Finance

U.S. Federal Reserve Chair Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, D.C., on March 20, 2024.
Elizabeth Frantz | Reuters

This is a comparison of Wednesday’s Federal Open Market Committee statement with the one issued after the Fed’s previous policymaking meeting in March.
Text removed from the March statement is in red with a horizontal line through the middle.

Text appearing for the first time in the new statement is in red and underlined.
Black text appears in both statements.

Arrows pointing outwards More

When it comes to economic growth, America comfortably beats Europe. Many factors have fed America’s outperformance, from tech innovation to vast oil reserves. But there is one explanation that seems almost too simplistic: that “Americans just work harder”, as the head of Norway’s oil fund put it in an interview with the Financial Times on April 24th.The numbers do in fact bear out this assertion—a rare case of national stereotypes being empirically provable. On average Americans work 1,811 hours per year, according to data from the OECD, a club of mostly rich countries. That is 15% more than in the EU, where the average is 1,571 hours. And it is not just that Europeans spend a few extra weeks on the beach. The typical working day in Britain, France and Germany is half an hour shorter than in America, according to the International Labour Organisation. More

Hundreds of small and regional banks across the U.S. are feeling stressed.”You could see some banks either fail or at least, you know, dip below their minimum capital requirements,” Christopher Wolfe, managing director and head of North American banks at Fitch Ratings, told CNBC.
Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates.

The majority of those banks are smaller lenders with less than $10 billion in assets.
“Most of these banks aren’t insolvent or even close to insolvent. They’re just stressed,” Brian Graham, co-founder and partner at Klaros Group, told CNBC. “That means there’ll be fewer bank failures. But it doesn’t mean that communities and customers don’t get hurt by that stress.”
Graham noted that communities would likely be affected in ways that are more subtle than closures or failures, but by the banks choosing not to invest in such things as new branches, technological innovations or new staff.
For individuals, the consequences of small bank failures are more indirect.
“Directly, it’s no consequence if they’re below the insured deposit limits, which are quite high now [at] $250,000,” Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corp., told CNBC.

If a failing bank is insured by the FDIC, all depositors will be paid “up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category.”
Watch the video to learn more about the risk of commercial real estate, the role of interest rates on unrealized losses and what it may take to relieve stress on banks — from regulation to mergers and acquisitions. More

New York Community Bank on Wednesday posted a quarterly loss of $335 million on a rising tide of soured commercial loans and higher expenses, but the lender’s stock surged on its new performance targets.
The first-quarter loss, equal to 45 cents per share, compared to net income of $2.0 billion, or $2.87 per share a year earlier.
When adjusted for charges included merger-related items, the loss was $182 million, or 25 cents per share, deeper than the 15 cents per share loss estimate from LSEG.

A New York Community Bank stands in Brooklyn, New York City, on Feb. 8, 2024.
Spencer Platt | Getty Images

New York Community Bank on Wednesday posted a quarterly loss of $335 million on a rising tide of soured commercial loans and higher expenses, but the lender’s stock surged on its new performance targets.
The first-quarter loss, equal to 45 cents per share, compared to net income of $2.0 billion, or $2.87 per share a year earlier. When adjusted for charges included merger-related items, the loss was $182 million, or 25 cents per share, deeper than the 15 cents per share loss estimate from LSEG.

“Since taking on the CEO role, my focus has been on transforming New York Community Bank into a high-performing, well-diversified regional bank,” CEO Joseph Otting said in the release. “While this year will be a transitional year for the company, we have a clear path to profitability over the following two years.”
The bank will have higher profitability and capital levels by the end of 2026, Otting said. That includes a return on average earning assets of 1% and a targeted common equity tier 1 capital level of 11% to 12%.
Otting took over at the beleaguered regional bank at the start of April after an investor group led by former Treasury Secretary Steven Mnuchin injected more than $1 billion into the lender. NYCB’s troubles began in late January with a disastrous fourth-quarter earnings report when it shocked analysts with its level of loan loss provisions. The bank’s stock plunged amid multiple management changes and rating agency downgrades.
Shares of the bank jumped 20% in premarket trading.
NYCB has “identified an opportunity” to sell $5 billion in assets to boost the company’s liquidity levels, Otting told analysts during a conference call. That transaction could close within 60 to 70 days and may be announced soon, he added.
This story is developing. Please check back for updates. More

Bitcoin dropped as low as $56,757.93, falling below $57,000 for the first time since Feb. 28, according to data from CoinGecko.
Rival cryptocurrencies ether, solana, and XRP fell 4.5%, 5.9%, and 1.4%, respectively.
Geoff Kendrick, Standard Chartered’s head of digital asset research, said bitcoin’s drop below $60,000 “has now re-opened a route to the 50-52k range.”

