In this article, we have covered the highlights of global market news about the Treasury yield, the U.S. economy, BlockFi, and the Midday stock moves.
10-year Treasury yield drops to its lowest point since May.
Friday saw a decline in U.S. Treasury rates as recession worries and poor economic data prompted investors to seek shelter.
The benchmark 10-year Treasury note’s yield decreased by eight basis points to 2.889 percent, close to its lowest position since late May. The 30-year Treasury bond’s yield decreased by less than one basis point to 3.116 percent.
The 2-year Treasury rate, often more responsive to changes in American monetary policy, was eight basis points lower at 2.839 percent. Prices and yields follow opposite trends.
After the ISM manufacturing index came in at 53, just shy of the 54.3 Dow Jones projection, yields continued to decline.
The Fed’s preferred inflation indicator, the core personal consumption expenditures price index, increased by 4.7 percent in May, according to official data released the day before this data set. Even though it is 0.2 percentage points lower than the previous month, the rate is still close to 1980s-era levels. According to Dow Jones, the index was predicted to climb by 4.8 percent in May.
Worries about an impending recession have grown due to persistently high inflation rates and the Federal Reserve’s attempts to stem a price increase. Additionally, they caused equities to perform poorly in the year’s first half.
On Thursday, the S&P 500 finished the worst half-year in decades. The broad market index saw its worst first-half slump since 1970, falling 20.6 percent.
The U.S. economy is most likely in a recession, according to the Atlanta Fed GDP tracker.
A Federal Reserve economic growth tracker indicates an increasing likelihood that the American economy has entered a recession.
Most Wall Street economists have warned of a higher likelihood of future negative growth. Still, they predict it won’t happen until at least 2023.
The Atlanta Fed’s GDPNow gauge, which continually updates and analyses economic statistics in real-time, shows a second-quarter production decline of 2.1 percent. That would meet the formal criteria for the recession when combined with the first-quarter decrease of 1.6 percent.
Nicholas Colas, the co-founder of DataTrek Research, said that “GDPNow has a solid track record, and the closer we get to the publication [of the original Q2 GDP estimate] on July 28th, the more accurate it gets.”
The tracker’s latest estimate of a 0.3 percent increase on June 27 was when it began to decline quite sharply. This week’s data revealed more deterioration in domestic investment and consumer spending, which reduced the April through June period negatively.
Rising interest rates have been one significant shift this quarter. The Federal Reserve has increased its benchmark borrowing rate by 1.5 percentage points since March to rein in rising inflation. Additional hikes are anticipated throughout the rest of the year and maybe into 2023.
Fed policymakers are confident that they can control inflation without causing the economy to contract. Jerome Powell, the chair, said earlier this week that the most crucial task is reducing inflation.
BlockFi’s option to be purchased by FTX under a new agreement
BlockFi, a crypto lending startup, has the opportunity to be purchased by FTX under a signed agreement.
The business said on Friday that the deal allows FTX to purchase BlockFi for a maximum of $240 million. A set of performance goals determines the purchase price. The business refused to provide a minimum deal price.
A source told CNBC on Thursday that a term sheet might be as cheap as $25 million and that it will be signed by the end of the week. Even at the top end of the FTX, transaction pricing significantly reduces BlockFi’s worth. According to PitchBook, the company’s value last year was $4.8 billion, and is situated in Jersey City, New Jersey.
The term sheet also adds a bigger loan to BlockFi’s balance sheet.
The revolving credit arrangement for FTX was expanded from $250 million to $400 million. According to BlockFi officials, the firm has “continued to run all our goods and services regularly” and has “not tapped on this credit line to date.”
Sam Bankman-Fried, the CEO of FTX, is regarded as a lender of last resort in the industry. Along with BlockFi, Bankman-business Fried’s Alameda Research gave Voyager a $500 million loan.
The business cited the instability of the cryptocurrency market and the collapse of the hedge fund Three Arrows Capital as reasons why BlockFi decided to proceed with the transaction. It also mentioned the troubled cryptocurrency firm Celsius, which halted user deposits two weeks ago due to “extreme market circumstances.” Despite being unaffected by Celsius, BlockFi reported a rise in customer withdrawals during that week.
BlockFi reported losses of $80 million, “which is a minuscule fraction of losses publicly acknowledged by other lenders,” according to the company. The business indicated that its losses with the hedge fund would be included in Three Arrows’ current bankruptcy case.
According to BlockFi CEO Zac Prince, “outside of this transaction, we recognize that there is a lot of anxiety, uncertainty, and skepticism in the crypto markets.” “From where we stand, we continue to see a thriving ecology.”
Midday stock moves: Micron, Kohl’s, Meta Platforms, and more.
Micron Technology: The chipmaker’s shares dropped 3% after providing an unfavorable fiscal fourth-quarter outlook and warned that a decline in consumer demand would negatively affect smartphone sales. The warning dragged down other chip companies, which were among the top S&P 500 decliners. Western Digital and On Semiconductor saw declines of 3.2% and 6.9%, respectively. All three companies—NVIDIA, Qualcomm, and Advanced Micro Devices—reduced their prices by more than 3%.
Kohl’s — After Kohl’s confirmed a CNBC story that it had ended discussions with Franchise Group, the retailer’s shares plummeted 19.6%. Kohl’s said that the retail climate had become worse since bidding started. The projection for the current quarter was similarly lowered by Kohl’s.
Meta Platforms: Following the announcement that it is scaling down its intentions to hire engineers as it braces for a possible downturn, Meta Platforms’ shares finished down 0.8 percent. According to a tape obtained by Reuters, CEO Mark Zuckerberg predicted that “one of the biggest downturns we’ve experienced in recent history” is coming.
FedEx: FedEx shares fell 1.4 percent after Berenberg decreased its price target and downgraded the transportation company, citing future challenges from increasing prices.
Intel: Semiconductor stocks fell on Friday, with Intel’s share price plunging almost 3%. Intel postponed plans to begin chip factory construction in Ohio this month as it waits for Congress to adopt legislation supporting the American semiconductor sector.
Coupang — Shares of the South Korean e-commerce startup saw an 18 percent increase after Credit Suisse raised them from “neutral” to “outperform.”
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