MARKET WRAPS
Watch For:
EIA Weekly Petroleum Status Report, Pending-Home Sales for
February; Federal Regulators Will Appear Before a House Panel to
Discuss the Collapse of SVB.
Today's Top Headlines/Must Reads:
- As Interest Rates Rose, Banks Did a Balance-Sheet
Switcheroo
- Banking Worries Fuel Gold Price Rally
- UBS Brings Back Former CEO Sergio Ermotti After Credit Suisse
Deal
- International stocks outperform, decouple from U.S. equities
by 'unusual degree'
Follow WSJ market coverage here
Opening Call:
Stock futures rose on Wednesday as investors appeared ever more
relaxed about the health of the bank sector and the prospects for
interest rates.
Strength in China-focused technology stocks - after traders took
news of entrepreneur Jack Ma's re-emergence and Alibaba's
restructuring as a sign of Beijing easing its crackdown on the
sector - were also helping the mood.
Read more here
"Investor sentiment improves as price action in bank stocks
point at waning stress. The S&P500 - which benefited from
falling yields due to the Silicon Valley Bank collapse - is now
sitting above the 200-day moving average," Swissquote Bank
said.
"But a move above the 4000-4200 range will likely be challenging
unless the next earnings season comes with a positive surprise.
Therefore, we could see gains in the S&P 500 rapidly fade if
the U.S. yields trend higher with the waning bank stress. But maybe
not today!" Swissquote added.
The CBOE VIX index has dropped below its long run average of 20,
a sign that traders are much calmer than of late.
VIX futures were now back in contango, a more normal structure
where longer-term contracts are priced higher, Fundstrat noted, and
added that "this normalization of spread is often a sign investors
see the worst of the crisis behind."
"That is generally a constructive sign and is certainly counter
to the general gloom of investors post-SVB failure. This ultimately
becomes an important point. If investors are gloomy and expect a
financial crisis to follow, but this doesn't happen, this means
sentiment and positioning will be key. In many ways, this could be
the setup now."
Read Markets Shift Attention Back to High Inflation
Read Market Seems to Have Drawn a Line Under Systemic Banking
Worries
Stocks to Watch
Bank shares looked set to continue their recovery. Among
regional lenders, First Republic Bank gained 3% premarket and
PacWest Bancorp rose 2%. Bank of America gained 1%.
ADRs of Alibaba fell 1% premarket. That put the stock on course
to hand back a small part of the previous day's gains, which were
fueled by the Chinese e-commerce giant's plans to split itself into
six independently run companies.
Arcturus Therapeutics completed the initial objectives with its
partnered Covid-19 and flu vaccine programs under collaboration
with CSL Seqirus. Shares rose 22% in after-hours trading.
Helbiz said it is refocusing the group's operations toward
micro-mobility and shutting down operations in most of the
unprofitable cities it operates. Shares rose 19% in after-hours
trading.
Lululemon Athletica jumped 14% after the clothing retailer
reported fiscal fourth-quarter earnings and sales that beat
analysts' expectations and issued better-than-expected guidance for
the current fiscal year.
Lucid Group rose 2% after the electric vehicle startup said it
would be cutting staff by 1,300 employees, or about 18% of the
workforce, in a bid to save money.
Micron Technology's stock gained 2% premarket after it said
industry fundamentals are starting to improve. Still, Micron
reported a sharp drop in quarterly revenue and said it was cutting
staff, as it grapples with weaker demand and lower prices for
memory chips. Shares of fellow chip companies Nvidia and Qualcomm
also gained.
N-Able is set to join the S&P SmallCap 600 index. Shares
rose 10% in after-hours trading.
UBS gained 3% as it was announced that Sergio Ermotti would
return as chief executive. Ermotti had run UBS for nine years until
2020.
Forex:
The dollar is unlikely to gain significant ground until
uncertainty over the banking sector eases, Commerzbank said, adding
that the market remains more sceptical towards the U.S. than the
eurozone.
"That is why the dollar has a more difficult standing against
the euro, as the Fed has become a little more cautious whereas the
ECB has continued its rate cycle almost unaffected by the events of
the past weeks and continues to sound restrictive."
