Market Update
European Markets Erased Early Advances, Record Rise in UK Shop Price Index
Bridgette Randall
28 Mar, 2023
Frankfurt
European markets struggled to hold early gains after investors turned cautious.
Benchmark indexes in London, Paris and Frankfurt opened higher but lost gains as the session progressed.
Investors stepped up to buy banks and financial services stocks after the easing of contagion worries.
Resource stocks closed higher after crude oil and base metal and commodities prices advanced.
In the final hour of trading, major averages lost most of the session's gains on the worries of recession and rising risks to losses at banks in the face of rapid rise in interest rates.
Investors reviewed the latest comments from the Bank of England Governor Andrew Bailey, but skepticism prevailed as rapid rise in interest rates are expected to cause larger losses in assets held by banks.
The U.K. banking system is in a "strong position capital and liquidity wise," Bailey told the Treasury Select Committee of the U.K.
Investors also overlooked a slight weakening of manufacturers' confidence in France for the first time in four months.
The manufacturing confidence declined to 104 in March from 105 in February, the statistical agency Insee reported Tuesday.
UK shop price index, a measure of food and non-food prices, increased in March, the British Retail Consortium reported Tuesday.
BRC-NielsenIQ shop price index increased 8.9% from a year ago in March, faster than 8.4% in February.
The annual increase was driven by a record increase in food prices by 15.0% and a record price increase of 5.9% in non-food items.
Europe Indexes & Yields
The DAX index increased 14.34 points to 15,142.02, the CAC-40 index added 10.07 points to 7,088.34 and the FTSE 100 index advanced 12.48 points to 7,484.25.
The yield on 10-year German Bunds increased to 2.27%, French bonds to 2.79%, the UK gilts to 3.45% and Italian bonds to 4.14%.
The euro edged higher to $1.08, the British pound inched up to $1.233 and the Swiss franc to 91.94 cents.
Brent crude oil increased 72 cents to $78.84 a barrel and the Dutch TTF natural gas price increased 57 cents to Є43.10 per MWh.
Europe Movers
A rebound in crude oil prices and base commodities lifted resource stocks.
Anglo American, Glencore, BP Plc, Shell Plc increased between 1% and 3%.
Diageo Plc declined 1.02% to 3,546.50 pence after the company said chief executive Ivan Menezes will retire at the end of June after ten years of service.
Debra Crew, current chief operating officer, will assume the leadership role and join the company's board from July 1.
Ocado Plc increased 2.5% to 463.52 pence after the online grocery delivery company reaffirmed its full-year earnings outlook.
The company said revenue in the first quarter ending in February increased 3.4% to £584 million and average weekly orders rose 3.6% to 381,000.
The company said active customers increased 13.8% to 951,000 from 835,000 a year ago.
RATIONAL AG declined 1.0% to €594.0 despite the commercial kitchen supplier posting a rise in revenue in fiscal year 2022.
Revenue in the fourth quarter increased 50% to Є290.4 million from Є193.5 million and after-tax net income jumped 182% to Є61.0 million from Є21.7 million and earnings per share rose to Є5.37 from Є1.91 a year ago.
UBS Group AG increased 1.7% to Sfr 17.74 after chief executive Ralph Hammers said buying Credit Suisse is a growth opportunity for the group.
"While we did not seek this transaction, we were prepared" and "We did not buy Credit Suisse only to close it," added Hammers in an internal note and reported first by Reuters.
Movers: Alibaba, Carnival, Lyft, Occidental Petroleum, PVH, Walgreens Boots
Scott Peters
28 Mar, 2023
New York City
Alibaba Group Holding Ltd jumped 8.02% to $93.03 after the Chinese e-commerce giant said it plans to split the company into six separate units including e-commerce, media and cloud services.
Carnival Corp increased 6% to $9.34 after the cruise line operator reported record quarterly bookings in the fiscal first quarter ending in February.
Revenue in the quarter increased to $4.4 billion from $1.6 billion and net loss shrank to $693 million from $1.9 billion and diluted loss per share decreased to 55 cents from $1.66 a share.
The cruise line estimated 98% occupancy in the fiscal second quarter and estimated adjusted operating earnings between $600 million and $700 million, compared to $382 million in the first quarter.
Lyft Inc increased 6.0% to $10.19 after the ridesharing company said its co-founders, chief executive Logan Green and President John Zimmer, plan to step down from management roles and transition to non-executive roles.
Former Amazon executive David Risher will become chief executive officer on April 17.
Occidental Petroleum Corporation jumped 2.1% to $60.89 and a regulatory filing showed Berkshire Hathaway acquired additional 3.7 million shares for $216 million, increasing the Warren Buffett controlled conglomerate's stake to 23.5%.
PVH Corp soared 18.9% to $87.58 after the apparel maker posted better-than-expected earnings in its latest quarter.
Revenue in the fourth quarter ending in January increased 2% to $2.49 billion and net income declined to $138.7 million from $390.8 million and diluted earnings per share fell to $2.18 from $5.553 a year ago.
