Hedge Funds Bet Big On USD

BlackRock, the largest asset manager in the world with $9 trillion in assets, says interest rates will rise another 75bps. But Janet Yellen says they aren’t going higher.

Market

Prices as of 4 pm EST, 4/14/23

Macro

Around the world, the de-dollarization trend is in full swing.

Countries–like China and Brazil–have recently stepped up their efforts to avoid the dollar but dethroning it could take decades.
Meanwhile, hedge funds are betting on a reversal in the USD in the coming months.
Leveraged funds were net short all major currencies against the dollar last week for the first time since January 2022.

Consumer sentiment ticked up in April but their outlook for short-term inflation rose sharply.

Expectations for 1-year inflation jumped to 4.6% from 3.6% in March, the sharpest increase since May 2021.
Long-term inflation expectations (5-year), on the other hand, have remained unchanged for 5 consecutive months at 2.9%.

US retail sales declined for the second straight month in March.

As interest rates rise, Americans are spending less on big-ticket items like vehicles, furniture, and appliances.
Overall sales dropped 1% month-over-month, much more than the -0.4% decline expected by economists.
The decline suggests the Fed’s efforts to slow down the economy are working, albeit slowly.

@gregdaco

Stocks

General Motors GM is planning to replace Apple’s AAPL CarPlay app on many of its new electric vehicles with its own display screen software.

The strategy echoes that of other EV makers, like Tesla TSLA, which aims to capitalize on potential billions from vehicles’ digital real estate and services.

Apple’s India sales hit a record $6 billion in the year ending March.

Revenue in the region rose nearly 50% over the period.
The company will be opening its first stores in the country this week and is adding local production at an increasing rate.

Credit Suisse CS investment fund outflows have accelerated over the last 3 weeks.

Since its merger with UBS, redemptions have reached $5.6 billion.
However, $240 million in net inflows from April 5-6 offer an early sign that investor uncertainty may be easing.

Is the current bear market for US stocks approaching its final leg?

Sectors that typically perform best at the end of a bear market—stapes, healthcare, and utilities—have been improving.
Meanwhile, the performance of industrials and financials are in line with their averages toward the end of previous bear markets.

MarketWatch

Energy

Efforts to bring new liquified natural gas (LNG) projects online in the US are facing headwinds.

Many projects are being delayed as increased competition between developers and rising costs make it difficult to secure long-term purchase agreements.
Even so, the war in Ukraine has kept demand for American fuel exports strong.

Earnings

As critical regional bank earnings approach, the biggest US banks are thriving with JPMorgan, Citi, and Wells Fargo posting strong profits, comfortably topping estimates.

JPM - $4.32 EPS (vs. $3.41 expected), $39.34 billion in sales (vs. $36.19B expected)
C - $2.19 EPS (vs. $1.65 expected), $21.45 billion in sales (vs. $19.99B expected)
WFC - $1.23 EPS (vs. $1.13 expected) $20.73 billion in sales (vs. $20.08 expected)

What we’re watching today:

Charles Schwabb SCHW
State Street STT
M&T Bank MTB
JB Hunt Transport JBHT
Equity Lifestyle ELS
Pinnacle Financial PNFP
ServisFirst SFBC
FB Financial FBK

Top Headlines

X.AI Corp: Shortly after calling AI “one of the biggest risks to the future of civilization”, Elon Musk created his own AI company.
Warning: Morgan Stanley’s Mike Wilson warns the S&P 500’s rally is at risk due to poor market breadth, inflation, and rising yields.
Defamation: Dominion Voting Systems and Fox News go to trial today, 2 years after the former filed a $1.6 billion defamation suit.
Climate: G7 countries have pledged to accelerate the phasing out of fossil fuels in favor of renewables.
Logistics: Freight shipments and transportation costs fell 4% and 12% YoY in March, respectively.
TikTok: Montana lawmakers approved a bill to ban TikTok across the state.
Home decor: Target is expanding its designer partnerships in an effort to compete with Lowe’s and Home Depot.
Bank policy: Global regulators are considering stricter rules on smaller US banks that would require them to be prepared for faster runs on deposits.

Week Ahead

Monday: NY Empire State manufacturing, NAHB Housing Market Index
Tuesday: Building permits, housing starts
Wednesday: MBA mortgage data, EIA stocks change
Thursday: Initial jobless claims, Philadelphia Fed manufacturing, existing home sales, CB Leading Index
Friday: S&P Global Flash PMIs

Crypto

Prices as of 4 pm EST, 4/14/23

Ethereum: Ether hit an 11-month high after seeing $2.1 billion in post-Shapella withdrawals.
Chasing yields: DeFi protocol Gamma has watched total value locked (TVL) double in the past month.
Shaq: Shaquille O’Neal has been served legal documents in the FTX class-action lawsuit.
Stablecoins: Lawmakers have released a new discussion draft bill to provide a regulatory framework for stablecoins in the US.
Exploit: Lending protocol Hundred Finance lost ~$7 million after a hack on the Optimism blockchain.

Deals

Biotech: Merck & Co. will acquire Prometheus Biosciences in a $10.8 billion deal.
Mobile gaming: Sega will buy Angry Birds maker Rovio Entertainment for $776 million.
Retail bid: Apollo Global Management has made a takeover bid for UK online retailer The Hut Group (THG).
Social media: Digital media conglomerate Starboard has bought conservative social media app Parler.
Metals miners: Vale SA, Anglo American, and Freeport-McMoRan are among the miners that have expressed interest in Teck Resources’ base metals unit.