Last Hike Appears To Be In

Stop me if you’ve heard this one before: regional banks are down again this morning. Gold has hit an all-time high. GDP is slowing. Inflation is still too high. And the FED just raised rates into what is likely going to be a recession.

Buckle up.

Market

Prices as of 4 pm EST, 5/3/23

Macro

The Fed unanimously raised interest rates by 25 bps, bringing the benchmark rate above 5%.

• For the first time since August 2019, the target rate is now higher than headline inflation.

• The FOMC used more flexible language in its statement that left the door open for a pause at its next meeting.

• However, Powell stressed that a rate cut in 2023—as markets expect—was not a part of the current outlook.

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The latest ISM purchasing managers index revealed a services sector growing steadily.

• April’s headline reading edged up to 51.9 from 51.2 in March driven by a surge in new orders and a rebound in exports.

• Prices paid by businesses also edged up, however, suggesting inflationary pressures remain.

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In contrast with Tuesday’s JOLTs data, yesterday’s ADP payroll numbers point to a resilient labor market.

• US companies added 296,000 jobs in April, more than double the expected amount and the most since July.

• Not exactly what the Fed wants to see.

• Wage growth, on the other hand, suggests a cooling market as annual pay gains decelerated to 6.7%.

@LizAnnSonders

Stocks

PacWest is in talks over a potential sale after becoming the latest regional bank to come under fire.

• Unlike the others, however, it says its core deposits have increased since March and that its cash and available liquidity are solid.

• Even so, shares fell as much as 60% this morning in pre-market trading on news the bank was exploring strategic options.

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The SEC has passed a rule that will require companies to provide more information about share buybacks.

• Companies will need to issue daily updates on repurchases during the previous quarter, as well as the reasoning for those repurchases.

• They’ll also need to detail policies in place to limit insider trading during buyback programs.

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Meanwhile, another regulator—the FTC—has proposed new restrictions on Meta Platforms.

• The agency accused the tech giant of misleading parents and repeatedly violating a 2020 privacy order.

• The new sanctions would prohibit the company from profiting off data it collects from users under 18 years of age.

• It would also limit the use of facial recognition technology and require Meta to provide additional protection for users.

Yahoo Finance

Energy

US oil prices extended their losses yesterday despite a draw in crude stocks.

• New EIA data also confirmed a rise in Cushing and gasoline stocks, while distillates drew down for the 5th consecutive weak.

• Meanwhile, a 5th straight weekly draw from the White House pushed Strategic Petroleum Reserves down to its lowest level since October 1983.

Zero Hedge

Earnings

Yesterday’s highlights:

Qualcomm QCOM: $2.15 EPS (vs. $2.15 expected), $9.28 billion in sales (vs. $9.1B expected).

• Net income and total revenue dropped 42% and 17%, respectively.

• Global shipments fell 14% on deteriorating demand.

• The company also provided weaker-than-expected guidance on earnings and sales for Q2.

What we’re watching today:

• Apple AAPL

• Royal Dutch Shell SHEL

• Anheuser-Busch BUD

• ConocoPhillips COP

• Booking BKNG

• Regeneron REGN

• Equinor EQNR

• Zoetis ZTS

• Becton Dickinson BDC

• EOG Resources EOG

• Canadian Natural Resources CNQ

• Monster Beverage MNST

• Shopify SHOP

• Intercontinental Exchange ICE

• Sempra Energy SRE

• Fortinet FTNT

• American Electric Power AEP

• Block SQ

Top Headlines

• Layoffs: Unity Software’s third round of layoffs is also its largest with ~8% of jobs being slashed.

• Pricing power: Earnings season has revealed consumer companies still have pricing power over shoppers.

• Complaints: Google employees are not happy their CEO is getting a pay raise while the company cuts costs.

• Hollywood AI: Hollywood executives are rejecting writers’ pleas to keep AI out of the film and TV industry.

• AI concerns: Tech leaders will meet with the White House to discuss the dangers of artificial intelligence.

• Bing AI: Microsoft is scrapping its waitlist to allow anyone with an account to use its revamped search engine.

• Homeowners: US homeowner equity remains near record highs despite a decline in home prices.

• TikTok ads: TikTok is launching a new ad product—Pulse Premier—for publishers that will give them a 50% cut of revenue.

Crypto

Prices as of 4 pm EST, 5/3/23

• SEC reversal: The SEC has removed the definition of “digital asset” from its latest hedge fund rule.

• NFT insider: A former OpenSea employee was found guilty in what was the first-ever NFT insider trading case.

• Miner tax: A new White House report doubled down on the proposed 30% tax for crypto mining firms.

• RIP Borrow: Coinbase will discontinue its program that allowed users to borrow cash using Bitcoin as collateral.

• Dominance: Bitcoin’s dominance rate in the broader market has increased to 49%, the highest in nearly 2 years.

Deals

• Terminated: TD Bank and First Horizon have called off their $13.4 billion deal due to a lack of clarity on regulatory approvals.

• UK IPOs: The UK is proposing looser rules to make London more attractive for IPOs.

• UK probe: The UK’s competition regulator has launched an investigation into Adobe’s proposed $20 billion Figma acquisition.

• Industrial parts: Apollo Global is closing in on a deal to acquire manufacturer Arconic for ~$3 billion.

• Adani: Adani Ports has sold its Myanmar port for a heavily discounted $30 million.

Meme Of The Day