After Hours Summary: Reasonably quiet after-hours; HLIT +7.6% after partnering with Charter Communications; AG -16.5% on mining suspension announcementAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: None
Companies trading higher in after hours in reaction to news: HLIT +7.6% (partners with Charter Communications), GRIN +4.2% (appoints new CEO and CFO), NNDM +3.9% (shareholders approve Murchinson's proposals), CDAY +1.8% (selected by Orica for HR and payroll), VNT +1.5% (new segment structure), GLDD +0.8% (awarded $138.8 mln in contracts), IAA +0.1% (Ritchie Bros completes IAA acquisition)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: None
Companies trading lower in after hours in reaction to news: AG -16.5% (suspending mining at Jerritt Canyon), KRTX -3.6% (commences $400 mln public offering), FMC -2.3% (to introduce long-range growth plan), TTEC -2.1% (CFO leaving; appointed interim CFO), CTRE -1.7% (increases quarterly dividend), SRE -1.5% (launches LNG project), SI -1.5% (delaying 10-K filing), SO -1% (hot functional testing started at Vogtle Unit 4), AFCG -0.7% (appoints new CFO), PARA -0.7% (files mixed shelf), TSLA -0.1% (assigned Baa3 rating)
Closing Stock Market SummaryThe stock market kicked off the new week with a reversal of the money flows that occurred last week. Banks showed nice resilience today following news over the weekend that the Swiss National Bank brokered a UBS (UBS 18.80, +0.60, +3.3%) acquisition of Credit Suisse (CS 0.94, -1.06, -53.0%) for a "takeunder" price of $3.2 billion.
Additionally, the Federal Reserve announced a coordinated central bank action with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank to enhance the provision of U.S. dollar liquidity while offering assurances that "the capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient."
Still, some angst around the banking industry persists, evidenced by the material decline seen today in shares of First Republic Bank (FRC 12.18, -10.85, -47.1%). The SPDR S&P Bank ETF (KBE), which was up 4.5% at its high this morning, closed with a slimmer 1.6% gain and the SPDR S&P Regional Bank ETF (KRE), which was up 4.9% at its best level of the day, had a 1.2% gain by the close.
Shares of First Republic Bank continued to suffer sharp losses today after FRC's debt was downgraded at S&P to B+ from BB+. There was a short-lived recovery attempt in FRC when The Wall Street Journal reported that JPMorgan Chase's (JPM 127.14, +1.33, +1.1%) Jamie Dimon is leading talks with executives at other banks about a deal that could involve converting the previously announced $30 billion in deposits into a capital infusion. Ultimately, however, FRC closed near its worst levels of the day.
Mega cap stocks, which enjoyed a leadership role last week, were relative underperformers today, which translated into some relative underperformance for the Nasdaq Composite and the information technology (+0.2%), communication services (+0.5%), and consumer discretionary (+0.4%) sectors. The Vanguard Mega Cap Growth ETF (MGK) was up a modest 0.2% versus the Invesco S&P 500 Equal Weight ETF (RSP), which rose 1.3%. The market-cap weighted S&P 500 advanced 0.9%, pushing above its 200-day moving average (3,935), which pivoted from resistance to support.
The outperformance of small and mid cap stocks today was helped by some rebound action in the bank and energy stocks. The Russell 2000 rose 1.1% and the S&P Mid Cap 400 rose 1.7%.
All 11 S&P 500 sectors closed with gains ranging from 0.2% (information technology) to 2.1% (energy).
The 2-yr note yield rose 10 basis points today to 3.92% and the 10-yr note yield rose nine basis points to 3.48%, as market participants anxiously await the FOMC decision on March 22.
- Nasdaq Composite: +11.6% YTD
- S&P 500: +2.9% YTD
- S&P Midcap 400: -0.7% YTD
- Russell 2000: -0.9% YTD
- Dow Jones Industrial Average: -2.7% YTD
There was no U.S. economic data of note today.
Looking ahead to Tuesday, market participants will receive the February Existing Home Sales (consensus 4.16 million; prior 4.00 million) at 10:00 a.m. ET.
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We think the uncertain credit situation is a pressing issue for SBG . . . SBG is now in a tough position, sandwiched between the possibility of a margin call on the margin loan on President Masayoshi Son’s SBG shares and the need to keep LTV below 25%.
To summarise, SoftBank is extending credit to its CEO to invest in a fund it manages. The loan is secured on a) his equity in the fund b) a bunch of SoftBank shares and c) his personal wealth. Just try to wrap your head around what would happen in a scenario where massive investment losses at SoftBank trigger a share price slide that wipes out most of Masa’s net worth.
Driven by Internet/AI expectations, the so-called unicorn bubble is one of the bubbles created by the excessive liquidity that central banks have been competing to provide in response to the pandemic. SBG—and its SVFs—could be hard hit by the collapse of the unicorn bubble. The longer economic stagnation and elevated interest rates persist, the tougher funding conditions get for unlisted companies, generally.
Moreover, financial institutions could become more cautious about lending to these unicorns, as SVB, which had a track-record of funding unlisted firms, went bankrupt, and unease has been mounting about similar banks following the SVB bankruptcy. While the percentage of SVF portfolio companies that are set to deplete their funds in the next twelve months is a mere 1% at SVF1, it is 10% at SVF2 and 21% at the LatAm Fund, and these percentages are rising. Additional valuation losses look likely at end-March (Q4) results, given the recent operating environment changes.
The situation is clearly fluid and it is hard to estimate SBG’s NAV accurately.