Revised Expectations

Good morning.?Today celebrates the spokesman of Democracy; Thomas Jefferson, an American founding father and an author of the Declaration of Independence who was also the third president of the United States. Did you know Thomas had a pet mockingbird named Dick? He was so fond of Dick...he even gave the bird a funeral when he died.

— Robert Baggetta

Stock data as of market close, cryptocurrency data as of 4:25 ET.?

Markets:?U.S. stocks took a hit on Wednesday after the release of the March inflation data, which revealed that consumer price gains slowed down, and the Fed minutes showed that further rate increases were still possible. The S&P 500 dropped by 0.41%, while the Dow Jones Industrial Average fell by 0.11%, and the Nasdaq Composite dipped by 0.85%. Bond yields also tipped lower, and the yield on the 10-year note ticked down to 3.40%.

Key Driver: Housing costs remain a key driver of inflation, according to the Bureau of Labor Statistics data, even as the residential market stabilizes. Investors are now watching the next meeting of the Federal Reserve to see if rates will be raised.

ECONOMICS

Coming Months

Federal Reserve policymakers have revised their expectations for rate hikes this year following a series of bank collapses that shook markets in March. The minutes of the Federal Open Market Committee gathering indicate that officials were less committed to a rate hike in May and were urging caution in assessing the impact of the banking crisis on the economy.

The Fed raised the benchmark lending rate a quarter point to a range of 4.75% to 5% but noted that “some additional policy firming may be appropriate.” Policymakers forecast rates reaching 5.1% this year, with seven of the 18 officials seeing rates going higher to cool price pressures.

In And Out

Ahead of the publication of consumer-price data on Wednesday, there was a notable surge in activity in the Treasury futures market, with the June 2023 10-year Treasury futures contract seeing about 5,000 contracts traded over a 60-second period, causing prices to jump. After the data were released, the broader Treasuries market rallied as the lower-than-anticipated headline inflation number spurred bets on cuts to Federal Reserve interest rates.

However, a core measure of prices that excludes food and energy showed an uptick in line with expectations. The year-on-year CPI measure fell to 5% from 6%, which was below the average analyst estimate of 5.1%. The benchmark two-year yield dropped to as low as 3.87%, and the 10-year yield fell as much as 9 basis points to 3.34%.

The 'CORE' Problem

The US inflation rate slowed down slightly in March, but this may not be enough to stop the Federal Reserve from raising interest rates next month. The core consumer price index rose 0.4% from the prior month following a 0.5% gain. Yet, key measures of housing costs posted the smallest monthly increases in about a year and grocery prices dropped. However, inflation is still too high, with the core CPI up 5.6% from a year ago, and investors still largely expect a rate hike at the Fed’s May meeting, even if the pace is slowed down slightly.

TECH

AI Predicts Stock Movements

A new study by University of Florida finance professors found that ChatGPT, a language model AI, can predict stock market returns by analyzing the sentiment of news headlines. The researchers fed ChatGPT over 50,000 news headlines and found a positive correlation between ChatGPT scores and the next-day stock performance for the companies analyzed. However, the researchers caution that investors should not solely rely on ChatGPT for investment decisions and that there are still limitations, such as not having access to the latest information and struggling with processing large numerical data.

New Design?...Well, You're Gonna Have to Wait: Shares of Cirrus Logic Inc. fell by 12% on Wednesday as analysts warned about the impact of a reported design change to the iPhone 15, which could negatively impact Cirrus's bottom line. The Texas-based company is highly reliant on Apple, with 88% of its revenue coming from the tech giant. A design change by Apple, especially so close to mass production, could have unexpected impacts on other components, warns Loop Capital, despite having buy ratings on both Apple and Cirrus. Apple's shares fell by 0.4% on Wednesday, making it the third straight negative session.

"We Didn't Even Know We Were Scamming"

The collapse of cryptocurrency exchange FTX has revealed shocking internal communications that show the company's leadership viewed coming into compliance with financial controls as a remote possibility. The report highlights that the company's record-keeping was so poor that it was difficult to determine how positions were marked. Despite this, former FTX CEO Sam Bankman-Fried saw the situation as a sign of success and even boasted about it, but in the end, a business that cannot keep track of its business is not sustainable.

"We sometimes find $50m of assets lying around that we lost track of; such is life." Bankman-Fried

CANADA

Rent = Unsustainable

The Canadian housing market is becoming increasingly unaffordable, particularly for millennials who fear they may never own a home. A recent study by Mercer Canada indicates that lifelong renters will need to save 50% more than homeowners to achieve a comfortable retirement. Homeowners can benefit from home price appreciation, lower shelter costs, and financial flexibility through built-up home equity. Renters must pay rent each month or face eviction, making it challenging to save for retirement.

The study found that young, lifelong renters would need to save eight times their salary to retire at age 68, while homeowners would only need to save 5.25 times their salary and could retire three years earlier at age 65.

Uncertain Economics

It seems as though the wide consensus around economics is fairly diverse and everybody seems to not know what to do...at least it seems that way. The Bank of Canada maintained its key interest rate at 4.5% while acknowledging that reaching the 2% inflation target could be difficult. Despite economic indicators showing signs of overheating, the central bank expects consumption to slow this year, with inflation decreasing to around 3% by mid-2023 and returning to 2% by the end of 2024. The Bank upgraded its forecast for economic growth in 2023 to 1.4% and expects economic growth to reach 2.5% by 2025. While rate cuts in 2023 are not the most likely scenario, the Bank remains prepared to raise the policy rate if necessary.

Banks, Medicine, and Energy

CHIPS

AbbVie Inc. (ABBV, $162.36):?Looking for a stock that's likely to beat earnings estimates in its upcoming report? Consider AbbVie, a drugmaker with a strong track record of surpassing estimates. In the last two quarters, AbbVie beat estimates by an average of 2.25%. Analysts have been trending estimates higher indicating a potential beat in the future. Keep an eye on AbbVie's next earnings report on April 27, 2023.

NextEra Energy, Inc. (NEE, $78.59): NextEra Energy's stock closed at $78.34, slightly down from the previous day, while the Dow and Nasdaq rose. Despite a 7.01% gain over the past month, NextEra Energy lagged behind the Utilities sector's 9.29% gain. The company is expected to report earnings growth of 8.11% and revenue of $5.92 billion, with full-year projections of +7.59% and +27.14%, respectively. Positive analyst estimate revisions suggest optimism about the company's outlook, despite trading at a premium to its industry.

Canadian Natural Resources Limited (CNQ, $59.70): Many investors tend to invest in loss-making companies with a good story, but this strategy can be risky, as these companies can absorb capital. Canadian Natural Resources, a profitable company with a compound annual growth rate of 30%, is a good example of a business that can consistently produce earnings per share. Shareholders can take comfort in the fact that company insiders are also investors with a considerable amount of wealth invested in the company, and the CEO's compensation is quite modest. While Canadian Natural Resources is an interesting investment, investors should be aware of the 2 warning signs identified in the company's investment analysis.

What Else Is Pulsin'

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General Motors moves deeper into mining with EnergyX lithium investment

New streaming app to 'Max' programming from HBO, Discovery

EPA Moves to Accelerate Transition to All-Electric Vehicles

U.N. Staff in Afghanistan Unable to Go to Work Due to Taliban Ban on Working Women

U.K. Doctors Continue Strike Actions, Say They Are at Breaking Point

Innovation / Environment / Positives

Multi-functional photonic filter could support future 6G advancements

Resouro’s large-tonnage, high-grade titanium-rare earth project in Brazil

Renewable energy storage boosted by ￡30m Government funding

ITER: A new era for energy

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