Investors are anxious to see Q1 earnings results from Citigroup, JPMorgan Chase, and Wells Fargo this morning, all of which report before the market opens. The rest of the big Wall Street firms report next week, including Charles Schwab on Monday, Bank of America and Goldman Sachs on Tuesday, and Morgan Stanley on Wednesday.

Most Wall Street insiders believe earnings at the big commercial bank will come in around expectations, though it's worth noting that forecasts have come down since the collapse of SVB and others in March. The bigger focus is going to be on details like bond balance sheets, real estate portfolios, loan growth, the outlook for dividends, loan-loss reserves, and other areas that could impact earnings in the quarters ahead. Investors will also be paying close attention to management comments regarding business and lending conditions, as well as consumer health.

Keep in mind, smaller regional banks begin reporting next week and their performance is likely to differ quite a bit from the big Wall Street firms. That's partially due to a higher level of deposit outflows following the March bank turmoil, as well as greater exposure to commercial real estate and small business loans. Investors want to see some stabilization of deposits at all banks, too. According to the latest Federal Reserve Board data, deposits at large US commercial banks declined by -$519.8 billion year-over-year through March 29, while deposits at small commercial banks fell by -$375.5 billion as consumers choose to park those funds in places like CDs and money markets where they can get higher returns.

Assets in money market funds reached a record $5.2 trillion as of April 5. In order to maintain a stable deposit base, experts believe banks will have no choice but to begin paying higher interest rates to savers, something that the big guys in particular have avoided doing so far. Higher rates on deposits, however, could deal a big blow to profits, especially if banks are curtail new lending. Remember, many of the loans currently sitting on bank balance sheets are collecting interest far below market rates.

A recent report from the Mortgage Bankers Association revealed that banks and mortgage companies lost an average of -$301 for each loan originated in 2022, down from an average profit of +$2,339 per loan the year before.

Some tech sector earnings will also start rolling next week with Netflix on Tuesday, ASML Holdings, IBM, and Tesla on Wednesday, and Taiwan Semiconductor on Thursday. Other highlights next week include J.B. Hunt on Monday; Johnson & Johnson, Lockheed Martin, and United Airlines on Tuesday; Abbott Laboratories, Baker Hughes, Kinder Morgan, and The Travelers Companies on Wednesday; American Express, AT&T, Blackstone, CSX, D.R. Horton, PPG Industries, and Union Pacific on Thursday; and FreeportMcMoRan, HCA Healthcare, Procter& Gamble, and Schlumberger on Friday.

Turning to economic data, investors will be closely scrutinizing Retail Sales and the University of Michigan consumer sentiment for clues as to how consumers are holding up. Data next week is fairly light with a heavy focus on the housing sector. Key releases include the NAHB Housing Market Index and Empire Manufacturing on Monday; Building Permits and Housing Starts on Tuesday; the Fed's Beige Book on Wednesday; and Existing Home Sales and the Philadelphia Fed Index on Thursday.

OPEC Data Show Oil Cuts Will Cause Widening Supply Shortfall: Oil supply cuts agreed by OPEC+ nations last week are putting global markets on track for a hefty supply deficit that will widen as the year progresses, the latest data from the group indicate. World markets may be under supplied by about 2 million barrels a day in the fourth quarter as a result of cutbacks announced by Saudi Arabia and its partners, according to figures in a report from the Organization of Petroleum Exporting Countries. The report on Thursday from OPEC’s Vienna-based research department provides some justification for the curbs, which should whittle down the supply surplus projected for this quarter. Oil inventories are above their five-year average, and current output from OPEC’s 13 members is about 300,000 barrels a day more than needed from April through June, at 28.8 million barrels a day. But in the second half of the year world markets stand to tighten considerably. OPEC already expected a supply deficit to emerge over the summer, and the newly unveiled cuts will make the shortfall even more pronounced. While OPEC+ described the cutbacks as a “precautionary measure aimed at supporting the stability of the market,” the group continues to forecast a substantial jump in global oil demand this year. Consumption will climb by 2.3 million barrels a day, surpassing pre-pandemic levels to reach a record 101.89 million a day, it projects. Source Bloombert

Walmart Eyes $5 Billion in New Debt Deal: Mega retailer Walmart was on pace to borrow $5 billion in the corporate bond market on Wednesday, with strong investor demand dialing back borrowing costs for the national chain. The company was initially expected to raise about $4 billion, but was on pace to increase its borrowing size and trim pricing after order books touched about $27 billion, according to Informa Global Markets. Walmart plans to use proceeds from the debt raise for general corporate purposes and has at least $4 billion of bonds maturing over roughly the next six months, according to a tally from CreditSights analysts. The debt deal comes as financial markets have again become more favorable for borrowers to navigate. The retailer’s big $1.5 billion class of 10-year bonds was expected to price Wednesday at a spread of about 70 basis points above the risk-free Treasury rate, or well below an initial range of about 95-100 basis points above the benchmark, according to Informa. Source Market Watch

Cars are Selling Below Sticker Price, First Time in Nearly Two Years: Car buying might be finally getting better. March was the first time in years that buyers didn't shell out more than a vehicle was listed for. The average amount that Americans spent on a new vehicle in March was $48,008, according to Kelley Blue Book — or $171 below an average sticker price of $48,179 (including luxury and non-luxury cars). For comparison, just a year earlier, consumers were paying on average nearly $1,000 more than the sticker price for a new car. That marks the first time in 20 months that car buyers didn't have to shell out more than a vehicle was listed for due to high markups on dealer lots. Brands like Chevrolet, Chrysler, Dodge, Ford, Hyundai, and more saw the average prices paid for their vehicles decline up to 3.8% in March, according to Kelley Blue Book, indicating incentives are also creeping back. In addition to the newfound difference in sticker price versus the price actually paid, new car prices have been trending downward overall for months now. March's average price paid is down from February's $48,558, January's $49,388, and December's $49,507 Source Insider

