Grants Opportunities

A new CNBC Delivering Alpha investor survey has shown that Wall Street investors believe the stock market is headed for losses after a positive first quarter, seeing cash as the best safe haven right now. They polled about 400 chief investment officers, equity strategists, portfolio managers, and CNBC contributors who manage money about their outlook for the second quarter and beyond. The survey was conducted over the past week. Nearly 70% of respondents said the S&P 500 could see declines ahead. Thirty-five percent of investors believe the biggest risk to the market this year is a Federal Reserve misstep, while another 32% said persistent inflation poses the most pressing threat.
Despite a banking crisis and continuous Fed tightening, the market has been particularly resilient. The S&P 500 is on track to post a winning quarter, up more than 5%, after equities staged a big comeback with the government’s emergency rescue measures that helped stem the chaos in the banking industry. “Economic concerns enveloping recession fears haven’t vanished as the yield curve still represents a counter to the market’s climb higher,” said Quincy Krosby, chief global strategist at LPL Financial. “But if the market can continue to edge higher in spite of a wall of worry that seems to climb higher with each new headline, it begs the question who’s right, and which side is more prescient.”

The Federal Reserve raised interest rates by three-quarters of a percentage point on Wednesday, marking the most aggressive rate hike since 1994. Following weeks of speculation, the Federal Open Market Committee boosted its benchmark funds rate to a range of 1.5%-1.75%, the highest level since just before the Covid pandemic started in March 2020. Stocks were volatile after the Fed’s decision but turned upward following Chairman Powell’s post-meeting news conference. “Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” Powell said. He added, though, that he expects the July meeting to see an increase of 50 or 75 basis points. He said decisions will be made “meeting by meeting,” and the Fed will “continue to communicate our intentions as clearly as we can.”

“We want to see progress. Inflation can’t go down until it flattens out,” Powell said. “If we don’t see progress … that could cause us to react. Soon enough, we will be seeing some progress.” The FOMC members indicated that rate increases would be much stronger in the future to arrest inflation which has been increasing at its fastest pace since December 1981, according to one commonly used measure. According to the midpoint of the range of individual members’ expectations, the Federal Reserve’s benchmark rate will end the year at 3.4%. An upward revision of 1.5 percentage points compared to the March estimate is in order. In 2023, the committee anticipates the rate to increase to 3.8%, a full percentage point higher than forecast in March. Read More

Former JPMorgan Chase investment banking chief Jes Staley is being sued by the bank for his ties to disgraced financier Jeffrey Epstein, seeking to hold him responsible for any legal fallout from two lawsuits against the bank. On Wednesday, the company filed a lawsuit against Staley to recoup his last eight years of pay at JPMorgan and make him responsible for potential payouts in lawsuits the company faces. Over 80 million dollars have been paid in compensation alone. The legal maneuver is the latest development in a series of cases that have involved the largest U.S. bank by assets. The U.S. Virgin Islands and a group of alleged Epstein victims sued the bank late last year, accusing it of facilitating the sex offender’s crimes. JPMorgan kept Epstein as a private wealth client until 2013, partly because Staley vouched for him, despite internal concerns after Epstein’s 2008 conviction on sex crimes.
Over the past few weeks, JPMorgan has gone from defending its former executive to blaming him for any Epstein fallout. The recent lawsuits revealed internal emails referencing a review of the Epstein account to be conducted by JPMorgan CEO Jamie Dimon. The bank denied it had seen any evidence the review took place. Plaintiffs have sought to question Dimon in the case, an effort the bank is resisting. “To the extent that Staley knew of, participated in, or witnessed sexual abuse associated with Epstein and did not report it to, or actively concealed it from JPMorgan,” it is Staley, and not the bank, who is responsible for injuries Epstein caused, JPMorgan said in its Wednesday filing. ‘Powerful exec’ JPMorgan also identified Staley as the “powerful financial executive” accused of sexually assaulting one of Epstein’s alleged victims in one of the suits it faces.

On Tuesday, HSBC reported earnings that exceeded analyst expectations for the fourth quarter of 2022. The bank reported a profit before tax of $5.2 billion for the three months ended in December, a 108% increase from $2.5 billion a year earlier and higher than the $4.97 billion expected in estimates. HSBC said its fourth-quarter results reflect strong reported revenue growth and lower reported operating expenses.
For the full year, reported revenue was $51.73 billion, up from $49.55 billion in 2021. The bank’s reported profit before tax for 2022 fell to $17.53 billion from $18.91 billion a year ago. It said the 2022 reported pre-tax profit included a $2.4 billion impairment due to the planned sale of its retail banking operations in France. HSBC, Europe’s largest bank by assets, said higher global interest rates support the firm’s confidence in achieving its target of at least 12% return on average tangible equity in 2023. “We completed the first phase of our transformation and our international connectivity is now underpinned by good, broad-based profit generation around the world,” Noel Quinn, group chief executive said in the release. “We are on track to deliver higher returns in 2023 and have built a platform for further value creation,” he said. Globally, central banks have been raising interest rates to keep inflation in check, resulting in strong net interest income for banks. In 2023, HSBC expects to earn at least $36 billion in net interest income.

