Morning News: May 9, 2024
Posted by Eddy Elfenbein on May 9th, 2024 at 8:08 am

The Debate Is Heating Up Over China’s Factory Output

China’s Exports Return to Growth in April, Boosting Economy

Why China’s Xi Faces a Pressing Challenge in Europe

Bank of England Leaves Interest Rates Unchanged, Signals It’s Closer to Cutting

Malaysia Central Bank Holds Rates Steady, as Widely Expected

What CFOs Are Saying About Higher-for-Longer Rates

Ex-Goldman Banker Fights Extradition Over Ghana Bribery Case

More Regulators Eye Whistleblower Award Programs Hoping for Insider Tips

Two Chinese Megacities Lift Home Purchase Curbs to Attract Buyers

With China’s Property Market Struggling, India, Korea and Vietnam Are Hot

‘Seriously Underwater’ Home Mortgages Tick Up Across the US

Gen Z Is Relying on Debt More Than Millennials Did at This Age

What’s a Golden Visa and Where Can You Still Get One?

What Happens When a Happening Place Becomes Too Hot

Floods in East Africa Damp Mother’s Day Cut-Flower Shipments

Meet My A.I. Friends

Apple’s New iPad Ad Leaves Its Creative Audience Feeling … Flat

Tim Cook Can’t Run Apple Forever. Who’s Next?

‘It’s a Money Loser’: Tax Breaks for Data Centers Are Under Fire

Reddit Seeks New Users, Revenue to Keep the Momentum Going

Norfolk Southern Shareholders Vote Thursday to Keep or Fire CEO

BAE Systems Backs Guidance as Defense Spending Remains High

Moderna’s New RSV Vaccine Undercuts the Promise of mRNA

Sony and Apollo’s Plan for Paramount: Break It Up

Disney, Hulu and Max Streaming Bundle Will Soon Become Available

Brands Face Growing Pressure From Activist Shareholders Over LGBTQ Marketing

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Morning News: May 8, 2024
Posted by Eddy Elfenbein on May 8th, 2024 at 7:03 am

Sweden’s Central Bank Cuts Key Rate as Europe Moves Ahead of the Fed

BOJ Governor Says Early Rate Hike Possible if Prices Rise Faster Than Expected

Profits Are Booming—and That’s Shielding the Economy

JPMorgan Limits Segantii Exposure Amid Insider-Trading Case

FTX Has Billions More Than Needed to Pay Bankruptcy Victims

Hedge Fund Tycoon Loses Ruling Over $40 Million WWII Shipwreck Treasure

Americans Are Racking Up ‘Phantom Debt’ That Wall Street Can’t Track

Rents May Be Last Tamed in Inflation Fight

Billions in Chips Grants Are Expected to Fuel Industry Growth

Apple’s China iPhone Shipments Soar 12% in March After Discounts

Google’s Pixel Leaves Little Room to Breathe for Sony Phones

TikTok’s Legal Bet on the First Amendment

South Africa Moots New Coal-Plant Closure to Secure $2.6 Billion

The Company Preaching America’s Nuclear Revival

EU’s von der Leyen: China Must Be Stopped from Flooding EV Market

South Korea Plans $7 Billion Push to Pivot EV Battery Industry Away From China

Will Tesla’s EV Charging Slowdown Supercharge Competitors?

Companies Are Balking at the High Costs of Running Electric Trucks

Toyota Motor Projects Annual Profit Drop, Announces Share Buyback

Activist Investor Seeks to Force Out Norfolk Southern’s Management

Uber Bookings Miss on Early Holidays, Weak Regional Demand

Shopify Reports Higher Revenue, Sees Growth Slowing

Neutrogena Lost Dermatologists and Missed Out on the $42 Billion Beauty Boom

How Uniqlo’s ‘Millennial Birkin’ Is Beating Designer Bags

Premier League Strikes Deal With Fanatics on Trading Cards

Refinery29’s New Owner Plans to Cover Sports, Buy More Media Companies

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CWS Market Review – May 7, 2024
Posted by Eddy Elfenbein on May 7th, 2024 at 8:19 pm

(This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

It’s still early, but so far, May is looking a lot better than April. The S&P 500 has rallied for the last four days in a row. On Tuesday, the index briefly stuck its head above 5,200. More importantly, the S&P 500 has overtaken its 50-day moving average. That comes after 15 straight days of closing below it. Still, I’m not convinced that the coast is clear.

