STOCK MARKET NEWS: Fed decision, First Republic in limbo, GameStop, Virgin Orbit soar
The Federal Reserve raises interest rates by 25 basis points, warns on the banking crisis, inflation and economic headwinds ahead of Chairman Jerome Powell’s press conference. GameStop, Virgin Orbit and Nike shares on the move. FOX Business is providing real-time updates on the markets, commodities and all the most active stocks on the move.
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The Fed raised the benchmark interest rate by 25 basis points and has a host of warnings on the banking crisis, inflation and lending.
Chairman Jerome Powell's press conference is one of the most anticipated and complicated in history.
Pacific Western Bank has raised $1.4 billion from investment firm Atlas SP Partners, the lender said on Wednesday, as the crisis-hit sector scrambles to limit the damage from the recent collapse of two mid-sized lenders.
The bank said deposits insured by the Federal Deposit Insurance Corp, including accounts eligible for pass-through insurance, exceeded 65% of its total deposits, as of March 20.Total deposits at the bank fell 20% to $27.1 billion from $33.9 billion as of Dec. 31.
Los Angeles-based PacWest also said it had explored the idea of raising new capital, but decided against the move due to a rout in bank stocks.
The U.S. Securities and Exchange Commission on Wednesday sued Chinese cryptocurrency entrepreneur Justin Sun, accusing him and other defendants of illegally selling crypto securities and scheming to artificially inflate trading volume in crypto assets.
Beginning around August 2017, Sun and his companies Tron Foundation Limited, BitTorrent Foundation Limited and Rainberry Inc engaged in a scheme to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT), the SEC said.
That included the use of "bounty programs" directing interested parties to promote the tokens on social media, including to U.S.-based investors, the SEC said. TRX and BTT were sold as securities, and thus their sale needed to be registered with the SEC, the regulator said in its complaint filed in Manhattan federal court.
The agency also charged eight celebrities, including Lindsay Lohan and Jake Paul, for illegally touting those assets without disclosing they were being compensated for it.
Chewy beat Wall Street revenue and profit expectations as the pet store gained market share.
Fourth quarter net sales rose 13.4% to $2.71 billion. Analysts expected $2.64 billion.
Net income was $6.1 billion for the three months ended Jan. 29 compared to a net loss of $63.6 billion a year ago.
Earnings per share were 1 cent compared to the estimate of a net loss of 11 cents.
“Chewy produced record-high revenue, profitability, and free cash flow,” said Sumit Singh, Chief Executive Officer of Chewy.
Reuters contributed to this report.
KB Home on Wednesday reported fiscal first-quarter net income of $125.5 million.
On a per-share basis, the Los Angeles-based company said it had net income of $1.45 exceeding Wall Street expectations.
The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $1.05 per share.
The homebuilder posted revenue of $1.38 billion in the period, which also beat Street forecasts. Five analysts surveyed by Zacks expected $1.31 billion.
MillerKnoll, Inc. on Wednesday reported fiscal third-quarter net income of $400,000. The furniture maker posted revenue of $984.7 million in the period.
On a per-share basis, the Zeeland, Michigan-based company said it had profit of 1 cent. Earnings, adjusted for one-time gains and costs, were 54 cents per share.
For the current quarter ending in May, MillerKnoll expects its per-share earnings to range from 37 cents to 43 cents.
The company said it expects revenue in the range of $930 million to $970 million for the fiscal fourth quarter.
All three of the major averages tumbled after the Federal Reserve raised interest rates by 25 basis points and warned that the banking crisis may tighten future lending. Energy, consumer discretionary and financial shares led the drop, while consumer staples fell the least. In commodities, oil rose 1.8% to $70.90 per barrel.
Johnson & Johnson said it would ask the Supreme Court to revive its effort to resolve the 38,000+ lawsuits over its talc products through the bankruptcy of a subsidiary, LTL Management, after an appeals court refused to reconsider its ruling that the bankruptcy was improper.
The lawsuits allege the company’s Baby Powder and other talc products are contaminated with asbestos, which J&J denies. J&J maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free.
Federal Reserve Chair Jerome Powell said a soft economic landing is still possible, even with the recent turmoil in the banking industry.
“I think the pathway still exists and we are still trying to find it,” Powell said. “Financial conditions have tightened probably more than traditional financial indexes say.”
Powell said it’s too early to say how much impact the stress to the banking industry has had on economic conditions. The question is how long this period will be sustained, Powell said, noting the longer the banking crisis lasts, the tighter credit conditions will be.
He said any possible recession will be hard to model because they are very hard to model.
