Investors Awaiting Clarity on Debt Ceiling Talks as U.S. Stocks Remain Mixed

U.S. stocks were mixed on Monday as investors awaited clarity on the outcome of debt ceiling negotiations. President Joe Biden was expected to meet with House Speaker Kevin McCarthy, a California Republican, later today as aides spent the weekend trying to sew up an agreement. The deadline for Congress to raise the ceiling or suspend it is quickly approaching, with some estimates saying the government will run out of options to continue paying its obligations as early as June 1. The uncertainty is hanging over markets as the Federal Reserve prepares to meet again next month to decide the next move on interest rates.

China banned some sales of Micron Technology, Inc. (NASDAQ:MU) chips to key industries in its country, citing national security. Shares of Micron fell 4.4%. Shares of Facebook parent Meta Platforms, Inc. (NASDAQ:META) rose 2% after European Union privacy regulators fined it $1.3 billion for sending user information to the U.S. Oil dipped, with Crude Oil WTI Futures down 0.1% to $71.59 a barrel, while Brent Oil Futures crude was down 0.1% to $75.52 a barrel. Gold Futures was down 0.3% to $1,975.

Exploring Private Equity’s Increased Lending Amid U.S. Banks’ Retreat

As regional banks face turmoil, non-bank lenders such as asset managers, private equity (PE) funds and insurers are stepping in to fill the gap. These investors have deep pockets and are investing in credit assets such as consumer car loans, mortgages, and financing the construction of buildings. Goldman Sachs Asset Management’s alternative investments business is also seeing potential growth in areas such as auto lending, SME and consumer lending, and fund financing.

PE firms such as Ares Management Corp, Brookfield Asset Management and KKR are lending in areas traditionally dominated by banks. KKR is even financing $550 million of loans for homeowners buying solar panels from SunPower. Investors providing private credit comprise 12% of the $6.3 trillion U.S. commercial credit market, according to Fitch Ratings.

The Federal Reserve has said that while private credit funds have grown swiftly, the risks they pose to the financial system appear limited. However, the International Monetary Fund has warned that the expansion of private credit may have added vulnerabilities to the financial system and called for more supervision of non-banks.

PE executives reject this criticism, saying that private credit is very transparent and investors have access to detailed information about the loans in their portfolios. With loan terms tougher and tighter, the option for private credit providers is on steroids, according to Drew Schardt, head of investment strategy at Hamilton Lane.

Ford Secures Multiple Agreements to Increase Electric Vehicle Production

Ford Motor Co (NYSE:F) has announced a series of new deals to source battery-grade lithium, as it plans to scale up electric vehicle production and take advantage of government tax credits. The deals include agreements with Albemarle Corp (NYSE:ALB), Compass Minerals, Nemaska Lithium, EnergySource Minerals and Sociedad Quimica y Minera de Chile S.A. (SQM).

Albemarle will supply Ford with more than 100,000 metric tons of battery-grade lithium hydroxide over a five-year period, while Compass Minerals will deliver up to 40% of its planned, phase-one battery-grade lithium carbonate to Ford once production begins. Nemaska Lithium will supply lithium products, including lithium hydroxide, to Ford over an 11-year period, while EnergySource Minerals will supply lithium hydroxide produced at its Imperial Valley, California site. SQM and Ford have agreed to a long-term lithium supply agreement.

The deals come as robust demand for environment-friendly vehicles has sent North American automakers scrambling for a steady supply of raw materials to boost EV output in a market dominated by Elon Musk’s electric-only Tesla (NASDAQ:TSLA) Inc.

TD Bank’s Earnings at Risk from Commercial Property Loans in Canada

As Canadian banks prepare to report second quarter earnings this week, investors are bracing for higher bad debt provisions and a potential hit to loan growth due to the economic fallout from the coronavirus pandemic. Analysts expect net income to be a mixed bag, with Bank of Montreal likely to be the top performer. TD Bank is in focus after its acquisition of First Horizon failed, and investors are keen to hear how the lender plans to deploy its estimated $20 billion in excess capital. Empty offices in big cities have raised concerns about banks’ commercial property loan exposure, while the Bank of Canada is increasingly worried about the ability of households to pay off their debts.

Mizuho to Expand US Presence with $550 Million Acquisition of Greenhill

Mizuho Financial Group Inc has announced that it will acquire independent investment bank Greenhill & Co Inc in an all-cash transaction. The Japanese lender will pay $15 per share of Greenhill, reflecting an enterprise value of about $550 million, including assumed debt.