Revenue in the full-year 2022 fell to $9.0 billion from $9.2 billion and net income decreased to $200.4 million from $952.3 million and diluted earnings per share plunged to $3.03 from $13.25 a year ago.
The apparel maker guided revenue in 2023 to increase between 3% and 4% and diluted earnings per share is projected to be $10.0 compared to $3.03 a year ago.
Walgreens Boots Alliance Inc advanced 3.7% to $34.17 after the pharmacy operator reported better-than-expected fiscal second quarter earnings.
Sales in the fiscal second quarter ending in February increased 3.3% to $34.8 billion from $33.7 billion and net income fell to $703 million from $883 million and diluted earnings per share declined to 81 cents from $1.02 a year ago.
The company retained its full-year adjusted earnings per share outlook between $4.45 and $4.65 a share, reflecting acceleration in business in February.
Price Unadjusted Wholesale and Retail inventories Advanced in February
Brian Turner
28 Mar, 2023
New York City
Wholesale and retail inventories rose in February, reflecting strong confidence in business community, the U.S. Census Bureau reported Tuesday.
Wholesale inventories, seasonally adjusted but price unadjusted, in February increased 0.2% from January to $920.3 billion, and increased 12.2% from a year ago.
Retail inventories, seasonally adjusted but not adjusted for prices, in February increased 0.8% from January to $747.3 billion, and up 10.8% from a year ago.
International Goods Trade Deficit Stayed Elevated In February
Brian Turner
28 Mar, 2023
New York City
The international goods trade deficit in February edged up to $91.6 billion from $91.1 billion in January, the U.S. Census Bureau reported Tuesday.
The preliminary international trade data will be revised in about a month based on a wider estimate.
Exports in February declined 3.8% to $167.8 billion from $174.6 billion in January but rose from $159.1 billion a year ago.
imports in February decreased 2.3% to $259.5 billion from $265.6 billion in January and fell from $264.4 billion a year ago.
Despite the slight decline, the international goods deficit remained elevated as imports of capital goods and vehicles stayed above annual average.
U.S. Investors Turn Cautious On Growing Recession Risks Driven By Regional Bank Capital Shortfall Worries
Barry Adams
28 Mar, 2023
New York City
Stocks on Wall Street traded down in early trading as investors reassessed the health of the U.S. banking system and the prospects of economic recession.
Investors turned cautious, despite the reassurances from regulators and officials, on the worries of wider contagion in the regional banking system.
U.S. officials have been offering soothing words but banks are set to declare larger losses in treasury securities assets, which are generally deemed safest investments.
Moreover, higher-rates-for-longer are going to expand losses in Treasury securities, forcing many banks to raise capital or seek government support.
Rising losses in regional banks and the near-impossible task of raising new equity capital in the current market conditions are also fueling worries that private sector lending will slow down as banks focus on rebuilding their balance sheets.
International Goods Trade Deficit Held In February
The international goods trade deficit in February edged up to $91.6 billion from $91.1 billion in January, the U.S. Census Bureau reported Tuesday.
Exports in February declined to $167.8 billion from $174.6 billion in January but rose from $159.1 billion a year ago.
imports in February decreased to $259.5 billion from $265.6 billion in January and fell from $264.4 billion a year ago.
Price Unadjusted Wholesale and Retail inventories Advanced in February
Wholesale inventories, seasonally adjusted but price unadjusted, in February increased 0.2% from January to $920.3 billion, and increased 12.2% from a year ago.
Retail inventories, seasonally adjusted but not adjusted for prices, in February increased 0.8% from January to $747.3 billion, and up 10.8% from a year ago.
U.S. Indexes & Yields
The S&P 500 index decreased 1.38 points to 3,976.15 and the Nasdaq Composite index fell 60.44 points or 0.5% to 11,708.40.
The yield on 2-year Treasury notes rose to 4.02%, 10-year Treasury notes increased 3.54% and 30-year Treasury bonds advanced to 3.78%.
Crude oil traded unchanged at $72.78 a barrel and natural gas edged down 3 cents to $2.05 a thermal unit.
U.S. Stock Movers
Alibaba Group Holding Ltd jumped 8.02% to $93.03 after the Chinese e-commerce giant said it plans to split the company into six separate units including e-commerce, media and cloud services.
Lyft Inc increased 6.0% to $10.19 after the ridesharing company said its co-founders, chief executive Logan Green and President John Zimmer, plan to step down from management roles and transition to non-executive roles.
Former Amazon executive David Risher will become chief executive officer on April 17.
Occidental Petroleum jumped 2.1% to $60.89 and a regulatory filing showed Berkshire Hathaway acquired additional 3.7 million shares for $216 million, increasing the Warren Buffett controlled conglomerate's stake to 23.5%.
Global Investors Anticipate More U.S. Government Backstopping In Banking Sector
Barry Adams
27 Mar, 2023
New York City
Stocks attempted to rebound on the first day of a new week and investors searched for good news as the U.S. financial regulators and Treasury officials offered a familiar solution to the fast moving regional banking crisis.
