RUTH - Wall Street Breakfast Podcast: PacWest Confirms Sale Talks

2023-05-04 07:20:22 ET

Listen on the go! Subscribe to Wall Street Breakfast on Apple Podcasts and Spotify PacWest Bancorp ( PACW ) confirms sale talks following stock plunge. Banking conditions have improved; pause decision not yet made : Powell press conference. J&J ( JNJ ) spinout Kenvue ( KVUE ) raises $3.8B through upsized IPO , making it largest of year. Learn more about these stocks with Seeking Alpha Premium .

This is an abridged transcript of the podcast.

• As expected! The Federal Reserve boosted the policy rate by 25 bps.

• We’re keeping an eye on PacWest *audio from Kevin Curran* the bank confirmed sales talks.

• Today is crypto Thursday *audio* Mike Fay is the Investing Group leader of BlockChain Reaction on Seeking Alpha. He’s our weekly crypto contributor and says the price action in SUI has been brutal.

OUR TOP STORY

U.S. stocks lost ground during Wednesday's trading, as investors digested another interest rate hike from the Federal Reserve.

The Nasdaq ( COMP.IND ) closed -0.5%, the S&P 500 ( SP500 ) ended -0.7% and the Dow ( DJI ) finished -0.8%.

All 11 S&P sectors ended in the red. Energy paced the declines, dropping another 1.9%. This came as oil prices fell again, retreating almost 5% to a level close to $68 per barrel.

Elsewhere among the market segments, Financials and Materials each posted losses of more than 1%. Meanwhile Communication Services and Health Care held up best, closing with just fractional declines.

Wednesday's slide came as the U.S. central bank announced another quarter-point rate hike , matching the move that Wall Street had widely expected. Looking ahead, Fed Chair Jerome Powell stressed a data-dependent strategy ahead of the next policy decision, scheduled for mid-June.

Currently, the markets widely expect the Fed to halt its rate increases at the June meeting.

In 10 meetings over the course of 15 months, the Federal Open Market Committee has raised the federal funds rate target range by 500 basis points, from near zero an the onset of March 2022.

Amid the rate announcement, Treasury yields pushed lower. The 10-year yield ( US10Y ) declined 7 basis points to 3.37% and the more rate-sensitive 2-year yield ( US2Y ) dropped 11 basis points to 3.87%.

While the Fed dominated conversation on Wall Street, earnings news continued to pour in as well. AMD ( AMD ) slumped following the release of its quarterly results , as investors worried about the semiconductor maker's outlook.

Earnings headlines also put pressure on Starbucks ( SBUX ). Shares of the coffeehouse chain retreated after the company delivered a cautious assessment of economic risks .

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PacWest Bancorp confirms sale talks following a stock plunge.

*audio from Kevin curran*

If you look at the dedicated stock page on Seeking Alpha for PACW. You’ll see a red banner at the top of the page that says the stock is at high risk of performing badly.

In the ratings summary, SA Analysts say the stock is a hold. Wall Street says it’s a buy and the quant rating says it’s a sell.

On this fourth day of the week you’ll see that three articles have been written about PacWest . The most recent article is by Daniel Jones . He’s the Investing Group leader of Crude Value Insights.

In the article he downgrades his view of the company from buy to hold with the qualifying statement that this truly is a binary prospect at this moment that could go on to generate significant upside or could experience a complete loss like First Republic Bank.

I’ll leave a link in show notes.

MORE OF OUR TOP STORIES

Darden Restaurants (NYSE: DRI ) struck a deal on Wednesday to acquire Ruth's Hospitality Group (NASDAQ: RUTH ) for $21.50 per share in an all-cash transaction with an equity value of approximately $715M.

Ruth's is the owner and operator of the Ruth's Chris Steak House chain.

The Darden brand portfolio includes Olive Garden, Yard House, Ruth’s Chris competition, The Capital Grille among others.

The transaction is expected to be completed in June.

Shares of Ruth's Hospitality closed up 34 percent Wednesday to close at $21.48.

Shares of Darden ticked down just shy of one quarter of one percent.

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United Airlines Holdings (NASDAQ: UAL ) voiced plans to pursue an ambitious hiring push in coming years on Wednesday.

Airline executives indicated that the carrier hired 15,000 new workers in 2022 and aims to hire another 15,000 by the end of 2023. A total of 50,000 new employees are expected to be hired by the end of 2025.

—

Today is crypto Thursday and we’re turning to our weekly contributor Mike Fay . he’s the Investing Group leader of BlockChain Reaction on Seeking Alpha . He’s breaking down the Sui launch.

*audio from Mike Fay*

I’ll leave a link to Mike Fay’s author page on Seeking Alpha in show notes. One of his latest articles is entitled Crypto Recession Strategy: Staking Litecoin .

—

Johnson & Johnson (NYSE: JNJ ) spinout Kenvue ( KVUE ) upsized its hotly anticipated initial public offering, pricing shares at the upper end of its previously issued range to raise $3.8B.

Kenvue, which was J&J's consumer products division, offered 173M shares at $22 per share . Underwriters were granted a 30-day option to buy up to 26M additional shares to cover over-allotments.

Shares are expected to begin trading on the NYSE under the symbol KVUE today.

—

A New Jersey bankruptcy court judge is asking attorneys for talc litigation claimants and Johnson & Johnson to start mediation talks to reach a settlement.

A J&J (NYSE: JNJ ) lawyer told the court that as many as 80K litigants have agreed to an $8.9B settlement .

Those opposed to the settlement argue that many people who say the company's talcum powder products gave them cancer have not yet had their claims verified.

Attorneys representing parties opposed to the settlement have asked the judge to toss an attempt by a J&J subsidiary, LTL Management, to file for bankruptcy as part of its settlement effort.

The judge on Wednesday scheduled a June hearing for this request.

—

We’ve got an update to a story we told you about Wednesday here on Wall Street Breakfast.

Carl Icahn's Icahn Enterprises (NASDAQ: IEP ) plunged another 20% Wednesday after dropping 19% Tuesday following a new short report from Hindenburg Research.

According to the 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 that says Hindenburg Research intended solely to generate profits on its short position at the expense of IEP's long-term unitholders.”

Icahn Enterprises is now set to report Q1 results next Wednesday after delaying them from a release this Friday.

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Private equity firm Apollo Global (NYSE: APO ) is close to an agreement to buy aerospace-parts maker Arconic for $3 billion, or $30 a share.

According to a WSJ report, which cited people familiar, the deal may be announced when Arconic (NYSE: ARNC ) reports its Q1 results today.

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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 mixed. The Dow is down 0.1%. The S&P 500 is down 0.1% and the Nasdaq is up 0.2%. Crude oil is up 0.5% at less than $69 a barrel. Bitcoin is up 2% at $29,148.

The market in Japan is closed for a holiday.

The FTSE 100 is down 0.7% and the DAX is down 0.5%.

On today’s economic calendar, at 830 am jobless claims and at 430 pm the fed balance sheet.

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