Last Day Of Q1

Wall Street bonuses fell 26% last year. This was the biggest drop since 2008. Wall Street is estimated to be responsible for 16% of all economic activity in NYC.

Wild nights out for ibankers slowing down?

Market

Prices as of 4 pm EST, 3/30/23

Macro

As Q1 comes to an end, small banks find themselves in a tough position. Keep interest rates low and watch deposits continue to wane. Raise interest rates to compete for deposits with increasingly attractive money market funds and risk cutting into profits and hurting stock prices. Either way, regional bank growth and inequality are set to take a hit.
In the meantime, banks are still leaning on the Fed’s new lending facilities. Borrowing from the Bank Term Funding Program (BTFP) rose by ~$10 billion to $65 billion in the week ended March 29. On the other hand, usage of the Fed’s discount window fell by $22 billion to $88 billion over the same period.
While GDP was little changed from the previous estimate, GDI (Gross Domestic Income)–which measures the income generated and cost incurred from producing goods and services–fell by 1.1% in the fourth quarter, the biggest drop since the onset of the pandemic. At the same time, corporate profits tumbled by the most in 2 years, falling 2% as companies face rising costs, weaker demand, and elevated borrowing costs.
Initial jobless claims edged higher last week but still point to a healthy (tight) labor market, something which runs counter to the Fed’s objectives. Initial claims rose to 198,250 (vs. 196,000 expected) while continuing claims ticked up by 4,000 to 1.689 million (vs. 1.697 million expected).

Stocks

After halting production in February due to an EV battery fire, Ford F has resumed full production of its electric F-150 Lightning. It’s also jacked up prices on some of its models, including its lower-cost version which now comes with a $60,000 price tag, 50% higher than its original starting price of $40,000 announced last year.
Netflix is restructuring its film group to focus on quality over quantity. The company plans to consolidate units that produce small- and mid-size movies in a move that will result in some layoffs as well as the departure of two of its most experienced executives.
Citigroup C has upgraded US stocks to overweight while downgrading their European counterparts to neutral. The bank also raised global tech stocks (to overweight) and lowered expectations for global financials (to neutral), citing lingering concerns in the sector as well as a looming credit crunch.
Just under 2 months ago, on the heels of a fierce rally in equities to start the year, Michael Burry published a one-word tweet: “sell”. True to form, the tweet provided no explanation and was soon deleted. Yesterday, however, Burry offered a follow-up to the not-so-cryptic message and admitted he was wrong to have advised investors to get out.

Energy

Ongoing disruptions to Iraqi exports have boosted oil prices which are on pace for a 7% gain this week as an ongoing disagreement between Baghdad and Kurdistan has resulted in reduced production. The two parties are set to meet next week, however, which could lead to the resumption of more than 400,000 bpd.
Meanwhile, after surging to record highs in 2022, coal prices have dropped significantly as competition from renewables stiffens. In fact, last year was the first ever in which renewables–including wind, solar, hydropower, and biomass–accounted for more US power generation than coal.

Earnings

I-Mab IMAB
Tingo TIO
Bioventus BVS
Ascent Industries ACNT

News

Criminal charges: For the first time ever, a former US president (one Donald J. Trump) will face criminal charges.
Ya think?: Treasury Secretary Janet Yellen said yesterday it may be possible that efforts to support the US financial system are incomplete.
Recession confirmed: Even though it’s all anyone is talking about, Jim Cramer says he’s still looking for the first sign of a recession.
Europe inflation: Despite a record drop in headline inflation (6.9% from 8.5%), core inflation in the region hit a record 5.7% in March.
China rebound: Activity in China’s services sector jumped to its highest in more than 10 years in March, suggesting the country’s economic recovery is well underway.

Crypto