Federal officials are looking for ways to provide additional liquidity to the banking system and hunt for ways to stem the crisis from spreading further into the banking system.
The Federal Deposit Insurance Corporation managed to sell only about 40% of the total assets of the former Silicon Valley Bank for about 25% of its nominal value and entered into a loss sharing arrangement with the acquiring bank First Citizen BancShares.
The FDIC said for now losses stemming from saving Silicon Valley Bank stand at $20 billion and the cost is likely to rise if assets held in the receivership are sold at a larger discount.
The Deposit Insurance Fund had $128.2 billion to insure a total deposit of $17.7 trillion across all 7,738 FDIC insured and supervised banks, according to the fourth quarter 2022 report released by the agency.
In other words, the FDIC is insuring deposit with only 0.7% of funds in its account.
U.S. Treasury officials and bank regulators have managed to calm markets for now, but larger losses are looming in Treasury securities holdings at banks of all sizes as interest rates keep going higher.
Higher interest rates decrease the value of the Treasury securities, as bond prices adjust to lower values reflecting higher yields.
On Monday, stock investors overlooked stress in the banking sector but bond yields and crude oil prices closed higher.
U.S. Indexes & Yields
higher bond yields dragged tech stocks lower but broader market indexes closed up.
The S&P 500 index increased 6.53 points to 3,977.53 and the Nasdaq Composite index declined 55.12 points or 0.5% to 11,768.84.
The yield on 2-year Treasury notes increased 23 basis points to 4.01%, 10-year Treasury notes inched up 16 points to 3.53% and 30-year Treasury bonds 12 basis points to 3.77%.
Gold edged down $20.32 to $1,956.99 an ounce, after trading at a one-year high of $2,000.
Crude oil increased $3.61 to $72.81 a barrel and natural gas futures declined 11 cents to $2.09 a thermal unit.
US Movers
First Citizens BancShares Inc soared 47% to $854.49 after the North Carolina-based bank agreed to acquire Silicon Valley Bank's assets from the FDIC.
First Citizens agreed to pay $16.5 billion for $72 billion of assets (or loan portfolio), own and operate 17 branches of the former bank, the FDIC said in a statement.
The FDIC will retain $90 billion of assets of the now defunct Silicon Valley Bank and the agency received stock appreciation rights potentially worth $500 million in the First Citizens BancShares, Inc.
The FDIC-controlled Silicon Valley Bank Bridge Bank, National Association will reopen as First-Citizen Bank & Trust Company, a wholly-owned subsidiary of First Citizens BancShares.
The FDIC estimated the cost of the failure of Silicon Valley Bank to be approximately $20 billion and the exact cost will be determined once the receivership is terminated.
The FDIC and First–Citizens Bank & Trust Company entered into a loss–share transaction on the commercial loans it purchased from the former Silicon Valley Bridge Bank, National Association.
The FDIC as receiver and First–Citizens Bank & Trust Company will share in the losses and potential recoveries on the loans covered by the loss–share agreement.
First Republic Bank jumped 14% and PacWest Bancorp advanced 4% after Bloomberg News reported that the U.S. government is looking to provide additional liquidity to regional banks as the government and agencies search for a buyer for Firth Republic Bank.
European Markets Look Beyond Current Turmoil In Banks
European market indexes advanced after the U.S. bank worries eased and investors shifted focus to domestic economic and corporate news.
Stocks traded higher after Germany's business confidence unexpectedly improved and investors overlooked slowing credit growth.
With the full effect of higher interest rates still not felt by the economy, economic slowdown may be approaching faster than previously expected.
On Monday, investors focused on the receding banking worries and rising confidence in the German business community.
Eurozone Private Lending Growth Slowed In February
Eurozone private lending rose at the slowest pace in February, reflecting higher interest rates and weak credit demand, the European Central Bank reported Monday.
Private sector lending increase slowed to an annual growth rate of 3.3% in February from 3.8% in January.
M1 money supply, which includes currency in circulation and overnight deposits, declined 2.7% in February, a faster pace than the decrease of 0.8% in January.
M3 money supply, a wider measure of money in circulation, rose at a slower annual pace of 2.9% from 3.5% in January.
German Business Climate Index Improved In March
The business climate index increased to 93.3 in March from 91.1 in February, the Ifo Institute reported Monday.
The index increased for the fifth month in a row after current situation and expectations indexes improved.
The current situation indicator increased more-than-expected to 95.4 in March from 93.9 in the previous month and the expectations index increased to 91.2 from 88.4 respectively.
"Despite turbulence at some international banks, the German economy is stabilizing." said Clemens Fuest, president of the ifo Institute.
In manufacturing, the index rose substantially and companies were more satisfied with their current business situation. Moreover, pessimism almost completely disappeared from their expectations.
Sentiment improved considerably, especially in key areas of manufacturing such as the automotive, chemical, electrical and electronics, and machinery and equipment industries.
Europe Indexes & Yields
The DAX index increased 1.1% to 15,127.68, the CAC-40 index added 0.9% to 7,078.27 and the FTSE 100 index advanced 0.9% to 7,471.77.