“We don’t know where it will happen this time. We’re very focused on getting inflation down.”
Powell noted if a central bank can’t control inflation, the result is a long series of years of high and volatile prices increases.
“You can have very long expansions without high inflation. It’s just a place where we should try and get to,” Powell said.
Federal Reserve chair Jerome Powell says he welcomes outside investigations into the failure of Silicon Valley bank.
“When a bank fails there are investigations,” the Fed chair said.
Powell called Silicon Valley Bank an outlier.
“At a basic level Silicon Valley Bank failed badly,” Powell said, noting that deposit withdrawals came at a faster rate than the historical record would suggest.
"The speed of the run was very different from what we've seen in the past. Supervision and regulation need to keep up with what is happening."
Powell said the Fed’s investigation will be “thorough and transparent. It is clear we need to strengthen regulations,” Powell said.
The Fed plans to review supervision and regulation to find the right policies.
Powell noted supervisors were aware that Silicon Valley Bank were very much engaged with the bank. “Nevertheless it still happened,” Powell said. “That is the nature of the review.”
Federal Reserve chair Jerome Powell it’s still too early to tell how stress in the banking section will affect credit conditions.
“Remember this is 12 days ago,” Powell said. “It’s very difficult. There’s so much uncertainty.”
He said it's guesswork at this point. The chair added that a significant number of people at the Federal Open Market Committee meeting anticipated there would be a tightening of credit conditions.
“It’s possible these events will have very modest effects on the economy,” Powell said.
If stress in the banking sector has a larger impact then “monetary policy will have less to do,” Powell said. “In principle, you would need more rate hikes.”
Policies have to bring inflation down to 2% over time, but it doesn't all have to come from interest rate hikes, Powell noted.
Powell added the process of getting inflation under control has a long way to go and is likely to be bumpy.
Federal Reserve chair Jerome Powell says the nation’s central bank took decisive action to address the recent banking crisis to prevent undermining confidence in the banking section.
Powell says the Fed is prepared to use all its tools to keep the U.S. banking system safe and sound.
“The U.S. banking system is sound and resilient,” Powell said.
“Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation,” the Fed said.
“Some additional policy firming may be appropriate. Our policy decisions will reflect that assessment," Powell said.
Powell noted deposit flows have stabilized in the past week.
The Federal Reserve is reassuring Americans that the U.S. banking system is "sound and resilient."
"Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation," the nation's central bank said. "The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks."
The statement comes as the Fed's rate-setting committee raised the target range for the federal funds rate by 25 basis points to 4.75% to 5%.
The Fed said indicators point to modest growth in spending and production, while inflation remains elevated.
Billionaire Richard Branson's cash-strapped Virgin Orbit Holdings Inc is nearing a deal for a $200-million investment from Texas-based venture capital investor Matthew Brown via a private share placement, according to a term sheet seen by Reuters.
The space startup did not comment on the likely deal, but said on Wednesday it would resume operations on March 23 and prepare for its next mission by recalling some of its employees, sending its shares up 60% in premarket trading.
Matthew Brown Companies did not immediately respond to a request for comment.
A deal would be a boost of confidence for the satellite launch company that has been grappling with dwindling cash and mounting losses in recent quarters in a highly competitive market.
DirecTV and Newsmax have come to a new deal that will return the news channel to the satellite broadcaster’s lineup beginning on Thursday.
DirecTV stopped carrying Newsmax nearly two months ago when they came to an impasse on contract details. The addition of Newsmax will come at no extra cost to its customers, says DirecTV.
Newsmax will also be available on DirecTV STREAM and U-verse, which have between them have 13.5 million to 14 million subscribers. As a result of the agreement, Newsmax will reach more than 60 million U.S. homes.
The Federal Aviation Administration on Wednesday issued a safety alerts to airlines, pilots and others about the "need for continued vigilance and attention to mitigation of safety risks" after a series of high-profile near collisions.
"While the overall numbers do not reflect an increase in incidents and occurrences, the potential severity of these events is concerning," the FAA said.
Six serious runway incursions have occurred since January that prompted the agency to convene a safety summit last week.
"Operators should evaluate information collected through their safety management processes, identify hazards, increase and improve safety communications with employees and enact mitigations," the alert said.
Oregon lawmakers passed a sweeping $200 million housing and homelessness package on Tuesday, displaying a bipartisan will to tackle two of the state's most pressing crises.
The vast majority of the funding — about $157 million — is aimed at boosting homelessness and eviction prevention services. The money will go toward increasing shelter capacity, addressing youth homelessness, and funding rapid rehousing efforts and rental assistance programs.
