Bank of America, Goldman Sachs and Bank of New York Mellon are among the big names reporting on Tuesday, along with streaming giant Netflix.
With attention on the extent of deposit flight from smaller U.S. banks, deposit rates are being forced higher and the improvement on returns for savers is likely to be both a drag on banks going forward but also a boon to household wealth.
As depositors demanded greater security and better returns, Apple said it aims to attract U.S. savers with a new high-yield deposit account, partnering with Goldman Sachs to offer users of its Apple Card 4.15% on savings accounts – 10 times higher than the national average.
The upshot for markets has been to underline recent stock market gains but switch the spotlight back on interest rates, which are creeping higher again as the worst fears for the March banking shock retreat into the rearview mirror.
Wall St futures were higher again on Tuesday, with European bourses and most Asia indices advancing too. The VIX volatility gauge continued falling to its lowest since Jan 5, 2022.
The take on the Fed is that futures now see a 90% chance of another quarter-point rate hike next month, with prior assumptions of a reversal of that move by September now being pushed out to November and year-end rates nudging up to 4.55%. Two-year Treasury yields hovered close to one-month highs of 4.21%.
With euro zone and UK rate expectations pushing higher too, the dollar slipped back again against the euro and sterling.
British wages rose faster than anticipated last month, in a move that economists judge may tip the Bank of England towards a further rise in interest rates next month, despite an unexpected increase in joblessness too.
As a reflection of how markets’ prevailing views are being questioned, Bank of America’s latest survey of fund managers showed investors had lifted bond allocations in April to the highest since 2009 and kept cash levels at an elevated 5.5%.
The resurfacing of U.S. debt ceiling tensions this week was another irritant for U.S. interest rates and bond markets on Tuesday, with the day’s deadline for annual U.S. tax returns likely to allow a more accurate update on how long the Treasury coffers will last without a debt cap extension.
Elsewhere, billionaire Elon Musk said on Monday he will launch an artificial intelligence (AI) platform that he calls “TruthGPT” to challenge the offerings from Microsoft and Google.
