Goldman Sachs Earnings Disappoint Investors

The Wall Street Journal reports that the bank's consumer banking business is a drag on its overall performance.

Bank of America announced on Tuesday that its deposits declined less than expected in the last quarter. BNY Mellon also reported a slight rise in deposits. This pushed their shares higher in premarket trade as investors saw more evidence that America's largest lenders have grown stronger since Silicon Valley Bank was shut down last month.

Goldman Sachs is a major outlier. It reported revenues below Wall Street forecasts and booked a $470-million loss in its efforts to sell loans related to the struggling Marcus consumer banking division. In premarket, its stock dropped nearly 4 percent.

Smaller banks face a more bleak future. State Street, M&T Bank, and Charles Schwab reported on Monday that they had lost nearly $60 billion of deposits in the last quarter. State Street's stock fell by more than 9 per cent on Monday. This was its worst performance in a single day for three years. Schwab has halted stock buybacks, citing uncertainty in the market.

Banks face pressure to increase interest rates in order to stop the exodus of deposits. According to Gerard Cassidy of RBC Capital Markets, an analyst in banking, about $12 billion worth of deposits left State Street during the last quarter because customers were looking for higher interest rates.

According to the Federal Deposit Insurance Corporation (FDIC), the average savings account in a U.S. Bank pays 0.37 percent interest. This is a very low rate, especially since the Fed has raised the federal funds rate from 3.5 percent to almost 5 percent in the last year. The difference between the Fed’s prime lending rate (the Fed’s prime deposit rate) and the average account rate reached a record high.

Watch for competitors to take advantage of this gap. Apple and Goldman Sachs announced on Monday a savings account paying 4.15 percent interest. Marcus, a Goldman Sachs savings account, offers a rate of 3.9 percent.

Stocks continue to rise despite banking uncertainty. Since the collapse of Silicon Valley Bank, the S&P 500 has risen 7.5 percent. There are increasing concerns about a possible recession in the second part of the year. This is due to a poor earnings season, and turmoil around lenders that could lead to a credit crisis.

Morgan Stanley's Chief Investment Officer, Mike Wilson, warned investors Tuesday that consumers had withdrawn more than $1 trillion in deposits from American banks. Wilson suggested that "a credit crisis has begun."

The trial for defamation against Fox News will begin on Tuesday. The New York Times reported that despite the one-day delay, Dominion Voting Systems (DVS) and Fox were unlikely to settle despite their discussions about a possible truce. Both companies disagreed on the amount of damages that Fox could face. Dominion insisted that it was entitled to more than $1.6 billion.

Members will gather to discuss Kevin McCarthy's proposal at the New York Stock Exchange on Tuesday. McCarthy proposed a one-year extension of the country's borrowing limits in exchange for drastic government spending reductions. McCarthy faces a difficult task. He only has a narrow majority to pass his proposal, and the Democratically-led Senate will not entertain it.

Some business school recruits are delayed in starting their careers by consulting giants. The Wall Street Journal reported that Bain & Company offered M.B.A. candidates up to $40,000 if the start next year, and they take on other projects such as working at a non-profit group or becoming a Yoga instructor until then. As of Monday, McKinsey & Company had not given start dates to many recruits. The company has confirmed that it has done so. Both consulting firms and clients are cutting jobs.

Hollywood writers have authorized a strike. The unions that represent thousands of writers for film and television overwhelmingly backed a walkout on May 1, when their contracts with major studios expired. The first strike in 15 years would occur if a walkout occurs. Both the unions representing writers and the studios that employ them are at odds over economic issues including the use mini-rooms for producing shows.

Stocks of Manchester United plummet on reports that a possible sale is off. Shares of the English soccer team fell by over 10% on Monday, after ESPN reported that Joel and Avram Glaser, the co-chairmen of the club, thought they could get a significant minority investment while keeping control. The Glazers believe that the value of United could increase over the next decade.

China published Tuesday solid economic data, the first quarter after Beijing lifted Covid-19's strict restrictions. These numbers should give the world's 2nd largest economy hope that it has finally turned the corner. The recovery was uneven, aided by the low base effect following last year's rolling locksdowns. However, there are still many questions about the management of the country's economy and private enterprise.

G.D.P. These figures are near the government's 5 percent growth target for the year. Analysts expect that the recovery will accelerate in the next few months, as the pent-up consumer demand is released.

Retail sales rose by 5.8 percent on an annual basis, with a 10.6 percent increase in March. Outbound trade grew by 8.4 percent, as did government expenditures on infrastructure.

