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

“When they judge you, yawn.
When they misunderstand you, smile.
When they underestimate you, laugh.
When they condemn you, ignore.
When they envy you, rejoice.
When they oppose you, prevail.”
― Matshona Dhliwayo

Overnight

Sailing the Black Sea since 1783, Russia’s finds its fleet there functionally inactive after losses (Newsweek)

U.N. Security Council passes Israel and Hamas ceasefire resolution as U.S. abstains; Israel cancels senior delegation’s D.C. visit (FT)

French, American intelligence both point to ISIS as perpetrators of Moscow attack (USA Today)

U.S., U.K. accuse China of extensive hacking campaign (FT)

Citi CEO says reorganization now complete (RT)

Treasuries supported by Gilts rally before 5-year note auction (BBG)

Steve Mollenkopf returns to the spotlight as Boeing’s new chairman as CEO, others step down (Barron’s)

On average, each electric car sold costs its maker $6,000: $33,000 loss, Rivian; $433,000 loss, Lucid; $5,300 net profit, Tesla (QZ)

Ericsson cuts 1,200 employees in Sweden amid sluggish 5G spending (RT)

Peltz withholds votes from Iger ahead of 3 Apr board meeting when proxy battle may be decided (CNBC)

Novo Nordisk to acquire Cardior Pharmaceuticals, maker of RNA therapies for heart disease, for €1B (FT)

Canva acquires Affinity Design Suite in push to rival Adobe (The Verge)

Lucid raises $1B from affiliate of Saudi Arabia’s PIF; shares rise (RT)

Trading in Fisker shares halted after hoped-for deal with large automaker collapses; production paused (RT)

Qualcomm backs out of Autotalks deal over antitrust concerns (BBG)

Match Group names two new board directors amid pressure from Elliot Investment Management (Reuters)

Cocoa surpasses $9,000 per ton for the first time amid supply shortage; more expensive than copper (BBG)

Goldman Sachs says gold rally set to continue through the end of 2024 (YF)

Russia orders oil producers to reduce output in Q2 to meet its OPEC+ target (RT)

Morgan Stanley upgrades energy sector; cites higher crude prices and compelling valuation (CNBC)

Analysts see U.S. oil production at record 14M bpd by year-end amid falling costs, improved drilling efficiency (BBG)

Traders buying oil contracts at fastest pace since Dec 2019, top-ten fastest since 2013 (RT)

Asia PE deals set for worst Q1 since 2015 (RT)

Bankers in Japan see 10% decline in bonuses despite booming markets (BBG)

U.S. median home prices hit a 2.5 year low, down 7.6% YoY (RT)

Reddit options bets overwhelmingly bullish as shares soar further (RT)

Trump Media SPAC options are pricing the stock to fall 95% MoM (BBG)

Bitcoin’s surge stirs crypto VC from its slumber (WSJ)

Foreign direct investment in China continues to fall (WSJ)

China is trying to stem outflow from domestically-focused ETFs (FT)

E.U. launched an investigation into Meta, Apple, and Alphabet (CNBC)

Australia plans first stress test of financial system in 2025 (BBG)

Florida bans social media for kids under 14 (BBG)

Bullish bets on Mexican peso hits their highest level in over a year (BBG)

High delinquencies spell trouble for Brazil’s fintechs (BBG)

Italy poverty hits new high despite economic recovery (RT)

Alibaba calls off Cainiao IPO as market slump worsens (BBG)

Binance executive escapes from custody in Nigeria, where he faced a criminal investigation (Semafor)

Gaza, Ukraine attract world headlines while other crises, especially in Africa, are largely ignored as a result of “identity geopolitics” (Semafor)

Men’s March Madness tournament sees its oldest batch of college players in years; 296 players in their fifth or sixth seasons of playing (WSJ)

Charts of the Day

First news

• BlackRock is increasingly stonewalled by certain states in an anti-ESG campaign, but the effect is more of pea gravel thrown against a third-story window.

