Finance NetNet


  Thursday, 4 Feb 2016 | 1:42 PM ET

Falling odds of Fed rate hike hurting banks

Posted By: Jon Marino
Janet Yellen
Getty Images
Janet Yellen

It's less likely the Federal Reserve will raise interest rates again next month, according to a growing number of economists. If they're right, it compounds the problems big banks on Wall Street are facing.

Most banks ended last year pricing in expectations the Fed would hike interest rates three or four times.

Banks including JPMorgan, Bank of America and Citigroup stand to make billions as the Fed increases interest rates. Collectively, the banks said rates being raised to 1 percent, or 100 basis points, over a 12-month timeframe equates to more than $9 billion in interest income, the revenue derived from lending.

Now, the idea that the Fed will raise rates to 0.5 percent in March has been discounted. Most banks' top economists say they're expecting two or three rate hikes in 2016, which means the banks could yet reap billions in interest income that has been sorely missed since the financial crisis. Still, it's not clear banks will get even half the interest rate increases they expected this year.

Goldman Sachs took the probability of a March interest rate hike off the table in a note from economists Jan Hatzius and Zach Pandl on Wednesday.

»Read more
  Wednesday, 3 Feb 2016 | 12:00 PM ET

Private equity may be Wall Street’s canary

Posted By: Jon Marino
Chart down
Nikada | Getty Images

Last year was bad for private equity. 2016 isn't shaping up to be any better.

Private equity firms' shares have underperformed market benchmarks to begin the year as investors price in recession fears and the rising cost of credit for deals.

Leveraged buyout firms did a paltry 116 deals globally in January, according to data from Dealogic, which tracks and analyzes mergers and acquisitions. It's less M&A by volume than the industry has done in the month of January in more than a decade. The $5.15 billion in value of deals private equity did last month is the least investors have spent in a January since 2009, when global credit markets were still slow in the wake of the global financial crisis.

"It's the credit markets," said Kenneth Leon, equity analyst from S&P Capital IQ. "When they seize up, you can't get deals done."

Exits — the sales of companies owned by private equity firms that mark a successful deal — are also down. In the wake of the initial public offering window slamming shut to begin the year, this shouldn't be a shocker anywhere on Wall Street.

»Read more
  Wednesday, 3 Feb 2016 | 11:22 AM ET

Gross: 'Shades of 2007' as central banks flunk

Posted By: Jeff Cox

Low interest rates and massive levels of central bank intervention have failed to generate strong economic growth and are beginning to endanger investors, bond guru Bill Gross said in his latest analysis.

Around the world, high debt levels combined with slow economic growth and tumbling oil prices are providing obstacles that extreme easing has been unable to cure, he said.

In the U.S., Gross said even the Federal Reserve is unsure that risks to its optimistic outlook are "balanced," generating "shades of 2007" in terms of what the headwinds are for growth.

In sum, the problems challenge the assumption of central bankers like Janet Yellen in the U.S. and Mario Draghi in Europe that low interest rates are a cure for whatever ails the global economy.

Read MoreThe Fed is losing its benchmark: Gross

"They all seem to believe that there is an interest rate SO LOW that resultant financial market wealth will ultimately spill over into the real economy. ... How successful have they been so far?" he wrote. "Why after several decades of 0 percent rates has the Japanese economy failed to respond? Why has the U.S. only averaged 2 percent real growth since the end of the Great Recession?"

»Read more
  Tuesday, 2 Feb 2016 | 1:29 PM ET

This bank is most immune to falling oil prices

Posted By: Jon Marino
Morgan Stanley headquarters in Times Square, New York.
Source: Morgan Stanley
Morgan Stanley headquarters in Times Square, New York.

No major Wall Street bank has endured as difficult a start to 2016 as Morgan Stanley, with the investment bank's stock down more than 20 percent so far this year.

But one analyst has found a silver lining in a sea of red. The bank's exposure to energy is far less than that of most competitors, which means that if oil's swoon continues, Morgan Stanley is expected to face lower stock declines.

"We like [Morgan Stanley]," because it has "lower than peer energy exposure," David Konrad, head of U.S. banks research at Macquarie, wrote Tuesday.

Macquarie lifted its rating on Morgan Stanley shares from "neutral" to "outperform'' and assigned a price target of $33 a share. Currently, the stock trades at less than $25.

A separate report, from Goldman Sachs on Jan. 20 notes that at $4.8 billion, Morgan Stanley's "assumed energy loans" are smaller than competitors like Bank of America, Citigroup, Wells Fargo and JPMorgan Chase. This, in turn, means the amount of capital needed to build a reserve against bad paper would cost the bank much less than its peers.

»Read more
  Tuesday, 2 Feb 2016 | 1:52 PM ET

Banks have more bad news for the economy

Posted By: Jeff Cox

Investors aren't the only ones running for safety as the market tumbles and the economy wobbles.

Businesses, too, are indicating an unwillingness to take on risk as loan demand declined for the first time in about four years, according to the Federal Reserve's Senior Loan Officer Survey released this week.

Demand for commercial and industrial loans has plunged in 2016, with declines happening across business sizes. Large- and medium-sized businesses had an 11.1 percent decline, while demand from small businesses fell 12.7 percent.

Read MoreWhy 2016 keeps getting uglier

For large and medium businesses, the decline was the first since the fourth quarter of 2012 — demand was flat in the second quarter of 2015 — and tracking for the biggest three-month decline since the fourth quarter of 2011.

