STOCK MARKET NEWS: Dow sinks 543 points as SVB, banks spook market, Biden’s budget released

MARKETS

SVB sinks wiping $61B in market value off bank stocks

Silicon Valley Bank lost over half its value after investors bailed on the shares following plans for a large capital raise.

Silicon Valley Bank or SVB spooked investors with its financial update and plans for a capital raise wiping billions off the market value itself as well as the nation's top banks.

Daniel Werfel testifies before the Senate Finance Committee during his confirmation hearing to be the Internal Revenue Service Commissioner, Feb. 15, 2023, on Capitol Hill in Washington. (AP Photo/Mariam Zuhaib)

The U.S. Senate confirmed Daniel Werfel to serve as commissioner of the Internal Revenue Service on Thursday by a vote of 54-42.

Werfel, who pledged before senators not to expand tax audits on businesses and households making less than $400,000 per year, will serve a five-year term as leader of the federal tax collection agency.

POLITICS

Werfel confirmed as next IRS head

President Joe Biden’s nominee to lead the Internal Revenue Service has received confirmation by the U.S. Senate. The vote to confirm Daniel Werfel had a 54-42 result.

President Joe Biden  nominated Werfel to steer the IRS as it receives nearly $80 billion over the next 10 years through the Inflation Reduction Act, which Congress passed in August along party lines.

Previously a private consultant who led Boston Consulting Group’s global public sector practice, Werfel faced rounds of questions before the Senate Finance Committee in February on how he would spend the agency’s new infusion of money.

He drew praise for being willing to leave a private consulting job to take on the top job at the troubled agency.

U.S. President Joe Biden speaks to the news media after attending a closed Senate Democratic Caucus lunch at the U.S. Capitol in Washington, D.C., Mar. 2, 2023. (Reuters/Leah Millis)

U.S. President Joe Biden will propose a budget that would scrap oil and gas industry subsidies, according to a document seen by Reuters, reviving a perennial debate about whether fossil fuel companies should be receiving lucrative tax breaks.

While the proposal has little chance of making it through a divided Congress, it represents a political signal from the White House , which has repeatedly criticized Big Oil for raking in record profits at a time of high consumer energy costs since the Russian invasion of Ukraine.

POLITICS

Biden aims to cut tax breaks for oil, gas companies in budget blueprint

President Joe Biden's new budget proposal calls for the elimination of tax breaks for oil and gas development as part of the administration's deficit reduction push.

DocuSign CFO Cynthia Gaylor plans to step down from her position in the coming months. DocuSign has initiated a search led by Chief Executive Officer, Allan Thygesen, to identify the company's next CFO. Gaylor will remain in her role to ensure a smooth transition.

Separately, the electronic signature company reported fourth quarter and fiscal 2023 financial results.

Total revenue rose 14% to $659.6 million. Subscription revenue was $643.7 million, an increase of 14% year-over-year. Professional services and other revenue was $15.9 million, a decrease of 5% year-over-year.

Net income for the three months ended Jan. 31 was 4.9 million compared to a year ago loss of $30.4 million.

People pass by the GAP clothing retail store in Manhattan, New York, U.S., Aug. 15, 2016. (Reuters/Eduardo Munoz)

Gap Inc on Thursday forecast full-year sales below Wall Street estimates, signaling a slowdown in demand as inflation-weary consumers curb discretionary spending.

Shares of the company fell about 7% in extended trading.

With the Federal Reserve prepared to raise interest rates more than expected in an attempt to control inflation, consumers, especially at the lower- to mid-income rung, have turned more cautious and curbed spending on non-essential items like apparel.

Gap is also seeing a slowdown in demand for casual and active wear as people returning to work and social occasions prefer more formal clothing, pants and dresses.

The company also said president and chief executive officer of Athleta, Mary Beth Laughton, was exiting the business, effective on Thursday.

Gap, also the owner of the Banana Republic brand, expects fiscal 2023 net sales to decrease in the low to mid-single digit, compared with analysts' expectations of 1.64% rise.

Oracle Corp. logo displayed on a screen on the floor at the New York Stock Exchange (NYSE) in New York, U.S., Sept. 18, 2019. (Reuters/Brendan McDermid)

Oracle Corp missed quarterly revenue estimates on Thursday, as businesses slowed down IT spending against the backdrop of a sobering economic outlook.

Back-to-office and hybrid work have pushed up demand for the company's suite of cloud software, especially from large businesses.

Total revenue rose 18% to $12.39 billion in the third quarter ended Feb. 28, but was slightly below a consensus of $12.42 billion from 21 analysts, according to Refinitiv.

Oracle's net income fell to $1.89 billion, or 68 cents per share, in the quarter, from $2.32 billion, or 84 cents per share, a year earlier.

Ulta Beauty is higher in extended trading.

