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CPI rises in line with expectations at 6% YoY. Jerome Powell just averted a heart attack. This buys him some breathing room on raising rates. To fight inflation he needs to keep raising. But doing so risks more bank failures. Take it easy Powell!
Inflation rose 0.4% in February and 6% year-over-year. It was the 8th straight month of slowing and the lowest YoY reading since September 2021. Stripping out food and energy prices, core CPI rose 0.5% for the month to 5.5% year-over-year. All figures were in line with the market’s expectations.
The US 2-year yield saw the biggest single-day drop yesterday since 1982, worst than the fall during the Black Monday crash of 1987. Over the past three sessions, the yield has fallen over 100 basis points. The decline has prompted a dramatic unwinding of the deeply inverted 2/10 yield curve.
Following the fall in the US 10-year yield, the rate on the average 30-year mortgage dropped to 6.57%. The rate was above 7% as recently as last Wednesday. A further decline could bring homebuyers back to the market.
Now that Silicon Valley Bank has been declared a “threat to the financial system,” the Federal Deposit Insurance Corp. (FDIC) is prepping for another attempt at auctioning off the bank. According to officials, there was at least one bid made for SVB by another institution, but none came from the largest US banks.
Financial conditions have re-tightened rapidly. By Bloomberg’s measure, conditions are as tight as they were at the S&P’s October lows:
These are the bank stocks that were halted yesterday: Signature Bank, First Republic Bank, Western Alliance Bancorporation, PacWest Bancorp, Bank of Hawaii, Metropolitan Bank, Macatawa Bank, Zions Bancorporation, Customers Bancorp, and East West Bancorp.
Uber, Lyft, DoorDash, and Instacart all scored a big win yesterday after a California appeals court upheld the current law which classifies gig workers as independent contractors rather than employees. The decision means the companies won’t be required to hire more workers as employees to whom they’d be forced to provide benefits.
Meta’s second round of job cuts begins tomorrow as the “year of efficiency” marches on. This round—which will target policy, marketing, and communications teams—is expected to be of a similar magnitude to the company’s headcount reductions late last year, which totaled some 11,000 workers.
The recent theme for investors has been a flight to safety:
Despite objections from Democrats and environmentalists, the Biden administration has approved a massive oil-drilling project in the Alaskan Arctic. The ~$7 billion project is expected to produce a peak of 180,000 barrels per day, or roughly 40% of current Alaskan crude production.
Meanwhile, oil has not escaped the panic provoked by SVB’s collapse, which has added more pressure to crude prices. On the other hand, positioning data suggest money managers are the most bullish on oil prices since May 2019.
$VWAGY Volkswagen
Lennar
Yamana Gold
Full earnings here.
Student loans: A restart to student loan repayments is set to put even more financial strain on young consumers.
Ichan: Carl Icahn is preparing for a proxy fight at Illumina.
Flight to safety: In the wake of SVB's collapse, investors are rushing into safe-haven assets like gold and bonds.
Whoops: After delaying its annual report, Credit Suisse admits finding "material weaknesses" in its internal controls over financial reporting.
Opioids: The Justice Department alleges Rite Aid fueled the opioid crisis by filing hundreds of thousands of illegal prescriptions for drugs like fentanyl and oxycodone.
Big day: Bitcoin enjoyed its biggest one-day gain (13%) yesterday since November with prices surging back above $24,000.
RIP shorts: As a result, more than $100 billion in Bitcoin shorts were liquidated on Monday.
Record outflows: Digital asset funds saw $255 million in outflows last week—the largest on record.
Meta: Headcount isn't the only thing Meta is cutting: the company is pulling the plug on its NFT initiatives to "focus on areas where we can make impact at scale".
Check out GritCRYPTO for more.
Self-driving: Chinese self-driving startup WeRide has filed for a US IPO where it will look to raise as much as $500 million.
VW: Volkswagen announces a 5-year $193 billion budget for investments in battery production and North American operations.
Takeover doubts: Doubts arise on whether TD Bank will follow through with the acquisition of First Horizon after the latter falls 36% below the former's takeover offer.
Healthcare: Sanofi has agreed to acquire diabetes drug developer Provention Bio in a $2.9 billion deal.
Survey software: Silverlake and CPP Investments will acquire software company Qualtrics for $12.5 billion.
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