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First Republic Bank deposits tumble more than $100… The next domino?

April 24 (Reuters) – First Republic Bank (FRC.N) shares sank more than 20% after the closing bell on Monday as it said deposits plunged by more than $100 billion in the first quarter and it was exploring options such as restructuring its balance sheet.The deposit slump overshadowed profits that beat expectations for the beleaguered company, shored up through deposits from U.S. banking giants last month after two regional lenders collapsed. San Francisco-based First Republic plans to shrink its balance sheet and slash expenses by cutting executive compensation, paring back office space, and laying off nearly 20% to 25% of employees in the second quarter, it said Monday. The company also aims to increase its insured deposits and cut borrowings from the Federal Reserve Bank. “We’re taking steps to meaningfully reduce our expenses to align with our focus on reducing the size of the balance sheet,” CEO Mike Roffler said in a post-earnings conference call. The briefing lasted less than 15 minutes and ended without executives taking questions from analysts. Managers’ decision to forgo a question-and-answer session with analysts was reminiscent of calls during the 2008 financial crisis, said Timothy Coffey, an analyst at Janney Montgomery Scott LLC who had dialed in. First Republic also said it was “pursuing strategic options” to help expedite progress on strengthening the bank, without providing details. The lender was studying all options open to it, according to a person familiar with the matter, speaking on condition of anonymity because the discussions were private. The source said the bank was looking for the U.S. government to help by convening parties who could potentially play a role in buoying First Republic’s fortunes, including private equity firms and big lenders. First Republic came into intense focus after Silicon Valley Bank (SVB) and Signature Bank collapsed last month, shaking the confidence in U.S. regional banks and prompting customers to move billions of dollars to bigger institutions. “With the closure of several banks in March, we experienced unprecedented deposit outflows,” said Neal Holland, First Republic’s finance chief. Deposits fell to $104.47 billion in the first quarter from $176.43 billion in the fourth quarter despite the lender getting a $30 billion lifeline in combined deposits from U.S. banking heavyweights, including Bank of America Corp. (BAC.N), Citigroup Inc. (C.N), JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N). Without the $30 billion of deposits provided by big banks, the decline in deposits would have been almost $102 billion. “We had estimated net outflow of deposits to be around $40 billion,” Coffey told Reuters. “Losing that much in deposits and having to replace them with borrowings is very expensive.” Still, deposits began to steady in the week of March 27 and have remained stable through April 21, the company said. The lender earned $1.23 a share in the first three months ended March, comfortably above the 85 cents per share analysts estimated for the quarter, according to Refinitiv data. The results showed the extent of the damage on First Republic after last month’s banking crisis, which fueled concern of a panic spreading through the financial system. It also faces a difficult path to revive its fortunes, banking analysts and industry experts say. For years, it lured high net-worth clients with preferential rates on mortgages and loans, making it more vulnerable than regional lenders with less-affluent customers. This will discourage potential buyers of the bank because “a large mortgage portfolio at incredibly low rates generating little revenue is not very attractive,” said Robert Conzo, CEO of New York-based investment advisory firm, The Wealth Alliance. First Republic’s loan book and investment portfolio also became less valuable as interest rates rose. The bank’s choices are limited when it comes to selling assets. Divesting the mortgage arm would likely result in losses, while selling the wealth management unit would get rid of one of its most lucrative businesses, said David Smith, an analyst at Autonomous Research. Wealth management “is one of the strongest parts of the bank remaining, so I think they’d be cautious about selling that,” he added. The bank is looking at ways it can downsize if its attempts to raise new capital fail, Reuters reported last month, citing three people familiar with the matter.

