Debt jitters and rising rates overshadowed by Nvidia blockbuster results

TradeTheNews.com Weekly Market Update: Debt jitters and rising rates overshadowed by Nvidia blockbuster results

5/26/2023 4:05:14 PM

Stocks entered the week still beholden to headlines coming out of Washington DC. Debt ceiling talks were said to be making progress after disappointment was expressed over the weekend. Sentiment swung on several occasions as both sides expressed frustration, though the negotiations continued without a deal. By Friday the S&P climbed back above 4200 helped in part by a growing belief a deal to raise the debt ceiling through 2024 will be put to a vote next week. Unlike equity markets, T-bill yields continued to climb along with and rates and spreads in general, suggesting bond markets are still positioning for potential issues related to the debt ceiling. Ratings agencies Fitch and DBRS both cut their outlooks for the United States sovereign bond ratings to negative. Wall Street spent considerable brain power on re-examining the playbook from the 2011 US downgrade by S&P, and on developing strategies for clients to hedge portfolios in a similar scenario.

Wednesday’s release of the FOMC minutes did little to change the entrenched narrative that the June meeting is still a close call on whether Fed Reserve officials will decide to pause or skip another 25 basis point rate hike. Friday’s April personal spending and PCE inflation data was notably hotter than expected. The data is likely to support a cadre of Fed hawks who have expressed progress on inflation remains too slow. Those officials have been vocal in messaging that if the Fed chooses hold off on hiking at next month’s meeting it is not a signal they are done. In their view rates are likely to need to go a little higher from here to reach a sufficiently restrictive level. Nevertheless, stock markets continued to look past the hotter than expected inflation data and its implications for rates heading in to the long holiday weekend. Semiconductors and the NASDAQ led the way higher basking in the AI glow of on incredible Nvidia quarterly earnings report. For the week the Dow fell 1%, S&P gained 0.3% and the NASDAQ rose 2.5%.

In corporate news small caps opened the week with a bid after FTSE Russel provided an initial look at expected index additions and subtractions for 2023. MU shares were under scrutiny when management estimated the combined direct and indirect impact on sales from a newly issued China ban could be around 25% of revenue. Toll Brothers posted strong earnings results and talked about how the present landscape is a boon for homebuilders with high rates keeping people locked in their homes buoying demand for new construction. A host retailers submitted results and managements that stood out positively included Abercrombie & Fitch, Urban Outfitters, Ralph Lauren, Elf Beauty, and Guess. Best Buy, Costco, Gap, Kohls and Lowe’s results were not quit as stellar, but perhaps better than many had feared. But by a wide margin Nvidia’s earnings a guidance captivated investors’ imaginations in a way that could only be compared to a select few Apple quarters. The juggernaut saw its market cap surge an astonishing $200B+ towards the $1T mark after the company guided Q2 revenue more than 50% above current consensus. AI talk consumed the street after CEO Huang said he believes we are at the beginning of a ten year mega-cycle referring to AI advancements calling it an "iPhone moment". The very next day Marvell Technology guided FY24 AI segment Rev 'to at least double' y/y and shares surged 30%.

Debt ceiling debate overhangs markets

TradeTheNews.com  Weekly Market Update: Debt ceiling debate overhangs markets

5/19/2023 4:03:53 PM

Major indices opened lower this week after US Empire Manufacturing saw the largest month over month decline since the 2020 pandemic. Hard landing worries persisted along with real concerns about a potential US debt default. US House Speaker McCarthy reiterated debt ceiling negotiators were still far apart while President Biden was set to leave for the G-7 in Japan with the clock ticking. On Tuesday US advanced retail sales missed on the headline but the control group surpassed market expectations. Importantly interest rates commenced what would be a notable move higher in the wake of Canada’s CPI data. Canada’s much hotter than expected inflation print (the first acceleration in 10-months) may have taken on more significance in some investor’s minds after the Bank of Canada paused their rate hiking cycle earlier this spring. By midweek the tone on the debt ceiling negotiations took on a significantly more constructive turn in tone, after President Biden appointed two of his most trusted and experienced aids to take the lead in talks with the Republicans and House leader McCarthy. Stocks surged led by the NASDAQ and risk on trade momentum picked up. Gold rolled over the US dollar rose in reaction to jump in US Treasury yields. By Friday US yields reached the highest levels since SVB collapsed in March. Market expectations for an additional Fed hike started to creep in as recession worries faded and Fed hawks like President Logan were vocal, when she noted she doesn’t necessarily see the case for a Fed pause yet.

On Friday Chairman Powell struck a ball that that appeared to be right down the middle in terms of what we recently heard from his colleagues. In a short panel appearance he largely reiterated the message provided at the FOMC press conference earlier this month. His commentary was overshadowed by news out of Washington that the debt talks had broken off. Mccarthy’s team walked out calling White House demands unreasonable while reports noted it was not just one issue, but several that have remained problematic. Finger pointing quickly ensued from both the GOP and White House, and no additional talks were expected on Friday. Stocks rolled into the red mid-session and yields moved off the highs while gold prices recouped some of the week’s losses. US T-bill yields remained above 5% all the way out to the 1-year note. For the week the S&P added 1.7%, Dow gains 0.4%, and the NASDAQ jumed 3%.

A weak earnings report from Home Depot kicked off the retail portion of earnings season potentially fanning lingering hard landing worries. Targets Inc Q1 earnings were better than expected but, Q2 and FY guidance was notably conservative. Management acknowledged the softer sales trends experienced in Q1 continued into May which was a narrative repeated on other earnings conference calls throughout the week. Walmart’s strong Q1 results and raised guidance definitely allayed some of the ongoing growth concerns. Western Alliance Bancorp surged after the bank noted total deposits rose in the last week buoying the entire regional bank complex mid-week. Cisco reported better-than-expected earnings and sales results for its third quarter but initial stock weakness was attributed to worries about waning order growth. Deere reported exceptionally strong results and significantly raised their FY forecast for profits. Netflix was the poster child for strength in the NASDAQ 100 which surged to a fresh 52-highs. The streaming behemoth noted that their ad tier service now has more than 5M monthly users.