The yield on 10-year German Bunds edged higher to 2.26%, French bonds rose to 2.76% and the UK gilts to 3.38% and Italian bonds to 4.08%.
The euro edged up to $1.078, the British pound inched higher $1.22 and the Swiss franc to 91.63 cents.
Brent crude oil added $2.98 to $77.98 a barrel and the Dutch TTF natural gas price rose Є1.42 to Є42.53 a MWh.
Europe Movers
Deutsche Bank AG increased 6.2% to €9.07 after German Chancellor Olaf Scholz rejected comparison with Credit Suisse and said that Germany's largest bank is "profitable" and there is no "reason to be concerned."
The comments lifted stocks of other peers in the region.
Commerzbank, BNP Paribas, Barclays and UniCredit jumped between 1% and 3%.
Salzgitter AG soared 6.9% to €33.54 after the steelmaker forecasted better-than-expected profit in 2023.
Novartis AG advanced 8.4% to $90.55 after the Swiss drug maker reported positive results for its breast cancer trial drug Kisqali.
"The Independent Data Monitoring Committee recommended stopping the trial early as the primary endpoint of invasive disease-free survival has been met," the company said in a statement released to investors.
Eurozone Bank Lending Growth Weakened, German Business Climate Index Improved
Bridgette Randall
27 Mar, 2023
Frankfurt
European market indexes advanced after the U.S. bank worries eased and investors shifted focus to domestic economic and corporate news.
Stocks traded higher after Germany's business confidence unexpectedly improved and investors overlooked slowing credit growth.
With the full effect of higher interest rates still not felt by the economy, economic slowdown may be approaching faster than previously expected.
On Monday, investors focused on the receding banking worries and rising confidence in the German business community.
Eurozone Private Lending Growth Slowed In February
Eurozone private lending rose at the slowest pace in February, reflecting higher interest rates and weak credit demand, the European Central Bank reported Monday.
Private sector lending increase slowed to an annual growth rate of 3.3% in February from 3.8% in January.
M1 money supply, which includes currency in circulation and overnight deposits, declined 2.7% in February, a faster pace than the decrease of 0.8% in January.
M3 money supply, a wider measure of money in circulation, rose at a slower annual pace of 2.9% from 3.5% in January.
German Business Climate Index Improved In March
The business climate index increased to 93.3 in March from 91.1 in February, the Ifo Institute reported Monday.
The index increased for the fifth month in a row after current situation and expectations indexes improved.
The current situation indicator increased more-than-expected to 95.4 in March from 93.9 in the previous month and the expectations index increased to 91.2 from 88.4 respectively.
"Despite turbulence at some international banks, the German economy is stabilizing." said Clemens Fuest, president of the ifo Institute.
In manufacturing, the index rose substantially and companies were more satisfied with their current business situation. Moreover, pessimism almost completely disappeared from their expectations.
Sentiment improved considerably, especially in key areas of manufacturing such as the automotive, chemical, electrical and electronics, and machinery and equipment industries.
Europe Indexes & Yields
The DAX index increased 1.1% to 15,127.68, the CAC-40 index added 0.9% to 7,078.27 and the FTSE 100 index advanced 0.9% to 7,471.77.
The yield on 10-year German Bunds edged higher to 2.26%, French bonds rose to 2.76% and the UK gilts to 3.38% and Italian bonds to 4.08%.
The euro edged up to $1.078, the British pound inched higher $1.22 and the Swiss franc to 91.63 cents.
Brent crude oil added $2.98 to $77.98 a barrel and the Dutch TTF natural gas price rose Є1.42 to Є42.53 a MWh.
Europe Movers
Deutsche Bank AG increased 6.2% to €9.07 after German Chancellor Olaf Scholz rejected comparison with Credit Suisse and said that Germany's largest bank is "profitable" and there is no "reason to be concerned."
The comments lifted stocks of other peers in the region.
Commerzbank, BNP Paribas, Barclays and UniCredit jumped between 1% and 3%.
Salzgitter AG soared 6.9% to €33.54 after the steelmaker forecasted better-than-expected profit in 2023.
Novartis AG advanced 8.4% to $90.55 after the Swiss drug maker reported positive results for its breast cancer trial drug Kisqali.
"The Independent Data Monitoring Committee recommended stopping the trial early as the primary endpoint of invasive disease-free survival has been met," the company said in a statement released to investors.
First Citizens Agreed to Acquire Silicon Valley Bank's Assets, Deposits Under Loss-Sharing Arrangement
Scott Peters
27 Mar, 2023
New York City
First Citizens BancShares Inc soared 47% to $854.49 after the North Carolina-based bank agreed to acquire Silicon Valley Bank's assets from the FDIC.
First Citizens agreed to pay $16.5 billion for $72 billion of assets (or loan portfolio), own and operate 17 branches of the former bank, the FDIC said in a statement.
The FDIC will retain $90 billion of assets of the now defunct Silicon Valley Bank and the agency received stock appreciation rights potentially worth $500 million in the First Citizens BancShares, Inc.
