The stock market rally came under pressure as the Federal Reserve signaled a "rapid" balance sheet runoff starting as soon as the early May meeting, to go along with rapid Fed rate hikes. The major indexes retreated, especially techs and the Nasdaq. The 10-year Treasury yield was up to a three-year high, rising above the two-year yield once again. Elon Musk disclosed a 9.1% Twitter stake and hosted a Tesla Austin grand opening "Cyber Rodeo."
Stock Market Rally Under Pressure
The stock market rally came under pressure as the Nasdaq and other key indexes fell below key levels. Chip, shipping and travel stocks were among the losers, while medical, commodity and defense stocks held up well. Hawkish Fed comments on balance sheet cuts sent the 10-year Treasury yield sharply higher while the two-year yield held steady, ending a brief yield curve inversion. Crude oil prices fell sharply, below the $100 a barrel level.
Fed Signals 'Rapid' Tightening
Federal Reserve policy signals grew still-more hawkish this week, with a surprising new emphasis on balance-sheet tightening. On Tuesday, Fed Gov. Lael Brainard, soon-to-be Fed vice chair, talked about shrinking the balance sheet at a "rapid" pace as part of a one-two punch to "get inflation down," along with hiking its benchmark overnight lending rate. A day later, minutes from the Fed's March 15-16 meeting indicated that policymakers had agreed that runoff of Fed asset holdings should begin as soon as May and quickly ramp up to $95 billion per month.
The yield curve is no longer inverted. The 10-year Treasury yield shot up, reflecting the great supply of debt that the Treasury will need to find buyers for. The 2-year yield was little changed.
Musk Buys Twitter Stake, Joins Board
Tesla CEO Elon Musk disclosed a 9.1% stake in Twitter, several days after the legal deadline. Initially, the stake was declared to be "passive," but a day later Twitter said Musk would join its board of directors. Twitter stock soared. Meanwhile, former President Trump's Truth Social continues to struggle, with key tech execs leaving amid major app problems. Trump himself has only posted once on the site. Digital World Acceptance, the SPAC partner for Truth Social parent Trump Media & Technology, plunged.
Tesla Austin Deliveries Begin
Tesla officially opened its factory in Austin, Texas, on Thursday night, with Model Y deliveries now starting to get underway. The plant is the first to feature Tesla's new structural battery pack and 4680 battery cells, though the cells are not ready for mass production. The Cybertruck made a cameo appearance, but production won't start until at least 2023. Meanwhile, the Tesla Shanghai plant has been closed since March 28 amid government lockdowns due to surging Covid cases. Chinese regulators also said Tesla must provide a safety-related software update to fix a semiconductor component on more than 127,000 Model 3s, though an actual hardware repair may be needed ultimately. Many of the vehicles were made in the U.S. Tesla stock rose Monday following the prior week's record Q1 deliveries, then reversed lower for the week.
News In Brief
Greenbrier, a manufacturer of railroad equipment, reported second-quarter results that beat expectations.
Advanced Micro Devices is buying distributed computing startup Pensando for $1.9 billion to bolster its data center business. Pensando makes products that accelerate networking, security, storage and other services for cloud, enterprise and edge applications.
Carnival reported record weekly bookings as Covid fades. CCL stock and other cruise stocks initially bounced, but then retreated with travel stocks generally.
BYD reported March EV and plug-in hybrid sales of 104,878, up 333% vs. a year ago and topping 100,000 for the time. BYD also has halted production of traditional gas-burning vehicles.
Hertz will buy 50,000 Polestar electric vehicles. That follows a late 2021 deal to buy 100,000 Tesla Model 3 sedans. Shares of Hertz and Gores Guggenheim, Polestar's SPAC merger partner, jumped Monday but later slashed gains.
Merck projected $10 billion in peak revenue from its cardiovascular drugs, with that happening sometime in the mid-2030s. The projection includes sotatercept, a drug acquired with Acceleron Pharma, and several medicines in collaboration with Bayer.
AbbVie announced promising test results that could expand usage of its treatment for blurry near vision, Vuity. The eye drop is approved as a once-daily treatment. But results from a new study suggest it could be effective as a twice-daily drop.
Moderna and BioNTech toppled Wednesday after an Israeli study suggested immunity wanes quickly following a second Covid booster shot.
Simply Good Foods reported a better-than-expected 44% EPS gain, while sales growth accelerated for a second straight quarter to 29%. SMPL stock jumped, clearing an early entry.
HP Inc. jumped Thursday after Warren Buffett's Berkshire Hathaway disclosed an 11% stake in the PC and printer giant.