Corporate results abate near-term recession concerns

TradeTheNews.com Weekly Market Update: Corporate results abate near-term recession concerns

4/28/2023 4:05:46 PM

Heading into this week, it was all about earnings, earnings, and more earnings. Corporate profitability remained above what most had expected coming into the Q1 earnings season, though firms were not raising guidance by as much as they had beat significantly lowered estimates. Mega-cap tech was led by Microsoft and Meta earnings reports garnering significant excitement among investors. Nevertheless management teams also acknowledged real risks on the horizon and ongoing macroeconomic headwinds will likely curtail growth for some time.

Economic data continued to show real deceleration. April Richmond Fed data contracted more than expected and included significant declines in both new orders and backlog. Consumer confidence data missed estimates and March was revised lower despite corporate leaders insisting that the consumer remains on solid footing. The US 10-year drifted lower as market expectations solidified further around a 25bps hike at next week’s FOMC meeting. The Euro rose ahead what is expected to be the first of at least two more 25bps hikes next week by the ECB. The Yen exhibited notable weakness on Friday after the new BOJ Governor Ueda largely stayed the course in his first official meeting heading the central bank. For the week, the S&P gained 0.9%, the DJIA added 0.9%, and the Nasdaq rose 1.3%.

The corporate news week started off with the bankruptcy filing of Bed Bath and Beyond, ending its long struggle to remain solvent. First Republic Bank continued to flounder as it appears to be on track to FDIC receivership, failing any last minute white knight stepping in. Meanwhile other regional banks showed some resilience, notably PacWest, which reported quarterly results close to expectations and announced that deposits have risen significantly since the collapse of SVB. GM beat earnings expectations handily and talked about its progress in EV production, but shares still fell as investors worried about auto market pricing pressures and a potential recession.

Many tech giants reported this week, and Microsoft and Meta shined, both beating expectations by a wide margin and touting their efforts in developing new AI products. Google and Amazon didn’t fare as well with their earnings results, and Amazon in particular highlighted that customers are restraining their cloud spending amid economic uncertainties. Adding to pressure in that business, it was reported that Alibaba was cutting prices at its cloud unit by as much as 50% for core and storage products. And in M&A news, UK antitrust regulators rejected proposed remedies for Activision’s deal, sharply reducing chances that the acquisition by Microsoft will come to pass.


SUN 4/23
BBBY Said to have filed for Chapter 11 bankruptcy protection on Apr 23rd; To eventually close all of its 360 Bed Bath & Beyond and 120 Buybuy Baby locations - press

MON 4/24
CSGN.CH Reports Q1 (CHF) Adj Pretax -1.32B v -1.01B y/y, Rev 18.5B v 4.41B; Includes write-down of 15.0B in AT1 capital notes; Notes net new outflows moderated but have not yet reversed as of Apr 24th
(DE) German govt agrees wage deal with Verdi trade union for public-sector workers (>2.5M employees); To pay one-off payment of €3,000 over 15 months and to raise monthly wages by minimum €340 from Apr 1st, 2024
KO Reports Q1 $0.68 v $0.65e, Rev $11.0B v $10.9Be
(US) APR PRELIMINARY S&P/MARKIT MANUFACTURING PMI: 52.8 v 48.0e
(US) APR DALLAS FED MANUFACTURING ACTIVITY: -23.4 V -11.0E
FRC Reports Q1 $1.23 v $0.72e, Rev $1.2B v $1.13Be; Deposits down 40.8% q/q (incl $30B infusion), but deposit activity remained stable through 4 weeks to Apr 21st; To cut workforce 20-25%
FRC Exec: Pursuing strategic options such as restructuring balance sheet; Retained 90% of wealth management professionals and wealth assets from teams that left represent less than 20% of total - earnings call comments
PKG Reports Q1 $2.20 v $2.27e, Rev $1.98B v $2.08Be; Guides Q2 below consensus; Notes after a strong start in Jan, consumer spending was increasingly softer as Q1 progressed
(JP) Japan Cabinet Office (Govt) Apr Monthly Report: Maintains overall economic assessment, reiterates economy picking up moderately but sees weakness; raises view on imports [first upgrade since July 2022]
(JP) Semiconductor Equipment Association of Japan (SEAJ) Mar Chip-Making Equipment Billings Y/Y: 6.5% v 0.1% prior