Rating agency Moody’s also downgraded First Republic alongside several other banks on Monday. The lender had its rating reduced by three notches, which was more severe than peers including Western Alliance Bancorp (WAL.N), Comerica Inc (CMA.N), and US Bancorp (USB.N). Investors are combing through results from several regional banks to gauge their health and ability to absorb future financial shocks. The largest U.S. banks reported windfall profits from higher interest payments in the first quarter, largely brushing off the turmoil. “It’s just a really tight picture for First Republic based on its earnings,” said Autonomous Research analyst Smith. “Getting the bank in shape will be a lot of work, to put it mildly.” NN: Dead man walking. Its time to take them outback and put them out of their misery

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Nasdaq underperforms on worries about tech earnings ahead

 

 

April 24 (Reuters) – The Nasdaq closed lower and underperformed the S&P 500 and the Dow on Monday, pressured by high-profile megacaps as investors awaited results from companies including Microsoft while Tesla shares fell on concerns about its spending plans. Tesla Inc (TSLA.O) fell after the automaker raised its 2023 capital expenditure forecast to ramp up output, weighing down consumer discretionary stocks (.SPLRCD). It was one of the biggest drags on the benchmark S&P 500, along with Microsoft Corp (MSFT.O), which was under pressure ahead of its results due out on Tuesday. Also on deck this week are reports from Alphabet Inc (GOOGL.O), Amazon.com Inc (AMZN.O) and Meta Platforms Inc (META.O). A rally in these stocks has supported Wall Street this year, so investors are worried about whether the gains can continue given the gloomy economic outlook. “People are a little tentative that the outperformance may not continue in earnings season, which thus far has been quite a bit better than expected. Granted the bar was low,” said Randy Frederick, managing director, trading and derivatives at Charles Schwab in Austin, Texas. Frederick also pointed to anxiety about upcoming economic data such as first-quarter growth and inflation readings.  Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, said the Philadelphia semiconductor index (.SOX) would likely underperform because of increasing global tensions with China. Stocks have largely held steady through the start of the earnings season on stronger-than-expected results from big banks, allaying concerns about a contagion from the regional banking crisis in March. Of the 90 S&P 500 companies that have reported first-quarter results so far, nearly 77% have topped analysts’ estimates compared with the long-term average beat rate of 66%, as per Refinitiv IBES data. Early readings of first-quarter U.S. GDP, personal consumer expenditure index (PCE) for March, and April consumer confidence are among the data scheduled for release this week. Mixed data last week cemented bets of a 25-basis-point rate hike by the Federal Reserve in May, with money market traders pricing in a 92% chance of such a move, according to CME Group’s Fedwatch tool. Fed policymakers said in the past week that the central bank has more work to do to bring down inflation.

U.S. Treasury yields eased following recent signs of slowing inflation and economic activity, though investors appeared increasingly concerned about a government spending stand-off and the potential for the United States to hit its debt ceiling sooner than expected. U.S. House of Representatives Speaker Kevin McCarthy said the House would vote on his spending and debt bill this week. NN: I feel like its the quiet before the dawn. Unless i see a big opportunity i prefer to do nothing.

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Oil turns to gains, rises by more than 1%

The prices of oil futures turned to gains on Monday after previously scoring losses amid general unpredictability concerning central banks and their future steps in relation to raising interest rates. Adding to the uncertainty are the conflict in Sudan and the worries about the export of petroleum products from that country. West Texas Intermediate for June’s deliveries advanced by 1.30% at 2:00 pm ET to sell for $78.84 per barrel. A minute later, Brent for settlements in June increased by 1.36% to go for $82.77 per barrel. NN: These are strange markets. Better to wait for them to shake out a little more…. News flow has been very very slow

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Feds bowman focus on lowering inflation…….. Fed’s Logan Says Inflation Has Been Much Too High….. Fed’s Mester sees policy rate over 5%

The Federal Reserve is focused on reducing inflation so as to support a growing economy and rising incomes, Fed Governor Michelle Bowman said on Thursday, adding that the strong labor market has made it hard for growing businesses to find workers. “We want to hear how inflation, along with the higher interest rates needed to bring inflation down, is affecting you and your communities,” Bowman said in remarks prepared for delivery at the start of a “Fed Listens” event in Odessa, Texas convened to elicit stories about how everyday lives are impacted by Fed policy. “These conversations provide important context to the economic data that we consider, and they help guide our thinking about how we can best achieve stability and support for the economic well-being of all Americans.” The Fed has raised interest rates sharply over the past year, and recently has signaled it may stop raising rates soon but leave them high for a while to keep pushing down on inflation. Bowman did not make any specific comments on her view of the appropriate rate path in her brief remarks. The Fed’s next policy-setting meeting is May 2-3

