(Boursier.com) – Wall Street recovered very clearly on Tuesday. The S&P 500 gained 1.95% at 3,931 pts, the Dow Jones 1.4% at 32,265 pts and the Nasdaq 2.22% at 11,437 pts. The trend is therefore much more positive, while operators are risking daring purchases on the most massacred banking stocks, and inflation figures have not revealed any major surprises. On the Nymex, a barrel of WTI crude fell 1.4% to $73.7. The ounce of gold consolidates by 0.3% to $1,910. The dollar index advanced 0.1% against a basket of benchmark currencies.
The US consumer price index for February rose by 0.4% compared to the previous month and by 6% year-on-year, which is fully in line with market expectations. Excluding food and energy, the CPI climbed by 0.5% compared to January and by 5.5% over one year, against respectively 0.4% and 5.5% of market consensus. February average hourly earnings rose 0.2% month-on-month and 4.6% year-on-year, as expected.
Expectations of monetary tightening have fallen considerably since Friday and the fall of Silicon Valley Bank. The major disturbances in the segment of American regional banks should encourage the Fed to show much more moderation on March 22, after its next monetary meeting. According to the CME Group’s real-time tool FedWatch, the highest probability for this next meeting is that of a quarter-point tightening (86% probability), which would take the fed funds rate between 4. 75 and 5%. The status quo is not excluded at this meeting, with a probability of 14%. Concerning the May 2-3 meeting, the dominant hypothesis is that of a range of 5-5.25% (84% ‘proba’). For the June 13-14 meeting, this same tool gives 50% a range of 4.75-5%, which means that the Fed could proceed with its long-awaited pivot before the end of the first half!
Finally, note that the Financial Times believes that the collapse of SVB shows close parallels with the collapse of Continental Bank Illinois in 1984 in the midst of a Fed tightening cycle. Then-Fed Chairman Paul Volcker said the monetary tightening cycle had come to an end given the bank bailouts, which led the Fed to cut rates within six months.
Values
First Republic jumped by… 56% on Wall Street, after plunging 61.8% last night! Moody’s, which is threatening to downgrade the record of this regional bank, nevertheless notes that the share of deposits from bank customers exceeding the federal insurance threshold makes its funding profile more sensitive to rapid and large waves of withdrawals. Thus, the agency judges that if this bank were to face higher withdrawals than anticipated and if the liquidity guarantees proved insufficient, the bank could need to sell assets, which would reveal the unrealized losses. The bank’s available-for-sale and held-to-maturity securities accounted for more than a third of its common tier-1 capital in December, according to the agency. Finally, remember that First Republic communicated to reassure the markets, highlighting its improved and diversified financial position, thanks in particular to access to additional liquidity from the Fed and JP Morgan Chase.
The chief executive of First Republic, quoted by CNBC, also claimed that the bank was not currently experiencing massive withdrawals. He added that business was proceeding as usual.
Moody’s Investors Service has placed First Republic Bank as well as five other US financial institutions under surveillance for potential downgrades. Moody’s targets First Republic, Western Alliance, UMB Financial, Zions Bancorp, Comerica and Intrust Financial. The agency is concerned about the dependence of these firms on uninsured deposit funding and unrealized losses on their asset portfolios.
JP Morgan (+1%)… The exodus of American regional banks is confirmed, following the falls of Silicon Valley Bank and Signature Bank. The Financial Times indicates that the big American banks are crumbling under the demands of new depositors. The collapse of SVB thus accelerated customer referrals to banks such as JP Morgan Chase, Citigroup (+6%) or Bank of America (+1%). The big US banks are even “inundated with requests” from customers trying to transfer funds from smaller establishments. According to the FT, which quotes bank executives, this movement would be the largest for deposits in more than a decade. JP Morgan, Citi and the other large groups would try to accommodate these new customers arriving en masse, eager to quickly carry out their formalities and transfers. These big banks would have taken additional steps to speed up the normal “on-boarding” process, the FT said, citing people familiar with the matter.
Thus, despite the emergency measures taken by the Fed, the FDIC and the US Treasury to reassure depositors, the latter would arrive massively at larger establishments deemed more solid, such as JP Morgan, Citi or BofA. this would particularly concern clients with assets above the $250,000 federal guarantee threshold. The transfer movement from regional banks began last week and has continued since Monday.
Meta Platforms (+5%). Group CEO Mark Zuckerberg has confirmed that the company will lay off another 10,000 more employees and close 5,000 other vacancies that have not been filled, as part of the social media giant’s ‘year of efficiency’ . Thus, Meta is continuing to cut costs amid slowing digital ad sales. “Over the next two months, organizational leaders will announce restructuring plans focused on flattening our organizations, canceling lower priority projects and reducing hiring levels,” Zuckerberg said. This is the second round of layoffs for Meta in recent months, as the group laid off 11,000 workers, around 13% of its workforce, in November.
BuzzFeed falls 10% on Wall Street, while the online media group said that most of its cash and cash equivalents were housed in the Silicon Valley Bank, which has just collapsed. Yesterday evening, the group also published its annual financial results, showing total revenues of $437 million, up 10%, but a net loss of $201 million including a non-cash goodwill impairment charge of $102 million. dollars. A year earlier, the group had made a profit of 26 million. Adjusted EBITDA for the year ended was $0.5 million, compared to $41.5 million a year earlier. For the fourth quarter, revenue corrected 8% to $135 million, while net loss reached $106 million. Adjusted EBITDA was $17.6 million versus $34.2 million a year earlier. For its first fiscal quarter, BuzzFeed anticipates revenues of $61 to $67 million and an adjusted Ebitda loss of $18 to $25 million.
United Airlines (-6%), the American air carrier, falls on Wall Street. The group unveiled a disappointing guidance for the current quarter, reporting an unexpected loss due to the drop in demand. Thus, United is now expecting a first fiscal quarter loss, with increased salary and fuel costs and weakening demand. The company points to new seasonal demand patterns in January and February, with appetite for travel tending to subside, limiting the group’s ability to change fares. United still expects second-quarter revenue to be better than expected, and the group is sticking to its full-year profit forecast. Total revenue per available seat mile, an indicator of pricing power, is expected to rise 22% to 23% in the first quarter from a year earlier, slower than the 25% growth previously expected. The group expects an adjusted diluted loss per share of between $0.60 and $1 in the first quarter.
Boeing (+4%) would have won a large contract with Saudi Arabia, an order of up to 121 787 aircraft from two Saudi airlines, namely the public company Saudi Arabian Airlines and the new national player Riyadh Air. This is indicated by a source familiar with the matter quoted by Yahoo Finance. 78 aircraft are considered on firm order and 43 on option. Based on the list price of the 787, the deal would be worth up to $40 billion. Details could be finalized on Tuesday.
Uber (+6%) and Lyft (+5%) rebound on Wall Street, while a Californian appeals court ruled unconstitutional the proposal forcing VTC services to consider drivers as employees and not self-employed.