MARKET LEVELS

MORNING INSIGHT

Good morning!

Fed speak still points to 2-4 cuts in 2024, which is dovish overall. 

The key data point this week is the Feb PCE deflator on Friday. 

We still see “gas in the tank”.

Click HERE for more.

TECHNICAL

WTI Crude likely lifts to the high $80’s which should aid Energy’s rally into 2Q.

Monday was a rather lackluster day of trading from a net point gain/loss perspective, but despite fractional losses of -0.31% for SPX, only Industrials and Consumer Discretionary fell more than -0.50%. Technology’s loss in Hardware and Software were offset by bullish gains in Semiconductor stocks, which helped to dampen the loss in this group.

Meanwhile, Energy proved to be the best-performing of any of the major sectors on Monday; this group continues to show excellent strength and should remain a Technical Overweight.

Looking at S&P Futures on this daily chart below, support lies near SPX-5200 while resistance could very well materialize near 5350-5400 on any gains back above last Thursday’s intra-day peak of 5261.

No evidence of any correction is yet underway despite three straight sessions where prices fell from a higher opening print earlier. Overall, it’s likely that prices turn back higher and push up into late March, given no evidence of technical deterioration.

Click HERE for more.

CRYPTO

• As Bitcoin mining difficulty has hit a new all-time high, Core Scientific is looking for opportunities to purchase mining machines at a discount following next month’s Bitcoin halving. The halving will reduce Bitcoin’s block reward subsidy from 6.25 BTC to 3.125 BTC, effectively cutting miners’ revenues in half. It is expected that some of the less efficient miners will become financially distressed as a result. CEO Adam Sullivan believes the first thing that struggling miners will look to do is sell mining facilities, presenting an opportunity for Core Scientific to expand on its 222,000 miners at a discount. Core Scientific emerged from bankruptcy in January and believes its restructuring and lessons learned from 2021 and 2022 position it well to navigate the halving and find opportunities to outpace competitors. CORZ is currently trading at $3.50 but if its share price reaches $6.81, it would trigger some of its warrants, freeing up $670 million in cash that could be used for potential expansions.
• The Philippines SEC is moving to block local access to Binance in the country. In November, the regulatory agency issued a warning that Binance was operating without the proper licenses and approvals, claiming Binance was illegally operating an exchange and soliciting investment from Filipino citizens. The SEC deemed that continued public access to Binance poses a threat to Filipino investors’ funds. With the help of the National Telecommunications Commission (NTC), the SEC is blocking all webpages and apps related to Binance. The ban will take effect within the next three months to allow investors adequate time to liquidate and withdraw their funds. The regulator also asked Google and Meta to block any Binance-related advertisements. Despite the regulatory setback, BNB has risen 4.43% today, approaching $600.

Click HERE for more.

FIRST NEWS

Republican States put BlackRock in a Hard Place. BlackRock is facing a $13.3bn withdrawal in an anti-ESG campaign led by Republican states. It’s a minor 0.1% of its $10 trillion assets, and yet the mosquito bite stings. The Texas Permanent School Fund’s $8.5bn withdrawal marks the largest single divestment amid broader GOP-led opposition to ESG policies. Despite the political backlash, BlackRock and other firms are reevaluating their ESG commitments. The financial implications of divestments are being debated among state treasurers and pension officials.

A campaign spearheaded by Republican states against BlackRock over its consideration of environmental, social, and governance (ESG) factors, notably climate change, has led to the withdrawal of double-digit billions from the asset management giant over the past two years. Paradoxically, some Republican state pension funds retain investments exceeding $20 billion with BlackRock, which reported $138 billion in net inflows from the Americas region in 2022, signaling robust overall growth despite the divestments. In response to the Texas Permanent School Fund’s landmark decision to pull $8.5 billion by April’s end, BlackRock has intensified its political lobbying and PR efforts, such as co-hosting a power grid investment summit in Houston with Texas Lieutenant Governor Dan Patrick.

