Author: Reuters

By Stephanie Kelly

(Reuters) – Oil prices were little moved in early trading on Tuesday, as market participants assessed a visit to the Middle East by U.S. Secretary of State Antony Blinken to discuss a ceasefire offer in the region.

Blinken met Saudi Arabia’s de-facto ruler on Monday. Palestinians hope the visit will clinch a truce before a threatened Israeli assault on Rafah, a border city where about half the Gaza Strip population is sheltering.

The ceasefire offer, delivered to Hamas last week by Qatari and Egyptian mediators, awaits a reply from militants who say they want more guarantees it will bring an end to the four-month-old war.

Brent crude futures were down 2 cents at $77.97 a barrel as of 00:01 GMT, while U.S. West Texas Intermediate crude futures edged down 3 cents to $72.75. Both contracts gained nearly 1% on Monday, rising for the first time in four sessions.

The United States continued its campaign against Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes.

In Russia, two Ukrainian drones struck the largest oil refinery in the country’s south on Saturday, a source in Kyiv told Reuters. It was the latest in a series of long-range attacks on Russian oil facilities, which has reduced Russia’s exports of naphtha, a petrochemical feedstock.

Market participants awaited industry data due later on Tuesday on U.S. crude stockpiles. Five analysts polled by Reuters estimated on average that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.

(Reporting by Stephanie Kelly; Editing by Edwina Gibbs)

MANILA (Reuters) – Philippine annual inflation was at 2.8% in January, versus the previous month’s 3.9%, the statistics agency said on Tuesday.

Economists in a Reuters poll had forecast annual inflation of 3.1% in January, within the central bank’s 2.8% to 3.6% projection for the month.

(Reporting by Neil Jerome Morales and Mikhail Flores; Editing by Kanupriya Kapoor)

By Lisa Richwine

LOS ANGELES (Reuters) -Pop superstar Taylor Swift set another record on Sunday, winning the Grammy award for album of the year for an unprecedented fourth time as women dominated the music industry’s top honors.

Swift also announced from the Grammys stage that she would release a new album in April.

The 34-year-old won album of the year for “Midnights,” eclipsing music legends Frank Sinatra, Paul Simon and Stevie Wonder, who each claimed the prize three times.

Swift said she was thrilled by the honor and gushed about the fulfillment she feels from writing and singing songs. “It makes me so happy,” she said. “All I want to do is keep doing this.”

Earlier, Swift claimed the prize for best pop vocal performance and used the moment to announce that she will release “The Tortured Poets Department” on April 19.

“I want to say thank you to the fans by telling you a secret that I’ve been keeping from you for the last two years,” Swift said as she disclosed the new album, which was made available for pre-sales during the Grammys telecast.

Swift, who is about to jet to Tokyo to resume the world’s highest-grossing concert tour, was among the women who swept the major Grammy awards on Sunday.

Billie Eilish claimed song of the year for “What Was I Made For?,” a ballad written for the “Barbie” movie soundtrack.

“As a woman, it feels a lot of the time like you’re not being seen,” Eilish told reporters backstage. “I feel that this makes me feel very seen. Sometimes it feels really good to have somebody tell you ‘good job.’”

Miley Cyrus, winner of her first two Grammys on Sunday, landed the record of the year honor for her empowerment anthem “Flowers.”

“This award is amazing,” Cyrus said, “but I really hope that it doesn’t change anything because my life was beautiful yesterday.”

Best new artist went to R&B and pop singer Victoria Monet, who thanked her mom, “a single mom raising this really bad girl.”

Winners were chosen by the musicians, producers, engineers and others who make up the Recording Academy. The group has worked to diversify its membership in recent years by inviting more women and people of color to its ranks.

SZA, who went into the night as the most-nominated artist, won three trophies including best R&B song for “Snooze.”

“I came really, really far,” she said. “I can’t believe this is happening, and it feels very fake.”

Indie rock band boygenius, a band formed by musicians Phoebe Bridgers, Lucy Dacus and Julien Baker, also claimed three awards.

JONI MITCHELL, BILLY JOEL PERFORM

Comedian Trevor Noah, back for a fourth stint as host, opened the show on CBS by joking that it was “the only concert that starts on time.”