"As a result, levels in EUR/USD above 1.08 seem justified,"
Commerzbank added.
---
Sterling could fall against the euro after recent gains as the
ECB shows more resolve to raise interest rates further than the
BOE, ING said.
ECB member Madis Muller joined the "hawkish" rhetoric of other
policymakers Tuesday by signalling that there's still room to lift
rates, ING said.
"We saw EUR/GBP fall below 0.8800, but we don't expect the
pair's weakness to be very sustainable as we see the market pricing
for Bank of England tightening as too aggressive and policy
divergence should be a primary driver for a higher EUR/GBP."
Energy:
Crude futures were higher on supply concerns and signs pointing
to strengthening U.S. demand.
The continued closure of a key pipeline for Iraqi oil is
supporting prices, ING said. The pipeline handles around 400,000
barrels a day of oil.
"Supply concerns continue to prop up prices," ING said.
Data on U.S. crude stocks reportedly showed a large drawdown
following weeks of rising inventories, slumping by over 6 million
barrels a day, according to API data.
Metals:
Base metals and gold were weaker, with relative calm in the
markets following recent banking sector turmoil.
Deutsche Bank said the calm is most felt in bond markets and Fed
futures, with yields starting to rise and the market trimming
expectations of rate cuts from the central bank.
Commodity Prices Outlook
Commodity prices, especially oil, have been hit during the
banking crisis this month, and Swiss bank UBS expects prices to
move higher for the rest of the year amid a weaker dollar and
higher demand coming from China.
The Swiss bank expects commodity prices to boradly rise 20% in
the next 12 months with the gains led by energy and industrial
metals, while gold will also be a valuable hedge.
"Our stance is backed by China's recovery, an expected
inflection point in the Fed's rate-hiking cycle and the associated
weaker U.S. dollar, several unresolved supply-side issues due to
lacking investment or geopolitics, persistently low inventories in
key consuming countries, and ongoing weather risks," UBS added.
TODAY'S TOP HEADLINES
UBS Brings Back Former CEO Sergio Ermotti After Credit Suisse
Deal
UBS Group AG said its former leader Sergio Ermotti will return
as chief executive, as the Swiss banking giant moves into a new era
with its takeover of Credit Suisse Group AG.
Mr. Ermotti, who previously ran UBS for nine years, will start
on April 5 after the bank's annual general meeting, it said.
Jamie Dimon to Face Questioning in Lawsuit Over JPMorgan's
Epstein Ties
Jamie Dimon will be questioned in a civil lawsuit over JPMorgan
Chase & Co.'s relationship with Jeffrey Epstein, people
familiar with the matter said.
The U.S. Virgin Islands sued JPMorgan late last year, saying the
bank facilitated Esptein's alleged sex trafficking and abuse by
allowing him to remain a client and helping him send money to the
late financier's victims.
For Alibaba, Six Is Bigger Than One-And a Smaller Target
Six is bigger than one. Simple arithmetic, but that's also the
market verdict for Alibaba's plan to split itself into six units.
The market may or may not have it right on the nitty-gritty
numbers-but the political dividend could be just as important.
Shares of the Chinese e-commerce giant rose 14% in New York on
Tuesday, adding $33 billion to its market value. Alibaba said
Tuesday that it will restructure the company into six independently
run companies-each with its own CEO and board. Those will include
Chinese commerce, global e-commerce, cloud computing, local
services, logistics and entertainment. The core Chinese e-commerce
business will stay wholly owned by Alibaba but each of the other
units could seek their own funding, and maybe eventually conduct
initial public offerings.
The Metaverse Is Quickly Turning Into the Meh-taverse
The metaverse that was the hot thing in tech less than two years
ago has cooled.
Walt Disney Co. has shut down the division that was developing
its metaverse strategies, The Wall Street Journal reported this
week. Microsoft Corp. recently shut down a social virtual-reality
platform it acquired in 2017. And Mark Zuckerberg, who renamed
Facebook to Meta Platforms Inc. to signal his seriousness about the
metaverse, focused more on artificial intelligence on an earnings
call last month.
