Good morning. Happy Friday.
The Asian/Pacific markets mostly did well. Japan, China, Hong Kong, South Korea and Taiwan all posted solid gains. Singapore was weak. Europe, Africa and the Middle East are currently doing great. The UK, France, Germany, Finland, Hungary, Spain, Portugal, Israel, Austria, Sweden, Saudi Arabia and the Czech Republic are leading. Futures in the States point towards a moderate gap up open for the cash market.
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VIDEO: Trading ETFs with Simple Indicators
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The dollar is down. Oil is up; copper is down. Gold and silver are up. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
Turning around?
Equities are getting some of their momentum back at the end of a choppy week that saw a jump in inflation rattle the markets. All three major averages snapped three-day losing streaks by closing solidly in the green on Thursday, and while they’re still on track for hefty weekly losses, the positive sentiment stuck around overnight. Dow and S&P 500 futures rose by 0.5% and 0.7%, respectively, while contracts linked to the tech-heavy Nasdaq, which has been hit especially hard, climbed 1.1%.
Bigger picture: Fed officials have been suggesting that the central bank has no intention to withdraw its support as the 10-year Treasury yield fell by another 3 bps to 1.63%. On Thursday, new Fed board member Christopher Waller also helped calm inflation jitters by saying the central bank would need several more months of data before assessing economic progress. Meanwhile, so-called reopening trades such as airlines and cruise companies ripped higher as the CDC eased mask guidelines (see below).
“Higher inflation is likely to remain in the spotlight as the post-pandemic recovery accelerates,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “But while we expect inflation fears to generate bouts of volatility, and we continue to position for reflation, we also see such market swings as an opportunity to build exposure to structural winners.”
“The corporate turnaround is strong enough to keep markets rising, even as bond yields increase in anticipation of central bank tightening,” added Robert Buckland, equity strategist at Citi. “So buy any short-term dips, as we may be seeing now. There is a time to turn more cautious but that may be next year, not this.”
Economic data this morning: Retail sales will provide fresh insights on the pace of the recovery, while industrial production figures will signal the extent to which supply chain bottlenecks have held back output. The University of Michigan will also publish its consumer sentiment index for May, shedding light on financial conditions and attitudes about the economy.
Masks off
“Anyone who is fully vaccinated can participate in indoor or outdoor activities, large or small, without wearing a mask or physical distancing,” CDC Director Rochelle Walensky said on Thursday. “If you are fully vaccinated, you can start doing the things that you had stopped doing because of the pandemic. We have all longed for this moment when we can get back to some sense of normalcy.” The shift in guidance indicates a broader return to everyday life and is a bet that any new outbreaks from relaxed guidelines won’t be enough to reverse progress from inoculations.
Exceptions: The agency still recommends fully vaccinated people wear masks on “all planes, buses, trains and other forms of public transportation,” as well as in healthcare settings, homeless shelters and correctional facilities. Masks are also recommended for people who are partly vaccinated (i.e. haven’t yet received their final dose), or for children who haven’t gotten a vaccine.
Traders reacted to the news by selling off shares in notable mask makers. Allied Healthcare Products (AHPI) and Alpha Pro Tech (APT) closed the session down nearly 11% and 6%, respectively. On the other side of the trade, shares of Ulta Beauty (ULTA) finished the day up 3% after D.A. Davidson analyst Michael Baker said the beauty retailer was likely to be a beneficiary of the mask lifting restrictions.
Bottom line: The CDC’s guidelines are recommendations and don’t have the force of law. Decisions on when and where masks must be worn rest with states, local governments and businesses, which can decide whether to maintain or relax their existing mask mandates, as well as incentives or deterrents to enforce compliance.
House of Mouse
The pandemic dealt a heavy blow to Disney’s (DIS) theme parks, but it was a boon for the company’s streaming service. However, investors weren’t as impressed this past quarter as Disney+ signed up another 9M users, taking its total number to 103.6M paid subs vs. expectations of 109M. Average monthly revenue per subscriber also fell 29% to $3.99 – a move the company blamed on the launch of Disney+ Hotstar – and DIS shares slid 4.2% in extended trading.
Coming up fast: While Netflix (NFLX) has double the number of subscribers than rival Disney, the latter’s figures look a whole lot better when adding in its other streaming services: ESPN Plus had 13.8M subs (up 75% year-over-year), and Hulu had 41.6M subscribers (up 30%). Netflix has also reported a sharp slowdown in new signups, putting the godfather of streaming on the defensive, but CEO Reed Hastings has attributed the downturn to pandemic distortions and feels it will grow again as more shows come back in the second half of 2021.
Meanwhile, revenue at Disney’s Parks, Experiences and Products segment tumbled 44% to $3.17B, and the pandemic cost the division around $1.2B in lost operating income. Similar losses were reported in each of the company’s last four earnings reports, with many of its theme parks closed or operating at reduced capacity, while its cruise ships and guided tours remained suspended. Looking to get back to business, Disney reopened its two California-based parks on April 30 and has high expectations for the coming quarters.
Outlook: “We’re pleased to see more encouraging signs of recovery across our businesses, and we remain focused on ramping up our operations while also fueling long-term growth for the company,” said CEO Bob Chapek. “This is clearly reflected in the reopening of our theme parks and resorts, increased production at our studios, the continued success of our streaming services, and the expansion of our unrivaled portfolio of multiyear sports rights deals for ESPN and ESPN Plus.”
No credit score needed
Wells Fargo (NYSE:WFC), JPMorgan Chase (NYSE:JPM), and U.S. Bancorp (NYSE:USB) are among a group of banks that will start providing customer deposit account information as part of a government-supported initiative to give more people access to credit cards, WSJ reports. The idea is to use alternative data, such as bank account information, to determine credit risk for those people who don’t have a traditional credit score. The pilot program is expected to start later this year and about 10 banks have agreed to exchange data.