What makes me say that? On Friday, the government reported that the U.S. economy created 175,000 net new jobs last month. That’s a decent figure but it was well below expectations. Economists had been expecting a gain of 240,000. Also, the unemployment rate ticked up to 3.9%. That’s still low, but it’s the highest in over two years.

Oddly enough, the immediate impact of the jobs report has been positive—not because it’s good news itself but because it could push forward the Fed’s plans to cut rates, and that would be good for the market.

In other words, bad news is good news because it may spur the Fed to action. I realize that may sound odd, but welcome to Planet Wall Street.

In the jobs report, I was particularly disappointed to see that average hourly earnings increased by only 0.2% for April. That needs to improve. Over the past year, average hourly earnings are up 3.9%. Both numbers were 0.1% below expectations. These are crucial numbers for Wall Street because it may signal that consumers are close to being tapped out.

Here’s a look at the year-over-year increase in average hourly earnings. Notice how it’s increased but the rate of increase has consistently fallen.

The government also calculates a broader unemployment rate, called the U-6 rate, which includes “discouraged” workers. For April, the U-6 rate rose to 7.4% which is the highest since November 2021. The labor force participation rate stayed the same at 62.7%.

We’re also seeing more part-time workers shift to fulltime. Last month, the number of fulltime workers increased by 949,000 while part-time workers dropped by 914,000.

Here are some details about jobs growth in different sectors:

Consistent with recent trends, health care led job creation, with a 56,000 increase.

Other sectors showing significant rises included social assistance (31,000), transportation and warehousing (22,000), and retail (20,000). Construction added 9,000 positions while government, which had shown solid gains in recent months, was up just 8,000 after averaging 55,000 over the previous 12 months.

The recent gains had been heavily tilted to government and healthcare jobs. I’d like to see those gains broaden out.

Moses Sternstein points out that the jobs market isn’t so much growing as it’s “closing in the gaps.” The number of jobs that need to be done has stayed roughly the same but the number of people available to fill those jobs has been fewer than expected. As a result, job gains are modest while the unemployment rate is low. One effect of this has been higher wages for low-end workers.

That’s part of the reason why we’ve seen an imbalance in inflation. Services like haircuts have been hit hard by inflation while goods like new TVs haven’t moved that much. It all comes down to how much the product is dependent on labor costs.

So where does this put the Fed? That’s hard to say, but the futures market now thinks the first Fed rate cut will come in September. Prior to the jobs report, we were looking at a cut in November. There’s also a slight chance of another rate cut before the end of the year. Any rate cuts are good for stocks and that’s probably why the market has rallied the last few days.

We’re still in Q1 earnings season. Overall, the results have been quite good but only relative to expectations. Q1 earnings growth is currently tracking at 5.31%. That’s up from 2.99% one month ago.

So far, 77.4% of companies have beaten Wall Street’s earnings estimates while 59.1% have beaten on sales. A little more than half have beaten on both.

Stay tuned for next Wednesday, May 15. That’s when we’ll get the CPI report for April. There hasn’t been much improvement here in several months.

Apple’s Massive $110 Billion Share Buyback

Last week, Apple’s (AAPL) board of directors made news by announcing a new $110 billion share buyback plan. That’s an astounding amount of money. Of the ten largest share buyback announcements of all time, Apple owns six of them.

The plans also raised some questions about how a company ought to use its excess cash. Is a buyback plan the best thing to do with shareholders’ money? Is Apple no longer an innovation giant, or has it become a high-cash-flow value stock?

I have some thoughts about this. Ideally, I’d prefer to see a company pay out cash dividends. Apple increased its dividend by one penny to 25 cents per share. The best thing about this is that it gives shareholders the option of using their dividend payment to buy more shares, which is effectively what the buyback does automatically.