EV Startup Lucid Cuts 18% of Workforce, Including Some
Executives
Lucid Group Inc. plans to lay off approximately 1,300 employees,
or 18% of its workforce, as the electric-vehicle startup looks to
cut operating expenses and preserve cash ahead of releasing a
second model next year.
The California-based company, which sells luxury electric sedans
priced at $87,000 and above, expects to complete the head-count
reductions by the end of the second quarter.
Lululemon's stock soars 13% on revenue, earnings beat
Lululemon Athletica Inc.'s stock vaulted 13% in extended trading
Tuesday after the clothing retailer reported quarterly results that
topped analyst revenue and earnings estimates, and offered strong
full-year revenue guidance.
Lululemon LULU reported fiscal fourth-quarter net earnings of
$119.8 million, or 94 cents a share, compared with net earnings of
$434.5 million, or $3.36 a share, in the year-ago quarter. Adjusted
earnings were $4.40 a share.
Cal-Maine Foods profit jumps eightfold, revenue more than
doubles as egg prices rise
Cal-Maine Foods Inc. on Tuesday reported that revenue more than
doubled and its profit increased eightfold in the third quarter, as
prices for eggs rose significantly and even as avian bird flu
continued to affect egg production.
Cal-Maine Foods CALM shares rose about 4% after hours, after
falling 1.8% in the regular session to close at $54.27, as its
results beat Wall Street expectations.
As Interest Rates Rose, Banks Did a Balance-Sheet Switcheroo
As the Federal Reserve's interest-rate hikes sent bond prices
plunging last year, some of the country's largest banks used a
simple accounting maneuver to help keep billions of dollars of
losses from piling up on their books.
They declared that they intended to hold on to large portions of
their money-losing bonds until they matured rather than selling
them, and they then changed the bonds' accounting labels
accordingly. From then on, the bonds would be frozen in time, no
matter how far their values fell in the market.
Banking Worries Fuel Gold Price Rally
Banking-sector turmoil and worries about the economy have gold
prices hitting $2,000 a troy ounce for the first time in a
year.
The most-actively traded gold futures contract has jumped 7.4%
to $1,973.50 this month, reaching an intraday high of $2,014.90
last week and on pace for the largest monthly percentage increase
since May 2021. Prices hadn't topped $2,000 since Russia's invasion
of Ukraine last spring.
BlackRock says the market is wrong on the Fed. Here are the
bonds it's recommending now.
The Federal Reserve is going to stop throwing punches, but it's
not about to cut interest rates even as signs of fragility in the
financial sector emerge, says leading fund manager BlackRock.
In a note from the BlackRock Investment Institute, the fund
manager says the Fed, and other central banks, have made clear that
banking troubles wouldn't stop them from hiking interest rates.
International stocks outperform, decouple from U.S. equities by
'unusual degree'
International stocks are broadly outperforming this quarter,
decoupling from the U.S. to an unusual extent, according to
DataTrek Research.
"Non-US stocks have decoupled from domestic equities by a
statistically unusual degree over the last 50 days," said Nicholas
Colas, co-founder of DataTrek, in a note Tuesday. This together
with their outperformance may bode well for flows into
international stocks heading into the second quarter, according to
the note.
German Consumer Sentiment Set to Improve in April, Helped by
Lower Energy Prices
Consumer confidence in Germany is expected to improve again in
April, its sixth gain in as many months, prompted by lower energy
prices, though momentum in the month weakened as recession fears
loom.
Germany's forward-looking consumer-sentiment index forecasts
confidence to tick up to minus 29.5 in April from a downwardly
revised minus 30.6 in March, the highest level since July 2022,
according to data from market-research group GfK published
Wednesday.
Australian February Inflation Data Opens Door to Rate Hike
Pause
SYDNEY-Australia's inflation pressures cooled in February,
opening the door to a pause in the Reserve Bank of Australia's
campaign of aggressive interest-rate increases that began almost a
year ago.
The monthly consumer-price index rose 6.8% in the year to
February, down from 7.4% in January and 8.4% in December, the
Australian Bureau of Statistics said Wednesday. Economists had
expected an annual CPI increase of 7.1% in February.
