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Jamie Dimon, CEO of JPMorgan Chase, said Thursday the market is likely to be thrown into panic when the U.S. approaches a sovereign debt default. Dimon told Bloomberg in a televised interview that an actual default would be “potentially catastrophic” for the country. Dimon said he expects the worst-case scenario will be avoided, however, because lawmakers will be forced to respond to growing concerns. “The closer you get to it, you will have panic” in the form of stock market volatility and upheaval in Treasurys, he said. Dimon joined a host of business figures and administration officials in making dire predictions about the consequences of failing to raise or suspend the U.S. debt limit. This would allow the world’s largest economy to default on its bonds. Treasury Secretary Janet Yellen has said the default idea is “unthinkable” and would lead to economic disaster. “If it gets to that panic point, people have to react, we’ve seen that before,” Dimon said. But “it’s a really bad idea, because panic becomes something that is not good,” he added. “It could affect other markets around the world.”
According to Dimon, Morgan, with approximately $3.7 trillion in assets, has been preparing for the possibility of an American default. Such an event would ripple through the financial world, impacting “contracts, collateral, clearing houses, and affect clients definitely around the world,” he said. According to him, the bank’s war room already meets once weekly, but it will move to daily meetings around May 21 and then to three meetings a day afterward. He exhorted politicians from both major U.S. parties to compromise and avoid a ruinous outcome. “Please negotiate a deal,” Dimon said.

The price of cryptocurrencies fell on Monday as investors bet that First Republic Bank’s acquisition could end the financial crisis. This has been the primary driver of Bitcoin’s rally this year. Bitcoin fell about 4.2% to 28,137.76 to start the week and month, according to Coin Metrics. Ether lost 4% to 1,828.81. First Republic was taken over by regulators on Monday, making it the third failure of a U.S. bank this year and the largest since the 2008 financial crisis. JPMorgan Chase will acquire the majority of the deposits and assets of the company. Last week, bitcoin rallied in April as troubles at the bank unfolded. Trading of the cryptocurrency has been choppy, however, as investors straddle the effects of the banking crisis on crypto with high inflation, Federal Reserve policy, a potential recession, and an increasingly bearish narrative building around the U.S. dollar. “It’s unclear whether the banking crisis narrative can continue to be a boon for bitcoin,” said Alex Thorn, head of firmwide research at Galaxy. “Overall, the market lacks clear positive near-term catalysts, with supply issues overhanging bitcoin … That being said, bitcoin accumulation by small addresses is outpacing issuance, and we expect Ethereum staking to increase, each of which provides a supportive supply narrative.”
“Outside of crypto-native factors, we expect a back-of-the-year macro environment to be characterized by tightening, recession, and an expanding multipolarity in the global economy, all of which can be supportive of gold and bitcoin,” he added. The cryptocurrency market has been expected to slow down from its first-quarter rally, although it has gained about 70% for the year after finishing down more than 60%. April marked the first time Bitcoin had a fourth consecutive positive month in two years. “Bitcoin and ether started 2023 inorganically cheap, allowing for plenty of room to move higher off a low-base effect,” Thorn said. “A widening banking crisis became evident in March, and the contrast with Bitcoin’s transparent and decentralized nature provided a further leg up for Bitcoin, while Ethereum’s successful Shanghai upgrade provided a catalyst for ethereum.”

A Standard Chartered note published Monday predicted Bitcoin’s value could reach $100,000 by 2024. Standard Chartered analyst Geoff Kendrick said the collapse of Silicon Valley Bank and other mid-tier U.S. lenders solidified Bitcoin’s status as a “decentralised, trustless, and scarce digital asset.” “We see potential for Bitcoin (BTC) to reach the USD 100,000 level by end-2024, as we believe the so-called ‘crypto winter’ is finally over,” Kendrick said in the report titled “Bitcoin — Pathway to the USD 100,000 level.” “The current stress in the traditional banking sector is highly conducive to BTC outperformance – and validates the original premise for Bitcoin as a decentralised, trustless and scarce digital asset,” Kendrick added. “Given these advantages, we think BTC’s share of the total digital assets market cap could move into the 50-60% range in the next few months (from around 45% currently).” Bitcoin was trading at $27,601.55 as of 9:40 a.m. ET, according to CoinGecko data. The woes of Circle’s USD Coin and other so-called stablecoins, which aim to achieve a 1-to-1 peg to the U.S. dollar, have benefited Bitcoin, Kendrick said.
USDC lost its dollar peg after its issuer Circle revealed exposure to SVB. CoinGecko data shows that the coin’s market value fell to $30.7 billion from more than $43 billion since Mar. 10, when the U.S. government placed the bank into receivership. This, coupled with the stabilization of risk assets and speculation that the Federal Reserve will ease monetary tightening further, means the “pathway to the USD 100,000 level is becoming clearer,” Kendrick said. Bitcoin supporters believe diversifying into digital currency is wise during hard times. As the theory goes, bitcoin has a limited supply of 21 million bitcoins, meaning it should appreciate as demand for alternative assets grows to avoid the effects of high inflation.

