π¦π S&P Downgrades Banks, Shares Fall
Happy Wednesday all,
I donβt find myself thinking this too often, but this edition of Hump Days has a lot of international topics. Financial news on the global scale is really ramping up with Iran defying OPEC+ oil production cuts, BRICS discussing expansion, and China dealing with a currency selloff.
In other news, we just published a new video on YouTube on the top 5 savings accounts out there. Be sure to give it a watch and leave a comment with your thoughts.
Enjoy this weekβs Hump Days!
- Humphrey, Rickie & Tim
π Eye-Catching Headlines
ποΈ Mortgage rates hit their highest point since 2000 (CNBC)
π΅βπ« BRICS divisions re-emerge ahead of critical expansion debate (Reuters)
π¨π³ China ramps up fight with yuan bears to stop selloff spiraling (Bloomberg)
πΈ In an unusual turn of events, pay for new hires is shriveling (WSJ)
π Car prices might be unsustainable for buyers, loan delinquencies surging (WSJ)
π China surprises with modest rate cut amid growing yuan risks (Reuters)
π² iPhone 15 getting one of the biggest upgrades in years, new charging port (CNBC)
The Weekly Brief
Shares of U.S. banks drop after S&P downgrades some ratings (Reuters)
S&P Global followed Moodyβs in cutting ratings on some regional lenders with high commercial real estate exposure. On Monday, Associated Banc-Corp, Valley National Bancorp, UMB Financial Corp, and Comerica Bank all had their ratings cut. The ratings actions even impacted the stock of major banks even though they were not mentioned by S&P. JPM and Bank of America saw stock fall 2%, and Citi, Wells Fargo, Goldman, and Morgan Stanley each dropped 1%.
Hump Days Take
These downgrades represent the further straining of the banking sector, which has seen its costs increase following the Fed's interest rate hikes. According to experts, some banks have loan portfolios that only draw in 2.5%-4.5% in interest income while needed to pay depositors 4.5%-5.5% in savings and money market accounts. With that being said, there is no immediate systemic risk to the banking sector, however.
Iran aims to boost oil output, complicating OPEC+ and U.S. efforts (Bloomberg)
Iran plans to raise oil production just as OPEC+ recently announced cuts to support prices. Iran expects to boost production to 3.4M barrels per day, just 400k off from the capacity limit of 3.8M bpd. The country has already boosted production by 50% over the past two years, with much of it flowing to China.
Hump Days Take
Iran was once the second-largest producer in OPEC, but many rounds of economic sanctions crippled its energy industry, and crude exports were throttled under Trump's policy of maximum pressure. Iran partially offsets the recent output cuts made by Saudi Arabia and Russia that have been weighing on oil prices.
Investors expect rates and inflation to remain elevated, Fed has more to do (Bloomberg)
The Federal Reserve is meeting this week at Jackson Hole, and according to a Bloomberg survey, over 80% expect Fed Chair Jerome Powellβs speech to reinforce the message of a hawkish hold, meaning they expect rates to hold at the current level but that the Fed will be ready to raise rates if needed. According to the same survey, over two-thirds of respondents say the Fed has yet to conquer inflation.
Hump Days Take
Compared to a year ago, the U.S. is in a significantly better spot than all other major economies. However, uncertainty still looms over the Fed about whether they've raised rates high enough to tame prices and for how long rates need to remain elevated.
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