MARKET WRAPS

Watch For:

Monthly Wholesale Trade for March; earnings from BioNTech, Dish Network, Lucid, Palantir Technologies, PayPal, Skyworks Solutions, Tyson Foods, Western Digital

Today's Headlines/Must Reads

- Stock Funds Rise, but Outlook Is Iffy

- Investors Flock to Safety Plays, but Stock 'FOMO' Lingers

- Ford, Tesla CEOs Exchange Jabs and Praise Amid Heated EV Rivalry

- Biden, Lawmakers Look to Break Impasse on Debt Ceiling

- Big Oil Has $150 Billion in Cash and Investors Want a Share

- U.S. Sanctions Drive Chinese Firms to Advance AI Without Latest Chips

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Opening Call:

Stock futures are little changed ahead of what is expected to be a busy trading week with more earnings and more inflation data scheduled.

All eyes will be on the consumer price index, which is published on Wednesday. It will show whether the inflation rate continues to decelerate and whether the Federal Reserve was right last week to signal a pause in rate increases.

Stocks to Watch

AMC Entertainment was down 3% in premarket trading after the chain said it reached an agreement to settle a putative stockholder class action over converting AMC Preferred Equity Units into common shares, and a proposed 10-to-1 reverse stock.

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Berkshire Hathaway rose 1% after it reported that operating profit after taxes rose 12.6% to $8.1 billion in the first quarter on higher investment income and increased insurance profit.

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Occidental Petroleum was down 1% in premarket trading after Warren Buffett tamped down speculation that Berkshire Hathaway, which owns roughly 24% of Occidental, wants to buy the entire company.

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PacWest Bancorp shares rose 12% in premarket trade after the embattled lender late Friday said it was reducing its dividend.

"Given current economic uncertainty, recent volatility in the banking sector and potential changes in regulatory capital requirements, we view reducing the dividend as a prudent step to accelerate our plans to build capital to CET1 of 10%+."

Forex:

The dollar continued to edge lower as concerns over U.S. banking-sector stress and debt ceiling negotiations keep alive expectations the Fed will cut interest rates soon, despite Friday's above-forecast jobs data, Swissquote said.

"The dollar remains under a decent selling pressure. The debt ceiling and the ongoing stress in U.S. regional banks help keep the Fed doves in charge of the market despite economic data calling for a tight hand from the Fed."

Strong U.S. inflation data on Wednesday could help tame U.S. rate-cut expectations, however, Swissquote added.

Read Euro Resilient Above $1.10 But Moves Are Likely to Be Limited for Now

Bonds:

As central banks race toward the finish line of interest-rate rises, investors are extending duration in their portfolios, J.P.Morgan Asset Management said.

"This can be seen in proprietary J.P. Morgan Asset Management positioning surveys which show that as the markets approaches the peak of policy rates, investors seek to lock in these higher level of yields before central banks start the next race of lowering policy rates."

With a recession on the horizon, JPM AM finds that investors are also allocating capital to safer parts of the fixed-income universe such as USD and EUR government funds, with these inflows coming at the expense of riskier sectors such as USD loan funds and USD high yield funds.

Energy:

Oil prices rose more than 1% following a volatile stretch of trading that has seen prices slump to 16-month lows.

Underwhelming Chinese economic data has raised the most credible concern over oil demand, CBA said.

"The narrative that oil markets will tighten later this year because of rising Chinese demand is being challenged," it added.

Traders are looking for fresh clues on crude demand this week. OPEC is set to release its monthly report on Thursday while the EIA will release its short-term outlook on Tuesday.

Metals:

Gold prices ticked higher ahead of inflation data later this week that will be key for the metal's direction.

The precious metal has mostly gained in recent weeks as investors have added to safe-haven assets amid concerns about the U.S. economy.

"Renewed concerns about U.S. banking stress, slowing economic growth and rising geopolitical tensions all bode well for gold investment demand," ANZ said.

U.S. inflation data on Wednesday, that will shape the Fed's views on interest rates, will likely be a key driver of gold prices.

Lithium

Morgan Stanley said the lithium market may have reached a turning point, "for now at least."

After a five-month selloff, some prices are bouncing as inventories fall, supply growth disappoints and sentiment improves.