The FDIC-controlled Silicon Valley Bank Bridge Bank, National Association will reopen as First-Citizen Bank & Trust Company, a wholly-owned subsidiary of First Citizens BancShares.
The FDIC estimated the cost of the failure of Silicon Valley Bank to be approximately $20 billion and the exact cost will be determined once the receivership is terminated.
The FDIC and First–Citizens Bank & Trust Company entered into a loss–share transaction on the commercial loans it purchased from the former Silicon Valley Bridge Bank, National Association.
The FDIC as receiver and First–Citizens Bank & Trust Company will share in the losses and potential recoveries on the loans covered by the loss–share agreement.
Mixed Markets On Wall Street, Banks Rebounded
Barry Adams
27 Mar, 2023
New York City
Major averages on Wall Street looked past stress in the regional banking sector and extended gains of the previous week.
Financial regulators stepped up activities and quickly found a buyer for the assets of the Silicon Valley Bank, but at a sharply discounted price and terms favorable to the buyers.
In addition, regulators focused on providing more liquidity to regional banks, including Firth Republic Bank with a business model similar the SVB.
In the past, when a bank is in trouble, banking peers rapidly swoon in and scoop up assets of the troubled bank, but banks of all sizes are showing significant restraint, highlighting looming losses in bank's assets and economic uncertainty.
The FDIC managed to sell about 40% of the total assets of the former Silicon Valley Bank for about 25% of its nominal value and entered into a loss sharing arrangement with the acquiring bank First Citizen BancShares.
Treasury yields edged slightly higher as investors hoped that swift actions from regulators may provide additional stability to the banking system.
Indexes & Yields
The S&P 500 index increased 3.45 points to 3,974.15 and the Nasdaq Composite index declined 28.31 points or 0.3% to 11,793.23.
The yield on 2-year Treasury notes increased 15 basis points to 3.93%, 10-year Treasury notes inched up 10 points to 3.43% and 30-year Treasury bonds 5 basis points to 3.70%.
Gold edged down $20.32 to $1,956 an ounce, after trading at a one-year high of $2,000.
Crude oil increased $1.66 to $70.96 a barrel and natural gas futures declined 12 cents to $2.08 a thermal unit.
US Movers
First Citizens BancShares Inc soared 47% to $854.49 after the North Carolina-based bank agreed to acquire Silicon Valley Bank's assets from the FDIC.
First Citizens agreed to pay $16.5 billion for $72 billion of assets (or loan portfolio), own and operate 17 branches of the former bank, the FDIC said in a statement.
The FDIC will retain $90 billion of assets of the now defunct Silicon Valley Bank and the agency received stock appreciation rights potentially worth $500 million in the First Citizens BancShares, Inc.
The FDIC-controlled Silicon Valley Bank Bridge Bank, National Association will reopen as First-Citizen Bank & Trust Company, a wholly-owned subsidiary of First Citizens BancShares.
The FDIC estimated the cost of the failure of Silicon Valley Bank to be approximately $20 billion and the exact cost will be determined once the receivership is terminated.
The FDIC and First–Citizens Bank & Trust Company entered into a loss–share transaction on the commercial loans it purchased from the former Silicon Valley Bridge Bank, National Association.
The FDIC as receiver and First–Citizens Bank & Trust Company will share in the losses and potential recoveries on the loans covered by the loss–share agreement.
First Republic Bank jumped 14% and PacWest Bancorp advanced 4% after Bloomberg News reported that the U.S. government is looking to provide additional liquidity to regional banks as the government and agencies search for a buyer for Firth Republic Bank.
Movers: Block, Carvana, Chewy, Coinbase Global, Darden Restaurants, KB Home, Worthington Industries
Scott Peters
23 Mar, 2023
New York City
Block Inc dropped 14.9% to $61.75 after the short seller Hindenburg Research said that the company's stock is its latest short position.
The short seller said that the company's cash app lacks basic compliance controls and facilitates "crime" and takes advantage of the "unbanked" customers it claims to serve and inflates the number of transacting users, a key metric used by investors.
Block responded to allegations from Hindenburg Research and said it plans to work with the SEC and regulators and explore its legal options against the short seller.
"Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price.
We have reviewed the full report in the context of our own data and believe it’s designed to deceive and confuse investors.
We are a highly regulated public company with regular disclosures, and are confident in our products, reporting, compliance programs, and controls," Block said in its response.
Carvana Co increased 10.5% to $9.32 on top of 15% increase in the previous session after the company offered to exchange secured notes to unsecured note holders of as much as $1 billion at a 2% premium to the prevailing market price.
Coinbase Global Inc dropped 11.9% to $67.95 after the cryptocurrency trading app operator received Wells notice from the Securities and Exchange Commission.
The potential charges are related to Coinbase spot trading, Coinbase Wallet and Coinbase Prime, according to a company's filing with the regulatory agency.
Chewy Inc declined 9.1% to $34.29 after the online pet food store posted better-than-quarterly sales and earnings in the fourth quarter.
The company also reported a slight decline in active users to 20.4 million in the fourth quarter from 20.5 million in the previous quarter.