The beauty chain matched Wall Street revenue estimates and topped profit estimates.

Fourth quarter net sales rose 18.2% to $3.2 billion. Analysts expected $3.02 million.

Net income for the three months ended Jan. 28 rose to $340.75 million, up from $289.37 million.

Diluted earnings were $6.68 per share better than the estimate of $5.65.For fiscal 2023, Ulta Beauty expected net sales of $10.95 billion to $11.05 billion. The guidance for dilated earnings per share is $24.70 to $25.40.

Ex-Goldman Sachs banker Roger Ng exits the Brooklyn Federal Courthouse (EDNY) in Brooklyn, New York, Mar. 9, 2023. (Reuters/Brendan McDermid)

Former Goldman Sachs banker Roger Ng was sentenced to 10 years in prison on Thursday, after he was convicted of helping loot billions of dollars from Malaysia's 1MDB sovereign wealth fund.

A jury in federal court in the New York City borough of Brooklyn last April found Ng, Goldman's former head of investment banking in Malaysia, guilty of helping his former boss Tim Leissner embezzle money from the fund, launder the proceeds and bribe government officials to win business.

The charges stem from some $6.5 billion in bonds that Goldman helped 1MDB, which was founded to finance development projects in Malaysia, sell in 2012 and 2013.U.S. prosecutors said $4.5 billion of that sum was embezzled by officials, bankers and their associates, in one of the biggest scandals in Wall Street history.

Funds were used to buy high-end real estate, jewelry and artwork, and finance the Hollywood film, "The Wolf of Wall Street," according to the Department of Justice.

U.S. District Judge Margo Brodie, who imposed the sentence, said Ng and his co-defendants "effectively stole money" meant for infrastructure and economic development projects to aid the Malaysian people.

Mastercard logo is seen on a credit card in this picture illustration Aug. 30, 2017. (Reuters/Thomas White)

Top payment networks Visa Inc and Mastercard Inc said on Thursday they have paused work on implementing a new sales code for gun merchants, citing Republican pushback in various U.S. states on concerns about improper tracking of consumer behavior.

POLITICS

Visa, Mastercard, Discover pause work on code that would track gun purchases

Major payment processing companies have paused work on a plan to track when cardholders make purchases at gun stores, dealing a blow to gun-control advocates.

The Geneva-based International Organization for Standardization (ISO) approved the new merchant category code (MCC) in September to help detect suspicious firearms and ammunition sales to combat gun violence. Bills in several Republican-led states would bar or limit the use of the voluntary code.

A Mastercard representative said on Thursday via email that such bills would cause "inconsistency" in how the code could be applied by merchants, banks and payment networks.

Visa said in a statement sent by a spokesperson.

Discover Financial said in an emailed statement that it was removing the new MCC from its next network update planned for April in order "to continue alignment and interoperability with the industry."

A representative for American Express, the third-largest payment network, did not immediately comment.

Then Barclays' CEO Jes Staley arrives at 10 Downing Street in London, Britain, Jan. 11, 2018. (Reuters/Peter Nicholls)

JPMorgan Chase & Co has sued Jes Staley, its former private banking head and later Barclays Plc's chief executive, accusing him of entangling it with sex offender Jeffrey Epstein, and saying Staley himself had been accused of sexual assault.

BUSINESS-LEADERS

JP Morgan sues former executive over Jeffrey Epstein ties, potential damages

JPMorgan Chase & Co. faces two lawsuits regarding its ties to Jeffrey Epstein, with allegations that the bank was responsible for enabling him as it retained Epstein as a client.

The largest U.S. bank filed two complaints on Wednesday night in Manhattan federal court, where it is also defending against lawsuits by the U.S. Virgin Islands and a unnamed woman, Jane Doe 1, who say JPMorgan aided in Epstein's sex trafficking by keeping him as a client.

JPMorgan said Staley should cover some or all damages if it were found liable, and pay punitive damages for his "intentional and outrageous conduct" in concealing information about Epstein  and putting his own and Epstein's interests above the bank's.

The Wall Street bank also wants Staley to repay all compensation from 2006 to 2013. Based on industry standards, that amount could total tens of millions of dollars.

Staley is not a defendant in the Doe or U.S. Virgin Islands lawsuits.

A lawyer for Staley did not immediately respond to a request for comment after business hours. Other media said a lawyer for Staley declined to comment.

Home for sale, Evesham Twp., N.J., Feb. 26, 2023.

The average long-term U.S. mortgage rate rose for the fifth straight week to its highest level since breaching 7% in November, just as the spring buying season gets ready to kick off.

REAL-ESTATE

Mortgage rates climb for fifth week on job growth and inflation

The Federal Reserves renewed hawkishness as inflation continues has sent Mortgage rates soaring to the highest its been since November.

Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate climbed to 6.73% from 6.65% last week. The average rate a year ago was 3.85%.

The average long-term rate hit 7.08% in the fall — a two-decade high — as the Federal Reserve continued to raise its key lending rate in a bid to cool the economy and quash persistent, four-decade high inflation.

Hiring sign is displayed at a retail store in Mount Prospect, Ill., Jan. 13, 2023. (AP Photo/Nam Y. Huh)

The number of Americans applying for unemployment benefits last week jumped by the most in five months, but layoffs remain historically low as the labor market continues to be largely unaffected by the Federal Reserve's interest rate hikes.

ECONOMY

Jobless claims rise sharply to highest level since December

Applications for U.S. unemployment benefits last week climbed to the highest level since late December, pointing to some softness in the labor market.

Applications for jobless claims in the U.S. for the week ending March 4 rose by 21,000 to 211,000 from 190,000 the previous week, the Labor Department said Thursday. It’s the first time in eight weeks that claims came in above 200,000.

The four-week moving average of claims, which flattens out some of the weekly ups and downs, rose by 4,000 to 197,000, remaining below the 200,000 threshold for the seventh straight week.

Applications for unemployment benefits are considered a proxy for layoffs.

GM logo is seen on the facade of the General Motors headquarters in Detroit, Mich., Mar. 16, 2021. (Reuters/Rebecca Cook/File Photo)

General Motors Co said on Thursday it was expecting to take a pre-tax charge of up to $1.5 billion in connection with its voluntary separation program (VSP).

The announcement comes as layoffs by U.S. companies in the past two months touch their highest since 2009, with the tech sector accounting for more than a third of the over 180,000 job cuts announced.

MARKETS

GM offers buyouts as part of cost reduction plan

Automaker GM will offer buyouts for most of its salaried employees and global executives but said the actions are not job cuts.

The automaker had in January disclosed a $2-billion cost cut target, including reducing employment through attrition.

Under the terms of the VSP, eligible employees who leave the company will be offered lump sum payments and other compensation based on their years of service, GM said.

It expects to take the bulk of the charge in the first half of 2023.

A GM executive in February said the company was cutting hundreds of executive-level and salaried jobs.

iStock

The rising cost of living and long-term price increases of residential properties in U.S. coastal markets is pushing out-of-state real estate investors into America’s southern and Rust Belt cities. 

MARKETS

Long-distance real estate investment in residential properties a hotbed in US South and Midwest

Long-distance real estate investment in single-family rental homes is growing amid inflationary pressures, interest rate hikes and an influx of instructional investors.

Metropolitan areas including San Antonio, Tampa, Indianapolis, Jacksonville and Charlotte, North Carolina, are emerging as target destinations for long-distance investors. 

Data compiled by Lima One Capital shows real estate investors are benefiting from above-average occupancy and rental rates under current market conditions, which play a key part in supercharging cash flow for portfolios.

The data also showed higher interest rates are pricing out would-be homebuyers, pushing them toward single-family rental homes.

According to the Lima One data, the top five U.S. states for institutional investment are Arizona (14.3%), Georgia (12.7%), Tennessee (10.7%), Nevada (10.6%) and North Carolina (10.2%).

Representations of cryptocurrencies are seen in this illustration, Aug. 10, 2022. (Reuters/Dado Ruvic/Illustration)

Shares of crypto-focused companies fell on Thursday after Silvergate Capital Corp disclosed plans to wind down operations and voluntarily liquidate, as the aftermath of FTX's implosion last year reverberates through the industry.

Analysts said a complete closure of the crypto lender could take one or two years depending on how quickly outstanding loans are repaid and assets are disposed of.

MARKETS

Bitcoin slides on Silvergate fallout

The price of bitcoin is down on Thursday after another cryptocurrency exchange, Silvergate Capital, prepares to liquidate following a $1B quarterly loss and dip in digital asset demand.

Silvergate's latest move adds to a list of high-profile collapses among crypto market players since last year.

The company's shares plunged 37% to $3.11, a day after hitting a record low and have lost 64% since March 1 when the company flagged a going concern risk.

Shares of peer Signature Bank, which has been pivoting away from crypto since late last year, fell 8%.In its second mid-quarter update this month, Signature said digital assets accounted for just 18.5% of its total deposit balance.

Crypto exchange Coinbase Global, which cut ties with Silvergate last week, dipped nearly 1%. Miners Riot Blockchain and Marathon Digital slid 2.3% each.

Bitcoin steadied at $21,711, near its lowest level since mid-February, with analysts and investors saying the market impact of the news was limited as it was widely expected.

Woman stands in front of a General Electric (GE) sign during World Artificial Intelligence Conference in Shanghai, China, Sept. 1, 2022. (Reuters/Aly Song)

General Electric Co forecast revenue at its cash-cow aviation business to grow by at least low-double digit through 2025 on strong demand for jet engines and aftermarket services, sending its shares up 5.5% in early trading on Thursday.