Analysts and agencies estimate Oregon is short 140,000 housing units, and federal data shows its homeless population has increased by 22% since 2020.
The crises are affecting both cities and rural regions. About 4,000 of the nearly 18,000 homeless people in the state live in rural areas, according to the latest 2022 federal point-in-time count.
A vote on President Joe Biden's choice to run the Federal Aviation Administration was delayed indefinitely Wednesday in the face of an opposition blitz by Republicans, who say the nominee lacks enough experience in aviation to lead the agency, which is under pressure to stem a surge in dangerous close calls between planes.
The Senate Commerce Committee was scheduled to vote on Denver International Airport CEO Phillip Washington, whose nomination has languished since Biden announced his choice last July.
Committee Chair Maria Cantwell, D-Wash., said the vote would be delayed to gather information requested by senators. She did not detail the information or name the committee members who sought the delay.
U.K. inflation accelerated for the first time in four months in February as high food and energy prices hit consumers battered by the nation’s cost-of-living crisis.
The consumer price index jumped to 10.4% in the 12 months through February from 10.1% the previous month, the Office for National Statistics said Wednesday. The figures surprised analysts who had forecast inflation would slow to 9.9%.
The figures increased pressure on the Bank of England to approve an 11th consecutive interest rate increase when it meets on Thursday, regardless of concerns about the economic impact of strains on the global banking system.
Many economists now expect the central bank to boost its key bank rate by at least a quarter percentage point.
Papa John's on Wednesday said Ann Gugino has resigned as chief financial officer.
Gugino, has served as CFO of Papa John's since 2020, and will remain with the company until May 31 to help her successors.
VP of treasury and tax Chris Collins, will temporarily oversee the company's finances while Papa John's searches for a new chief financial officer.
Other recent leadership changes include Jeffrey Smith, an activist investor stepping away from the chairmanship of the board and COO C. Max Wetzel leaving to become the CEO of Carl's Jr. and Hardee's parent company.
Carmaker Stellantis said on Wednesday it would invest 130 million euros ($140 million) in its Eisenach assembly plant in Germany to produce a new battery electric vehicle (BEV) there from the second half of next year.
The new BEV vehicle will be the successor to the Opel Grandland compact SUV currently produced in Eisenach, the automaker said in a statement.
Current production at the facility also includes plug-in hybrid versions of the Opel Grandland.
Stellantis, the world's third-largest automotive group by sales, wants 100% of its European passenger car sales and 50% of its U.S. passenger car and light-duty truck sales to be battery electric vehicles by 2030. Its other brands include Peugeot, Fiat, Alfa Romeo and Jeep,
The Eisenach plant, in the German state of Thuringia, was opened in 1992, when Opel was part of General Motors. As of 2022 it has produced a total of 3.7 million vehicles, Stellantis said.
Boeing Co. will take additional charges to the KC-46 tanker program due to a supplier quality issue with the center fuel tank, the company's finance chief said Wednesday.
Boeing Chief Financial Officer Brian West did not disclose the precise value of the additional charges, which will be announced as part of the company's first quarter earnings, but margins at Boeing's defense business would be negative as a result.
While 767 freighter deliveries "will recover in the second quarter," tanker deliveries will take longer "but we will recover the year," West said at the Bank of America Global Industrials Conference, adding that the issue would not impact Boeing's annual cash flow target of $3 billion to $5 billion in 2023.
West also acknowledged a slight schedule slip for Boeing's 737 MAX 10, which will "likely" be certified and delivered next year. Boeing Commercial Airplanes head Stan Deal had predicted in December that MAX 10 certification could occur in late 2023 or early 2024.
MAX 7 certification and delivery is still expected to occur in 2023, and "we are working very, very closely with Southwest to make sure that we can help them with their fleet management," West said.
Petco Health and Wellness is trading lower after missing Wall Street revenue and profit forecasts.
Fourth quarter net revenue rose 4.2% to $1.58 billion, which is lower than the estimated $1.59 billion.
Comparable sales grew 5.3% year over year and 18.8% on a two-year basis, resulting in the seventeenth consecutive quarter of comparable sales growth.
Net income rose 20% to $32.7 million.
The company reported profits of 23 cents per share, 5 cents lower than the same quarter last year when the company reported EPS of 28 cents. Profits of 24 cents per share were anticipated by the twelve analysts providing estimates for the quarter.
Separately, the pet store chain announced a partnership with Freshpet to produce and deliver fresh, customized subscription meal plans directly to pet parents' doors.