Net sales in the fourth quarter increased 13.4% to $2.71 billion and swung to a net income of $56.1 million from a loss of $63.6 million and diluted earnings per share was 1 cent compared to a loss of 15 cents a year ago.
Darden Restaurants, Inc decreased 0.9% to $149.78 after the company lifted its fiscal year sales outlook as same store sales jumped 11.7%.
Sales in the fiscal third quarter ending in February increased 13.8% to $2.8 billion from $2.4 billion and net income increased to $288.6 million from $247.0 million and diluted earnings per share rose to $2.36 from $1.94 a year ago.
The company declared a quarterly cash dividend of $1.21 a share, payable on May 1 to shareholders on record April 10.
Darden repurchased approximately 870,000 shares for $124 million and $687 million were still available under the current $1 billion repurchase authorization.
KB Home increased 8.7% to $39.99 after the company reported fiscal first quarter sales near the upper end of its guidance range.
Total revenue in the quarter ending in February decreased to $1.38 billion from $1.39 billion and net income declined to $125.5 million from $134.3 million and diluted earnings per share edged lower to $1.45 from $1.47 a year ago.
The Los Angeles, California based home builder said homes delivered fell 3% to 2,788 and the average selling price increased 2% to $495,500.
Higher home prices and mortgage rates cut into new order flows and home backlog.
Net new orders declined 49% to 2,142 and net new order value dropped 53% to $1.0 billion.
The homebuilder's ending backlog value dropped to $3.31 billion from $5.71 billion and unit backlog plunged to 7,016 from 11,886 a year ago.
Worthington Industries, Inc jumped 15.9% to $61.59 after the steel processor reported a smaller-than-expected decline in sales and earnings.
Revenue in the fiscal third quarter ending in February declined 20% to $1.1 billion from $1.4 billion and net income dropped to $46.3 million from $56.3 million and diluted earnings per share decreased to 94 cents from $1.11 a year ago.
The company's board declared a quarterly dividend of 31 cents per common share payable on June 29 to shareholders on record June 15.
Tech Stock Rally After Emboldened Investors Bet On Rate Hike Pause
Barry Adams
23 Mar, 2023
New York City
Tech stocks led the gainers on Wall Street after traders bet the Federal Reserve is done raising rates for now.
Microsoft, Apple, Meta, Alphabet, Nvidia, Tesla and Intel advanced between 2% and 5% following a rally in the tech sector.
The rate-pause or slower-hike debate raged on Wall Street after the Federal Reserve increased interest rate for the ninth time in a row over the last 12 months.
Despite the multiple rate hikes, inflation is not cooling fast enough for policymakers as tight labor market conditions support higher wages.
However, inflation pressures are mostly rooted in price actions by corporations and services providers and higher food, energy and housing prices are contributing to 4-decade high inflation.
U.S. Treasury yields edged slightly lower but short term bond rates stayed above the medium and long term bond yields, suggesting tighter lending conditions for households and corporations.
Regional banks rebounded on the hopes that the Fed may pause after raising rates one last time in May.
Indexes & Yields
The S&P 500 index increased 1.1% to 3,980.31 and the Nasdaq Composite index advanced 1.8% to 11,873.44.
The yield on 2-year Treasury notes inched 6 basis points lower to 3.91%, 10-year Treasury notes edged down 3 basis points to 3.46% and 30-year Treasury bonds rose 2 basis points to 3.72%.
Crude oil increased 20 cents to $71.10 a barrel and natural gas edged up 2 cents to $2.20 a thermal unit.
U.S. Stock Movers
Carvana Co increased 10.5% to $9.32 on top of 15% increase in the previous session after the company offered to exchange secured notes to unsecured note holders of as much as $1 billion at a 2% premium to the prevailing market price.
Coinbase Global Inc dropped 11.9% to $67.95 after the cryptocurrency trading app operator received Wells notice from the Securities and Exchange Commission.
The potential charges are related to Coinbase spot trading, Coinbase Wallet and Coinbase Prime, according to a company's filing with the regulatory agency.
Chewy Inc declined 9.1% to $34.29 after the online pet food store posted better-than-quarterly sales and earnings in the fourth quarter.
The company also reported a slight decline in active users to 20.4 million in the fourth quarter from 20.5 million in the previous quarter.
Net sales in the fourth quarter increased 13.4% to $2.71 billion and swung to a net income of $56.1 million from a loss of $63.6 million and diluted earnings per share was 1 cent compared to a loss of 15 cents a year ago.
Markets Slide After Powell and Yellen Comments
Barry Adams
22 Mar, 2023
New York City
Market indexes turned up after the rate hike but sharply fell after comments from the Federal Reserve Chairman.
As widely expected, the Federal Reserve raised the fed funds target rate range by 25 basis points to between 4.75% and 5.0%.
The accompanying statement from the Federal Reserve after the policy decision showed that the Fed is considering to increase rate one more time and then pause.
“The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy,” shattering all expectations of a rate pause.
“Rate cuts are not in our base case” for the rest of the year 2023, Powell answered during a press conference after the rate decision.
