Stock Market News: First Republic's fate revealed, banks in focus, American's pilots vote to strike
JPMorgan Chase leads the First Republic rescue, United Health Group suffers a data breach and the FAA activates faster routes. 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 Federal Deposit Insurance Corporation (FDIC) has accepted a bid from JPMorgan Chase Bank to assume all deposits of First Republic Bank, the California Department of Financial Protection and Innovation announced early Monday morning.
The San Francisco-based bank has struggled since the collapse of Silicon Valley Bank and Signature Bank in early March, and it was widely seen as the bank most likely to collapse next.
Investors and depositors grew increasingly worried First Republic Bank may not survive as an independent entity due to its high amount of uninsured deposits and exposure to low-interest rate loans.
U.S. stocks ended little changed on Monday as investors took in the weekend auction of First Republic Bank and braced for another expected interest rate hike from the Federal Reserve this week.
JPMorgan will pay the FDIC $10.6 billion to take control of most of the regional bank's assets.
Market watchers also digested the latest economic news. The Institute for Supply Management (ISM) said on Monday that its manufacturing PMI rose last month from March.
The Fed, which has been raising rates to cool inflation, is expected to hike rates an additional 25 basis points on Wednesday.
The Central Florida Tourism Oversight District board announced Monday that it will counter-sue Disney after the company filed a lawsuit against Florida Gov. Ron DeSantis.
Disney filed a lawsuit against DeSantis last Wednesday, alleging the Republican orchestrated a "targeted campaign of government retaliation" against the company that violates Disney's free speech rights.
Disney is challenging the legality of a new board appointed by DeSantis to govern the Central Florida Tourism Oversight District – where the Walt Disney World resort is located.
The board met Monday morning and passed a motion to take legal action against Disney, which will be filed in state court.
Conservation groups sued the Federal Aviation Administration on Monday, challenging its approval of expanded rocket launch operations by Elon Musk's SpaceX next to a national wildlife refuge in South Texas without requiring greater environmental study.
The lawsuit comes 11 days after SpaceX made good on a new FAA license to send its next-generation Starship rocket on its first test flight, ending with the vehicle exploding over the Gulf of Mexico after blasting the launchpad to ruins on liftoff.
The shattering force of the liftoff hurled chunks of reinforced concrete and metal shrapnel thousands of feet from the site, adjacent to the Lower Rio Grand Valley National Wildlife Refuge near Boca Chica State Park and Beach.
The blast also ignited a 3.5-acre (1.4-hectare) fire on nearby grounds and sent a cloud of pulverized concrete drifting 6.5 miles to the northwest and raining down over tidal flats and the nearby town of Port Isabel, according to the U.S. Fish and Wildlife Service.
The International Monetary Fund (IMF) appreciates quick action by U.S. regulators to seize First Republic Bank and find a private buyer, an IMF spokesperson said on Monday.
It said the resilience of the global financial system continued to be tested and strains were evident across a number of institutions and markets.
"Recent events continue to remind us of the challenges posed by the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities in the global financial system. We appreciate the quick and orderly resolution of this troubled bank by the U.S. regulators,” the spokesperson said.
A union representing American Airlines Group Inc pilots said on Monday its members had approved a strike mandate ahead of the busy summer travel season, although the chances of an actual labor disruption remain slim.
The Allied Pilots Association (APA), which represents 15,000 American Airlines pilots, held a strike authorization vote in April to put pressure on the Texas-based carrier for higher salary and better working conditions, even as the two sides closed in on an agreement in principle.
More than 96% of the APA membership participated in the vote and over 99% voted in favor of authorizing a strike, the union said in a statement.
"We remain confident that an agreement for our pilots is within reach and can be finalized quickly. The finish line is in sight," American Airlines said in a statement.
ON Semiconductor's shares jumped 7% on Monday after the chipmaker's quarterly guidance beat Wall Street's expectations, spurring other chip stocks with heavyweight Nvidia hitting its highest level in over a year.
With investors looking for signs of when a downturn in global chip revenue may bottom out, ON Semiconductor's quarterly results and guidance beat analysts' expectations even as the supplier of chips for automobiles and industry said it was taking a "cautious stance" to its outlook because of macroeconomic uncertainty.