Folk singer Joni Mitchell performed for the first time at the Grammys, singing “Both Sides Now” from a chair and sporting blonde braids and a beret, with Brandi Carlile playing guitar beside her.

In a tribute to the many musicians and industry executives who passed away in the last year, Stevie Wonder played “For Once In My Life” to honor the late Tony Bennett who sang along from a video.

Annie Lennox sang “Nothing Compares 2 U” in a tribute to Sinead O’Connor, and Fantasia Barrino honored Tina Turner with her version of “Proud Mary,” backed by singers in shiny gold and silver fringed outfits.

Jon Batiste played “Ain’t No Sunshine” and “Lean On Me” in a tribute to Clarence Avant, known as “the Godfather of Black music.”

Near the start of the show, country star Luke Combs sang his cover hit “Fast Car,” alongside the original singer and writer of the 1988 song, Tracy Chapman.

Toward the end, Billy Joel performed his new single “Turn The Lights Back On,” his first original song in 17 years.

In accepting the Dr. Dre Global Impact Award, rapper Jay-Z aired some Grammy grievances, including the fact that his superstar wife Beyonce had never won album of the year despite having earned more Grammys than anyone else.

“I don’t want to embarrass this young lady,” Jay-Z said as Beyonce watched from the audience. “But she has more Grammys than anyone and never won album of the year. So even by your own metrics, that doesn’t work.”

(Reporting by Lisa Richwine and Danielle Broadway; Editing by Mary Milliken, Stephen Coates and Neil Fullick)

By Michael Holden and Muvija M

LONDON (Reuters) -King Charles has been diagnosed with a form of cancer and will postpone public engagements to undergo treatment, Buckingham Palace said on Monday, but added he remained “wholly positive” about the scare less than 18 months into his reign.

Charles, 75, who became king in September 2022 following the death of his mother Queen Elizabeth, has begun a series of treatments, the palace said, adding he was looking forward to returning to fulltime duties as soon as possible.

The cancer revelation comes after Charles spent three nights in hospital last month where he underwent a corrective procedure for a benign enlarged prostate.

The palace said a separate issue of concern had been spotted during that hospital stay, but did not given any further details beyond saying tests had revealed the king had a “form of cancer”.

“No further details are being shared at this stage, except to confirm that his majesty does not have prostate cancer,” the palace said.

“Throughout this period, his majesty will continue to undertake State business and official paperwork as usual.”

As such, Charles will continue to have meetings with Prime Minister Rishi Sunak, while his wife Queen Camilla will continue with her engagements.

SMILING

On Sunday, the king gave no indication of the diagnosis when he was pictured smiling and waving to onlookers as he attended a church service with Camilla.

It was his first public outing since he and his daughter-in-law Kate left the same London hospital a week ago where they had both undergone planned treatments.

Kate, the Princess of Wales and wife to heir to the British throne Prince William, spent two weeks at the London clinic following abdominal surgery for an unspecified but non-cancerous condition.

She will not be returning to royal duties until after Easter. William, who has been looking after their three children as she recovers, will carry out his first public engagement since her operation on Wednesday.

While the royals usually closely guard details of their health, regarding it as a private matter, Charles has been open about his recent treatment.

“His Majesty has chosen to share his diagnosis to prevent speculation and in the hope it may assist public understanding for all those around the world who are affected by cancer,” Buckingham Palace said.

Sunak sent his best wishes to the King on X. “I have no doubt he’ll be back to full strength in no time and I know the whole country will be wishing him well,” he said.

BIDEN CONCERN

The leaders of Australia and Canada, where Charles is also head of state, expressed their best wishes and hopes for the king to make a speedy recovery, while U.S. President Joe Biden said he was concerned by the news and planned to call Charles later.

“Navigating a cancer diagnosis, treatment, and survivorship takes hope and absolute courage,” Biden said. “Jill and I join the people of the United Kingdom in praying that His Majesty experiences a swift and full recovery.”

The monarch told his immediate family personally about his cancer diagnosis, and Prince Harry, his younger son, will travel to the UK to see him in the coming days, a source close to the Duke of Sussex said.

