Welcome back,

The S&P, Nasdaq and Dow all rose as investors eye the Fed meeting.

Let’s keep it concise.

Market Headlines 👀

• Tesla (TSLA) bonds upgraded to investment grade by Moody's ratings agency.

• JPMorgan (JPM) owns contracts underpinned by nickel that the London Metal Exchange just discovered were stones.

• Dollar languishes as bank crisis fears ebb on Credit Suisse (CS) rescue.

• Credit Suisse (CS) bond-wipeout threatens $250B market.

• Credit Suisse (CS) is at risk of losing tens of thousands of jobs after UBS (UBS) takeover.

• Nvidia (NVDA) announced the launch of the Nvidia Omniverse Cloud in partnership with Microsoft Azure (MSFT).

• TikTok CEO says company is at “pivotal” moment US lawmakers seeking ban.

• Google (GOOGL) releases Bard, its AI chatbots competitor.

• Amazon’s (AMZN) HQ2 is stalling, and so are its incentives.

• Volkswagen's (VWAPY) Scout unit wins $1.3B in incentives for South Carolina factory.

• US Air Force seeks $73B through 2028 for Northrop Grumman (NOC)-developed bomber and intercontinental ballistic missile.

• President Biden signs bill to declassify COVID origins intelligence.

• US home prices fell in February for the first time in 11 years.

  • Sales rose 14.5% in February, but were down 22.6% from a year earlier.

• Treasury secretary Yellen says the US will intervene if needed to protect smaller banks.

• EV charger makers brace for slowdown as new Made In America rules kick in.

• Tesla (TSLA) expected to deliver strong Q1 retail sales in China.

• Vanguard (VTI) to shutter business in China, exiting $3.9T Ant venture.

• Canada inflation slows to 5.2% year-over-year in February (est. 5.4%).

Earnings 💸

• Nike (NKE)

  • EPS: $0.79 beats (exp. $0.65)

    • Revenue: $12.4B beats (exp. $11.47B)

• GameStop (GME)

  • EPS: $0.16 beats (exp. -$0.15)

  • Revenue: $2.23B beats (exp. $2.18)

• Tencent Music (TME)

  • EPS: $0.11 misses (exp. $0.12)

  • Revenue: $1.08B beats (exp. $1.05B)

Recap Around the Street 🧠

The Federal Reserve holds its highly anticipated FOMC March meeting tomorrow against an increasingly uncertain economic backdrop. Fed Chair Powell had been widely signaling a 50 bps hike in the lead-up March’s FOMC, but the recent banking crisis brought about fears for the health of the financial sector.

Here are the current odds for each rate hike, and their potential implications on the financial system:

• No Change (21.8%): If the Fed were to keep rates unchanged due to strains in the financial sector, it would question its resolve to bring high inflation under control. Fed Chair Powell has stated numerous times that rates would have to stay higher for longer to battle inflation.

• 25 bps Hike (78.2%): A quarter-point move currently makes the most sense to economists. The smaller hike would signal the Fed is relenting on its previous hawkish stance, especially with inflation still running well above the central bank’s 2%-target. This could leave the Fed at risk of easing policy just as inflationary pressures begin to reaccelerate.

• 50 bps Hike (0%): With mounting stress in the banking sector, markets aren’t currently expecting any chance of a 50 bps rate hike. An aggressive move is likely to add to “hard-landing” fears for the economy.

Credit Suisse’s (CS) emergency merger with UBS (UBS) means its riskiest bonds, known as Additional Tier 1 bonds, will be wiped out. These bonds are also known as “AT1 bonds” or “CoCos” (i.e. contingent convertible bonds). AT1s were created after the financial crisis to transfer banking risk from taxpayers to bondholders.

AT1s became popular with money managers and banks as a relatively safe way to boost yields on bond portfolios. The bonds often paid higher interest rates than traditional debt. But AT1s are still risky, and can be written down to a fraction of their value or become worthless.

The decision to wipe out Credit Suisse's AT1 bonds has rattled investors in similar bank debt markets. Normally, bondholders rank above equity holders in the capital structure. That means when a company defaults, creditors receive their proceeds before equity holders.

But, in this case, the Credit Suisse bonds provided for regulators to write them down without wiping out equity holders. So, equity holders in Credit Suisse will recover better than tier 1 bondholders.

Revenue for ChatGPT Plus hit almost 2x its prior record high in a day after its release. GPT Plus, formally known as GPT-4, is ChatGPT's subscription plan. In short, if you only have the free access to ChatGPT, you’re still interacting with GPT3.

Just yesterday, reports emerged that nearly half of firms’ HR leaders are formulating policies on employee’s ChatGPT use. Policies currently range drastically. Some Wall Street firms, like Bank of America (BAC) and Goldman Sachs (GS) have banned the chatbot. Meanwhile, hedge fund giant Citadel has embraced it.

Market Preview 🎞️

• Wednesday: FOMC rate decision, UK CPI, ECB Chairs speak; US Treasury Secretary Yellen to appear at a Senate subcommittee hearing focused on 2024 budget; EIA crude oil inventory report

• Wednesday earnings: Chewy (CHWY), Hyzon Motors (HYZN), Cassava Sciences (SAVA) and Petco (WOOF)

• Thursday: US new home sales; initial jobless claims; BOE rate decision; Eurozone consumer confidence; EU leaders meet in Brussels for a two-day summit; US Treasury Secretary Yellen testifies on the budget to a House Appropriations subcommittee

• Thursday earnings: General Mills (GIS), Accenture (ACN), Darden Restaurants (DRI), FactSet Research (FDS), Gambling.com Group (GAMB) and Equinor SA (EQNR)

• Friday: US durable goods; European Flash PMIs; Japan CPI & PMI; BOE’s Mann speaks

• Friday earnings: Express (EXPR)

That’s all for today, folks! We’ll be back around the same time tomorrow with a curated list of important news, economic data and market highlights. 

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