Coffee With Greta: Banks Slide Again
DJIA Futures: -257 (-0.8%) SPX Futures: -27 (-0.7%) NASDAQ Futures: -34 (-0.3%) Good morning friends! Futures are lower as regional bank shares continue to slide. Let’s get right to it! Banks Take Advantage Of Emergency Fed Program Regional bank shares are tumbling again today after several took billions in short-term loans from the Fed this week. First Republic Bank (FRC) shares are down 19.4% ahead of the open, leading the 3.2% decline in the SPDR S&P Regional Banking ETF (KRE). The drop comes after First Republic shares rallied nearly 10% on Thursday after a group of 11 banks pledged to deposit $30 billion into the bank. Those institutions include Bank of America (BAC), Wells Fargo (WFC), Citigroup (C), JPMorgan Chase (JPM), Goldman Sachs (GS), and Morgan Stanley (MS). But news of banks taking advantage of the Fed’s emergency program then broke after the close on Thursday, sending the sector lower again. Banks borrowed a total of $11.9 billion from the Bank Term Funding Program this week. They also borrowed nearly $153 billion in shorter-term loans through the Fed’s discount window. FedEx Jumps On Earnings Beat, Higher Outlook FedEx (FDX) shares are rallying 11.1% in premarket trade after beating fiscal Q3 expectations and hiking its full-year guidance. Here’s how the shipping giant’s results compared to analysts’ estimates: Adjusted EPS: $3.41 vs $2.73 expected Revenue: $22.17 billion vs $22.74 billion expected FedEx also hiked its full-year outlook and said its cost-cutting efforts are offsetting lower demand in some of its units. The company now expects adjusted EPS of $14.60 to $15.20 in fiscal 2023 vs $13.00 to $14.00 previously. Analysts were forecasting full-year adjusted EPS of $13.56 Coming Up: Leading Economic Index, Consumer Sentiment There is still more important economic data on the way today. The Conference Board releases its February leading economic index at 10:00 a.m. ET. That index is expected to fall 0.4% after declining 0.3% in January. The University of Michigan also reports March consumer sentiment and inflation expectations at 10:00 a.m. Consumer sentiment is expected to be unchanged this month at 67.
Continue Reading -->How Charts Can Help You Avoid Disasters Like SIVB & SBNY
The regional bank crisis is one of the biggest stories of 2023. Investors in stocks like SVB Financial (SIVB), Signature Bank (SBNY) and others are staring at billions of dollars in losses. But, you could have avoided the trouble if you understand some simple trend analysis rules Let’s start with SIVB since they were the driver of this mess. There was nothing in SIVB’s chart that said “buy me” or even “hold me.” The stock’s been in a long-term downtrend, and it was rejected at the 200 day on February 2before losing the 8/21/50 day once again: So even if you didn’t get out on February 2, you had weeks to exit before the implosion. Signature Bank (SBNY) had an even worse chart than SIVB and appeared to be the next domino to fall. That’s why I bought puts, as you can see on my disclosure at the bottom of this article: And as for Credit Suisse (CS), it seems like it’s in a scandal of some kind once a year. But even before its latest problem (financial reporting issues), the chart has been screaming get away: Now let’s look at the The SPDR S&P Regional Banking ETF (KRE) is obviously a major focus. And it gave a signal to exit on February 21 at $62. Then it broke the 2022 low at $56 – another sign to exit: Now, see if KRE holds Monday’s low at $41.92. Wednesday’s $44.64 low is important too. That will tell us a lot about sentiment. XLF also signaled trouble. Remember, banks are supposed to do well when rates are rising. But on March 7, XLF put in a big bearish engulfing red candle. That was a big warning that the sector could be in trouble. JP Morgan (JPM) is thought of as the “best in class” bank, but even it couldn’t escape the heat. It also put in a bearish engulfing candle on March 7. Finally, we have Bank of America (BAC). Of course it’s getting hit like the other banks. But it failed to make higher highs in February the way JPM did. BAC also just broke the 2022 lows. The chart is telling is there are more problems ahead. So keep a close eye on it. The lesson here is simple. Charts usually tell us something’s in