TUES 4/25
UBSG.CH Reports Q1 $0.32 v $0.61 y/y, Rev $8.74B v $9.38B y/y
ABBN.CH Reports Q1 Net $1.04B v $877Me, Rev $7.86B v $7.55Be; Raises FY23 Rev outlook citing strong start for the year
NOVN.CH Reports Q1 Core EPS $1.71 v $1.57e, Rev $13.0B v $12.5Be; Raises FY23 guidance
NESN.CH Reports Q1 (CHF) Rev 23.5B v 23.1Be
(UK) Kantar announces 12 week grocery market share and sales: UK grocery price inflation rose by 17.3% in the four weeks to Apr 16th v 17.5% prior
(US) Biden administration said to be quietly preparing for the possibility that Ukraine’s counteroffensive falls short of expectations; Proposals mulled reportedly include a “ceasefire” and not permanent peace talks, leaving the door open for Ukraine to regain more of its territory at a future date - Politico
ABBN.CH CEO: Many other markets like India and South America have stepped up and helped compensate for orders decline in US, China and Germany; Upgraded guidance based on strong start to year which continued through Q1 - post earnings comments
(UK) Bank of England (BoE) Statement: BoE, BoJ, ECB and SNB in consultation with Fed to revert frequency of 7-day operations from daily to once-per-week, effective May 1st
(EU) EU countries reach deal to approve reform of EU Carbon market Deal to cut carbon market emissions by 62% from 2005 levels by 2030; To launch second carbon market in 2027 - press
(US) US Pres Biden formally announces his 2024 presidential re-election campaign (as speculated)
CNC Reports Q1 $2.11 v $2.23e, Rev $38.9B v $36.3Be; Raises FY23 outlook
GE Reports Q1 $0.27 v $0.13e, Rev $14.5B v $13.4Be; Raises lower-end of FY23 outlook
GM Reports Q1 $2.21 v $1.58e, Rev $40.0B v $38.5Be
MMM Reports Q1 $1.97 v $1.59e, Rev $8.00B v $7.47Be; Announces additional restructuring actions affecting 6K positions globally
MCD Reports Q1 $2.63 v $2.30e, Rev $5.90B v $5.57Be
RTX Reports Q1 $1.22 v $1.11e, Rev $17.2B v $16.9Be
BIIB Reports Q1 $3.40 v $3.31e, Rev $2.46B v $2.34Be; Deprioritized certain programs in stroke, gene therapy, and ophthalmology as part of ongoing R&D pipeline optimization
ADM Reports Q1 $2.09 v $1.71e, Rev $24.1B v $23.5Be
(US) Nevada reports Mar casino gaming Rev $1.31B, -3.2% y/y, Las Vegas strip Rev $724.6M, -2.9% y/y
(US) APR RICHMOND FED MANUFACTURING INDEX: -10 V -8E
(US) APR CONSUMER CONFIDENCE: 101.3 V 104.0E
KER.FR Reports Q1 Rev €5.08B v €5.06Be
ASM.NL Reports Q1 Net €183M v €146M y/y, Rev €710M v €517M y/y; Memory market demand weakened and expected to remain low for remainder of the year
(US) March money supply M2 down 1.2% ($257.3B) from prior month to $20.818T (biggest drop on record since 1959]
MSFT Reports Q3 $2.45 v $2.22e, Rev $52.9B v $51.0Be
GOOGL Reports Q1 $1.17 v $1.06e, Rev $58.1B v $56.9Be; Authorizes to buy back additional $70B of shares (5.3% of market cap)
PACW Reports Q1 $0.66 v $0.65e, Rev $316M v $320Me; Deposits rose by $1.1B in the last 11 days of March and $700M subsequent to quarter-end
CMG CEO: Q1 strength continued into Apr; Feel good where we are now and no plans to take additional pricing, but will if we need to – CNBC
CARR Confirms to acquire Viessmann Climate Solutions for €12B in cash and stock issued directly to Viessmann Group with a long-term ownership commitment
MSFT CEO: Guides Q4 total segments Rev $54.85 v $54.8Be (calculated); Sees FX headwind of 2% on revenue during Q4 - earnings call comments
BABA Cloud unit said to cut prices by up to 50%, relates to core and storage products - Chinese press

WED 4/26
ROG.CH Reports Q1 (CHF) Rev 15.3B v 16.4B y/y
BN.FR Reports Q1 Rev €6.96B v €6.67Be; Raises FY23 guidance
GSK.UK Reports Q1 Adj £0.37 v £0.33e, Rev £6.95B v £6.49B
(SE) SWEDEN CENTRAL BANK (RIKSBANK) RAISES REPO RATE BY 50BPS TO 3.50%; AS EXPECTED; decision was not unanimous
(US) US 5-year Credit Default Swaps (CDS) rise to 62bps v 59bps d/d (highest since 2011
HLT Reports Q1 $1.24 v $1.14e, Rev $2.29B v $2.26Be; Raises guidance
ADP Reports Q3 $2.52 v $2.42e, Rev $4.93B v $4.89Be; Raises eps guidance
PAG Reports Q1 $4.31 v $3.92e, Rev $7.34B v $6.74Be; Automotive retail and commercial truck retail demand for new vehicles remains strong
ATVI *UK CMA blocks Microsoft from purchasing Activision to protect innovation and choice in Cloud Gaming; Found Microsoft's solution had significant shortcomings and would require regulatory oversight by CMA
(UR) CHINA PRES XI SPEAKS WITH UKRAINE PRES ZELENSKIY FOR 1ST TIME SINCE UKRAINE WAR STARTED VIA CALL; Xi tells Zelenskiy negotiations are only solution for the war
(CN) China Foreign Ministry: In near future, China will send delegation to Ukraine and other countries to help reach political settlement; China and Ukraine are strategic partners and since Ukraine crisis started, China has actively promoted peace talks
(US) MAR PRELIMINARY DURABLE GOODS ORDERS: 3.2% V 0.7%E; DURABLES (EX-TRANSPORTATION): +0.3% V -0.2%E
FRC David Faber: Sources continue to suggest White House/Treasury are unwilling to step up pressure on banks to purchase FRC assets at a price that will allow for repair of balance sheet – CNBC
(US) DOE CRUDE: -5.1M V -1ME; GASOLINE: -2.4M V -1ME; DISTILLATE: -0.6M V -1ME
(US) Atlanta Fed GDPNow: Cuts Q1 GDP estimate from 2.5% to 1.1%; On poor NAR, Q1 investment figures
META Reports Q1 $2.20 v $1.96e, Rev $28.7B v $27.5Be; Expects Irish Data Protection Commission (IDPC) to issue a decision in May relating to transatlantic data transfers of Facebook EU/EEA user data; Trims Opex guidance
URI Reports Q1 $7.95 v $8.12e, Rev $3.29B v $3.14Be
005930.KR Reports final Q1 (KRW) Net 1.58T v 11.3T y/y, Op 640B v 14.1T y/y (600B prelim), Rev 63.7T v 77.8T y/y (63.0T prelim); Expects recovery in chip demand during H2 2023