Lawmakers Scold Fed Over Silicon Valley Bank Collapse
Senators rebuked the Federal Reserve for failing to prevent the
collapse of Silicon Valley Bank despite identifying risks
beforehand, while the central bank's top regulator blamed the
firm's executives for not fixing its problems.
In an appearance Tuesday before the Senate Banking Committee,
Michael Barr, the Fed's vice chairman for banking supervision,
defended the actions of the Fed's supervisors and said the central
bank had privately raised concerns with SVB before its March 10
collapse and had given the lender poor ratings for managing its
risks.
Ukraine Downs Russian Warplane Near Bakhmut
Ukraine said its forces shot down a Russian warplane near
Bakhmut while repelling multiple attempts by the Kremlin's forces
to seize the eastern city, which has become an important prize in
the broader war.
Bakhmut, a small city in Ukraine's eastern Donetsk region, has
become a central battleground in Russia's assault on the country,
with the fight there taking on increasing symbolic and strategic
importance to both sides after more than six months of brutal
combat. Ukraine's forces have held out in the city against
overwhelming Russian firepower after the Kremlin's forces began
targeting the area last summer.
Kevin McCarthy Pushes for Debt-Ceiling Talks as Unity Eludes
GOP
WASHINGTON-House Speaker Kevin McCarthy tried to prod President
Biden into starting talks over spending cuts as a condition for
raising the debt ceiling, just as Republicans are struggling to
unite around a blueprint for negotiations ahead of dual deadlines
later this year.
The White House released its own budget proposal earlier this
month and has said it won't negotiate on spending until Republicans
put forward their own plan. Mr. McCarthy has rejected that notion
and said in a letter to Mr. Biden that talks should start as soon
as possible. While neither budget would have a chance of becoming
law, they serve to outline the parties' policy intentions.
Trump Grand Jury Won't Consider Hush-Money Probe Again This
Week
The Manhattan grand jury investigating Donald Trump's role in
paying hush money to a porn star has concluded its work for the
week, according to people familiar with the matter, making the
timing of any potential charges against the former president
unknown.
The grand jury isn't expected to meet Wednesday, when it has
often heard Trump-related evidence, and any work the panel does on
Thursday is expected to be on other cases, the people said. It
isn't clear whether grand jurors will consider the Trump matter
next week, according to the people.
Jamie Dimon to Face Questioning in Lawsuit Over JPMorgan's
Epstein Ties
Jamie Dimon will be questioned in a civil lawsuit over JPMorgan
Chase & Co.'s relationship with Jeffrey Epstein, people
familiar with the matter said.
The U.S. Virgin Islands sued JPMorgan late last year, saying the
bank facilitated Esptein's alleged sex trafficking and abuse by
allowing him to remain a client and helping him send money to the
late financier's victims.
Fire Started in Protest at Mexican Migrant Detention Center
Kills Dozens
Thirty-eight migrants were killed and 30 others injured in a
fire at a migrant detention facility in the border city of Ciudad
Juárez, Mexico, started by occupants protesting their impending
deportation, authorities said Tuesday.
A surveillance video showed migrants trapped in locked cells as
the fire erupted, while two guards appeared to make no attempt to
release the detained men as smoke filled the detention area. The
authenticity of the video was confirmed by Interior Minister Adán
Augusto López.
Taiwan President's U.S. Trip Touches a Flashpoint in U.S.-China
Ties
The U.S. and China have described Taiwan as the most volatile
flashpoint in their increasingly fraught bilateral relations.
Now, after months of sparring by Washington and Beijing over the
Ukraine war, a suspected surveillance balloon, TikTok and other
issues, Taiwan is set to return to the center of great power
tensions, with the island's leader traveling to the U.S.
U.S. Stops Sharing Data on Nuclear Forces With Russia
The U.S. has informed Russia that it will no longer exchange key
data on its strategic nuclear forces following Moscow's decision to
suspend its participation in the New START treaty cutting
long-range nuclear arms, U.S. officials said Tuesday.
"This is the first action we have taken within the treaty in
response to Russia's suspension," a senior Biden administration
official said. "It is our goal to encourage Russia to return to
compliance with the treaty."
