Markets slump as bank fears grow while gold nears setting a record

Dow retreated 286, decliners over advancers 5-2 & NAZ was off 58.  The MLP index fell 2+ to the 215s & the REIT index recovered 2+ to the 366s.  Junk bond funds continued to be sold & Treasuries saw buying in the PM.  Oil finished little changed in the 68s & gold jumped 18 to 2055 (more on both below).

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The recent failures of several large regional banks have prompted federal regulators to turn to asset manager BlackRock to help dispose of more than $100B in securities without causing further turmoil in financial markets.  The Federal Deposit Insurance Corp (FDIC) has taken 3 large regional banks into receivership since Mar after they failed due to liquidity problems.  When a bank fails & enters FDIC, the agency takes on responsibility for handling its affairs & begins finding a buyer for some or all of the failed firm's assets & liabilities.  In early Apr, the FDIC announced that it retained the services of BlackRock Financial Markets Advisory (FMA) to help sell the $114B in assets it kept in receivership after the failures of Silicon Valley Bank & Signature Bank in Mar & their subsequent sale to other financial institutions.  The BlackRock FMA unit has gained a reputation as a sort of financial crisis fixer.  It helped manage the fallout from the collapse of Bear Stearns & took on American International Group's toxic mortgage portfolio amid the 2008 financial crisis when it also advised the New York Federal Reserve.  The Fed came calling again amid the COVID-19 pandemic when BlackRock helped run a program in which the Fed would buy corp debt from struggling companies rocked by lockdowns to relieve financial stress.  This spring’s banking crisis has once again led BlackRock's FMA into a pivotal position that will likely deepen the firm's prestige & access to institutions around the world.

FDIC enlists top investment firm to clean up banking castoffs

Starbucks (SBUX) reported quarterly profits that topped expectations, but the company's outlook failed to impress investors.  Business in China rebounded with spending increasing as most of the country's COVID-19 curbs have been scrapped.  The coffeehouse chain posted a 3% rise in China comparable sales.  That helped add to a 7% increase in intl sales, more than double the 2.94% increase of the estimate.  While the China recovery was better than the company expected, growth in average weekly sales there will be at a more moderate pace in H2, CFO Rachel Ruggeri said.  On a global basis, comparable sales climbed 11%, trouncing expectation of a 7.4% rise.  Excluding one-time items, Starbucks EPS was 74¢, beating estimates of 65¢.  The North American market saw a 12% jump in comparable store sales.  The earnings report was the first presided over by CEO Laxman Narasimhan.  He reaffirmed the company's guidance for its fiscal year, but said the business environment remains challenging.  The chain has added customers to its rewards program, which now has 30.8M active members in the US, up 15% over this time last year.  They are also building more cafes, adding 100 net new stores in North America & more than 360 internationally.  The stock rose 76¢.
If you would like to learn more about SBUX, click on this link:
club.ino.com/trend/analysis/stock/SBUX_aid=CD3289&a_bid=6aeoso5b6f7

Starbucks profits beat estimates, shares dive on outlook

Shoppers browse racks of clothing with a glass of wine in hand.  A display of pet accessories & a water bowl greet four-legged visitors.  Couples push strollers through a store on a neighborhood walk.  It's not a local boutique.  It’s Bloomie's, a new store from Macy’s.  The department-store operator is thinking smaller & outside of the mall with its latest stores as it shutters more of its giant mall anchors. Macy's has opened 10 locations in strip centers — mini-versions of its namesake stores & Bloomingdale's — 5 plans to add 5 more this fiscal year.  The shops, called Market by Macy's & Bloomie’s, are about 1/5 of the size of the its typical Macy's & Bloomingdale's stores.  Macy's off-mall expansion is part of its answer to investors who think of department stores as dusty & dull.  The company is chasing customers in bustling shopping centers & fast-growing suburbs as it exits dying malls.  Inside these new & smaller stores, it's offering a slimmed-down assortment of popular brands with displays that rotate frequently to stay fresh & on-trend.  This year will offer a pivotal test for the strategy, CEO Jeff Gennette said.  The retailer will wrap up the test-&-learn phase of the stores & decide on expansion plans by year-end, he said.  “The hope is that we’re going to have a model that we’re going to be able to scale more aggressively in 2024 and beyond,” Gennette said.  “We’re very bullish on the concept. We’re very bullish on the early learnings. The size, the locations are all working.”  Early returns suggest a strong start for the strategy:  Sales at the off-mall stores have outperformed the rest of the company.  At Market by Macy's & Bloomie's, comparable sales at the stores open over a year grew 8% & 12% in the holiday qtr, respectively, including licensed departments.  That compares with a decline of 3.3% at Macy's & feeble growth of 0.6% at Bloomingdale's during the same 3-month period, including licensed departments & online sales.  The stock fell 54¢.
If you would like to learn more about Macy's, click on this link:
club.ino.com/trend/analysis/stock/M_aid=CD3289&a_bid=6aeoso5b6f7

Macy’s opens more strip mall stores as expansion strategy faces pivotal test.

Gold futures marked their highest settlement since Aug 2020 while flirting with a new record.  Overall weakness in the $, banking-sector issues & worries surrounding a potential recession boosted haven demand for the precious metals.  Gold for Jun gained $18 (0.9%) to settle at $2055 per ounce after trading as high as $2085.  The settlement was the 2nd-highest on record & the highest for a most-active contract since Aug 2020.   The blend of economic concerns, sliding Treasury yields & a weak $ allowed gold to shine again.  The $ weakened after Federal Reserve Chair Jerome Powell suggested that the central bank would likely keep interest rates on hold after hiking its policy rate by 5 percentage points since Mar 2022.  A weaker $ has helped to lift gold, as have fears about a weakening US economy.  The $ has lost more than 2% so far this year.

Gold inches closer to a record high, buoyed by recession fears and weaker U.S. dollar

US oil futures finished a few cents lower, erasing most of an overnight plunge in prices that had touched their lowest intraday levels of the year.  The market had become deeply oversold & the combination of short-covering & speculative dip-buying sent futures back above the key 2023 support band of $66-68 a barrel.  Jun West Texas Intermediate crude fell 4¢ to settle at $68.56 a barrel after trading as low as $63.57.

U.S. Oil Futures End Slightly Lower, Off The Session's Worst Levels

Dow is clearly on defense as it is near its 6 months lows.  That's because it feels like the economy is in a recession already, even if it is only a mild one (what the oil market is worried about).  At the same time, the gold bugs are very happy.

Dow Jones Industrials