Stock investors got mostly what they expected from the Federal Reserve yesterday, including a 25 basis-point rate hike and indications that the central bank is close to pausing its hiking campaign. The Fed's interest rate projections, laid out in the so-called "dot plot", point to a peak rate of 5.1%, or a range of 5.0%-5.25%, which is unchanged from the last estimate in December. Meaning perhaps one more 25-basis point hike could happen at the next meeting on May 2-3 (no policy meeting in April), which is a disappointment to those hoping this would be the last of the cycle. Fed Chief Jerome Powell also stressed that rate cuts are not likely in the playbook for this year, which dashes the hopes of some bulls that thought the recent banking sector turmoil might spook the Fed into backtracking a bit.

Wall Street, however, is still placing its bet on the Fed pivoting and cutting rates prior to yearend, Powell, was firm in his stance that the Silicon Valley Bank collapse was one-off that resulted from bad management, including not hedging risks in long-dated securities. Powell also insisted that SVB's failure was not a sign of wider failures to come. At the same time, the Fed Chief emphasized that the bank turmoil will cause financial conditions to tighten further and increase the credit crunch, which in turn should slow the economy.

On the flip side, there are still many Wall Street insiders who are not entirely convinced that the current banking crisis is contained and they are extremely nervous that further Fed tightening will increasingly destabilize the financial system, particularly if it leads to more widespread loan defaults. Many on Wall Street were even more rattled by Treasury Secretary Janet Yellen's testimony in front of the Senate Banking Committee yesterday where she insisted that regulators are not considering "blanket" insurance or guarantees of deposits above the current $250,000 FDIC limit for all banks.

For what it's worth, that's a move that only Congress can make. Still, Yellen's comments raise bigger questions about the current attempts to rescue First Republic Bank with some worried that potential losses for depositors could contribute to more bank failures.

Today, investors will be digesting New Home Sales, as well as earnings results from Accenture, Darden Restaurants, and General Mills. As for the overall stock market, I'm mostly neutral to slightly bullish at the moment.

Apple, Microsoft Dominate U.S. Markets After FAANG Trade Fizzles: The FAANG era is apparently over as the U.S. market is dominated by just two stocks now. The combined weighting of Apple Inc. and Microsoft Corp in the S&P 500 has risen to 13.3%, the highest level on record, while the influence of other big technology stocks has waned of late, according to Strategas Securities data going back to 1990. Not since International Business Machines Corp. and AT&T in 1978 have two stocks made up a greater share of the benchmark, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. The big tech stocks began to diverge once worries about inflation began bubbling and the Federal Reserve started raising interest rates, dimming the allure of some growth stocks. Source WSJ

Child Death Rate Rising at the Fastest Rate in 50 Years: Mortality rates for children are rising at rates not seen in at least half a century, interrupting a long era of progress in shepherding America’s youth to adulthood. The death rate for children and adolescents rose by nearly +20% between 2019 and 2021, according to an analysis published March 13 in the Journal of the American Medical Association. Child mortality rates trended downward for decades, the collective result of several successful public health campaigns. Fewer children are dying of diseases that vaccines can prevent. Smoke detectors, bicycle helmets and seat belts all have contributed to lower death rates among the young. For many years, disease killed more children than any other cause. In the 1960s, car accidents eclipsed disease as the most common cause of child deaths. In 2020, firearms surpassed car accidents as the leading killer of American children. Probably because more kids were at home and not at school and less people were traveling in cars. Another factor now creating concern is alcohol and drugs, which caused twice as many child deaths in 2021 as in 2019, mostly via accidental overdose. Also, a spiraling mental health crisis looms across the landscape of child mortality. Pediatric death rates are rising mostly because of injuries, as opposed to diseases such as cancer and COVID-19. Boys are dying at nearly twice the rate of girls. Source The Hill

Job Site "Indeed" Cutting Over 2,000 Positions as Tech Sector Cools: Job hiring platform Indeed will cut about 2,200 positions, roughly 15% of its total workforce, which the company says will affect “nearly every team." Chief Executive Officer Chris Hyams wrote in a blog post that the job market will continue to cool after the post-pandemic boom, and that he expects human resources tech revenue to decline in fiscal 2023 and possibly again in 2024. Some 500 tech companies have shed more than 150,000 workers in this year alone, according to Total US job openings were down -3.5% last quarter from a year earlier, Hyams said, while sponsored job volumes were down -33%. In the US, he said “job openings will likely decrease to pre-pandemic levels of about 7.5 million or even lower over the next two to three years.” Given that environment, “our organization is simply too big for what lies ahead,” Hyams wrote. Source Bloomberg