Adding to the downward pressure on broader indexes was comments from the U.S. Treasury Secretary Janet Yellen.
Yellen said that the FDIC is not considering providing a "blanket insurance" to bank deposits in the Q&A session with the Senate appropriations subcommittee hearing.
The central bank, in a node to the rising stresses in the U.S. banking system, said "the U.S. banking system is sound and resilient" and added that "some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time."
The Federal Reserve also lowered its economic growth projection in 2023 but also revised slightly higher its estimate of inflation and core inflation in the year from its December projection.
The fast moving banking crisis has complicated the Fed's decision making because rising rates are contributing to losses in generally considered safe investments in Treasury securities.
Inflation in recent months has eased but core inflation, which excludes volatile energy and food prices, has stayed stubbornly high.
The Fed is battling two opposite trends, higher interest rates are needed to curb 4-decade high inflation and higher rates will increase losses in Treasury securities held by banks of all sizes.
The Fed has been advertising the need to bring down inflation to its preferred level of 2% from the current rate near 8% and the central bank's credibility is on the line if it pauses before the substantial reduction in inflation.
Despite the multiple rate hikes over the last twelve months, interest rates are still negative and not restrictive enough.
Indexes & Yields
The S&P 500 index increased 3.63 points to 4,005.50 and the Nasdaq Composite index added 8.04 points to 11,866.72.
The yield on 2-year Treasury notes edged 4 basis points higher to 4.22%, 10-year Treasury notes inched up 3.61% and 30-year Treasury bonds edged up 1 basis point to 3.72%.
Crude oil decreased 26 cents to $69.50 a barrel and natural gas futures edged down 10 cents to $2.25 a thermal unit.
U.S. Stock Movers
PacWest Bancorp decreased 2.4% to $11.93 and the regional bank in focus said it has "solid liquidity and stabilized deposit balances" in its latest update to investors.
Total available cash is $11.4 billion, which exceeds $9.5 billion in uninsured deposits. The bank said deposit withdrawals were $6.8 billion in the current quarter to March 20.
The bank also confirmed it borrowed $3.7 billion from the FHLB, $10.5 billion from the Federal Reserve Discount Window, and $2.1 billion in Bank Term Funding Program,
GameStop Corp soared 45.6% to $25.70 after the specialty retailer swung to a profit and posted a surge in gross margin.
Nike Inc decreased 1.4% to $123.88 after the athletic footwear and apparel maker reported higher revenue and earnings in its latest quarter.
However, gross margin suffered after the company used markdowns and promotion to liquidate inventories.
Calmness Returned to European Markets
European markets broadly advanced after calmness returned to financial markets.
Coordinated actions between governments and central banks soothed market nerves after the rescue of the second largest bank in Switzerland.
Bond yields were stable and the euro advanced after the ECB president Christine Lagarde said, in her prepared remarks ahead of a conference, "inflation is still high, and uncertainty around its path ahead has increased."
While energy price inflation is easing but domestic prices are still rising and "If this continues and aggregate demand picks up from its current compressed levels, we could see a handover from imported to domestic price pressures that keeps overall price pressures high," noted Lagarde in the statement.
Real wages have declined in the Euro Area and rising wages are likely to contribute to higher inflation in the months ahead.
Euro Area Current Account Surplus Expanded In January
The current account surplus in the Euro Area increased in January after the international goods surplus increased, the European Central Bank said in a report Wednesday.
The current account surplus increased to Є17.0 billion from Є13.0 billion in the previous month, reflecting €14 billion surplus in international trade in services, €11 billion surplus in goods and €1 billion rise in primary income.
These surpluses were partly offset by a deficit of €9 billion in secondary income.
Current account deficit was €98 billion or 0.7% of the euro area GDP in 12 months to January, compared with a surplus of €252 billion or 2.0% one year earlier.
Separately, the Swiss National Bank said current account surplus widened to Sfr 14.7 billion in the fourth quarter of 2022 from Sfr 9.1 billion in the same period a year ago.
UK Inflation Accelerated In January
Consumer price inflation unexpectedly increased in February after falling for four month in a row, the Office for National Statistics reported Wednesday.
Consumer prices rose at a faster pace of 10.4% in February after rising at 10.1% in January, after food and non-alcoholic beverages inflation accelerated to 18.0% from 16.7% in the previous month.
Restaurant and hotel price inflation increased to 12.8% in February from 10.1% in January and apparel and footwear inflation increased to 8.1% from 6.2% and health services cost increased 6.8% from 6.2% in the previous month.
On the other hand, transportation services inflation slowed to 2.9% from 3.1% and housing and utilities prices rose at a slower pace of 26.6% from 26.7% in the previous month.
On a monthly basis consumer prices advanced 1.1% from January.
Europe Indexes & Yields
The DAX index increased 0.1% to 15,216.19, the CAC-40 index advanced 0.2% to 7,131.12 and the FTSE 100 index gained 0.4% to 7,566.84.
The yield on 10-year German Bunds held at 2.28%, French bonds closed at 2.83%,the UK gilts edged up to 3.44% and the Italian bonds increased to 4.14%.