Backdrop: In recent years, some big U.S. lenders have developed risk models – based on their own customers’ bank account activity – to approve financing for applicants with limited or no credit histories. The move resulted in credit-card approvals for about 700K additional customers at JPMorgan alone over the last five years. In 2018, FICO also announced a scoring system that factored in how consumers manage their bank accounts, but few lenders (and no banks) signed up for the program.
The average FICO score in the U.S. rose to 711 in 2020, marking an eight-point increase from 2019 and the most significant spike since 2016. However, some 53M adults in the U.S. still don’t have traditional credit scores, according to Fair Isaac (NYSE:FICO), the creator of FICO credit scores. More often than not, they are limited to payday loans and other costly forms of credit.
Go deeper: The effort comes as loan growth at banks weakens with consumers wary of taking on debt and stimulus payments giving them the ability to pay down credit card balances. In the absence of lending, extra deposits can be costly for banks, putting pressure on their regulatory ratios and eventually requiring them to hold more capital. Banks like JPMorgan and Citigroup (NYSE:C) have even been recently advising large corporate clients to move their savings into money market funds given their cash-flooded balance sheets.
What else is happening…
Colonial Pipeline paid $5M ransom to DarkSide hackers amid fuel crunch.
Worker shortage? McDonald’s (NYSE:MCD) boosts pay at company-owned stores.
Amazon (NASDAQ:AMZN) hiring 75K fulfillment and logistics workers in N. America.
Pinterest (NYSE:PINS) to test live streams with creator event this month.
EV news… Fisker (NYSE:FSR) inks deal with Foxconn for vehicle production.
‘To be clear, I strongly believe in crypto’ – Elon Musk.
Cryptocurrency exchange Binance reportedly under DOJ investigation.
Latest buys and sells? ARK ETFs sit out the market rally.
AMC Entertainment (NYSE:AMC) soars after completing 43M-share equity offering.
Biden’s cyber order means new boon for enterprise cloud stocks – Wedbush.
Corn futures plunge in ‘long overdue correction in overbought market.’
Thursday’s Key Earnings
Airbnb (NASDAQ:ABNB) -1.8% AH posting a disappointing Q1 bottom line.
Alibaba (NYSE:BABA) -6.3% on mixed Q1 results with a profit miss.
Coinbase (NASDAQ:COIN) +0.5% AH tripling revenues from last quarter.
Disney (NYSE:DIS) -4.1% on slowing Disney+ subscriber growth.
DoorDash (NYSE:DASH) +7% AH on a big sales beat, strong guidance.
XPeng (NYSE:XPEV) -4.9% predicting another quarter of chip shortages.
Today’s Economic Calendar
8:30 Retail Sales
8:30 Import/Export Prices
9:15 Industrial Production
10:00 Business Inventories
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
1:00 PM Fed’s Kaplan Speech
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Good morning. Happy Thursday.
The Asian/Pacific markets posted big losses. Japan, China, Hong Kong, South Korea, India, New Zealand, Taiwan, Thailand and the Philippines dropped 1% or more. Europe, Africa and the Middle East currently lean down. Hungary and Saudi Arabia are doing well, but the UK, Poland, South Africa and Spain are down more than 1%. Futures in the States point towards a moderate gap up open for the cash market.
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VIDEO: Is Bitcoin a Fraud?
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The dollar is unchanged. Oil and copper are down. Gold and silver are down. Bonds are up. Bitcoin is down big.
Stories/News from Seeking Alpha…
Dogefather dings Bitcoin
The crypto world erupted overnight after Tesla (TSLA) CEO Elon Musk said he would suspend vehicle purchases using Bitcoin (BTC-USD). “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” he wrote in a tweet. “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at a great cost to the environment.”
Trading at about $58K earlier on Wednesday, Bitcoin slumped to as low as $47K, or roughly 30% below its all-time high just shy of $65K. It’s now changing hands at $51K, while the decline has weighed on the broader crypto world by wiping away $365B in market value. Musk still clarified that Tesla will not be selling any Bitcoin and “we intend to use it for transactions as soon as mining transitions to more sustainable energy.” Tesla is also looking at other cryptocurrencies that “use <1% of Bitcoin's energy/transaction," a move that could be bullish for something like Ethereum (ETH-USD), which uses less energy-intensive proof-of-stake.
Twitter blows up: “Unlike @elonmusk I am not flip flopping every other second about #bitcoin. You will have to rip my bitcoin from my cold dead hands,” writes Dave Portnoy. “When Elon realizes that bitcoin mining is actually pushing the renewable energy industry forward, he will refresh position and #bitcoin will moon,” added Cameron Winklevoss, while his brother Tyler declared: “Bitcoin mining is a massive subsidy for renewable energy.” Another bite from Bitcoin Magazine: “[We’ve] suspended purchasing any Teslas. We are concerned about the rapid increase in bad arguments, especially energy FUD, from the company’s CEO.”
Recap: During the first quarter of 2021, Tesla bought $1.5B worth of Bitcoin, then sold $272M worth. According to the company’s most recent earnings, profits from Bitcoin sales specifically allowed the company to notch a $101M “positive impact” toward profitability. Interestingly enough, Musk just three weeks ago was in agreement with Square’s (SQ) Jack Dorsey who said Bitcoin would be a “key driver of renewable energy’s future.” It also begs the question of what kind of durability Bitcoin has as a future currency, when prices can plunge nearly 20% at the turn of a tweet.
Diem changes tack (again)
A long-delayed digital payments project from Facebook (NASDAQ:FB), called Diem (formerly known as Libra), is pursuing yet another avenue to get its model off the ground. The company is relocating its main operations from Switzerland to the U.S. as it scales back its global ambitions. It even withdrew its application for a payment system license from the Swiss Financial Market Authority, noting that the certification wasn’t necessary as it pursues a different direction.
“It’s a realization that the effort will require a presence that is acceptable to U.S. regulators,” said Richard Levin, chairman of financial technology and regulation practice at law firm Nelson Mullins.