The acquisition follows Mizuho’s efforts to expand its overseas businesses. Earlier this year, the company planned to acquire Texas-based private equity placement agent Capstone Partners. Of Japan’s three megabanks, Mizuho has been slower to move than bigger rivals Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group.

The Greenhill business will sit within Mizuho’s banking division, led by Michal Katz, head of banking in the Americas. Greenhill Chairman and CEO Scott L. Bok will become chairman of the M&A and restructuring advisory business.

Mizuho CEO Yoshiro Hamamoto has previously stated that the group’s brokerage arm Mizuho Securities Co “has room for further growth” in the United States and acquisitions are an option the company is exploring. The acquisition of Greenhill is a step in the right direction for Mizuho as it looks to expand its presence in the US.

Benchmark: Activision Blizzard is a Prime Investment Choice, Promising Rewards for Investors

Benchmark analysts have reiterated their Buy rating and $90 price target on Activision Blizzard (ATVI), labeling it a top pick in the EDM sector. They believe investors will be rewarded with an approximate 21% upside to Microsoft’s $95 bid or an approximate 15% upside to their FY23 $90 price target if the deal is abandoned. ATVI is delivering on a meaningful product cycle that should drive record growth over the medium term, with a near-term growth catalyst from the Diablo IV launch. Benchmark is cautious that ATVI’s F2Q23 operating income will be impacted by marketing and software amortization related to the launch. They also believe Microsoft could be successful on appeal with the Competition Appeal Tribunal after the UK blocked the acquisition.

Chevron Acquires PDC Energy in $7.6 Billion Transaction

Chevron Corp announced on Monday that it will acquire PDC Energy Inc in an all-stock transaction for $7.6 billion, including debt. This is the second acquisition in three years that will expand Chevron’s shale operations in Colorado and Wyoming. The deal is expected to add 10% to Chevron’s proved reserves at a cost of less than $7 per barrel and add $1 billion to annual free cash flow. The deal values PDC at $72 per share, representing a premium of 10.56% to Friday’s close and carries the equity value of $6.3 billion. The acquisition is expected to close by the end of the year and was unanimously approved by the boards of both companies.

BNY Offers More Opportunities for Short-Term Investment as Investors Seek Higher Returns

NEW YORK (Reuters) – BNY Mellon (NYSE:BK) is expanding its offering of short-term investment products to help investors navigate the uncertain economic environment. The bank is now offering access to mutual funds, interest-bearing deposits and sponsored cleared repurchase agreement sweep products through its LiquidityDirect platform.

The offerings are geared at corporate treasurers seeking to maximize liquidity and mitigate counterparty credit risk. BNY currently oversees $1.3 trillion of cash investments across deposits, money market funds and other instruments, and manages $15 trillion in money-market transactions a year.

The rapid U.S. interest-rate increases, the regional banking crisis, and debt ceiling negotiations have prompted investors to seek safety and capital preservation. BNY’s platform is becoming a one-stop shop for clients to manage their cash, as some regional banks, a key source of market liquidity, undergo stress.

LiquidityDirect saw a 16% increase in money-market funds flows in mid-March, BNY data showed. The bank is helping investors to manage their liquidity based on the current market conditions and maximize their returns.

Goldman Sachs Predicts Apple’s AR/VR Headset Will Succeed Where Others Have Failed

Apple’s AR/VR headset has the potential to succeed where others have not, according to Goldman Sachs analysts. They believe that the headset’s points of differentiation, such as its installed base of billions of device and services users, an established developer ecosystem, and existing 1P content investments, give it the potential to succeed. Goldman Sachs estimates that the headset and related services could contribute $11-$20 billion of annual revenue from F2024-28 and LSD% accretion to net income starting in F2025. The analysts also believe that Apple’s operating system improvements and new MacBooks could help to strengthen the company’s ecosystem and catalyze an upgrade cycle.

Premarket Trading: DraftKings and PacWest Increase, Micron, Meta Platforms, and Apple Decline

FRCB stock rose 2.3% after the bank announced a new $1.5 billion share repurchase program. Investors are optimistic that the bank will be able to increase its earnings per share and return value to shareholders.

Overall, stocks were mixed in premarket trading on Monday, with some companies seeing gains while others experienced losses. Investors are keeping an eye on the news and developments in the market to make informed decisions.