North American Morning Briefing: Traders Reassess Fallout from Powell, Yellen

MARKET WRAPS

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Weekly Jobless Claims; Current Account for 4Q; New Home Sales for February; President Biden visits Canada; earnings from Accenture, General Mills, Darden Restaurants

Today's Headlines/Must Reads

Pro Take: The Fed Hits Inflation With Ninth Rate Hike as Banks Reel

Fed Walks Tightrope Between Inflation, Bank Turmoil-but for How Long?

Macro Hedge Funds Hit by Financial Turmoil

What Does 'Made in America' Mean? In Green Energy, Billions Hinge on the Answer.

Big Oil Eyes New Deals in North Africa Amid Rising Energy Demand

Electric-Vehicle Growth Expands GM Cyber Chief's Concerns to Charging Stations

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Opening Call:

Stock futures were slightly firmer on Thursday as investors reassessed the market's negative reaction to events late in the previous session.

SPI Asset Management said the improvement in market sentiment reflected a belief that Jerome Powell will be proven wrong after he made clear he disagreed with investors' bets the Fed will have cut rates to about 4.2% by the end of the year.

"U.S. futures are nudging higher as the market bets the Fed loses its nerve and downshifts anyway. Note the modern-day history book of Fed pauses is very bullish for stocks," SPI said.

Track reactions in Europe to the Fed interest rate hike.

Calmer conditions in bond markets were also supporting the mood, while a strong showing for some Asian bourses helped to underpin sentiment.

"Some relatively strong gains were recorded [in Asia], with investors choosing for the moment to focus on the possibility of stronger conditions in the region, propelled by the reopening of the Chinese economy," Interactive Investor said.

Stocks to Watch

Agile Therapeutics reported higher revenue and a narrower loss in its latest quarter. Its stock rose 16% in after-hours trading.

Chewy fell 2% after reporting a surprise profit in its fiscal fourth quarter but posting a drop of 1.2% in active customers from a year earlier to 20.41 million.

Coinbase was down 11% in premarket trading after saying it received a "Wells Notice" from the SEC, which warned that the agency's staff had made a preliminary determination to recommend an enforcement action against the crypto exchange.

First Republic Bank gained 4% in premarket trading, while fellow regional lender PacWest Bancorp rose more than 5%. First Republic dropped more than 15% on Wednesday, and PacWest slumped more than 17% following conflicting messages from government officials about the safety of deposits.

KB Home rose 2% after reporting fiscal first-quarter earnings and sales that beat analysts' estimates. The company said it began to see an increase in demand as it entered the spring selling season.

SQZ Biotechnologies said its Phase 1 SQZ-AAC-HPV-101 clinical trial would continue. Its shares rose 33% in after-hours trading.

Steelcase posted fiscal fourth-quarter sales that beat Wall Street expectations. The stock rose 3% in premarket trading.

Forex:

The dollar hit a seven-week low against a basket of currencies and is likely to stay weak after the Fed signaled rates may be close to a peak, ING said.

"The dollar weakened on the back of the moderate dovish surprise by the Fed yesterday, and reluctance from the Treasury to consider an extension to the deposit insurance," ING said.

Sentiment towards the dollar should stay bearish especially against European currencies, albeit with small corrections high rather than a straight-line dollar depreciation, ING added.

UniCredit Research said falls in the dollar could propel the euro rapidly above $1.10. EUR/USD received a big boost after the Fed, reaching a seven-week high of 1.0931.

"This reopens the chance of a relatively rapid test of the year-to-date peak of 1.1033 [in EUR/USD], with no major obstacle in between," UniCredit Research said.

Once above 1.10, EUR/USD's path towards 1.12--UniCredit's current target for this year--could also be quite smooth, with only 1.1073 as a notable resistance level.

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The Swiss franc turned higher on the day against the euro, after the SNB raised interest rates by 50 basis points to 1.5% and declared an end to the bank crisis.

Although the decision had been widely expected, some analysts had warned beforehand of the risk of the central bank opting for a smaller 25 basis point rate rise or even no rise at all due to recent banking-sector troubles, particularly with Credit Suisse.

Measures taken by Swiss authorities, including the SNB, to rescue Credit Suisse have "put a halt to the crisis," the SNB said in a statement accompanying the rate decision.

Read Swiss Central Bank Lifts Key Rate, Declares End to Bank Crisis

Energy:

Crude futures were slightly lower having made solid post-Fed gains. Despite the losses, analysts said demand for oil remains strong and is likely to strengthen further.