I also fear when a company holds too much cash. This often leads to unwise acquisitions. This is known as the Bladder Theory of Corporate Finance.

I have no problem with the idea of share buybacks, but I think they’re often abused. For example, too often share buybacks merely use shareholder money to buy an overpriced stock. This is what happened at Cisco (CSCO) for many years.

I also don’t like it when companies offer large stock options to their senior executives but share buybacks tend to mask how much money is at stake.

Here I have to give Apple credit. The company has gradually reduced the number of shares outstanding. In fact, over the past year, Apple’s profit declined but its earnings-per-share increased slightly thanks to fewer outstanding shares. According to MarketWatch, over the last 10 years, Apple has reduced its share count by 37%.

If you’re going to do a buyback, that’s the way to do it.

IES Holdings Revisit

Three weeks ago, I told you about IES Holdings (IESC). This is one of those great companies with an impressive track record that’s virtually ignored by Wall Street. Since 2012, it’s up 90-fold. Literally, IESC isn’t followed by a single analyst on Wall Street.

The company “provides infrastructure services including electrical, communications, low-voltage, network, AV, and security alarm systems to the residential, industrial and commercial markets.”

In the newsletter, I wrote: IESC’s next earnings report will probably be out in early May, but I can’t say what Wall Street’s consensus is since there isn’t one.” Well, on Friday, IESC released its earnings report, and it was a good one.

For its fiscal Q2, IESC’s revenues rose by 24% and its operating income was up 146%. Q2 earnings rose from $1.07 per share last year to $2.29 per share for this year. IESC has $106 million in cash and not a dime of debt. During Friday’s trading, shares of IESC jumped 18%. In two weeks, IESC gained 50%.

I certainly can’t take credit for predicting that would happen, but it does show you that there are plenty of good stocks to own that aren’t part of the Magnificent Seven.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.

Morning News: May 7, 2024
Posted by Eddy Elfenbein on May 7th, 2024 at 7:04 am

What India’s Addition to JPMorgan’s Bond Index Means

Chris Dixon’s Campaign to Overhaul Crypto’s Grifty Reputation

Revolut Launches UK Crypto Exchange as Digital Assets Recover

Behind Nigeria’s Arrest of Binance Employee, Claims of a Bribe Request

Wall Street Bonuses to Rise this Year as Deals Return

High-Tech Trading Firms Race to Grab Bond Market Turf

The Big Questions Hanging Over a Blackstone Fund

UBS Returns to Profit as CEO Ermotti Affirms Buyback Plans

Insider Trading Allegations Hit Asia’s ‘Block-Trade King’ for Global Banks

OpenAI Releases ‘Deepfake’ Detector to Disinformation Researchers

Amazon to Invest $9 Billion in Singapore Cloud Infrastructure

LMR Partners Adds US Oil Strategy in Commodities Push

Saudi Aramco Net Income Falls on Declining Crude Oil Volumes

China’s Solar Panel Giants Say Prices Are Near the Bottom

Third Point’s Loeb Says AI Will Boost Texas Power Producer Vistra

A New Kind of Power Company Will Put a Battery in Every Home

Tesla Autopilot Probe Escalates With US Regulator’s Data Demands

Apple Needs to Move the iPad Beyond the Toddler Stage

Disney Beats on Profit, Raises Outlook Despite Revenue Miss

Instacart, Uber Join Forces to Add Uber Eats to Instacart App

Let’s All Take a Deep Breath About China

China’s New Love of Coffee Is Coming for Yours

How the US Drives Gun Exports and Fuels Violence Around the World

Taylor Swift Draws Five Times as Many US Luxury Travelers as the Olympics

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Morning News: May 6, 2024
Posted by Eddy Elfenbein on May 6th, 2024 at 7:03 am

