Morgan Stanley Downgrades Banks as Recession Risks Rise
41 minutes ago
Analysts at Morgan Stanley on Monday cut their outlook on large- and mid-capitalization banks to “in-line” from “attractive,” writing that President Donald Trump’s tariffs are increasing recession risks.
In their note on large-cap banks, Morgan Stanley analysts led by Betsy Graseck wrote that while their base case is for a “significant” gross domestic product (GDP) slowdown, recession risks have surged. The slower GDP growth, coupled with increasing economic uncertainty, is set to “push out the nascent capital markets rebound, incrementally slow loan growth, and drive net charge offs across consumer and commercial loans,” they wrote.
They said that American consumers, who drive U.S. GDP growth, “do not have savings levels to absorb these tariffs and continue spending at pre-tariff levels.”
The analysts also downgraded Goldman Sachs (GS) to “equal-weight” from “overweight,” saying the Wall Street powerhouse is the most exposed to investment banking revenue, which is more vulnerable “to recession risk and deteriorating market conditions” than that of traditional commercial banks. They upgraded Bank of America (BAC) to “overweight” from “equal-weight,” citing cheap valuations.
Shares of Goldman Sachs slipped nearly 1% intraday, while those of Bank of America are up more than 3%.
Meanwhile, Morgan Stanley analysts led by Manan Gosalia downgraded midcap banks, “as higher and faster than expected tariffs raise recession risks, weigh on loan growth and in-turn, forward EPS and multiples.”
Oil Prices So Low That It’s Not Always Profitable to Drill
1 hr 35 min ago
Oil prices fell to their lowest level in years on Monday as worries about the reciprocal tariffs President Donald Trump announced last week continued to ripple through global markets.
Futures contracts for West Texas Intermediate, the U.S. crude oil benchmark, traded as low as $58.96 on Monday morning, their first dip below $60 since April 2021. Oil prices have slumped about 15% since Wednesday when Trump announced sweeping tariffs that are expected to raise the effective U.S. tariff rate to its highest level in more than a century.
Economists warn that tariffs of that magnitude will likely slow global economic growth, dealing a blow to oil demand. Trump campaigned on taming inflation and has tied that goal to cheaper energy.
“Oil prices are down, interest rates are down (the slow moving Fed should cut rates!), food prices are down, there is NO INFLATION,” he posted to Truth Social on Monday morning.
Oil prices are a direct input to inflation formulas and indirectly influence prices through their impact on the cost of producing and shipping goods. They are also volatile, which is why some economists consider core inflation, which excludes energy and food prices, a better indicator of inflationary trends than the headline figure.
The Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation measure, increased 0.3% in December, January, and February. Meanwhile, core PCE accelerated in each of those months and rose 0.4% in February.
While lower oil and gas prices could offset some tariff-related price increases, they’re likely to have economic fallout of their own. According to the most recent Dallas Fed Energy Survey, oil producers require an average price of $65 a barrel to profitably drill a new oil well, with nearly 60% requiring prices to be higher. That could complicate Trump’s plan to “unleash American energy” by encouraging producers to ramp up oil production.
“In a strange twist to the administration’s hope for more domestic oil and gas production, higher steel tariffs may result in fewer wells completed due to higher completion costs,” one oilfield services firm recently told the Dallas Fed. “The margins are thin enough for many wells, and this will likely result in downward pressure on total wells brought online.”
The president has insisted that higher costs can be offset by slashing regulations, which he claims burden oil and gas producers with unnecessary costs. However, some drillers operating in the Permian Basin, the source of nearly half of America’s oil, say the new administration’s regulatory plans will be “no real change at all.”
“We still get our permits from the Railroad Commission in Texas, for example, not the Environmental Protection Agency,” according to one firm. “The federal regulatory regime matters if you are operating in the Gulf of Mexico or Alaska but not for the Permian, Eagle Ford, Bakken, Utica, etc.”
Why Tesla’s Biggest Bull Just Slashed His Target Price
2 hr 24 min ago
Tesla (TSLA) stock tumbled Monday as the selloff sparked by the Trump administration’s new tariffs continued, and Wedbush analysts led by bull Dan Ives cut their price target for the stock to $315 from $550 previously.
The analysts called the current tariff uncertainty a “double whammy” for Tesla, as it will negatively affect the electric vehicle maker’s costs and profit margins, and also drive more negative reaction to CEO Elon Musk and the brand, leading to lower sales.
Jabin Botsford / The Washington Post / Getty Images
“Tesla has essentially become a political symbol globally….and that is a very bad thing for the future of this disruptive tech stalwart and the brand crisis tornado that has now turned into an F5 tornado,” the analysts wrote.
They estimated Tesla has lost “at least 10% of its future customer base” over “self created brand issues.” The impact will also be felt in China, where the analysts said the impact of Musk’s association with the Trump administration could drive Chinese consumers to buy increasing numbers of EVs made by domestic companies like BYD.
The analysts called for Musk to “step up, read the room, and be a leader in this time of uncertainty.” They said their bullish view of Tesla remains for the long term but “there is no denying this is a pivotal moment of truth for Musk to turn things around…or darker days are ahead.”
Tesla shares were down 4% in recent trading and have fallen about 43% since the start of the year.
One of Trump’s Biggest Wall Street Backers Wary of Tariff Plan
3 hr 38 min ago
Even one of President Donald Trump’s most vocal backers is wary of his tariff plan.
Bill Ackman, the billionaire CEO of hedge fund Pershing Square and one of Trump’s most fervent supporters on Wall Street, on Sunday criticized the president’s “massive and disproportionate tariffs” on key U.S. trading partners and urged Trump to call a “90-day time out” to allow for negotiations.
“Business is a confidence game. The president is losing the confidence of business leaders around the globe,” Ackman posted to X on Sunday evening. “The consequences for our country and the millions of our citizens who have supported the president—in particular low-income consumers who are already under a huge amount of economic stress—are going to be severely negative. This is not what we voted for.”
Michael M. Santiago / Getty Images
Ackman equated Trump’s reciprocal tariffs—including a 20% levy on imports from the European Union, 46% on Vietnamese goods, and 24% on Japanese products—with declaring “economic nuclear war on every country in the world,” and warned the move would obstruct investment in the U.S. and cause lasting damage to America’s reputation on the world stage.
In separate posts Sunday evening and Monday morning, Ackman placed blame for the tariff plans squarely on the president’s advisors. “I just figured out why @howardlutnick is indifferent to the stock market and the economy crashing,” he wrote late Sunday, referring to Commerce Secretary and former Cantor Fitzgerald CEO Howard Lutnick. “He and Cantor are long bonds. He profits when our economy implodes,” Ackman wrote.
National Economic Council Director Kevin Hassett criticized Ackman on Fox News on Monday morning, saying, “I would urge everyone, especially Bill, to ease off the rhetoric a little bit. … The idea that it’s gonna be a ‘nuclear winter’ or something like that is completely irresponsible rhetoric.”
Ackman softened his comments on Lutnick Monday morning, writing that “It was unfair of me to lash out at @howardlutnick. I don’t think he is pursuing his self interest… I am just frustrated watching what I believe to be a major policy error occur after our country and the president have been making huge economic progress that is now at risk due to the tariffs.”4
But Ackman continued to push back on the tariff plans. “The formula used by the administration to calculate tariffs made other nations’ tariffs appear four times larger than they actually are,” he wrote Monday morning, citing research from the American Enterprise Institute, a right-leaning think tank. “The President’s advisors need to acknowledge their error before April 9th and make a course correction before the President makes a big mistake based on bad math.”
Goldman Cuts GDP Estimate, Raises Risk of Recession
4 hr 26 min ago
Goldman Sachs analysts told clients Sunday they are cutting their forecast for gross domestic product growth in 2025, and raising their recession risk forecast in response to the Trump administration’s new tariffs.