Fed’s Logan Says Inflation Has Been Much Too High

Federal Reserve Bank of Dallas President Lorie Logan on Thursday outlined what she’s looking for to show the US central bank has made enough progress in its battle to cool price pressures. “As you surely know, inflation has been much too high,” Logan said in opening remarks to a Fed Listens event in Odessa, Texas. “The Fed has raised interest rates by 4.5 percentage points over the past year to bring the economy into better balance.” Logan said she’s looking for sustained improvement in inflation statistics, an economy that’s evolving as forecast and a change in the factors underlying inflation, including a hot labor market and imbalance in supply and demand. The Dallas Fed chief, whose remarks were brief and didn’t touch on her outlook for the economy or monetary policy, also said she’s been looking at the impact of banking sector stresses on the broader economy. Logan is a voter on this year’s policy-setting Federal Open Market Committee. Fed Governor Michelle Bowman also delivered brief remarks at the event, held at Odessa College, and likewise avoided any explicit policy comment. “Lately, as you know, the Fed has been focused on lowering inflation, which is essential if we want to support a growing economy and rising incomes,” Bowman said. The US central bank has raised rates at a fast clip over the past year, bringing the benchmark interest rate to a target range of 4.75%-5%. Market participants expect policymakers to deliver one more 25 basis-point hike, at their May 2-3 meeting, before pausing. Fed officials have said they’re closely watching the tightening of lending conditions following the collapse of Silicon Valley Bank in March and the ensuing financial-market turmoil.

Fed’s Mester sees policy rate over 5%

Cleveland Federal Reserve President Loretta Mester said on Thursday the U.S. central bank still has more interest rate increases ahead of it, while noting the aggressive move to boost the cost of borrowing over the last year to quash high inflation is nearing its end. “Demand is still outpacing supply in both product and labor markets and inflation remains too high,” Mester said in a speech to the Akron Roundtable, a community forum in Akron, Ohio.  Change in financial conditions “would work in the same direction as tighter monetary policy,” which the Fed will need to take stock of “to help us calibrate the appropriate path of monetary policy going forward.” Mester said she expects the unemployment rate, which is currently 3.5%, to rise to between 4.5% and 4.75%. She sees inflation, which was running at a 5% clip on a year-over-year basis in February based on the Fed’s preferred measurement, easing to 3.75% this year and hitting the central bank’s 2% target in 2025. In response to an audience question after her formal remarks, Mester said she believes the U.S. is likely to escape a recession, even as growth probably cools quite a bit as a result of Fed policy actions. “The ‘soft landing,’ of course, is what we’re aiming for,” Mester said, referring to a scenario in which monetary tightening slows the economy, and inflation, without triggering a recession. “In this environment, I do think we’re going to have very slow growth – I think growth will be well below 1%.” With activity that tepid, it would be skirting outright contraction, Mester said. But even if a recession happens, she said she does not believe it would be a deep one amid an otherwise resilient economy.  “In order to put inflation on a sustained downward trajectory to 2%, I anticipate that monetary policy will need to move somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time,” Mester said, referring to the central bank’s benchmark overnight interest rate. But she also noted that supply imbalances in the economy are on the mend, and with the cumulative impact of Fed rate rises weighing on the economy, “we are much closer to the end of the tightening journey than the beginning.” Mester added what happens next with rates will depend on the economy

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Oil Prices Continue To Fall As Demand Concerns Persist

  • Oil prices continued to trend lower in morning trade in Asia, with WTI heading toward $78 and Brent moving closer to $82.
  • Despite the EIA reporting a sizeable inventory draw of 4.6 million barrels for the week to April 14th, traders were focused on demand concerns.
  • The Fed has repeatedly indicated that is it not done with rate hikes, which traders see as countering any growing demand from China.

