UPS - Wall Street Breakfast Podcast: One More Rate Hike?

2023-07-26 06:44:36 ET

Summary

• The Federal Reserve is expected to raise rates, but future actions are uncertain.
• The International Brotherhood of Teamsters has reached a tentative agreement with United Parcel Service, which includes wage increases and workplace protections.
• PacWest Bancorp and Banc of California are merging in an all-stock deal.

Listen below or on the go on Apple Podcasts and Spotify One more Federal Reserve rate hike expected but hawks, doves differ on what's next. (00:33) PacWest ( PACW ) to merge with Banc of California ( BANC ) in all-stock deal. (01:18) UPS signs tentative five-year deal with Teamsters to avoid a costly strike. (02:29)

This is an abridged transcript of the podcast.

The Federal Reserve's policy-setting arm is widely expected to boost its key rate by 25 basis points today as the central bank slows its pace of tightening. But, what comes next is up for debate.

Last month, the Federal Open Market Committee kept its federal funds rate target range unchanged at 5.00%-5.25% as it assessed the effects of tightening already implemented and the banking turmoil this past spring.

Even though today’s decision is expected to be the final hike, Fed Chair Jerome Powell emphasized at the press conference in June that the FOMC would take a meeting-by-meeting approach to its rate decisions . He added, "It may make sense to raise rates higher but at a slower pace."

PacWest Bancorp (NASDAQ: PACW ) has agreed to combine with Banc of California (NYSE: BANC ) in an all-stock merger transaction.

The regional lenders made the announcement Tuesday .

Before the official announcement, the Wall Street Journal reported that PacWest ( PACW ) was in advanced talks to sell itself to Banc of California ( BANC ). That report sent shares of both companies swinging by double digits, with PACW -- enduring multiple volatility-related halts -- and ending the day 27% lower and BANC 11.17% higher.

Premarket PACW is up more than 35% and BANC is up more than 11%.

The combined company, which is expected to have ~$36.1B in assets, will operate under the Banc of California name and brand after the transaction closes.

BANC said it has struck investment agreements with Warburg Pincus and Centerbridge Partners, which will invest a total of $400M for newly issued equity securities concurrently with closing of the merger.

The deal comes after PacWest ( PACW ) took the spotlight during the regional bank crisis earlier this year, disposing of certain assets to shore up its balance sheet.

The International Brotherhood of Teamsters announced on Tuesday that it struck a deal with United Parcel Service (NYSE: UPS ). The union pointed to "overwhelmingly lucrative" contract which raises wages for all workers, more full-time jobs, and dozens of workplace protections and improvements in the new five-year deal. The UPS Teamsters National Negotiating Committee unanimously endorsed the tentative agreement.

In a statement, the committee said, "UPS has put $30 billion in new money on the table as a direct result of these negotiations.”

UPS ( UPS ) closed the day Tuesday down nearly 2%.

We’ve got a full breakdown of what the deal includes in this article in show notes.

And big tech earnings. Alphabet GAAP EPS of $1.44 beats by $0.10, revenue of $74.6B beats by $1.84B. Premarket Alphabet is up about 7 percent.

And Microsoft GAAP EPS of $2.69 beats by $0.14, revenue of $56.2B beats by $710M. However, premarket Microsoft is down more than 4 percent.

Other headlines to look out for on Seeking Alpha:

Alphabet earnings call: Full speed on AI, with refocused teams

Microsoft slips even as Q4 results surpass estimates

Stellantis reports 1H results; reaffirms FY23 guidance

Meta Earnings look-ahead: Ad business and AI to be the catalyst for the quarter

Snap slides amid glum third-quarter forecast

Boeing says aviation industry will need 2.3M more workers by 2042

Dish Network jumps, reportedly will sell Boost mobile service on Amazon

On our catalyst watch for the day- Samsung ( OTCPK:SSNLF ) will host its latest Unpacked event. The tech company is expected to unveil a flip-style foldable, which could be the Galaxy Z Flip 5. Other product reveals expected are the Z Fold 5, Galaxy Watch 6, new Galaxy Tablets, and new accessories. Shares of Samsung have rallied in the past after the Unpacked event created buzz.

And a U.S. House of Representatives panel will hold a hearing to consider legislation to speed up the adoption of self-driving cars. The hearing is titled "Self-Driving Vehicle Legislative Framework: Enhancing Safety, Improving Lives and Mobility, and Beating China."

U.S. stocks ended higher on Tuesday.

The Nasdaq ( COMP.IND ) closed 0.61% higher. The S&P 500 ( SP500 ) added 0.28% and the Dow ( DJI ) gained 0.08%. The blue-chip index has now ended in the green for 12 consecutive trading sessions, its best such run since February 2017.

Of the 11 S&P sectors, five ended trading in the green, led by Materials and Tech. Real Estate and Financials topped the losers.

Treasury yields were higher ahead of today’s rate decision. The 10-year yield ( US10Y ) was up 2 basis points to 3.88%, while the 2-year yield ( US2Y ) was also up 2 basis points to 4.86%.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are pointing lower. The Dow is down 0.2%, the S&P 500 is down 0.1% and the Nasdaq is down 0.1%. Crude oil is down 1.2% at more than $78 a barrel. Bitcoin is up 0.1%.

In the world markets, the FTSE 100 is down 0.4% and the DAX is down 0.6%.

On today’s economic calendar, at 10am new home sales. At 2pm we’ll find out the fed’s interest rate decision and at 230pm we’ll hear from fed chair Jerome Powell.

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