Why Apple’s Latest Move Is Another Blow for Banks.

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Apple certainly picked its moment to launch its latest push into financial services.

The tech giant has unveiled a high-yield savings account with an interest rate of 4.15%, in partnership with Goldman Sachs. That rate is more than 10 times the national average, Apple says.

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As well as being a sign of Apple’s ambitions, it’s another threat to banks.

Earnings from State Street and Charles Schwab Monday were a reminder, if one were needed, that banks are struggling to keep hold of their customers’ cash—both reported a fall in deposits in the first quarter.

Savers were already moving their dollars into higher-yielding money-market funds, as the Federal Reserve’s aggressive interest-rate hiking has played out over the past year or so. But the recent banking turmoil has only accelerated deposit outflows at regional banks.

Apple, a trusted brand with a huge customer base when it comes to iPhones, adds to the competition and gives consumers another option for where to put their cash. It will also put pressure on the big banks currently offering low rates.

For the company itself, it appears to be a shrewd and well-timed move. It comes after last month’s launch of Apple Pay Later, which allows consumers to split purchases into four payments over six weeks.

Apple is serious about becoming a major player in financial services, and it could shake up the entire sector.

—Callum Keown

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McCarthy Calls for Spending Cuts to Raise Debt Ceiling

House Speaker Kevin McCarthy (R., Calif.) visited the New York Stock Exchange on Monday and listed Republicans’ demands for agreeing to suspend the nation’s debt ceiling until May 2024. Demands include federal spending limits, the recovery of unspent Covid-19 aid, and work requirements for benefits.

• The speech repeated GOP demands that members wouldn’t agree to a “no-strings-attached debt-limit increase.” Senate Majority Leader Chuck Schumer (D, N.Y.) called the speech “political grandstanding.” The government hit the $31.4 trillion limit in January and has been maneuvering to keep payments flowing.

• Deputy White House press secretary Andrew Bates told Barron’s that McCarthy is “engaging in dangerous economic hostage-taking” and said he again failed to clearly outline what House Republicans are proposing and would vote on apart from a vague wish list of demands.

• McCarthy invoked a visit to the NYSE in 1985 by then-President Ronald Reagan, the first sitting president to do so. Back then, Reagan also called for a halt to a government spending spree. McCarthy said Monday those words “echo throughout these halls.”

• House Democrats have discussed a parliamentary tactic called a discharge petition to force a vote on a debt-limit increase without the cooperation of leadership. The idea was shelved earlier this year but still available. At least five Republicans in addition to all 213 Democrats are needed to support it.

What’s Next: The Bipartisan Policy Center has estimated a summer or early fall deadline for when the government can no longer pay its debt and obligations. The exact timing depends on 2022 tax collections, with tax filing day today. New estimates for the deadline are expected in May.

—Janet H. Cho

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China’s GDP Beat Expectations-Other Data Show ‘Uneven’ Recovery

China’s gross domestic product (GDP) rose 4.5% in the first three months of the year, convincingly beating the

FactSet

economists’ consensus for 3.4% growth.

• Alibaba, JD.com, and other U.S.-listed Chinese stocks all climbed Tuesday as the country’s economy rebounded at a faster-than-expected pace in the first quarter.

• But Hong Kong-listed Chinese stocks were mixed as investors digested more economic data, such as industrial output, which missed expectations, and fixed asset investment growth, which unexpectedly slowed to 5.1% in March.

• The other data released Tuesday highlighted how “uneven” the recovery has been, OANDA analyst Craig Erlam said. Retail sales jumped 10.6% in March, ahead of expectations for a 7.5% rise, as Chinese consumers did their bit to boost the economy.

What’s Next: The GDP figure shows China’s recovery from the country’s Zero Covid era has started well, and global luxury goods companies will be encouraged by the strength of the Chinese consumer. However, the recovery ahead is far from straightforward, as the mixed data show.

—Callum Keown

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Tesla’s First-Quarter Margins Expected to Decline After Price Cuts

Tesla
’s
first-quarter earnings are expected to fall after several price cuts this year, but analysts say the Street’s main focus will be on profit margins. Analysts expect margins of about 21%, down from about 27% in the fourth quarter of 2022 and more than 30% in the year-earlier quarter.