Harry now lives in California with his American wife Meghan and their two children after the couple stepped down from royal duties in 2020.

After waiting longer than any heir in British history to become king, Charles’ first year on the throne was dominated by his coronation – Britain’s biggest ceremonial event for generations, full of pomp and pageantry.

While before he became sovereign there were suggestions that the long-time environmental campaigner would bring a radical overhaul of the monarchy, Charles has generally followed in the style of his mother, while trying to add some of his own touches.

Polls suggest most Britons have a favourable view of his reign so far, although younger generations appear much less enthusiastic about the royal family in general.

Prior to his recent health issues, the biggest shadow over the royals was the ongoing fallout between his son Harry and the rest of his family, most notably Harry’s elder brother Prince William.

Ingrid Seward, editor-in-chief of Majesty Magazine, said that for Charles, a workaholic who often worked until midnight on his papers, his recent health issues would mean he would have to take it more slowly now.

“His body will tell him he has to, and Camilla certainly will,” she said. “I think he’s mentally exhausted since the death of the queen. It’s been non-stop for him since then.”

While Queen Margrethe II of Denmark abdicated last month in favour of her son King Frederik X after 52 years on the throne, Seward said there was no chance Charles would follow suit.

“Absolutely not, 100% no,” she said.

(Reporting by Michael Holden, Muvija M and William James; Writing by Kate Holton and Michael Holden; Editing by Hugh Lawson and Rosalba O’Brien)

By Yoruk Bahceli

(Reuters) – Inflation and the U.S. presidential election will be the biggest drivers of global markets this year, while liquidity challenges are a growing focus, according to traders surveyed by JPMorgan.

Some 27% of traders see inflation as having the biggest impact, followed by 20% for the November election, the survey published on Tuesday showed.

Bonds and equities rallied late last year on hopes that slowing inflation would prompt hefty central bank rate cuts this year. But those bets have been scaled back, with Friday’s blowout U.S. jobs data prompting the biggest sell-off in U.S Treasuries since September.

Markets are bracing for further volatility as the U.S. presidential election looms, with former president Donald Trump’s victory in the New Hampshire Republican primary bringing him closer to a rematch with Democrat President Joe Biden.

JPMorgan’s Global Head of Digital Markets Eddie Wen said greater focus this year on macro and risk events may create short-term volatility, with particular focus on the release of U.S. monthly jobs and inflation numbers.

Recession fears, which topped last year’s survey, fell to third place at 18% as economic growth beats expectations, the survey said.

War in Europe, where Russia’s invasion of Ukraine heads into its third year, and the Middle East, where the Hamas-Israel conflict is watched for signs of escalation, followed at 14%.

Traders expected volatile markets to remain their top trading challenge, but the share of respondents putting it in first place dropped 18 percentage points from last year to 28%.

Liquidity availability neared the top of the list of trading challenges at 24%, up from 22% last year, while access to liquidity remained traders’ biggest market structure concern.

Chi Nzelu, global head of macro e-Trading at JPMorgan, said as electronic trading grows in prominence, having consistent access to liquidity across a breadth of providers was becoming more important to investors.

“They want to know that it will continue to be reliable even in shock times, which has broadly been the case across different markets in recent years,” he said.

Traders in credit markets and cash equities named liquidity availability as their top challenge.

“The market structure within the credit markets is becoming more complicated,” said Wen.

“There are more trading platforms to support trading of corporate bonds alongside the emergence of portfolio trading, bloc trading, larger trades, all now becoming more electronic over time.”

This meant selecting the best way to execute trades was becoming a key question for investors, he said.

(Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe and)

By Arriana McLymore and Greg Bensinger

(Reuters) – Amazon.com has begun rolling out a new artificial intelligence assistant that is meant to address shoppers’ product questions, but the feature raises as many questions as it answers.

Rufus, as the software is known, will help users, according to Amazon, by guiding them to the toaster ovens or dinosaur toys that best fit their needs. Yet Amazon has a history of steering customers towards products that most benefit Amazon, either because they are more profitable or are backed by advertising dollars, according to the Federal Trade Commission’s pending 2023 antitrust lawsuit against Amazon.

