Benzinga - Hedge funds made $7 billion short selling banks last month. March was the single most profitable month for short sellers in the banking sector since the 2008 financial crisis.
Market
Prices as of 4 pm EST, 4/6/23
Macro
- The US Department of Defense is investigating what could be one of the most significant leaks of highly classified military documents in the country’s history. The documents include a wage range of topics, like sensitive information about the war in Ukraine, its allies, and US intelligence sources within Russia, all of which have turned up across multiple social media platforms and have the potential t harm national security.
- The US commercial real estate (CRE) market has $1.5 trillion in front-loaded debt coming due before the end of 2025. The looming maturity wall is raising concerns over the ability of small and regional banks—who have been rocked by massive deposit outflows over the past month—to provide financing to borrowers as declining property values add to refinancing risks.
- US job growth slowed in March with nonfarm payrolls increasing by 236,000 (vs. 239,000 expected). Despite the lower-than-expected gain, the unemployment rate dropped to 3.5% (not what the Fed wants to see) which suggests resilient labor demand and keeps pressure on policymakers to raise rates at their next meeting in May.
Stocks
- Net-short leveraged fund positions in the 10-year futures last week reached their most bearish level in over a year. The ramped-up bets against benchmark Treasuries suggest traders anticipate the Fed will hike interest rates next month as the economy remains resilient in the face of turmoil in the banking sector.
- Wall Street’s biggest banks, including Goldman Sachs, Morgan Stanley, JPMorgan, and Citigroup, are facing difficulties complying with EU regulations that require investors to separately pay for investment research and trading services. A temporary waiver protecting US broker-dealers from having to register as investment advisers will expire on July 3, which means the banks will have to either register, move research teams, or cut off clients from US-produced research.
- As we head into earnings season, analysts are expecting a 6.8% drop (YoY) in Q1 profits for S&P 500 companies. They are also expecting annual revenue growth of just 1.8% for the quarter. The former would be the largest decline since Q2 2020 while the latter would mark the slowest growth since Q3 2020.
Energy
- A surge in supply from smaller oil producers like Nigeria, Iran, and Guyana threatens to undermine OPEC+ efforts to keep prices high. This new dynamic has commodities strategists rethinking previous calls for a supply crunch in the second half of the year.
- Meanwhile, investors are rushing to pull money out of oil exchange-traded products. WisdomTree’s Brent Crude Oil ETP (BRNT) saw its largest single-day drop since 2019 last week, while ProShares Ultra Bloomberg Crude Oil ETF (UCO) experienced its biggest weekly outflows since March 2022.
Earnings
- Pricesmart (NASDAQ: PSMT)
- Tilray Brands (NASDAQ: TLRY)
- Greenbrier Companies (NYSE: GBX)
News
- Underperformance: After 57% of active fund managers outperformed last year, only a third managed to beat their benchmarks in Q1 2023.
- Smashed: Nintendo’s The Super Marios Bros. Movie smashed box office expectations over its weekend debut, raking in $377 million and $206 million in global and domestic sales, respectively.
- Twitter vs. NPR: After receiving backlash for labeling National Public Radio as “government funded media”, Twitter has changed the description tag for the news organization to “state-affiliated media”.
- Chinese tech: Despite mounting losses at TikTok, ByteDance posted record profits totaling $25 billion in 2022, surpassing both Tencent and Alibaba for the first time.
- Trucking: Truckload rejection rates in the US have fallen below 3% for the first time since the pandemic began as capacity shifts from being unsustainably tight to dangerously loose.
Week Ahead
- Monday: Wholesale inventories, consumer inflation expectations
- Tuesday: NFIB business optimism, Redbook
- Wednesday: Inflation rate, FOMC minutes, monthly budget statement
- Thursday: Producer prices, initial jobless claims
- Friday: Retail sales, import/export prices, industrial & manufacturing production, business inventories, Michigan consumer sentiment
Crypto
Prices as of 4 pm EST, 4/6/23
- Low leverage: Limited overall use of leverage in Bitcoin (CRYPTO: BTC) markets during this year’s rally suggests the risk of liquidations on big price swings remains low.
- Web3 VC: Derivatives exchange operator Bitget has announced the launch of a new $100 million venture fund aimed at web3 startups in Asia.
- Crytpo funding: Cross-chain interoperability protocol LayerZero led a big week for crypto startup funding, raising $120 million in a Series B round which values the company at $3 billion.
- Mining bill: A bill aimed at regulating Bitcoin mining in Arkansas would protect miners against discrimination, entitling them to the same rights as data centers.
- DeFi exploit: A large portion of the $3.3 million in losses resulting from a smart contract bug on SushiSwap were recovered through a white hat security process.
Deals
- Nutrition: Online vitamins retailed Sunday Natural is exploring a possible sale that could value the company at $655 million.
- Chinese IPOs: Shares in 10 Chinese companies surged by nearly 100% on their first day of trading under new rules in Shanghai and Shenzhen which remove regulatory approval requirements and caps on IPO prices.
- Slow M&A: Global merger & acquisition activity was slow in Q1, with only 3 pending deals announced valued at $10 billion or more.
- M&A optimism: Meanwhile, a Bloomberg survey of 17 merger arbitrage analysts, brokers, and fund managers suggests optimism over an increase in deal activity ahead after a flurry of private equity deals were announced in Q1.
- O&G: Exxon Mobil is in talks to acquire top shale oil producer Pioneer Natural Resources.
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