Too Much U.S. Government Information Is Classified, Report
Finds
WASHINGTON-U.S. officials classify information that should
either be public or more widely shared within the government,
hobbling national defense objectives and jeopardizing congressional
oversight of the executive branch, a Washington research
organization found in a new report.
The findings, published Tuesday by the Nonproliferation Policy
Education Center, stem from a nearly two-year review of the U.S.
classification system and are based on interviews with dozens of
current and former officials from the Pentagon, intelligence
agencies, the State Department and elsewhere, as well as
congressional staffers.
Write to ina.kreutz@wsj.com TODAY IN CANADA
Earnings:
Constellation Software 4Q
Dollarama 4Q
Fennec Pharms 4Q
Neo Performance Materials 4Q
VIQ Solutions 4Q
Economic Calendar (ET):
Nothing major scheduled
Stocks to Watch:
Avino Silver & Gold Mines 4Q EPS 1c; 4Q Rev $14.6M; 4Q Adj
EPS 3c
---
Galiano Gold 4Q Gold Production Was 34,090 Ounces; AGM Expected
to Produce 100,000 to 120,000 Ounces at AISC1 Guidance of Between
$1,900/oz to $1,975/oz in 2023; 4Q Rev $57.8M; 4Q EPS 13c; 4Q Net
$83.7M; 4Q Adj Loss/Shr 3c
---
Goeasy Provides Update on Canada Budget, Announces New Funding
Capacity;
Expects to Keep Posting Annual Rise in Adj Diluted EPS, Despite
Govt Plan to Lower Max Allowable Rate of Interest to 35%; Govt Rate
Cap Plan May Seriously Affect Other Lenders, Reducing Competition
and Driving Business to Those With Operating Leverage;
Goeasy: Well-Placed to Adapt to Potential Rate Change by
Accelerating Strategy of Continously Reducing Weighted Average
Interest Rate Charged to Borrowers; To Keep Expanding Products,
Distribution Channels, Leveraging Risk-Based Pricing to Cut
Borrowing Costs for Consumers;
Has Also Raised Senior Secured Revolving Credit Facility by
C$100M to C$370M; Has Received Approval From Canadian Insurer for
C$150M of Additional Financing;
Enhancements Complement Existing C$1.6B Revolving Securitization
Warehouse Facilities, Will Be Used for General Purposes; Confident
That Existing Funding Facilities, Ability to Raise Additional Debt
Financing, Will Fund Organic Growth Targets
---
Sierra Metals 4Q Revenue From Metals Payable $46.2 M; 4Q
Loss/Shr 16c; Special Committee Continues to Evaluate Certain
Strategic Alternatives
Expected Major Events for Wednesday
06:00/GER: Apr GfK consumer climate survey
06:45/FRA: Feb Housing starts
06:45/FRA: Mar Consumer confidence survey
08:00/ITA: Feb Foreign Trade non-EU
08:30/UK: Feb Monetary & Financial Statistics
08:30/UK: Feb Bank of England effective interest rates
08:30/UK: Feb Money and Credit - Lending to Individuals, Lending
to Businesses, Broad Money and Credit
11:00/US: 03/24 MBA Weekly Mortgage Applications Survey
12:30/US: 4Q U.S. International Investment Position
14:00/US: Feb Pending Home Sales Index
14:30/US: 03/24 EIA Weekly Petroleum Status Report
23:01/UK: Feb UK monthly automotive manufacturing figures
23:01/UK: Mar CBI Growth Indicator and Service Sector Survey
23:50/JPN: Mar Provisional Trade Statistics for 1st 10 days of
Month
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Expected Earnings for Wednesday
Abraxas Petroleum (AXAS) is expected to report for 4Q.
Accelerate Diagnostics Inc (AXDX) is expected to report $-0.13
for 4Q.
Aerovate Therapeutics Inc (AVTE) is expected to report for
4Q.
Arlington Asset Investment Corp (AAIC) is expected to report
$0.04 for 4Q.
Atreca Inc (BCEL) is expected to report for 4Q.
Avalo Therapeutics Inc (AVTX) is expected to report for 4Q.