The FTC accused Amazon of “biasing Amazon’s search results to preference Amazon’s own products over ones that Amazon knows are of better quality.” Further, the FTC alleges the Seattle firm operates a “pay-to-play” system, giving top billing for the products on which marketers were willing to spend the most. The company has denied the claims and said it will contest the suit in court.

Amazon’s general counsel said in 2023 that the FTC “is wrong on the facts and the law,” and that its practices “have helped to spur competition and innovation across the retail industry.”

Like for other generative AI services, the algorithm behind Rufus is a closely held secret and Amazon declined to discuss how it operates. It offered some clues, including a press release, that said it is trained using Amazon’s product catalog, reviews, information from the web and question and answer sections.

But Michael Pachter, a Wedbush Securities analyst, said Amazon would be turning money away if it didn’t ostensibly open Rufus’ results up to advertisers. “You’ll most likely get sponsored results,” he said. “Advertising drives retail and Amazon is no different – why do you think they are generating tens of billions of dollars in advertising a year?”

The company on Thursday reported a 27% jump in ad sales in last year’s fourth quarter to $14.7 billion.

At least initially, Rufus doesn’t appear to be influenced by advertising. Gil Luria, a D.A. Davidson senior software analyst, said that was likely necessary to build trust with consumers. “If they lose your faith in how they answer, you’re not going to ask them anymore,” Luria said.

ADVERTISING AND CONSUMER CHOICES

Yet the company has time and again allowed advertising to creep into its recommendations.

Consumers may have once believed that an “Amazon’s Choice” designation indicated a review or testing process, but Amazon once granted that badge to marketers who were willing to pay for it, according to a 2019 Digiday story citing an Amazon internal deck from 2017.

Amazon has denied that the company has ever allowed sponsored results in “Amazon’s Choice” and said the label relies primarily on criteria such as reviews, shipping speed and price, according to a company spokesperson.

Europe’s top antitrust enforcer Margrethe Vestager said Amazon’s ability to limit access to the “Amazon’s Choice” badge was one reason for her objection to the company’s planned takeover of Roomba-maker iRobot. Amazon walked away from the deal last month.

And Amazon previously allowed marketers to place products in customers’ online baby registries without their knowledge, a Wall Street Journal investigation found. It has since ended the practice.

Amazon.com search results included nine sponsored listings on average, a study by Profitero from 2020 to 2021 found, twice the amount as Walmart and four times that of Target.

Jim Tierney, Chief Investment Officer of Concentrated US Growth Equities at AllianceBernstein, said he saw real promise in Rufus “if you actually have some kind of an AI conversational shopper.”

“That just means more engagement and more conversion, which means more revenues and more units (sold),” Tierney said.

But Amazon offered few clues in rolling out Rufus to select customers. In a call with investors, CEO Andy Jassy said Rufus “lets customers discover items in a very different way than they have been able to on e-commerce websites.”

Amazon in a blog post showed how the software might respond to a query about a particular pickleball paddle’s worthiness for beginners. “This paddle is a great option for beginners,” the software replied, according to a screenshot. “The large sweet spot helps beginner players get the ball over the net consistently.” In another example it displayed Tyrannosaurus Rex toys for a query about best toys for a “dinosaur obsessed 5-year old.”

The company said Rufus is trained using Amazon’s product catalog, reviews, information from the web, and question and answer sections.

However Rufus evolves, Luria said Amazon has an edge over Google and Microsoft’s AI applications because it has a rich trove of purchasing and personalized data that’s quite an advantage at the checkout counter.

(Reporting by Arriana McLymore in New York and Greg Bensinger in San Francisco; Editing by Nick Zieminski and Lisa Shumaker)

By Samrhitha A, Aishwarya Venugopal and Chuck Mikolajczak

(Reuters) -Meta Platforms added $196 billion in stock market value on Friday, marking the biggest one-day gain by any company in Wall Street history after the Facebook parent declared its first dividend and posted robust results.

Meta’s stock surged 20.3% for the session, also recording its biggest one-day percentage increase in a year and its third biggest since its 2012 Wall Street debut. Its stock market value now stands at more than $1.22 trillion.

Days ahead of Facebook’s 20th anniversary, Meta late on Thursday authorized an additional $50 billion in share repurchases and said its quarterly dividend would be 50 cents per share.

While dividends are associated with mature, slow-growth companies, Meta’s is the fourth offered by Wall Street’s most valuable technology-related heavyweights, along with Apple, Microsoft and Nvidia.

“Paying a dividend suggests the company wants to reboot its reputation and be taken more seriously. But ultimately the amount being paid is only a token gesture,” said Dan Coatsworth, an investment analyst at AJ Bell.

Friday’s increase in Meta’s market capitalization eclipsed the previous record held by Amazon, which saw its market value surge by $190 billion on Feb. 4, 2022 following a blowout quarterly report. One day before, Meta lost over $200 billion in value, the biggest loss in U.S. stock market history, after it issued a dismal forecast.

Meta’s dividend plan means a hefty payout for CEO Mark Zuckerberg, who owns about 350 million Meta Class A and Class B shares. The Facebook co-founder could get about $175 million every quarter.

Optimism about the potential for artificial intelligence contributed to a 24% rally in the S&P 500 last year, with Meta, Nvidia, Microsoft and Broadcom recently hitting record highs. With Friday’s gain, Meta is now up 35% in 2024.

The world’s biggest social media company flagged strong ad sales and a rebound in user growth during its fourth-quarter results that saw its revenue surge 25%. Its forecast for current-quarter revenue also exceeded analysts’ estimates.

Surging revenue, combined with an 8% drop in costs and expenses after eliminating more than 21,000 jobs since late 2022, allowed Meta to triple its net income to $14.02 billion.

“The ‘Year of Efficiency’ has paid off, with both headcount and costs dropping, and Meta exceeding our expectations for full-year 2023 ad revenue,” said Jasmine Enberg, principal analyst at Insider Intelligence.

While Meta’s dividend is small compared to many companies, it could make its stock more attractive to a broader swathe of investors, including exchange-traded funds focused on stocks that pay dividends.

Meta’s dividend yield is about 0.4% following Friday’s stock rally. By comparison, Apple’s dividend yield is about 0.5%, while Microsoft’s is 0.7% and Nvidia’s is under 0.1%, according to LSEG.

“This can start attracting investors who really do look for dividends and more steady income,” said Brian Jacobsen, Chief Economist at Annex Wealth Management.

Exchange Traded Funds (ETFs) that are focused on U.S. dividend payers have assets of over $400 billion, accounting for just over 5% of the entire domestic ETF universe, according to data from Morningstar Direct.

Meta has been spending billions of dollars over the past decade to boost its computing capacity for generative AI products it is adding to Facebook, Instagram and WhatsApp, and to hardware devices such as its Ray-Ban smart glasses.

(Reporting by Aishwarya Venugopal and Samrhitha Arunasalam in Bengaluru; Additional reporting by Medha Singh, Akash Sriram and Yuvraj Malik; Writing and additional reporting by Noel Randewich in Oakland, Calif.; Editing by Alden Bentley, Shounak Dasgupta, David Gregorio, Kirsten Donovan and Deepa Babington)

By Trevor Hunnicutt

WASHINGTON (Reuters) – U.S. President Joe Biden’s administration is taking aim at grocery chains, sending an election-year suggestion that the companies lower prices on goods from milk to eggs and bread.

“Our message is a very clear one that the president has and will continue to lean into, which is, if you’re a company whose input prices have come down and you’re not passing those savings along to the consumer, he will call you out,” said Jared Bernstein, the chair of Biden’s Council of Economic Advisers, in a virtual meeting with reporters.

“We’ve seen elevated (profit) margins, particularly in the grocery sector, and have taken note that there needs to be more pass-through there (to consumers).”

Bernstein did not name any specific companies.

Grocery giants Walmart, Kroger and Albertsons are booking 20-plus percent gross profit margins, roughly in line with where they were before the COVID-19 pandemic spiked inflation.

A White House analysis of Census data shows food-and-beverage retailers’ revenues as a share of their costs have risen sharply from before the pandemic to a level not seen since the mid-2000s, a measure that they say more directly tracks retail mark-ups.