But the big concerns remain. Property, which accounted for a quarter or more of the gross domestic product in the last decade, continues to be a drag. Construction of new homes and offices, as well as stores, has fallen by 5.8 percent per year.

Diversifying supply chains to avoid China is a priority for companies. Michael Dell told The Financial Times customers demanded that his company source its products outside of China to avoid supply disruptions. JPMorgan Chase predicts that Apple's products will be manufactured outside China in a quarter by 2025. This is up from fewer than 5 percent.

The private sector remains unconvinced. One indicator is that youth unemployment in March was 19.6 percent, the second highest on record. Yu Jie, an expert on China at Chatham House think tank, says that companies are hesitant to hire because of the economic uncertainty, and Beijing's influence in the private sector. She told DealBook that "restoring confidence will take some time."

Elon Musk, in a long-awaited, aired interview on Monday with Fox News' Tucker Carlson, discussed a variety of topics. He made a claim – without any evidence – that the U.S. Government had "full" access to Twitter's direct messages, and admitted that its valuation has plummeted since he purchased it.

Musk revealed that he was also working on a new artificial intelligence company, a rival to OpenAI (the parent company of ChatGPT), which he previously backed. The billionaire, however, said that he has different goals from the tech giants who are racing to launch A.I. products.

Musk is aiming for a "maximum A.I. that seeks truth," which he refers to as TruthGPT. Musk filed to form a new Nevada-based company called X.AI last month. Musk did not provide any concrete details, but he said that the company would be focused on developing software to "try to understand the nature" of the universe.

Microsoft and Google, which he called "two heavyweights" in the A.I. Microsoft and Google are the two "heavyweights" of the A.I. race. He said they were focused too much on profit and not enough safety.

He and others sent an open letter last month calling for a stop to the development of artificial intelligent, citing concerns that developers are creating giant experiments they cannot "understand or predict reliably."

Musk has more news to share

Musk said that Twitter's steep drop in value was due to the fact that he bought the company right before a drop in digital advertising expenditures. He did not attribute it to anything he had done. Musk is scheduled to appear on stage at the Possible Digital Marketing Conference on Tuesday.

Twitter labelled the Canadian Broadcasting Corporation account as "69% government-funded media" after the broadcaster stated that less than 70% of its funding comes from the Government.

Andi Owen is the C.E.O. MillerKnoll, the office furniture giant. Owen criticised employees in a video that was widely circulated online from a town hall held in March for asking about bonuses while the company was struggling with declining sales.

Gary Gensler, the chairman of S.E.C. Gary Gensler will be questioned by the House Financial Services Committee for the first ever time since Republicans have taken over the leadership of this chamber. The exchanges may get heated based on the recent statements of its chairman, Republican Representative Patrick McHenry from North Carolina.

McHenry accused Gensler for stalling his investigation of FTX, a crypto exchange that crashed in November. He also threatened to use "compulsory processes" if the agency did not hand over documents regarding its December charges against Sam Bankman Fried, the FTX founding.

S.E.C. S.E.C. proposals include amending the definition of "exchanges" to include trading platforms for digital assets. This would allow more oversight by the agency and more stringent custody requirements for investment advisors who want to expand their crypto asset offerings.

The rules on climate disclosure could also get hot. The S.E.C. The S.E.C. proposed that companies be required to publish information about their climate risk management, including emissions data. This would apply to large companies and include emissions from "Scope 3", which originate downstream.

McHenry created a Republican Working Group focused on vetting policies in the areas of governance, social issues and environmental concerns. Bill Huizenga, the Michigan leader of this group, called the proposed rules on climate disclosure "disastrous", and "a prime example" of regulatory excess.

The proposed changes to market structure are also on the table. The 2021 meme stock trading frenzy brought to light the payment for order flow practice, whereby market makers such as Citadel Securities paid brokerage firms like Robinhood or Schwab in exchange for the flow of trades.

S.E.C. The S.E.C. has proposed a change to the current practice to provide investors with more transparency regarding the execution price of a specific trade. Wall Street has spoken out against these moves.


Glencore, the commodities giant, has reportedly urged 120 Teck Resources shareholders to reject the Canadian miner’s plan to split itself and support the $22.5 billion bid for the company. (Reuters)

Lululemon, which bought Mirror for $500 million dollars in 2020, is reportedly considering selling the company. (Bloomberg)


Ron DeSantis, the Florida governor, announced a new bill to restore state control over Disney's theme park. (NYT)

The fund-raising committees of Nikki Haley (former governor of South Carolina running for the Republican nomination for president) have received support from donors such as oil magnate Harold Hamm, and investment banker Aryeh Boukoff. (CNBC)

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