Demand worries outweighed supply concerns this week to push down oil prices, reinforced by heightened expectations of more U.S. rate hikes that lifted the greenback. In morning trade in Asia oil was down for the third day out of the last four, despite the EIA reporting an inventory draw of 4.6 million barrels for the week to April 14, compared to a modest build in crude oil inventories for the previous week, at 600,000 barrels. For the week before that, however, the EIA had estimated a sizable draw of 3.7 million barrels. Instead of reacting to the draw, oil traders apparently were more concerned with other news or rather non-news: the Fed has indicated repeatedly that it is not done with rate hikes. It seems there are expectations for at least one more rate hike, to be announced next month before the Fed pauses with the inflation-control measure. “When the Fed’s commentary indicates further rate hikes, economic troubles look inevitable,” Priyanka Sachdeva, an analyst at brokerage Phillip Nova, told Bloomberg. “The only ray of hope here is China’s reemergence, which is expected to be significant enough to outweigh the dented demand from the West.” “WTI crude is back below the $80 level and it could continue drifting lower if the strong dollar trade resumes,” OANDA’s Edward Moya told Reuters. What’s more, the gloom and doom that oil traders appear to see for the U.S. economy has proven stronger than optimism about China, which earlier this week pushed prices higher for a while after it reported stronger-than-expected GDP growth data. Yet that wasn’t the full picture. “Though China reported better-than-expected GDP data, both industrial production and fixed asset investments fell short of consensus data, which did not help (in) boosting oil prices,” CMC Markets analyst Tina Teng told Reuters. NN: Their is no slow down in demand anywhere in the world. This is the bums rush. Sort term traders taking small profits to cover the big loses they took on the crash to $70 in Brent…. I for one regard this as a buying opportunity.

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Standard Chartered: Oil Demand To Hit All-Time High In August

  • Commodity experts at StanChart have predicted that global oil demand will set a new all-time high of 102.24mb/d in August.
  • StanChart sees oil demand setting fresh all-time highs in both November and December.
  • The bullish interpretation simply is that this is an all-time high; the bearish one is that it has taken no less than four years for global demand to recover.

Previously, we reported that energy agencies have been growing more bearish with their forecasts on oil demand growth with four experts including  IEA and OPEC Secretariat giving divergent views. Alarmingly, the normally bullish U.S.-based Energy Information Agency (EIA) has cut its forecast in each of the past nine months.  The EIA’s latest growth prediction of a decline of 420,000 barrels per day (kb/d) in what experts refer to as the call on OPEC (i.e. global demand minus non-OPEC supply) in the current year, a level 1.87 million barrels per day (mb/d) lower than its July 2022 forecast. Other agencies expect lackluster growth: Standard Chartered sees “the call” growing by just 63,000 b/d, 1.41mb/d less than its July 2022 forecast, while the International Energy Agency (IEA) expects growth of 400kb/d, 2.326mb/d below its July 2022 forecast.  The upshot of it all is that all four agencies at least expect some growth, though they can’t seem to come close to finding consensus on the magnitude. But here’s the best part: at least one expert has predicted that oil demand will hit an all-time high in the current year. Commodity experts at StanChart have predicted that global oil demand will set a new all-time high of 102.24mb/d in August, surpassing the previous record of 102.2mb/d set in August 2019.

Source: Standard Chartered Research

Regarding the question of whether fundamentals are improving or weakening, StanChart says we can put on both our bullish and bearish lenses. The bullish interpretation simply is that this is an all-time high; the bearish one is that it has taken no less than four years for global demand just to get back to the previous high. Indeed, StanChart reckons that had it been business-as-usual during those four years, global oil demand would have increased by another 5mb/d. Even better, StanChart sees oil demand setting fresh all-time highs in both November and December with demand set to rise above 103mb/d for the first time in June 2024. On the natural gas front, natural gas futures pared their Tuesday  gains in early trading in Wednesday’s intraday session as traders continued to mull the impact on balances of a chilly late April weather pattern. Gas prices jumped more than 9% on Tuesday after weekend weather forecasts pointed to a second consecutive period of strong demand for natural gas due to colder weather. Mild weather-driven demand has taken a toll on gas markets, with Henry Hub prices trading as low as $1.84 on Friday.  Wednesday’s fall marks an end to a three-session rally.  From a technical standpoint, ICAP Technical Analysis analyst Brian LaRose has told Natural Gas Intelligence that the bulls still have some work to do to take control of the market:

