MARKET WRAPS
Watch For:
EIA Weekly Petroleum Status Report; FOMC rate decision and projections; Canada New Housing Price Index
Today's Top Headlines/Must Reads:
- What to Watch From the Fed Meeting
- Bank Failures Train Spotlight on Shortcomings in Risk Management
- Apple, Microsoft Dominate U.S. Markets After FAANG Trade Fizzles
- First Republic Bank Taps Lazard for Help With Review of Strategic Options
- How the Last-Ditch Effort to Save Silicon Valley Bank Failed
Follow WSJ market coverage here
Opening Call:
Stock futures dipped on Wednesday as traders eyed the difficult rate-setting choice facing the Federal Reserve.
Futures markets are pricing in an 89% probability of a 25 basis point hike to a range of 4.75% to 5%.
"There'll be plenty of focus on whether the Fed hikes today, but just as important will be how they're looking at the current turmoil and whether they still expect any more rate hikes after today," Deutsche Bank said.
"Our U.S. economists think that the [European Central Bank's] decision last week offers a relevant blueprint for the Fed: raise rates in line with expectations, drop forward guidance, but signal a continued tightening bias," Deutsche added.
Across the pond, the U.K. inflation data showed price rises accelerating again and remaining in double digits. The Bank of England will deliver its rate decision Thursday.
"As inflation remains well above the BoE target, there's now a stronger case for the BoE to press ahead with a rate hike, even in a period of greater financial market uncertainty," Moneyfarm said.
"It will be interesting to see how the BoE and the Fed consider the dynamics between fighting inflation and managing financial stability. The ECB has already indicated that it sees no contradiction between those two goals," Moneyfarm added.
Stocks to Watch
Array Technologies was down 2.2%. It reported fiscal fourth-quarter profit and revenue that beat analysts' forecasts.
Diebold Nixdorf said that it secured $55 million in additional funds to support its near-term goals. Shares rose 40% in after-hours trading.
First Republic Bank rose 1.6% in premarket trading. The stock fell in after-hours trading Tuesday following a report from The Wall Street Journal that said the regional lender this week had hired Lazard to help with a review of strategic options that could include a sale, and tapped consultant McKinsey to assist with the bank's post-crisis structure.
GameStop said cost-cutting measures helped it record its first quarterly profit after seven consecutive quarters of losses. Shares rose almost 40% in premarket trading.
Luminar Technologies fell 7.9% to $7.12 after shares of the lidar company were downgraded to Sell from Neutral at Goldman Sachs with a price target of $5, the Fly reported.
Nike reported quarterly earnings and sales that beat Wall Street expectations but shares declined 1.6% in premarket trading as gross margins contracted.
Telesis Bio issued 2023 revenue guidance above estimates. Shares rose 10% in after-hours trading.
Market Insight
Fitch expects global market volatility to continue despite the government-brokered deal for UBS to acquire Credit Suisse likely easing concerns about a broader financial contagion.
"Investors and depositors are still trying to understand the magnitude of risks to the banking sector and...will remain jittery in the near term."
The rescue agreement, while positive, highlights the fragility of the banking sector and regulators' willingness to backstop additional risks, Fitch said.
The urgency of the deal also shows that despite regulators reaffirming Credit Suisse's capital position, they weren't certain the bank would be able to stem the loss of confidence, which could pose a more systemic risk, Fitch added.
Forex:
The Fed's likely hike of interest rates by 25bps should help the dollar recover, ING said.
However, the decision is "a close call," and dollar gains may be limited by the improved sentiment, ING added.
"There is room for the dollar to recover some ground on the back of a moderate hawkish surprise by the Fed. However, we are observing a gradual improvement in investor sentiment... which makes us tilt to a bearish short-term bias in the dollar."
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Sterling rose after U.K. inflation data was unexpectedly strong, with headline annual CPI increasing by 10.4% in February.
Economists polled by The Wall Street Journal had expected CPI to decline to 9.9%, from January's 10.1%.
Read U.K. Inflation Resumes Its Rise, Defying Expectations
Energy:
Oil prices were weaker in Europe ahead of the Fed decision.
Metals:
Base metals prices were mixed, while gold moved higher in early London trading, as investors looked to the Fed rate decision.
Iron Ore
Commonwealth Bank of Australia said the price of iron ore is likely to retreat to $100 a metric ton by the fourth quarter, pulled lower by soft Chinese steel demand.
"Current policy settings suggest that China's steel demand impulse should ease through 2023."
Although, financial turmoil in advanced economies could prompt China to direct more stimulus to infrastructure if its own annual growth target comes under threat, which would be positive for iron-ore prices, CBA said.
TODAY'S TOP HEADLINES
First Republic Bank Taps Lazard for Help With Review of Strategic Options
First Republic Bank is beefing up its adviser ranks as the troubled lender seeks to stay afloat and plan for a postcrisis future amid a trans-Atlantic crisis of confidence in the banking system.
The California bank this week tapped Lazard Ltd. to help with a review of strategic options that could include a sale, a capital infusion or asset trimming, according to people familiar with the matter. It also hired consulting firm McKinsey & Co. to help map out a postcrisis structure for the bank, the people said.
How the Last-Ditch Effort to Save Silicon Valley Bank Failed
Depositors were draining their accounts via smartphone apps and telling their startup networks to do the same. But inside Silicon Valley Bank, executives were trying to navigate the U.S. banking system's creaky apparatus for emergency lending and to persuade its custodian bank to stay open late to handle a multibillion-dollar transfer.
The depositors won the race. Regulators shut down SVB around the time a multibillion-dollar cash infusion was set to arrive, marking the second-largest bank failure in U.S. history.
Silicon Valley Bank's Former Parent Says FDIC Seized About $2 Billion of Its Cash
Silicon Valley Bank's former parent company can't access about $2 billion that it had deposited at the failed bank, after regulators froze the company's accounts and are exploring whether it should help shoulder costs associated with the bank's failure.
Lawyers for SVB Financial Group, the holding company that used to control the now-defunct bank, claimed during the company's first hearing in bankruptcy court on Tuesday that the Federal Deposit Insurance Corp. has improperly blocked access to cash stored in accounts it holds at the successor to Silicon Valley Bank.
TikTok CEO Shou Zi Chew Promises Firewall to Shield User Data
WASHINGTON-TikTok CEO Shou Zi Chew plans to offer a series of broad promises on platform safety and security at a much-anticipated congressional hearing on Thursday, according to his testimony.
Mr. Chew will pledge to keep safety on Chinese-owned TikTok a top priority-especially for teenagers-and also will promise to firewall U.S. user data from foreign access and keep the platform free from government interference.
Ares Forms $1 Billion Credit Secondary Venture With Mubadala
Ares Management Corp. and Mubadala Investment Co. have formed a joint venture to buy secondhand stakes in private-credit funds.
The partnership, anchored by the Abu Dhabi-based sovereign-wealth fund, will initially invest around $1 billion in deals involving portfolios acquired from investors in private funds and deals instigated by fund managers, according to a statement seen by The Wall Street Journal. The amount of capital made available for investment will increase as the credit secondary market expands, the statement said.
GameStop Shares Surge After It Posts Surprise Profit
GameStop Corp. shares surged more than 40% after the retailer said cost cutting helped it record its first quarterly profit after seven consecutive quarters of losses.
GameStop has been working to turn around its business for close to two years under the leadership of a revamped executive team and board of directors.
Nike Sales Jump as It Works Through Inventory Glut
Nike Inc. made progress working through the inventory glut that squeezed the sneaker maker last year, reporting a 14% jump in quarterly sales and raising its revenue growth target.
The sportswear company said its inventory increased 16% in the quarter ended Feb. 28 compared with the same period a year ago. Inventories had swelled by more than 40% in each of the prior two quarters.
What to Watch From the Fed Meeting
The Federal Reserve faces on Wednesday one of its thorniest policy decisions in years: whether to lift interest rates again to fight high inflation or hold them steady amid the most intense banking crisis since 2008.
The central bank will announce its decision at 2 p.m. Eastern time in a statement. Officials are also scheduled to release new interest-rate and economic projections. Fed Chair Jerome Powell is set to answer questions from reporters at 2:30 p.m. ET.
Bank Failures Train Spotlight on Shortcomings in Risk Management
As banks and regulators scurry to respond to the most perilous industry conditions since the 2007-08 financial crisis, experts say one persistent issue needs attention: risk oversight that's not always up to the job.
(MORE TO FOLLOW) Dow Jones Newswires
03-22-23 0618ET