• Tesla reports Wednesday, and Wall Street expects per-share earnings of 86 cents from $23.7 billion in sales compared with per-share profit of $1.07 from sales of $18.8 billion a year earlier. Analysts are also expecting updates on inventory and orders.

• Only 16 EV models qualify for a full or partial $7,500 federal tax credit. New thresholds require that a certain percentage of battery parts and minerals come from the U.S. or other qualifying countries, the Treasury Department announced. Previously, 25 electric and plug-in models qualified.

• Models qualifying for EV tax credits include nearly all of

  General Motors
  
  ’ new EV models; six

  Ford Motor
  
  electric and plug-in hybrid models, including the Mustang Mach-E and F-150 Lightning; Tesla Model 3s and Model Ys; and Stellantis NV Jeep and Chrysler plug-in hybrids.

• Despite costing thousands of dollars more than gas-powered vehicles, EVs as a percentage of U.S. cars sold more than doubled in the past two years to 8.5% in February, car-rating business J.D. Power said. The Biden administration wants two-thirds of car sales to be EVs by 2032.

What’s Next: GM is dropping Apple’s CarPlay, an app that allows drivers to use their iPhones through the car display, in many of its EVs as well as a similar app by Google for Android. It is developing new software for the display, The Wall Street Journal reported.

—Al Root and Janet H. Cho

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Charles Schwab, State Street Report Deposit Outflows In Yield Hunt

Charles Schwab

reported strong overall first-quarter results, with net income up 14% from the same quarter last year, but the brokerage firm faces a problem familiar to many financial companies: deposit outflows as customers search for higher yields.

• Schwab’s main brokerage and custodial business brought in $132 billion of core net new assets, in line with expectations, but its bank deposits fell 11% from the fourth quarter and 30% from last year’s first quarter, a sign that customers are shifting money from low-paying bank accounts to higher-yielding options.

• State Street
  ,
  one of the largest custody banks, said deposits were about $224 billion at the end of the first quarter, down 5% from the fourth quarter and 11% from one year ago.

• Amid regional bank turmoil, U.S. money-market funds captured net inflows of about $362 billion in March, Morningstar Direct said. That compares with the record $686 billion net inflows in March 2020, but was up from $51.6 billion in February.

• Apple
  
  is offering high-yield savings accounts through

  Goldman Sachs
  
  for Apple Card holders. The accounts have no fees, no minimum deposits or balance requirements, and offer an initial interest rate of 4.15%. Customers can deposit or withdraw money through a linked bank account.

What’s Next: Schwab borrowed $45.6 million from Federal Home Loan Banks, up from $12.4 million in the fourth quarter, but CFO Peter Crawford told analysts that FHLB loans “won’t be part of our long-term financial picture.” The company is pausing its share buyback program.

—Andrew Welsch and Janet H. Cho

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Hollywood, Media Companies Brace for Potential Writers’ Strike

Unions representing thousands of television and movie writers said they have nearly unanimous support to strike when their contract with the major Hollywood studios runs out on May 1, voting about 98% in favor of a walk out.

• A strike could put the development of new scripted productions for streaming platforms, television networks, and movie theaters in limbo. It could also pose an immediate halt to work on late-night television talk shows and the Saturday Night Live comedy show, the New York Times reported.

• Already produced scripted shows would take a while longer to show the effects of a walkout. A strike in 2017 was averted but writers walked out for 100 days in 2007 over pay issues, costing the local Hollywood economy an estimated $2.1 billion, NPR reported.

• East and West coast branches of the Writers Guild of America said more than 9,000 writers had approved a strike, calling it an “existential” moment as pay for writers has stagnated despite a proliferation of television series in the streaming era.

• The writers’ union wants an increase in minimum pay, an increase in residual payments from streaming, and higher contributions to its health and pension plans.

What’s Next: Hollywood executives have been stockpiling scripts and are preparing to produce unscripted reality series, the Times reported.

Warner Bros Discovery

CEO David Zaslav has said he was hopeful a deal could be reached.

—Liz Moyer

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner