The economy is slowing. The financial system is wobbly. The FED is raising rates next week into a (likely) recession. Companies are laying people off and replacing them with AI.
What a time to be alive.
Market
Prices as of 4 pm EST, 4/27/23
Macro
In its first meeting under new governor Kazuo Ueda, the Bank of Japan (BOJ) decided to keep interest rates ultra-low.
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As expected, the central bank kept its yield curve control policy unchanged.
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It also scrapped guidance and announced a plan to review past monetary policy, setting the stage for future policy changes.
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The yen fell sharply on the announcement while government bonds reversed course higher.
Pending home sales in the US dropped unexpectedly in March, falling by 5.2%.
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It was the largest decline since September.
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Inventory is failing to keep up with demand as homeowners with low mortgage rates remain reluctant to sell.
The US economy expanded at a slower pace than expected in the first quarter with GDP rising just 1.1%.
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Despite the strongest increase in consumer spending (3.7%) in 2 years, a sharp decline in business investment and a drop in inventories were a drag on growth.
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Meanwhile, the personal consumption expenditures index—the Fed’s preferred measure of inflation—increased by 4.2% (from 3.9% in Q4), well above the central bank’s 2% target.
Stocks
Cost-cutting measures across US companies continue by way of layoffs.
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After laying off 700 workers in November, Lyft announced it will eliminate over 1,000 additional jobs (~26% of its workforce).
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Dropbox said it plans to cut 500 jobs (~16% of employees) to combat slowing growth and economic headwinds.
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Gap Inc—which cut 500 corporate positions in September—said it would eliminate another 1,800 jobs as a part of a broad restructuring to become more nimble.
US stocks rallied yesterday as investors looked past a weak first-quarter GDP report.
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Fueled by better-than-expected earnings from Big Tech, equities enjoyed their best day since January 6.
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The S&P 500 and Nasdaq rose 2% and 2.4%, respectively.
BofA’s Michael Hartnett, however, thinks the rally could soon come to an end as corporate profits drop and the labor market fizzles.
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He warns that despite the risk of a hard landing for earnings, markets are currently pricing just a 4% decline in profits.
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Hartnett expects interest rates will remain high and advised clients to sell the S&P 500 above 4,200, which is less than 2% higher than yesterday’s close.
Energy
OPEC is at odds with the International Energy Administration (IEA).
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The group claims the agency is stoking volatility after warning production cuts risked fueling inflation.
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The cartel also criticized the IEA for its call to halt investments in new oil and gas projects.
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Meanwhile, oil prices are on track for the 6th straight month of losses.
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That’s the longest such streak in more than 8 years.
Earnings
Here are some of yesterday’s highlights:
Amazon (NASDAQ:AMZN): $0.31 EPS (vs. $0.20 expected), $127.36 billion in sales (vs. $124.7B expected).
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Sales for Amazon Web Services topped analysts’ estimates but marked a deceleration from the previous quarter.
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Shares initially popped but reversed course after a warning over ongoing weakness in cloud revenue growth.
Intel (NASDAQ:INTC): -$0.04 EPS (vs. -$0.15 expected), $11.7 billion in sales (vs. $11.04B expected).
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Earnings and revenue dropped 133% and 36% YoY, respectively.
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It was the 5th straight quarter of declining sales and the largest quarterly loss in company history.
What we’re watching today:
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Exxon Mobil (NYSE:XOM)
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Chevron (NYSE:CVX)
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Sony Group (NYSE:SONY)
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Colgate (NYSE:CL)
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Charter Communications (NASDAQ:CHTR)
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TC Energy (NYSE:TRP)
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W.P. Carey (NYSE:WPC)
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Ares Management (NYSE:ARES)
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Cameco (NYSE:CCJ)
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Avantor (NYSE:AVTR)
Top Headlines
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Chinese distrust: A campaign by Chinese authorities could raise risks for Western companies operating in the region.
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Smartphones: Sony’s president predicts weakness in the smartphone market will continue over the next year.
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SAFE Banking Act: Cannabis firms could get a boost from the reintroduction of a bill that would provide much-needed banking services to the industry.
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Punked: Jerome Powell spent 16 minutes on a call with Russian pranksters posing as Ukrainian President Volodymyr Zelensky.
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AI disclosures: The EU plans to require AI tools to disclose copyright materials used in building their systems.
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Fed talk: According to a language processing model, Fed sentiment is increasingly dovish.
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Egg relief: Wholesales egg prices are expected to drop to $1 in the coming weeks for the first time since 2021.
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China housing: Individual mortgages in China grew by the smallest amount on record in Q1.
Crypto
Prices as of 4 pm EST, 4/27/23
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Compliance: Without a hint of irony, SEC chairman Gary Gensler said “the law is clear” for crypto exchanges.
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Crypto-friendly: Hong Kong regulators are urging banks to work with and provide financial services to properly licensed crypto firms.
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HODL: Long-term Bitcoin holders are profitable for the first time in nearly a year.
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Record fine: The CFTC imposed a $3.4 billion civic penalty in the largest-ever fraud case handled by the agency.
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Binance Japan: Binance will begin operations in the Japanese market in July.
Deals
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Oil sands: Suncor will buy TotalEnergies’ Canadian oil sands operation for $4.1 billion.
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Fitness IPO: Personal training and hardware startup Forme has priced its US IPO at $8 per share, the top end of its marketed range.
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British boutique: Deutsche Bank will buy UK broker Numis for $511 million in a surprise deal.
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Sportsbook: FanDuel owner Flutter won shareholder support for a US listing.
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Russian exit: Mercedes-Benz completed its exit from Russia this week after selling shares in its Russian subsidiaries to a local car dealer chain.
