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MARCH 25, 2024

BLACKROCK BOOSTS CRYPTO

BlackRock Inc. is expanding its digital asset investment offerings with the launch of the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), which tokenizes cash and U.S. Treasury bills on the Ethereum blockchain. This fund offers qualified investors the opportunity to earn yield in U.S. dollars through Securitize Markets, LLC. Following BlackRock’s announcement, the cryptocurrency market has responded positively, with Bitcoin and Ethereum trading close to the $67,000 and $3,440 mark respectively as of 8:00 AM CST. In addition, it is also worth attributing the current positive trend to global central banks beginning to cut rates, such as the Swiss National Bank and the Central Bank of Mexico, as well as the decrease in selling pressure on Bitcoin from the Grayscale Bitcoin Trust. Furthermore, shorts betting against Bitcoin and Ether faced substantial losses, with over $100 million in leveraged futures positions liquidated recently, indicating a positive sentiment towards the prices of both Bitcoin and Ether.

ETF LINEUP EXTENDED

Morgan Stanley has recently made waves in the exchange-traded funds (ETF) market by converting two fixed-income mutual funds from Eaton Vance into ETFs, expanding their ETF lineup to a total of 14 funds. With a focus on active, fixed-income ETFs, Morgan Stanley’s decision to convert these mutual funds showcases a deepening commitment to these investment products, demostrating the firm’s growing presence in the highly competitive $9 trillion ETF industry. The newly launched ETFs, known as the Eaton Vance Total Return Bond ETF (EVTR) and the Eaton Vance Short Duration Municipal Income ETF (EVSM), are actively managed and will come with fees of 32 and 19 basis points, respectively. Moreover, this decision aligns with the broader industry trend of transitioning from mutual funds to ETFs, as other major players such as Dimensional Fund Advisors, JPMorgan Asset Management, and Fidelity Investments have also made similar transitions in recent years.

SEMICONDUCTOR REVIVAL

Although the semiconductor industry saw a downturn due to reduced consumer electronics spending post-pandemic, impacting Micron Technology, the tech company has experienced a return to profitability in the second quarter for 2024 fueled by a rebound in PC and smartphone purchases and Nvidia’s AI revolution. This resurgence is not only significant for Micron’s stock and the memory chip market but also points to continued growth in the AI computing sector, given Micron’s collaboration with Nvidia. Moreoever, Micron’s strong financial performance and Nvidia’s soaring stock value suggest a promising future for both companies in the semiconductor market. With Micron’s reported 58% year-over-year sales increase and estimated 76% jump in revenue for the third quarter, the company anticipates continued growth following a challenging period. Looking ahead, Micron’s production of HBM3e memory, predominantly used in accelerated computing and AI, indicates potential profitability and demand for high-end memory chips beyond fiscal 2024. Furthermore, as Micron expects revenue from HBM to bolster overall financial margins, the company’s positive outlook for the semiconductor industry aligns with Nvidia’s anticipated growth trajectory, positioning both companies for likely success.

SURGING GROWTH WORRIES

The U.S. Treasury market, which is the largest in the world, has been rapidly growing by issuing more bonds, almost doubling since the start of the pandemic and hitting a record $23 trillion in 2023. This expansion is concerning for Wall Street because past experiences show that quick growth can lead to problems. Although treasury bonds are typically seen as safe investments and are easy to trade, some worry that any issues in the Treasury market could spread to other parts of the financial system due to recent changes in trading rules. The Treasury Department issues bonds when the government does not have enough money from taxes to cover spending, borrowing a significant $2.4 trillion in 2023. The total market value has now reached $27 trillion, which is six times larger than before the 2008 financial crisis, thus, concerns are rising about the market’s ability to handle this increased level of bond sales as government spending continues to grow steadily.

KEY EVENTS HAPPENING THIS WEEK

Monday: New home sales report for February and speeches from Atlanta Fed President Raphael Bostic,Chicago Fed President Austan Goolsbee, and Fed Gov. Lisa Cook.

Tuesday: S&P Case-Shiller home price index report for January, durable-goods orders report for February, and consumer confidence report for March.

Wednesday: Speech from Fed Gov. Christopher Waller.

Thursday: Second revision of GDP for fourth quarter, pending home sales report for February, initial jobless claims for week ending on March 23, and final consumer sentiment and Chicago Business Barometer (PMI) reports for March.

Friday: Personal consumer index (PCE), and advanced U.S. trade balance in goods, retail inventories and wholesale inventories reports for February, and speech from Fed Chair Jerome Powell.

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