“Still peg the 50-day moving averages as the immediate challenge. These moving averages are presently converging with the upper bollinger bands. Run into resistance and Henry Hub has the potential to be violently repelled. Bust through these moving averages and we will have the first hard evidence suggesting a major shift in the narrative may be taking hold,”  LaRose said.

Although the short-term outlook remains soft with a swing back to light national demand expected due to warm weather in southern and eastern halves of the U.S., the medium term outlook is likely to improve with NatGasWeather predicting that much more of the U.S. will experience cooler than normal lows of 20s to lower 40s as  the cold front progresses eastward, triggering relatively strong late season demand. Meanwhile, Russia’s state-owned gas supplier, Gazprom has warned Europe that there “…is no guarantee that nature will make such a gift” again, referring to the continent successfully making it through winter despite cuts in Russian gas supplies thanks to a warmer-than-expected winter. Europe has failed to secure enough long-term LNG contracts to offset cut-off Russian gas imports, with Reuters predicting this may prove costly next winter and could sharply tighten the market. The European Union views natural gas as a bridge fuel in the transition to renewable energy, and buyers generally struggle to commit to long-term contracts. This means that Europe might be forced to buy more from the spot markets like it did in 2022, which in turn is likely to push prices up. NN: We will soon see record demand or oil…… And their will be a supply crises

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America’s richest banker places a massive bond-market bet on inflation

While some regional bank chiefs mismanaged rising rates, billionaire Andy Beal patiently waited years for yields to rise before buying Treasury inflation-protected securities like crazy.