The logo of the cryptocurrency Bitcoin (BTC) can be seen on a coin standing in front of a Bitcoin chart.
Silas Stein | Picture Alliance | Getty Images

Bitcoin on Wednesday plunged sharply to its lowest level in over two months amid broader risk-off sentiment in markets, as investors kept an eye on the U.S. Federal Reserve’s upcoming interest rate decision.
The world’s top digital currency by market value dropped as low as $56,757.93, falling below $57,000 for the first time since Feb. 28, according to data from CoinGecko.

Bitcoin was last down 6.3% Wednesday to a price of $57,505.24.
Rival cryptocurrencies ether, solana, and XRP fell 4.5%, 5.9%, and 1.4%, respectively.
Crypto market participants are eyeing the upcoming interest rate decision from the U.S. Federal Reserve. The Federal Open Market Committee is due to meet on Wednesday afternoon to discuss its latest policy on interest rates.
Markets have become more shaky lately, as investors fret over the prospect of a longer path toward interest rate cuts. Investors are looking for clues from Fed Chair Jerome Powell on what needs to happen before rates can come down. 
Bitcoin has been known to trade more akin to traditional risk assets, such as stocks. Its backers have described it as a hedge against rising inflation — but the token’s track record here has been mixed.

Geoff Kendrick, Standard Chartered’s head of digital asset research, said in a note out on Wednesday that bitcoin’s drop below $60,000 “has now re-opened a route to the 50-52k range.”
“The driver seems to be a combination of crypto specific and broader macro,” Kendrick said.
He noted the primary factors impacting the token were five days of consecutive outflows from the U.S. spot bitcoin exchange-traded funds, as well as a deterioration in the macro backdrop and worsening market liquidity.
Kendrick added that the reaction to the launch of spot bitcoin ETFs in Hong Kong earlier this week was “poor,” focusing on small first-day turnover volume from the ETFs in the millions of dollars, despite the net asset positions of the ETFs being solid.
“Of course liquidity matters when it matters, but with a backdrop of strong US inflation data and less likelihood of Fed rate cuts it matters at the moment,” Kendrick said in the note.
The downward price action in crypto markets also comes a day after the former CEO of Binance, Changpeng Zhao, was sentenced to four months in prison over money laundering charges. More

A new ETF designed to shield investors from the risk of market volatility starts trading on Wednesday. 
The Calamos S&P 500 Structured Alt Protection ETF (CPSM) promises to deliver investors “100% downside protection” against the index’s losses over a one-year outcome period, according the firm’s news release.

Calamos’ head of ETFs Matt Kaufman helped build the new product.
“There’s no tricks. There’s no magic,” he told CNBC’s “ETF Edge” on Monday. “This is the secret sauce.”
Kaufman explained the new ETF enters into three options positions. Investors in the fund are subject to limits on the extent to which they can capture gains tied to the S&P 500.
“They all work together. It’s a fully funded options package that delivers the upside of the S&P 500 to a cap with 100% capital protection over a 365-day outcome period,” he said. “Then at the end of that year, the options reset, stay in the ETF and keep on going.”
The fund will have an annual expense ratio of 0.69%.

Arrows pointing outwards

In order to receive the full downside protection against losses in the S&P 500 that the fund promises, Kaufman noted investors must buy it Wednesday when it hits the market.
“If you buy in on day one, you get that 100% protection,” he said. “[But] even day two [or] day three, there’s probably opportunities to buy in all along the way.”

Arrows pointing outwards

The fund is just one of a suite of 12 structured protection ETFs the firm plans to launch over the course of the next year. Upcoming funds include those aiming to protect against losses tied to the Nasdaq 100 and Russell 2000 benchmarks. 
Disclaimer More

An Amazon worker walks past his Amazon Prime delivery truck in Washington, DC, on February 19, 2022.
Stefani Reynolds | Afp | Getty Images

Check out the companies making headlines in extended trading.
Amazon — Shares gained nearly 2% after the company beat on both top and bottom lines. Amazon posted earnings of 98 cents per share on $143.31 billion in revenue. Analysts surveyed by LSEG had forecast earnings of 83 cents per share on $142.5 billion in revenue. The advertising and Amazon Web Services segments also topped expectations. However, the company’s second-quarter revenue forecast was shy of estimates. 

