North American News
US major stock indices close the day lower. Major indices down for the 2nd consecutive day
- Consistent declines for the 3 major indices
The major US stock indices are required by about 1% on the day:
- Dow industrial average fell -367.19 points or -1.08% at 33684.54
- S&P index fell -48.31 points or -1.16% at 4119.57
- NASDAQ index fell -132.08 points or -1.08% at 12080.52
- Russell 2000 fell -37.10 points or -2.10% at 1732.10
Energy shares were lower after the sharp fall in crude oil prices:
- Chevron -4.28%
- Exxon -7.26%
- Hess -4.33%
- Occidental Petroleum -1.86%
Regional banks were also sharply lower. The S&P regional bank indice (KRE) fell $-2.60 or -6.27% to $38.86.
In after-hours earnings:
- Ford Motor Co (F) Q1 2023:
- Adj. EPS: $0.63 (expected $0.41)
- Revenue: $41.5 billion (expected $36.08 billion)
- Reaffirms FY forecast
- Sees FY adj. EBIT: $9 billion-$11 billion (expected $9.52 billion)
Shares of Ford are trading at $11.76 down from $11.80 at the close
- Starbucks Corp (SBUX) Q2 2023:
- Adj. EPS: $0.74 (expected $0.65)
- Revenue: $8.7 billion (expected $8.4 billion)
- Comp. sales: +11% (expected +7.33%)
- North America comp. sales: +12% (expected +9.03%)
- US comp. sales: +12% (expected +8.91%)
- International comp. sales: +7% (expected +1.51%)
- China comp. sales: +3% (expected -9.86%)
Starbucks shares are trading at $113.04 down from the closing level of $114.46 in volatile trading
- Advanced Micro Devices (AMD)
- EPS $0.60 versus expected $0.56
- Revenues $5.35 billion were 6 expected $5.3 billion
Shares of AMD are trading at $89.66 down from the closing at $89.91
JOLTS job openings for March 9.595M vs 9.775 million estimate
- JOLTS job openings for March 2023
- Prior month
- Job openings decreased to 9.6 million on the last business day of March, down by 384,000 and 1.6 million lower than in December.
- Job openings rate was 5.8% in March, down by 1.0 percentage point since December.
- Job openings decreased in transportation, warehousing, and utilities (-144,000) but increased in educational services (+28,000).
- Hires remained stable at 6.1 million, with a rate of 4.0%.
- Hires decreased in real estate and rental and leasing (-29,000).
- Total separations (5.9 million) and the rate (3.8%) remained stable for the fourth month in a row.
- Total separations decreased in accommodation and food services (-107,000) but increased in construction (+104,000).
- Quits remained stable at 3.9 million, with a rate of 2.5%.
- Quits decreased in accommodation and food services (-178,000).
- Layoffs and discharges increased to 1.8 million (+248,000) with a rate of 1.2%.
- Layoffs and discharges increased in construction (+112,000), accommodation and food services (+63,000), and health care and social assistance (+42,000).
- Other separations remained stable at 276,000, decreasing in finance and insurance (-31,000) and real estate and rental and leasing (-7,000).
US March factory orders +0.9% vs +1.1% expected
- US March 2023 factory order data
- Prior was -0.7% (revised to -1.1%)
- Factory orders ex transportation -0.7% versus -0.3% prior
Revisions to durable goods orders
- March durable goods +3.2% versus +3.2% preliminary. Prior month -1.2%
- Durable goods ex transportation % versus +0.3% preliminary. Prior month -0.3%
- Durable goods non-defense capital goods ex-air -0.6% versus -0.4% preliminary. Prior month -0.7%
Regional bank fears resurface with some down more than 30% today
- Metropolitan Bank and PacWest Bancorp tumble
Not so fast, Jamie.
“This part of the crisis is over,” JPMorgan CEO Jamie Dimon said to start the week in an analyst call after taking over First Republic in an FDIC auction. Dimon said there’s a chance “another smaller” bank fails, but “this pretty much resolves them all.”
