>>> US Close Dow -0.77% S&P -0.54% Nasdaq -0.24% Russell -0.23%

Closing Stock Market Summary

The S&P 500 declined 0.5% on Wednesday, as the market weighed a hawkish-sounding FOMC policy announcement against an accommodative tone from Fed Chair Powell. The Nasdaq Composite (-0.2%) and Russell 2000 (-0.2%) both declined just 0.2% while the Dow Jones Industrial Average declined 0.8%. 

To start, the FOMC did what most market observers were expecting: it kept the target range for the fed funds rate near zero and maintained the pace of asset purchases by at least $120 billion per month. The central bank also remained committed to the view that recent inflation pressures have largely been due to transitory factors. 

The hawkish part stemmed from the Fed's interest-rate projections signaling a rate hike by the end of 2023, versus a prior indication of leaving rates unchanged through 2023. What's more, the Fed increased the interest on excess reserves to 0.15% from 0.10%, and the reverse repurchase rate was increased by five basis points to 0.05%. 

The S&P 500 was down as much as 1.0% during the start of Fed Chair Powell's follow-up press conference while the fed-funds-sensitive 2-yr yield rose five basis points to 0.21%. The 10-yr yield touched 1.59% before settling at 1.57%, or seven basis points above yesterday's settlement. The U.S. Dollar Index rose 0.8% to 91.28.

The benchmark index briefly returned to pre-FOMC levels, reportedly after Fed Chair Powell said this was the "talking about talking about [tapering asset purchases]" meeting and that the Fed will provide advanced notice before announcing any decision to make changes to asset purchases. The Fed Chair once again reiterated that interest-rate projections are not a good forecasting tool. 

Ten of the 11 S&P 500 sectors still closed in negative territory, though, including utilities (-1.5%), consumer staples (-1.2%), and materials (-1.2%) with losses over 1.0%. The consumer discretionary sector (+0.2%) was the only sector that closed higher, largely due to Amazon (AMZN 3415.25, +32.12, +1.0%) and Tesla (TSLA 604.87, +5.51, +0.9%). 

In other developments, housing starts and building permits data for May missed consensus expectations, Citigroup (C 71.46, -2.36, -3.2%) warned trading revenue for the second quarter could drop 30% yr/yr, and Oracle (ORCL 77.08, -4.58, -5.6%) issued downside EPS guidance for its fiscal first quarter. 

WTI crude futures settled relatively unchanged at $72.06/bbl.

Reviewing Wednesday's economic data:

  • Total housing starts increased 3.6% month-over-month to a seasonally adjusted annual rate of 1.572 million units (consensus 1.635 million). Total permits decreased 3.0% month-over-month to 1.681 million (consensus 1.730 million).
    • The key takeaway from the report is that while housing starts showed a larger than expected increase, building permits decreased in most regions, which is not going to help alleviate the ongoing supply shortage.
  • Import prices increased 1.1% in May, while import prices excluding oil increased 0.9%. Export prices increased 2.2% in May, while export prices excluding agriculture increased 1.7%.
  • The weekly MBA Mortgage Applications Index increased 4.2% following a 3.1% decline in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report, the Conference Board's Leading Economic Index for May, and the Philadelphia Fed Index for June on Thursday.

  • Russell 2000 +17.2% YTD
  • S&P 500 +12.5% YTD
  • Dow Jones Industrial Average +11.2% YTD
  • Nasdaq Composite +8.9% YTD

>>> Fed Chair Powell: May say more about tapering timing as we see more data; th

Fed Chair Powell: May say more about tapering timing as we see more data; this was the 'talking about talking about' meeting - post rate decision Q&A
- Committee did discuss progress towards goals today; We will provide advance notice before adjusting bond buys
- A couple years out, we will be looking at a very strong labor market; confident we are on path to very strong labor market
- Labor force participation can return to higher levels, but notes there have been a significant number of retirements recently
- There have been very large amounts of job openings out there
- We must be humble about ability to understand the data
- Inflation drivers are recently from categories linked to the recovery
- Timing on moderation of inflation is uncertain but seems likely factors causing it will be temporary
- Expects supply increases in coming months reducing bottlenecks
- Coming meetings will still be discussing future plans; will give appropriate notice when plans change
- Inflation expectations are anchored and in a good place right now
- We did not have discussions about rate liftoff at the meeting; that would be highly premature
- Dots are not a great forecaster of future rate moves; should be taken with a grain of salt
- Main message with SEP is that participants are becoming more comfortable that conditions for higher rates will be met sooner; that's a good thing
- Near-term discussions that will begin is about path of asset purchases; tapering process will be orderly, methodical, and transparent
- Not concerned about reverse repo facility volumes; the RRP provides floor on money market rates
- We are seeing higher wages for market entrants in low-skill jobs; we think supply and demand in labor market will meet in the coming months
- We are working on the supplemental leverage ratio but nothing to share on particulars or timing at the moment
- There is a chance on the other side of this that inflation could be quite low
- We are not out of the woods with respect to COVID variants; notes UK's delay of reopening due to the delta variant
- Economy is still growing at a very healthy rate
- We cannot estimate the neutral rate with great precision

WWD : Travis Scott: ‘The Kids Rule the World’

Travis Scott: ‘The Kids Rule the World’
The enterprising musician has taken a why-wait approach to giving back.

