo to employees, CEO Andy Jassy said the tech giant will lay off 9,000 employees in the coming weeks. The cuts are on top of the previously announced layoffs which totaled more than 18,000 employees. Jassy said the latest round of layoffs will primarily impact employees in Amazon’s cloud computing, human resources, advertising, and Twitch livestreaming businesses.
Continue Reading -->Coffee With Greta: Banks Still In Focus
DJIA Futures: +125 (+0.4%) SPX Futures: +13 (+0.3%) NASDAQ Futures: +32 (+0.3%) Good morning friends! Futures are rising as a crucial Fed week begins and uncertainty remains about the global banking system. Let’s get right to it! UBS Buys Credit Suisse Credit Suisse (CS) shares are plunging 56.7% ahead of the open after UBS Group (UBS) bought the Swiss bank over the weekend. UBS shares are up 1.8%. UBS agreed to buy Credit Suisse for $3.2 billion in a deal orchestrated by Swiss regulators and the Swiss National Bank. The Swiss National Bank pledged a loan of up to $108 billion to support the takeover and said, “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 Swiss government meantime granted a guarantee to assume losses up to 9 billion Swiss francs from certain assets over a preset threshold “in order to reduce any risks for UBS”. Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares they hold. The UBS Chairman said, “This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure.” The combined bank will have $5 trillion worth of invested assets. First Republic Slides On Credit Rating Downgrade First Republic (FRC) shares are tumbling 17.2% in premarket trade after S&P cut the bank’s credit rating again. S&P reduced its rating on the bank to B+ from BB+ on Sunday. That grade is in the “junk” rating category and signifies the bank is risky and has a higher than average chance of default. S&P said, “The deposit infusion from 11 U.S. banks, the company’s disclosure that borrowings from the Fed range from $20 billion to $109 billion and borrowings from the Federal Home Loan Bank (FHLB) increased by $10 billion, and the suspension of its common stock dividend collectively lead us to the view that the bank was likely under high liquidity stress with substantial deposit outflows over the past week.” FDIC To Sell Signature Bank Assets To Flagstar Bank New York Community Bancorp (NYCB) shares are jumping 29.2% ahead of the open after the FDIC announced an agreement to sell Signature Bank’s assets to the bank’s subsidiary, Flagstar Bank. Flagstar will assume basically all of Signature’s deposits, some of its loan portfolios, and all 40 of its former branches. Roughly $60 billion of loans and $4 billion of deposits will remain in control of the regulator. Under the arrangement, Flagstar will buy $12.9 billion of loans for $2.7 billion. The FDIC estimates the deal will cost its Deposit Insurance Fund approximately $2.5 billion. Fed Week Begins The Fed kicks off its next policy meeting on Tuesday with the rate hike decision on Wednesday. CME Group’s FedWatch Tool shows nearly 68% of traders expecting a 25 basis point hike this week with 32% anticipating no hike. The lower expectations come after turmoil spread across the banking sector following the collapse of Silicon Valley Bank and Signature Bank. Traders will be paying close attention to Fed Chair Jerome Powell’s press conference on Wednesday to hear his comments about the banking system.
Continue Reading -->5 Financials to Watch on the Credit Suisse Mess
We have mostly red arrows around the world to start the week as we absorb news of CS being taken under at 77 cents. FRC is down 20% as the powers that be try to figure it out. Banks closed near last week’s lows while money hid in megacap tech. We have Powell Wednesday and Xi visiting Russia. SPX futures were all over the map from +22 last night to -40 at 4:30 am to flattish around 7:00 am. We’ll see if 3900ish holds to stay intact ahead of Powell this week. As of now, the market thinks we get a 25b pps raise at most, and then a full-point cut before year-end. This is a headscratcher. See if tech holds up, and if banks go red to green. Now let’s look at some of the major financial names in the news: BAC is still one of the weakest big banks here as it’s below 2022 lows. Friday’s low is $27.62. See how it reacts around that today. FRC is under pressure and there is lots of talk about potential deals. The low from last week is $17.53. It’s down 21% this morning. See how it reacts today. SCHW gave a nice options opportunity at $48ish. I bought calls for $3, sold half at $8ish, and created a spread on the rest. See if $53.76 holds this week. COIN did a Red Dog Reversal long last Monday around the $51.57 pivot. It cleared $66 Thursday to kiss the 200 day Friday. It’s up this morning as BTC looks headed to $29k. I’d trim and trail. Bitcoin reclaimed $20.4K and cleared $22.5K to see $26K+. I discussed the bull flag setup. Some are long vs. $23.8K for a move to $29Kish. It’s at $28K to manage. Scott Redler Positions Disclosure as of 2023-03-20 at 7.30.41 AM
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