THRS 4/27
DBK.DE Reports Q1 Pretax €1.85B v €1.63Be, Rev €7.70B v €4.46Be; On track to meet or exceed 2025 targets
STM.FR Reports Q1 $1.10 v $1.32 y/y, Rev $4.25B v $3.55B y/y; Raises lower-end of FY23 outlook, but notes potential pricing headwinds in H2 2023
BAS.DE Reports final Q1 Net €1.56B v €1.22B y/y, Adj EBIT €1.93B v €1.88B y/y, Rev €20.0B v €23.1B y/y
UNA.NL Reports Q1 Rev €14.8B v €13.8B y/y
TTE.FR Reports Q1 Adj Net $6.54B v $6.3Be, Adj EBITDA $14.2B v $12.7Be; Confirms to accept offer from Suncor for Canada oil sands assets; To buy back up to $2.0B in shares during Q2; Raises interim dividend 7% to €0.74/shr
(RU) Russia Dep PM Novak: OPEC+ sees no need for further oil output cuts; To redirect 140M tons of oil and oil productions from Europe to Asia during 2023
7201.JP Raises FY23 Net ¥220B (prior ¥155B) Op ¥370B (prior ¥360B); Cuts Rev ¥10.5T (prior ¥10.9T)
UNA.NL CEO: All business groups growing ahead of expectations; Does not see any particular downtrading - post earnings comments
SO Reports Q1 $0.79 v $0.75e, Rev $6.48B v $6.71Be; Encouraged by continued strong residential customer growth
CAT Reports Q1 $4.91 v $3.79e, Rev $15.9B v $15.2Be
CAT Guides Q2 Rev to increase q/q in line with normal seasonality; FY23 adj Op margin to be in the top half of our target range - earnings slides
CBRE Reports Q1 $0.92 v $0.83e, Rev $7.41B v $7.34Be
CMCSA Reports Q1 $0.92 v $0.81e, Rev $29.7B v $29.4Be
OSK Reports Q1 $1.59 v $0.99e, Rev $2.27B v $2.09Be; Raises guidance; Continues to experience strong demand for its access products
1211.HK Reports Q1 (CNY) Net 4.13B v 0.8B y/y, Rev 120.2B v 69B y/y
ABBV Reports Q1 $2.46 v $2.46e, Rev $12.3B v $12.1Be
GWW Reports Q1 $9.61 v $8.55e, Rev $4.09B v $4.07Be; Raises guidance
MA Apr month to date transaction volume +17% y/y, Cross-border volume +29% y/y
(US) MAR PENDING HOME SALES M/M: -5.2% V 0.8%E; Y/Y: -23.3% V -20.7%E
AMZN Reports Q1 $0.31 v $0.25e, Rev $127.4B v $124.4Be; Guides Q2 op inc very wide
INTC Reports Q1 -$0.04 v -$0.16e, Rev $11.7B v $11.1Be
TMUS Reports Q1 $1.58 v $1.45e, Rev $19.6B v $19.90Be; Raises FY guidance
INTC Expecting modest H2 2023 recovery; On our way to deliver $3B of cost savings in 2023, $8-10B annually exiting 2025
SNAP Reports Q1 +$0.01 v -$0.01e, Rev $988.6M v $1.01Be
X Reports Q1 $0.77 v $0.57e, Rev $4.47B v $4.16Be
(US) Fed releases factors affecting reserve balances (H.4.1): Discount window borrowing rose to $73.9B v $69.9B w/w; Banks have borrowed $81.3 v $74B w/w from new BTFP facility
AMZN CFO: Customers continue to evaluate ways to optimize their cloud spending; Seeing these optimizations continue into Q2 with April Rev growth rates ~500bps lower than what we saw in Q1 - earnings call comments
(JP) JAPAN APR TOKYO CPI Y/Y: 3.5% V 3.3%E; CPI (EX-FRESH FOOD) Y/Y: 3.5% V 3.2%E; Tokyo Core CPI is highest since 1982
(US) EPA to waive E15 from volatility limits on an emergency basis, to permit summer sales of higher-ethanol gasoline - US financial press

FRI 4/28
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Removed forward guidance on interest rates and confirms to conduct broad-perspective review lasting 1-1.5 years
COF CEO: Net charge-off rate hasn't caught up yet, but based on what we see in our delinquencies, we think the monthly charge-off rate will get back to 2019 levels around mid-2023; Our credit metrics tend to move a quarter or two ahead of the industry - call comments
(FR) FRANCE Q1 PRELIMINARY GDP Q/Q: 0.2% V 0.2%E; Y/Y: 0.8% V 0.9%E
ENI.IT Reports Q1 Adj Net €2.91B v €2.30Be, Adj Op €4.64B v €3.60Be, Rev €27.2B v €32.1B y/y; Planned €2.2B share buyback is confirmed
6758.JP Reports FY22/23 Net ¥937B v ¥882.2B y/y, Op ¥1.21T v ¥1.20T y/y, Rev ¥11.5T v ¥9.92T y/y
(DE) GERMANY APR NET UNEMPLOYMENT CHANGE: +24.0K V +8.0KE; UNEMPLOYMENT CLAIMS RATE : 5.6% V 5.6% PRIOR’
(DE) GERMANY Q1 PRELIMINARY GDP Q/Q: 0.0% V 0.2%E; Y/Y: -0.1% V +0.3%E (avoids a technical recession)
- GDP NSA (unadj) Y/Y: 0.2% v 0.8%e
(EU) EURO ZONE Q1 ADVANCE GDP Q/Q: 0.1% V 0.2%E; Y/Y: 1.3% V 1.4%E
(UR) Ukraine Defense Min Reznikov: Preparations for our counteroffensive are being wrapped up
(EU) Reportedly more than a quarter of Europe is in drought as of April; Some experts warn even rainy spring can’t fix Europe’s ongoing groundwater shortage – Politico
CVX Reports Q1 $3.55 v $3.37e, Rev $50.8B v $48.0Be; Expects to buy back $4.375B in shares in Q2 v $3.75B q/q
(DE) GERMANY APR PRELIMINARY CPI M/M: 0.4% V 0.6%E; Y/Y: 7.2% V 7.3%E
(US) Q1 EMPLOYMENT COST INDEX (ECI): 1.2% V 1.1%E
(US) MAR PERSONAL INCOME: 0.3% V 0.2%E; PERSONAL SPENDING: 0.0% V -0.1%E
(US) MAR PCE DEFLATOR M/M: 0.1% V 0.1%E; Y/Y: 4.2% V 4.1%E
(US) APR FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 63.5 V 63.5 PRELIM
(US) Atlanta Fed GDPNow: Sets initial Q2 GDP estimate at 1.7% vs latest Q1 indication of 1.1%
(US) Fed's Barr releases report on SVB failure; Must address weaknesses in supervision and regulation; Need stronger standards across a broader set of banks, will consider improved liquidity and capital requirements
(US) Mar Dallas Fed Trimmed Mean PCE (m/m) +3.4% v 4.6% prior

Inflation data shows some progress but central bankers still not convinced; Earnings season begins

TradeTheNews.com Weekly Market Update: Inflation data shows some progress but central bankers still not convinced; Earnings season begins

4/14/2023 4:12:36 PM

Stock markets rose this week helped in large part by signs disinflationary forces have continued to take hold in the US economy. Equity action remained decidedly resilient despite the data being unsuccessful in swaying the bond markets into believing the Fed will finally look to pause rate hikes at the May meeting. Core CPI prices continued to be somewhat stickier while the headline y/y prices dropped an encouraging, yet somewhat expected,100 bps relative to February. Weakness in housing and rental data was offset by upside surprises in airfares, hotels, and rental cars. March PPI rose at the slowest annual pace since Jan 2021, and advanced retail sales figures also suggested significant slowing in March. Fed officials made it clear they welcomed the recent data, nevertheless most indicated it was largely coming in line with their expectations and most believed there was still more work to do on rates.

By Friday, investors were clearly looking past the data and focusing on large bank earnings reports which suggested banks have continued to flourish despite the recent regional bank failures. Importantly managements stressed, at least for now, they do not expect to pull back lending meaningfully due the recent turmoil. To that point, FOMC voters continued to emphasize they were clearly zeroed in on credit conditions leading into their May decision. Stocks retreated and Treasury yields rose on Friday after the April University of Michigan 1-year inflation outlook jumped more than 100 bps to 4.6%. The Greenback finished the week at the lowest levels in roughly a year as FX exchange markets, like bond markets, implied that even if the Fed raises rates next month they will be forced to pivot in the second half. For the week, the S&P gained 0.8%, the DJIA was up 1.2%, and the Nasdaq added 0.3%, with notably heavy volume in the tech index.

Earnings season unofficially kicked off with JP Morgan, Citibank and Wells Fargo all beating analyst estimates, and suggesting that they are more concerned about the slowing economy than any fleeting contagion from the regional bank failures of last month. Airline stocks including America and Delta provided updates that indicated travel demand remains solid but margins may be a bit challenged this year. Boeing disclosed fresh problems with its troubled 737 MAX program, halting deliveries of some aircraft due to quality issues in the tail section fittings, coming just days after reports that aircraft manufacturer wants to significantly boost 737 production. CarMax demonstrated that the used car market hasn’t completely cooled off, reporting solid Q4 numbers and affirming longer term targets. In M&A news, intermodal container leasing firm Triton International agreed to be acquired by Brookfield Infrastructure for $13.3B.


SUN 4/09
(EU) French Pres Macron: Europe must reduce its dependency on the US; EU must resist pressure to become ‘America’s followers’ and avoid getting dragged into a confrontation between China and the US over Taiwan
(US) Pentagon: Inter-agency effort with DoJ assessing impact of intelligence leak [**Note: related to analysis by US intelligence agencies about Ukraine, Russia and several other countries]
(KR) North Korea remains unresponsive to calls from South Korea via military hotline - Yonhap
(TW) Taiwan Defense Ministry: Current China drills on par with response to Pelosi visit in 2022; Spotted 70 China aircraft around Taiwan in the past 24 hrs; Also spotted 11 China ships around Taiwan

MON 4/10
Q1 global PC shipments 56.9M v 80.2M y/y; Apple's Q1 PC shipments -40.5% y/y - IDC
(JP) New BOJ Gov Ueda: Agreed with PM of no immediate need to change the 2013 joint statement as it helped create a non-deflationary state - comments after meeting PM Kishida
(JP) New BOJ Gov Ueda: It is appropriate to continue with negative rates and monetary easing under framework of YCC (yield curve control); Current monetary easing is very powerful, intense - inaugural press conference
(TW) Taiwan Defense Ministry: Spotted 91 Chinese aircraft, 12 ships around Taiwan as of 10:00 GMT Monday
(US) New York Nov Fed March Survey of Consumer Expectations: 1-year ahead inflation expectations at 4.7% v 4.2% in February (first increase since Oct)
(US) Atlanta Fed GDPNow: Raises Q1 GDP estimate from 1.5% to 2.2%
(UK) Reportedly PM Sunak plans to call for general elections in autumn of 2024 in order to improve chances of winning - Telegraph
(US) President Biden signs bill terminating national emergency for Covid-19
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 3.50%; AS EXPECTED
(CN) CHINA MAR CPI M/M: -0.3% V -0.5% PRIOR; Y/Y: 0.7% V 1.0%E [slowest annualized pace since Sept 2021]

TUES 4/11
(US) Biden administration considers rules for AI tools such as ChatGPT - US financial press
(JP) Japan Trade Union Confederation (Rengo) chief: Do not believe that one-off wage hikes for 2023 are adequate; Will seek further wage increase in 2024 and in 2025
(TW) Taiwan Mar Trade Balance: $4.2B v $2.9Be; Sees Apr exports falling 18-20% y/y
(CN) CHINA MAR AGGREGATE FINANCING (CNY): 5.38T V 4.50TE
(US) Mar NFIB Small Business Optimism Index: 90.1 v 89.8e; Availability of loans index -9 v -5 prior (biggest drop since 2002 and 2nd biggest drop on record)
KMX Reports Q4 $0.44 v $0.22e, Rev $5.72B v $5.83Be
CLF Reports prelim Q1 Rev $5.2B v $5.1Be; Adj EBITDA ~$200M vs "above $123M guidance" noting "almost entirely driven by the unit cost reductions"; Guides Q2 EBITDA 'multiple times higher' q/q
ACI Reports Q4 $0.79 v $0.69e, Rev $18.3B v $18.2Be
(US) USDA WORLD AGRICULTURAL SUPPLY AND DEMAND ESTIMATES (WASDE): End 2022/2023 US Stocks (M bu): Soybeans: 210 v 201e; Corn: 1,342 v 1,320e; Wheat: 598 v 581e