trouble before the news. You didn’t need to know about SIVB’s failure to manage interest rate risk to know the stock was an avoid. You just needed to see the chart was in a clear downtrend. The same is true for SBNY, CS, FRC, and the other declining names. You can even go back to the peak of Cathie Wood’s ARK Innovation ETF (ARKK) and high-growth names back in February 21. The charts went into downtrends well before growth numbers slowed. Moving averages are not a magic bullet. But they do a great job of telling you the temperature of the trend. With the banks, it was clear things were cooling off. Scott Redler’s positions disclosure as of 2023-03-16 at 8.34.27 AM
Continue Reading -->Coffee With Greta: Regional Banks Still Sliding
DJIA Futures: -95 (-0.3%) SPX Futures: -9.5% (-0.2%) NASDAQ Futures: +3 (+0.02%) Good morning friends! Futures are mostly lower as regional bank shares continue to drop and traders digest new economic data. Let’s get right to it! Regional Banks Continue Slide First Republic Bank (FRC) shares are tumbling 33.3% ahead of the open as concern about the future of U.S. regional banks continues. Other regional banks are also under pressure with PacWest Bancorp (PACW) dropping 17.8% and Western Alliance Bancorp (WAL) falling 7.6%. First Republic had the third highest rate of uninsured deposits among U.S. banks last week. It was behind SVB and Signature Bank, which were both shutdown by regulators. The bank has said it is weighing its options to stabilize its business, including a potential sale. But analysts say any sale under pressure may end up being a bad deal for shareholders. Swiss National Bank Backs Credit Suisse Credit Suisse (CS) shares are up 4.6% in premarket trade after the bank announced it will borrow up to 50 billion Swiss francs ($53.68 billion) from the Swiss National Bank. That money will be under a covered loan facility and a short-term liquidity facility at the Swiss National Bank. Credit Suisse said the money will, “support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs.” The measures come after Credit Suisse shares tumbled on Wednesday after the Saudi National Bank said it would not be able to provide more capital to the bank. Weekly Jobless Claims Tumble Weekly jobless claims dropped more than expected last week. The Labor Department reported 192,000 Americans filed initial unemployment claims. That was down by 10,000 from the previous week’s revised level and better than expectations for 205,000. Continuing claims dropped by 29,000 to 1.68 million in the week ending March 4. The data is a sign of the labor market maintaining strength amid the Fed’s rate hiking cycle. Housing Starts, Building Permits Surge U.S home construction surged in February. The Census Bureau reported housing starts jumped 9.8% to a seasonally adjusted annual rate of 1.45 million units last month. That was sharply higher than expectations for starts to be unchanged at an SAAR of 1.31 million units. Single-family starts rose 1.1% while multi-family starts surged 24.1%. The growth is expected to continue in months ahead as new permits issued in February surged 13.8% to an SAAR of 1.52 million units. That was also better than expectations for 1.34 million. Single-family permits rose 7.6% while multi-family permits jumped 24.3%. Philly Fed Manufacturing Index Remains In Contraction Another key manufacturing gauge is deep in contraction territory. The Philadelphia Fed’s manufacturing index improved by just over 1 point this month to -23.2. That was worse than expectations for a -14.5 reading. New orders fell to -25.4 while shipments dropped to -28.2. Manufacturers also reported a decline in employment with the employment index decreasing from 5.1 to -10.3. That’s the second negative reading since June 2020 and the lowest reading since May 2020. This negative data comes after the Empire State manufacturing index dropped deep into contraction territory as well on Wednesday. In Case You Missed It Homebuilder sentiment rose unexpectedly in March. The National Association of Homebuilders sentiment index rose to 44 this month from 42 in February. That topped expectations for the survey to decline to 40. Builders have been feeling more confident about the future of the housing market this year as mortgage rates cool and demand remains high.