Last week, Biden said “there are still too many corporations in America ripping people off: price gouging, junk fees, greedflation, shrinkflation.” Biden has pushed drug makers to lower insulin costs, hotel chains to reduce fees and tried to diversify the meat-packing industry after beef prices skyrocketed in the aftermath of the pandemic.

Biden’s pitch for lower supermarket prices comes ahead of the Democrat’s November bid for re-election. A cavalcade of strong economic data – including blockbuster jobs and wage numbers on Friday – has not translated into good approval ratings for Biden, with voters still saying they are concerned about high costs.

Consumer confidence is improving, Bernstein said, citing the University of Michigan consumer survey that showed sentiment rising to its highest level since July 2021 and noting the recent strong U.S. stock market run.

“As inflation continues to ease and the job market remains tight and real wages and wage growth continue to beat price growth, that should start to show up as improved confidence,” he said.

“We’re also working hard to lower costs – actual lower costs, not just lower inflation,” said Bernstein, citing eggs, milk, appliances, airfares, used cars and gas as particularly sensitive areas for Americans.

While eggs only account for 0.1% of the consumer price index, Bernstein said, “in the national psyche it’s a lot bigger than that and we’re very cognizant of that.”

The United Nations food agency’s world price index fell in January to its lowest level in nearly three years, driven by declines in cereals and meat.

Kroger and Albertsons plan to close on a proposed $24.6 billion merger later this year, pending an antitrust review amid fears that the deal could raise prices.

“We agree with President Biden,” a Kroger spokesperson said. “Too many grocers in America have increased margins in contrast to Kroger.”

The spokesperson added that the merger would “lower prices for even more of America’s consumers by delivering at least half a billion in additional price investments at Albertsons stores.”

A spokesperson for the National Grocers Association, which represents independent grocers, called for stricter antitrust enforcement and said “the nation’s largest retailers have used their muscle to force food suppliers to offset higher production costs by charging their smaller rivals higher prices.”

(Reporting by Trevor Hunnicutt; Editing by Heather Timmons and Sandra Maler)

By Samrhitha A, Aishwarya Venugopal and Chuck Mikolajczak

(Reuters) -Meta Platforms added over $214 billion in stock market value on Friday, with its shares surging to a record high after the Facebook parent declared its first dividend and posted robust results.

Meta’s stock jumped as much as 23% and was last up 21.4%, on track for its third biggest daily percentage increase since its 2012 Wall Street debut. Its stock market value now stands at more than $1.2 trillion.

Days ahead of Facebook’s 20th anniversary, Meta late on Thursday authorized an additional $50 billion in share repurchases and said its quarterly dividend would be 50 cents per share.

While dividends are associated with mature, slow-growth companies, Meta’s is the fourth offered by Wall Street’s most valuable technology-related heavyweights, along with Apple, Microsoft and Nvidia.

“Paying a dividend suggests the company wants to reboot its reputation and be taken more seriously. But ultimately the amount being paid is only a token gesture,” said Dan Coatsworth, an investment analyst at AJ Bell.

The dividend plan means a hefty payout for CEO Mark Zuckerberg, who owns about 350 million Meta Class A and Class B shares. The Facebook co-founder could get about $175 million every quarter.

Optimism about the potential for artificial intelligence contributed to a 24% rally in the S&P 500 last year, with Meta, Nvidia, Microsoft and Broadcom recently hitting record highs. With Friday’s gain, Meta is now up 35% in 2024.

The world’s biggest social media company flagged strong ad sales and a rebound in user growth during its fourth-quarter results that saw its revenue surge 25%. Its forecast for current-quarter revenue also exceeded analysts’ estimates.

Surging revenue, combined with an 8% drop in costs and expenses after eliminating more than 21,000 jobs since late 2022, allowed Meta to triple its net income to $14.02 billion.

“The ‘Year of Efficiency’ has paid off, with both headcount and costs dropping, and Meta exceeding our expectations for full-year 2023 ad revenue,” said Jasmine Enberg, principal analyst at Insider Intelligence.