WED 4/12
(TW) Taiwan Defense Ministry: Checking on China's no-fly zone plan; China said no-fly zone is mainly for aerospace activities from 09:30AM local time for 27 minutes on Apr 16th
(TW) Taiwan’s ruling DPP party presidential candidate Lai: Taiwan already independent, no need to declare independence; China must realize a war would be a global disaster
TRTN To be acquired by Brookfield Infrastructure at $85.00/shr in ~$13.3B cash-stock take-private deal; Triton shareholders will be able to elect to receive the mixed cash/stock consideration or all-cash or all-stock consideration
(US) BofA Institute: March credit & debit card spending per household +0.1% y/y, -1.5% m/m (slowest Y/Y growth since Feb 2021); Notes no clear evidence of the impact of regional bank stress but weakness was broad-based across retail and services
AAL Reports prelim Q1 $0.01-0.05 v $0.04e (prior guided around breakeven), ASMs +9.2% y/y (prior guided 8-10%), TRASM +25.5% y/y (prior guided +24-27%) - filing
(US) MAR CPI M/M: 0.1% V 0.2%E; Y/Y: 5.0% V 5.1%E (lowest M/M since July 2022 and slowest annual pace since May 2021); Core CPI Y/Y records 1st acceleration in 7 months
(EU) ECB's Holzmann (Austria):Reiterates ECB should hike rates by 50bps in May
BAS.DE Reports prelim Q1 adj EBIT €1.93B v €1.78Be, Rev €20.0B v €21.7Be; Lower y/y sales largely driven by lower volumes
- Sales were considerably lower than average analyst estimates for the first quarter of 2023
(US) DOE CRUDE: +0.6M V -0.5ME; GASOLINE: -0.3M V -1.5ME; DISTILLATE: -0.6M V -0.5ME
(US) Atlanta Mar Sticky-CPI annualized 4.7% v 6.8% m/m, core 4.5% v 6.6% m/m
MC.FR Reports Q1 Rev €21.0B v €19.7Be
WBD Plans launch of rebranded 'Max' streaming service in the US on May 23rd
(US) FOMC MAR MINUTES: CONSIDERED WHETHER TO PAUSE AT MARCH MEETING; Some officials would have considered half point hike absent of bank problems
(AU) AUSTRALIA MAR EMPLOYMENT CHANGE: +53.0K V +20.0KE ; UNEMPLOYMENT RATE: 3.5% V 3.6%E
(CN) CHINA MAR TRADE BALANCE: $88.2B V $39.2BE

THRS 4/13
(UK) FEB MONTHLY GDP M/M: 0.0% V 0.1%E
9983.JP Reports H1 Net ¥153.4B v ¥146.8B y/y, Op ¥220.3B v ¥189.3B y/y, Rev ¥1.47T v ¥1.22T y/y; Raises Outlook and provides 5 year sales target of ¥5T
(EU) REPORTEDLY DEBATE AMONG ECB MEMBERS FOR MAY RATE MOVE CONVERGING FOR 25BPS HIKE; DEBATE NOT OVER AS ONE SMALL GROUP PREFER 50BPS WHILE ANOTHER SMALL GROUP PREFER NO CHANGE - PRESS
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €9.75B VS. €8.0-9.75B INDICATED RANGE IN 3-YEAR, 7-YEAR AND 30-YEAR BTP BONDS
AMZN CEO Jassy: Companies are being more cautious in spending which is headwind for AWS; Over the last several months, we took a deep look across the company, business by business; AWS has an $85B annualized revenue run rate, still early in its adoption curve; Investing heavily is Large Language Models and Generative AI - shareholder letter
FAST Reports Mar net sales $675.8M +6.8% y/y
FAST March daily sales growth was relatively softer and finished soft, likely due to manufacturers tightening spending and adjusting production to reflect more streamlined supply chains - slides
NVO Reports prelim Q1 Rev +25% y/y; Raises FY23 Rev +24-30% y/y (prior +13-19% y/y), Op profit +28-34% y/y (prior +13-19% y/y)
(US) INITIAL JOBLESS CLAIMS: 239K V 235KE; CONTINUING CLAIMS: 1.81M V 1.84ME
(US) TREASURY $18B 30-YEAR BOND REOPENING DRAWS 3.661% V 3.877% PRIOR; BID TO COVER 2.36 V 2.35 PRIOR AND 2.37 OVER LAST 8 REOPENINGS
(EU) ECB's Holzmann (Austria):Reiterates half-point hike in ballpark for May
(US) Fed releases factors affecting reserve balances (H.4.1): Discount window borrowing decline to $67.6B v $69.7B w/w; Banks have borrowed $71.8 v $79B w/w from new BTFP facility
(KR) North Korea tested a new type of ICBM that uses solid fuel technology on April 13th - North Korea press
BA Stops delivery of some 737 MAX aircraft due to "quality issue" with fittings on vertical tail section raised by supplier Spirit AeroSystems on Apr 12th; Currently active 737s can continue flying, there is no "immediate" safety risk - press
(US) Reportedly Republicans and House Speaker McCarthy (R-CA) are preparing a proposal to suspend the debt limit by one year to May 2024 - Roll Call
(SG) SINGAPORE Q1 ADVANCE GDP Q/Q: -0.7% V -0.1%E; Y/Y: 0.1% V 0.6%E

FRI 4/14
RMS.FR Reports Q1 Rev €3.38B v €3.20Be; Notes April trends continue to be favorable in US, store traffic continues to rise
IEA Monthly Oil Report (OMR); Notes Russia oil flows returned to levels last seen before Ukraine war
UNH Reports Q1 adj $6.26 v $6.24e, Rev $91.9B v $89.3Be
(US) Fed's Bostic (non-voter): After one more rate hike, Fed can pause and assess the impact of rate hikes on the economy; Fed can 'hit hard and hold'
BLK Reports Q1 $7.93 v $7.73e, Rev $4.24B v $4.23Be
PNC Cuts FY23 outlook; Guides Q2 average loans stable q/q, NII -4% to -2% q/q, Rev -3% q/q, Net charge-offs $200-250M v $195M q/q - earnings slides
JPM Reports Q1 $4.10 v $3.41e, Managed Rev $38.3B v $35.2Be
JPM Raises FY23 NII $81B (prior $74.0B), market dependent; Affirms Adj expense $81B (prior $81B) - earnings slides
WFC CFO: We have NOT changed our credit risk appetite; Consumers continue to spend even as economy softens - media call
C Reports Q1 $1.86 adj v $1.66e, Rev $21.4B v $19.9Be; Notes banking activity picked up from the end-2022; Continues to wind down Russia ops
JPM CFO: Do NOT see ourselves particularly tightening underwriting; Reserve build largely driven by worsening outlook - media call
(US) MAR ADVANCE RETAIL SALES M/M: -1.0% V -0.4%E; RETAIL SALES (EX-AUTO) M/M: -0.8% V -0.4%E
(EU) Reportedly ECB officials pushing for complete halt in reinvestments in asset purchase program in H2 2023 as they focus squarely on taming inflation - press
(US) APR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 63.5 V 62.1E; 1 year inflation expectations 4.6% v 3.7%e
(US) Atlanta Fed GDPNow: raises Q1 GDP estimate from 2.2% to 2.5%

Ebbing bank fears and milder inflation readings stir animal spirits

TradeTheNews.com Weekly Market Update: Ebbing bank fears and milder inflation readings stir animal spirits

3/31/2023 4:28:16 PM

Investor optimism reigned this week heading towards the end of what has been a surprisingly strong Q1. Risk appetite was bolstered by waning concerns over global and regional banks and continued hopes that the Fed will soon pause. First Citizens’ agreement to purchase a large swath of SVB assets with modest additional support from the FDIC came following a weekend where there were no new, negative developments regarding the global banking system. Animal spirits also resurfaced Monday morning with the announcements of several modest M&A deals.