Axcella Health Inc (AXLA) is expected to report for 4Q.
Cathedral Energy Services (CET.T) is expected to report for
4Q.
Cintas Corp (CTAS) is expected to report $2.99 for 3Q.
Clovis Oncology Inc (CLVSQ) is expected to report $-1.72 for
4Q.
Codiak BioSciences Inc (CDAK) is expected to report for 4Q.
Conn's (CONN) is expected to report $-0.88 for 4Q.
Constellation Software (CSU.T) is expected to report $6.25 for
4Q.
Dollarama (DLMAF,DOL.T) is expected to report $0.88 for 4Q.
Excellon Resources (EXN.T) is expected to report for 4Q.
GlycoMimetics Inc (GLYC) is expected to report $-0.17 for
4Q.
Lightbridge Corp (LTBR) is expected to report for 4Q.
Local Bounti Corp (LOCL) is expected to report for 4Q.
Lyra Therapeutics Inc (LYRA) is expected to report for 4Q.
Microbot Medical Inc (MBOT) is expected to report for 4Q.
Neptune Wellness Solutions Inc (NEPT,NEPT-T) is expected to
report for 3Q.
NexImmune Inc (NEXI) is expected to report for 4Q.
Odyssey Marine Exploration Inc (OMEX) is expected to report for
4Q.
Oncocyte Corp (OCX) is expected to report $-0.09 for 4Q.
Paychex Inc (PAYX) is expected to report $1.24 for 3Q.
Pieris Pharmaceuticals Inc (PIRS) is expected to report $-0.21
for 4Q.
Professional Diversity Network Inc (IPDN) is expected to report
for 4Q.
ReShape Lifesciences Inc (RSLS) is expected to report for
4Q.
Reading International Inc (RDI) is expected to report $0.10 for
4Q.
Security National Financial Corp (SNFCA) is expected to report
for 4Q.
Semtech (SMTC) is expected to report $0.27 for 4Q.
Sharecare Inc (SHCR) is expected to report for 4Q.
Tattooed Chef Inc (TTCF) is expected to report for 4Q.
Telesat Corp (TSAT) is expected to report for 4Q.
TuSimple Holdings Inc (TSP) is expected to report for 4Q.
US Global Investors (GROW) is expected to report for 2Q.
UniFirst Corp (UNF) is expected to report $1.02 for 2Q.
Vyant Bio Inc (VYNT) is expected to report for 4Q.
bluebird bio Inc (BLUE) is expected to report $-0.38 for 4Q.
iSign Solutions Inc (ISGN) is expected to report for 4Q.
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ANALYST RATINGS ACTIONS
Adobe Raised to Buy From Hold by Erste Group
Applied Molecular Trnsprt Cut to Neutral From Buy by Chardan
Capital
Array Technologies Raised to Buy From Hold by Truist
Securities
Carnival Raised to Equal-Weight From Underweight by Wells
Fargo
Ciena Raised to Strong Buy From Outperform by Raymond James
Coherus BioSciences Raised to Buy From Neutral by UBS
Easterly Govt Properties Raised to Buy From Neutral by Compass
Point
Elevance Health Raised to Outperform From Sector Perform by RBC
Capital
Encore Capital Group Raised to Buy From Neutral by Janney
Montgomery Scott
FactSet Research Raised to Neutral From Sell by Redburn
Partners
Fox Corp. Cut to Neutral From Buy by B of A Securities
Genesco Raised to Buy From Neutral by Seaport Global
iHeartMedia Cut to Underperform From Neutral by B of A
Securities
Marathon Petroleum Cut to Neutral From Overweight by JP
Morgan
NextEra Energy Raised to Buy From Hold by Erste Group
Occidental Petroleum Raised to Outperform From Market Perform by
TD Cowen
Paramount Global Raised to Buy From Neutral by B of A
Securities
Parsons Raised to Outperform From Market Perform by William
Blair
TD SYNNEX Cut to Hold From Buy by CFRA
Venus Concept Cut to Hold From Buy by Maxim Group
Walmart Cut to Hold From Buy by Erste Group
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
March 29, 2023 06:13 ET (10:13 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.