Gold Prices Near Record as Investors Bet Inflation Will Stick Around: Gold prices hit their highest level of the year on Thursday, driven by bets that inflation will remain sticky despite recent declines. The most actively traded gold-futures contract rose to $2,055.30 a troy ounce, up +13% year to date. That also put it within striking distance of its record high, reached in the summer of 2020. The rising gold price shows investors are wagering that the Federal Reserve will pull back from its rate-hiking campaign even with inflation readings well above the central bank’s 2% target. That in turn is born from concerns that the economy might be weaker than it seems. A reversal by the Fed could result in higher inflation becoming embedded in the economy in coming years, analysts say, creating an environment that favors higher gold prices. This year’s advance for the metal, used in everyday items from jewelry to electronics, comes after it ended 2022 flat. Gold avoided the steeper losses posted by stocks and bonds but still disappointed those who had expected it to thrive during an era of persistent inflation. Investors poured a net $653 million in the first quarter into SPDR Gold Shares, the world’s largest physically backed gold ETF. That marks the largest quarterly inflow since the $7.29 billion received during the first quarter of 2022, according to Dow Jones Market Data. The fund gained 8% over the same period, its largest percentage gain since the three-month period ending December 2022. Source WSJ

America, the World's Biggest Economy, is Leaving It's Peers in the Dust: If there is one thing that Americans of all political stripes can agree on, it is that the economy is broken. Nearly four-fifths tell pollsters that their children will be worse off than they are, the most since the survey began in 1990, when only about two-fifths were as gloomy. The last time so many thought the economy was in such terrible shape, it was in the throes of the global financial crisis. Yet the anxiety obscures a stunning success story—one of enduring but underappreciated outperformance. America remains the world’s richest, most productive and most innovative big economy. By an impressive number of measures, it is leaving its peers ever further in the dust. In 1990 America accounted for a quarter of the world’s output, at market exchange rates. Thirty years on, that share is almost unchanged, even as China has gained economic clout. America’s dominance of the rich world is startling. Today it accounts for 58% of the G7’s GDP, compared with 40% in 1990. Source The Economist

Shadow Lenders to Bridge Real Estate Void Left by Banks, Bonds: Shadow lenders are circling commercial real estate, a large asset class that traditional banks and the bond market are increasingly backing away from, potentially forcing borrowers to start paying up for deals. Regional banks make up about 70% of the commercial real estate loans made out by US banks. But the turmoil sparked by the US regional bank crisis combined with rising loan defaults on troubled properties has burned small banks, prompting them to scale back on commercial real estate lending as they reduce risk and shrink balance sheets. The other major source of liquidity for property owners, namely the bond market — where commercial real estate mortgages are packaged and sold as securities — has dried up too. Issuance of commercial mortgage bonds is down about 82% year-over-year. That leaves room for a rising class of shadow lenders to step in and fill the void. They’re mostly private credit funds using their own capital to dish out loans, usually charging more than banks for their financings. Source Bloomberg

Positive Attitude Can Protect Your Memory as You Age: A glass half full—when it comes to aging, anyway—could help you recover from a health setback. That’s according to a letter from Yale School of Public Health researchers published Wednesday by JAMA Network Open. They followed more than 1,700 older Americans—with a mean age of 78 years—for more than a decade. Participants who had a common type of memory loss known as mild cognitive impairment (MCI), but a positive attitude about aging—who did not agree with statements like, “The older I get, the more useless I feel”—were 30% more likely to eventually regain normal cognitive functioning than those with negative views, they found. Those with optimistic views generally recovered more quickly, too—on average, two years quicker than those with more pessimistic views. A sunny outlook also seemed protective for those with normal cognition. From the outset, they were less likely to have MCI, and they were “significantly” less likely to develop it over a 12-year period. And there’s more good news: Positive thoughts can be cultivated, as the authors point out—meaning that efforts to improve attitudes on aging at a societal level could improve cognitive health en masse. Source Fortune

US Manufacturing Boom has a Real Estate Problem: Fueled by a combination of hefty government incentives, a transition to new transportation and energy technologies, and national security concerns about relying on distant suppliers, especially in China, there's a factory-building boom taking place across the U.S. But all that new construction has a real estate problem. More specifically, a "megasite" problem. While the U.S. has plentiful land, there are not that many places to quickly plunk a billion-dollar-plus factory. The factory renaissance could soon hit a barrier because of the scarcity of ready-to-go megasites, according to 25 economic development groups, state and local officials, utilities, and companies interviewed by Reuters. There’s no single definition for a megasite, but it generally refers to a very large plot — one common threshold is 1,000 acres — tied to transport, low-cost and preferably renewable energy, and a nearby supply of skilled labor. According to Didi Caldwell, president of consultancy firm Global Location Strategies, there were 20 industrial projects with investments over $1 billion and a promise of creating at least 1,000 jobs announced last year in the U.S. - up from 15 the year before, and only eight the year before that. In the decade and a half before the recent spike, the annual average was just over five and many years saw just three or four large projects announced. One major constraint, particularly for energy-hungry factories such as battery plants, is the need for large amounts of electrical power. Source Reuters

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