Starbucks — Shares slipped almost 10% in extended trading after the coffee chain missed fiscal second-quarter estimates on the top and bottom line. Starbucks earned 68 cents per share on revenue of $8.56 billion, and missed the forecast from analysts polled by LSEG of 79 cents per share for earnings and $9.13 billion for revenue.
Advanced Micro Devices – The chip company fell more than 7% after its gaming segment revenue for the first quarter came in at $922 million, down 48% on a year-over-year basis. Total revenue was slightly ahead of the Street’s expectations at $5.47 billion, versus the consensus estimate of $5.46 billion, per LSEG. It forecast revenue for the current quarter in line with the analyst forecast of $5.70 billion.
Pinterest — Shares surged nearly 19% following an earnings and revenue beat in the first quarter. Pinterest reported adjusted earnings of 20 cents per share, topping forecasts for 13 cents per share, according to LSEG. Revenue growth also accelerated in the quarter.
Super Micro Computer — Shares dropped nearly 8% after Super Micro Computer posted fiscal third-quarter revenue of $3.85 billion, missing the $3.95 billion consensus estimate, according to LSEG. Adjusted per-share earnings of $6.65 topped the per-share estimate of $5.78. The company also issued strong fourth-quarter revenue guidance.
Chesapeake Energy — Shares were little changed after the natural gas producer posted disappointing earnings of 56 cents per share, excluding items. The results missed the FactSet consensus estimate of 59 cents per share.

Caesars Entertainment — The casino stock lost about 3% on disappointing first-quarter results. Caesars posted a wider-than-expected loss of 73 cents per share, while analysts had estimated losses of 7 cents per share, per LSEG data. Revenue also missed forecasts, coming in at $2.74 billion versus consensus estimates of $2.84 billion. 
Mondelez International — The snack company’s shares slipped more than 1% despite announcing better-than-expected first-quarter results. Mondelez posted adjusted earnings of 95 cents per share on $9.29 billion in revenue. Analysts’ estimates called for earnings of 89 cents per share and $9.16 billion in revenue, according to LSEG data. However, management said it expects currency translation to reduce net revenue growth by around 1.5% this year. 
Diamondback Energy – The oil and gas company posted earnings of $4.50 per share, excluding items, that beat analysts’ estimates by 4 cents per share, according to FactSet, for the first quarter. Revenue came in at $2.23 billion, beating expectations of $2.10 billion. The shares fell 1% after hours. 
Clorox — The consumer goods company slipped 3%. Revenue in the fiscal third quarter came in at $1.81 billion, missing estimates of $1.87 billion, according to LSEG.
— CNBC’s Sarah Min, Brian Evans, Alex Harring, Darla Mercado and Tanaya Macheel contributed reporting More

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 29, 2024. 
Brendan Mcdermid | Reuters

The volatility in the bond market has had equity investors on their toes for months, but at what point will rising yields spoil stocks’ 2024 rally?
The answer is 5% on the 10-year Treasury yield, according to Goldman Sachs. In a new 19-page paper using market data since the 1980s, the Wall Street firm said when that threshold is reached, the correlation between bond yields and stocks turns negative.

“While there is no ‘magic number’, historically bond yields at around 5% is when higher yields become a clear problem for equities — that is the point where the correlation with bond yields is no longer decisively positive,” wrote a team of Goldman strategists led by Peter Oppenheimer, chief global equity strategist.
The benchmark 10-year yield jumped 5 basis points Tuesday to 4.67% after data showed employee compensation costs increased more than expected to start the year. It marked yet another danger sign about persistent inflation, which the market thinks will keep the Federal Reserve on hold until later this year before it starts to consider cutting rates. A basis point equals one-hundredth of a percentage point.

Arrows pointing outwards

Goldman said investors are currently in the “optimism phase” of the cycle, where confidence — and complacency — grow, pushing valuations higher.
“Equity valuations are higher and the cycle is more mature so equity markets are very sensitive to moves in bond yields,” Goldman said. “They underperform with yields moving higher around news of overheating and higher inflation, while they outperform when the market prices Central Banks to cut interest rates.”
The 10-year Treasury yield, a key barometer for mortgage rates, auto loans and credit cards, has risen almost 80 basis points this year as the market adjusts to a higher-for-longer rate regime. The current rate on the Federal Reserve’s fed funds for overnight lending is 5.25%-5.50%.

After starting the year forecasting at least six reductions in interest rates, the market is now pricing in a 75% chance of just one rate cut, according to the CME Group’s widely followed FedWatch tracker that derives its probabilities from where 30-day fed funds futures are trading. The central bank’s rate-setting Federal Open Market Committee began its two-day meeting Tuesday.
Billionaire investor Warren Buffett has long stressed the impact of interest rates on all investments, saying higher rates exert a huge gravitational pull on asset values, lowering the present value of any future earnings.
Rising yields dent the appeal of risk assets as shorter-dated Treasury bills and longer-dated Treasury notes offer solid yields and a risk-free alternative to stocks.
— CNBC’s Michael Bloom contributed reporting.

Don’t miss these exclusives from CNBC PRO More