OpenAI Tech Gives Microsoft's "Bing" a Boost in Search Battle with Google: The integration of OpenAI's technology into Microsoft-owned Bing has driven people to the little-used search engine and helped it compete better with market leader Google in page visits growth, according to data from analytics firm Similarweb. Page visits on Bing have risen +15.8% since Microsoft unveiled its artificial intelligence-powered version on Feb. 7, compared with a near -1% decline for the Alphabet Inc-owned search engine, data till March 20 showed. The figures are an early sign of the lead the Windows maker has taken in its fast-moving race with Google for generative AI dominance, thanks to the technology behind ChatGPT, the viral chatbot that many experts have called AI's "iPhone moment". They also underscore a rare opportunity for Microsoft to make inroads in the over $120 billion search market, where Google has been the dominant player for decades with a share of more than 80%. While Bing AI has been available to most users around the world since February, Google began the public release of its chatbot Bard only on Tuesday. Source Reuters

Remote Work Starts Hitting Office Rents: After a lag, the work-from-home revolution is finally starting to show up in the data for office building rental rates. Major markets like San Francisco and Manhattan — where long commute times seem to be driving the durability of the WFH lifestyle — have been hit the hardest. On the other hand, markets like Raleigh, Boston and Minneapolis — which have a higher concentration of health services, biotech and life science employment — seem to be faring well. (It's hard to do laboratory research from your home office.) Small and midsized banks (those not among the top 25) currently hold 67.2% of all outstanding commercial real estate loans. According to a new analysis by Cushman & Wakefield, the U.S. office market could be saddled with 330 million square feet of obsolete space by the end of the decade. The real estate services giant projects much of that property — the equivalent of all the office space in Atlanta, the nation's eighth-largest office market — is ill-suited to meet the demands of hybrid working and environmental priorities. About 70% of the nation's office buildings were developed before 1990 and don't meet the demands of tenants today, the firm found in its analysis. In the next year or so, office vacancy is projected to rise before coming down slowly through 2030. At that rate, the office market would have a vacancy rate of 18% — mirroring where it is today — by the end of the decade, surpassing what is estimated to be a healthy vacancy rate of 13%. Source Axios

America's Banks are Missing Hundreds of Billions of Dollars: It's easy to understand how money gets destroyed in a traditional bank run. The crowds want their cash and banks are trying to provide it. But when customers flee, it sometimes cannot satisfy all comers before the institution topples. The remaining debts (which, for banks, include deposits) are wiped out. This is not what happens in the digital age. The depositors fleeing Silicon Valley Bank (SVB) did not ask for notes and coins. They wanted their balances wired elsewhere. Nor were deposits written off when the bank went under. Instead, regulators promised to make SVB’s clients whole. Although the failure of the institution was bad news for shareholders, it should not have reduced the aggregate amount of deposits in the banking system. The odd thing is that deposits in American banks are nevertheless falling. Over the past year those in commercial banks have sunk by half a trillion dollars, a fall of nearly -3%. This makes the financial system more fragile, since banks must shrink to repay their deposits. Where is the money going? The answer begins with money-market funds, low-risk investment vehicles that park money in short-term government and corporate debt. Such funds saw inflows of $121bn during the week svb failed. According to the Investment Company Institute, an industry outfit, in March they had $5.3trn of assets, up from $5.1trn a year before. But you won't find the missing money there either, because these funds are unable to take deposit. Source The Economist

SEC Charges Celebrities in Crypto Scheme: The Securities and Exchange Commission charged crypto asset entrepreneur Justin Sun and three of his companies with the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT). The SEC also charged Sun and his companies for paying eight celebrities and social media influencers to tout TRX and BTT without telling their fans and followers that they were being paid to do so and how much they were being compensated, as required. The celebrities are Lindsay Lohan, Jake Paul, DeAndre “Soulja Boy” Cortez Way, Austin Mahone, Michele “Kendra Lust” Mason, Miles “Lil Yachty” Parks McCollum, Shaffer “Ne-Yo” Smith, and Aliaune “Akon” Thiam. The celebrities except for Cortez Way and Mahone collectively agreed to pay more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting or denying the SEC’s findings. Source Barrons

Is There Really an "Airbnbust" Happening?: Whispers of an apocalyptic "Airbnbust" have spread online among short-term-rental hosts facing empty booking calendars, stiff competition for guests, and tumbling earnings. The shift has sparked fears of an irreversible slide in the business and a broader economic slowdown. But the hand-wringing over the idea of a downturn ignores a conflicting, but undeniable, reality: The short-term-rental business is bigger than ever, and some operators are thriving like never before. The number of nights booked at US short-term rentals reached a record high in 2022, as did total revenue, according to AirDNA, which tracks properties listed on the vacation-rental sites Airbnb and Vrbo. Airbnb recently reported that 2022 was its first profitable year ever. But the deluge of new listings foreshadowed an inevitable correction. In February, occupancy rates remained "well above pre-pandemic figures," according to AirDNA, but supply growth continued to outpace demand. As the market normalizes, some short-term-rental hosts are coming to grips with the fact that the banner days of 2021 are long gone. Source Insider

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