Investing

Before the Bell: What We Talk About When We Talk About Interest Rates and Banks, and Coinbase to Be Sued

Premarket action on Thursday had the three major U.S. indexes trading mixed. The Dow Jones industrials were down 0.02%, but the S&P 500 was up 0.26% and the Nasdaq 0.78% higher.

All 11 market sectors closed lower on Wednesday. Real estate (−3.64%) and financials (−2.37%) fell the most. Technology (−0.92%) and consumer staples (−0.98%) posted the day’s smallest losses. The Dow closed down 1.63%, the S&P 500 down 1.65% and the Nasdaq down 1.6%.

Two-year Treasuries dropped 21 basis points to end Wednesday at 3.96%, and 10-year notes fell 11 basis points to close at 3.48%. In Thursday’s premarket, two-year notes were trading at around 3.98% and 10-year notes at about 3.49%.

Wednesday’s trading volume was below the five-day average. New York Stock Exchange losers outpaced winners by 2,249 to 768, while Nasdaq advancers led decliners by more than 3 to 2.

Match Group Inc. (NASDAQ: MTCH) rose 2.27% to lead Wednesday’s S&P 500 winners. The company is reportedly raising the monthly subscription price for its Tinder+ dating service from $4.00 to $7.50. One might ask why it took Match so long to figure out that people are willing to pay nearly twice as much as the company was charging.

First Republic Bank (NYSE: FRC), down 15.5% for the day, was Wednesday’s big loser. The day’s other top losers were Comerica Inc. (NYSE: CMA), down 8.5%; Lincoln National Corp. (NYSE: LNC), down 7.9%; M&T Bank Corp. (NYSE: MTB), down 7.8%; and U.S. Bancorp (NYSE: USB), down 7.3%.

Following the FOMC rate hike of 25 basis points, stocks turned higher until Fed chair Jerome Powell began speaking. Powell said that the central bank does not expect to see a rate cut this year and that recent events in the banking system reduce the odds of a soft landing for the economy.

Perhaps most distressing to investors was the disconnect between Powell’s funereal outlook and Treasury Secretary Janet Yellen’s more upbeat comments on the U.S. banking sector. Does the left hand know what the right hand is doing? Or, at least, what it is thinking?

The weekly report on new claims for jobless benefits will be released before markets open. Economists are expecting a slight uptick in new claims, from 192,000 to 198,000. The Census Bureau’s February report on new home sales is due after markets open. Forecasts call for a rise from a prior level of 670,000 to 685,000.

In Thursday’s premarket, tech’s megacaps continued in their roles as safe havens. Apple, Alphabet, Microsoft, Meta Platforms and Amazon all traded up by around 1%. Tesla was also up more than 1%. Chip biggies Nvidia and AMD trading higher as well, by more than 1.5%.

Crypto investors got some bad news Wednesday afternoon when Coinbase Global Inc. (NASDAQ: COIN) revealed that the U.S. Securities and Exchange Commission had issued a Wells notice to the company, informing it that the SEC was about to sue Coinbase for violations of federal securities laws. In a federal filing, Coinbase said it believes that the potential suit “would relate to aspects of the Company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet. The potential civil action may seek injunctive relief, disgorgement, and civil penalties.”

The SEC’s action is the latest in a string of enforcement actions, many of which seek to force crypto issuers and trading platforms to register their coins, tokens, and activities as securities. For its part, Coinbase’s chief legal officer said, “If needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets.”

Another federal regulator, the Commodities Futures Trading Commission, has staked its own claim to regulating crypto as it does commodities like oil and natural gas. And yet a third voice has risen, arguing to just forget about regulating crypto and just prosecute the firms for fraud.

Coinbase stock closed down more than 8% on Wednesday and traded down more than 14% in Thursday’s premarket.

After the FOMC rate announcement, Bitcoin rose by about 1.4% to around $27,750, before pulling back slightly. Bitcoin traded up about 1.3% early Thursday at $27,705.

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