"The China ex-works carbonate price bottomed at $21/kg [ex-VAT], close to what we believe to be the cost support level from China's high-cost and low-grade lepidolite supply," Morgan Stanley said. That price is now back around $27.50 a kilogram.

"Unlike for nickel and cobalt, we still model a full-year lithium market deficit for 2023 [on very conservative China pure BEV sales growth of +13% yoy], and we expect the recently oversupplied lithium market to become tighter again for the remainder of 2023,"


TODAY'S TOP HEADLINES


PacWest Stock Climbs After Dividend Cut. Other Regional Banks Are Rising Too.

PacWest Bancorp and other under-pressure regional bank stocks pointed higher early Monday as the sector continued its comeback after Friday's strong rally.

The Beverly Hills-based lender said late Friday it was cutting its dividend, citing economic uncertainty and volatility in the banking sector. CEO Paul Taylor described it as a "prudent step."


Elon Musk's Goal for Twitter: 'Unregretted User-Minutes'

When it comes to judging the new Twitter, Elon Musk has created his own measurement of success: unregretted user-minutes.

Whatever that means.


Ford, Tesla CEOs Exchange Jabs and Praise Amid Heated EV Rivalry

Jim Farley of Ford Motor has been taking public shots at Tesla. Elon Musk is unfazed.

"There's no doubt about it. The demand for Tesla is changing, and in some sense is deteriorating," the Ford CEO said at a Wall Street Journal event Wednesday when asked about Mr. Musk, who leads Tesla.


Ares Sets Sights on $10 Billion for Direct Loan Fund

Ares Management is raising its third fund dedicated to extending loans to midsize U.S. businesses, seeking 25% more capital than it raised for a predecessor over two years ago, as banks step back from financing leveraged buyouts.

The alternative asset manager best known for its $214.2 billion in private-credit strategies aims to collect $10 billion for its Ares Senior Direct Lending Fund III, according to documents prepared for the $24.52 billion Teachers' Retirement System of Louisiana.


U.S. Sanctions Drive Chinese Firms to Advance AI Without Latest Chips

U.S. sanctions are spurring Chinese tech companies to accelerate research to develop cutting-edge artificial intelligence without relying on the latest American chips.

A Wall Street Journal review of research papers and interviews with employees found that Chinese companies are studying techniques that could allow them to achieve state-of-the-art AI performance with fewer or less powerful semiconductors. They are also researching how to combine different types of chips to avoid relying on any one type of hardware.


Banks Are in the Grips of Investor Crisis of Confidence

First Republic Bank's seizure and sale to JPMorgan Chase was supposed to be a cathartic moment for American banks, the denouement of the financial system's latest crisis of confidence.

The relief lasted for barely a day. On Tuesday, shares of regional banks were plunging, with a handful of them dropping by double-digit percentages. At one point on Thursday, the KBW Nasdaq Regional Banking Index was down by 15% from the prior week, though it rallied back on Friday to finish the week down 8%.


Online Sports Bettors Lose More as Parlays Gain Popularity

Online sports betting has soared in popularity in the five years since a 2018 Supreme Court decision cleared the way for its legalization in the U.S. So far, more than two dozen states and the District of Columbia have embraced online sports betting and others are considering it.

But there is a key question-familiar to investors in financial markets-that potential online bettors might want to consider: What are the average overall returns?


Google Plans to Make Search More 'Personal' with AI Chat and Video Clips

Google is shifting the way it presents search results to incorporate conversations with artificial intelligence, along with more short video and social-media posts, a departure from the list of website results that has made it the dominant search engine for decades.

The changes represent a response to big shifts in the way people access information on the internet, including the emergence of AI bots like ChatGPT. They would nudge the service further away from its traditional format, known informally as the "10 blue links," according to company documents and people familiar with the matter.


Warren Buffett Retains Sense of Optimism at Berkshire's Annual Meeting

OMAHA, Neb.-It has been a tumultuous year since Warren Buffett last took the stage to talk to his company's shareholders.

Markets swooned. Tensions between the U.S. and China rose to new heights. And three U.S. banks toppled in quick succession, raising fears about the potential for wider fallout in the financial system.


Stock Funds Rise, but Outlook Is Iffy

It's not much but investors will take it.

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05-08-23 0612ET