"The Energy Information Association's weekly report highlighted strong exports, while domestic fuel stockpiles declined," ANZ Research said, adding that Asian demand also remained firm, while the prospect of no more rate hikes this year was providing impetus for oil.

Read Big Oil Eyes New Deals in North Africa Amid Rising Energy Demand

Metals:

Base metal prices were mixed while gold rose more than 1%, as investors reacted to a "dovish" Fed.

"This was a 'dovish hike', i.e., higher rates but with lower projections, " Peak Trading Research said.

The dollar fell following indications from Jerome Powell that fewer or possibly no more rate hikes are set to happen for the rest of this year, a bullish trend for commodity markets, Peak said.

TODAY'S TOP HEADLINES

Big Oil Eyes New Deals in North Africa Amid Rising Energy Demand

CAIRO-After years of underinvestment in North Africa's energy infrastructure, global oil-and-gas giants from Halliburton Co. and Chevron Corp. to Eni SpA are ramping up their presence in the region as demand from Europe grows.

Executives in the industry are betting it is worth drilling again in some of the hardest places to do business in the world as Europe increasingly turns to other sources for its energy needs after shunning its main supplier, Russia, over the invasion of Ukraine. In recent months, a string of European officials have visited the region to help advance talks over potential supply deals.

TikTok CEO Seeks to Convince Congress Chinese-Owned App Isn't Security Threat

WASHINGTON-TikTok CEO Shou Zi Chew testifies Thursday morning at a high-stakes congressional hearing, as safety and security concerns over the Chinese-controlled platform deepen even as its popularity in the U.S. grows.

Mr. Chew, a Harvard-educated Singaporean army reservist and former Goldman Sachs banker, will testify before the House Energy and Commerce Committee, whose members have already signaled concerns that Beijing could influence TikTok content and harvest user data.

Electric-Vehicle Growth Expands GM Cyber Chief's Concerns to Charging Stations

Electric vehicles are taking General Motors Co.'s cyber chief into new territory.

Kevin Tierney, the auto maker's chief cybersecurity officer, often finds himself monitoring risks across information-technology systems, autonomous vehicles and manufacturing plants. Now, he's adding power-grid security to his day-to-day work.

Banks Are Risky. Silicon Valley Bank's Risk Officer Was AWOL.

James Lam had just been hired by a new financial division of GE Capital when he walked into his boss's office with a problem: He was ordering business cards and had no idea what to put on them. Since his position didn't really exist, it also didn't have a title, so he was given permission to invent one. He called himself a chief risk officer.

Thirty years later, as he followed the spectacular implosion of Silicon Valley Bank, there were few people more qualified than Mr. Lam to ask two simple questions.

Starbucks's New CEO Brews Coffee at Stores to Prepare for Role

CHICAGO-New Starbucks Corp. Chief Executive Laxman Narasimhan plans to be in regular contact with departing CEO Howard Schultz-but it will be clear who is in charge, both men said.

"There's places where he can be really helpful. The world, though, needs boxes and lines," Mr. Narasimhan said in an interview. "There's one CEO, and that's me."

China Evergrande Reaches Debt-Restructuring Deal With Bondholders

China Evergrande Group has reached an agreement with its offshore debtholders under which the property developer will issue new bonds and equity-linked products.

Binding agreements have been entered into with bondholders, including for $19.15 billion of notes the company had previously issued, Evergrande said late Wednesday.

SEC Plans Lawsuit Against Coinbase, According to Exchange

The Securities and Exchange Commission has told Coinbase Global Inc. that it plans to take enforcement action against the company, escalating its crackdown on digital-currency firms by targeting the biggest U.S. crypto exchange, Coinbase said Wednesday.

Coinbase said it had received a letter from the SEC known as a Wells notice, in which regulators say they believe companies or individuals violated investor-protection laws. The notices aren't final because the agency's commissioners must authorize any lawsuits or enforcement settlements.

Avaya Cleared to Hand Control to Lenders in Repeat Bankruptcy

Avaya Holdings Corp. won court approval Wednesday on a lender-backed chapter 11 exit plan that trims nearly $2.6 billion in debt from its balance sheet and provides new financing to continue transforming itself from a traditional provider of office telecommunications equipment to a subscription-based software provider.

Senior lenders including Apollo Global Management Inc. and Brigade Capital Management LP have agreed to exchange top-ranking debt for the equity in reorganized Avaya, which will become a private company upon leaving bankruptcy while wiping out existing Avaya shareholders.

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March 23, 2023 06:10 ET (10:10 GMT)

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