PAY IT FORWARD: Had Parsons given a most-appreciative award at its annual benefit Tuesday night, Travis Scott would have won hands-down.
Bounding across the stage and pumping his fists en route to the podium to accept his award, Scott thanked Parsons and “God for getting him to this point in life — that was kind of hard.” In addition to supporting high schoolers in his hometown of Houston, the performer created the Cactus Jack Foundation to help future generations, and the organization has developed a fashion design program with Parsons that will be unrolled in Houston.
The 30-year-old attended Tuesday’s gala with Kylie Jenner and their daughter, Stormi. Next week, the musician is expected to reveal some major news about a fashion venture and another one tied to his Cacti seltzer. With an estimated net worth of $50 million, he has previously collaborated with Dior, Nike, Helmut Lang and others.

After thanking a tableful of friends, Scott said his design ethos is grounded in “trying to keep everything youthful” and in check with “everything he probably felt between the ages of 10 and 12.” The objective is to never lose that feeling no matter where he gets in life, and should that feeling go away, “Walk away very fast,” Scott said. “The important thing to remember is that the kids rule the world. They’re never going to stop ruling the world. The more that we acknowledge that, the more peace we can probably find. And connectivity we can find with everyone.”


Trying “to sneak everyone through the back doors of life” and “give opportunity to rage accordingly,” Scott said while that may seem a little overwhelming at times, it comes from good faith and good love. “To every young kid who is out there, probably in the crib, having that weird frustration that you’re either too young or don’t have the means to do what you gotta do, there’s going to be a point in life just take full advantage of it,” he said. “In today’s society, you don’t have to wait for anyone to do anything. You have everything right in your hands. I just think go hard with that.”
Afterward, Scott spoke with WWD about the importance of giving back. “It’s super important to me because giving back is the way you can initiate another opportunity for somebody to take that step forward for something they want to do. Even with the things that I’m doing with Parsons and the school in Houston, there aren’t a lot of creative opportunities out of Houston. People, who have the same aspirations in design, to create stages, do music or any sort of creative pursuit, need the opportunity to do it. This is just a stepping stone to inspire somebody else at a university to do the same thing. Just [by] linking up the communities, we can all move forward in building a super utopian state.”
As for why the musician started to give back early on, he said, “All the ideas are fresh when you’re young. If you have the opportunity to do it now, why wait until you’re older? That’s just years of other people’s lives that you could be changing. I’m from such a small place. To find my place, where I am now, how did I do it? I knew if I was able to help the next person, man, I would love to do it.”


Scott credited his friends for playing pivotal roles in his life including artist Dozie Kanu, who was on hand. Speaking of the art in his videos, Scott said, “It’s all a trifecta. There are all different ways of inspiration and connectivity that draw me in. It’s kind of an informal thing.”
Parsons’ gala wasn’t Scott’s only stop for the night. Afterward, he was off to Madison Square Garden to catch what was left of the New York Nets-Atlanta Hawks showdown.

WWD : Salvatore Ferragamo’s Employees Strike for Possible Fragrance Deal

Salvatore Ferragamo’s Employees Strike for Possible Fragrance Deal
A group of workers in Florence expressed opposition to the company's ongoing negotiations with Interparfums for the licensing of Ferragamo perfumes.

MILAN — A group of Salvatore Ferragamo employees protested on Wednesday in a one-hour sit-in in front of the company’s Osmannoro plant, outside Florence.

The strike was announced last week by the Rsu and Filctem Cgil trade unions to express “strong opposition” to the fashion house’s ongoing exclusive negotiations with Interparfums Inc. for the worldwide licensing of Ferragamo branded perfumes.

As reported, the Florentine company’s fragrance division has been managed in-house for two decades. Therefore, in a statement trade unions underscored that the possible deal implicates that “the rights and jobs of 40 workers are at risk.”

The unions stated that, “in the moment of the COVID-19’s greatest impact, workers have tightened their belts; with sacrifice they have contributed in overcoming the most difficult period by accepting the ‘Cassa integrazione’ [wage support measure] and the rescheduling of the vacation plan, but today [now] that the markets are reopening they expect their sacrifice to be rewarded.”

