Banks are in the spotlight as the Federal Reserve focuses on interest rate movements
If the market forecast is correct, the Fed on Wednesday will raise borrowing costs by a quarter of a percentage point as turmoil in regional bank stocks widens, eroding confidence in businesses and consumers and threatening to push the economy into recession. be.
The decision came amid a brutal sale of shares in a local bank. Cleaned billions of dollars from small lender market valuations. Investors have been concerned about the health of these banks since March when Silicon Valley Bank collapsed in one of the most prominent bank failures in U.S. history.
Regulators hoped the sale of troubled First Republic Bank to JPMorgan Chase this week would stifle the panic. However, short-sellers who profit from betting that stocks will fall continue to target regional financial institutions such as PacWest, Western Alliance and Zions Bancorp (PacWest and Western Alliance share prices have fallen before the market). trading down again).
A market carnage could bring more pain to local banks. Ryan Nash, research director at Goldman Sachs, said the drop in prices could make it more likely that CFOs from these lenders will say, “You know, we should be thinking about diversification and moving money. There is,” he said.
“Most of the big failures are likely in the past, but I think there’s a risk that pressure on stock prices will reinvigorate,” he said, adding that he’s concerned about the health of the sector.
Meanwhile, the Fed faces political pressure. Ten progressive lawmakers, including Senators Elizabeth Warren and Bernie Sanders suspend rate hikes To “avoid creating a recession that will destroy jobs and crush small businesses.”
Lawmakers have warned Fed Chairman Jay Powell that higher borrowing prices could make matters even worse for troubled banks.
None of these are likely to deter the Fed from raising rates on Wednesday. said the analyst. In fact, according to Elsa Lignos, global head of foreign exchange strategy at RBC Capital Markets, a “shock pause” would unsettle an already nervous market and “would do more harm than good. “right.
But economists are increasingly betting Wednesday’s rate hike will be the last in this tightening cycle. Watch what Mr. Powell has to say about upcoming Fed meetings. Equities, particularly those of local banks, could be particularly tough if Mr. Powell suggests the Fed needs to stay hawkish on rates to combat inflation.
Lignos advised paying attention to Powell’s remarks about whether “additional policy tightening may be appropriate,” a dovish turn by the Federal Reserve.
this is what is happening
Elon Musk has threatened to hand over NPR’s Twitter account. In an email exchange with a journalist from a news agency, Mr. Musk wrote that he could Give the @NPR handle to “another company”” If the broadcaster didn’t start tweeting again. NPR suspended his Twitter post last month in protest after the platform labeled him “state-owned.”
House Democrats are working on a long-term plan to avoid a US debt default. This includes a so-called discharge petition to bypass House Speaker Kevin McCarthy, but Democrats will have to convince some Republicans. Meanwhile, the White House is debating whether to pursue a substantive constitutional challenge that would bypass Congress and allow the debt ceiling to be raised.
Howard Schultz’s final quarter is a success. coffee chain reported Earnings Exceeding Expectations For the first three months of the year, Schultz handed over the CEO title to Laxman Narasimhan. The company benefited from a surge in sales there after Covid-19 restrictions were lifted. However, Starbucks shares fell 5% in pre-market trading after keeping its guidance for the second half of 2023 unchanged.
Donald Trump ends CNN boycott. The former president will attend a May 10 town hall-style meeting hosted by The News Network. His appearance shows that the Republican presidential candidate, who hasn’t appeared on CNN since 2016, may be expanding his media profile beyond Fox News and other conservative channels. There is a possibility that
The late-night show goes dark on the first day of the writers’ strike. ‘The Tonight Show Starring Jimmy Fallon’ will rerun on Tuesday, and new episodes of the show hosted by Stephen Colbert and Jimmy Kimmel have been suspended after film and TV writers hit the picket line Unlike in the 1990s, late-night stars have publicly expressed their support for the union.
Hindenburg turn the tables on Icahn
For nearly half a century, Karl Icahn has rocked Wall Street as a corporate predator and activist shareholder, forcing big companies to bow to his demands and change their strategies.
But on Tuesday, his public company hindenburg studiesa short-selling firm that made a name for itself in recent years by taking on Indian tycoon Gautam Adani and Twitter co-founder Jack Dorsey.
Hindenburg accused Icahn Enterprises of being overvalued. The firm trades well above net asset value, unlike similar financial institutions run by Bill Ackman and Dan Loeb. Hindenburg also alleged that the disproportionately large dividend was funded by the sale of shares.