For a decade, Andrew Beal waited for market conditions to change. With interest rates at rock-bottom levels, year after year, and other small and regional banks taking big risks to generate a little bit of income, Beal mostly did nothing. He sat on his hands while the assets of the bank that he ran decreased over a ten-year period.  Then, a year ago, Beal pounced.  As the Federal Reserve was about to embark on a rapid series of big rate hikes to fight inflation, the sole owner and chief of Beal Bank, based in Plano, Texas, started buying. He didn’t buy mortgage or Treasury bonds that had for years been popular with regional banks desperate for yield. Instead, Beal bought Treasury inflation-protected securities, mostly with durations of up to three years. He bought a lot of them.  By the end of 2022, Beal Bank’s assets had more than quadrupled to $32.6 billion, up from $7.5 billion at the end of 2021. The asset rise made Beal Bank the nation’s 61st biggest bank. Beal has essentially made a massive bet on inflation, buying $21.2 billion of Treasury bonds, Beal Bank’s filings with the Federal Deposit Insurance Corporation show. Just about all of those bonds are TIPS, says a person familiar with the trade who was not authorized to speak publicly.  The massive trade is the latest move by one of the nation’s most successful contrarian investors and provides some insight into what the nation’s richest billionaire banker thinks could be ahead for the U.S. economy. It suggests Beal believes inflation is here to stay for at least several years.  For decades, Beal, 70, has owned two separately chartered banks under the Beal Bank name. Based in the Dallas area, he has tried to remain out of the public eye, but on a few occasions his activities have drawn attention. He famously showed up at the Las Vegas Bellagio in 2001 and challenged the world’s best poker players to some of the highest-stakes games ever played at the time. In the years leading up to the 2008 financial crisis, Beal virtually shut down his bank amid the ill-fated lending boom, putting him in a strong financial position to swoop-in after the crash to buy up distressed assets on the cheap. He made a fortune. Beal also publicly backed and financially supported the presidential campaigns of Donald Trump, his longtime friend. Beal’s enormous bet on TIPS is his biggest banking bet by far since his epic trade during the financial crisis and is reminiscent of his moves during that era. Once again, it sets Beal Bank’s strategy apart from widespread banking excess and mismanagement. Beal Bank declined to comment for this story.  When the U.S. economy emerged from the 2008 financial crisis, a new and difficult reality hit the nation’s banking sector. The U.S. economy was being fueled by the Federal Reserve’s monetary policy that kept interest rates at ultra-low levels for years. Many banks, particularly regional ones, found it challenging to put their deposits to work in a profitable way.  Beal headed to the sidelines. He stopped making too many new loans, let the ones he made or acquired during the financial crisis run off, and did not buy many more assets. Beal Bank ended 2011 with $9.5 billion in assets and eight years later, on the eve of the pandemic, it had shrunk to $7.1 billion of assets, FDIC filings show.  Some other banks pursuing asset and profit growth went in another direction. For example, as Silicon Valley Bank’s assets exploded from $20 billion at the end of 2011 to $211 billion at the end of 2022, the bank’s executives decided years ago to increase SVB’s income by buying long-dated mortgage bonds with low fixed yields. But when rates rose dramatically last year, the bonds SVB bought fell in value because bond yields move in the opposite direction of prices, making SVB vulnerable to a bank run that ultimately caused it to fail. Many other banks made similar moves, according to the FDIC, which said banks were sitting on $620 billion of unrealized losses at the end of 2022. Many experts believe if the nation’s banks fully marked their assets to market, those losses would be much greater. For his part, Beal only started buying assets as the U.S. central bank started to raise rates last year, ramping up the purchases in the summer and fall of 2022. Beal Bank almost exclusively bought TIPS, bonds with principals that rise in value as consumer prices increase, resulting also in higher interest payments to the investor that are based on the increased principal value.  Beal funded the trade by tapping brokered deposits, issuing fully insured certificates of deposits with low yields. Beal Bank does have several branches in states like Texas, Florida and Arizona, but most of its funding has traditionally not come from core deposits. Beal Bank hedged the funding with derivatives and swaps that locked-in the low costs of funds for the duration of the trade, a person familiar with it said.  Last year, Beal Bank generated $1.48 billion of net income, up from $600 million in the prior year. The TIPS trade contributed to Beal Bank’s bottom line. So did income that has been generated by a group of natural gas power plants that Beal Bank foreclosed on when natural gas prices cratered a few years ago. Those plants are now profitable.  That’s all good for Beal. Beal Bank paid out $426 million in dividends last year, FDIC filings show. Forbes estimates Beal’s net worth at $10.3 billion. By contrast, JPMorgan Chase chief Jamie Dimon’s net worth is estimated at $1.7 billion. NN: Thier will be BIG winners and even bigger losers. And US government treasuries are the greatest gift of GOD in what is coming.

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Oil falls 2%

April 19 (Reuters) – Oil prices fell about 2% to a two-week low on Wednesday despite a sharp decline in U.S. crude inventories, as the U.S. dollar strengthened on fears that looming U.S. Federal Reserve interest rate hikes could curb energy demand in the world’s top consumer. A stronger dollar can hurt global demand for oil by making it more expensive in other countries, and investors were also discouraged by uneven economic data in China, the world’s biggest crude importer.Brent futures fell $1.45, or 1.7%, to $83.32 a barrel by 11:46 a.m. EDT (1546 GMT) . U.S. West Texas Intermediate (WTI) crude fell $1.47, or 1.8%, to $79.39. WTI and Brent were headed for their lowest closes since March 31, erasing all price gains since the surprise oil output cut announced on April 2 by the Organization of the Petroleum Exporting Countries, Russia and other allies in the OPEC+ group. “The crude benchmarks are posting … lows this morning in response to a strengthening in the U.S. dollar that is, in turn, weighing on risky assets following some hot inflation data out of Europe,” analysts at energy consulting firm Ritterbusch and Associates told customers in a note. “We still believe that the market has been too focused on the supply side of the global oil equation following the OPEC output cuts and that world oil demand is significantly weaker than widely perceived,” the note said. U.S. crude stockpiles fell by 4.6 million barrels last week to a 10-week low, according to the U.S. Energy Information Administration (EIA). , That is a much bigger withdrawal than the 1.1-million barrel decline analysts forecast in a Reuters poll and the 2.7-million barrel decline reported by the American Petroleum Institute late Tuesday. In China, stock markets closed lower due to uneven first-quarter data indicating a bumpy economic recovery after the country dropped its strict zero-COVID policy. The Fed is likely to have one more interest rate rise in store, Atlanta Fed President Raphael Bostic said on Tuesday. Markets are pricing in an 86% chance of the Fed raising rates by 25 basis points in May. In Europe, European Central Bank officials remained wary of inflation and have suggested further rate hikes also. NN: A consolidation phase for sure.

