My top 10 things to watch Friday, March 10
1. Momentous: Startup lender Silicon Valley Bank capital raise fails, sources tell CNBC. SVB Financial (SIVB) looks to sell itself. Caught lending against shaky collateral. Had to sell Treasurys at a loss to have required reserves. Silvergate Capital (SI) lent against crypto assets and exchanges. Near-knockout punch for crypto, which I believe has been propped up artificially by zealots. SVB shares continue to collapse. Silvergate shares rise after recently losing most of their value.
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2. The SVB and Silvergate fallout continues to spill over to the wider banking sector. Club holdings Wells Fargo (WFC) and Morgan Stanley (MS), which we don’t believe have these problems, nonetheless took it on the chin Thursday. They’re relatively steady early Friday.
3. The Dow, the S&P 500 and the Nasdaq see modest losses early: Weighed down by those two troubled banks on the brink but somewhat supported by a Goldilocks jobs report. February nonfarm payroll additions beat estimates but downshift from January’s blowout growth. Wage inflation last month came in cooler than expected on a year-over-year basis.
4. The questions: Can the problems at SVB and Silvergate cause the Fed to pause tightening given that the Treasury portfolio, thought to be safe, turned fraught because of accelerated rate interest hikes? The jobs report lends even more support to the argument for another quarter-point Fed hike at March meeting. The drop in the 2-year Treasury yield from 2007 highs says the same thing. But, we still need to see what next week’s inflation numbers show.
6. Ulta Beauty (ULTA) has blowout quarter, but I didn’t like the forecast at all. Lots of good news here both mass and prestige products. Loyalty program up to 40 million subscribers m. So, now we struggle with this multiple. In beauty, we like and own Estee Lauder (EL), which gets better and better as China continues to reopen its economy after abandoning zero-Covid.
7. Gap (GPS) is so fraught here. I think there is ZERO brand equity. I truly believe that the only asset here is the $1 billion in the bank. So many firings and negative numbers coming in Athleta.
8. Oracle (ORCL) really misunderstood by Wall Street. Growth is very good. Excellent logos. Cash flow excellent. Larry Ellison on top of his game. In enterprise software, the Club owns Salesforce (CRM).
9. Extraordinary: JPMorgan raises price target on General Electric (GE) to $100 per share from $88. GE used to be covered by bear Stephen Tusa. No longer. The stock hit an intraday five-year high on Thursday. Can’t believe this turnaround in coverage. Bank of America likes too.
10. UBS downgrades Club holding Caterpillar (CAT) to sell from neutral. Cuts price target to $225 per share from $230.
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