Continue Reading -->Coffee With Greta: Bank Woes Continue
DJIA Futures: -597 (-1.8%) SPX Futures: -73 (-1.8%) NASDAQ Futures: -181 (-1.5%) Good morning friends! Futures are sliding as trouble at Credit Suisse overshadows positive inflation data. Let’s get right to it! Credit Suisse Trouble Shakes Financial Sector Credit Suisse (CS) shares are sliding 26.3% ahead of the open as concerns mount about the Swiss bank’s future. The bank’s largest backer, Saudi National Bank, told Credit Suisse it will not provide further financial support. The Saudi National Bank chairman said, “We cannot because we would go above 10%. It’s a regulatory issue.” SNB currently holds a 9.9% stake in Credit Suisse. Credit Suisse shares hit a fresh all-time low following that news. The Financial Select Sector SPDR ETF (XLF) is down 3.4% in premarket trade while the SPDR S&P Regional Banking ETF (KRE) is down 4.7%. Wholesale Inflation Falls U.S. wholesale prices fell unexpectedly in February, in a good sign for inflation. The Bureau of Labor Statistics’ producer price index fell 0.1% monthly and rose 4.6% annually. That was better than economists’ expectations for a 0.3% monthly increase. It also marked a decline from the 0.3% monthly and 5.7% annual increase in January. Excluding food, energy, and trade, the core PPI rose 0.2% monthly and 4.4% annually last month. That was better than expected and lower than January. Retail Sales Slide Retail sales dropped in February as consumers spent less at department stores, auto dealers, and restaurants. The Census Bureau report shows retail sales fell 0.4% last month to $697.9 billion. Spending dropped 4% at department stores, 2.5% at furniture retailers, 2.2% at restaurants and bars, and 2.0% at auto dealerships. Empire State Manufacturing Index Tumbles A key gauge of the U.S. manufacturing sector weakened significantly this month. The New York Fed’s Empire State manufacturing index tumbled 18.8 points to -24.6. That was down sharply from -5.8 in February and worse than expectations for -7.8. Any reading below zero indicates a contraction in manufacturing activity. New orders dropped 13.9 points to -21.7 while six-month business expectations fell 1.8 points to 2.9. Coming Up: Homebuilder Sentiment The National Association of Homebuilders releases its March sentiment index at 10:00 a.m. ET. That survey is expected to decline to 40 this month from 42 in February. Homebuilders have been feeling more confident about the housing market in recent months, with the sentiment index rising. But it still remains below the key 50 level which indicates negative sentiment. In Case You Missed It Meta Platforms (META) shares jumped 7.3% Tuesday after the company announced more layoffs. CEO Mark Zuckerberg said the social media giant will lay off 10,000 more workers over the next couple of months in addition to the previous cuts announced in November. Meta expects the cuts to results in $3 to $5 billion in restructuring costs.
