CVS - Wall Street Breakfast Podcast: Fed Decision Day Then What?

2023-05-03 06:46:34 ET

Listen on the go! Subscribe to Wall Street Breakfast on Apple Podcasts and Spotify Federal Reserve expected to boost policy rate by 25 bps again - then pause? Icahn Enterprises ( IEP ) drops on new Hindenburg Research short report (update). How Investors Should Think About AI, Micron (MU), Tesla ( TSLA ) And The Fed With Chaim Siegel. Learn more about these stocks with Seeking Alpha Premium .

This is an abridged transcript of the podcast.

• The Federal Reserve is expected to boost the policy rate by 25 bps. Then what?

• Today is stock of the week Wednesday. *audio* Chaim Siegel is the Investing Group leader of Fed Trader on Seeking Alpha. Today he’s sharing why he believes Micron is so important.

• Revlon emerges from Chapter 11 protection. The CEO says the company looks to unlock the full potential of its brands.

OUR TOP STORY

Federal Reserve policymakers met Tuesday and the meeting will continue today to assess whether they've done enough to cool down the hottest inflation seen in 40 years.

Market participants are betting that the Federal Open Market Committee isn't finished yet in its rate-hiking moves.

The debate at the Fed is expected to be between a 25-basis point rate hike, which would bring the federal funds rate target range to 5.0%-5.25%, or keeping the range at 4.75%-5.0%.

But market participants expect little in the way of debate. As of this morning, according to the CME FedWatch tool, investors see a 88% probability of a 25-bp hike on Wednesday, up from a 48.4% probability a month ago.

One datapoint that may make the case for another rate hike is weekly jobless claims, which unexpectedly fell on Thursday. The labor market has been persistently resilient, and Fed Chair Jerome Powell has repeatedly said the labor market is unsustainably tight and needs to become more balanced.

Even though today’s announcement hasn’t even happened yet, the question about what’s next after today continues to come up.

There’s an article I’d like to point out. It’s on Seeking Alpha. It’s entitled “The Fed Is Set To Tighten The Screws Further On The Economy.”

It was written by Logan Kane.

He tells his 21K followers that he sees a good chance of another rate hike in June.

I’ll leave a link to the article in show notes.

NOW MORE ON THE MARKET

U.S. stocks finished solidly in the red on Tuesday, as investors remained cautious ahead of the Federal Reserve's interest rate decision, due out today.

Concerns about the government's debt ceiling also weighed on the markets. By the way, there’s an article published just hours ago and it asks the question, Is the debt ceiling constitutional and has the U.S. ever defaulted? I’ll leave you a link for that one as well.

The Nasdaq ( COMP.IND ) closed -1.1%, the S&P 500 ( SP500 ) finished -1.2% and the Dow ( DJI ) ended -1.1%.

Ten of the 11 S&P sectors finished lower. Energy led the decline, dropping more than 4% amid a 5% drop in crude oil prices. Meanwhile, financials fell more than 2%. Consumer Discretionary posted a fractional advance.

A move to quality prompted buying in the fixed-income market, sending Treasury yields lower. The 10-year yield ( US10Y ) declined 15 basis points to 3.43% and the 2-year yield ( US2Y ) dropped 16 basis points to 3.98%.

On the earnings front, Pfizer ( PFE ) finished near the flat line after announcing better-than-expected earnings and revenue. Meanwhile, Uber ( UBER ) surged almost 11% after revealing Street-beating revenue and providing an upbeat forecast .

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Today is stock of the week Wednesday. We’re joined by Chaim Seigel. He’s the Investing Group leader of Fed Trader on Seeking Alpha.

He’s telling us about the most important stock in the world…

*audio from Chaim Siegel*

That was a snippet of an interview from the Investing Experts Podcast on Seeking Alpha.

Investing Experts is available wherever you get your podcasts. It offers in-depth conversations about today’s market.

I’ll leave a link to this episode in show notes.

MORE OF OUR TOP STORIES

CVS Health (NYSE: CVS ) announced the completion of its $10.6B acquisition of primary care company Oak Street Health on Tuesday, following a last-minute deal to raise $5.0B to finance the transaction.

In February, the pharmacy retailer announced an all-cash deal to acquire Chicago based Oak Street ( OSH ), which operates a network of primary care centers focused on older adults.

The offer price of $39 per share indicated an enterprise value of ~$10.6B .

CVS ( CVS ) said it reached a term loan agreement on Monday to secure $5B in borrowings to fund the transaction along with its existing cash and available resources. More details on the acquisition are expected during the company’s Q1 2023 earnings call today.

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Carl Icahn's Icahn Enterprises (NASDAQ: IEP ) plunged 20% after a new short report from Hindenburg Research.

according to the short report released on Tuesday, Hindenburg has taken a short position in the units of Icahn Enterprises and alleges the IEP units are "inflated."

Icahn responded to the report in a statement , saying, "We believe the self-serving short seller report published by Hindenburg Research was intended solely to generate profits on Hindenburg's short position at the expense of IEP's long-term unitholders.”

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Top tech executives from Alphabet's Google (NASDAQ: GOOG ), Microsoft (NASDAQ: MSFT ), OpenAI, and Anthropic, will meet with Vice President Kamala Harris and other high-ranking officials from the Biden administration on Thursday to discuss pressing issues related to artificial intelligence.

The invitation noted President Biden's expectation that companies “must make sure their products are safe before making them available to the public."

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According to media reports, President Biden is said to be close to nominating Philip Jefferson, a current Federal Reserve Board governor, as the central bank's vice chair and economist Adriana Kugler as a governor on the central bank's board.

Jefferson would take the role previously held by Lael Brainard, who left the Fed in February to take the White House post of National Economic Council director. Kugler is currently executive director for the U.S. at the World Bank.

The moves would make Jefferson the second Black person to become the Fed's vice chair. Kugler would become the first Latina to serve on the board.

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Revlon, Inc. ( OTCPK:REVRQ ) announced it is emerging from bankruptcy protection after a successful restructuring and will be renamed Revlon Group Holdings LLC.

According to the new private entity, it touts about $236M of liquidity and has eliminated more than $2.7B in debt from its balance sheet.

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If you’d like to see a transcript of the podcast. You can always find an abridged transcript of the podcast on Seeking Alpha.com . There’s a link in show notes that says Wall Street Breakfast. Just click on the podcast for today and that’s where you’ll find the transcript.

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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 green. The Dow is up 0.2%. The S&P 500 is up 0.3% and the Nasdaq is up 0.3%. Crude oil is down 3% at less than $70 a barrel. Bitcoin is up 2.3% at $28,657.

In the world markets, the market in Japan is closed for the rest of the week for a holiday. The markets in China are closed today. Hong Kong is open.

The FTSE 100 is up 0.3% and the DAX is up 0.9%.

On today’s economic calendar, at 815am the ADP employment report, at 2pm the FOMC announcement and at 230 pm Jerome Powell will speak.

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