A daily market update from FS Insight — what you need to know ahead of opening bell

“If every day were Earth Day we wouldn’t be in the mess we’re in.”— Neil deGrasse Tyson

Overnight

Fed officials still see three rate cuts this year (WSJ)

Fed will soon slow pace of QT, per Powell (BBG)

Ireland’s PM Leo Varadkar unexpectedly resigned (CNBC)

Israel has eliminated Marwan Issa, a top Hamas commander in Gaza (WSJ)

Julian Assange, Justice Department exploring guilty plea to end 14-year legal drama (WSJ)

Vietnam’s president resigns after less than a year in office on heels of prominent anti-corruption campaign (Semafor)

Intel gets $8.5 billion award for U.S. chip-plant construction (WSJ)

Amundi launches ‘lowest cost’ all-country equities ETF (Citywire)

SEC accuses two firms of lying about how they used AI in managing investments (WM)

Apollo offers $11 billion for the Hollywood studio of Paramount, whose directors weigh merger with Skydance (WSJ)

Apple faces legal protest from Meta, Microsoft, X and Match (WSJ)

Wall Street is investing in law firms in Arizona, where it’s legal for non-attorneys to do so (WSJ)

The Pentagon’s R&D arm is ready to share its tools for countering deepfakes  (Semafor)

SEC probing crypto companies in Ethereum investigation as hopes for ETF dim (Fortune)

U.S. proposes second offshore wind auction in Gulf of Mexico (U.S. News)

EPA issues new auto rules aimed at cutting carbon emissions, boosting electric vehicles and hybrids (YF)

Budget Office report credits immigration and spending deals with improved outlook despite huge debt (YF)

House committee probes SEC overreach (HR)

ECB tries to dampen bets on streak of rate cuts (RT)

Investors flock to U.S. medium-term bonds amid policy uncertainty (RT)

Big U.S. firms are borrowing at one of the highest levels on record (WSJ)

Investors bet on European consumer stocks as economic confidence grows (FT)

European borrowers are simply not defaulting as expected (RT)

Tokio Marine is seeking to spend $10B on global M&A (RT)

Hindenburg shorted data center firm Equinix (RT)

Hedge fund Palliser hired ex-Elliott partner Kasoff (RT)

U.S. will bring an antitrust lawsuit against Apple (BBG)

Petrobras bondholders left unscathed after $12B equity rout (BBG)

$77 billion in annual credit by U.S., U.K. banks driving increase in industrial meat and dairy production in breach of banks’ own climate stance (PBN)

First news

• Cunning proposal to offload emissions risk between banks and other firms may not reduce emissions at all
• Hungry for power for AI et al, Microsoft pushes the envelope on next-gen nuclear reactors
• French startup wants to sound death knell for diesel generators.

MARKET LEVELS

MORNING INSIGHT

Good morning!

The Fed has made a dovish pause. This has at least five positive implications for stocks. We discuss the various factors that are incrementally changing because of the Fed’s decision.

Click HERE for more.

TECHNICAL

Here are our updated Upticks for March 2024. There are four new additions:

• MSTR -0.13%  – MicroStrategy Inc
• ORCL 1.01%  – Oracle Corp
• FCX 0.05%  – Freeport-McMoRan Inc
• TSLA 4.22%  – Tesla Inc

Click HERE for more.

CRYPTO

• Mind Language is an agnostic graph-based meta-programming language designed to enable easy program creation and modification through natural language or a drag-and-drop editor. Mind Language hopes to revolutionize programming by bridging the gap between human creativity and AI innovation.
• The first product being developed via Mind Language is MindTrade, a solution for building custom trading strategies. MindTrade enables an easy, intuitive, and efficient programming environment with composability to build complex modular applications.
• Beyond MindTrade, the potential for Mind Language is much larger. Mind Language sits at the intersection of low-code/no-code platforms and AI agents, two multi-billion markets with high forecasted growth. Mind Language’s versatility and cross-domain potential make it poised for extensive growth across a variety of use cases.
• Mind Language’s native token is  MND, which will be used as a utility token to pay for Mind Language services. Mind Language has a circulating market capitalization of $10.3 million, and an FDV of $12.4 million.
• Mind Language presents a compelling mix of innovation, market potential, and adaptability. In our view, Mind Language should find a wide range of applications and use cases, driving demand for the MND token and fueling price appreciation.

FIRST NEWS

Smart One. Hedge fund veteran and Philadelphia asset manager Andrew Hohns is pitching a new type of securitization – a method for large banks to cut the carbon footprint of their balance sheets by offloading their financed emissions to third-party investors – for a fee, although the plan is unlikely to actually reduce real-world emissions.