Continue Reading -->Coffee With Greta: CPI As Expected, Bank Stocks Rebound
DJIA Futures: +259 (+0.8%) SPX Futures: +38 (+1.0%) NASDAQ Futures: +120 (+1.0%) Good morning friends! Futures are jumping as traders digest new inflation data and bank stocks rebound. Let’s get right to it! February CPI In-Line With Expectations Inflation pressures slowed as expected in February. The Bureau of Labor Statistics’ consumer price index rose 0.4% monthly and 6% year over year. That was in-line with economists’ expectations and down from 0.5% monthly and 6.4% annually in January. The core CPI rose 0.5% monthly and 5.5% annually. That was slightly higher than economists’ expectations for 0.4% monthly but as expected annually. Following the recent turmoil in the banking sector, CME Group’s FedWatch Tool shows 79% of traders expecting a 25 basis point rate hike at next week’s Fed meeting. The market is also pricing that hike in as the last one of the year. Regional Bank Stocks Rebound Shares of regional banks are rebounding today after plummeting over the past few sessions in the wake of the SVB and Signature Bank (SBNY) collapse. First Republic Bank (FRC) shares are surging 56.9% in premarket trade after losing 61.8% on Monday. Western Alliance Bancorp (WAL) shares are also jumping 40.9% after Wells Fargo analysts reiterated their overweight rating on the stock. The SPDR S&P Regional Banking ETF (KRE) is up 8.5% ahead of the open after tumbling 12.3% on Monday for its biggest one-day loss since March 2020. United Airlines Q1 Profit Warning United Airlines (UAL) shares are falling 4.6% ahead of the open after issuing a profit warning for the first quarter. The airline said it expects an adjusts quarterly loss of between $0.60 to $1 per share this quarter. That’s down from its previous forecast for earnings between $0.50 and $1 per share. United blamed that adjusted outlook on weaker demand growth and higher fuel costs this quarter. In a securities filing, the company said, “While all months of 2023 are expected to produce unit revenue significantly above the corresponding months in 2019, the Company is observing new seasonal demand patterns, with lower-demand months such as January and February 2023 growing less than higher-demand months.” Ride-Share Companies Rally On CA Court Decision Uber (UBER), Lyft (LYFT), and DoorDash (DASH) shares are all rallying ahead of the open after a California appeals court ruled the companies can continue treating their drivers as independent contractors. UBER is up 7.1%, with LYFT up 7.2%, and DASH rising 8.5%. The ruling overturned a previously ruling that required the companies to treat drivers as employees and provide benefits. The decision is likely to be appealed in the California Supreme Court.
Continue Reading -->5 Banks to Watch Right Now
There are many moving pieces this morning. The Fed, Treasury, and FDIC came out to breed some confidence by backing bank deposits. Three banks failed in the past week. Everyone is trying to compare this to Bear, Lehman, MF Global, Worldcom, Enron etc, but it’s too early to tell. Some are saying the Fed will cut rates, or at least stop raising. What does that mean? The SPX isn’t even at the December low of 3760, which is way above the October low of 3491. Even with all these volatile events. So to me, Friday’s SPX low of 3846 shouldn’t be the 2023 low. The Oscillator went out at -80 so we will get a bounce attempt. 3908-3928 is resistance. The major area is 3960ish. Sectors are not created equal. Know what you own and why. At times like this, if you want to take a shot at something, I’d use calls or puts so the risk is defined. SPY did another Red Dog Reversal sell around the $399.71 pivot last Thursday. On Friday it broke below $390.53 to see $384.33. This morning it’s been very erratic. If they try and rally, $390-$392 is resistance. Above that is $396ish. If they sell them, see how it handles $384.33. Below that is $377ish. Now let’s dig into the financials everyone’s watching: JPM did a Red Dog Reversal on Friday around the $129.22 pivot. This will be important because it seems like the major banks are getting the flows from all the regionals. It’s down small. See if it goes green or if sellers come in. BAC isn’t special but it did a small Red Dog Reversal long after a big move lower. SCHW got hit hard and fast to show risk can happen. $75 was the trigger sell, and it hit $64 Friday. This morning it was down below $50. If you think it’s overdone, I’d go out a few months with calls because the risk is the premium paid. Look at SVB and SBNY – some thought they were getting bargains but they’re zeros. Watch SCHW today for sentiment. COIN: I bought puts out a month in case this gets hit. But it’s a lotto play. BTC is up a lot today. SBNY: I bought $60 puts early Friday because it felt like this could be next. The stock seems like a zero so this should pay off big. Scott Redler’s positions disclosure as of 2023-03-13 at 9.02.02 AM
