The S&P 500 dropped for a fourth day, its longest pace of declines for a month, closing down 0.4 per cent at 1,324.80. Bank shares led the way down (Bloomberg).
Some Fed officials remain open to easing but remain unwilling to extend Operation Twist beyond June, according to the latest FOMC minutes (Reuters). Committee members noted ‘downside risks’ including the eurozone and a fiscal cliff in the US in deciding to continue forecast guidance that rates are likely to remain low into late 2014, despite individual predictions that they will rise sooner (Financial Times).
Countdown to the Facebook IPO: insiders out, retail money in. Facebook will increase the size of the offering by 100m shares, or 25 per cent, allowing early investors and directors to cash out more of their stakes (Wall Street Journal). Some 57 per cent of shares sold could now come from existing holders’ stakes, excluding the exercise of an over-allotment option. Some institutional investors are wary that sizeable insider selling could make the shares volatile after the IPO (Financial Times). Retail demand for stock in Facebook shows few signs of stopping (Reuters). Brokerages including E*Trade and TD Ameritrade have stopped taking client orders for the IPO (Reuters).
Tranches have emerged as a major element in JPMorgan’s failed Whale trade on credit indices. People familiar with the trade said that the bank’s chief investment office bought protection on tranches of a credit index to protect against a downturn in credit markets. To hedge the move, the bank had to sell greater sums of protection on the index as a whole. The hedge malfunctioned amid the credit rally of late 2011, having misjudged correlations (Financial Times). The CIO’s use of Value-at-risk modelling separate from the rest of the bank has also come under new scrutiny (Reuters).
Debt ceiling politics saw a clash over spending cuts. President Barack Obama warned Republican lawmakers that a bill to raise the debt limit should not include cuts (Reuters).
Google unveiled “Knowledge Graph”, a bid to provide more detailed results from its search engine. The move to load search results with additional data is a challenge to Facebook’s championing of the ‘social graph’ of information via personal connections (Financial Times, Google blog.).
US data for the day come from initial weekly claims at 0830am EST, and Philly Fed and Conference Board leading indicators at 10am EST.
– Herbalife on the other side of an Einhorn-ing.
– The Reformed Broker recaps the Ira Sohn conference.
– A bevy of economics papers, via Free Exchange.
– Why software piracy spells BRIC.
– And.. Tyler’s underrated European artworks.