—— Fed Considers Larger Rate Hikes; Electronic Trading Becomes Hot Wall Street Role; Private Credit Giants Rival Investment Banks; CVC Invests in Women’s Tennis Association; Meta Begins New Round of Layoffs This Week; Salesforce Launches $250M AI Fund; U.S. Series B VC Funding Shows Alarming Decline
1. Fed Considers Larger Rate Hikes
Today, Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee, stating that the latest economic data has been stronger than expected and that the terminal rate may need to go higher than previously anticipated. If necessary, the Fed is prepared to accelerate the pace of rate hikes.
Following the announcement, U.S. Treasury yields rose, equities declined broadly, and the U.S. dollar continued to strengthen. Traders now expect the Fed to raise interest rates by 50 basis points this month, up from the prior expectation of 25 basis points.
Powell emphasized that while inflation has eased in recent months, returning to the 2% target will be a long and challenging process.
Powell said the economic data was stronger than anticipated and suggested the Fed may need to raise rates more aggressively and more frequently.
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2. Electronic Trading Becomes Hot Wall Street Role
According to a survey by research firm Coalition Greenwich of 25 Wall Street firms, more than half of U.S. sell-side institutions plan to increase hiring in their electronic trading departments over the next 18 months.
Additionally, 30% of firms intend to expand teams in execution and advisory analytics, while 25% plan to hire more algorithmic trading staff.
Electronic trading, characterized by minimal human involvement and a heavy reliance on algorithms and technology, is becoming increasingly vital as Wall Street faces intensified competition. High-speed and automated trading are now key growth areas. Citigroup recently expanded its staff focused on automating infrastructure.
More than half of firms plan to hire in electronic trading to keep pace with the automation trend.
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3. Private Credit Giants Rival Investment Banks
Sources report that private credit giants such as Apollo, Blackstone, and Ares plan to provide $5.5 billion in acquisition financing to help Carlyle acquire a 50% stake in healthcare analytics firm Cotiviti. These lenders are confident they can “steal” lending business from traditional banks like JPMorgan and Goldman Sachs.
Carlyle could announce the acquisition of Cotiviti, which is valued at approximately $15 billion, within days or weeks.
Over the past few months, volatile bond markets have left investment banks unable to offload underwritten loans. To reduce risk, banks have tightened lending and raised thresholds.
Ares Head of Credit Kipp deVeer stated that large-scale acquisition financing is no longer the exclusive domain of banks. Private equity firms have ample dry powder and are eager to deploy capital in rare, high-quality deals.
Private equity giants like Blackstone now have enough capital to issue megadeals rivaling traditional banks.
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4. CVC Invests in Women’s Tennis Association
Today, the Women’s Tennis Association (WTA) announced that private equity firm CVC Capital Partners will become a commercial partner and invest in enhancing fan engagement channels and digital platforms.
A CVC spokesperson revealed the firm invested $150 million in WTA Ventures, a joint venture with the WTA, acquiring a 20% stake. The WTA will retain full governance over tournament operations.
CVC’s existing sports investments include Spanish football and volleyball, rugby, and broadcasting rights for various leagues.
CVC’s investment has received full support from the WTA and its players, with a goal of driving growth and adding value for the league, its athletes, and its fans.
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5. Meta Begins New Round of Layoffs This Week
Sources report that Meta Platforms, the parent company of Facebook and Instagram, could initiate a new round of layoffs as early as this week.
In November, Meta laid off 11,000 employees, accounting for 13% of its total workforce at the time.
Following the news, Meta’s share price rose 2.3% today to $189.21. Year to date, the stock is up 54%.
Meta employees report low morale and high anxiety, with many fearing they will be terminated before bonuses are distributed later this month.
In February, Meta announced plans to launch “Meta Verified,” a subscription service granting verification badges on Facebook and Instagram, priced at $11.99 per month and targeting content creators.
Over the three years since the pandemic began, Meta’s revenue per employee has trailed that of other major tech firms.
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6. Salesforce Launches $250M AI Fund
CRM software giant Salesforce has announced that its venture capital arm, Salesforce Ventures, has launched a $250 million AI fund to invest in promising generative AI startups.
The company initially plans to invest in four startups: Anthropic, Cohere, Hearth.AI, and You.com.
Salesforce EVP of Corporate Development John Somorjai stated that the company has a long history of investing in high-potential enterprise tech firms, and these new investments align with its strategic focus.
Salesforce also announced today that it will add new AI tools to its platform, including Einstein GPT, a customer service and sales email assistant.
Salesforce shareholders have been pressuring the company to accelerate AI development and adoption.
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7. U.S. Series B VC Funding Shows Alarming Decline
After tech and biotech valuations began collapsing last year, Series B funding for U.S. startups initially remained resilient—but that last bright spot in venture capital has now faded in recent months.
So far in 2023, Series B funding in the U.S. has plummeted and may hit the lowest quarterly total in three years.
According to Crunchbase, total Series B funding in the second half of 2022 fell 60% year-over-year.
Series B rounds are closely watched because they typically go to companies that have proven the value of their product or technology and are ready for larger funding rounds. As such, Series B activity serves as a key barometer of investor confidence in startups.
Only six U.S. Series B rounds this year have exceeded $100 million—far below the 90 recorded during the same period in 2022.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.