Ease into the new week
(Bloomberg) — Hello from New York City, where we need more rain and the rats are still winning. After last month’s banking drama, this week promises some clues as to where we might be headed.
The big bank watch: Bond investors will pay a lot more attention than usual to quarterly bank results as they assess the potential hit to economic growth from any slide in lending. After a trio of heavyweight Wall Street banks reported windfalls last week, a swath of regional lenders, including Truist and Republic First, will report earnings this week. The results will give traders a key insight into the health of the industry and its willingness to make loans following the collapse of Silicon Valley Bank. Volatility has gripped the $24 trillion Treasury market ever since.
The big market thought: US stocks have defied skeptics, pushing higher amid talk of recession and as companies prepare to report the biggest drop in earnings since the pandemic began three years ago. There’s a potential explanation: The worst of the economic pain might actually be behind us. A Bloomberg Intelligence model known as the Economic Regime Index indicates that an economic downturn possibly started in June and bottomed in December. Hurray!
The big outlook: Treasury Secretary Janet Yellen said US lenders may pull back on credit in the wake of recent bank failures — enough to do some of the Federal Reserve’s work for it. In an interview on CNN’s Fareed Zakaria GPS, Yellen said she remains optimistic the US can avoid a recession and a spike in unemployment as the economy cools and inflation slows.
The big struggles of big box retailer Bed, Bath & Beyond now extend to matrimony The chain has long been a popular spot for engaged couples to register, but since January thousands of betrothed have removed items from their BB&B registries on Zola, an online wedding services platform. Bed, Bath & Beyond has been deeply damaged by months of financial turmoil and warnings of a potential bankruptcy.
The big blast off: SpaceX’s mammoth new rocket Starship could embark on a test launch as soon as Monday, a key milestone in the company’s quest to send humans to the moon and eventually to Mars. The entire Starship system stands at 394 feet (120 meters), is more powerful than any previous crewed spacecraft and is taller than the Saturn V, the only rocket to take humans past Earth’s orbit. Starship is also meant to be fully reusable, which SpaceX promises will reduce costs.
The big chaos: Fighting between Sudan’s army and a rival paramilitary group spread across the country, with dozens dead and fears mounting of a full-blown civil war. “A full implosion of Sudan is in nobody’s interest but can be expected to draw in neighbors, either directly or by proxies,” said Irene Panozzo, a former political adviser to the European Union.
The big challenge: In Brazil, President Luiz Inacio Lula da Silva has been confronted with just how divided the nation of more than 215 million people has become since he was last in office. Haunted by the Jan. 8 riots, Lula has decided to put the pursuit of unity on the backburner, according to a person familiar with his thinking, and instead go all out to conquer his opponents to protect his policy ambitions.
The big opinion: The exposure of more than 100 top-secret US documents pertaining largely to Russia’s war in Ukraine, allegedly circulated by a 21-year-old National Guardsman, “exposed not just weaknesses in the US ability to protect classified information, but they have also weakened the willingness of allies and partners to share sensitive views and information with the US,” James Stavridis writes in Bloomberg Opinion. It has also raised questions “about the sheer mass of what is classified.”
ICYM our Big Take: Last year, as the Federal Reserve began hiking interest rates to tamp down inflation, regional banks across the US reported a surge in lending to a group of well-connected people: their own directors, officers and major shareholders. The trend continued through all of last year, reaching almost $10 billion by the end of 2022, according to a Bloomberg News analysis. Some of the biggest increases were at firms that have recently failed, or are now struggling in the banking crisis — including Silicon Valley Bank, Western Alliance Bank and First Republic Bank.
And finally, Bloomberg’s Felix Gillette joins the Big Take podcast to explain how, as Hasbro’s 50th anniversary approaches, there’s a quest to make its venerable Dungeons and Dragons not just popular but actually profitable, and to move the tabletop favorite into the digital age.
Have a great week.
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