Flashback: Facebook first unveiled Libra in June 2019 as part of an effort to expand beyond social networking and “empower the billions of people” that don’t have bank accounts. The project, which was backed by a basket of major currencies, immediately ran into fierce opposition from policymakers around the world. There were already existing privacy concerns about how Facebook handled user information, and they saw the potential for the new scheme to enable crime, money laundering and erode their control over the monetary system. A quarter of the project’s founding members also dropped out before the inaugural meeting in Geneva, including PayPal (PYPL), eBay (EBAY), Stripe (STRIP), Visa (V) and Mastercard (MA).
Current efforts: Diem Networks U.S., a unit of the Diem Association, will run a blockchain-based payment system that allows real-time transfer of Diem stablecoins and will be registered with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network. Diem’s scope will be scaled back to a single dollar-backed digital coin, which will be issued and managed by California-based Silvergate Bank. While the company has played an outsized role in the initial phases of the project, Facebook says that after the network has launched, its responsibilities will be the same as any of the other founding members.
Wall Street selloff
While traders have been quick to dump growth stocks as inflation fears spring up in the economy, the concerns are now spreading to the broader market. Should the price pressures run too hot for a sustained period of time, the Fed may be forced to taper or even bring some rate hikes forward. The sentiment saw U.S. stock index futures flash red again overnight, with the DJIA down 0.7%, and contracts linked to the S&P 500 and Nasdaq off 0.5% and 0.4%, respectively.
Cue the CPI: Data from the U.S. Bureau of Labor Statistics yesterday showed that inflation in the year to April climbed at its fastest pace since 2008. The Consumer Price Index came in at 4.2% vs. expectations of 3.6%, which is already ahead of the Fed’s 2% target. While much of the rising costs reflect growing industrial and consumer activity after last year’s COVID-related shutdowns, panic still spread amid concerns over how long it will take for prices to settle down. Markets sold off, with the Dow recording its worst day since January, while the S&P 500 and Nasdaq fell over 2%.
Investors today will be looking for further comments on the inflation situation as the Fed’s Thomas Barkin, Christopher Waller and James Bullard speak at several events. More data is also ahead, with producer prices for April and weekly jobless claims. Meanwhile, the 10-year Treasury yield is back up at 1.70%, a level not seen since the beginning of April.
Analyst commentary: The Fed says this surge should be temporary, but “if inflation does not calm,” the challenge to the central bank’s credibility “could be disruptive,” cautioned Tai Hui of JP Morgan Asset Management. “You may get dull periods but this year is going to be a big battle between the bullishness of mass reopening/stimulus on one hand and the inflationary consequences on the other,” added Deutsche Bank strategists led by Jim Reid. “Expect regular pockets of volatility.”
Return to service
The Colonial Pipeline, the largest gasoline pipeline in the U.S., reopened late on Wednesday after a ransomware attack caused it to close five days ago. The cyber breach has sent prices at the pump above $3 per gallon, the highest since October 2014, amid shortages and panic buying across the southeastern United States. Gasoline stations have already run dry from Florida to Virginia and it will still take “several days for the product delivery supply chain to return to normal.”
Not paying ransom: Colonial doesn’t plan to make a payment to the hackers, according to the Washington Post. It’s also working with the cybersecurity firm Mandiant to restore data from backup systems where possible and rebuild systems where necessary. The hackers, a shadowy criminal gang called DarkSide, meanwhile appeared to be readying to extort Colonial by stealing data that it could later threaten to release without a payment. However, Mandiant traced the stolen data to a server owned by a New York hosting firm, which shut down the server to prevent further data from flowing to the group.
DarkSide is believed to be operating out of Russia, but the White House has said it has no evidence so far that the attack was state-sponsored or directed by the Kremlin. On Wednesday, the criminal gang posted the names of another three new targets on the dark web that have been cyberattacked. While the companies have not publicly confirmed the breaches, one is said to be based in Illinois, one in the U.K. and the other in Brazil.
Go deeper: Following a series of sweeping cyberattacks on private companies and federal government networks over the past year, President Biden signed an executive order on Wednesday aimed at strengthening U.S. cybersecurity defenses. It will see create a standardized playbook for federal responses to cyber incidents and push the federal government toward upgrading to secure cloud services and other cyber infrastructure. It will also establish a “Cybersecurity Safety Review Board” and require IT service providers to tell the government about cyber breaches that could impact U.S. networks.
What else is happening…
Streaming and Parks on watch as Disney (NYSE:DIS) report quarterly earnings.
CDC recommends Pfizer (NYSE:PFE) vaccine for 12- to 15-year-olds.
Bill Ackman’s Pershing Square holds nearly 6% of Domino’s (NYSE:DPZ).
Amazon (NASDAQ:AMZN) wins $300M tax fight in latest blow to EU crusade.
Hertz (OTCPK:HTZGQ) soars 50% after approving $6B plan to exit bankruptcy.
Cramer is calling them ‘WoodStocks’; latest changes to ARK ETFs.
Cathie Wood views crypto as a future multi-trillion-dollar space.
Mexico invalidates union vote and reviews labor dispute at GM plant.
Boeing (NYSE:BA) wins FAA clearance for 737 MAX electrical fix.
Global chip shortage will last until Q2 of 2022 – Gartner.
Wednesday’s Key Earnings
Bumble (NASDAQ:BMBL) -0.1% AH despite user boost, swinging a profit.
Lemonade (NYSE:LMND) -18.5% after Q1 loss per share missed consensus.
Wix.com (NASDAQ:WIX) -17.3% as raised annual sales view lacked upside.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Producer Price Index
10:00 Fed’s Barkin Speech
10:30 EIA Natural Gas Inventory
1:00 PM Fed’s Waller Speech
1:00 PM Results of $27B, 30-Year Note Auction
4:00 PM Fed’s Bullard: U.S. Economy and Monetary Policy
4:30 PM Fed Balance Sheet
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Good morning. Happy Wednesday.