Investor focus seemed to shift away, at least for now, from the worries around US banking deposits and expected tightening financial conditions as a result of the banking crisis. EU CPI readings continued to show improvement on the headline figures with core numbers remaining stickier. Richmond Fed data remained weak but did show improvement from February while surpassing market expectations. Friday’s PCE data showed slight softening but not enough to significantly alter the messaging coming for Fed officials. US Treasury yields moved up, led by the US 2-year which gained a foothold back above 4%. Nevertheless, futures markets remained at odds with the Fed’s message, still pricing in a pivot to rate cuts later this year. Stock volumes declined significantly particularly early in the week and the US dollar remained heavy, weighed upon by strength in the Euro. The NASDAQ has seen the early February highs come back into focus while the S&P is about half way back to those levels. For the week, the S&P gained 3.5%, the DJIA was up 3.2%, and the Nasdaq rose 3.4%.

In corporate news this week, regulators took some additional steps to resolve the recently failed regional banks. First Citizens Bancshares saw its stock rocket higher after the bank negotiated a sweetheart deal to take on the assets of Silicon Valley Bank. Reports said that Newmark Group had been tapped to sell the bulk of Signature Bank’s loan book. Shares of Carnival floated higher after the cruise line reported solid Q1 results and said strong bookings performance has continued into March, though it also guided Q2 and fiscal year numbers below analyst consensus. Boeing was lifted by a report that it soon plans to boost 737 Max production rates above the current 31 aircraft per month. The semiconductor sector got some good news from Infineon, which announced its Q2 and fiscal year results will be higher than previously expected. Some of that optimism was stripped, however, by a report on Friday that China’s Cyberspace Administration plans to conduct a national security review of Micron’s sales in China.


SUN 3/26
(US) Fed’s Kashkari (voter) said too soon to forecast rate decision for the next Fed meeting – CBS
(US) US officials said to consider expanding emergency lending facility for banks, this is said to be one of the many considerations by officials - US financial press

MON 3/27
SIVB FDIC confirms First Citizens to acquire and assume $56B in deposits and $72B in loans of SVB with option to acquire all bank branches and corporate locations; The deal is structured as a whole bank purchase with loss share coverage
DNO.NO Provides Kurdistan operations update: Ordered to temporarily halt deliveries to Iraq-Turkey pipeline [~470Kbpd] following arbitration case between Iraq and Turkey has been awarded in Iraq's favor
(TW) DigiTimes report: The recovery of semiconductor industry is finally emerging; Capacity utilization rate is expected to recover ahead of schedule; Chip industry expected to be better than expected in H2 2023
MAERSKB.DK CEO Clerc: I think we have not seen really strong rebound in China as of yet; Chinese consumer is a bit more stunned by what’s happened and is not in a splurging mood right now - FT
(CH) Swiss weekly Total Sight Deposits (CHF): 567.0B v 515.1B prior (2nd biggest increase on record)
FCNCA Provides additional details on acquisition of SVB; FCB entered into five-year, $70B line of credit and a commercial shared loss agreement with the FDIC to cover an estimated $60B of loans - filing
WEC Affirms FY23 $4.58-4.62 v $4.60e; Cuts Q1 outlook to $1.56-1.58 v $1.77e (prior $1.68-1.72), citing warm winter weather
(US) BofA Institute: Mar 18th-to-date credit and debit card spending decelerated to -2% y/y v being flat y/y during Feb
(EU) European Banking Authority (EBA) Chair Campa: Warns about very big risks in financial system
CCL Reports Q1 -$0.55 v -$0.62e, Rev $4.43B v $4.35Be; Guides below consensus; Strong bookings performance has continued into March

(US) MAR DALLAS FED MANUFACTURING ACTIVITY: -15.7 V -10.0E; New Orders -14.3

TUES 3/28
(UK) Kantar announces 12 week grocery market share and sales: UK grocery inflation in March at 17.5% (the highest level ever recorded)
OMV.AT CEO: Russian gas can be replaced relatively easily with LNG currently
NESN.CH CEO: Nestle to continue to adjust prices to offset inflation as price increases have had limited effect on consumer spending so far; To re-examine banking relationship in Switzerland and abroad following Credit Suisse fall
9988.HK Confirms new organizational and governance structure into 6 units; Each to have the flexibility to raise outside capital and potentially to seek its own IPO
1211.HK Reports final FY22 (CNY) Net 16.6B v 16.0-17.0B prelim +445% y/y, Rev 424B v >420B prelim +96% y/y; Plans to issue CNY50B worth of debt financing instruments
(US) Nevada reports Feb casino gaming Rev $1.24B, +11.2% y/y, Las Vegas strip Rev $712.5M, +18.9% y/y
(US) MAR RICHMOND FED MANUFACTURING INDEX: -5 V -10E
(US) MAR CONSUMER CONFIDENCE: 104.2 V 101.0E
IFX.DE Raises Q2 rev >€4B (prior guidance €3.9B); Raises FY Rev meaningfully above prior guidance to €15-16B
(US) President Biden: Banking crisis is not over yet; Have done what is possible for banks; Watching situation very closely
JEF Reports Q1 $0.54 v $1.23 y/y, Rev $1.28B v $1.69B y/y; Says it 'does not know when the capital markets will return to some version of normalcy'

