Stocks are slightly higher to start the week with banking institutions remaining the major focus for investors following the latest updates regarding Credit Suisse (CS) and First Republic Bank (FRC).
Banking Update
UBS Group (UBS) agreed to takeover its long time rival Credit Suisse for around $3.25 billion following Credit Suisse’s liquidity and short-term debt issues. Credit Suisse shares lost more than 50% following the acquisition news while UBS stock rose just under 5%. Credit Suisse additional tier 1 (AD1) bondholders will be left with virtually nothing as Swiss regulators ordered AT1 debt to be written down to zero. Shareholders will meanwhile receive nearly $3.25 billion under the UBS takeover.
Meanwhile, First Republic Bank saw its shares crash another 31% on Monday with its fate remaining uncertain as its credit rating was cut from BB+ to B+ by Standard & Poor. JP Morgan’s CEO Jamie Dimon is leading talks with other big banks to continue aid for First Republic Bank as the $30 billion already deposited will not be enough. Despite some bad apples with Silvergate, Silicon Valley Bank, Credit Suisse and First Republic Bank, leading banks such as JP Morgan Chase, Morgan Stanley, and Goldman Sachs saw their shares rise Monday with other big banks seeing their share price remain mostly unchanged.
Economic Data
With massive uncertainty surrounding the banking system and inflation remaining higher than normal, investors are eagerly awaiting what the Federal Open Market Committee decides for its next rate decision. Currently markets are expecting another rate hike despite the concerns following turmoil at Silvergate, SVB, and First Republic.
A small, 25 basis point, increase is expected while some financial institutions such as Goldman Sachs are predicting the Federal Reserve to hold rates steady. Any talks of a rate decrease have evaporated at the moment at least with inflation data from the CPI report last week still showing higher price increases than the Fed's target.
Outside of the interest-rate decisions, new economic data is highlighted by existing and new home sales releasing Tuesday and Thursday morning. Existing sales are projected to increase from 4 million to 4.16 million sales in February while new sales are expected to drop from 670,000 to 650,000 sales. Lastly, initial unemployment claims are estimated to rise from 192,000 to 204,000 weekly claims.
Earnings
Quarterly earnings reports are relatively light this week but a good amount of high profile names are expected to releases financial results including Tencent Music (TME), Nike (NKE), GameStop (GME), Chewy (CHWY), Accenture (ACN), and General Mills (GIS).
All but Nike and Accenture are expected to see an improvement in earnings-per-share (EPS). Accenture is expected to see a slight decrease from $2.53 a year ago to $2.50 for the first quarter of 2023. Nike’s EPS is meanwhile projected to fall from $0.87 to $0.55 but see revenue improve slightly from a year ago.
Economic Events this Week
Tuesday
- 10:00 ET - Existing Home Sales
Wednesday
- 07:00 ET - MBA Mortgage Applications Index
- 10:30 ET - EIA Crude Oil Inventories
- 14:00 ET - Fed Rate Decision
Thursday
- 08:30 ET - Continuing Claims
- 08:30 ET - Initial Claims
- 10:00 ET - New Home Sales
Friday
- 08:30 ET - Durable Orders
Earnings Reports This Week
Tuesday:
Before the bell:
TME, HUYA, CSIQ, ONON
After the bell:
NKE, GME, AIR, ARRY
Wednesday:
Before the bell:
BZUN, WOOF, WGO, OLLI
After the bell:
CHWY, KBH, MLKN, PHR, SCS
Thursday:
Before the bell:
ACN, GIS, DOOO, CMC, DRI, FDS
After the bell:
AUY, OXM, CURV, HRTX
