DTEA - Wall Street Breakfast Podcast: Bank Earnings On Tap

2023-04-14 07:11:01 ET

Listen on the go! Subscribe to Wall Street Breakfast on Apple Podcasts and Spotify Banks Q1 earnings focus on deposit levels, outlook. DOJ says Adobe ( ADBE ) agrees to $3M settlement over kickback allegations. NY-based menswear brand Bonobos bought by Express ( EXPR ) and WHP from Walmart ( WMT ) for $75M. Learn more about these stocks with Seeking Alpha Premium .

This is an abridged transcript of the podcast.

• Bank earnings are in focus today as some of the big names like JPMorgan Chase, Wells Fargo and Citigroup report premarket.

• Adobe agrees to pay millions of dollars to settle kickback allegations

• And a deal has been reached for the sale of the Washington Commanders NFL team

OUR TOP STORY

With concern over recent banking turmoil, investors will be keenly attuned to what the first big banks' Q1 earnings reveal today. In the waning three weeks of the quarter, the failures at Silicon Valley Bank, Silvergate Capital, and Signature Bank had bank customers and investors nervous about the stability of the financial system.

Chiefly, analysts will hone in on deposit levels. For the megabanks, such as JPMorgan Chase ( JPM ) and Wells Fargo ( WFC ), deposits are expected to rise as the customers of some smaller, regional banks shift uninsured deposits to larger institutions.

Seeking Alpha has a full breakdown of earnings expectations including the full bank earnings calendar. I’ll leave a link to that article in show notes.

On tap for today premarket: JPMorgan Chase ( JPM ), Wells Fargo ( WFC ), Citigroup ( C ), PNC Financial ( PNC ), BlackRock ( BLK ).

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The New York Post is reporting that Wells Fargo (NYSE: WFC ) representatives are scheduled to meet with staff from the U.S. Office of the Comptroller of the Currency on Friday,

The federal banking regulator was said to have hit Wells Fargo ( WFC ) with a number of "matters requiring attention" (MRAs) -- partly motivated by the bank failures in March -- that focus on concerns of inadequate internal financial controls and oversight of equity and fixed income traders, the article said.

The OCC declined to comment, the NYP said , adding that Wells Fargo ( WFC ) did not respond to a request for comment.

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The European Data Protection Board said on Thursday that it had created a task force to look into ChatGPT, the popular chatbot created by Microsoft (NASDAQ: MSFT )-backed OpenAI.

In a statement , the EDPB said the task force is designed to "foster cooperation and to exchange information on possible enforcement actions conducted by data protection authorities."

The move comes after ChatGPT was temporarily banned in Italy over privacy concerns.

Germany and Spain have also recently said they could potentially curb the use of ChatGPT in their respective countries, citing data privacy concerns.

NOW MORE ON THE MARKET

The release of economic data gave a boost to U.S. stocks on Thursday.

The Nasdaq ( COMP.IND ) closed +2.0%, the S&P 500 ( SP500 ) ended +1.3% and the Dow ( DJI ) finished +1.1%.

Investors cheered the latest reading for wholesale inflation. The producer price index unexpectedly dropped in March compared to the previous month, falling 0.5%. Economists had expected an increase of 0.1%. Compared to last year, the figure showed a lower-than-expected increase of 2.7%.

The cooler-than-expected PPI figures followed CPI data from earlier in the week, which showed a moderation in the headline consumer price growth during March. Taken together, the latest reads point to continued disinflation, raising hope that the Federal Reserve would have the cover needed to pause its rate-hiking campaign.

Leo Nelissen is a Seeking Alpha contributor. He said "Unfortunately, we’re not out of the woods yet.” Nelissen said “PPI data was revised higher for February and increases in sub-indexes that feed into PCE super-core inflation mean that the Fed cannot give up on fighting inflation yet."

Elsewhere, initial jobless claims rose 11K last week to reach 239K, coming in above expectations. The larger-than-expected increase in Americans filing for first-time unemployment claims suggested some moderation in the labor market.

Trading in the fixed income market was muted. The 10-year yield ( US10Y ) climbed 3 basis points to 3.45%, while the 2-year yield ( US2Y ) was unchanged at 3.97%.

