Today’s bulletin is from Brian Sozzi, executive editor of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi is at LinkedIn. Read this and more market news on the go with Yahoo finance app.
No doubt Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and everyone remotely connected to the field of financial services could use a drink (or five) after a crazy week in the business world.
Credit Suisse (CS), long troubled, got $54 billion from the Swiss government. First Republic (FRC), which is melting fast, got a $30 billion uninsured deposit injection by 11 rival banks. Silicon Valley Bank (SIVB) assets are still being bought by the FDIC after its collapse a week ago.
Banking sources told Yahoo Finance’s newsroom that more bank seizures could be on the way. The KBW Bank ETF is down 29% for the month.
And yet analysts still love financial stocks!
Did we mention there’s a Federal Reserve meeting next week? The one where Nomura (NMR) thinks the Fed will cut interest rates.
Here are a few things that caught our attention during this wild week on Wall Street:
1. A Credit Suisse buyer?
UBS (UBS) could step in to buy struggling Credit Suisse, JPMorgan analyst Kian Abouhossein speculated in a note to client.
“We see a resolution scenario as the most unlikely in our opinion and an intervention with the 3rd option of an acquisition as the most likely scenario, especially by UBS,” the analyst said.
Just what UBS needs in the midst of a banking crisis – to take over the assets and culture of a deeply troubled rival.
2. Relegation of the First Republic
Wedbush analyst David Chiaverini lowered his First Republic rating to Neutral from Outperform and sees the stock drop to $5. First Republic shares changed hands at $25 on Friday afternoon.
“We believe that a distressed merger and acquisitions sale could result in minimal residual value, if any, for holders of common stock due to the FRC’s significant negative tangible book value after taking into account the fair value marks on its borrowings and titles,” said Chiaverini. “We note that assets of an M&A target must be marked at fair value in an acquisition.” Brutal.
3. Kellogg CEO sees no change to end of food stamp benefits
Kellogg CEO Steve Cahillane told me (video above) that he doesn’t see people spending less because pandemic emergency food stamp payments ended earlier this month. These checks put an extra $95 a month in the hands of low-income consumers.
4. FedEx Layoffs
FedEx executives casually slipped into their earnings call, almost giddily, that they were cutting jobs to finally deliver better profits to investors. “By the end of this fiscal year, we expect US headcount to drop by approximately 25,000 year-over-year,” the executives said.
5. Fed Rate Cut Call
The future favors the bold. To that end, Nomura strategist Aichi Amemiya was the first on the street to abandon a rate cut call ahead of the Fed’s next policy meeting. His view: “In reaction to the looming risks to financial stability, we now expect the Fed to cut rates in 25 basis point increments at the March FOMC meeting, compared to where we previously expected a 50 basis point increase since February, 24”.
6. Lawmakers Eye Bank Rules
Representative Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, came out attacking the banks in a chat with Jennifer Schonberger of Yahoo Finance. “This is all about regulation, and it’s all about the fact that at some point there was great advocacy to make sure that regional banks and smaller banks didn’t have to comply with some of the rules that maybe didn’t allow them to come in. [this situation]”Waters said on Yahoo Finance Live. The read: The return of tighter banking regulation looms.
7. Banks to the rescue
Curious to know how the $30 billion First Republic deal came to fruition? The Yahoo Finance team of Dan Fitzpatrick and David Hollerith has you covered.
Brian Sozzi is the executive editor of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi is at LinkedIn.
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