The analysts now put a 45% chance on a recession coming in the next year, up from 35% previously, due to a “sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed.”
However, that 45% is predicated on the effective tariff rate rising by 15 points, less than it’s currently expected to rise if the Trump administration’s tariffs announced last week go into effect on Wednesday. If most or all of those tariffs are enacted and the effective tariff rate rises by roughly 20 points, the analysts said the likelihood of a recession could rise above 50%.
The Goldman analysts lowered their GDP growth forecasts to 0.5% for the fourth quarter and 1.3% for 2025, down from 1% and 1.5%, respectively.
The analysts said they now expect the Federal Reserve to make three consecutive quarter-point rate cuts starting in June, a month earlier than they previously expected cuts to start. In a recession, they expect about 2 points in total cuts over the next year.
The major indexes were down sharply Monday morning, extending last week’s tariff-fueled selloff after the stock market had one of its worst weeks in years.
Wall Street Banks Trim S&P 500 Forecasts
5 hr 26 min ago
Banks are scaling back their 2025 outlooks for U.S. stocks as uncertainty about the economy and markets escalates.
The benchmark S&P 500 could slump to 4,700, a further 7%-8% decline from Friday’s close, if President Donald Trump sticks with his tariff plans or the Federal Reserve doesn’t ease interest rates, Morgan Stanley analysts wrote.
The analysts said they had offered a 5,100-5,200 technical support level for the S&P 500 last Thursday but noted that “with the market quickly trading there on Friday and overnight futures down another 3-5% so far, our thoughts turn to the next area of support, which lies closer to the 200-week moving average, or 4700.”
Oppenheimer analysts on Monday cut their target to 5950 from 7100.
“The equity market appears oversold in our view,” Oppenheimer’s analysts wrote, “with uncertainty at levels investors find hard to embrace along with what we call ‘a negative pitch book’ that seemingly projects negative outcomes to infinity that’s taken hold in the near term of trader, investor, and consumer sentiment.
The index closed at 5,074.08 Friday, having suffered the seventh-worst week in the last 25 years, a decline of more than 9%. The S&P 500 was down nearly 5% in early trading Monday.
“Valuations also offer better support at that price so investors should be prepared for another 7-8% potential downside from Friday’s close if there is no line of sight to a less severe trade environment and the Fed remains firmly on hold,” Morgan Stanley’s analysts wrote.
Trump so far has shown no signs of backing down from the tariffs, while Fed officials have elected to keep their key interest rate steady. Fed Chair Jerome Powell said Friday that Trump’s larger-than-expected tariffs could stoke inflation and slow economic growth.
Bitcoin Price Levels to Watch as Cryptocurrency Slides
6 hr 12 min ago
Bitcoin (BTCUSD) dropped below the closely watched $80,000 level on Monday amid intensifying worries about the impact of tariffs.
The digital currency was at $77,400 recently, down from around $84,000 on Friday afternoon and trading at its lowest levels since November, as investors steer clear of risky assets.
After falling below the 200-day moving average (MA) last month, bitcoin’s price consolidated within a rising wedge before breaking down below the bearish pattern in late March, signaling a continuation move lower.
Indeed, the cryptocurrency’s price has continued its downtrend, with declines accelerating on Sunday evening after a brief period of sideways drift. It’s also worth pointing out that the 50-day MA has crossed below the 200-day MA to form an ominous death cross, a chart pattern that warns of further selling.
Investors should watch key support levels near $74,000, $65,000, and $57,000, while also monitoring a major overhead area near $87,000.
Read the full technical analysis piece here.
Futures Point to Sharply Lower Open for Major Indexes
6 hr 53 min ago
Futures tied to the Dow Jones Industrial Average were down 2.2%.
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S&P 500 futures were off 2.4%.
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Nasdaq 100 futures slid 2.7%.
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