The Asian/Pacific markets leaned to the downside. China and Hong Kong did well, but Japan, South Korea, India, Taiwan, Australia and the Philippines were weak. Europe, Africa and the Middle East are currently split. The UK, South Africa, Portugal, Sweden and Saudi Arabia are up; Russia, Greece, Norway and Hungary are down. Futures in the States point towards a moderate gap down open for the cash market.
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My interview with WorldClassPerformer.com
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The dollar is up. Oil is up; copper is down. Gold and silver are down. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
Is it transitory?
Get ready for some early action this morning as the consumer price index for April is published at 8:30 a.m. ET. The figure is expected to be the hottest in nearly a decade, rising 3.6% Y/Y, though economists have cautioned that the jump could appear larger due to the base effects of 2020 when prices were weak amid pandemic shutdowns. The Fed has also maintained that the pickup in inflation will be transitory, but traders in financial markets don’t appear to be so sure.
How is the CPI calculated? The measure uses a “basket of goods” approach that aims to compare the costs of various consumer goods and services. These can include transportation, food, rent, haircuts and medical care (80,000 items are included in the report). Each month, data collectors from the Bureau of Labor Statistics call, visit, or check the websites of thousands of retail stores, professional offices and other establishments to assess nationwide price information. Specialists then examine the data for accuracy and make statistical adjustments based on any given item’s value.
The anticipated 3.6% jump in the headline number for April would be the largest since Sept. 2011, and follows a 2.6% Y/Y print last month, which already was above the Fed’s inflation target. On a core basis (excluding food and energy), the CPI is expected to have increased by 0.3%, or 2.3% Y/Y. “I just think that in general there’s this thought that inflation may rear its ugly head,” said JJ Kinahan, chief market strategist at TD Ameritrade. “We see a little bit higher rates, not significantly, but a bit higher rates. And I think this struggle between value and growth also continues at the same time.”
Outlook: Investors have already seen widespread price increases on commodities like copper and lumber, while the bond market’s forecast for inflation over the next decade has risen substantially. That’s helped trigger swings in the stock market, sending the Cboe Volatility Index on Tuesday to its highest level since March. Meanwhile, executive usage of the word “inflation” has increased 800% in Q1 earnings calls, according to Bank of America, while last week’s big jobs report miss is being viewed as a sign that companies will have to raise wages to lure more unemployed people into the workforce.
On shaky ground
Volatility is still reigning high in the markets, with Wall Street’s best fear gauge, known as the VIX, hitting levels yesterday that haven’t been seen in two months. The index traded as high as 23.73 intraday, as concerns about inflation spread to other areas of the market, with the Dow losing 473 points, to end the day down 1.4%. The Nasdaq meanwhile rebounded from earlier losses of 2%, but the buy-on-dip crowd couldn’t push the index into the green before the close.
Things aren’t looking better this morning. Stock index futures are all off by about 0.4% ahead of an inflation report that could shake markets once again. Fears about a sustained jump in inflation have particularly weighed on growth stocks, including those in the tech sector that were popular during the pandemic. Cyclical shares have meanwhile climbed on expectations of a full economic reopening, but those gains could also be challenged in the new price environment.
Quote: “Everyone who is involved in markets knows that the inflation data is running hot,” said Jonathan Golub, Credit Suisse’s chief U.S. equity strategist. “The debate right now: Is this temporary or is this something stickier? And we won’t know for a long time, but that’s really where the conversation is going.”
Go deeper: If the latest price rise is mostly commodity-driven, the future will largely depend on how long those inputs keep rising. For example, the demand that ensued following the 2009 economic rebound pushed up global inflation for two years until commodity markets topped out. This time around, raw materials aren’t the only factor fueling inflation, given the shortages of everything from electronics to cars, as well as logistical logjams. That’s on top of pent-up demand from the pandemic, as consumers take out their wallets and the government entertains the idea of trillions more in federal spending.
Restart deadline
Operators of the Colonial Pipeline (NYSE:SHLX) will know by late Wednesday whether it’s safe to restart flows of fuel following a crippling cyberattack last week that shuttered the 5,500-mile conduit. Even when the pipeline is restored to full service, it’ll take about two weeks for gasoline stored in Houston to reach East Coast filling stations, while heavier diesel and jet fuel will take even longer (about 19 days).
The national average of retail gasoline prices has already risen above the politically sensitive level of $3 a gallon for the first time in six years, adding to broader inflationary pressures. More than 1,000 gas stations in the Southeast have reportedly run out of fuel, while premium for wholesale gasoline in the New York area reached its widest in three months. Crude processors are also being forced to reduce run rates, while refiners are booking ships to store growing fuel stockpiles.
Steps taken: Emergency shipments of gasoline and diesel from Texas are on the way to southeastern cities via trucks as the White House relaxed some environmental rules to help bring in more fuel. The Department of Transportation is meanwhile considering a temporary waiver of the Jones Act that could permit foreign tankers to transport gasoline and diesel to East Coast ports. With Colonial only managing to restart a small segment of the pipeline as a stopgap measure, the EPA has additionally allowed the sale of gasoline that doesn’t satisfy requirements meant to help combat smog in certain areas.
Outlook: Corporations are trying to figure out what to do given the situation. Southwest Airlines (NYSE:LUV) has begun flying supplies to Nashville, Tennessee, and other cities, while United Airlines (NASDAQ:UAL) loaded extra fuel on flights to preserve local supplies in places like Baltimore and South Carolina. Shares of retailers like Home Depot (HD), Lowe’s (LOW), Walmart (WMT) and Target (TGT) also traded lower yesterday as investors showed some anxiety over the future of gas prices and stimulus drying up.
