JPMorgan Absorbs First Republic Bank – Stocks Hit Near Highs

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In his Daily Market Notes report to investors, Louis Navellier wrote:

JPMorgan Absorbs First Republic Bank

Stocks hit the high for the year as First Republic Bank (NYSE:FRC) was absorbed by JPMorgan Chase & Co (NYSE:JPM).

With the expectation of the Russell 2000, all the major indexes carved out a gain for April on the strength of the major rally at the end of last week, with stocks now near the high for the year and back where we were a full year ago, before the Fed began to raise rates.

Consider that for the year to date, the biggest 50 S&P stocks are up 15.4% while the equal-rated Russell 1000 is up only 1.5%. The biggest names are acting as the safe haven as predictions of a recession continue.

Fears of a banking crisis have faded for the moment, albeit the regional bank index is lower this morning as investors consider how the ability for a run on a bank via online withdrawals has changed the game.

JPMorgan, the biggest bank in the country, had to get a provision to become even bigger to absorb First Republic, another sign that bigger is a major advantage this year.

All Eyes on Fed

Today’s economic numbers showed stability in manufacturing although still in recession, but with slightly higher employment and pricing, adding to expectations that the Fed will raise rates this Wednesday and may not signal a pause, leading interest rates higher today.

I think this is a mistake though, especially in the wake of First Republic Bank being taken over by the FDIC and then acquired by JPMorgan.

The earnings season is far from over and this morning’s results continue to be largely beats with no major cuts in 2nd half forecasts.

But the event of the week remains the Fed decision on Wednesday, with their commentary very important given the hopes that the regional banking situation may make them more cautious while the strength of the stock market and still rock bottom unemployment appears to give them room for further increases to push for their 2% inflation target, which is still a long way off.

Attractive Money Markets

The stickiness of housing prices due to the low inventory may hold back the inflation calculation more than expected. Even if they come across as aggressive it is likely that the trend we’ve seen of investors seeking shelter in the biggest names will continue, which will support index prices.

The longer stocks hold up, the more all the money on the sidelines will reconsider just how attractive 4% money markets really are. 

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A hungry South Korean student ate a banana that was part of one of Maurizio Cattelan’s art installations. The artwork, called Comedian, consisted of a ripe banana duct-taped to a wall. After eating the banana, the student taped the peel back onto the wall, with the museum later replacing it with a fresh banana. Source: Sky News. See the full story here.