US Open: Stocks rebound, Jobless Claims decline again, Block tumbles, BOE/SNB/Norges all hike, Turkey holds, Tesla rallies, Oil higher, Gold recaptures $2000, Bitcoin faces massive resistance at $30k

US stocks are rising as Wall Street digests what might be the Fed’s last rate hike and Secretary Yellen’s comment on blanket deposit insurance.  The post-Fed selloff came from Yellen’s comment that they haven’t looked at backing all bank deposits with FDIC insurance.  This was bad news for the banks and contagion fears. Yellen’s comment at a Senate panel hearing should be taken with a grain of salt given a decision to back all deposits would need congressional support.  Optimism should remain that authorities will do their best to avoid further banking contagion and any systemic risks. 

Corporate headlines were mixed today.  General Mills earnings posted a nice top and bottom line beat along with raised guidance.  The bolstered outlook was due broad-based growth across each of their segments. Ford announced that they could see electric vehicle losses rising to $3 billion this year. 

US Data

The labor market still refuses to show any major signs of weakening and that is going to make life harder for the Fed.  The consensus view is that the labor market is going to weaken in the spring.  Well, it is now spring and the last weekly reading for the winter posted another surprise decline.  If hiring doesn’t  show meaningful signs of slowing down soon, Wall Street might have to price in one more rate rise for the May 3^rd FOMC meeting. 

Block

Block shares collapsed after Hindenburg Research said the payment company facilitates “fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics”. Cash App claims to have 80 million annual transacting active users, a highly inflated number given evidence of massive user duplication on the platform.  The short-seller’s allegations have sent Block shares tumbling almost 20%.

BOE

With an assessment that the UK banking system is resilient, the BOE was able to keep the rate hiking cycle going with a 25 bps rate rise.  The key bank rate now stands at 4.25% and markets are leaning towards another hike at the May meeting. BOE’s Tenreyro and Dhingra supported a hold as 11 consecutive rate increases had taken policy to restrictive territory. 

With inflation still running hot, the BOE did not remove future hikes off the table and if banking turmoil continues to ease, they could be positioned to deliver a couple more hikes. 

SNB

The SNB was able to deliver a half-point rate rise as confidence prevails that the banking crisis has been dealt with. The SNB staff projections raised the 2023 GDP growth forecast from 0.5% to 1.00%. Inflation for this year was raised to 2.4%, while the 2024 forecast was brought up to the 2.00% target.     

SNB President Jordan reiterated the view that they could not rule out additional rate hikes or be active in FX markets. The SNB is pleased that the measures taken together with the Federal govt and FINMA have put a halt to the financial crisis. 

Norges

The Norwegian krone rallied after the Norges signaled more rate hikes are coming. Economists were all expecting Norway’s central bank to raise the key deposit rate by 25 bps to 3.00%. Today’s hike sent the policy rate to the highest levels since 2009 and expectations are for at least a half-point more in hikes by the summer. Inflation is too high and even though

With inflation remaining too high, the Norges turned hawkish as they signaled that if the “krone proves weaker than projected, or pressures in the economy persist, a higher policy rate than currently projected may be needed to bring inflation down to target”.

CBRT

The Turkish central bank (CBRT) decided to keep the policy rate (one-week repo auction rate) constant at 8.5% as they monitor the impact of the effects of the earthquake in the first half of the year.  Political pressure to ease has been in place given elections occur in May.  The bank can’t just keep on easing as they have record deficits. 

Tesla

Electrek reported that Tesla told employees that it expects to lose the full $7,500 federal tax credit on its cheapest electric car because the batteries come from China. This would be a big blow as their cheapest vehicle, the Model 3 Standard Range was a key part of their growth trajectory.  The Model Y and Model 3 vehicles in the US are expected to maintain the federal tax credit as their batteries are made in the US.

While Tesla is bracing for a hit with their cheapest vehicle, Ford reminded us that there’s a reason why Tesla dominance remains.  Tesla shares are trading higher at the open.  .  

Oil

Crude prices are rising after another labor market reading suggests the economy isn’t ready to break.  There is too much pessimism in the oil market right now and any signs that the economy remains resilient could help trigger a short-covering rally. 

The bears have been in control as many energy traders remain unconvinced that the demand will be improving enough to bring down stockpiles.  The key takeaway from the FOMC meeting for energy traders is that the Fed is probably going to send this economy into a recession.  China’s reopening story remains subdued and that is keeping oil grounded around the low $70s. 

Gold

Gold is becoming a favorite trade on Wall Street as many traders remain nervous post-Fed and over how quickly will US authorities be able to contain further banking turmoil.  Gold is rising after jobless claims reminded traders that the labor market is still tight, complicating a growing number of Fed rate cut bets.  Gold is going to shine here and it seems positioned to find a home above the $2000 level.  A run to record territory is not that far away and could happen if financial stability concerns do note ease. 

Bitcoin

Bitcoin is facing major resistance at the $30,000 level.  The recent crypto rally has been fueled by bank runs that have led many to become skeptical with traditional banking given all the vulnerabilities with deposit flights.  

For the rally to continue, Bitcoin needs a fresh catalyst to break above the $30,000 level.  

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