In addition to capital requirements, banks face reputational damage and potential regulatory penalties for financing emissions-intensive projects: say, ones involving fossil fuels. Conversely, they could face backlash for restricting lending to traditional energy companies.

Per the scheme, banks could potentially transfer this emissions-risk exposure to other entities better positioned to manage it – similar to credit-risk transfer to a hedge fund, where, if borrowers default, the hedge fund bears the losses instead of the bank.

They could pay premiums to pass the reputational and regulatory risks of emissions-linked lending to firms focused on sustainability or green investment mandates. If this is done properly, the banks pay less to these firms than the capital savings from offloading the risk, while the firms profit in their own way. The banks continue financing industries they deem important for economic reasons, while transferring the associated emissions risks off their books in exchange for fees paid to the risk-takers.

Executed strategically, this reduces the banks’ capital constraints and reputational exposures related to emissions financing. At the moment, banks get bad publicity and possibly regulatory consequences if they lend too much money to fossil fuel projects – which, apparently, they very much do, as some many banks have been found to be in violation of their anti-deforestation policies by increasing lending to livestock companies (see last news item in the Overnight section, above). The top lender to unsustainable global agribusinesses is Bank of America.

Micro-softly Treading into Next-gen Reactors. Bill Gates’ TerraPower plans to build first U.S. next-generation nuclear plant as the company applies to start June construction on a novel sodium-cooled reactor near a retiring coal plant in Wyoming. The move positions TerraPower in a race against Russian and Chinese competitors to develop and export lower-cost advanced reactors. Back in January we wrote about Microsoft’s hiring to support projects like these (Drs. Proton and Electron).

The company’s Natrium-branded reactors could be built at roughly half the cost of conventional water-cooled reactors that have dominated the industry since the mid-20th century.

The nearly $1 billion in private funding raised by TerraPower enabled an agreement with the Emirates Nuclear Energy Corporation in December to explore the use of Natrium reactors for power generation and hydrogen production in the U.A.E. The U.S. government has also pledged up to $2 billion to support completing TerraPower’s first plant in Kemmerer, Wyoming.

Construction will commence in June regardless of whether the Nuclear Regulatory Commission issues a permit by then. The reactor’s innovative sodium-cooling design allows early non-nuclear construction with a projected 2030 operations launch.

Using liquid sodium instead of water as a coolant is supposed to be a game-changer, as the nearly 900°C boiling point allows the cost to be brought down to half of a light water reactor.

TerraPower is one of dozens of companies racing to develop a new generation of smaller, more efficient reactors touted as critical for fighting climate change, known as small modular reactors (SMRs) with capacities around 300MW. While state-controlled entities in Russia and China have deployed two operational SMR plants, targeting future markets in Africa, Indonesia, and elsewhere, the nuclear industry in the U.S. faces challenges like higher interest rates and shortages of highly-enriched fuel.

The Kemmerer reactor will initially serve as a demonstration, but aims to transition into a full commercial operation. Last October, TerraPower and utility partner PacifiCorp announced studying the possibility of deploying five more Natrium units by 2035.

Analysts view TerraPower’s secure funding (avoiding public markets) and competitive sodium-cooled design as advantages over other domestic SMR developers. The 345MW Natrium design developed with GE Hitachi also incorporates molten-salt energy storage, allowing 500MW peak output for over 5 hours. FT, The Register

Fantastic French Flexibility. In related news, French company Schneider Electric has reached a partnership with a power-generation startup aimed at displacing diesel generators across the U.S. Schneider will deploy Mainspring Energy’s ‘linear generator’ across renewables-powered microgrids to provide baseload power. The linear generator is a new type of device thatcan turn different fuels into electricity by using twin cylinders to compress fuel and air in order to break down the fuel molecules and push the cylinders back out, generating power. Unlike conventional generators, Mainspring’s device can take those different fuels without hardware changes, meaning the linear generator can shift from natural gas to hydrogen and ammonia over time as the latter becomes more available. Even when it uses natural gas, it emits fewer emissions than regular gas-powered generators.

Mainspring — which has received funding from Khosla Ventures, Shell Ventures, and Bill Gates — is not yet profitable, focusing on scaling its solution for now. It expects to see linear generators powering hundreds of megawatts of electricity next year, from tens of megawatts this year. PR Newswire 

Where It Hurts. The number of barrels per day of Russian crude oil refining capacity taken offline by Ukrainian drone strikes over the weekend may be as high as 900,000 per a JPMorgan estimate. Combined with Western sanctions on Russian crude oil exports, the strikes leave more of Russia’s oil trapped within the country, which damages the Kremlin’s fossil-fuel revenues but also drives up prices globally. Semafor