To battery swap or not
As it looks to deepen its presence in the electric car market, Renault (OTC:RNSDF) is considering introducing battery-swapping capabilities, which would significantly cut waiting times at charging stations. “It’s not decided, but I see it as an interesting opportunity,” CEO Luca de Meo told the FT. “We need to find a pragmatic solution, but from a business point of view, there’s a point separating the battery from the car.” The French automaker is part of the Renault-Nissan-Mitsubishi Alliance, which is one of the biggest car manufacturers in the world and a leader in EVs (think the pioneering Leaf and best-selling Zoe).
Backdrop: Interestingly enough, Renault was once a trailblazer in battery swapping technology for electric vehicles. Starting in 2010, the carmaker became the primary partner for Better Place, an Israeli startup that hoped to revolutionize the e-mobility industry. The company initially set up shop in Israel, Denmark and Hawaii, but was plagued by financial difficulties and mismanagement, and eventually went bankrupt in 2013.
Tesla (NASDAQ:TSLA) also began conducting its own battery swapping trials in 2013, but it dropped the project a few years later as consumers increasingly expressed interest in its Supercharger network. While the process seems simple, making a business out of swapping is a bit complicated. Batteries are the single most expensive component in any EV, but they’re still in a rapid stage of development and manufacturers have been reluctant to standardize anything. In fact, at Tesla’s Battery Day event last September, the EV maker said it plans to integrate batteries into structural elements of future cars, comparing them to the fuel tanks located within the wings of an airplane.
Enter NIO: The Chinese EV maker just recorded a milestone of 2M battery swaps to date and plans to double its Chinese network to more than 500 stations in 2021. Each NIO (NYSE:NIO) battery swap takes only a few minutes (and comes with a full charge), compared to the 35 minutes it takes a Supercharger to load a Tesla battery from 10% to 80% (it’s even slower at home). Besides quicker turnaround times, battery swapping technology also allows EV makers to decouple the cost of batteries from their vehicles, meaning drivers aren’t worried about depreciating battery capacity or the value of their cars.
What else is happening…
Bumble (NASDAQ:BMBL) hopes to get its buzz back in today’s earnings report.
Xiaomi (OTC:XIACF) rallies after removal from U.S. government blacklist.
Apple (AAPL) chose not to disclose breach that infected 128M iPhones?
mRNA technology could help create ‘more potent’ seasonal flu shots.
Palantir (NYSE:PLTR) allows bitcoin payments, could invest in cryptocurrency.
Should Tesla (NASDAQ:TSLA) accept Dogecoin (DOGE-USD)? Musk wants to know.
L Brands (NYSE:LB) announces plans to spin off Victoria’s Secret.
Big reversal for Plug Power (NASDAQ:PLUG) as analysts keep the faith.
States won’t receive J&J (NYSE:JNJ) vaccine deliveries next week – Politico.
Cathie Wood’s ARKK sheds a third of its Apple (NASDAQ:AAPL) holdings.
Tuesday’s Key Earnings
Chesapeake Energy (NASDAQ:CHK) +5% AH cranking out a profit, initiating dividend.
Electronic Arts (NASDAQ:EA) +1.8% AH on bookings beat, upside guidance.
Macerich (NYSE:MAC) -0.4% hit by retroactive breaks in rent.
Palantir (PLTR) +9.4% posting Q1 revenue beat, upside sales guidance.
QuantumScape (NYSE:QS) -2.9% AH boosting capex spending outlook.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
9:00 Fed’s Clarida: U.S. Economic Outlook and Monetary Policy
10:30 EIA Petroleum Inventories
10:45 Atlanta Fed’s Business Inflation Expectations
1:00 PM Results of $41B, 10-Year Note Auction
1:00 PM Fed’s Bostic: U.S. Economic Outlook and Monetary Policy
1:30 PM Fed’s Harker Speech
2:00 PM Treasury Statement
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Good morning. Happy Tuesday.
The Asian/Pacific markets closed mostly down. Japan, Hong Kong, South Korea, Taiwan, Australia and Singapore posted big losses. Europe, Africa and the Middle East are currently mostly down. The UK, Denmark, Poland, France, Turkey, Germany, Greece, Russia, Sout Africa, Finland, Switzerland, Hungary, Norway, Sweden, Spain, Netherlands, Italy, Portugal, Israel and Austria are down big. Futures in the States point towards a huge gap down open for the cash market.
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My interview with WorldClassPerformer.com
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The dollar is down. Oil is down; copper is up. Gold and silver are down. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Look out below
A flurry of inflation jitters clobbered tech stocks on Monday as the Nasdaq dropped 2.4% for its worst day since March. The yield on the 10-year Treasury note also rose 3 bps to 1.6% – hitting growth names that depend on low rates to fuel their expansions – while the DJIA snapped a 5-session winning streak after pushing above the 35,000 milestone. Things don’t look better this morning, with Nasdaq futures off 1.4% and weighing on the broader market. Contracts linked to the Dow and S&P 500 are 0.6% and 0.9% lower, respectively, while most of Europe and Asia are also in the red.
Time to buy puts? Shares of semiconductor companies were among the biggest decliners, along with cloud companies, while Big Tech stocks came under pressure. Facebook (FB) is down 2% premarket to $300/share, after tumbling 4% on Monday, while Tesla (TSLA) slid another 3.5% to $606/share after sinking 6.5% in the previous session. The plunge is also weighing on Cathie Wood’s ARK Innovation ETF (ARKK) – in which Tesla is the top holding – as the notable growth fund slipped another 3% premarket to the $100 level (it fell 5% on Monday and is off 35% from its peak).
Meanwhile, prices are rising everywhere. Some are tied to commodities, which are getting scooped up at a record pace as the global economy emerges from the coronavirus pandemic. Consumer products are rising for the same reason, but have also been affected by supply chain shortages and logistical logjams. While some spikes could be temporary, like gasoline futures that whipsawed due to the closure of the Colonial Pipeline, economists hope the same will occur for the broader industry as supply moves to match demand.
