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U.S. stock index futures edged higher on Wednesday after a Wall Street selloff in the previous session, with investors a...
05/03/2023

U.S. stock index futures edged higher on Wednesday after a Wall Street selloff in the previous session, with investors awaiting more economic data ahead of the outcome of a Federal Reserve policy meeting later in the day.

Major U.S. stock indexes dropped more than 1% on Tuesday as regional bank shares tumbled and as investors tried to gauge how much longer the Fed may need to hike interest rates.

Regional lenders such as PacWest Bancorp and Western Alliance (NYSE:WAL) Bank continued their weakness in premarket trading on Wednesday, with their shares down 10.5% and 6.7%, respectively.

While the Fed is widely expected to deliver a 25-basis point interest rate hike, investor focus will be on cues if further hikes are on the cards if inflation remains high.

Major global central banks have embarked on an aggressive interest rate hike campaign, with the Fed already having hiked its benchmark rates nine times by 475 basis points to a range of 4.75%-5.00% since March 2022.

Graphic: U.S. Fed interest rate increases - https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdqqgepm/Fed%20rate%20hikes.png

Amid concerns about the banking sector, inflation above the U.S. central bank's 2% target level and a still-strong labor market, Fed Chair Jerome Powell's press conference will be parsed for any signs of rate cuts later this year.

Ahead of the Fed's policy decision, investors will monitor U.S. ADP National Employment report due before the opening bell. The data is expected to show private payrolls likely increased by 148,000 jobs in April, higher than the 145,000 additions in March.

The Institute for Supply Management will also release its non-manufacturing PMI after markets open. It likely rose to 51.8 in April from 51.2 in March. S&P Global (NYSE:SPGI)'s final reading of Composite and Services PMI for April is also on deck.

Meanwhile, top U.S. Senate Republicans on Tuesday called on President Joe Biden to accept their party's debt-ceiling package or make a counter-offer, while a top Democrat said the Senate might try to advance a "clean" debt-ceiling hike next week.

CVS Health Corp (NYSE:CVS), Phillips 66 (NYSE:PSX), Exelon Corp (NASDAQ:EXC) and Yum Brands Inc are among companies set to report quarterly results on Wednesday.

Analysts expect quarterly earnings for S&P 500 companies to decline 1.4% from a year earlier, according to IBES data from Refinitiv, compared with a 5.1% drop expected at the start of April.

At 5:41 a.m. ET, Dow e-minis were up 17 points, or 0.05%, S&P 500 e-minis were up 3 points, or 0.07%, and Nasdaq 100 e-minis were up 15 points, or 0.11%.

Ford Motor (NYSE:F) Co slipped 0.8% as the automaker said it was cutting prices on its Mustang Mach-E electric vehicle and reopening orders.

Advanced Micro Devices (NASDAQ:AMD) slumped 5.7% after the chipmaker forecast quarterly sales below estimates due to a weak PC market, pushing rival Intel Corp (NASDAQ:INTC) up 2.1%.

The Federal Reserve gears up to reveal its latest rate decision as investors eagerly await comments from the U.S. centra...
05/03/2023

The Federal Reserve gears up to reveal its latest rate decision as investors eagerly await comments from the U.S. central bank's chair Jerome Powell. A battle begins between two leading activist investors, while the pressure on midsize lenders fails to abate.

1. One more and done?

The Federal Reserve is set to deliver its latest policy decision later today, with the U.S. central bank widely tipped to raise interest rates by another 25 basis points.

Should this come to pass, the Fed will have hiked borrowing costs from 0% to a floor of 5% in the span of about a year. The unprecedented scale and pace of these increases highlight just how desperate policymakers have been to bring down soaring inflation.

The toll of the tightening is starting to show. The U.S. banking system is creaking, while recent data suggests that the labor market is cooling and the economy as a whole is slowing.

Yet, price growth remains stubbornly elevated. So, investors will be keen to find out if the Fed will now push pause on its rate-rising campaign and, if so, for how long.

2. Futures edge up ahead of Fed decision

U.S. stock futures pointed higher on Wednesday, but stayed broadly near the flatline, as investors await the Fed decision and any commentary around the central bank's future plans.

At 04:53 ET (08:53 GMT), the Dow futures contract was up by 39 points or 0.12%, S&P 500 futures traded 6 points or 0.15% higher, while Nasdaq 100 futures moved up 23 points or 0.18%.