Oil Climbs as Gaza Tensions Rise, Saudi Arabia Hikes Prices

Global Gas Glut to Be Delayed by Another Year

Russia’s War Economy Starves Crucial Oil Industry of Manpower

Xi And Macron Meet to Confront Trade Tensions

China Is Buying Gold Like There’s No Tomorrow

Global Housing Shortages Are Crushing Immigration-Fueled Growth

What It’s Like to Be a Regional Fed President On the Road

At $2 Million Per Minute, Treasuries Mint Cash Like Never Before

Lamborghini Bros No More: Crypto Is Creating a New Wealth Effect

Bill Gross Is the Bond King, But Diversification Is Emperor

Italy’s White-Collar Mafia is Making a Business Killing

Credit Suisse’s Last CEO Koerner to Leave UBS in Coming Weeks

JPMorgan’s Top China TMT Banker Crystal Zhu Said to Join Morgan Stanley

Buffett Praises Apple After Trimming It, Drops Paramount Stake

Elon Musk Is Astonished By Warren Buffett’s Berkshire Hathaway Amassing As Much Cash As Tesla CEO’s Wealth: ‘Wow’

The Oracle of Omaha warns about AI: What Buffett said at Berkshire

How Bad Is A.I. for the Climate?

Tensions Rise in Silicon Valley Over Sales of Start-Up Stocks

Qualcomm’s Smartphone Future Looks Brighter With AI

China Makes Cheap Electric Vehicles. Why Can’t American Shoppers Buy Them?

Li Auto Shares Gain on Strong L6 Orders

Boeing’s Big Space Test: Using Starliner to Ferry NASA Astronauts

Australia’s Qantas to Pay $79 Million to Settle ‘Ghost Flights’ Case

How Online Shopping Is Saving the Bricks-and-Mortar Store

Target Is Taking Its Popular In-House Apparel Brand Abroad

Howard Schultz Urges Starbucks to Fix its U.S. Business

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Morning News: May 3, 2024
Posted by Eddy Elfenbein on May 3rd, 2024 at 7:03 am

Problems Mount for Group of Seven’s Price Cap on Russian Oil

Oil Companies Expand Offshore Drilling, Pointing to Energy Needs

Biden, BP and the High-Stakes Sequel to Deepwater Horizon

Drought to Deluge: Eastern Africa Bears Brunt of Climate Change

A Billionaire Wanted to Save 1 Trillion Trees by 2030. It’s Not Going Great

Geopolitics Takes a Central Role in Supply Chains

The Treasurys Market Is Getting Squeezed From All Sides

Traders Pull Forward First Full Fed Rate Cut to November Ahead of Jobs

The April Jobs Report

HSBC Has No Plans to Dispose of Further Businesses, Chairman Says

‘Your Fund Is Under Attack’: BlackRock Fights to Repel Saba Raid

What Will Warren Buffett Bet on Next?

Even the World’s Most-Envied Retirement Plan Is Falling Short

Calls to Divest From Israel Put Students and Donors on Collision Course

Utah Lights An Innovative Path To Matching Benefits With Work Realities

Carvana Father-Son Duo Make $11 Billion in 3,000% Stock Rebound

Google, Meta and Microsoft Apparently Didn’t Get the ‘Monopoly’ Memo

Google Employees Tune Out Antitrust Threat as Trial Comes to a Head

Apple Rallies on Upbeat Forecast, Record-Setting Buyback

Boeing’s Latest Trouble Is a Jet Part Caught Up in Russia Sanctions

Sony, Apollo Propose $26 Billion Deal for Paramount Global

Startups Go to Hollywood: AI Movies Aren’t Just a Gimmick Anymore

The Rise of Food Robots Butchering Cows and Packing Veg

Starbucks Is Running Out of Americans to Drink Its Expensive Coffee

Jean Paul Gaultier Owner Puig Shares Rise on First Day of Trading

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Morning News: May 2, 2024
Posted by Eddy Elfenbein on May 2nd, 2024 at 7:07 am

Australia’s Trade Surplus Narrows as Households Defy High Rates

China’s Climate Envoy Has an Economic Case to Make in Washington

Biden Calls Ally Japan ‘Xenophobic’ Along With China, Russia

Japan Likely Spent About $23 Billion in Latest Yen Intervention

Powell Keeps Rate Cuts on Table But Leaves Timing Less Certain

You Can’t Call Jerome Powell a Big Teaser

What Will It Take for the Fed to Lower Rates?