Continue Reading -->Coffee With Greta: Bank Contagion
DJIA Futures: -343 (-1.1%) SPX Futures: -39 (-1.0%) NASDAQ Futures: -48 (-0.4%) Good morning friends! Futures are lower as bank stocks continue to plunge despite emergency action from regulators and the Fed over the weekend. Let’s get right to it! Regulators To Protect SVB Depositors U.S. regulators announced a plan over the weekend to backstop all depositors with money at Silicon Valley Bank and Signature Bank (SBNY). Depositors at both institutions will have access to all of their money, even over the insured deposit amount of $250,000. That access will start today after the banks were taken over by regulators last week. The Treasury Department designated both as systemic risks, which gives authority to unwind both in a way that it said “fully protects all depositors”. The FDIC’s deposit insurance fund will be used to cover depositors. The Fed also announced it is creating a new Bank Term Funding Program in response to the turmoil across the banking industry. That program is meant to safeguard institutions impacted by the market instability of SVB’s failure. Banks will be able to get loans of up to one year from the Fed in exchange for high-quality collateral such as Treasurys, agency debt, and mortgage-backed securities. The Fed said, “This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy. The Federal Reserve is prepared to address any liquidity pressures that may arise.” The Treasury Department is providing up to $25 billion from its Exchange Stabilization Fund as a safeguard against any potential losses from the Fed funding program. First Republic Bank Plunges First Republic Bank (FRC) shares are plunging 60.5% ahead of the open, leading the decline across the banking sector. First Republic said Sunday it had received additional liquidity from the Fed and JPMorgan Chase (JPM). That move reportedly raised its unused liquidity to $70 billion. The bank will also likely take advantage of the Fed’s new emergency funding program. The founder and CEO said in a joint statement, “First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks.” The new funding is meant to cover a rush of withdrawals as uninsured depositors are likely to remove their money from regional banks after the collapse of SVB last week. Other regional bank shares are also plunging with Western Alliance Bancorp (WAL) down 65.6% and Pacwest Bancorp (PACW) tumbling 44.1%. Investors Rush Into Bonds, Gold Treasury yields are tumbling this morning as investors flood into the safety of the bond market after the SVB collapse. The 2-year yield is down 52 basis points to 4.07% while the 10-year yield is down 25 basis points to 3.46%. Gold prices are also rallying, briefly topping $1,900 and hitting the highest level since early February. Uncertainty is spreading across the market about the possible contagion effects of the SVB collapse. Pfizer To Acquire Seagen Seagen (SGEN) shares are surging 15.9% in premarket trade after Pfizer (PFE) struck a deal to acquire the company for nearly $43 billion. Pfizer will pay $229 in cash per share for Seagen, a 32.7% premium to Friday’s closing price. The deal is meant to bulk up Pfizer’s cancer treatments portfolio. The drugmaker said it expects more than $10 billion in “risk-adjusted” sales from Seagen in 2030.
Continue Reading -->Coffee With Greta: Higher Unemployment Boosts Stocks
DJIA Futures: +27 (+0.1%) SPX Futures: +13 (+0.3%) NASDAQ Futures: +68 (+0.6%) Good morning friends! Futures are rising as the February jobs report shows signs of slowing inflation. Let’s get right to it! Unemployment Rises, Wage Gains Slip U.S. job growth came in hotter than expected but the unemployment rate rose unexpectedly in February. The Labor Department reported the economy added 311,000 jobs last month vs expectations for a 225,000 gain. The unemployment rate rose to 3.6% vs expectations for it to be unchanged at 3.4%. Although February’s job growth was hotter than expected, it was a cooldown from January’s blowout number which was revised lower by just 13,000 to 504,000 jobs. Leisure and hospitality continued to lead the gains, adding 105,000 jobs. Retail added 50,000, government added 46,000, and professional and business services grew by 45,000. Information-related jobs declined by 25,000 