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%
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
TradeTheNews.com Weekly Market Update: Mixed jobs report and SVB collapse trouble investors, dampens Fed expectations
3/10/2023 4:17:14 PM
It was a tumultuous week for investors to say the least. Markets encountered two distinct catalysts and neither supported equity valuations, but did induce significant volatility into fixed income markets. Initially all eyes were on Capitol Hill where Fed Chairman Powell testified on Tuesday and Wednesday. His remarks were clearly received as more hawkish than many investors may have hoped for. The door was kicked wide open for a 50 bps hike later this month after he implied the pace of tightening could re-accelerate depending on the upcoming data. Powell also acknowledged the March dots will be revised higher after January data and December revisions partly reversed softening trends, but how much higher remains unclear. The US 2-year yield surged above 5% and the 2-10 year spread inversion plunged well below -100 basis points before ADP employment and JOLTS jobs reports came in stronger than expected, supporting the Chairman’s message.
Separately ominous signs emerged that the Fed’s aggressive tightening campaign is starting reveal cracks in portions of the economy. Multiple US regional banks highlighted the difficulties that the rising cost of deposits are causing, and that this credit normalization is likely to hamper bank profitability going forward. Banking stocks came under significant pressure in the wake of those investor comments and the deepening inversion across the US Treasury yield curve. But, it was the implosion of Silicon Valley Bank that resulted in full blown panic reminiscent of the lead up to the 2008 Financial Crisis. SVB shares plunged more than 60% on Thursday after management said it would need to raise nearly $2.3B to cover unforeseen asset impairments mostly related to long term US Treasury holdings. Shares continued to plunge on Friday along with a host of other regional banks amid reports of an ongoing run on SVB by its depositors. The FDIC was forced to assume control of SVB, effectively shutting the institution down in what amounted to the largest bank failure since the 2008 financial crisis and the second-biggest failure in US history behind Washington Mutual. Many expected some sort of forced resolution this weekend in the form of a sale or bailout. Nevertheless a debate raged on several fronts on just how bad the fallout will be from the unforeseen demise of this key cog in the US venture capital ecosystem.
Friday’s jobs report largely offered a green light to those traders looking to park money in the relative safety of government backed debt. February payroll data stayed hot, but that was largely expected. It was the below-trend gain in average hourly earnings and another decline in the workweek that suggested take home compensation and wage trends in general may be softening more than anticipated. The volatility in US Treasury markets and in the 2-year yield in particular has been ferocious. That yield, which was approaching 5.10% mid-week, had careened to 4.6% which was the fastest 2-day decline since 2008. Expectations for a 50 bps hike later this month receded, as futures now favor 25 bps once again. The US dollar lost ground, trading down more than 1% broadly, while gold price jumped nearly 2%. The S&P dropped back below 3,900 and appears to be testing below the uptrend channel coming off the Oct 22nd low. For the week, the S&P sold off 4.6%, the DJIA lost 4.5%, and the Nasdaq was down 4.7%.
Outside of the regional banking sector upset, corporate news continued to focus on earnings reports and investor day presentations. Shares of Dicks Sporting Goods hit an all time high after its strong earnings report, proving business is still good in the post-pandemic period. GE shares moved out to 5-year highs after management told investors guidance is on track and that they are seeing significant free cash flow growth. Oracle earnings beat expectations and provided solid guidance, but shares were still caught in the riptide of Friday’s sell off. On the M&A front, Black Knight suffered a setback as the FTC officially decided to challenge the acquisition by ICE on the grounds it would limit competition in the mortgage loan technology business. Spirit Airlines faces a similar battle as the DOJ confirmed it would seek to block its proposed merger with Jetblue.