In Jamie Dimon’s America, the Stock Market Has Already Voted

Wall Street Seizes Opportunity to Gut SEC Trading Surveillance

The State of Crypto Is Anything But Strong

Why Banks These Days Are So Excited About Being Boring

Blackstone Taps Vast Source of Cash in $1 Trillion Credit Push

NYSE-Parent ICE’s Profit Rises on Record Surge in Energy Market Volatility

Strongest U.S. Challenge to Big Tech’s Power Nears Climax in Google Trial

The Judge Deciding Google’s Fate

Why Megacorporations Shouldn’t Overestimate Their Monopoly Power

Musk’s Starlink Persists in Unauthorized Areas Despite Shutdown Warnings

Huawei Secretly Backs US Research, Awarding Millions in Prizes

Intel Bets $28 Billion Comeback on High=Tech US Chip Designs

BYD’s First-Quarter Story Is in The Margins

Apple’s Earnings Come With a Low Bar and Big Buyback Hopes

Shell Beats Forecasts on Gas-Trading Resilience; Launches $3.5 Billion Buyback

Moderna Posts Quarterly Sales Beat, Smaller Loss than Expected

Novo Nordisk Hikes Guidance as Weight-Loss Drug Sales Surge. Why the Stock’s Falling

Peloton CEO McCarthy to Step Down; Firm to Cut 15% of Workforce

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Morning News: May 1, 2024
Posted by Eddy Elfenbein on May 1st, 2024 at 7:05 am

South Korea’s Export Growth Accelerated in April

Australia’s Manufacturing PMI Shows Signs of Recovery

Fed to Signal Delay of Interest-Rate Cuts

The Fed Won’t Climb Down Yet. Others Can’t Wait

Banks Rent Rivals’ Balance Sheets to Skirt Capital Rules

NYCB’s Results Are Better Than Worst Fears After Rocky Quarter

Wanted: Megabank Chief Willing to Work for Half Pay

Barclays Begins Implementing Job Cuts Across Investment Bank

He Lost $36 Billion in a Week. Now Bill Hwang Is Fighting to Avoid Prison

Binance Crypto Founder Zhao Sentenced to Four Months in Prison

Bulgarian Distrust of Russia Simmers Over a Black Sea Oil Terminal

Coal Is Proving to Be a Tough Habit to Kick

BP Bets Big, Again, On the Gulf of Mexico

A Yeast-Like Bacteria Can Cut Carbon Emissions While Creating Sustainable Aviation Fuel and Sneakers

How Sewage Is Helping Along the Energy Transition

China’s Electric Cars Keep Improving, a Worry for Rivals Elsewhere

Tesla Axes Supercharger Team in Blow to Broader EV Market

Will GM Regret Kicking Apple CarPlay off the Dashboard?

Elon Musk vs. Jeff Bezos Is America’s New Moon Race

The Ozempic Effect: How a Weight Loss Wonder Drug Gobbled Up an Entire Economy

CVS Tumbles as Rising Medical Costs Hit Profit Forecast

J&J Advances $6.475 Billion Settlement of Talc Cancer Lawsuits

AI Is Helping Automate One of the World’s Most Gruesome Jobs

KFC Owner’s Sales Fall for First Time Since 2020

Starbucks Posts First Sales Drop Since 2020 During Global Pullback

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CWS Market Review – April 30, 2024
Posted by Eddy Elfenbein on April 30th, 2024 at 5:48 pm

(This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

T.S. Eliot famously wrote that “April is the cruelest month.” Well, this April wasn’t a very kind one for investors. (By the way, Eliot was a Lloyd’s Bank employee.)

The S&P 500 fell 1.6% today and it was down 4.2% for the month. This snapped the market’s five-month winning streak. The Dow had its worst month since September 2022. In retrospect, we had a charmed market from November through March. It was bound to come to an end.

As it turned out, the S&P 500 reached its closing peak on the final trading day for March, which was the day before Good Friday (Maundy Thursday, to be more precise).

The bulls have clearly been on the defensive this month, and I don’t think the coast is clear just yet. The S&P 500 is still below its 50-day moving average (the blue line). It may soon come up against its 200-day moving average (in green). These aren’t good omens.