“Icahn is using funds from new investors to pay dividends to old investors,” the company wrote in a public report. (Hindenburg is betting that Icahn Enterprises stock will fall, the company’s shares fell 20% on Tuesday.)
Hindenburg also cites Jefferies, the only major investment bank to publish a study on Icahn Enterprises, which it also helped sell its stake in.
Mr. Icahn hit back. “We believe that the selfish shortseller report released today by Hindenburg Research was intended solely to generate profits on short positions in Hindenburg at the expense of long-term unit holders in the IEP,” the company said in a statement. stated and disclosed.
Hindenburg has gained one prominent following. It’s Mr. Ackman. The hedge fund mogul remembers clashing with Icahn over the prospects of Herbalife, the supplement company Ackman has sold short. (Remember quarrel Between the two CNBC guys who took Wall Street by storm?)
They reconciled, but time may not have healed all their wounds. “This short report has a karmic quality that reinforces the concept of the wheel of life and death.” Ackman tweeted Hindenburg report. “So it’s a must-read.”
artificial intelligence 101
Stocks of educational companies rammed After Chegg CEO Dan Rosensweig warned on Tuesday that ChatGPT is cannibalizing growth. It is one of the biggest signs that you may struggle to protect
ChatGPT started hitting Chegg’s business in March, Rosensweig told analysts on this week’s earnings call. It was the first time a CEO has spoken out about the potential financial damage chatbots can do to his company. “We now believe that is having an impact on our new customer growth rate,” he said.
The comments surprised investors. Chegg’s stock fell more than 48% on Tuesday, as did shares of other education companies. London-listed Pearson is down 15%, while language-learning platform Duolingo is down 10%.
Rosenweig called In a subsequent interview with CNBC, the selling was “greatly overstated,” and the comments helped the stock regain lost ground.
Market impact is just a hint of AI-induced chaos. Nathan Benaich, founder of AI-focused investment firm Air Street, said: Author of the Capital and State of AI Reports, he told DealBook, “The education business is just the first domino to fall.”
Other AI News:
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Federal Trade Commission Chairman Lina Khan outlines her vision for regulating AI in a Times Opinion guest essay.
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Refraction AIPi, a startup created by LinkedIn co-founder Reid Hoffman and Google DeepMind co-founder Mustafa Suleyman, is a chatbot that focuses more on conversations than rival products such as ChatGPT and Google’s Bard. has been introduced.
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Toronto-based AI startup Cohere has raised $250 million at a valuation of around $2 billion. Backers included tech giants Salesforce and his Nvidia.
“That’s not how white men fight”
More details are emerging about what may have ultimately led to Tucker Carlson’s dismissal on Fox News last week. The New York Times reports that evidence uncovered during the discovery phase of Dominion Voting Systems’ defamation lawsuit against the media company included a particularly inflammatory text of his message. It was sent to producers by a television host just hours after the January 6 riots at the Capitol.
From Carlson’s text message:
Jumping such a man is clearly a disgrace. That’s not how white men fight. But suddenly he finds that the mob is rooting for the mob against the man. I really wanted them to hurt the child. I could taste it.
At that moment, an alarm went off somewhere in my brain. This is bad for me. It’s becoming something you don’t want to be. Antifa creeps are humans. As much as I despise his behavior, as much as I am sure I would personally hate him if I knew him, I should groan at his suffering. not.
Fox’s board learned of the documents the day before Dominion’s trial began, telling management that it would hire top-tier law firm Wachtell, Lipton, Rosen & Katz to investigate Carlson. It’s not clear how important this particular message was to Fox’s decision-making, but within days the company agreed to pay $787.5 million to settle Dominion’s lawsuit,1 Within a week Carlson appeared in court.
speed lead
bargain
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during the first day of Tenure of Harvey Schwartz As CEO of the Carlyle Group: Many listening sessions, but no drastic restructuring of the investment firm yet. (FT)
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Lilium, a German air taxi startup that went public through SPAC, plans to: Sale of shares worth up to $250 million Fund the development of electric jets. (Reuters)
policy
best of the rest
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Fast-fashion giant Shein launches glamorous assault to counter criticism of China ties and accusations of copying designs ahead of potential IPO (NYT)
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Anheuser-Busch InBev Promised free beer and more to Bud Light distributors to offset backlash from ad campaigns featuring transgender influencers. (WSJ)
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“Real cost Our superfood obsessionAvocado, acai, durian, etc.” (Insider)
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