WED 3/29
(CN) US Senior Administration Official: US looking to reschedule the recently postponed Blinken visit to China; Also discussing visits by Yellen and Raimondo to China; Biden expects to talk to Xi soon
NXT.UK Reports FY22 Pretax £870.4M v £823M y/y, Rev £5.15B v £4.75B y/y; Last 8-weeks full price sales -2.0% y/y v -1.5% guided for FY23/24; Expect Q2 to be weaker than Q1
(UK) FEB MORTGAGE APPROVALS: 43.5K V 41.3KE (highest since Nov 2022)
(US) US PRES BIDEN SAID TO BE PREPARING TO CALL FOR NEW RULES FOR MID-SIZE BANKS; DISCUSSIONS STILL UNDER FLUX – Washington Post
M CEO Gennette to retire in Feb 2024; Appoints Bloomingdale’s CEO Tony Spring (58) as President and CEO-elect; CFO to also be COO
SBNY FDIC hired Newmark Group to sell $60B of Signature Bank loans - WSJ
CTAS Reports Q3 $3.14 v $3.01e, Rev $2.19B v $2.14Be; Raises guidance
(US) FEB PENDING HOME SALES M/M: 0.8% V -3.0%E; Y/Y: -21.1% V -22.4% PRIOR
(US) DOE CRUDE: -7.5M V +0.5ME; GASOLINE: -2.9M V -1.5ME; DISTILLATE: +0.3M V -1ME
(US) FDIC is said to be considering squeezing the biggest banks as it plugs $23B hole; Industry could face special assessment following SVB and Signature failures - press


THRS 3/30
EU reaches deal on 2030 renewable energy targets - press
(DE) GERMANY MAR CPI NORTH RHINE WESTPHALIA M/M: 0.6% V 1.0% PRIOR; Y/Y: 6.9% V 8.5% PRIOR (slowest annual pace since July 2022)
HMB.SE Reports Q1 (SEK) Net +540M v -1.12Be y/y, Rev 54.9B v 49.2B y/y; Notes spring season delayed in many important markets because of cold weather
(ES) SPAIN PRELIMINARY MAR CPI M/M: 0.4% V 0.7%E; Y/Y: 3.3% V 3.9%E V 6.0% PRIOR (slowest annual pace since Aug 2021)
(US) WSJ's journalist and US citizen Evan Gershkovich detained in Russia over 'spying charges' - Russian press
RH CEO: I have never seen a luxury home market down 45% a quarter ever, not even in 2008 or 2009; So I think we're near the bottom; But could it get a little worse? I think it could - earnings call
(US) Reportedly Freeport LNG export plant remains on track to pull in as much natural gas from pipelines as the facility can process - press
(DE) GERMANY MAR PRELIMINARY CPI M/M: 0.8% V 0.7%E; Y/Y: 7.4% V 7.3%E
(US) Q4 FINAL GDP ANNUALIZED Q/Q: 2.6% V 2.7%E; PERSONAL CONSUMPTION: 1.0% V 1.4%E
(US) INITIAL JOBLESS CLAIMS: 198K V 195KE; CONTINUING CLAIMS: 1.69M V 1.70ME
(US) Q4 FINAL GDP PRICE INDEX: 3.9% V 3.9%E; CORE PCE Q/Q: 4.4% V 4.3%E
(US) Treasury Sec Yellen: Recent bank failures point up need to assess past deregulatory actions for banks; Must address vulnerabilities in non-bank sector too
(US) Fed's Barkin (non-voter): Reasons to think inflation battle to take some time; If Fed backs off too soon inflation may come back stronger
(US) Fed’s Kashkari (voter): We have very high inflation but it is not being driven by wages
BA Exec: To raise 737 Max production rates above the current 31/month "very soon" - press
(US) Fed releases factors affecting reserve balances (H.4.1): Discount window borrowing declined to $88.2B v $110.2B w/w; Banks have borrowed $64.4B v $53.6B w/w from new BTFP facility
(US) Manhattan grand jury votes to indict former Pres Trump a minimum 34 counts of business fraud; Trump is expected to surrender early next week [Tues, Apr 4th]; First time in US history current or former president will face criminal charges - NYT
(JP) JAPAN MAR TOKYO CPI Y/Y: 3.3% V 3.2%E; CPI (EX-FRESH FOOD) Y/Y: 3.2% V 3.1%E
(CN) CHINA MAR MANUFACTURING PMI (GOVT OFFICIAL): 51.9 V 51.6E [3rd month of expansion]

FRI 3/31
(UK) MAR NATIONWIDE HOUSE PRICE INDEX M/M: -0.8% V -0.3%E; Y/Y: -3.1% V -2.2%E (biggest Y/Y drop since July 2009)
SAN.ES Notes first months of 2023 are on positive trend, sees Q1 lending +4% y/y, deposits +6% y/y; Affirms FY23 Rev 'double digit growth', ROTE >15%, Cost-to-income ratio 44-45% - ahead of AGM
(FI) Finland Foreign Min Haavisto: Finland's NATO entry paperwork will be done in matter of few days
(DE) GERMANY MAR NET UNEMPLOYMENT CHANGE: +16.0K V +1.0KE; UNEMPLOYMENT CLAIMS RATE: 5.6% V 5.5%E
(EU) EURO ZONE MAR CPI ESTIMATE Y/Y: 6.9% V 7.1%E; CPI CORE Y/Y: 5.7% V 5.7%E (record high for Core CPI)
(EU) EURO ZONE FEB UNEMPLOYMENT RATE: 6.6% V 6.6%E
(CN) China Top 100 developers Mar sales said to rise 29.2% y/y, +42.3% m/m to CNY660.9B - press
(US) FEB PERSONAL INCOME: 0.3% V 0.2%E; PERSONAL SPENDING: 0.2% V 0.3%E
(US) FEB PCE DEFLATOR M/M: 0.3% V 0.3%E; Y/Y: 5.0% V 5.1%E
MU China to launch cybersecurity review of Micron product sales in China - press
(US) MAR FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 62.0 V 63.3E
(US) USDA Quarterly Grain Stocks Report* (bu): Corn 7.40B v 7.48Be, Soybean 1.69B v 1.75Be, Wheat 0.946B v 0.93Be
(US) Atlanta Fed GDPNow: Cuts Q1 GDP estimate from 3.2% to 2.5%
(US) Feb Dallas Fed Trimmed Mean PCE (m/m) +4.0% v 5.8% prior