The US stock market closed slightly higher on Friday as traders assessed more corporate earnings, but all three major indices finished in negative territory for the week. The Nasdaq lost 0.3% for the week, and the Dow dipped 0.2% to snap a four-week winning streak. The S&P 500 ticked down less than 0.1% for the week. According to FactSet, more than 75% of S&P 500 companies reported so far have exceeded analysts’ earnings expectations. Mega-cap tech like Alphabet and Amazon are on deck for next week’s quarterly results. As of 4:00 p.m. ET on Friday, the S&P 500 was 4,133.52, up 0.09%. Dow Jones Industrial Average: 33,808.96, up 0.07% (22.34 points). Nasdaq Composite: 12,072.46, up 0.11%
In an exclusive interview with Insider, economist Mohamed El-Erian explained the credit squeeze threatening the US economy and the risks of more interest rate hikes. Bloomberg reports US money-market funds saw their assets drop for the first time since last month. According to Larry Summers, the Federal Reserve has inflation on the ropes while lamenting the debt-ceiling fiasco. According to Citi’s chief economist, the US economy could be headed towards a credit crunch that would only prolong a recession. West Texas Intermediate crude oil increased 0.49% in commodities, bonds and crypto, to $77.75 per barrel. Brent crude, oil’s international benchmark, rose 0.59% to $81.58. Gold declined 1.79% to $1,993 per ounce. The yield on the 10-year Treasury rose 2.3 basis points to 3.568%. Bitcoin dropped 3% to $27,255.

Warren Buffett believes there will be more bank failures in the future, but depositors shouldn’t worry. “We’re not over bank failures, but depositors haven’t had a crisis,” the Berkshire Hathaway chairman and CEO told CNBC’s Becky Quick on “Squawk Box” Wednesday from Tokyo. “Banks go bust. But depositors aren’t going to be hurt.” Last month, Silicon Valley Bank and Signature Bank collapsed — respectively, the second and third biggest bank failures in American history. Regulators responded by providing an additional funding facility and backstopping all deposits in the failed lenders. The “Oracle of Omaha” said some of the “dumb” things that banks do periodically became uncovered during this period, including having mismatched assets and liabilities as well as questionable accounting. “Bankers have been tempted to do that forever,” Buffett said. “Accounting procedures have driven some bankers to do some things that have helped their current earnings a little bit and caused the recurring temptation to get a little bit bigger spread on record, a little more than earnings.”
Buffett said that some bankers would continue this behavior, putting some stock shareholders at risk. The 92-year-old investor, however, said there was unnecessary fear and panic about depositors losing their money since the system is designed to safeguard them all. “The costs of the [Federal Deposit Insurance Corp.] are borne by the banks. Banks have never cost the federal government a dime. The public doesn’t understand that,” said Buffett. “Nobody is going to lose money on a deposit in a U.S. bank. It’s not going to happen … you don’t need to turn a dumb decision by managers into a panicking the whole citizenry of the United States about something they don’t need to be panicked about.” He stressed that it’s crucial that banks retain the public’s confidence, and they can lose that confidence in seconds, as highlighted in the recent blowup.

Following the March jobs report, which showed a resilient economy and moderate inflation, S&P 500 futures and Treasury yields increased on Friday. S&P 500 futures gained 0.2%. Dow Jones Industrial average futures added 64 points. Nasdaq-100 futures rose 0.1%. The 2-year Treasury yield jumped 17 basis points to 3.99%. The 10-year Treasury yield added 12 basis points to 3.41%. (One basis point equals 0.01%, and yields move inversely to prices.) The U.S. added 236,000 jobs in March, about in line with expectations, with the unemployment rate falling to 3.5% from 3.6% a month earlier. Based on the consensus estimate from Dow Jones economists, expectations were for a 238,000 increase in non-farm payrolls. Those same economists anticipated the unemployment rate to hold steady at 3.6%. Average hourly earnings increased by 4.2% on a 12-month basis, the lowest level since June 2021. The New York Stock Exchange is closed for Good Friday so regular trading won’t begin until Monday. Futures and bond trading close early on Friday.
The S&P 500 lost 0.1% for the week that ended Thursday, breaking a 3-week win streak as a series of weak labor data points hinted to investors that a recession could be near. The Nasdaq Composite was down 1.1% for the week, while the Dow squeaked out a small gain. Earlier this week, ADP said private payrolls slowed significantly in March, Labor Department data showed job openings falling to the lowest in nearly two years, and weekly jobless claims came in higher than expected. Friday’s jobs report contradicts that weak data and will likely divide investors. Some may like the resilient economy, while others may not mind a slight weakening in the labor market to get the Federal Reserve to back off its ongoing tightening campaign. The Fed’s next decision on interest rates is May 3.

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

The Federal Reserve is expected to raise interest rates by a quarter percentage point next week, despite turmoil in the banking industry and uncertainty ahead. Many experts expect the rate on Wall Street to rise by a quarter percentage point. The expectations for interest rates have been on a rapid swing over the past two weeks, ranging from a half-point hike to holding the line and even at one point talk that the Fed might be willing to reduce rates. However, a consensus has emerged that Fed Chairman Jerome Powell and his fellow central bankers will want to signal that while they are attuned to the financial sector upheaval, continuing the fight to bring down inflation is essential. That likely will take the form of a 0.25 percentage point, or 25 basis point, increase, accompanied by assurances that there’s no preset path ahead. The outlook could change depending on market behavior in the coming days, but the indication is for the Fed to hike.
“They have to do something, otherwise they lose credibility,” said Doug Roberts, founder, and chief investment strategist at Channel Capital Research. “They want to do 25, and the 25 sends a message. But it’s really going to depend on the comments afterward, what Powell says in public. … I don’t think he’s going to do the 180-degree shift everybody’s talking about.” Markets largely agree that the Fed is going to hike. As of Friday afternoon, there was a 75% chance of a quarter-point increase, according to CME Group data using Fed funds futures contracts as a guide. The other 25% was in the no-hike camp, anticipating that the policymakers might take a step back from the aggressive tightening campaign that began just over a year ago. Goldman Sachs is one of the most high-profile forecasters seeing no change in rates, as it expects central bankers in general “to adopt a more cautious short-term stance in order to avoid worsening market fears of further banking stress.”

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.