MON 3/6
(PT) ECB's Centeno (Portugal): ECB targets headline inflation, NOT core inflation; Asked about possible 50bps hike in Mar, says decision must be based on data; Notes interest rates have risen too fast
(EU) ECB chief Lagarde: Reiterates very likely to raise rates by 50bps in Mar
(AT) ECB's Holzmann (Austria): Calls for four more 50bps interest rate hikes by July 2023 [**Note: implies 4.50% terminal rate v 4.00% currently expected by markets]
CIEN Reports Q1 $0.64 v $0.36e, Rev $1.06B v $959Me
VST To acquire Energy Harbor Corp in deal valued at $3.0B plus 15% interest in Vistra Vision; Increases share buyback by $1B (12.2% of market cap)
(US) JAN FACTORY ORDERS: -1.6% V -1.8%E
SAVE Reportedly Spirit-Jetblue merger facing DoJ anti-trust suit as soon as Tuesday, DoJ said to see deal as anticompetitive - press
KEY Cuts FY23 NII outlook to +1-4% from 6-9% prior (assumes cumulative beta in the mid to high 30's v mid-to-high 20% guid) - investor presentation
(CN) China's new Foreign Min Qin Gang : US's China policy entirely deviated from the rational and sound track; US means to contain and suppress China in all respects and get the two countries locked in a zero-sum game - first speech since taking office
TUES 3/7
(UK) FEB HALIFAX HOUSE PRICE INDEX M/M: 1.1% V 0.0% PRIOR; Y/Y: 2.1% V 1.9% PRIOR (fastest M/M increase since June 2022)
(TW) Taiwan Feb Trade Balance: $2.4B v $3.9Be
(CN) CHINA FEB FOREIGN RESERVES: $3.133T V $3.157TE (1st decline in 5 month
DKS Reports Q4 $2.93 v $2.86e, Rev $3.60B v $3.41Be; Guides FY23 strong; Raises Quarterly dividend 105.1% to $1.00 from $0.4875 (indicated yield 3.03%)
Feb Manheim Used Vehicle Value Index: +4.3% M/M; -7.0% Y/Y (inline with mid-Feb update)
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -0.7% v -1.5% prior
(US) FED CHAIR POWELL: WE WILL STAY THE COURSE UNTIL THE JOB IS DONE; ULTIMATE PEAK LIKELY TO BE HIGHER THAN EXPECTED; PREPARED TO INCREASE PACE OF RATE HIKES IF NEEDED; LATEST ECONOMIC DATA HAS BEEN STRONGER THAN EXPECTED
(US) 2-year Treasury yield touches 5% for first time since 2007
(US) JAN CONSUMER CREDIT: $14.8B V $25.3BE
UPS Affirms FY23 Rev $97.0-99.4B v $97.9Be, adj Op margin 12.8-13.6%, Capex $5.3B, FCF $8B in base case - conf slid
WED 3/8
ADS.DE Reports final Q4 FY22 Net -€482M v +€123M y/y, Op -€724M v -€717Me, Rev €5.21B v €5.29Be; Cuts annual dividend 79% to €0.70/shr from €3.30/shr
(DE) GERMANY JAN RETAIL SALES M/M: -0.3% V 2.3%E; Y/Y: -4.6% V -5.0%E
(UK) BOE’s Dhingra (dove; dissenter): Further tightening is a bigger risk to output; Prudent strategy would be to hold policy steady
(US) FEB ADP EMPLOYMENT CHANGE: +242K V +200KE; Pay growth "still quite elevated"
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATE UNCHANGED AT 4.50%; AS EXPECTED [**Note: becomes 1st G7 Central Bank to pause in current tightening cycle]
(US) JAN JOLTS JOB OPENINGS: 10.824M V 10.55ME
(US) DOE CRUDE: -1.7M V +0.5ME; GASOLINE: -1.1M V -2ME; DISTILLATE: +0.1M V -1ME
(US) Atlanta Fed GDPNow: raises Q1 GDP from 2.0% to 2.6%
(US) USDA WORLD AGRICULTURAL SUPPLY AND DEMAND ESTIMATES (WASDE) CROP REPORT: End 2022/2023 US Stocks (M bu): Soybeans: 210 v 219e; Corn: 1,342 v 1,299e; Wheat: 568 v 576e
(US) FERC: Allows Freeport LNG production up to the max capacity authorized
