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Stocks Rise On Hopes Of FOMC 📈 | Yields Rising Causing Market Troubles 👀 | Paramount’s CEO Finally Departs 🤝 | Boeing Looks to Debt Market To Raise $10B 🎯
Market Closes Green In Anticipation Of FOMC 🐳
The market saw a pop today to kick off an economic data filled week with Federal Reserve Rate Decision on Wednesday, Monthly jobs report, and earnings from more of the heavy hitters in the market today. Lets take a look at how our indexes performed today:
The S&P500 saw a rise of 0.3%
The Nasdaq Composite also rose 0.3%
The Dow Jones Industrial Average rose 0.3%
Tesla lead the market today with a 15% surge after news relating to Full Self Driving technology in China is now being released. The market did see a dip after the US Treasury increased its borrowing estimate from $41B to $243B for the current quarter.
Rising Yields: A Challenge for Equities 📈
Stocks are currently facing a “systemic problem” due to rising Treasury yields, which are negatively impacting equity sentiment. This is reminiscent of 2023 when higher yields led to a significant stock market decline. The 10-year Treasury yield has increased by over 40 basis points to 4.63% since the beginning of April, while the S&P 500 has dropped approximately 3% in the same period. The rise in yields has been driven by investors scaling back their expectations for Federal Reserve interest rate cuts in 2024. Market expectations have shifted from nearly seven cuts to around just one. This upside pressure in yields is expected to persist unless Fed Chair Jerome Powell “surprises on the dovish side” during his press conference.
However, recent hot inflation readings suggest that this is unlikely. Economists anticipate that the main message from the press conference will be that policy needs more time to work, and the next move is still likely to be a rate cut.
The rise in yields has also dampened the impact of a stronger-than-expected first-quarter earnings season, with S&P 500 companies topping earnings estimates by an average of 9%. However, stock price reactions have been muted due to the pressure on valuations from higher rates. In the near term, strategists believe that certain parts of the equity market, particularly stocks with weak balance sheets, are more likely to lag if rates continue to climb.
Keypoints:
Rising Treasury yields are negatively impacting equity sentiment.
Market expectations for Federal Reserve interest rate cuts in 2024 have decreased, leading to upside pressure on yields.
Hot inflation readings suggest that policy needs more time to work, and the next move is still likely to be a rate cut.
The rise in yields has dampened the impact of a stronger-than-expected first-quarter earnings season.
Stocks with weak balance sheets are more likely to lag if rates continue to climb.
🍿Paramount Global’s CEO Departure and Potential Dealmaking
Paramount Global announced that CEO Bob Bakish will step down, with an “Office of the CEO” consortium taking his place. This change comes amid growing tensions between Bakish and Shari Redstone, who controls Paramount through National Amusements.
National Amusements is in exclusive talks with David Ellison’s Skydance Media to sell its controlling stake in Paramount. Skydance aims to merge its production studio with Paramount’s, but the deal faces opposition from nonvoting shareholders who claim it unfairly benefits Redstone. Skydance has submitted a revised offer, including a $3 billion cash injection and a larger stake for current shareholders.
Sony Pictures Entertainment and Apollo Global Management have also been in talks for a joint bid to buy Paramount. However, the final decision depends on Redstone. The executive shakeup occurs as Paramount’s streaming losses narrowed in Q1, with a focus on leveraging content, strengthening the balance sheet, and optimizing the streaming strategy.
Keypoints:
Bob Bakish steps down as Paramount Global CEO, replaced by an “Office of the CEO” consortium.
National Amusements is in exclusive talks with Skydance Media to sell its controlling stake in Paramount.
Skydance aims to merge its production studio with Paramount’s, but the deal faces opposition from nonvoting shareholders.
Sony Pictures Entertainment and Apollo Global Management have been in talks for a joint bid to buy Paramount.
Paramount’s Q1 streaming losses narrowed, with a focus on content, balance sheet, and streaming strategy optimization.
Boeing Raises $10 Billion in Debt Amidst Credit Downgrade and 737 MAX Production Shock 😳
Boeing (BA.N) raised $10 billion in debt on Monday to strengthen its balance sheet and prepare for maturities on its existing debt load, including $4.3 billion in 2025. The U.S. planemaker has been dealing with heightened regulatory scrutiny and the aftermath of the 737 MAX crises and the pandemic’s impact on travel.
Boeing’s credit outlook was downgraded to just above “junk” status by ratings agencies last week, and both S&P and Moody’s assigned ratings nearing junk to Boeing’s new senior unsecured notes. Despite this, Boeing’s bond sale was successful, with strong demand allowing the company to reduce concessions and tighten spreads.
Boeing plans to use the bond proceeds to boost liquidity and is in discussions to potentially acquire Spirit AeroSystems Inc in a debt-financed transaction for approximately $4 billion.
Keypoints:
Boeing raises $10 billion in debt to strengthen its balance sheet and prepare for maturities on its existing debt load.
Credit ratings agencies downgraded Boeing’s credit outlook to just above “junk” status last week.
Strong demand for Boeing’s bonds allowed the company to reduce concessions and tighten spreads.
Boeing is in discussions to potentially acquire Spirit AeroSystems Inc in a debt-financed transaction for approximately $4 billion.
The planemaker faces ongoing challenges from regulatory scrutiny, 737 MAX crises, and the pandemic’s impact on travel.
