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'
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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.
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"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.
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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
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03-29-23 0613ET
