—— Federal Reserve Begins Considering Rate Cuts; FTX Customers May Recover Funds; U.S. Treasury to Issue Record Bonds; New York Community Bank Shares Plunge 36%; Judge Rejects Musk’s $55 Billion Pay Package; Positive Signs for New York Office Market; Microsoft Azure Revenue Soars
1. Federal Reserve Begins Considering Rate Cuts
At today’s FOMC meeting, the Federal Reserve decided to keep the benchmark interest rate unchanged for the fourth consecutive quarter.
The current rate remains at 5.25% to 5.5%, the highest in 22 years. The market now sees a 40% chance of the Fed’s first rate cut in March. However, most Fed officials still believe it is too early for rate cuts.
Fed Chairman Jerome Powell expressed satisfaction with the decline in inflation and stated there is no rush to cut rates.
Raphael Bostic, President of the Atlanta Fed, indicated that the Fed may have to reverse course and raise rates again if it cuts too early.
The Fed’s balance sheet has shrunk to $7.7 trillion as of today.
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2. FTX Consumers May Recover Funds
Bankrupt cryptocurrency exchange FTX revealed to the bankruptcy court that it may fully repay customers and creditors who can prove their losses.
Restructuring advisors need to review millions of claims and sift through fraudulent ones. Attorney Andrew Dietderich said the task is massive, and not everyone will recover their principal, but they have a strategy to complete the process.
Additionally, another team responsible for FTX’s restructuring has abandoned efforts to relaunch the exchange due to high costs.
FTX is seeking new investors to restart its operations, though funding is insufficient to cover costs.
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3. U.S. Treasury to Issue Record Bonds
The U.S. Treasury announced today that it will expand the volume of Treasury bond issuance at upcoming auctions over the next three months.
In April, the Treasury will issue $70 billion in 5-year bonds, setting a new record for bond issuance of 2-year or longer maturities.
In recent months, the Treasury has increased bond issuance due to the growing federal budget deficit, which reached $1.7 trillion last year.
The 2-year Treasury yield fell 0.15% to 4.21% this morning, likely due to slightly lower-than-expected job growth.
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4. New York Community Bank Shares Plunge 36%
New York Community Bancorp (NYCB) reported a significant reduction in its quarterly dividend from 17 cents per share to 5 cents due to stricter reserve requirements.
Due to the poor credit market, NYCB’s loan loss reserves ballooned to $552 million, more than 10 times analysts’ expectations.
Over the past 18 months, NYCB grew rapidly through two acquisitions, quickly expanding its total assets to $100 billion, which will attract more regulatory scrutiny.
After the earnings report, NYCB’s stock price plunged 36%.
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5. Judge Rejects Musk’s $55 Billion Pay Package
A Delaware judge ruled today that Tesla CEO Elon Musk cannot receive a $55 billion compensation package, deeming the amount too high. Tesla’s board must now rewrite Musk’s pay plan.
Musk had repeatedly asked the board for a new stock reward plan, hoping to gain more control over Tesla while expanding AI technology.
Musk’s net worth has reached $51.1 billion, but most of it is tied up in stock options.
Over the past years, Musk has met his stock incentive goals but has not exercised the options.
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6. Positive Signs for New York Office Market
A report from property and asset management firm VTS indicates signs of recovery in New York’s office market, with site visits and leasing demand increasing for six consecutive months.
In December, REBNY reported that Manhattan office building visits increased by 67% month-over-month, with Midtown visits rising 73%, although Downtown saw a 54% drop.
VTS CEO Nick Romito stated that while it is too early to say the office market has bottomed out, the new data indicates improvement.
The demand for office space from tenants looking to lease at least 50,000 square feet increased by 38.9%, although it was lower than Los Angeles’ 46.8%.
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7. Microsoft Azure Revenue Soars
On Tuesday, Microsoft reported that its Q2 fiscal year 2023 revenue rose 18% to $62 billion, with net income of $2.93 per share.
Azure cloud services revenue increased 30%, surpassing analyst expectations and outpacing the previous quarter’s 29%. The company expects Azure growth to stabilize in the current quarter.
Investors believe that CEO Satya Nadella is positioning Microsoft to become a major AI powerhouse, with the company’s market value surpassing $3 trillion, now exceeding Apple’s.
Microsoft Office cloud services reached 400 million paid enterprise users last quarter.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.