Interestingly, defensive sectors like Consumer Staples and Healthcare have started leading the market recently. That comes after an extended period of lagging the market. Defensive sectors typically shine when investors get nervous, and that’s clearly what’s happening. In fact, I wouldn’t be surprised to see defensive sectors start to the lead the market for several months. One of my favorite investing quotes comes from Michael Gayed: “There are no gurus, only cycles.”

It’s true. Consider a boring consumer stock like JM Smucker (SJM). It’s been running against the Magnificent 7 cycle for a long time. The jelly stock is currently going for 11 times next year’s earnings, and the dividend yields 3.7%. Smucker has increased its dividend for the last 26 years in a row. I get it. Smucker isn’t that exciting, but at some point, a company that owns Twinkies and Meow Mix has a certain future.

We’re in the middle of Q1 earnings season. The overall results are improving but this hasn’t been a terribly strong season for Wall Street. Q1 earnings growth is currently tracking at 3.4%. That’s kinda blah.

Shares of Starbucks (SBUX) got dinged after its earnings report fell short of expectations. It’s rare to see SBUX miss.

The only bright spot of this earnings season is that many companies are exceeding their very low expectations. Of the companies that have reported earnings so far, 78.8% have beaten their earnings estimates while 59.6% have beaten on revenue. Slightly more than half (52.7%) have beaten on revenue and earnings.

Financials stocks are providing a big help. Earnings growth for financials is currently running at 7.94%, but that’s up from 3.22% one month ago. Technology is another big winner. Earnings growth for that sector is running at 21.79%.

For Q1, the S&P 500 is expected to earn $54.50 per share. That’s the index-adjusted figure. For all of 2024, the index is expected to earn $240.74 per share. That’s up 9.78% over last year. That translates to a forward P/E Ratio of 21. That’s elevated but not extreme.

The Fed Will Continue to Hold Rates Steady

In addition to all the earnings reports, the Federal Reserve started its two-day meeting today. I’ll spoil the drama for you: the Fed won’t be making any changes to interest rates this meeting. According to the futures market, traders are placing a 99.5% chance that the Fed will leave interest rates alone. That seems low.

It will be interesting to hear what Fed Chairman Jerome Powell has to say about the economy and the path for inflation. I suspect that the Fed wants to cut rates, but the recent data isn’t cooperating. Powell said that the economic numbers have “clearly not given us greater confidence” that inflation is falling back to the Fed’s 2% range.

The conventional wisdom has shifted markedly this year. Not that long ago, it was widely assumed that the Fed would be cutting rates by now. Not only is the Fed not cutting, but it looks like the Fed won’t cut rates until September, and that could be the only rate cut this year. Tomorrow’s policy statement will be released at 2 p.m. ET.

It seems that it was relatively easy to get inflation to fall from 9% to 3% but getting it from 3% to 2% is proving to be quite difficult. In fact, I wouldn’t be surprised if the next move from the Fed is a rate hike.

We’re in an unusual period where the Fed has done nothing to interest rates, but that nothing has reflected a big change in the Fed’s outlook. The Fed has changed from expecting to cut rates soon to a wait-and-see stance.

Indeed, on Friday, we got more evidence that inflation continues to be stubborn. The Commerce Department released its PCE price data for March. This is important because it’s the Fed’s preferred measure of inflation, but the downside is that the data appears much later than the CPI reports.

For March, the PCE price index increased by 0.3%. The core PCE increased by 0.3% as well. Over the last year, the headline PCE price index has increased by 2.7% which was 0.1% above expectations. The core PCE price index increased by 2.8% over last year, and that also was 0.1% above expectations.

The PCE report also showed that personal spending increased by 0.8% in March. Wall Street had been expecting an increase of 0.7%. Personal income increased by 0.5% which matched expectations. The savings rate dropped to 3.2%. That’s down 2% over the last year.

The other major economic report we got recently was last Thursday’s GDP report. That was our first look at Q1 GDP, and it wasn’t very good. For the first three months of this year, the U.S. economy grew at a 1.6% real annualized rate. That was below consensus for 2.4%.