while transportation and warehousing lost 22,000. Average hourly earnings rose 4.6% year over year, below expectations for a 4.8% gain. On a monthly basis, wages rose 0.2% vs 0.4% expected. Bitcoin Falls Below $20,000 Crypto prices continue to fall alongside stocks with the collapse of Silvergate Capital (SI) putting more pressure on the industry. Bitcoin gave up the $20,000 level earlier this morning before recovering some of those losses. Currently the coin is at $20,031, down 7.5% over the past 24 hours. Ethereum is down 8.5% at just over $1,400. Oracle Revenue Disappoints Oracle (ORCL) shares are falling 4.9% ahead of the open after missing fiscal Q3 revenue expectations. Here’s how the software company’s results compared to analysts’ estimates: Adjusted EPS: $1.22 vs $1.20 expected Revenue: $12.4 billion vs $12.43 billion expected The CEO forecast fiscal Q4 EPS of $1.56 to $1.60 on revenue of $13.62 billion to $13.85 billion. Analysts were estimating earnings of $1.47 per share on $13.75 billion in revenue. Oracle also hiked its quarterly dividend by 25% to $0.40 per share. That dividend will be paid on April 24 to all shareholders of record as of April 11. Gap Falls On Big Q4 Loss Gap (GPS) shares are falling 8.1% in premarket trade after reporting a wider Q4 loss than expected. Here’s how the retailer’s results compared to analysts’ expectations: Loss per share: $0.75 vs $0.46 expected Revenue: $4.24 billion vs $4.36 billion expected Comparable sales were down 5% year over year while in-store sales dropped 3% and online sales plummeted 10%. Gap announced it was eliminating its chief growth officer role, effective immediately, while Athleta’s CEO also left the company on Thursday. The company said it plans to close 50 to 55 Gap and Banana Republic stores this year while opening 30 to 35 Athleta and Old Navy stores. DocuSign Drops Despite Earnings Beat DocuSign (DOCU) shares are tumbling 13.5% ahead of the open despite beating Q4 expectations on the top and bottom line. Here’s how the online document signing company’s results compared to analysts’ estimates: Adjusted EPS: $0.65 vs $0.52 expected Revenue: $659.6 million vs $641 million expected Guidance was also in line with expectations with DocuSign saying it expects Q1 revenue of $639 million to $643 million. The CEO said, “We finished the year strong, delivering across our key financial metrics and making tangible progress on our strategic priorities. We are reshaping DocuSign to invest in our innovation roadmap and self-service capabilities.” The company announced its CFO will stepdown later this year and the stock was downgraded by JPMorgan analysts to underweight from neutral. In Case You Missed It General Motors (GM) shares dropped 4.9% on Thursday after the automaker announced it will offer voluntary buyouts to a “majority” of its salaried employees. CEO Mary Barra made that announcement in a letter sent to workers. The Voluntary Separation Program is part of GM’s efforts to cut $2 billion in costs over the next two years. All U.S. employees who have been with the company for five years or more are eligible for the program. Those approved for the program will receive one month of pay for every year they’ve worked for the company.
Continue Reading -->Coffee With Greta: Crypto Shock
DJIA Futures: +65 (+0.2%) SPX Futures: +4 (+0.1%) NASDAQ Futures: +8 (+0.1%) Good morning friends! Futures are slightly higher as traders look ahead to Friday’s jobs report. Let’s get right to it! Silvergate Liquidating Silvergate Capital (SI) shares are plummeting 36.7% ahead of the open after the crypto banking giant announced it will shutdown operations and liquidate Silvergate Bank. Silvergate is the second-largest crypto banking firm in the U.S. with just over $11 billion in total assets. The company said in a statement, “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward.” According to the company’s liquidation plan, all deposits will be fully repaid. Cryptocurrencies are dropping following the announcement. Bitcoin is down 1.4% in the past 24 hours to $21,700 with Ethereum down 1.0% to just over $1,500. Weekly Jobless Claims Jump Weekly jobless claims jumped more than expected last week. The Labor Department reported 211,000 Americans filed initial claims for unemployment benefits. That was up by 21,000 from the previous week and higher than 195,000 expected. It was the highest level of claims since late December. Continuing claims rose by 69,000 to 1.72 million vs 1.66 million expected. That was the highest level since January 2022. Etsy Drops On Double-Downgrade Etsy (ETSY) shares are dropping 4.4% in