Through this period, it also expects profit margins at GE Aerospace to be about 20%, the company said as its executives began addressing investors at a conference in Ohio.

A jump in air travel demand has driven up sales at its aerospace division, which makes and services engines for Boeing Co and Airbus SE jets.

GE stuck to its profit expectations for 2023 despite the dim economic outlook and persistent supply shortages. It expects adjusted earnings per share of $1.60 to $2.00, with revenue growth percentage in high single digits.

"We're well positioned to have a strong year," Chief Executive Larry Culp told investors.

Swiss bank Credit Suisse logo seen at its headquarters in Zurich, Switzerland, Mar. 24, 2021. (Reuters/Arnd Wiegmann)

Credit Suisse has postponed publication of its annual report after a last-minute call from the Securities and Exchange Commission (SEC), which raised questions about its earlier financial statements.

The unusual intervention by the U.S regulator is the latest blow for Credit Suisse as the lender reels from a series of scandals and setbacks that have sent its share price plunging and led clients to withdraw billions.

The bank said the SEC had called it late on Wednesday regarding "certain open SEC comments about the technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls."

The bank had revised how it booked a series of cash flows, including share-based compensation and foreign exchange hedges. Credit Suisse said that following the call it decided to postpone publication of the annual report.

The SEC did not immediately respond to a call and an email request for comment made by Reuters outside of business hours.

Other regulatory authorities besides the SEC were not involved, a person familiar with the matter said.

SVB Financial Group said on Wednesday it intends to offer $1.25 billion of its common stock and $500 million of depositary shares in separate offerings.

The California-based financial company also said it sold about $21 billion of securities, which will result in an after-tax loss of $1.8 billion in the first quarter of 2023.

SVB said it had entered into an additional agreement with private equity company General Atlantic, which will purchase $500 million of common stock at the public offering price in a separate private transaction.

Up to Wednesday's close of $267.83, the company had a market value of $15.86 billion, according to Refinitiv.

SVB said Goldman Sachs and SVB Securities will act as book-running managers for each offering.

General view inside a Ladbrokes shop in Harpenden, Britain, Mar. 18, 2020. (Reuters/Peter Cziborra)

British gambling group Entain warned of lower core profit margins in 2023 as it exits unregulated markets and faces regulatory headwinds and higher costs for wages and energy in the United Kingdom.

"BetMGM, the joint venture in the US, continues to shine bright – giving Entain some healthy exposure to the US market," said Aarin Chiekrie, equity analyst at Hargreaves Lansdown. "Recent performance has been impressive and cash profits should start to flow in the second half of the year. There had previously been speculation that MGM would look to take full control, but MGM’s CEO has recently quashed those rumours. For now, it will remain a joint venture, but we wouldn’t rule out a takeover bid in years to come.”

The owner of Ladbrokes, Coral and bwin forecast core profit margins of about 26% for 2023, down from 2022, although still ahead of pre-pandemic levels.

Entain reported underlying core earnings of 993 million pounds ($1.18 billion) for the year ended Dec. 31, compared with 881.7 million pounds in the year-ago period.

Analysts on average had forecast an underlying core profit of 975 million pounds, according to a company compiled consensus.

Reuters contributed to this report.

LoanDepot Inc. on Wednesday reported a fourth-quarter loss of $77.3 million, after reporting a profit in the same period a year earlier.

On a per-share basis, the Foothill Ranch, California-based company said it had a loss of 46 cents.

The results missed Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for a loss of 26 cents per share.

The lender posted revenue of $169.7 million in the period, which also fell short of Street forecasts. Five analysts surveyed by Zacks expected $199.2 million.

For the year, the company reported a loss of $273 million, or $1.75 per share, swinging to a loss in the period. Revenue was reported as $1.26 billion.

POLITICS

Norfolk Southern CEO to apologize before Congress over East Palestine, Ohio, train derailment

Norfolk Southern CEO Alan Shaw will testify that he's "deeply sorry" about the East Palestine, Ohio, derailment before the Senate Committee on Environment and Public Works Thursday.

Norfolk Southern CEO Alan Shaw is expected to face a grilling following the rail derailment on February 3 in Ohio that dumped toxic chemicals into the region impacting thousands of residents with the cleanup ongoing. Lawmakers want answers on what happened and what the rail operator will do to take care of residents.

POLITICS

Biden set to unveil slew of tax hikes on wealthy Americans, corporations in budget

Higher taxes on wealthy Americans and corporations are expected to be a key tenet of President Biden's budget request as he seeks to reduce the deficit.

President Biden is expected to lay out a broad budget plan that is expected to impact the U.S. economy and may include tax hikes and an aggressive stance on corporate buybacks.