News and analysis

Latest developments from inflationary data and US central bank authorities have encouraged me to take profit on my only stock from the banking segment, a moderate stake in JPMorgan Chase & Co (JPM). You may wonder what happened to this reputable financial institution or its ratings, or just to my personal assessment of its reliability. Everything is OK with JPMorgan ever since it was established more than 150 years ago. In fact, I still consider JPMorgan as the strongest representative of the US banking family, and that was exactly the reason why I left a block of my JPM stock in peace after selling out all other banking stocks. So, the point is I feel the banking segment may form the weakest link among broader sectoral distribution of Wall Street investments, as I don't believe anymore that the squeezed financial income by US banks may be hold unharmed when the benchmark 10-year public bond yields exceeded 4.5%, for the first time since late November.

Specifically, too high bond yields may further drop the value of most previously accumulated old bonds on the balance sheet of large and small banks, indiscriminately. Historically high borrowing costs is the reason behind the curtain of this piece, where the Federal Reserve wrote the screenplay of this sad episode. Again, expensive costs for credit financing, from the banking customers point of view, makes their need for credit lower, weakening the source of regular income for banks. Borrowing costs, as well as bond yields, cannot follow below certain high standards when the interest rate cuts phase of a monetary cycle is postponed due to persistent inflationary pressure.

The Federal Reserve (Fed) Minutes this Wednesday have clearly confirmed to me that most of the Fed members are ready for a longer period of tight policy. "Some" of them literally agreed that the current 5.25%-5.50% interest rate range was "less restrictive than desired, which could add momentum to aggregate demand and put upward pressure on inflation". This is exactly a train of thought, which is used from time to time in the periods of arguing the need for even more rate hikes, and not rate cuts. Well, no policy makers actually pencilled a higher policy rate on dot plot projections, yet it is now hard to imagine any rate cut at least before September. The Fed has no reason to cut, as they need to wait two or three consecutive quarters with declining CPI (consumer price index) numbers, while the CPI is surging at the moment. Central bankers seem to be not sure about inflation dynamics in coming summer months with usually growing gasoline prices, as Minutes also showed they were debating whether it became risky to ease too soon, before the inflation path shifted back towards the major supposed autobahn leading to its 2% target. "Participants generally noted their uncertainty about the persistence of high inflation and expressed the view that recent data had not increased their confidence that inflation was moving sustainably down to 2%," the minutes said in favour of two opposite views in one sentence. Such rhetoric looks like replacing some portion of lies. This was a bad sign.

Share price of the Bank of America (BAC) quickly lost nearly 3% for the last two trading sessions. Technically, the Bank of America formed a potential top to slide down further, after the head and shoulders pattern appeared on daily charts and the neckline was broken just a day ago. Meanwhile, as the segment's undisputed leader, JPM has wasted only about 1% so far. Yet, the uptrend in JPM is under question as well. So, this does not look reasonable to squander the big advantage after the JPM price climbed up from a $150 area to about $200 per share from the pre-Christmas time to this spring. No prudent owner will leave it to chance, especially when the cut of cards will look more and more unfavourable. This is why I don't want to wait for the earnings date, which is scheduled for tomorrow, Friday April 12, when JPM and some other large banking players like Blackrock, Wells Fargo and Citigroup would reveal their quarterly numbers, as Q1 numbers do not matter too much when the hurricane on bond yields is already here.

The banking rally accelerated in the first three months of the year, hand by hand with a bias towards cutting rates. Previously, they projected cutting rates by 0.75%, and now the crowd began to understand that even a 0.5% rate cut would be a sweet dream scenario for 2024, when the single rate cut just two months before the November elections to the White House would be like throwing us a bone, just for the bulls would not suddenly transform into bears in the improper time.

VeChain (VEC) has experienced a notable uptick, rising by 12.0% to $0.0474 over the course of this week. Although prices reached $0.0493 on Thursday, they retraced slightly thereafter. It's worth noting that VEC had previously touched this level on March 12, but faced resistance amidst a broader correction in the crypto market.

Despite the challenges posed by Bitcoin (BTC) maintaining its position around $70,000 per coin, VeChain (VEC) possesses its own set of bullish catalysts that could propel prices upwards, potentially towards the $0.1000 mark. As the market consolidates at current levels, integration of VEC into Big Tech projects may contribute to sustained upward momentum for VEC.

Philip Morris multinational tobacco company (PM) stocks have reached a notable support level at $90.00, a price point that has been retested 11 times since April 2021. This support has demonstrated its resilience over time and appears to be well-defended by large market players. Given this historical pattern, there is a reasonable expectation that the support level will hold once again.

Considering the current price of $89.08 per share, I plan to initiate a long trade position. My target price for this trade is set at $100.00 per share, representing an 11.0% increase from the current level. To manage risk, I will place a stop-loss order at $80.00 per share, which is below the lows observed on December 30, 2022.

The tongue ever turns to the aching tooth, and so I am always in a search for any fresh negative information about Boeing Corporation (BA). As you well know, I have conceived a long-term bullish position in Boeing's major rival Airbus (AIR) since the beginning of 2024, later complemented by a more risky idea of short-selling directly on Boeing stock. I waited for the moment when the trading deal with Boeing proved to be effective, following the official US FAA (Federal Aviation Administration) announcement on investigating another whistleblower's claims that the aircraft manufacturer allegedly ignored reported safety or quality warnings when continuing a mass production of its 787 and 777 jets. As a result, the share price of Boeing lost nearly 2% this Wednesday to set another anti-record since at $174.63 on daily closing price since late November of 2022. The lowest intraday point was below $172.50. Now I am riding my hobby horse again by sharing the details of Boeing's potentially growing reputational concerns, which strongly affected supply orders.

A January 5 panel blowout on a 737 MAX plane served as a faint warning compared to Boeing engineer Sam Salehpour's testimony before the FAA commission. The man already witnessed challenges like threats and exclusion from working meetings, after he "identified engineering problems that affected the structural integrity of the jets", adding that Boeing "employed shortcuts to reduce bottlenecks" during 787 assembly, according to his attorney's comments to Reuters. Previously, the FAA had to investigate quality problems and manufacturing flaws for the same 787 model, which led Boeing to halting deliveries of this jet for more than a year in 2021-2022. At that time, Boeing management admitted some 787 planes had shims of improper size for filling tiny gaps with areas violating skin-flatness specifications. Yet, the engineer Sam Salehpour insists that further assembly process made an "excessive stress on major airplane joints. As two examples, "embedded drilling debris" was allegedly found by him on more than 1,000 planes, while some misalignment problems in the 777 jets were remedied by using force, so that he "literally saw people jumping on the pieces of the airplane to get them to align".

"Voluntary reporting without fear of reprisal is a critical component in aviation safety," the FAA only commented after the meeting with the whistleblower. Sometimes conciseness may tell more than verbosity. As to the professional community of engineering employees, called SPEEA, it just identified him as a member who works at Boeing's plant in Washington. In combination with a strange “suicide” of another Boeing's accuser, John Barnett, the story continues to cast a shadow on the giant company's working processes on assembly of popular jets. A Senate investigation subcommittee is scheduled to hold a hearing with Salehpour in about a week, on April 17. The issue is titled "Examining Boeing's Broken Safety Culture: Firsthand Accounts''. Boeing CEO Dave Calhoun recently said he is going to step down by the end of 2024, and he would supposedly testify at a hearing. The top Republican members on the panel said their goal is "to provide Boeing the opportunity to explain to the American people why, in light of recent apparent safety failures, the public should feel confident in Boeing's engineering and assembly processes''. "Rather than heeding his warnings, Boeing prioritized getting the planes to market as quickly as possible, despite the known, well-substantiated issues he raised," Salehpour's lawyers said in their statement a couple of days ago.

On a parallel course, the U.S. Department of Justice said it is trying to find out whether Boeing violated a 2021 settlement that allowed the company to avoid responsibility on a charge of "conspiring to defraud the FAA" after two fatal crashes in 2018 and 2019. Nothing looks easy for Boeing now. Its delivery numbers plunged nearly by half YoY, as of the end of March. As the investigations are protracted, the market crowd is not eager to dig up Boeing shares from the hole it entered mostly by its CEOs' inaction and silence. Technically, the accomplished failure under the thin ice of a former $180 support would lead to a test of an area around $150 per share, which I feel as still a good chance for earning money on holding short sell positions on Boeing. The next possible target could be around $125, corresponding to the very lows of 2022.

Meanwhile, Airbus shares moderately retreated from its recent all-time peaks, yet its management confirmed confidence in airplane output forecasts. The European competitor of Boeing is getting additional orders from all those airlines, which need to continue post-covid recovery. Nothing new or very special except that Airbus reported 142 deliveries in Q1, being closer to the way to an annual delivery target of 800 aircrafts. Single-aisle production volume is below planning levels at around 50 planes a month, but the manufacturing process is going to be accelerated to reach 75 a month in 2026, the company's chief executive Guillaume Faury confirmed.