Hence, the trade unions are asking the company to interrupt the negotiations for the licensing deal. “Instead of the sale of strategic assets such as the one of perfumes, we expect the management to present an industrial plan that invests in innovation and employment,” read the document.

In response, the Salvatore Ferragamo company underscored that the possible licensing agreement “is aimed at ensuring a further boost to the perfume business and the continuity of the Made in Italy production. Negotiations with Interparfums are still ongoing; as already communicated to the trade unions, and as has already happened in the past, the company is ready to [take action] to offer the best possible solutions for workers.”

The potential licensing agreement with Interparfums wouldn’t be the first in the history of the Ferragamo fragrance business.

In 1994, the brand signed an agreement for the development and manufacturing of its first fragrance with Eurocos Cosmetics, a Germany-based division of Procter & Gamble.

After discontinuing the deal with nothing having been produced, in March 1997 Ferragamo and Bulgari formed a joint venture — each taking a 50 percent stake — called Ferragamo Parfums SA. At the time, Bulgari was given management responsibility under a service contract.

After a four-year-long partnership, the two parties amicably dissolved the joint venture contract, with Ferragamo, acquiring from Bulgari its 50 percent stake for an undisclosed sum. The Ferragamo Parfums division was established in 2001 to control the entire fragrance business in-house, from the development of the scent to the distribution.

Interparfums’ fragrance licenses include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Moncler, Montblanc, Paul Smith, Repetto, S.T. Dupont and Van Cleef & Arpels. The group also owns Lanvin fragrances and the Rochas brand.

In the first quarter of 2021, sales of Salvatore Ferragamo fragrances were up 5.3 percent to 10.5 million euros. Overall, in the three months ended March 31, the company’s revenues rose 10.3 percent to 244.6 million euros compared with 222 million euros in the same period last year.

>>> FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% (AS EXPECTED); IOER RA

FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% (AS EXPECTED); IOER RAISED TO 0.15% V 0.10%E; MOVES UP TIMETABLE FOR POTENTIAL HIKES TO 2023; FOMC PROJECTIONS SHOW TWO HIKES BY END OF 2023

- Decision was unanimous
- Maintains $80B Treasury buying, $40B MBS buying per month
- Sees inflation higher on transitory factors
- 7 officials see rates increasing in 2022; 13 officials see rates increasing in 2023
- Will continue bond buying until substantial further progress on goals
- Economic activity and employment have strengthened

Statement: The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals. Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. The path of the economy will depend significantly on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee's maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

WSJ : Untraceable Bitcoin Is a Myth

Untraceable Bitcoin Is a Myth
How could the FBI recover $2.3 million of the pipeline ransom? It isn’t a mystery.

How did the Justice Department recover $2.3 million of the ransom paid by Colonial Pipeline to a group of hackers known as DarkSide? Isn’t bitcoin, the cryptocurrency in which the payment was made, supposed to be untraceable? Actually, no. Bitcoin is anonymous, but it’s far from private—an important but often overlooked distinction. The Justice Department recovered more than $1 billion in bitcoin in various investigations during 2020 alone.

The blockchain—bitcoin’s historical ledger of all transactions—is publicly viewable at all times by anyone, so that there can’t be any under-the-table cash transactions. Software firms such as Chainalysis and Elliptic have supported federal investigators with a suite of analysis tools intended to help trace criminals and tax cheats, including those who try to obscure the bitcoin trail through dozens of successive transactions.

What complicates recovery is bitcoin’s anonymity. Senders and recipients are denoted by wallet addresses—a string of numbers and letters—rather than names or Social Security numbers. Other cryptocurrencies such as Monero, zCash and Haven are working on technologies that would offer both anonymity and privacy. But even then, users would face the “off-ramp” dilemma.

That arises when criminals need to spend their bitcoin or convert it into conventional currency. The final transaction deanonymizes the participant and usually triggers the jurisdiction of one or more government agencies. Thus, once criminals transfer their coins into an exchange wallet—even one that doesn’t adhere to the exchange’s Know Your Customer/Anti-Money-Laundering requirement—investigators have what they need to freeze and ultimately claim those assets. That’s likely what happened in the case of Colonial Pipeline.

Traditional currency poses problems of its own for investigators. Bank notes are untraceable unless authorities note the serial numbers in advance. Global banks amassed some $15 billion in fines in 2020 for tacitly enabling money laundering and other financial crimes. Bitcoin’s transparency may do more to mitigate fraud and theft than traditional banking and currency ever could.

WSJ : Morgan Stanley Hires Greg Weinberger Away From Credit Suisse

Morgan Stanley Hires Greg Weinberger Away From Credit Suisse
The investment banker’s departure comes as the Swiss bank deals with losses tied to the meltdown of Archegos Capital Management

Morgan Stanley MS -1.27% has hired longtime investment banker Greg Weinberger away from Credit Suisse Group AG , according to people familiar with the matter, the Swiss bank’s highest-profile departure yet as it deals with losses tied to the meltdown of Archegos Capital Management.

