The week kicked off with JP Morgan adding First Republic to its cache of failed bank acquisitions.
Markets turned sour midweek as investors betting on a rate hike pause saw the rug pulled from under their feet as the Fed once again raised benchmark rates by 25 basis points.
Yet there seems to be bigger trouble for the US economy as the debt ceiling crisis continues to linger with a possibility of US defaulting on its debt as early as June. Here are the news that made headlines this week.
In spite of the Federal Reserve's announcement that it was "getting close" to halting its cycle of interest rate increases, the US economy continued to grow more quickly than anticipated in April, demonstrating the economy's resiliency.
According to data released by the Bureau of Labour Statistics on Friday, the US created 253,000 non-farm jobs in November, defying predictions of a downturn.
Although downward revisions to the data from the previous two months partially offset the headline payrolls increase, the unemployment rate and wage growth figures also pointed to the labor market remaining tight. This casts doubt on the Fed's ability to start reducing interest rates as soon as investors had anticipated.
Treasury Secretary Janet Yellen issued a warning that the United States may have exhausted all available options for paying its debts by June 1. This is sooner than both the government and Wall Street had anticipated.
New tax revenue information, according to Yellen, has forced the department to revise its prediction of when the Treasury Department "will be unable to continue to satisfy all of the government's obligations" to possibly as early as June 1, if Congress doesn't raise or suspend the debt ceiling before then.
The time is sooner than what Wall Street analysts had predicted. Though economists admitted that weaker-than-expected tax collections might advance that schedule, their most recent estimate set the debt default deadline to some point in late July.
President Joe Biden has called for a meeting with the "big four" congressional leaders at the White House to discuss the debt limit as a result of the announcement.
The Federal Reserve authorized its tenth-rate hike in just over a year and gave a hesitant nod that the tightening cycle now underway is coming to an end.
However, with persisting worries about economic growth and a financial crisis that has unnerved Wall Street, markets were betting that the Fed would ease up on rate hikes. In the immediate aftermath of the Fed's announcement, equities barely managed to hang onto the gains as Treasury rates decreased in most cases.
The hike raises the fed funds rate to its highest level since August 2007—a target range of 5%–5.25%.
JPMorgan acquired First Republic Bank in a government-led deal for the failed lender, putting to rest one of the biggest troubled banks remaining after turmoil engulfed the industry in March. The acquistion was announced in the early morning hours Monday after First Republic was seized by regulators.
The Wall Street bank agreed to the takeover after private rescue efforts failed to fill a hole in the troubled lender’s balance sheet and customers yanked their deposits. Other banks that were in the race to acquire First Republic include PNC Financial Services Group, Citizens Financial Group and Fifth Third Bancorp
This acquisition makes the biggest US bank even larger while minimizing the draw down to the Federal Deposit Insurance Corp.’s guarantee fund.
Nearly $279 million was awarded to a whistleblower by the US Securities and Exchange Commission. The award is more than twice as much as the prior record, $114 million, which was announced in October 2020.
In a heavily redacted SEC decision dated May 5, the agency did not identify the recipient of the award or specify which enforcement activities led to the payout, in accordance with a policy created to protect whistleblowers who choose to maintain their anonymity.
Due to higher-than-expected sales of iPhones, Apple's second fiscal quarter results topped Wall Street's low forecasts. Apple's net income for the quarter was $24.16 billion, down from $25.01 billion in the same time last year. The overall revenue decreased by 3% from the previous quarter's $97.28 billion.
However, Apple's total sales decreased for the second consecutive quarter. The shares of the tech giant increased by about 2% during extended trading, and they kept rising after Apple provided forecast figures for the current quarter.
Apple continued its practise of not offering official instructions, which dates back to 2020 and the beginning of the Covid-19 epidemic. On an analyst call, management normally shares certain data points.
Apple finance chief Luca Maestri said the company expects overall revenue in the current quarter to decline about 3%.
Shopify has announced that it is laying off a fifth of its workforce as the Canada-based online retail services platform has struggled to gain traction with its logistics unit. Shopify is now selling
the physical-delivery business, and e-commerce company Deliverr to Flexport. The online retailer is also disposing of 6 River Systems warehouse robotics operation to U.K. automated grocery-fulfillment specialist Ocado Group.
“We are changing the shape of Shopify significantly today to pay unshared attention to our mission,” Chief Executive Tobi Lutke wrote in a letter to employees on Thursday. Some Shopify employees on the logistics team will move to Flexport or Ocado while others will be laid off.
The deals basically put a stop to Shopify's efforts to establish its own logistics-fulfillment business in addition to the e-commerce sales technology platform it provides merchants. Deliverr was purchased by Shopify for $2.1 billion less than a year ago with the intention of combining it with 6 River Systems to form a unified logistics division. For $450 million, Shopify purchased 6 River Systems in 2019.