It’s unclear what the catalyst for the latest leg down is. It could be short-term buyers taking profits or getting blown out while hoping for a rebound. There’s also a lack of any segment of would-be buyers as uncertainty plagues the sector due to fears about commercial real estate and hold-to-maturity loans. We could simply be seeing multiples compress on regional banks.
The fear is that this leads to another round of deposit flight and puts the FDIC in a bind. Like Dimon, many thought that FRC would be the end of the regional banking crisis. After today’s price action, no one should be so sure.
Commodities
Gold jumps past $2000 on US mixed data, ahead of FOMC’s decision
- The gold price jumped over $20.00 on a risk-off impulse, lowering US T-bond yields.
- Sentiment deteriorated as US Treasury Secretary Yellen warns of obligation shortfall.
- US job openings decline for the third consecutive month, as shown by the JOLTs report.
Gold price breaks the barrier of the $2000 figure on woes surrounding a banking crisis in the United States (US) while market players wait for the US Federal Reserve (Fed) decision about raising rates. After hitting a daily low of $1978.58, the XAU/USD exchanges hands at $2008.52, gaining more than 1%.
Gold surges on risk-off impulse on Yellen’s warning about hitting the debt ceiling
Risk aversion was one of the reasons behind the $25.00 gains in Gold. JP Morgan’s acquisition of First Republic Bank easied worries in the banking industry. However, fiscal policy, mainly the rise of the debt ceiling in the US, keeps investors nervous. The US Treasury Secretary Janet Yellen commented in a letter to the US Congress that the office would not meet all US government obligations by June 1.
Aside from this, the US economic agenda revealed that job openings fell for the third straight month in March, though they remained at steady levels. The US Department of Labor (DoL) announced the JOLTs report, which came at 9.590 million, below the 9.775 million estimated by analysts.
In other data, Factory Orders for March jumped to 0.9%, above estimates of 0.8% and better than February’s contraction of 1.1%. Despite Monday’s ISM Manufacturing PMI report in contractionary territory, orders improved.
Additionally, XAU/USD found a bid, sponsored by lower US Treasury bond yields, across the board. US 2-year T-note yields are plunging 20 bps at 3.935%, while the 10-year benchmark note rate yields 3.431%, plummeting 14 bps.
Meanwhile, the Federal Reserve Open Market Committee (FOMC) two-day meeting begins today. The swaps markets, as shown by the CME FedWatch Tool, with traders expecting an 81.8% chance of a 25 bps rate hike to the Federal Funds Rate (FFR). Nevertheless, probabilities for a rate cut, uptick with investors estimating three 25 bps rate cuts by the year’s end.
WTI sinks close to 5% as risk aversion takes hold amidst global economic slowdown
- WTI loses ground for a fourth consecutive day as Wall Street reacts to Yellen’s debt obligation warning.
- Oil prices are pressured by weak manufacturing activity in China.
- OPEC production cuts cushioned WTI price amidst economic uncertainty and falling demand.
Western Texas Intermediate (WTI), the US crude oil benchmark, plunges more than 4%, reaching a five-week low, on risk aversion spurred by fears of contagion amongst US regional banks, alongside worries about the debt ceiling in the US. The latest report on business activity in China showed that the economy dipped. Therefore, WTI is trading at $71.99 per barrel, down 4.94%.
WTI extended its losses for four straight days. Wall Street registers losses after US Treasury Secretary Haney Yellen commented that the US government could not pay its debt obligations by June 1.
Oil prices came under pressure as China’s manufacturing activity shrank in April, as the National Bureau of Statistics (NBS) revealed. Manufacturing PMI dropped from 51.9 to 49.2 in April, while the Non-Manufacturing PMI edged down to 56.4 vs. 58.2 in March. The Composite figure stood at 54.4 from 57.0.
Zhao Qinghe, a Senior NBS statistician, said, “A lack of market demand and the high-base effect from the quick manufacturing recovery in the first quarter” was among the factors that led to the contraction in April.”
Reuters cited sources commented, “The unpredictable action of central banks in their mission to tame elevated consumer and producer prices, the rhetoric and action of consuming and producing nations have all cast a rather long shadow of doubt on prospects going forward.”