Get ready for CPI: Inflation data will come tomorrow, but economists are already penciling in a price rise of 3.5% in April. While consumers and investors might be alarmed, the Federal Reserve isn’t. The central bank has said it is comfortable allowing inflation to run past its 2% target for a while as it views the pickup in prices as “transitory.” Others are more concerned about the outlook, fearing a sooner-than-expected interest rate rise, and equities may be at a disadvantage given the uncertainty.
Vaccines for under-16s
The FDA, for the first time, has cleared a coronavirus vaccine’s use in adolescents aged 12 to 15, paving the way for many to be immunized before summer camp and the new school year in the fall. “The light at the end of the tunnel is growing, and today it got a little brighter,” President Biden said in a statement. At least 55M people in the U.S. have so far been vaccinated with Pfizer-BioNTech’s (PFE, BNTX) jab, according to the CDC, including about 2M 16- to 18-year-olds.
The next step will see a committee of experts – that advise the CDC – meet tomorrow to review Pfizer’s study data and decide whether to recommend the shot for youths. The federal government is meanwhile working with states, pediatricians and pharmacy chains to determine the logistics of administering the vaccines to children.
Data: Pfizer’s shot demonstrated 100% efficacy in an ongoing placebo-controlled trial with 2,260 participants between the ages of 12 and 15 years old. Pfizer also recently said it expects to ask the FDA in September to authorize its vaccine’s use in children 2 to 11 years should ongoing studies prove positive. Moderna (MRNA) is also studying its vaccine in children and J&J (JNJ) has said it is in talks with regulators to do so.
Go deeper: The expansion would be a major development in the country’s vaccination campaign, but is likely to divide parents between those who are eager to expand the level of immunity and those that are skeptical about long-term side effects (the shots are currently authorized for emergency use rather than fully approved). With much of the world banking a surplus of vaccines made in the U.S., the use also raises questions about whether the supply should be targeted to an age group that so far appears to be mostly spared from the severe effects of the disease.
Population growth decline
China’s population growth is expanding at its slowest pace since the 1950s, according to census data from the past decade, with the numbers on mainland China increasing 5.38% to 1.41B. The working-age population – people aged 15 to 59 – is on the decline as well, after hitting a 2011 peak of 925M, while the fertility rate was only 1.3 children per woman during 2020, missing a target of 1.8 that Beijing had set in 2016 (after replacing its one-child policy). China’s statistics agency even took an unusual step by announcing that the population did grow in 2020, but gave no total, prompting some to speculate it was an effort to pacify investors and corporations.
Race against time: At issue is whether the world’s second-largest economy may already be in irreversible population decline before accumulating the household wealth of G7 nations. While China has eased birth limits, couples have been put off by the high cost of living (especially in cities), cramped housing (many share apartments with their parents) and career choices (job discrimination faced by mothers). Childcare is also expensive, maternity leave is short and most single mothers are excluded from medical insurance or social welfare payments.
Thought bubble: Japan, Germany and other rich countries face similar challenges of supporting aging populations with fewer workers, but services play an important part in their economies and they have spent decades of investment on factories, technology and foreign assets. On the other hand, China is a middle-income economy that is highly based on manufacturing and labor-intensive farming. While the ruling Communist Party has proposed a series of economic reforms, it’s not yet clear if they will be large enough to ease strains on the nation’s underfunded retirement system.
What about the U.S.? Births in 2020 fell for the sixth consecutive year to the lowest levels since 1979, according to data from the CDC, and the figures probably have little to do with the pandemic (most babies were conceived beforehand). Total fertility rates and general fertility rates have also declined by 4% since 2019, notching record lows. “The United States is presently moving below replacement fertility levels, which is not good for the economy,” said Adina Batnitzky, a sociology professor at University of San Diego. “We will eventually have fewer working adults caring for the elderly, which further challenges our Social Security system,” added Pamela Smock, a demographer for the University of Michigan-Ann Arbor.
Instagram for kids?
A group of 44 state and territory attorneys general is urging Facebook (FB) CEO Mark Zuckerberg to abandon plans to launch a version of Instagram for children under 13. The AGs, led by New York State’s Letitia James, contend that “social media can be detrimental to children for myriad reasons and that Facebook has historically failed to protect the welfare of children on its platforms.” Shares of Facebook ended the session yesterday down 4%, but that also came against the backdrop of a broader tech selloff.
Flashback: In March, Facebook confirmed it was working on an “Instagram Kids” product version to tap the under-13 market that can’t use regular Instagram due to federal privacy regulations. Facebook had launched a Messenger Kids application in 2017 – a version of its Messenger product tied to parents’ Facebook accounts. But Messenger Kids contained a glitch that allowed children to circumvent restrictions and join group chats with strangers, according to the AGs.
“Without a doubt, this is a dangerous idea that risks the safety of our children and puts them directly in harm’s way and in the paths of predators,” James declared. “There are too many concerns to let Facebook move forward with this ill-conceived idea, which is why we are calling on the company to abandon its launch of Instagram Kids.”
From the SA comments section: “Finally someone calling for some major common sense. Too bad parents aren’t as vigilant when it comes to their children’s safety and well being,” writes John McCoy. “I predict that 20 years from now, social media companies will be looked at the way tobacco and firearm companies are looked at today.” Other users see another case of Big Brother. “Are they going to pressure McDonald’s to stop selling Happy Meals which may lead to childhood obesity which is an actual health crisis?” replies Fooly Finance. “Don’t like it don’t use it.”
Dollar watching
The big miss in non-farm payrolls expectations for April has put increased pressure on the dollar since Friday as the greenback recorded its biggest one-day slide in five months. In fact, the U.S. Dollar Index has fallen decisively below its 2021 uptrend, putting it back to little changed for the year, and has recorded a decline of 10% since March 2020 (just prior to the pandemic). A relief rally starting in 2021 saw Goldman Sachs cancel its short call on the dollar – as many scrambled to cover positions – but the recent downtrend is leaving other Wall Street bears feeling vindicated.