Mr. Weinberger, a Credit Suisse CS -1.53% veteran, was most recently its global head of mergers and acquisitions.

Credit Suisse on Wednesday tapped Steven Geller and Cathal Deasy as co-heads of global M&A, some of the people said. The two will report to David Wah, who will become global head of advisory while continuing to lead the firm’s client advisory group.

Mr. Wah is one of the firm’s most senior deal makers, having previously led several sector groups. Mr. Geller joined the firm in 1994 and has been in charge of M&A in the Americas and global technology M&A, while Mr. Deasy, who joined in 2016, has been leading M&A in Europe, the Middle East and Africa.

Mr. Weinberger is expected to start at Morgan Stanley in the fall and continue to focus on advising clients on M&A in Morgan Stanley’s investment bank, the people said.

He has historically advised clients in the oil-and-gas sector as well as other sectors such as industrials and technology. He advised Chevron Corp. on its proposed $33 billion acquisition of Anadarko Petroleum Corp., which Chevron later walked away from after Occidental Petroleum Corp. agreed to pay more. He advised on several recent energy deals, including Chevron’s roughly $5 billion purchase of Noble Energy Inc. and Concho Resources Inc.’s roughly $10 billion sale to ConocoPhillips.

He has been with Credit Suisse since 1996, aside from a short stint with another bank.

More than 10 managing directors in the Swiss firm’s U.S. investment-banking division have internally disclosed plans to leave, most for rival firms, and others are considering their options. Investments held by Archegos, a family investment vehicle for Bill Hwang, plummeted in late March, forcing Credit Suisse and other banks to sell large stock positions at losses.

The woes of the bank’s prime-brokerage unit, which caters to investors such as Archegos, has overshadowed an otherwise strong run for the investment bank, especially within capital markets and advisory.

The bank has advised on large transactions lately including chip maker Advanced Micro Devices Inc.’s $35 billion purchase of rival Xilinx Inc. and the $21 billion acquisition of Speedway by the Japanese owner of the 7-Eleven convenience-store chain.

FT : Waymo raises further $2.5bn for self-driving car project

Waymo raises further $2.5bn for self-driving car project
Alphabet-owned company raised $3.2bn only 18 months ago as competition intensifies

Waymo has raised an additional $2.5bn, as an array of investors continued to back its driverless car project, stoking concerns about the rate of cash burn at the Alphabet-owned company.

Waymo, which started as a Google project in 2009, is generally considered the industry leader and its unpiloted “robotaxi” service in Phoenix has no rival in the US.

But competition is increasing as its rivals consolidate. In the past year alone Uber’s driverless group merged with Aurora, Lyft’s “Level 5” unit was sold to a division of Toyota, and Cruise, the driverless unit of GM, acquired the start-up Voyage.

Waymo declined to comment on its valuation, which was reported to be north of $30bn last year. Cruise is also worth more than $30bn and last week received the first permit from California regulators to operate a driverless passenger service in the state.

The deployment of driverless technology is taking considerably longer than most of the industry expected a few years ago. The tremendous amounts of cash needed has also favoured Alphabet, which has $135bn of cash on hand.

Co-chief executives Dmitri Dolgov and Tekedra Mawakana said on Wednesday: “There’s no greater challenge in artificial intelligence than building and deploying fully autonomous technology at scale.”

Waymo said new funds would help to “continue advancing” what it called the “Waymo Driver”, an Android-like operating system that it seeks to deploy through partnerships including with Volvo Cars, Daimler Trucks and Stellantis.

Waymo raised $3.2bn from outside investors in early 2020. The company declined to disclose how quickly it was burning through cash but confirmed it had more than 2,000 staff. LinkedIn lists 2,407 employees.

A former Google employee estimated the costs of operation at about $1m per head, which suggested the new funding round would pay for just 12 months of activity. A rival executive suggested Waymo’s annual costs could be significantly less, but still above $1bn.

The fundraising follows at least eight high-level executive departures in recent months, including the chiefs of finance, manufacturing, safety, auto partnerships, future automotive and investor relations.

John Krafcik stepped down as chief after a five-year stint in April. Krafcik was an automotive production specialist who had led Hyundai’s North American operations and his departure was widely seen as Waymo acknowledging that the role he was to serve — deploying tens of thousands of driverless robotaxis in multiple cities — would take much longer than expected.

Alphabet led the funding round and Tiger Global participated for the first time. All existing investors took part including Andreessen Horowitz, T Rowe Price, the Canada Pension Plan Investment Board, Fidelity, Mubadala, Perry Creek Capital, Silver Lake, Temasek, plus auto supplier Magna and car retailer AutoNation.