Investing

Before the Bell: China Dodges US Chip Restrictions, Crypto Bank Liquidates, Tesla Steering Wheels Fall Off

Paul Ausick

Published: March 9, 2023 7:35 am

Premarket action on Thursday had the three major U.S. indexes trading mixed. The Dow Jones industrials were up 0.03%, while the S&P 500 was down 0.18% and the Nasdaq 0.49% lower.

Seven of 11 market sectors closed higher Wednesday. Real estate (1.32%) and technology (0.84%) added the most. Energy (−1.02%) and health care (−0.56%) posted the day’s worst losses. The Dow closed down 0.18%, the S&P 500 up 0.14% and the Nasdaq up 0.4%.

Two-year Treasuries closed up five basis points at 5.05% on Wednesday, and 10-year notes rose by one basis point to a 3.98% close. In Thursday’s premarket, two-year notes were trading at around 5.04% and 10-year notes traded at about 3.99%.

Fed Chair Jerome Powell appeared before the House Financial Services Committee Wednesday morning and delivered the same message he had brought to the Senate the day before. Equities did not move much in either direction. The move higher in two-year Treasury notes indicated concern that the Fed might be moving interest rates too high, forcing a recession in the months to come.

New claims for unemployment benefits are expected to come in at 195,000, up 5,000 from the previous week, when the report is released before markets open. The number of continuing claims, which lag new claims by a week, fell by 5,000 in the last report to 1.655 million.

Friday’s report on February’s nonfarm payrolls almost certainly will move markets. Economists have forecast job growth of 205,000, far below the January growth rate of 517,000. Private payrolls, which totaled 443,000 new jobs in January, are forecast to have added 203,000 new jobs in February. The unemployment rate is expected to remain unchanged at 3.4%.

Wednesday’s trading volume was below the five-day average. New York Stock Exchange winners outpaced losers by 1,574 to 1,459, while Nasdaq decliners led advancers by roughly 6 to 5.

Among S&P 500 stocks on Wednesday, semiconductor shares carried the day. ON Semiconductor Corp. (NASDAQ: ON) added 5.59%, Advanced Micro Devices Inc. (NASDAQ: AMD) rose by 3.97% and Nvidia Corp. (NASDAQ: NVDA) added 3.83%. The rise may be all about China. ON, or onsemi as it prefers to be called, is a leading chipmaker for the automotive industry, while AMD and Nvidia provide high-end graphics processing chips (GPUs) that will benefit from the current interest in artificial intelligence. The Financial Times ran a story Wednesday on how Chinese AI groups have found a way to dodge U.S. restrictions on high-end chips.

Norwegian Cruise Line Holdings Ltd. (NASDAQ: NCLH) and Carnival Corp. & PLC (NYSE: CCL) were big losers Wednesday. Norwegian, down 4.26%, was the big loser among S&P 500 stocks, and Carnival was not far behind, dropping 3.13%. More than 300 passengers and crew fell sick on a Carnival-owned Princess Cruises ship during an 8-day cruise between Galveston, Texas and Mexico. The cause of the illness is still under investigation by the Centers for Disease Control and Prevention.

After markets closed Wednesday, Silvergate Capital Corp. (NYSE: SI) announced its intention to liquidate Silvergate Bank “in an orderly manner and in accordance with applicable regulatory processes.” The wind-down and liquidation include full repayment of all deposits. Silvergate stock traded down more than 47% in Thursday’s premarket.

Silvergate Bank has been a major player in the cryptocurrency world since it began taking non-interest-bearing deposits from crypto owners that were used as a means to pay other bank clients for digital assets. The bank’s network did not trade crypto; all transactions were completed in dollars or euros. The collapse of FTX, one of Silvergate’s largest clients, forced the bank to sell assets below their face value, suffering big losses. Once the exodus started, the rush to the exits picked up. In other words, a typical bank run caused by borrowing short and lending long.

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Tesla Inc. (NASDAQ: TSLA) dropped more than 3% on Wednesday and traded down nearly 3% more in Thursday’s premarket. The National Highway Traffic Safety Administration (NHTSA) has launched an investigation into two reported incidents in which the steering wheel of a 2023 Model Y came off while driving. More than 120,000 vehicles could be affected by the investigation.

The NHTSA report noted that both vehicles were delivered to the owners missing the retaining bolt that attaches the steering wheel to the steering column.