The euro strengthened to $1.08, the British pound to $1.22 and the Swiss franc to 91.82 cents.
Brent crude oil rose 42 cents to $75.74 a barrel and the Dutch TTF natural gas fell 5.7% to Є39,9 per MWh.
Europe Movers
Banks across the eurozone eased after rebounding in the previous session.
Deutsche Bank, Commerzbank, BNP Paribas, HSBC, Societe Generale, and UniCredit declined between 1% and 3%.
L'Oreal, Pernod Ricard and Thales advanced between 1% and 2%.
Mercedes Benz, BMW and Renault added between 0.6% and 1.0%.
UK Inflation Accelerated, Euro Area Current Account Surplus Expanded
Bridgette Randall
22 Mar, 2023
Frankfurt
European markets broadly advanced after calmness returned to financial markets.
Coordinated actions between governments and central banks soothed market nerves after the rescue of the second largest bank in Switzerland.
Bond yields were stable and the euro advanced after the ECB president Christine Lagarde said, in her prepared remarks ahead of a conference, "inflation is still high, and uncertainty around its path ahead has increased."
While energy price inflation is easing but domestic prices are still rising and "If this continues and aggregate demand picks up from its current compressed levels, we could see a handover from imported to domestic price pressures that keeps overall price pressures high," noted Lagarde in the statement.
Real wages have declined in the Euro Area and rising wages are likely to contribute to higher inflation in the months ahead.
Euro Area Current Account Surplus Expanded In January
The current account surplus in the Euro Area increased in January after the international goods surplus increased, the European Central Bank said in a report Wednesday.
The current account surplus increased to Є17.0 billion from Є13.0 billion in the previous month, reflecting €14 billion surplus in international trade in services, €11 billion surplus in goods and €1 billion rise in primary income.
These surpluses were partly offset by a deficit of €9 billion in secondary income.
Current account deficit was €98 billion or 0.7% of the euro area GDP in 12 months to January, compared with a surplus of €252 billion or 2.0% one year earlier.
Separately, the Swiss National Bank said current account surplus widened to Sfr 14.7 billion in the fourth quarter of 2022 from Sfr 9.1 billion in the same period a year ago.
UK Inflation Accelerated In January
Consumer price inflation unexpectedly increased in February after falling for four month in a row, the Office for National Statistics reported Wednesday.
Consumer prices rose at a faster pace of 10.4% in February after rising at 10.1% in January, after food and non-alcoholic beverages inflation accelerated to 18.0% from 16.7% in the previous month.
Restaurant and hotel price inflation increased to 12.8% in February from 10.1% in January and apparel and footwear inflation increased to 8.1% from 6.2% and health services cost increased 6.8% from 6.2% in the previous month.
On the other hand, transportation services inflation slowed to 2.9% from 3.1% and housing and utilities prices rose at a slower pace of 26.6% from 26.7% in the previous month.
On a monthly basis consumer prices advanced 1.1% from January.
Indexes & Yields
The DAX index increased 0.1% to 15,216.19, the CAC-40 index advanced 0.2% to 7,131.12 and the FTSE 100 index gained 0.4% to 7,566.84.
The yield on 10-year German Bunds held at 2.28%, French bonds closed at 2.83%,the UK gilts edged up to 3.44% and the Italian bonds increased to 4.14%.
The euro strengthened to $1.08, the British pound to $1.22 and the Swiss franc to 91.82 cents.
Europe Movers
Banks across the eurozone eased after rebounding in the previous session.
Deutsche Bank, Commerzbank, BNP Paribas, HSBC, Societe Generale, and UniCredit declined between 1% and 3%.
L'Oreal, Pernod Ricard and Thales advanced between 1% and 2%.
Mercedes Benz, BMW and Renault added between 0.6% and 1.0%.
Fed Hikes Rates by 25 Basis Points, Says Banking System Is "Sound"
Brian Turner
22 Mar, 2023
New York City
The Federal Reserve revised the fed funds target range by 25 basis points to between 4.75% and 5.0%, matching the expectations set by most investors.
The central bank, in a node to the rising stresses in the U.S. banking system, said "the U.S. banking system is sound and resilient" and added that "some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time."
The Federal Reserve also lowered its economic growth projection in 2023 but also revised slightly higher its estimate of inflation and core inflation in the year from its December projection.
The economic growth is now estimated at 0.4% in 2023 from the previous estimate of 0.5% in December, unemployment rate to 4.5% from 4.6%, the personal consumption price expenditure index or PCE inflation to 3.3% from 3.1% and core PCE inflation to 3.6% from 3.5% respectively.
The policy committee left its estimate of the federal funds rate unrevised at 5.1%, indicating only one additional rate hike before the Fed pauses.
The fast moving banking crisis has complicated the Fed's decision making because rising rates are contributing to losses in generally considered safe investments in Treasury securities.
While the largest 11 banks are perceived to have adequate capital and liquidity, a growing number of banks from the 75 regional banks may be forced to borrow from the central bank or raise capital in depressed market conditions.