(US) President Biden budget proposes to tax incomes >$400K at 39.6%; Proposes to impose a 25% minimum tax on billionaires - US financial press
(CN) CHINA FEB CPI M/M: -0.5% V +0.8% PRIOR; Y/Y: 1.0% V 1.9%E [slowest annualized pace since Feb 2022]
- PPI Y/Y: -1.4% v -1.3%e
THRS 3/9
ANNOUNCES TECHNICAL DELAY OF PUBLICATION OF 2022 ANNUAL REPORT; Notes last-minute SEC call to comment on certain revisions to its consolidated cash flow statements from 2019-2020
WAF.DE Reports FY22 Net €434.4M v €289.6M y/y, Rev €1.81B v €1.41B y/y; Notes start into 2023 was rather muted
(US) Sen. Lindsey Graham (R-SC): To introduce a bill laying the groundwork for Pres Biden to use US military force against Mexican drug cartels; I would get tough on Mexico - Fox News interview
GE Affirms FY23 $1.60-2.00 v $1.95e, Rev 'high single digits'; Notes significant FCF growth continues into 2023 - investor day slides
GE CEO Culp: See's FY23 "high-growth", Feel very good about our affirmation of our financial projections today – CNBC
BKI FTC officially votes to challenge the ICE/BKI deal
(US) INITIAL JOBLESS CLAIMS: 211K V 195KE (highest since late Dec 2022); CONTINUING CLAIMS: 1.72M V 1.66ME (highest in 13 months)
SBNY Issues Updated Financial Figures as of March 8, 2023; Reiterates Strong Financial Position and Limited Digital-Asset Related Deposit Balances in Wake of Industry Developments
(US) BIDEN ADMINISTRATION PROPOSED BUDGET: PROJECTS $1.846T DEFICIT IN FISCAL 2024, $17.054T DEFICIT OVER 2024-2033; Annual deficits over $1T each year through 2033, projects annual deficits 4-6-6.8% of GDP through 2033
(US) Q4 FINANCIAL ACCOUNT HOUSEHOLD CHANGE IN NET WORTH: +$2.927T V -$392B PRIOR
(US) TREASURY $18B 30-YEAR BOND REOPENING DRAWS 3.877% V 3.585% PRIOR; BID TO COVER 2.35 V 2.45 PRIOR AND 2.38 OVER LAST 8 REOPENINGS
ORCL Reports Q3 $1.22 v $1.20e, Rev $12.4B v $12.4Be; Raises Quarterly dividend 25% to $0.40 from $0.32 (indicated yield 1.81%)
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED
FRI 3/10
TSM Reports Feb Rev (NT$) 163.2B, +11% y/y and -18.4% m/m; YTD Rev 363.2B +13.8% y/y
(UK) JAN MONTHLY GDP M/M: 0.3% V 0.1%E
DTG.DE CFO: No signs of weakening demand; Expects further partial supply chain difficulties in 2023, but no production disruptions expected - post earnings comments
(IT) Italy Jan PPI M/M: -9.9% v +3.8% prior; Y/Y: 11.6% v 39.2% prior (slowest annual pace since Aug 2021)
(RU) Russia Foreign Min Lavrov: Talks with US Sec of State Blinken on G20 sidelines were constructive; Discussed Ukraine and nuclear arms issues
*FDIC: Moving to protect insured depositors of Silicon Valley Bank; Bank closed by California regulator; SVB is the first insured institution to fail this year
TradeTheNews.com Weekly Market Update: More stubborn inflation data and Russia bear swat markets
2/24/2023 4:15:17 PM
US investors returned to a holiday shortened trading week with geopolitics back in focus. President’s Biden’s surprise trip to Kyiv ushered in a string of headlines from both sides in the lead up to the one-year anniversary of Russia’s invasion of Ukraine. Ultimately, new rounds of sanctions, tariffs, and aid were introduced by the West, even as high-level Chinese officials visited Moscow, sparking speculation about Beijing’s designs on acting as either a peace broker or arms broker in the conflict.
