Good morning. US stock futures were little changed in Tuesday morning trading as investors turned their attention to the release of more earnings reports.

"It’s not always easy to do what’s not popular, but that’s where you make your money"

John Neff

Top News

US officials, chip manufacturers meet to discuss China policy

WHAT: Chip company big shots and Biden Administration officials met behind closed doors to discuss China trade policy as chip manufacturers push for a halt to more export curbs that are currently under consideration.

WHY: The chip industry is keen to protect its profits in China. Last year, China accounted for $180 billion in semiconductor purchases — more than a third of the worldwide total of $555.9 billion.

Investment bank cuts US recession risk

WHAT: Goldman Sachs’ chief economist Jan Hatzius took out his probability scissors and gave a slight trim to the likelihood of a US recession in the next 12 months. The bank’s forecast has been adjusted to 20% from 25% with Hatzius stating the main reason for the adjustment was that “recent data has reinforced our confidence that bringing inflation down to an acceptable level will not require a recession”

WHY: Market expectations of a so-called “hard-landing” have been recently challenged by data showing slowing consumer and producer price inflation in recent months.

Rejected…

WHAT: Americans are feeling the sting of rejection as their credit applications face a higher likelihood of being denied. The Federal Reserve’s latest survey revealed that the rejection rate for loan applicants has soared to a 5-year high of 21.8%. Overall credit applications have also declined to there lowest level since October 2020.

WHY: In the previous survey published back in February, before the collapse of Silicon Valley Bank and other US lenders, the rejection rate was 17.3%. The increase since then has been broad-based across age groups, and highest among those with credit scores below 680.

In Other News

SEC head: AI poses risk to financial stability

 WHAT: Wall Street’s top regulator has a message about artificial intelligence: AI is rapidly shaking things up and regulators will likely need to adjust to preserve the stability of the financial system. “AI may heighten financial fragility as it could promote herding with individual actors making similar decisions because they are getting the same signal from a base model or data aggregator” US Securities and Exchange Commission Chair Gary Gensler said.

WHY: Gensler also warned that publicly traded companies should be wary of misleading investors through their corporate statements and disclosures about the risks and opportunities AI might bring.

No hiding place for crypto companies

WHAT: The G20’s Financial Stability Board (FSB) has a memo for crypto firms: “Get your act together, or face the full force of regulation!” The FSB published final recommendations as requested by the G20 on how firms that trade crypto assets should be supervised. The rules focus on robust governance to avoid conflicts of interest, and proper risk management and disclosures to ensure that customer money is segregated from company cash.

WHY: The European Union has already approved the world’s first comprehensive set of rules for crypto asset markets, but the FSB’s “global baseline” minimum standards are designed to accommodate jurisdictions that want to go further.

Tesla board returns mega payout

WHAT: Tesla’s board members, including CEO Elon Musk, have decided to take a detour on their compensation highway. They’ve agreed to return over $735 million in stock awards and cash to settle an investor lawsuit that accused board members of improperly giving themselves massive compensation packages.

WHY: The Tesla directors denied any wrongdoing as part of the accord, but said they agreed to settle the case to “eliminate the uncertainty, risk, burden and expense of further litigation”

Key Economic Events

• Tuesday - NAHB Housing Market Index

• Wednesday - No Major Economic News

• Thursday - Philadelphia Fed Business Outlook

• Friday - No Major Economic News

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