Stock Markets

Shares slip, yields rise as market awaits likely hawkish tone from Fed

Published

1 year ago

September 20, 2023

Shares slip, yields rise as market awaits likely hawkish tone from Fed

By Herbert Lash and Harry Robertson

NEW YORK/LONDON (Reuters) – Global stocks eased and the benchmark Treasury yield rose close to levels last seen in 2007 as a plunge in U.S. homebuilding in August underscored the balancing act the Federal Reserve faces in signaling its outlook on interest rates this week.

Traders and investors avoided big bets ahead of rate decisions by the Fed on Wednesday, the Bank of England on Thursday and the Bank of Japan on Friday, in a week with policy decisions also expected from other central banks.

Oil prices rose for a fourth straight session, with futures for global benchmark climbing past $95 a barrel, to further exacerbate inflation concerns and question whether rates need to go higher to quash inflation.

The U.S. central bank will likely pause its aggressive hiking of interest rates and also indicate its outlook on rates and economic growth in the months ahead when Fed Chairman Jerome Powell speaks on Wednesday.

“The story is a function of how dovish versus how hawkish he is going to be,” said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York, referring to Powell.

“The more dovish he is leads to an environment where yields are likely to move higher,” he said. “The less willing they are to assure being restrictive, the more likely inflation is to come back and bother them.”

The impact of rising interest rates crimped demand in U.S. housing as a resurgence in mortgage rates led homebuilding last month to plunge to more than a three year-low.

The yield on benchmark rose 2 basis points at 4.339%, just below the 4.366% level reached on Aug. 22, which was the highest since late 2007.

Stocks slid as expectations interest rates will stay higher for longer put a damper on the market. Futures show the Fed will keep its overnight lending rates above the 5% mark until late July 2024.

MSCI’s gauge of stocks across the globe shed 0.46%, while the pan-regional index in Europe lost 0.18%.

On Wall Street, the fell 0.69%, the lost 0.65% and the dropped 0.84%. The , which gauges the currency against six major peers, was 0.08% at 105.00, not far from Thursday’s six-month high of 105.43.

Investors and central bankers are contending with a sharp rise in oil prices as demand has picked up while Saudi Arabia and Russia have limited supply, and weak U.S. shale output has increased concerns.

futures rose 1.55% to $92.90 a barrel, while Brent was at $95.49, up 1.12%.

Samuel Zief, head of global FX strategy at JPMorgan Private Bank, said central banks should not be overly concerned by the run-up in oil prices, which he said should fade as economies slow.

“What the central banks are really, really focused on, it’s not really the supply-side energy shocks anymore, it’s really the sticky services part of the inflation basket,” he said.

The Bank of England sets policy on Thursday and is expected to hike rates by 25 basis points to 5.5%, in what many investors believe will be the last increase of the cycle.

The Bank of Japan is expected to leave rates on hold in negative territory on Friday, although it too will be scrutinized for clues about the outlook after Governor Kazuo Ueda hinted at a move away from ultra-loose policy.

In Asia, fell 0.87% under the weight of big losses for chip-related stocks including Tokyo Electron.

Japanese markets were closed Monday, when Asian tech stocks were sold off following a Reuters report that TSMC had asked its major vendors to delay deliveries.

Stock Markets

Citi completes split of Mexico business ahead of Banamex IPO

Published

18 hours ago

December 3, 2024

(Reuters) – Citigroup (NYSE:) has completed the separation of Banamex from its institutional banking business in Mexico as it prepares to list the retail bank, the Wall Street giant said on Monday.

The move to split Grupo Financiero Citi México from Grupo Financiero Banamex is part of Citi’s sweeping overhaul under CEO Jane Fraser aimed at simplifying its sprawling structure as it looks to improve the bank’s performance.

The New York-based bank is continuing to work on the proposed initial public offering of Banamex, the timing of which will depend on regulatory approvals and market conditions, Citi said.

“This separation represents an important milestone in our simplification,” Fraser said. “We will now prepare for the Banamex IPO.”

Citi has weighed a dual stock listing for the Banamex unit, possibly in Mexico City and New York, Reuters has reported.

The bank had previously said it planned to list its Banamex unit, which caters to nearly 20 million clients and has a network of 1,300 branches in Mexico, in 2025.

Citi was close to a $7 billion deal to sell Banamex to Mexican billionaire German Larrea’s conglomerate Grupo Mexico last year.