Stock markets continued to encounter resistance in the form of rising interest rates. The economic data and central bankers’ signaling remained supportive of the higher-for-longer narrative that has gained traction as investors have had to adjust to the stronger than expected January data. That theme culminated on Friday when the S&P fell to roughly a 1-month low after hotter than expected January PCE data spooked the market. The month over month core PCE reading of 0.6% was the largest monthly rise since August. Moreover, it got a boost from the category that Chair Powell has highlighted recently: core non-housing service prices. That sub-index also rose by nearly 0.6%, which was its largest gain since November 2021, illustrating this very large component of core inflation is not yet showing any real signs of deceleration. After that data, the US 2-year yield climbed above 4.8% and futures markets began to price in the terminal fed funds rate to exceed 5.4% later this year. The Dollar firmed up to the best levels in roughly two months while commodities and risk assets in general weakened into the end of the week. For the week, the S&P lost 2.7%, the DJIA was off 3%, and the Nasdaq fell 3.3%.
Growth and inflation tensions played out in corporate news this week. Discount retailer Dollar General, which usually flourishes during recession, announced it is cutting quarterly guidance, citing bad winter weather. Walmart beat analyst expectations handily, noting that the big box retailer is managing to contain capex costs and attracting more higher-end customers looking for bargains. Home Depot’s numbers were shakier, reporting a 6% decline in customer transactions and guiding a decline in earnings for the year, perhaps signaling more weakness in the housing market. Contrary to that, homebuilder Toll Brothers reported strong quarterly results and affirmed guidance, noting that it is seeing an uptick in demand continuing as recently as last weekend. In the tech world, Cybersecurity firm Palo Alto reported strong quarterly results and gave solid guidance, sending share higher. Intel continued to flounder, cutting its dividend by two thirds, though affirming its guidance. Adobe shares fell to their lowest levels of 2023 after reports emerged that the DOJ is preparing a suit to block its $20B acquisition of Figma.
MON 2/20
(TW) Taiwan Jan Export Orders Y/Y: -19.3% v -24.0%e; Sees Feb orders down between -10.8% and -6.9% y/y
(HK) Macau Jan tourist arrivals at 1.4M, +101.3% y/y
(US) US Pres Biden: Ukraine will get new military aid package worth $500M to be announced on Feb 21st; Will include HIMARS ammunition - statement from Kyiv
(NL) Dutch intelligence agency official: Russia tried to gain intelligence to sabotage critical infrastructure in the Dutch part of the North Sea; Russia may target Netherlands' offshore infrastructure - press
(TR) Magnitude 6.4 earthquake strikes Turkey-Syria border region
TUES 2/21
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 47.9 V 51.0E (moves back into contraction); Composite PMI highest since July 2022
TSM Reportedly considers to delay its Europe fab by two years to 2025 amid automotive chip shortage is no longer as severe as it was – press
(JP) Japan Cabinet Office (Govt) Feb Monthly Report: Maintains overall economic assessment
(RU) Russia Pres Putin: We are in difficult times, prior to historical events; We will decide tasks of special military operation step by step; Vows to continue military operation in Ukraine - Federal Council address
(UK) FEB PRELIMINARY MANUFACTURING PMI: 49.2 V 47.5E (7th straight contraction); Composite PMI highest since June 2022
(DE) GERMANY FEB ZEW CURRENT SITUATION SURVEY: -45.1 V -50.5E; EXPECTATIONS SURVEY: 28.1 V 23.0E
