Stock Market News: Key inflation data, oil earnings, Fed's SVB report

A trader works at the post where First Republic Bank stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 16, 2023. REUTERS/Brendan McDermid

Shares of First Republic Bank remain in a death spiral amid reports of uncertainty about whether the lender could see a rescue deal.

First Republic's stock tumbled as much as 50% in midday trading. The bank’s share value has already plummeted roughly 96% year to date and just more than 70% the last month amid federal discussions with banks and even private equity groups over a rescue solution for the distressed lender.

Reuters reported Friday, citing people familiar with the situation, that officials from the Federal Deposit Insurance Corporation (FDIC), the Treasury Department and Federal Reserve are coordinating talks to rescue First Republic. Private-sector efforts have yet to yield a deal.

The Federal Reserve released its assessment Friday morning of what led to Silicon Valley Bank’s collapse, saying the lender's failure was due to a "textbook case of mismanagement" and calling for greater supervision by regulators.

MARKETS

First Republic Bank shares nosedive amid uncertainty about rescue deal

Shares of First Republic Bank tanked on Friday. The Federal Reserve and the Federal Deposit Insurance Corporation’s Friday reports on the troubled banking industry.

Shoppers, visitors and employees exit the Mall of America on March 17, 2020 as the mall in Bloomington, Minn. (AP Photo/Jim Mone, File)

U.S. consumer spending was unchanged in March, while underlying inflation pressures remained strong, which could see the Federal Reserve raising interest rates again next month.

The unchanged reading in consumer spending last month, reported by the Commerce Department on Friday, followed a downwardly revised 0.1% gain in February. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was previously reported to have increased 0.2% in February. Economists polled by Reuters had forecast consumer spending dipping 0.1%.

The data was included in the advance gross domestic product report for the first quarter published on Thursday, which showed consumer spending surging at a 3.7% annualized rate that period after rising at a 1.0% pace in the October-December quarter.

The overall economy grew at a 1.1% pace as the acceleration in consumer spending was offset by businesses liquidating inventories in anticipation of weaker demand later this year. The economy expanded at a 2.6% rate in the fourth quarter.

ECONOMY

US consumer spending flat in March; core inflation still strong

The economy is facing several headwinds, including higher interest rates as the Fed fights inflation, and tightening credit conditions, which could crimp consumer and business spending.

Amazon.com Inc shares fell nearly 5% on Friday after the company warned its lucrative cloud services business slowed further in April, fuelling concerns that the long-time growth driver was struggling with a pullback in technology spending.

The company, one of the largest in the world by market capitalization, is on track to shed about $60 billion from its valuation of $1.126 trillion, if losses hold.

Atlantic Equities analyst James Cordwell said the slowdown reflected Amazon Web Services' greater exposure to technology companies and start-ups, which have slashed spending in recent months in the face of rising interest rates and high inflation.

"This makes it more difficult to have confidence that Q2 will be the bottom in terms of the decline," Cordwell said.

A Mastercard logo is seen on a credit card in this picture illustration August 30, 2017. REUTERS/Thomas White

Mastercard will expand its cryptocurrency payment card programme by seeking more partnerships with crypto firms, the company's head of crypto and blockchain said, even as the sector comes under closer scrutiny from regulators and banks grow wary.

Mastercard has already partnered with crypto exchanges including Binance, Nexo and Gemini to offer crypto-linked payment cards in some countries. The Binance cards allow users to make payments in traditional currencies, funded by their cryptocurrency holdings on the exchange.

"We have dozens of partners around the world who offer crypto card programmes and they continue to expand," Raj Dhamodharan, Mastercard's head of crypto and blockchain, told Reuters on Thursday.

"Providing access to crypto in a safe way is also part of our value proposition and we're continuing to do that."

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 10, 2023. REUTERS/Brendan McDermid

Wall Street's main indexes opened lower on Friday after Amazon warned about a slowdown in its cloud business, while strong inflation data cemented bets that the Federal Reserve will hike interest rates again next week.

The Dow Jones Industrial Average fell 28.73 points, or 0.08%, at the open to 33,797.43. The S&P 500 opened lower by 5.72 points, or 0.14%, at 4,129.63, while the Nasdaq Composite dropped 24.69 points, or 0.20%, to 12,117.54 at the opening bell.

A view of the Exxon Mobil refinery in Baytown, Texas September 15, 2008. REUTERS/Jessica Rinaldi

Exxon Mobil Corp on Friday reported a record first-quarter profit that was more than double a year ago and topped Wall Street estimates as rising oil and gas output overcame a pullback in energy prices from high levels.

"We delivered a first-quarter record despite the fact that energy prices and refining margins are softening a bit," Chief Financial Officer Kathryn Mikells said in an interview.

The biggest contributor to the better-than-expected earnings came from strong production growth, she said. Exxon's quarter was driven by new volumes of crude oil and fuels from the startup of new offshore developments and refining facilities.

Net profit rose to $11.43 billion, or $2.79 per share, compared to $5.48 billion a year ago that included a $3.4 billion after-tax writedown to exit Russia. Results beat consensus by 9%, according to REFINITIV data.

Intel Corp shares rose nearly 6% as the once-dominant chipmaker's quarterly print indicated "baby step progress" in efforts to turn around its business after ceding market share to rivals and struggling with all-time low margins.

At least 13 brokerages raised their target price on the stock that has underperformed rivals this year, encouraged by CEO Pat Gelsinger's remarks the PC market - on which Intel built its reputation - was stabilizing after multiple quarters of decline.

"While the future pace of the sector's recovery is uncertain, we do believe that Intel has reached a revenue, gross margin, and profit trough through this first half of 2023," said Benchmark analyst Cody Acree, upgrading the stock to "buy".

Intel on Thursday projected adjusted gross margins will climb above 40% in the second half, and said it had ramped up shipments of a key data center chip after a more than one-year-long delay had allowed rivals to take its market share.