Stocks Slip as Powell Focuses on Payroll; Biden’s budget targets wealthy companies for big tax hikes; Silvergate Goes Dark as FTX Collapse Rings Out; Senate Seeks to Revive ‘NOPEC’ Bill and Oracle Gains on Deck as AI Race Accelerates.
Five things to know before the market opens on Thursday, March 9:
1. — Stocks slide as Powell puts payroll in the spotlight
US stock futures were modestly lower on Thursday as investors pulled out of risk markets ahead of tomorrow’s crucial February jobs reports and continued to reassess interest rate risk following surprisingly aggressive testimony from the US. Federal Reserve Chairman Jerome Powell on Capitol Hill.
Powell concluded his semiannual appearance before Congress with testimony before the House Financial Services Committee, during which he reiterated the need for “higher, longer” interest rates to curb high domestic inflation, but pointed to the incoming data. he would dictate the size of the increases in the near term and that no decision has been reached before the Fed’s March policy meeting.
That puts Friday’s nonfarm payroll report in the spotlight, particularly after a higher-than-expected reading for February private employment additions from payroll processing group ADP yesterday, and JOLTS data showing that almost 10.83 million jobs remained unfilled during the month of January.
Traders appear to be leaning in the direction of an aggressive February jobs count, with market consensus holding at 205,000 and a headline unemployment rate of 3.4%, with bets on a 50 basis point rate increase on the 23rd. March rising to around 77%, according to CME Group’s FedWatch.
Stocks are also likely to take their directional cues from the bond market on Thursday, given the meager corporate earnings and weekly jobless claims numbers due at 8:30 am ET.
Benchmark 2-year Treasury yields were last seen at nearly 15-year highs at 5.035%, while 10-year bonds held just below the $4 threshold at 3.991%. Meanwhile, the US dollar index was down 0.21% at 105.457 against its global peers.
Heading into the trading day on Wall Street, futures contracts linked to the S&P 500 indicated an opening bell drop of 8 points, while those linked to the Dow Jones Industrial Average expected a 2-point rise. The technology-focused Nasdaq is seeing a 63-point drop.
In foreign markets, Europe’s Stoxx 600 fell 0.52% in early Frankfurt trading, while Credit Suisse fell another 5% after delaying the release of its annual report, while Britain’s FTSE 100 fell. 0.14% in London.
Overnight in Asia, the region-wide MSCI ex-Japan index fell 0.6% after softer-than-expected inflation data from China, while the Nikkei 225 finished up 0. 64% in Tokyo after the lower house of parliament approved the appointment of Kazuo Udea as the new governor of the Bank of Japan.
2. — Biden’s budget targets wealthy companies for big tax hikes
President Joe Biden is expected to unveil a series of tax hikes on wealthy Americans on Thursday, as well as a strengthened tax on share buybacks and an end to corporate loopholes, when he unveils his 2024 budget proposals later today. at an event in Philadelphia.
The White House has said the tax and spending plans will reduce the deficit by around $3 trillion over the next ten years by raising a minimum 25% ‘billionaire tax’, increasing levies on those who earn more than $400,000. per year to pay for Social Security, Medicare and Medicaid, quadrupling the 1% tax on corporate buybacks and nearly doubling the current 20% tax on capital gains, while also addressing what it calls dictated “wasteful” spending for special interests.
However, with Republicans in control of the House and Democrats holding only a slim majority in the Senate, it is unlikely that the president’s plans will make it to Congress, particularly given House Majority Leader Kevin McCarthy, He promised to stand firm on raising the debt ceiling to $31.4 trillion without a corresponding setback in public spending.
3. — Silvergate goes dark as FTX collapses.
Silvergate Capital (AND) – Get a free reportStocks tumbled in premarket trading Thursday after the crypto-focused lender said it would wind down operations and liquidate its wholly owned bank following multibillion-dollar losses linked to the FTX collapse late last year. .
Silvergate saw a spate of customer withdrawals from digital assets in the wake of the FTX scandal and the arrest of its founder, Sam Bankman-Fried, with more than $8 billion fleeing during the three months ending in December. The run prompted Silvergate to sell $5.2 billion of its digital assets at a $718 million loss in book value to maintain liquidity, which continued to deteriorate in the first two months of this year, leading to the closure of its flagship network. Silvergate Exchange. payment system
“In light of recent industry and regulatory developments, Silvergate believes that an orderly winding down of bank operations and a voluntary liquidation of the bank is the best way forward,” Silvergate said. “The bank’s liquidation and liquidation plan includes the full refund of all deposits.”
Shares of Silvergate were marked 45% lower in premarket trading to indicate an opening bell price of $2.70 each.
4. — The Senate seeks to revive the ‘NOPEC’ bill
Senate lawmakers are set to revive legislation Thursday that would remove sovereign immunity protecting OPEC, the oil-producing cartel, from US antitrust laws.
Republican Chuck Grassley and Democrat Amy Klobuchar will reintroduce the so-called No Oil Producer and Exporting Cartels bill, better known as NOPEC, before a Senate Judiciary Committee on Thursday after years of failed attempts to bring the 13-member group closer together. to US law.
“Current law has rendered the Justice Department powerless to prevent the 13 largest oil-producing countries from manipulating prices and raising costs,” Klobuchar said, referring to the group’s decision last year to cut production in around 2 million barrels per day despite the price shock of Russia’s ongoing war against Ukraine.
Russia, which is not a member of OPEC, has been closely linked to the cartel thanks in part to its close ties to de facto leader Saudi Arabia.
Brent crude futures for May delivery rose 9 cents to $82.75 a barrel on Thursday, while April WTI contracts, which are closely tied to US gasoline prices, rose 7 cents. at $76.73 per barrel.
5. — Oracle’s profits are in the offing as AI race accelerates
Oracle Corporation. (ORCL) – Get a free reportShares rose in premarket trading ahead of the cloud-focused software group’s third-quarter earnings after the closing bell.
Analysts expect Oracle to post a bottom line of $1.20 per share for the three months ending in January, the group’s fiscal third quarter, with revenue of about $12.43 billion, up 18.3% from the same period. last year period as it continues to benefit from the impact of the $28 billion purchase of Cenrer (CERN) – Get a free reportThe second largest developer of software used by doctors and hospitals to manage and store medical records.
Investors are likely to focus on Oracle’s near-term prospects for capital spending, its assessment of corporate demand for cloud expansion, and its plans to implement AI-related technologies across its suite of enterprise products.
Shares of Oracle ticked up 0.05% in premarket trading to indicate an opening bell price of $88.50 each.