On Wednesday, a Manhattan federal judge approved an unsealing motion from media companies, including CNBC, revealing the names of two of FTX’s co-founder Sam Bankman-Fried’s guarantors. Bankman-Fried was released on a $250 million recognizance bond in December after being indicted on criminal fraud charges. There were four guarantors, including his parents, to ensure Bankman-Fried’s cooperation with pretrial detention requirements. The other two guarantors are known to be Larry Kramer, president of the William and Flora Hewlett Foundation and dean emeritus at Stanford Law School, and Andreas Paepcke, a senior research scientist at Stanford University. Their names had been sealed, but several media outlets moved to make their identities public.
Both of Bankman-Fried’s parents, Joe Bankman and Barbara Fried, are on the faculty of Stanford. They live near the university. “Joe Bankman and Barbara Fried have been close friends of my wife and I since the mid-1990s,” Kramer told CNBC’s Eamon Javers. “During the past two years, while my family faced a harrowing battle with cancer, they have been the truest of friends — bringing food, providing moral support, and frequently stepping in at moment’s notice to help. In turn, we have sought to support them as they face their own crisis.” Kramer said he was acting “in my personal capacity” and has “no business dealings or interest in this matter other than to help our loyal and steadfast friends.” Kramer signed a $500,000 unsecured bond, while Paepcke signed the same type of bond for $250,000.

The world’s leading stablecoin issuer, Tether, published its latest quarterly financial report on Thursday, revealing for the first time that it generated a profit. Tether, which Hong Kong-headquarter Ifinex owns, said in a new attestation report that it made a $700 million “net profit” in the December quarter. The company says it has added the money to its reserves.
Tether said its latest quarterly results were buoyed by interest rate hikes by the U.S. Federal Reserve, resulting in higher government debt yields. “Tether is not disclosing any financial information other than those reported in the CRR [Consolidated Reserves Report],” Tether told CNBC in emailed comments. Tether makes money from various fees, including a $1,000 withdrawal fee (with a minimum withdrawal requirement of $100,000), investments in digital tokens and precious metals, and issuing loans to other institutions. Tether is the issuer of USDT, the world’s largest stablecoin by market capitalization. Stablecoins are tokens that are always meant to be fully backed by an equivalent value of reserve assets. The idea is that when someone wants to sell one unit of tether, they get $1 dollar in return. But Tether has long been dogged by concerns that its token isn’t completely backed one-to-one by an equivalent value of reserves. Last May, USDT temporarily lost its peg when terraUSD, a so-called algorithmic stablecoin, plummeted to near $0. Tether said this was the result of volatility in the trading of USDT rather than a reflection of its ability to return cash to holders.

Jeffrey Gundlach, CEO of DoubleLine Capital, believes the Federal Reserve will raise interest rates one more time before its tightening cycle ends. “I think one more,” Gundlach said Wednesday on CNBC’s “Closing Bell: Overtime.” “I think it’s tough to make the statement ‘ongoing increases’ with an ‘s’ at the end of the word ‘increase’ and do zero unless you had very substantial change in economic conditions.” The Federal Reserve raised its benchmark interest rate by a quarter percentage point on Wednesday, taking its target range to 4.5%-4.75%, the highest level since October 2007. The Fed’s statement included language noting that the central bank still sees the need for “ongoing increases in the target range.”
The so-called bond king said that Fed Chairman Jerome Powell made a “clarifying” statement at the press conference on Wednesday, saying real yields are positive across the curve. Gundlach said he was referring to Treasury Inflation-Protected Securities (TIPS), whose yields have stopped their ascent. “He’s looking at the TIPS market, which had a huge increase in yields last year. That was a major headwind for risk assets in the stock market,” Gundlach said. “They’ve stopped going up and I have a feeling that real yields are going to not go up in the first part of this year. So that keeps a little bit of runway, I think.” Stocks staged a big comeback in January, led by beaten-down technology names. The S&P 50 rallied 6.2% in January, notching its best start of the year since 2019. The tech-heavy Nasdaq Composite jumped 10.7% last month for its best monthly performance since July.

In an effort to compete with Apple Pay and PayPal, several banks are reported to be developing a digital wallet that integrates debit and credit cards. According to The Wall Street Journal, the digital wallet will be operated by Early Warning Services, a joint venture between several banks that also operates Zelle. According to the report, Wells Fargo, JPMorgan Chase, and Bank of America are among the major banks involved. The new wallet would initially be launched with Visa and Mastercard already on board. The company has confirmed to CNBC that it intends to launch a wallet product in the near future. Read More