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.

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.

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.

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.

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.