“We continue to see the ‘peaking U.S. exceptionalism’ narrative playing out through a weaker dollar over time due to a dovish Fed, benign risk appetite and a global recovery,” wrote analysts at Citigroup. Last month, the group said the greenback could fall another 20%, and J.P. Morgan and T. Rowe Price are among others predicting more losses ahead. “We expect the dollar to weaken further, given its diminishing appeal as a safe-haven currency as long as the global economic picture and risk appetite improve further,” UniCredit added in a research note.
Some statistics: Aggregate net short positions in the dollar vs. major peers hit $10B last week from $4B in mid-April, according to data from the Commodity Futures Trading Commission. Bearish bets totaled about $31B in January.
Outlook: The next move for the greenback could depend on whether the Fed will let the economy run hot. Last month, policymakers signaled expectations for interest rates that be kept at near zero through 2023, but some money markets are positioning for a rate rise sooner than that. Others suggest that even if the Fed would move early, the relationship has changed, as well as the currency’s traditional role with equities. Once upon a time, a weaker dollar was seen as a boon for U.S. equities, but a stronger buck didn’t prevent the continuous stock market highs that were notched in the first quarter.
What else is happening…
Colonial Pipeline sees service ‘substantially restored’ by end of week.
Cryptocurrency slump as Elon Musk and Gary Gensler advise caution.
Pentagon may reconsider Amazon (NASDAQ:AMZN) challenge to $10B JEDI contract.
Chipotle (CMG) boosts wages amid staffing pressure in restaurant industry.
Prepare for Lightning! Ford (NYSE:F) to unveil all-electric F-150 next week.
NBC (NASDAQ:CMCSA) won’t air Golden Globes due to controversy over diversity.
Apple (NASDAQ:AAPL) roundup: In-house 5G modem could arrive in 2023.
Biden administration planning summit to address global chip shortage.
Amazon (AMZN) sets records with bond issue valued at $18.5B.
Monday’s Key Earnings
Duke Energy (NYSE:DUK) +2.9% as Elliott Management took a stake.
Marriott (NASDAQ:MAR) -4.1% after EBITDA tally missed estimates.
Novavax (NASDAQ:NVAX) -12.7% AH on delayed regulatory vaccine submission.
Occidental Petroleum (NYSE:OXY) +0.3% AH showing best FCF since 2011.
Roblox (NYSE:RBLX) +3.8% AH as users flocked to videogame platform.
Property Group (NYSE:SPG) -1.8% despite seeing shopper ‘euphoria.’
The Trade Desk (NASDAQ:TTD) -26% following a guidance warning.
Tyson Foods (NYSE:TSN) unchanged amid margin pressures.
Virgin Galactic (NYSE:SPCE) -8.5% AH with no date set for test flight.
Wynn Resorts (NASDAQ:WYNN) +0.8% AH separating its online gaming business.
Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
10:00 Job Openings and Labor Turnover Survey
10:30 Fed’s Williams Speech
12:00 PM Fed’s Brainard: Economic Outlook
1:00 PM Fed’s Daly Speech
1:00 PM Results of $58B, 3-Year Note Auction
1:15 PM Fed’s Bostic: Economic Outlook
2:00 PM Fed’s Harker: Economic Outlook
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Good morning. Happy Monday.
The Asian/Pacific markets were split. China, South Korea, India, Australia, Indonesia and the Philippines did well; Japan, Hong Kong, New Zealand, Taiwan and Singapore were weak. Europe, Africa and the Middle East are currently mostly up. Poland, Turkey, Greece, Austria and Saudi Arabia leading. Futures in the States point towards a flat open for the cash market.
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The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
Pipeline disruption
The U.S. government has declared a state of emergency to keep fuel supply lines open following the shutdown of Colonial Pipeline on Friday. The 5,500-mile conduit, whose owners include Shell Midstream Partners (NYSE:SHLX) and others, carries 2.5M barrels a day to the East Coast, or 45% of its supply of diesel, gasoline and jet fuel. While Colonial is working toward a restart of operations along the key artery, some smaller lateral lines between terminals and delivery points are now operational. In the meantime, the Biden administration is allowing drivers that transport fuel to work extra hours, while oil products could be permitted to be shipped in tankers up to New York.
Recap: Hackers stole almost 100 gigabytes of data from Colonial Pipeline’s networks, before locking its computers with ransomware and demanding payment. Multiple sources have confirmed that a cybercriminal gang called DarkSide was behind the attack, and some evidence has emerged linking the group to Russia or elsewhere in Eastern Europe. The White House also formed a task force to probe the pipeline breach, and the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency is coordinating with Colonial Pipeline.
Fear of shortages: U.S. gasoline futures (XB1:COM) jumped more than 3% to $2.217 a gallon as trading reopened for the week, while WTI crude futures (CL1:COM) rose 1.3% to as high as $65.76/bbl. Besides connecting refineries to more than 50M people, the pipeline network serves major U.S. airports, including Atlanta’s Hartsfield-Jackson. While the U.S. Department of Energy could tap its reserve of 1M barrels of diesel fuel in the Northeast, it’s “little more than a Band-Aid,” ClearView Energy Partners said in a research note
Outlook: The attacks are “here to stay and we have to work in partnership with businesses to secure networks, to defend ourselves against these attacks,” Commerce Secretary Gina Raimondo told CBS’s Face the Nation. The hack could also give renewed impetus for Biden’s $2.3T infrastructure plan. In fact, the president this week is hosting top Democratic lawmakers at the White House, as well as a group of Republican senators who have proposed a separate $568B infrastructure plan, though Energy Secretary Jennifer Granholm has previously said Biden is willing to push through the “American Jobs Plan” without bipartisan support.
Digesting the jobs report
The new week is starting with some familiar investing trends as cyclicals look poised to notch modest gains this morning with tech on the back foot. Dow futures are ahead by 0.3%, while contracts linked to the Nasdaq are off by 0.3% and the S&P 500 is hugging the flatline. The bet, known as the reflation trade, would see stocks more sensitive to the economic cycle outperform their peers as businesses reopen following the coronavirus pandemic.
