Welcome back,

It’s been a big day for Big Tech CEOs, with Block’s Jack Dorsey finding himself on the wrong side of a short seller, to TikTok’s CEO appearing before Congress.

Let’s keep it concise.

Market Headlines 👀

• Block (SQ), co-founded by Jack Dorsey, falls after short-seller Hindenburg says it’s short the stock.

• TikTok CEO Shou Zi Chew testified before Congress.

  • China said it would strongly oppose any forced sale of TikTok.

• Walmart (WMT) laying off hundreds of US workers at five e-commerce fulfillment centers.

• Accenture (ACN) to cut 19,000 jobs as IT spending slows.

• Apple (AAPL) to spend $1B a year on films to break into cinemas.

• Ford (F) sees EV losses growing to $3B in 2023.

• SEC plans lawsuit against Coinbase (COIN).

• FTC order pressures tech platforms over fraudulent ads.

• Indeed (RCRRF) cuts 2,200 positions as tech sector cools.

• SpaceX plans new funding with backing from Saudi and UAE investors.

• US initial jobless claims fall to 191K (est. 197K; prev. 192K).

• American households are likely to sell $750B in stocks, Goldman Sachs (GS) estimates.

• The Bank of England (BoE) raised rates by a quarter percentage point (25 bps).

Earnings 💸

• General Mills (GIS) (Q3)

  • EPS: $0.97 beats (exp. $0.92)

  • Revenue: $5.1B beats (exp. $4.97B)

• Accenture (ACN) (Q2 ‘23)

  • EPS: $2.69 beats (exp. $2.49)

  • Revenue: $15.8B beats (exp. $15.56B)

• Darden Restaurants (DRI) (Q3)

  • EPS: $2.34 beats (exp. $2.25)

  • Revenue: $2.8B beats (exp. $2.73B)

• FactSet Research (FDS) (Q2)

  • EPS: $3.80 beats (exp. $3.69)

  • Revenue: $515.09M misses (exp. $515.47M)

Recap Around the Street 🧠

Fed Chair Powell and Treasury Secretary Yellen’s contradictory messages sparked a market selloff on Wednesday. Both officials touched on the health of the banking sector in their meetings, but each with a starkly different resolution of the current banking crisis.

Wednesday afternoon, the back half of Powell’s FOMC press conference overlapped with Yellen’s appearance before a Senate subcommittee. Though markets tend to get turbulent around a Powell speech, this turbulence reached a new level when both Powell and Yellen spoke on the state of banks and how far the government will go to protect depositors.

Yellen began by announcing that, “We are not considering insuring all uninsured bank deposits.” But Powell, at almost the exact same time, answered that, “Depositors should assume that their deposits are safe.” As a result, the S&P 500 fell, rose, went back to unchanged then plunged again. Major indices all ended the day down.

Today, Yellen reversed her comments in further testimony to a House Appropriations subcommittee. Yellen, in a U-turn, declared today that “Strong actions are to be taken to ensure deposits are safe.” In short: it appears as though Yellen saw that her comments blew up the market and immediately changed her prepared remarks.

Markets broadly welcomed UBS’ (UBS) takeover of Credit Suisse (CS), but it also welcomed the debate around “bail-ins” as banking fears persist. Switzerland’s decision to give priority to shareholders over some bondholders in its rescue of Credit Suisse is counterintuitive for finance folk. But, it has a political logic and precedent.

Bank bail-ins are a policy mechanism used to address financial instability in the banking sector. Historically, during a financial crisis like 2007-08, governments would use taxpayer money to bail out troubled banks. This was often criticized for being unfair and for rewarding risky bank behavior. In response, countries, including the US, implemented bank bail-in regimes. Unlike bailouts, bail-ins require banks to use their own resources to address their financial difficulties.

In an ideal scenario, bail-ins reduce the need for government intervention and lower the risk of taxpayer-funded bailouts. It also strives to maintain confidence in the banking system and prevent financial contagion.

The Bank of England (BoE) raised its key interest rate by a quarter percentage point to 4.25% from 4%. The hike is the central bank’s 11th consecutive increase since December 2021. Despite its attempts to cool down inflation, UK CPI unexpectedly picked up in February.

Though the BoE announced it expects inflation to fall rapidly before the summer, it warned hikes may continue. The BoE's move follows the Fed, which approved another 25 bps rate increase just a day earlier. Similarly, the European Central Bank (ECB) and the Swiss National Bank (SNB) raised their key rates by a half percentage point and 1.5%, respectively.

In each of their statements following the rate increase, central bankers (including the BoE and Fed) said they would "be vigilant to the evolving outlook" regarding the ongoing banking crisis. The BoE specifically warned that banks could cut back on lending during previous periods of strain. Historically, that could lead to a steeper economic slowdown and a more rapid decline in inflation.

Market Preview 🎞️

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

• Friday earnings: Express (EXPR)

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

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