Chapter 1: What challenges does Kevin Warsh face as Fed chair?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Wednesday, March 4th, and I'm your host, Kim Kahn. Our top story so far. Fed chief-to-be Kevin Warsh's job is getting tougher by the day.
The White House may want lower Fed funds rates, but the bond market is signaling rising inflation worries after the attacks on Iran and a surge in oil prices. President Trump has said the conflict could last four to five weeks.
That leaves a couple of months for things to normalize before Warsh's first meeting of the FOMC, though polymarket odds currently predict a cessation of hostilities by the end of June. Fed funds' futures now show a 60% chance rates stay unchanged after Warsh's inaugural meeting, up from 54% a week ago and 42% a month ago.
Two quarter-point cuts are still priced in by year-end, though the odds have dipped to around 60%.
Chapter 2: How is the ISM Services Index impacting the economy?
Minneapolis Fed President Neil Kashkari said it's too soon to know what impact a war with Iran might have on inflation or how long any effects could last. Coming into this moment, I was feeling pretty good, he said. I felt like policy was in a pretty good place. On the economic front, the ISM Services Index jumped to 56.1 in February from 53.8 in January, beating the 53.5 consensus.
It's the highest level in more than three years and marks the 20th straight month of expansion. Economists at Wells Fargo say some service sector firms are adding headcount in anticipation of stronger activity. And while higher prices remain a burden, the ISM data suggests that cost pressures aren't getting materially worse. Their bottom line?
Service sector conditions are improving as businesses navigate steep uncertainty. And ahead of Friday's jobs report, ADP says private sector employment grew by 63,000 in February, topping the 43,000 consensus.
Chapter 3: What recent developments are affecting the crypto market?
That's roughly in line with what economists expect from the official numbers, though ADP's track record is spotty. Among active stocks, crypto exchange names including Coinbase Global, Galaxy Digital, Bitcoin Miners, and other crypto-linked stocks rallied after Trump urged banks to make a good deal with the crypto industry to advance stalled legislation.
A major sticking point for progress on the crypto bill remains Wall Street's objection to stablecoins that feature yield-like payments. Crowdstrike is choppy post-earnings, but it got plenty of love from Wall Street. RBC's Matthew Hedberg said the company delivered a very strong quarter by accelerating its scale and raising fiscal 2027 ARR expectations.
He added that even with the raised outlook, upside is likely throughout the year. And Moderna continued to rise as analysts said its agreement to resolve a patent dispute with Arbitus Biopharma and Roivant's Genevent unit removed a key legal overhang for the COVID vaccine maker. Moderna agreed to pay $950 million to settle the dispute related to delivery technology behind its vaccine.
In other news of note, there's a whale to the rescue. Billionaire Leo Koguan, one of the largest individual shareholders of Tesla, said he bought 1 million shares of Nvidia.
Chapter 4: How are institutional investors responding to market volatility?
I am convinced AI is not a bubble, it's only the beginning, he posted. He told Bloomberg he plans to buy another million shares of Nvidia soon to show support for a nervous market.
And in the Wall Street Research Corner, Brown Brothers Harriman says institutional investors are preparing to expand their exposure to exchange-traded funds, even as market volatility pushes portfolio managers to refocus on strategies aimed at generating alpha.
In the firm's Global ETF Investor Survey, 96% of respondents said they plan to increase ETF allocations over the next 12 months, matching last year's record level. Tim Huber, managing director of ETF servicing, said that the next phase of growth will likely emphasize active management, broader asset class access, and more sophisticated operational capabilities.
That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com. And for a wealth of coverage on stocks and ETFs, go to SeekingAlpha.com.