Political Backlash and Financial Implications

The divestment campaign has sparked significant debate. BlackRock’s vice-chair, Mark McCombe highlighted the long-standing partnership between BlackRock and the Texas Permanent School Fund, which has reportedly generated over $250 million for Texas schools, saying of Texas’s $8.5 billion withdrawal, “Ending a long, successful partnership that has been a positive force for thousands of Texas schools and families in such a reckless manner is irresponsible.”

This campaign has also prompted a reevaluation of participation in climate-focused industry alliances. While BlackRock scaled back its commitment to Climate Action 100+, other firms like State Street, JPMorgan Asset Management, Pimco, and Invesco have withdrawn entirely. The divestments gained momentum in 2022 after West Virginia’s state treasurer accused BlackRock of boycotting fossil fuel companies, spurring several GOP-led states to initiate anti-ESG divestments.

Ideological Battle Over Investment Strategies

The ESG controversy reflects a broader ideological clash over investment strategies and the role of environmental and social governance in financial decisions. In North Carolina, State Treasurer Dale Folwell criticized BlackRock while maintaining $18.4 billion in investments, citing the inability to find a more cost-effective asset manager. Folwell’s actions, including voting the state’s holdings in proxy votes independently, underscore the intricate dynamics between political beliefs, fiduciary responsibilities, and investment strategies.

In Kentucky, pension officials argued that divesting from firms like BlackRock would violate their fiduciary duty to maximize returns, highlighting the financial implications of political decisions on investment strategies. Likewise, a study associated with the Texas Chamber of Commerce warned that Texas’s Fair Access laws, mandating divestment from firms perceived as hostile to fossil fuels or firearms, could harm the state’s pro-business climate and result in significant lost tax revenue. (We’ve covered this before: Texas Hold ‘Em.)

At the same time, as ESG investing faces headwinds, core demand remains resilient

Sure, one could say that a political backlash against what is being called ‘woke capitalism’ has soured sentiment towards ESG investing, dealing a blow to the latterly attractive but slippery notion of doing well by doing good (see FTX/SBF: The Comeback Kid). However, behavioral scientists argue that asset managers predicting “ESG will be dead in five years” are overlooking fundamental truths about investor behavior.

Research shows that ~70% of investors are willing to sacrifice some returns to align their investments with their values and desire to make a positive impact, per Greg Davies, head of behavioral science at the Oxford Risk consultancy. This underlying support for ESG persists despite outflows from sustainable funds in recent quarters.

In Q4 2023, global sustainable fund flows turned negative for the first time, led by a record $5 billion outflow from U.S. sustainable funds, but European passive sustainable funds like ETFs remained resilient, attracting $3.3 billion in net inflows on the back of $21.3 billion invested in passive strategies offsetting $18 billion outflows from active funds.

The apparent demand for passive sustainable products confounds the “peak ESG” narrative. Sustainable-finance experts argue the investment universe is nuanced, with some investors favoring passive ESG products for performance reasons rather than purely values alignment.

The ESG furor over greenwashing and prioritizing returns over impact risks obscuring investors’ true motivations, which often involve willingly sacrificing some wealth to create what they perceive as positive change, akin to philanthropic donations. While some critiques of exaggerated ESG claims are valid, differing interpretations of sustainability also contribute to greenwashing accusations between stakeholders.

Clarity on distinctions between ESG integration and dedicated sustainable investing is needed, but sustainability-focused investors like Ark Invest insist strong investment returns and positive impact are compatible goals.

Ultimately, understanding individual investor aspirations to balance the profit motive with supporting policies that promote an improved environment / controlled climate change (as opposed to more vague-sounding goals of “saving the planet”) is crucial. Recent surveys indicate consistently high interest in sustainable investments despite the current debate, suggesting demand for ESG products will persist and potentially rise from current levels as the market matures. Where that leaves Texas et al is less clear. We’d say that on a clear day you can see forever, but with the higher emissions potentially flowing out of the stance on ESG – well, you get the picture. FT, SuperNews