In other words, inflation is running higher than expected and economic growth is lower than expected. It looks as if we’ve entered a period of stagflation.

Within the GDP report, I like to look at the level of consumer spending because that’s the key driver of the economy. For Q1, consumer spending increased by 2.5%. That’s down from the 3.3% rate for Q4. Wall Street had been expecting an increase of 3%. One hopeful sign is that residential investment jumped 13.9% for Q1. That was its largest gain in more than three years.

The next big test for the market comes this Friday with the April jobs report. The consensus on Wall Street is that the U.S. economy added 240,000 net new jobs last month. That’s down from 303,000 jobs added in March (although that number will be revised on Friday). The unemployment rate is expected to remain at 3.8%.

I’ll be paying close attention to the numbers for wages. Those numbers have been getting better, but inflation continues to take a sizeable bite out of so many wage increases. For Friday, Wall Street expects to see a gain in average hourly earnings of 0.3%. For the past 12 months, the expectation is that earnings increased by 4.0%.

Is the regional banking crisis still on? That’s a good question. My tentative answer is “probably not,” but we got a jolt on Friday when the Federales seized Philly-based Republic First Bank (FRBK). This was the first bank failure this year. Republic First is not to be confused with First Republic which went kablooey last year.

Two years ago, the bank was going for about $5 per share. Today it closed at one penny.

It’s important to stress that Republic First Bank was a relative small fry. They had $4 billion of deposits and $6 billion in assets.

It’s actually kind of cool how the FDIC seizes on a busted bank. They’ll shut the bank on a Friday, do a full accounting, then move to sell the bank as soon as possible. They’ll often offer a neighboring bank a sizable discount to take on all the deposits.

The winner this time was Fulton Bank (FULT) of Lancaster, PA. By Saturday, the FDIC got Republic First’s 32 branches to open under the Fulton name. On Monday, shares of Fulton gained 7.5%. This is nowhere close to Silicon Valley Bank or First Republic which had assets of more than $200 billion.

The problem with a banking crisis is that you don’t know what you don’t know. You’ll think Bank A is well protected only to learn that it was heavily exposed to a particular sector of the economy that’s cratering. A bank can be perfectly fine but once investors start demanding their deposits, it can quickly become not so fine.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.

Morning News: April 30, 2024
Posted by Eddy Elfenbein on April 30th, 2024 at 7:04 am

Asia’s Major Export Engines Show Signs of Strength

China’s Leaders Hint at New Plan to Fix Biggest Drag on Economy

Taiwan’s Economic Growth Beats Expectations in Strong Start to Year

BOJ Accounts Suggest Japan Intervened Monday to Support Yen

Europe’s Economic Laggards Have Become Its Leaders

Fed to Signal It Has Stomach to Keep Rates High for Longer

High Fed Rates Are Not Crushing Growth. Wealthier People Help Explain Why

The Fed’s Quantitative Easing Program Cost Too Much

Trump’s Plans for the Fed Make No Sense, Even for Him

HSBC CEO Quinn Unexpectedly Steps Down After Almost 5 Years

Binance and CZ’s Fortunes Are Set to Grow, Jail or no Jail

Google CEO Sundar Pichai Nears Billionaire Status Powered by AI Boom

PayPal Forecasts Decline in 2024 Profit Amid ‘Transition Year’

How Congress Is Trying to Fix Air Travel

U.S. to Require Automatic Emergency Braking on New Vehicles in 5 Years

European Carmakers Miss Forecasts in Sluggish Start to the Year

Hydrogen Offers Germany a Chance to Take a Lead in Green Energy

China Climate Chief to Visit US With Aim to Bolster Key Ties

America’s Troubled Offshore Wind Push May Yet Take Off

UnitedHealth Stock Sales Prompt Lawmakers to Call for SEC Probe

Walmart Closes Health Centers, Telehealth Unit Over Rising Costs

Walmart Takes On Trader Joe’s and Whole Foods With New Premium Brand

Coca-Cola Raises Outlook as Organic Revenue Beats Estimates

McDonald’s Pushes Value as Consumers Grow Skittish on Spending

Paramount Faces a Mountain of Questions

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