Comments on the path ahead for borrowing costs and the state of the financial system will be in focus when Fed chair Jerome Powell makes his scheduled remarks following the interest rate announcement later today.

3. Hindenburg's new target

Billionaire Carl Icahn's publically-listed fund saw its shares shed nearly a fifth of their value in one day on Tuesday after it became the latest target of short-seller Hindenburg Research.

The Nathan Anderson-led Hindenburg alleged in a report that Icahn Enterprises LP (NASDAQ:IEP) was inflating the value of its assets, adding that the fund is trading at a heavy premium relative to its peers. Hindenburg claimed that IEP was driving its shares higher by, in effect, using sales of newly issued stock to pay out to old investors a frothy cash dividend of around 16% - the highest of U.S. large-cap firm, according to data cited by Reuters. Icahn, meanwhile, receives his dividend in stock rather than in cash, Hindenburg said.

Icahn, an activist investor whose storied Wall Street career has seen him press big-name brands into making sweeping changes, stood by the fund's public disclosures. He also hit out at Hindenburg, saying its allegations were a self-serving ploy to boost its own short position.

Such a public feud is nothing new for Hindenburg. Earlier this year, a report from the New York-based group wiped out $100 billion in value from shares in India's Adani Group (NS:ADEL) and, just last month, payments firm Block, Inc. (NYSE:SQ) was in its crosshairs.

4. U.S. regional lenders slump

Midsize U.S. banks saw their shares fall sharply on Tuesday, in a sign that the rescue of First Republic Bank has not yet assuaged all concerns over the state of the banking sector.

A broader index of regional lenders slipped to its weakest close since 2020. Among the biggest decliners were Western Alliance (NYSE:WAL), which dropped by 15%, and Los Angeles-based PacWest Bancorp (NASDAQ:PACW), where shares plummeted by 28%. The two have now lost over $5B in market value this year and are lower in premarket trading on Wednesday, as comparisons are drawn with recently failed peers like Silicon Valley Bank and First Republic.

On Monday, JPMorgan (NYSE:JPM) swooped in to snap up most of First Republic's operations after the San Francisco-based lender was seized by regulators. At the time, JPMorgan chief Jamie Dimon said that "this part of the crisis is over."

But investors have yet to be totally persuaded and remain on the lookout for another weak link in the financial system.

5. Qualcomm headlines earnings rush

A fresh batch of results from U.S. companies is due out today, highlighted by mobile chip supplier Qualcomm (NASDAQ:QCOM).

Investors hope that the San Diego-based group's returns, which are expected out after close of trading, will provide some insight into the state of the country's smartphone market.

Economic concerns and stubbornly elevated inflation have impacted consumer spending, which is causing stockpiles of handset parts at Qualcomm's customers to grow. As a result, analysts worry that demand for Qualcomm's semiconductors may soften.

Other key corporate names scheduled to release their latest earnings on Wednesday include pharmacy chain CVS (NYSE:CVS) and cosmetics brand Estee Lauder (NYSE:EL).

Greater Toronto Area (GTA) home prices increased in April from March as new listings posted a steep annual decline, addi...
05/03/2023

Greater Toronto Area (GTA) home prices increased in April from March as new listings posted a steep annual decline, adding to evidence that the housing market has turned a corner after being buffeted by sharply higher borrowing costs.

The average price of a GTA home rose to C$1.153 million ($846,425) in April, up 4% from March, Toronto Regional Real Estate Board (TRREB) data showed on Wednesday. It was the third straight month of gains.

On a year-over-year basis, the average price remained lower, but the pace of decline slowed to 7.8% from 14.6% in March. The average price was 13.6% below the February 2022 peak.

"Many buyers have come to terms with higher borrowing costs and are taking advantage of lower selling prices compared to this time last year," TRREB President Paul Baron said in a statement.

The Bank of Canada has paused its interest rate hiking campaign since January after lifting its benchmark rate to a 15-year high of 4.50%.

Sales also rose in April from March, while they were down 5.2% from April last year. New listings dropped at a steeper annual rate than sales, down 38.3%, increasing competition between buyers.

"The issue moving forward will not be the demand for ownership housing, but rather the ability to meet this demand with adequate supply," Baron said.

($1 = 1.3622 Canadian dollars)

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