Wall Street Breakfast: Data Dependent
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Fed Chair Jerome Powell will be back in the hot seat on Wednesday, delivering his second day of semi-annual monetary policy testimony before the House Financial Services Committee. Markets were already jolted in the previous session following comments that suggested the central bank could put an end to its recent shift towards more gradual tightening. The dollar surged and the benchmark S&P 500 Index closed out Tuesday with a loss of 1.5%, while the key 2-year (US2Y) and 10-year (US10Y) Treasury yield curve hit its deepest inversion since 1981 (see what's next here).
From the transcript: "The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy," Powell told the Senate Banking Committee. "As I mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."
The speech shows just how dependent the Fed will be on incoming data ahead of its upcoming policy meeting scheduled for March 21-22. Over the next two weeks, investors will be able to size up their positions on how hard the central bank will go, with a flurry of releases scheduled on the economic calendar. Data points include the JOLTS report today, the non-farm payrolls on Friday, as well as retail sales, the producer price index and figures on industrial production next week.
SA commentary: "The Fed will soon be entering a blackout period, and this was [Powell's] last chance to warn the market a rate hike greater than 50 bps is still possible if the data warrants it," wrote SA Marketplace author Mott Capital Management, outlining that the speech led to a massive repricing of rates. In fact, the CME's FedWatch Tool now shows a 70.5% chance of a half-point hike, up from 31% before the Fed Chair's speech. JR Research, author of Ultimate Growth Investing, also explores what this means for equities, in a new article entitled, SPY: Fortunes Will Be Made For The Brave. (248 comments)
Berkshire Hathaway (BRK.A, BRK.B) has resumed purchases of Occidental Petroleum (NYSE:OXY), raising its stake in the oil company to about 22%, according to an SEC filing. That means the Warren Buffett-led conglomerate now owns 200.2M Occidental shares worth $12.2B based on Tuesday's $60.85 closing price, as well as $10B worth of preferred stock and related warrants. The holdings would also generate around $144M of annual dividends, following OXY's increased payout announced last month. Occidental, which is now among Buffett's top 10 holdings, has more than doubled in price last year and was the top-performing stock on the S&P 500. (28 comments)
Senate Intelligence Committee Chairman Mark Warner (D-VA) has introduced bipartisan legislation aimed at policing the threat of technology from "adversarial" nations, a move lately pointed at a potential ban of Chinese-based hit TikTok (BDNCE). The "RESTRICT Act" would allow the U.S. Commerce Secretary to determine if a transaction poses "undue or unacceptable risk" to national security, and could be sent to the president for action, including forced divestment. "It's safe to assume that if the CCP is willing to lie about its spy balloon and cover up the origins of the worst pandemic in 100 years, they'll lie about using TikTok to spy on American citizens," declared Republican Sen. John Thune, who co-sponsored the bill as support builds on both sides of the aisle. Any ban on TikTok would affect social media players like Snapchat Spotlight (SNAP), Instagram Reels (META) and YouTube Shorts (GOOG, GOOGL). (33 comments)
Besides impacting the stocks mentioned above, outlawing TikTok could have far-reaching consequences for the creator economy, marketing departments and national security policies. Don't forget that the American government has already ordered the app to be removed from federal devices, as well as a probe from CFIUS. Check out an extra Wall Street Breakfast poll this week that explores whether the U.S. should and will end up banning TikTok.
Take the survey and see the results here
Today's Markets
In Asia, Japan +0.5%. Hong Kong -2.4%. China -0.1%. India +0.2%.
In Europe, at midday, London flat. Paris flat. Frankfurt +0.4%.
Futures at 6:30, Dow +0.2%. S&P +0.3%. Nasdaq +0.4%. Crude -0.3% to $77.35. Gold flat at $1820. Bitcoin -1.4% to $22,080.
Ten-year Treasury Yield unchanged at 3.97%
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Goods and Services Trade
10:00 Jerome Powell Speech
10:00 Job Openings and Labor Turnover Survey
10:30 EIA Petroleum Inventories
1:00 PM Results of $32B, 10-Year Note Auction
2:00 PM Fed's Beige Book
Companies reporting earnings today »
What else is happening...
This sector shook off Powell's hawkish remarks, but this one did not.
Climate change can erode asset values and shock financial system - Yellen.
WeightWatchers stock (WW) surges 80% on Sequence acquisition.
NTSB to probe Norfolk Southern (NSC) safety culture after recent incidents.
Earnings and outlook come in strong at CrowdStrike (CRWD).
Sleep-at-night stocks for those hedging or risk averse.
Amazon (AMZN) now 'solidly a top pick' at Goldman Sachs.
JetBlue (JBLU), Spirit Airlines (SAVE) push back on DOJ complaint.
Chances of Altria (MO) selling AB InBev (BUD) stake are increasing.
Occidental (OXY) sees U.S. oil production falling short of government forecast.
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