While the mid-point of ON Semiconductor's guidance for quarterly revenue between $1.975 billion and $2.075 billion implies a 3% dip from the year-ago quarter, it exceeded analyst expectations for a 7% drop, and it helped lift shares of other chipmakers.
The Philadelphia Semiconductor index climbed 0.7%, outperforming the Nasdaq's 0.1% rise. Nvidia, the world's most valuable chipmaker, climbed 3.5% to its highest since March 2022.
Lordstown Motors Corp. says it is in danger of failing because Foxconn is looking to back away from an agreement to invest up to $170 million in the commercial electric vehicle startup.
Lordstown said in a regulatory filing on Monday that it received a letter from Foxconn Ventures on April 21 saying that the company was in breach of the investment agreement because it had received a delisting warning from the Nasdaq stock market.
Foxconn also said that it would look to end the investment deal if the breach wasn’t resolved within 30 days.
General Motors Co has laid off several hundred full-time contract workers at its engineering hub in suburban Detroit over the weekend, the Wall Street Journal reported on Monday, citing a company spokesperson.
GM said in April that about 5,000 salaried workers had opted for buyouts to leave the company, bringing it closer to its cost-cut target of $2 billion by the end of 2024.
Price hikes and demand for vehicles have helped automakers counter inflationary headwinds. GM posted better-than-expected first-quarter earnings last week and raised its full-year profit and cash-flow forecasts.
Meta Platforms Inc is planning to raise $7 billion in a second bond offering, Bloomberg News reported on Monday, citing a person familiar with the matter.
The five-part bond issue's longest 40-year security could yield 215 basis points over Treasuries, according to the report.
The Facebook parent plans to use the funds to help finance capital expenditures, repurchase outstanding shares of its common stock, and for acquisitions or investments, according to the report.
Meta, which did not immediately respond to a Reuters request for comment, raised $10 billion in its first corporate bond issue last year. The company beat expectations for first-quarter profit and revenue on Wednesday, and its shares gained about 13% last week.
The bankers running the sale process for Subway have given the private equity firms vying for the sandwich chain a $5 billion acquisition financing plan, hoping to overcome a challenging environment for leveraged buyouts and fetch the company's asking price of more than $10 billion, people familiar with the matter said.
So far, bids for Subway have ranged between $8.5 billion and $10 billion, one of the sources said. Subway's financial adviser, JPMorgan Chase & Co, is now hoping a $5 billion debt financing package it has put forward will show buyout firms they can borrow enough to structure an attractive deal even at a $10 billion-plus valuation, the sources said.
The debt financing is based on a mix of loans and bonds and its size is equivalent to 6.75x Subway's 12-month EBITDA of about $750 million, the sources added.
U.S. manufacturing pulled off a three-year low in April as new orders improved slightly and employment rebounded, but activity remained depressed amid higher borrowing costs and tight credit, which have raised the risk of a recession this year.
The Institute for Supply Management (ISM) said on Monday that its manufacturing PMI rose to 47.1 last month from 46.3 in March, which was the lowest reading since May 2020. Economists polled by Reuters had forecast the index climbing to 46.8.
It was the sixth straight month that the PMI remained below the 50 threshold, which indicates contraction in manufacturing. The sector, which accounts for 11.3% of the economy, is being weighed down by the Federal Reserve's fastest interest rate hiking campaign since the 1980s.
Banks have also tightened lending following the recent financial market turmoil, while spending is shifting away from goods, which are typically bought on credit, to services.
Shares of major U.S. banks are mostly higher after JPMorgan Chase announced Monday that it would purchase most of the assets of the struggling First Republic Bank.
JPMorgan, Wells Fargo, Bank of America and Citigroup are all in positive territory in morning trading.
As part of the deal, JPMorgan will make a $10.6 billion payment to the Federal Deposit Insurance Corp (FDIC) for most of the San Francisco-based lender's assets, after government regulators seized control of the failed bank over the weekend, securing the third major U.S. financial institution to collapse in 60 days.
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