But tensions between the conglomerate and Mexican President Andres Manuel Lopez Obrador led to the two sides abandoning the deal, with Citi deciding to pursue an IPO instead.

Citi México will maintain a “significant” presence in the country and continue to serve the bank’s institutional clients with a team of roughly 3,000 employees.

The bank has closed its consumer banking divisions in nine markets since announcing its intention to exit the business across 14 markets in Asia, Europe, the Middle East, and Mexico, it said. Citi currently has a sale process underway in Poland.

Citi said its previously announced wind-downs of consumer businesses in China and Korea and overall presence in Russia are also nearly complete.

Stock Markets

Select Energy Services Stock Hits 52-Week High at $14.88

Published

18 hours ago

December 3, 2024

Select Energy Services Inc. (NYSE:) stock has reached a new 52-week high, trading at $14.88, with InvestingPro analysis showing strong financial health scores and a market capitalization of $1.77 billion. This milestone reflects a significant period of growth for the company, with the stock price doubling over the past year, marking an impressive 100.27% change. Investors have shown increased confidence in the company’s performance and future prospects, with analysts setting a high target of $19. The company maintains a healthy current ratio of 1.78 and has achieved 40% dividend growth. InvestingPro subscribers can access 12 additional key insights and a comprehensive Pro Research Report, part of the platform’s coverage of 1,400+ US stocks.

In other recent news, Select Water Solutions has reported significant growth in its third-quarter earnings call. The company has seen a 20% increase in third-quarter revenues and a 33% rise in gross profit before depreciation and amortization (D&A) compared to the previous quarter. Year-over-year figures are even more impressive, with revenue up by 40% and gross profit surging by 99% compared to the same period last year.

The company has secured 25,000 acres under long-term contracts in the Permian Basin and two pipeline agreements in the Bakken. In addition, a disposal acquisition in the Northern Delaware Basin has added 10,000 barrels per day of capacity. Despite expected seasonal declines in the fourth quarter, Select Water Solutions expects Q4 margins to remain strong at 51%-54%.

The company has increased its quarterly dividend by 17% to $0.07 per share and allocated approximately $150 million for growth capital in the water infrastructure segment. Select Water Solutions anticipates achieving record adjusted EBITDA for 2024 and significant growth in 2025. These recent developments highlight the company’s ongoing commitment to enhancing its service base and positioning itself for continued growth.

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Stock Markets

Morgan Stanley shuffles cyber stock ratings

Published

18 hours ago

December 3, 2024

Investing.com — Morgan Stanley made changes to its cybersecurity stock ratings on Monday, reflecting a more cautious stance for 2025 amid an evolving market environment.

While long-term prospects for the industry remain positive, analysts are adopting a more selective approach due to near-term pricing pressures and a less favorable U.S. fiscal backdrop.

The firm remains “positive on long-term tailwinds in security,” driven by advancements like GenAI and public cloud, which expand the attack surface and create new security needs.

However, Morgan Stanley (NYSE:) highlights several near-term risks. They note the spending environment is stable but still challenging, with tight budgets and increasing vendor consolidation putting pressure on pricing.

“CIOs/CISOs [are] looking to consolidate multiple vendors,” which could negatively impact prices in 2025, according to the investment bank.

In light of these pressures, the firm upgraded two cybersecurity stocks while downgrading others.

Morgan Stanley upgraded Cloudflare (NYSE:) and Okta (NASDAQ:) to Overweight, citing emerging AI product cycles and turnaround opportunities, respectively.

The bank sees incremental upside in companies with emerging product cycles, such as NET’s growth in Edge AI and OKTA’s improving demand and product cycles.

On the other hand, SentinelOne (NYSE:) and Tenable were downgraded to Equal-Weight from Overweight.

The downgrade of S reflects a “slower expected demand for core endpoint security in 2025” and pricing pressures from competitors. Meanwhile, TENB is said to face risks due to its high exposure to the U.S. public sector, which could see budget cuts.

Morgan Stanley also continues to favor “platform consolidators” like Palo Alto Networks (NASDAQ:) and CrowdStrike (NASDAQ:) in the long term but notes that near-term headwinds could limit their upside as they work through platformization challenges and above-average valuations.

Overall, while cybersecurity remains a key priority for organizations, near-term risks ”may not be fully appreciated by investors heading into 2025,” the firm concludes.