Two major central banks are expected to hike rates in the week: the Federal Reserve (Fed) and the European Central Bank (ECB).
Aside from this, WTI was cushioned as the Organization of Petroleum Exporting Countries (OPEC) cut its output by 190K bpd in March. The cartel agreed to cut production in late 2022 as the economic outlook worsened. For April, OPEC agreed to cut output by 1.27 million bpd, part of a 2 million reduction by the OPEC+ last year.
EU News
European equity close: Early gains reverse into large losses
- US regional banking fears bleed over to Europe
Closing changes for the main European bourses:
- Stoxx 600 -1.3%
- German DAX -1.3%
- UK FTSE 100 -1.2%
- French CAC -1.6%
- Spain IBEX -1.8%
- Italy MIB -1.7%
Eurozone April preliminary CPI +7.0% vs +7.0% y/y expected
- Latest data released by Eurostat – 2 May 2023
- Prior +6.9%
- Core CPI +5.6% vs +5.7% y/y expected
- Prior +5.7%
Other News
The odds of a hike tomorrow are down to 82%
- Regional banks sending a strong message
The day started with a surprise rate hike from the Reserve Bank of Australia and worries about what that could mean for the Federal Reserve.
Regional banks are sending a powerful message to tread cautiously, with some down 30% and the KRE regional bank index lower by 7%, setting off a broader wave of risk aversion. The Fed funds futures market is listening with the implied odds of a hike tomorrow down to 81% from close to 100% yesterday.
Further, the chance of a further hike in June has been erased and the market is pricing in 4.39% at year end from 4.75-5.00% currently.
A few days ago, Treasury officials were taking a hard line on FRC, saying it was idiosyncratic and the market largely agreed but after the equity wipeout in the sale to JPMorgan, the market is having second thoughts.
Last week, Berkshire Hathaway’s Charlie Munger said, perhaps ominously:
“Every bank in the country is way tighter on real estate loans today than they were six months ago. We have a lot of troubled office buildings, a lot of troubled shopping centres. There’s a lot of agony out there.”
US Senate Majority Leader Schumer: Wants a full two-year debt ceiling extension
- Senate Majority Leader Schumer speaking
US Senate Majority Leader Schumer is on the wires saying:
- Democrats will wait until May 9 meeting before deciding whether to move forward on clean debt bills ceiling
- He wants a full two-year debt ceiling extension rather than a shorter-term bill
Cryptocurrency News
Uniswap price crashing by 15% in two weeks has led to UNI holders resorting to this
- Uniswap price has been in a consistent downtrend since mid-February, shedding 30% of its value in two months.
- The lack of velocity is acting as a boon and a bane since UNI is making minimal growth even during bullish moments.
- The absence of profit is driving investors away, as over 75% of UNI holders are suffering losses at the moment.
Uniswap price has had a rather dull time over the last two months, which is beginning to bear a negative impact on the altcoin’s loyal holders. While the altcoin is bound to follow the broader market cues, the lack of movement at the hands of investors might be holding UNI back from noting gains.
Uniswap price needs its investors to let go
Uniswap price over the last two months has witnessed a consistent downtrend despite attempts at recovery. As a result, the altcoin has come down by nearly 30% to trade at $5.3 at the time of writing. This lack of growth can not be attributed to the broader market conditions since the leader of cryptocurrencies, Bitcoin, has been performing exceptionally in this period.
One of the reasons behind the minimal growth noted in the case of Uniswap is the transfer of capital from decentralized exchanges (DEXes), such as Uniswap, to liquid staking decentralized applications (Dapps) that occurred after Ethereum’s Shanghai upgrade. In the Decentralised Finance (DeFi) world, liquid staking protocols are close to surpassing the total value locked (TVL) on the DEXes ending a two and half year long domination.
This has resulted in UNI holders becoming sitting ducks waiting on profits. This is visible in the velocity of UNI tokens which is currently at a 12-month low, suggesting that the altcoin has not been moved around all that much. While a low velocity indicates a conviction, extending periods of the same also point towards potential contractions, which is the case with Uniswap price right now.
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