MORE OF OUR TOP STORIES

The U.S. Department of Justice (DOJ) on Thursday said Adobe (NASDAQ: ADBE ) had agreed to pay $3M to settle kickback allegations over sales of software to the federal government.

The DOJ alleged that Adobe had made improper payments under its Solution Partner program to companies that had a relationship with the government that allowed them to influence federal purchases of Adobe software.

The DOJ said in a statement , "Between January 2011 and December 2020, Adobe allegedly paid the companies a percentage of the purchase price of the software.

The statement went on to say that “The United States contends that these payments constituted prohibited kickbacks that resulted in Adobe causing false claims for payment to be submitted to federal agencies.”

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Boeing ( BA ) is down nearly 5 percent premarket. The plane maker warned that deliveries of its best-selling 737 Max jet might be delayed because of issues with a part supplied by Spirit AeroSystems.

Boeing ( BA ) didn't mention Spirit Aerosystems ( SPR ) by name. The supplier issued its own statement.

Premarket SPR is down 11 percent.

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Bonobos, the popular fashion apparel business owned by Walmart, will be purchased by Express (NYSE: EXPR ) and WHP Global for $75 million.

WHP will contribute $50 million to buy the brand and EXPR will acquire its operating assets and liabilities for $25 million.

Premarket Express is up more than 13 percent.

When you look at the dedicated stock page for Express, you’ll see the two most recent articles offer two different opinions.

Alex Galanis says Express is a very unsafe bet with a silver lining. In the article they rate the stock a hold. They say the recent deal with WHP Global aims to provide the company with cash necessary for its survival.

The other article is by Geoffrey Seiler who says Express is now basically a long-dated call option. They say the stock is a buy because the WHP Global deal improves its balance sheet and gives it some options, but WHP is the real winner.

I’ll leave a link to both articles in show notes.

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Tea merchant DAVIDsTEA (NASDAQ: DTEA ) said on Thursday that it is voluntarily delisting from the Nasdaq, effective at the close of the market today, April 14.

The company has been trading on the TSX Venture Exchange from April 3 under the ticker symbol DTEA.

After April 14, the company's shares will trade only in Canadian dollars.

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First Person ( FP ), a producer of psychedelic mushrooms for therapeutic purposes, has updated terms for its proposed $6M initial public offering.

The Canadian company said that selling shareholders now plan to offer 2.3M shares rather than 2.5M shares. According to the filing , First Person won't see any proceeds from the shareholder sale .

The company still intends to offer 1M shares priced between $5.50 to $6.50, which would raise $6M if priced at the midpoint. First Person originally filed in October 2022, seeking to raise $8M.

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NetSuite, the enterprise software unit of IT services giant Oracle (NYSE: ORCL ), has ordered its employees to return to the office following a work-from-home policy during the COVID-19 pandemic.

According to Bloomberg, the software unit has told most of its employees they need to return to the office, at least twice a week.

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Bloomberg is also reporting that a venture formed four years ago by coworking company WeWork (NYSE: WE ) and private equity firm Rhone has defaulted on a $240M loan for an office tower in San Francisco, California.

The building, located at 600 California St. in San Francisco's financial district, reportedly features a WeWork ( WE ) coworking space as an anchor tenant.

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A group led by Josh Harris, co-founder of Apollo Global Management, has reportedly agreed to terms on a deal to buy the NFL's Washington Commanders for $6B from Dan Snyder.

A successful deal would result in the highest price ever paid for a sports team, surpassing the Denver Broncos' $4.6B deal last year.

According to Sportico, Harris and Snyder are hoping to execute the contract in the coming days.

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Now let’s take a look at the markets as of 6:20 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are in the red. The Dow is down 0.2%. The S&P 500 is down 0.1% and the Nasdaq is down 0.3%. Crude oil is up 0.1% at more than $82 a barrel. Bitcoin is up 2% at $30,824.

In the world markets, the FTSE 100 is up 0.3% and the Dax is up 0.5%.

On today’s economic calendar, at 8:45 am the Fed’s Christopher Waller will speak on the economic outlook at the Graybar National Training Conference. And at 10 am business inventories.

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