Available exclusively on petco.com, Freshpet Custom Meals are crafted for optimal nutrition by veterinary nutritionists for dogs.
Reuters contributed to this report.
Video game retailer GameStop surprised investors with a quarterly profit of $0.16 cents per share or $48.2 million, reversing a $0.49 per share loss or $147.5 million, from the same period a year-ago.
Shares rose over 30%.
CEO Matt Furlong, on the earnings call, shared some thoughts on the future.
"Looking ahead, we're aggressively focused on year-over-year profitability improvement while still pursuing pragmatic long-term growth. We are taking a number of steps in fiscal year 2023 to improve our efficiency and support these overarching goals" he said as he outlined the goals below.
GameStop's To Do List
Cutting excess costs in Europe
Getting full console allocations to help us meet customer demand during this extended cycle
Assessing partnerships with gaming and retail companies that can enable us to capture cost-effective top line growth
Leveraging our unique refurbishment capabilities to drive growth in pre-owned
Building a stronger presence in higher-margin categories like collectibles and toys where we have already seen pockets of growth
The major U.S. benchmarks struggled for direction on Wednesday as investors await the Federal Reserve's decision on interest rates.
Shares of GameStop rallied after it posted a surprise quarterly profit, while Richard Branson's Virgin Orbit and Carvana rose as the companies work to restructure.
In banking, First Republic remains in limbo as the firm continues to seek a buyer or backer. Bigger money center banks including JPMorgan, Citigroup, Wells Fargo and Bank of America were mixed.
In commodities, oil is off approximately 0.03% to $69.65 a barrel as gold adds roughly 0.08% to $1,942.60 an ounce.
Meanwhile, the price of silver is up around 0.22% to $22.47 an ounce.
Ollie's Bargain Outlet Holdings Inc. on Wednesday reported fiscal fourth-quarter earnings of $53.1 million.
On a per-share basis, the Harrisburg, Pennsylvania-based company said it had net income of 85 cents. Earnings, adjusted for non-recurring gains, were 84 cents per share.
The results topped Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of 80 cents per share.
The retailer posted revenue of $549.8 million in the period, also exceeding Street forecasts. Six analysts surveyed by Zacks expected $542.9 million.
For the year, the company reported profit of $102.8 million, or $1.64 per share. Revenue was reported as $1.83 billion.
Ollie's Bargain Outlet expects full-year earnings in the range of $2.49 to $2.58 per share, with revenue in the range of $2.04 billion to $2.06 billion.
Carvana Co said on Wednesday it expects a smaller core loss in the current quarter due to a raft of cost-cut measures it implemented amid falling used-car sales, sending its shares up nearly 28% before the bell.
Carvana expects first-quarter core loss between $50 million and $100 million, down from a core loss of $348 million a year earlier.
However, demand for used cars has cooled in recent months, as people cut back on discretionary expenses amid recession worries, heaping pain on the industry already struggling with inventory purchased at higher prices.
Separately, Carvana announced it was offering creditors an option to exchange unsecured notes for those backed by collateral, in a move that will see repayment on some obligations pushed to 2028 from as early as 2025.
The offer would be for a principal amount of up to $1 billion in notes, with a condition that at least $500 million existing notes be validly tendered.
Winnebago Industries Inc. (WGO) on Wednesday reported fiscal second-quarter earnings of $52.8 million.
On a per-share basis, the Eden Prairie, Minnesota-based company said it had net income of $1.52. Earnings, adjusted for one-time gains and costs, were $1.88 per share.
The results beat Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $1.32 per share.
The recreational vehicle maker posted revenue of $866.7 million in the period, also topping Street forecasts. Four analysts surveyed by Zacks expected $780.7 million.
Travelzoo exceeded Wall Street revenue and profit expectations on quickening revenue growth in North America and Europe.
Fourth quarter revenue rose 36% to $18.6 million, topping the analyst estimate of $18.28 million and the company’s guidance of $18.5 million.
Net income for the three months ended Dec. 31 was $2.5 million compared to a net loss of $3.3 million.
Earnings per share came in at 20 cents, topping the estimate of 10 cents.
"Revenue growth accelerated in both North America and in Europe, leading to much stronger earnings," said Holger Bartel, Travelzoo's Global CEO. "As the recovery from the pandemic continues, we will leverage Travelzoo's global reach and trusted brand to further improve earnings in future periods."
Reuters contributed to this report.
Nike shares slipped on Wednesday after net income third quarter went from $1.40 billion in fiscal 2022 to $1.24 billion, with its diluted earnings per common share at $0.79. The diluted EPS figure marked a 9% drop year over year.
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