While Meta’s dividend is small compared to many companies, it could make its stock more attractive to a broader swathe of investors, including exchange-traded funds focused on stocks that pay dividends.

Meta’s dividend yield is about 0.4% following Friday’s stock rally. By comparison, Apple’s dividend yield is about 0.5%, while Microsoft’s is 0.7% and Nvidia’s is under 0.1%, according to LSEG.

“This can start attracting investors who really do look for dividends and more steady income,” said Brian Jacobsen, Chief Economist at Annex Wealth Management.

Meta has been spending billions of dollars over the past decade to boost its computing capacity for generative AI products it is adding to Facebook, Instagram and WhatsApp, and to hardware devices such as its Ray-Ban smart glasses.

(Reporting by Aishwarya Venugopal and Samrhitha Arunasalam in Bengaluru; Additional reporting by Medha Singh, Akash Sriram and Yuvraj Malik, and by Noel Randewich in Oakland, Calif.; Editing by Alden Bentley, Shounak Dasgupta and David Gregorio, Kirsten Donovan)

By Niket Nishant

(Reuters) -U.S. regional bank stocks recovered slightly on Friday from a brutal two-day sell-off sparked by investor concerns that New York Community Bancorp’s dismal earnings signaled broader problems for the sector.

The KBW Regional Banking Index gained 0.2%, reversing a dip early in the trading session. If the gains hold, the index will post its first positive day after three consecutive sessions of losses.

NYCB shares, which fell nearly 45% over the last two sessions after the lender slashed its dividend and posted a surprise loss on commercial real estate (CRE) loans, were up nearly 6% on Friday.

Raymond James on Friday said in a note that its analysts who participated in a webinar the firm hosted with NYCB’s management “came away comforted” that the bank’s deposits are very stable.

“Given deposit stability, the recent reserve build, still strong capital, and proactive cooperation by management to achieve new regulatory requirements, we believe the stock appears attractive for more aggressive investors with a longer term view,” the brokerage said.

Shares of Valley National Bancorp, Citizens Financial Group and some other mid-size banks also rose on Friday, boosting the view among some investors that NYCB’s problems and the subsequent sell off were a one-off.

“A lot of the banks have been proactive in dealing with their loan issues, and their credit quality doesn’t seem to be deteriorating as much as people thought in general,” said Tom Plumb, CEO of Plumb Funds.

In an email on Thursday, an NYCB spokesperson said the bank’s share price would recover “as the market continues to appreciate the value-enhancing actions” the bank had taken.

Over the last two sessions, short sellers targeting shares of regional banks were up about $1.4 billion in paper profits, according to data and analytics company Ortex.

CRE FEARS

NYCB, a major CRE lender in New York, on Wednesday boosted its provisions for credit losses by 345%, part of which was allocated to its CRE portfolio. NYCB said it took a hit on two separate loans.

“Part of NYCB’s 45% two-day plunge was due to the bank not being diversified from a loan perspective,” said CFRA analyst Alexander Yokum. “NYCB is overweight both commercial real estate office and multi-family loans and thus recent deterioration in these areas has had an outsized impact on the company.”

The bank’s disclosure re-ignited some investor worries that other lenders may be forced to crystallize CRE losses amid high interest rates and lingering pandemic office vacancies.

The Federal Reserve this week held rates steady while Fed Chair Jerome Powell said inflation remained too high, prompting traders to reprice the expected first rate cut from March and into May, according to futures data. Several banks have warned that elevated borrowing costs could lead to more borrowers defaulting on their loans this year.

Meanwhile, shares of Japan’s Aozora Bank slumped to a three-year low in Tokyo after it took a huge loan-loss provision against U.S. office loans.

Some investors said data released on Friday showing that U.S. job growth surged last month at well above the pre-pandemic pace and wage growth accelerated was a positive for lenders.

“For commercial banks, this should improve the outlook. There’s a lot of worry about defaults rising, but if the labor market is still humming, defaults shouldn’t rise too quickly,” said Brian Jacobsen, chief economist at Annex Wealth Management.

(Reporting by Niket Nishant, Chibuike Oguh and David French; Editing by Sriraj Kalluvila, Michelle Price, Kirsten Donovan and Leslie Adler)