Not everything is rosy on the economic front. Data on Friday showed that U.S. jobs rose by 266,000 in April, trailing estimates for a one million jump, marking a huge miss by economists and raising questions over what data they’re using. Despite the blunder, the news could be good for equities, as it may suggest the Fed may hold its accommodative stance for longer. Treasury Secretary Janet Yellen weighed in by saying the report “underscores the long-haul climb back to recovery, but still represents continued progress.”
Analyst commentary: “We would not read too much into any one jobs report, and continue to think the labor market remains on track and will be more than enough to underpin consumer confidence and consumption,” Wells Fargo’s Sameer Samana declared. He thinks cyclical stocks will continue to be favored over defensive shares, and jobs growth still likely to accelerate in the months ahead.
Prices on the rise: Commodities are getting another dose of supercycle today, with gasoline and crude oil rising after a cyberattack forced the closure of the East Coast Colonial Pipeline. Iron ore futures and copper also jumped to fresh records, before a CPI report this week that is forecast to show U.S. prices rising further in April. Meanwhile, a slew of Fed speakers will discuss the recent price trends this week, as well as how inflation could affect monetary policy and economic growth.
To the moon
Dogecoin (DOGE-USD) shed as much as 46% after trading as high as $0.74 before Elon Musk’s appearance on Saturday Night Live. The crypto is now changing hands at $0.51, but fell to as low as $0.40 on Sunday. Musk has a history of comments that can influence stocks, markets and crypto, and many were expected similar outsized moves after his role on the late-night comedy sketch. The fun didn’t stop overnight, as Musk tweeted SpaceX (SPACE) would launch a satellite name Doge-1 to the moon in 2022 (all funded by Dogecoin).
The skit: Musk was featured in satirical news segment Weekend Update, playing a character called “Lloyd Ostertag, financial expert,” who dubbed himself “The Dogefather.” At the beginning of the episode, Musk touted the benefits of cryptocurrencies and Dogecoin, saying the latter had started as an “internet meme… but has now taken off in a very real way.” However, after cast members Michael Che and Colin Jost repeatedly asked him to explain, “What is Dogecoin?” Musk ended the episode by saying, “yeah, it’s a hustle.”
Before the highly-publicized appearance, Barry Silbert, a big player in the crypto sector, turned against the cryptocurrency. “Okay $DOGE peeps, it’s been fun. Welcome to crypto!” he wrote over Twitter. “But the time has come for you to convert your DOGE to BTC [disclosure: we’ve gone short DOGE].” Silbert founded Grayscale Investments, which runs the popular Grayscale Bitcoin Trust (OTC:GBTC), as well as the Digital Currency Group, which owns CoinDesk.
Go deeper: Even at $0.51, the market value of Dogecoin is more than $70B, greater than the valuations of many blue-chip companies. The crypto is still up 10,000% in 2021, padding the accounts of some of its “early” investors, though many in the crypto community are debating the path forward. Will Dogecoin eventually make it to $1, or will traders bail on its rising popularity? Click through to join the discussion.
ARK ETFs
Cathy Wood is in the spotlight over her recent market returns, as well as her dealings with Archegos Capital Management. The flagship ARK Innovation ETF (NYSEARCA:ARKK), which focuses on high-flying growth stocks, is off 12% so far this year and has retreated more than 31% from its mid-February high, as a rise in U.S. Treasury yields and economic reopening plays led investors away from the sector. Just to note, ARKK still remains up nearly 94% over the last 12 months, a move that propelled Wood into an elite club of notable stock pickers.
What she’s saying: “I love this setup,” she told CNBC, following the sharp selloff in Tesla (TSLA), Shopify (SHOP) and other holdings in ARK’s ETFs. “The worst thing that could have happened to us is to have the market narrowly focus on just our ilk of stock – the innovation space.” She also reiterated her five-year time horizon, and now expects her strategies to produce a 25% to 30% compounded annual return (up from 15% forecast in February).
Some other details emerged in the conversation. Wood revealed that hedge fund veteran Bill Hwang provided seed capital for ARKs first four ETFs and his help was “crucial given the tough environment of securing funding for ETFs in the early 2010s.” She continued to say that “I have not spoken to him” since the demise of Archegos, but did send him a note wishing him well. The hedge fund collapsed in late March, when its debt-laden and concentrated positions on certain media stocks unraveled.
Others are pointing fingers: Chris Irons, who tweets under the handle “Quoth the Raven,” or QTRResearch, had what to say over the weekend: “Hwang seeds ARK, ARK buys TSLA, Mysterious OTM call buys in TSLA gamma squeeze the stock by 10x higher for 18 months… Hwang buys GSX, Mysterious OTM call buys in GSX gamma squeeze shorts and 4x the stock, Hwang blows up after gamma squeezes unwind… What’s next for ARK?” For her part, Wood said she had “no idea if Hwang had remained a shareholder in ARK ETFs.”
What else is happening…
Airbnb (NASDAQ:ABNB), DoorDash (NYSE:DASH) set to report earnings this week.
Pfizer (NYSE:PFE) CEO opposes U.S. call to waive COVID vaccine patents.
Plant-tech firm Benson Hill going public in $2B SPAC merger.
Facebook’s (NASDAQ:FB) content rules in ‘shambles’ – Oversight Board leader.
Verizon Media (NYSE:VZ) heads into uncertain future under Apollo’s aegis.
Plan for electric postal trucks gaining traction among Democrats.
Bankruptcy filings hold above 40K for second straight month.
COVID vaccination rates slow, office occupancy rate edges up.
Six ag stocks poised to ride food prices higher – Barron’s.
Today’s Economic Calendar
8:30 Fed’s Evans Interview
12:30 PM Investor Movement Index
2:00 PM Fed’s Evans: Economic Conditions and Monetary Policy
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