(RU) Russia Pres Putin: Russia suspends participation in START nuclear arms treaty [**Note: inspections had been halted since 2020]; We suspend participation, not withdrawing from this; Will not allow NATO to inspect our nuclear objects - Federal Council address
HUN Reports Q4 $0.04 v $0.11e, Rev $1.65B v $1.56Be; Optimistic that destocking will end in H1 2023; Notes seeing some green shoots in areas like China, automotive, and aerospace, but construction demand globally is still under pressure
GIS Raises FY23 outlook; Continues to expect to deliver top-tier shareholder returns
HD Reports Q4 $3.30 v $3.27e, Rev $35.8B v $35.9Be; Raises Quarterly dividend 10% to $2.09 from $1.90 (indicated yield 2.63%); Announces $1B investment in associates
WMT Reports Q4 $1.71 v $1.52e, Rev $164.1B v $159.7Be; Guides FY24 EPS short of consensus; Raises Quarterly dividend 1.8% to $0.57 from $0.56 (indicated yield 1.56%)
(US) Feb Philadelphia Fed Non-Manufacturing Regional Index: +3.2 v -6.5 prior
(US) FEB PRELIMINARY S&P/MARKIT MANUFACTURING PMI: 47.8 V 47.4E (5th month of contraction); Services moves into expansion territory
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -1.5% v +3.2% prior
(RU) Reportedly China's Xi to travel to Moscow in the spring; Xi expected to push Putin for peace talks with Ukraine – press
(EU) ECB chief Lagarde: Seeing no EU country in recession in 2023
(US) FERC grants Freeport LNG request to commission including cooldown of liquefaction Train 2 – filing
PANW Reports Q2 $1.05 v $0.78e, Rev $1.66B v $1.65Be
WED 2/22
RIO.AU Reports FY22 underlying Net $13.3B v14.0Be, underlying EBITDA $26.3B v $37.7B y/y, Rev $55.6B v $63.5B y/y
BN.FR Reports FY22 Net €959M v €1.92B y/y, Recurring Op €3.38B v €3.35Be, Rev €27.7B v €27.4Be
(JP) Semiconductor Equipment Association of Japan (SEAJ) Jan Chip-making Equipment Y/Y: -2.1% v +1.1% prior
STLA Reports FY22 adj Op €23.3B v €21.5Be, Rev €179.6B v €176.1Be; Plans up to €1.5B share buyback through 2023; Notes slow but steady improvement in chip supplies
(CN) China said to urge the State-run companies to drop the big four international auditors and use local ones citing data risk – press
7267.JP Said to raise wages by 5% (biggest increase in 30 years) - press
BIDU Reports Q4 (CNY) 16.87 v 13.90e, Rev 33.1B v 32.1Be; Announces $5B share buyback (10% of market cap) through Dec 2025; Plans to integrate Ernie bot into a number of Baidu's businesses
(US) Fed’s Bullard (Non-Voter): I think markets have overpriced a recession in 2023; US economy is stronger than what we previously thought which adds up to markets needing to price in tougher road for inflation and rates – CNBC
INTC Cuts Quarterly dividend 65.8% to $0.125 from $0.365 (indicated yield 1.92%); Affirms Q1 -$0.15 v -$0.15e, Adj Rev $10.5-11.5B v $11.1Be
(RU) Russia Foreign Ministry: We appreciate China's balanced position on Ukraine issue; "Vision" very much the same between us
TOL Exec: Uptick in demand continued through last weekend - post earnings comments
(RU) Russia said to cut crude exports from western ports by 25% in March versus Feb – pres
(US) FEB FOMC FEB MINUTES: ALL PARTICIPANTS AGREED MORE RATE HIKES NEEDED TO ACHIEVE JOB AND INFLATION OBJECTIVES; A FEW CALLED FOR A 50 BPS HIKE
(US) US said to consider releasing intelligence related to China potentially transferring arms to Russia - US financial press
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 3.50%; AS EXPECTED
THRS 2/23
ENI.IT Reports Q4 adj Net €2.5B v €2.1B y/y, adj Op €3.59B v €3.81B y/y, Rev €31.3B v €26.8B y/y
(RU) Reportedly Russia Pres Putin has already gamed out the possibility of using a nuclear weapon in Ukraine; Putin’s calculation implies that Russia is more committed to the Ukraine war than the West - FT
(EU) NATO Sec Gen Stoltenberg: See signs China is considering giving arms to Russia; Closely monitoring Russia on their nuclear weapons
TSM Reportedly TSMC's 5nm demand has suddenly increased recently as urgent orders came from NVIDIA, AMD and Apple, mainly for AI and server chips - DigiTimes
(EU) EURO ZONE JAN FINAL CPI Y/Y: 8.6% V 8.6%E; CPI CORE Y/Y: 5.3% V 5.2%E (record high)
(CN) Reportedly Citic Group Chairman Zhu Hexin is is the leading candidate for PBOC Gov post; China said to be preparing to shake up leadership of its financial system - US financial press
BABA Reports Q3 $2.79 v $2.29e, Rev $35.9B v $35.5Be; Expects continued recovery in consumer sentiment, economic activity
BRE Reports Q4 $1.33 v $1.19e, Rev $8.19B v $8.13Be
DG Cuts Q4 $2.91-2.96 (prior $3.15-3.30) citing lower-than-anticipated sales and higher-than-anticipated inventory damages; Notes Nov and Jan SSS were as expected, Dec SSS lower than expected as a result of the storm Elliott
HUM Raises FY23 individual Medicare Advantage products at least 775K (prior at least 625K) citing continued higher than anticipated sales volumes and favorable member retention early in 2023; Affirms FY23 >$28.00 v $28.02e
(US) INITIAL JOBLESS CLAIMS: 192K V 200KE; CONTINUING CLAIMS: 1.65M V 1.70ME
(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 2.7% V 2.9%E; PERSONAL CONSUMPTION: 1.4% V 2.0%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: 3.9% V 3.5%E; CORE PCE Q/Q: 4.3% V 3.9%E
(US) DOE CRUDE: +7.7M V +2ME; GASOLINE: -1.9M V +0.5ME; DISTILLATE: +2.7M V -0.5ME
(CN) Reportedly China and Russia negotiating the purchase of 100 strike drones, which could be delivered as soon as Apr 2023 - German press
INTU Reports Q2 $2.20 v $1.43e, Rev $3.0B v $2.90Be
SQ Reports Q4 $0.22 v $0.27e, Rev $4.65B v $4.53Be
SQ Jan-Feb 2023 Combined Gross Profit +25% y/y - shareholder letter
(JP) JAPAN JAN NATIONAL CPI Y/Y: 4.3% V 4.3%E; CPI EX-FRESH FOOD (CORE) Y/Y: 4.2% V 4.3%E (highest annual pace in 41 years)
(JP) BOJ GOV NOMINEE UEDA: Reiterates current monetary easing is appropriate; it takes time to achieve sustainable inflation (2% target) - Parliament testimony
(CN) China Ministry of Foreign Affairs (MOFA) releases proposal related to Ukraine; Calls for ceasefire and resuming peace talks; Calls for respecting the sovereignty of all countries; Dialogue and negotiation are the only viable solution to the Ukraine crisis
FRI 2/24
BAS.DE Reports final Q4 €0.09 v €0.30e, adj EBIT €373M v €420.2Me, Rev €19.3B v €20.1Be; Plans to eliminate 2.6K jobs in cost cutting initiative (2% of global workforce); To close one of two ammonia plants in Ludwigshafen
(US) US HIKING TARIFFS ON OVER 100 RUSSIA METALS, MINERALS AND CHEMICALS WORTH $2.8B; CONFIRMS NEW SANCTIONS AGAINST RUSSIA; ALSO TO SANCTION SOME THIRD-COUNTRY FIRMS, INCLUDING IN CHINA AND EUROPE – PRESS
WAF.DE Reports prelim Q1 Rev -15% q/q citing expected inventory adjustments for the next quarters and short-term postponement of delivery volumes of some customers in H1 2023
ERICB.SE Reportedly to cut 8.5K workers globally (~8% of total) – press
GM Spokesperson: Confirms GM to halt production at its Fort Wayne Truck Assembly plant in Indiana from Mar 27th for two weeks, citing DSO inventory bloat (**Note: 2nd time in 1 year) - press
(US) JAN PERSONAL INCOME: 0.6% V 1.0%E; PERSONAL SPENDING: 1.8% V 1.4%E
(US) JAN PCE DEFLATOR M/M: 0.6% V 0.5%E; Y/Y: 5.4% V 5.0%E (1st acceleration in annual pace in 7 months)
(US) FEB FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 67.0 V 66.4E
(US) Fed’s Bullard (Non-Voter): Soft landing is feasible; Expect inflation to come under control in quarters and years ahead
(US) Atlanta Fed GDPNow: Raises Q1 GDP from 2.5% to 2.7%