premarket trade after the e-commerce marketplace got a double-downgrade from a key analyst group. Jefferies double-downgraded the stock to underperform from buy today. The firm said it sees the stock tumbling 25% as consumer spending slows in the months ahead. Jefferies cited the need for Etsy to spend more on marketing as that turnover happens among consumers. LoanDepot Slides On Earnings Miss LoanDepot (LDI) shares are tumbling 7.4% ahead of the open after missing Q4 expectations on the top and bottom line. Here’s how the mortgage lender’s results compared to analysts’ estimates: Loss per share: $0.46 vs $0.27 expected Revenue: $169.7 million vs $190.9 million expected Revenue dropped by $104.5 million in the quarter as mortgage activity slowed sharply due to higher rates. The company also said it reduced total expenses by $91.4 million from Q3, driven primarily by lower staffing levels. LoanDepot ended 2022 with $864 million cash on hand. In Case You Missed It Job openings fell less than expected in January as the labor market remains hot. The Labor Department’s job openings and labor turnover survey (JOLTS) shows there were 10.8 million vacant jobs at the start of the year. That was down by 410,000 from December but higher than 10.6 million expected. The number of openings still outnumbers available workers by 1.9 to 1. The Fed released its latest Beige Book survey of conditions on Wednesday. That survey showed economic activity beginning to slow across the country. Nationwide activity increased only slightly in the latest survey. Six of the 12 Fed districts surveyed reported little or no change in economic activity while the other six reported modest growth.
Continue Reading -->Coffee With Greta: Private Job Growth Runs Hot
DJIA Futures: +36 (+0.1%) SPX Futures: +5 (+0.1%) NASDAQ Futures: +22 (+0.2%) Good morning friends! Futures are slightly higher as traders digest the latest jobs data and await day 2 of the Fed Chair’s testimony in Congress. Let’s get right to it! Private Payroll Growth Runs Hot The U.S. private sector expanded more than expected in February as the labor market remains hot. ADP reported private employers added 242,000 jobs last month vs 205,000 expected. That was up from 119,000 in January. The leisure and hospitality sector continued to lead the gains, adding 83,000 jobs. Financial activities added 62,000 and manufacturing grew by 43,000. This is the first piece of key data on the labor market this week. The Labor Department will release its January job openings and labor turnover survey (JOLTS) at 10:00 a.m. ET today. That report is expected to show the number of job openings in the U.S. fell to 10.6 million at the start of the year. The Labor Department’s official February jobs report on Friday is expected to show the U.S. economy added 225,000 jobs with the unemployment rate unchanged at 3.4%. Powell Testimony Day 2 Fed Chair Jerome Powell will testify in the House Financial Services Committee today, starting at 10:00 a.m. ET. This is the second part of his semiannual report on monetary policy to Congress. Powell shocked the market with a more hawkish tone during his testimony in the Senate Banking Committee on Tuesday. He told the committee that interest rates are likely to settle higher than the terminal rate the bank previously laid out. Powell said the Fed “would be prepared to increase the pace of rate hikes” if data shows that is necessary. CME Group’s FedWatch Tool now shows over 79% of traders expecting the Fed to go back to a 50 basis point rate hike at the March 22nd meeting. January Trade Deficit Rises Slightly The U.S. trade deficit rose slightly in January after surging throughout 2022. The Commerce Department reported the gap rose 1.6% to $68.3 billion at the start of the year. That was in line with expectations and down 28% year over year from $87.4 billion in January 2022. Imports rose 3% to $325.8 billion while exports rose 3.4% to $257.5 billion. Economists expect the deficit may decline this year for the first time since 2019 as Americans pullback on spending due to inflation and higher interest rates. Slower spending results in lower import levels. In Case You Missed It JetBlue Airways (JBLU) shares fell 2.9% on Tuesday after the DOJ sued to block the company’s takeover of Spirit Airlines (SAVE). The Justice Department claimed the merger would eliminate competition in the marketplace. The DOJ filing said the takeover would “leave tens of millions of travelers to face higher fares and fewer options.” Shares of the other major airlines rose following that filing.
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