»Read more
  Monday, 1 Feb 2016 | 2:49 PM ET

Icahn, others get burned by bad Cheniere bet

Posted By: Jon Marino

Cheniere Energy, the Louisiana-based natural gas exporter-to-be, is off to a lousy start in 2016. And it's taking a bunch of big names — including Carl Icahn — down with it.

After 2015, when the stock lost roughly half its value, one would think some investors would quit trying to catch a falling knife. But it doesn't look like some of Cheniere's biggest backers last year are willing to cut their losses quite yet.

The two biggest hedge funds in Cheniere increased their position in the stock in late 2015. To begin this year, shares have pared another 20 percent of their value. Since he initiated his position in mid-2015, Icahn is likely to have incurred roughly $200 million in paper losses on his expanding investment.

"It's one of the most popular stocks with hedge funds in the energy sector," said Raymond James equity research analyst Pavel Molchanov. "It definitely polarizes the investment community."

Baupost Group, which rarely reports a losing year, had a loss in 2015 largely due to its energy investments. But it's not keeping Baupost founder Seth Klarman from investing in Cheniere; in fact, he doubled down after losing on the natural gas company in 2015.

»Read more
  Monday, 1 Feb 2016 | 12:10 PM ET

This indicator says market poised for 24% gain

Posted By: Jeff Cox

Sentiment on Wall Street has gotten so bad that it's good, at least according to one indicator with a high degree of accuracy.

Investor optimism has continued to erode through the current correcting, with some gauges showing bearishness at multiyear highs.

One in particular — the Bank of America Merrill Lynch Sell Side Indicator — puts sentiment "close to where it was at the market lows of March 2009," the firm's strategists said in a report Monday. That date will be familiar to many investors as it marked the Great Recession low and preceded a 200 percent bull market surge.

Read MoreThis rare, fearful Fed trade may set tone for year

The gauge is a fairly basic measure of how the biggest portfolio managers are positioned. Over the course of the past 15 years, the traditional stock weighting is around 60 percent; currently, that level stands at 52.1 percent, a 0.7 percentage point slide from December and below the 52.9 percent threshold that would trigger a "buy" signal.

Using a little math, the indicator points to a 17 percent price return for the next 12 months, which gets the S&P 500 to the 2,270 range, based on Friday's closing level.

»Read more
  Saturday, 30 Jan 2016 | 5:00 PM ET

Check out the digs JPMorgan has for millennials

Posted By: Jon Marino

The JPMorgan Chase staffers stopped, briefly startled by construction sounds resembling a jackhammer that interrupted their gathering on the ninth-floor offices of its digital headquarters. They quickly returned to the task at hand: billiards.

Needless to say, this is not your ordinary bank office.

JPMorgan's digital initiative made its new home in 5 Manhattan West, near the city's developing Hudson Yards district and representative of a culture shift taking place on Wall Street. The bank aims to recruit millennial talent away from startups and tech industry titans, whose experience is ripe for financial services products that are increasingly being consumed online.

Read MoreJPMorgan playing ball with Steph Curry, Warriors

Today, the bank's digital operations headcount is more than 1,500; it seems certain that figure will only grow.

"We really need to attract talent from across the industry spectrum," Gavin Michael, JPMorgan Chase's head of digital, told in an interview.

Wall Street has to compete for tech talent with Silicon Valley companies eager to cater to needs and whims with in-office chefs, exotic retreats and benefits extending to employees' pets. It comes as pay on Wall Street, especially on the entry-level scale, has failed to match the banking business' outsized expectations.

»Read more
  Friday, 29 Jan 2016 | 2:20 PM ET

Trouble ahead: Why 2016 keeps getting uglier

Posted By: Jeff Cox

When it comes to economic growth, 2016 is looking a lot like 2015 — and probably even worse.

Friday's report showing that gross domestic product grew just 0.7 percent in the fourth quarter brought to a conclusion another year of dashed hopes for economic liftoff — "escape velocity," as it is sometimes called.

Seven years of zero interest rates, $3.7 trillion worth of Fed money printing and more than $6 trillion piled onto the public debt resulted in an economy still struggling to break 2.5 percent full-year growth. In fact, if the first reading on GDP holds up on revision, the U.S. economy will have expanded just 2.4 percent for the full year, according to the Commerce Department.

At the start of 2015, most economists expected U.S. growth of 3 percent or better, predicated on sizable gains in consumer spending, business investment and construction. Instead, the year featured consumers mostly hanging onto their gas savings, weak capital expenditures (including a decline of 1.8 percent in the fourth quarter) and slumping oil prices battering investment instead of lifting spending.

Read MoreBuy stocks when everyone's miserable: CEO

Looking ahead, the early indicators are not good, with chances of a recession gaining more traction on Wall Street.

»Read more
  Friday, 29 Jan 2016 | 2:06 PM ET

Americans still using their MasterCards, Visas

Posted By: Mary Thompson

The new year has been tough for U.S. investors, but as the results from MasterCard and Visa show consumers appear unfazed by the stock market's choppiness and the fears of a recession that has generated.

In the fourth quarter MasterCard reported that purchase volume in the U.S rose 8.4 percent, up from 7.6 percent in 2015. Visa's volume declined slightly to 8.9 percent from 9.4 percent.

In an interview following the earnings call, MasterCard CFO Martina Hund-Mejean told CNBC that the company feels pretty good about consumers and does not anticipate a change in their spending patterns this year. Hund-Mejean said the fourth-quarter purchase volumes reflect an increased willingness of consumers to spend the money they have been saving on lower gas prices.

Read More4 stocks to watch as American Express struggles

"What they are doing, and this only happened in the latter part of the year, is that rather than saving it, they are now feeling they can put it toward other discretionary spending," she said.

»Read more

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