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Fed’s Bostic expects one more rate hike…… Fed’s Barkin: More proof of inflation decline needed……. ECB’s Rehn: We must carry on with rate hikes

Federal Reserve Bank of Atlanta President Raphael Bostic told CNBC on Tuesday that he expects one more rate increase before the policymakers decide to hold the elevated rates “for quite a while” as the inflation rate in the country still remains “too high.” The Federal Reserve official stated that it could take longer than expected to bring the inflation down to its 2% objective, but underscored that he does not expect the country’s economy to fall into a recession. “The economy has proven to be extremly resilient, outperforming expectations,” Bostic said, adding that the overall demand in the country has remained strong. “It is important that we get our balance sheet back down to a size that is appropriate,” he stressed, and underlined that the Fed will also continue to monitor the banking system for “signs of trouble.”

Barkin: More proof of inflation decline needed

Federal Reserve Bank of Richmond President Thomas Barkin said on Monday that he still needs to see more evidence that the inflation is subsiding and moving toward the United States central bank’s 2% goal. Speaking at an event hosted by the Richmond Association for Business Economics, Barkin noted he is reassured by the developments in the banking sector. The national economy is performing “just fine” with the current federal funds rate in place, he added.

ECB’s Rehn: We must carry on with rate hikes

European Central Bank policymaker Olli Rehn insisted on Friday that the ECB has to consistently continue rate hikes due to inflation still being “too high.” Speaking to CNBC, Rehn stressed the ECB must “carry on and act consistently” with its tightening policy. “Inflation is still by far too high, and especially I’m concerned about core inflation, underlying inflation,” he argued. “It’s important that we carry on and act consistently, but we have to calibrate our decision based on an approach based on data dependency,” Rehn commented on the latest data, which revealed inflation declined to 6.9% last month. However, core inflation surged to a record high of 5.7% at the same time. “We have been reaching restrictive territory, and it’s important that we don’t relax prematurely,” Rehn concluded. NN:

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Morgan Stanley Strategist Sees US Stock Rally at Risk

The rally in the S&P 500 has been driven by only a handful of stocks, putting the index at risk of fresh lows if bond yields rise, according to Morgan Stanley’s Michael Wilson — one of the most bearish voices on Wall Street. The percentage of stocks outperforming the S&P 500 on a three-month rolling basis is the lowest on record, Wilson said. That “is the market’s way of warning us we are far from out of the woods with this bear market,” the strategist — who was ranked No. 1 in last year’s Institutional Investor survey for correctly predicting the stock slump — wrote in a note. The biggest risk could come from a slump in the technology sector if inflation proves sticky and bond yields rise, Wilson said. The tech-heavy Nasdaq 100 has surged 20% this year, partly as the sudden collapse of some regional US lenders sparked a rotation away from banking stocks and toward growth shares. Investors have also been betting that cooling inflation would prompt the Federal Reserve to stop hiking rates soon, but Wilson warned those expectations were premature. “If there is one thing that can throw cold water on the large mega-cap rally, it’s higher yields due to a Fed that can’t stop hiking as soon as perhaps some investors are expecting,” Wilson wrote. With the focus now turning to the first-quarter reporting season, the strategist said earnings forecasts remained “too optimistic” despite recent downgrades. He expects the pace of decline in estimates to “increase materially” over the next few quarters on disappointing revenue growth. NN: I could not be more clear here. A stock market crash is coming… the biggest ever. The hundred year event.