Good morning. Happy Friday.
The Asian/Pacific markets were split. Japan, India and Taiwan did well; China and Malaysia were weak. Europe, Africa and the Middle East are currently doing great. Denmark, Poland, France, Turkey, Russia, South Africa, Finland, Norway, Spain, the Netherlands, Italy, Israel and the Czech Republic are leading. Greece is down big. Futures in the States point towards a positive open for the cash market.
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My interview with WorldClassPerformer.com
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The dollar is up a small amount. Oil is up; copper is down. Gold is up; silver is down. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
Something’s cooking
The three-week-old antitrust trial between Apple (NASDAQ:AAPL) and Epic Games will wrap up on Monday, but not before an appearance from a high-profile defendant. CEO Tim Cook will take the stand today before the companies make their closing arguments and Judge Yvonne Gonzalez Rogers issues a final ruling (neither side wanted a jury trial). Other executives from both firms have already testified, including Craig Federighi, Apple’s SVP of Software Engineering; Phil Schiller, Apple Fellow and former longtime head of marketing, as well as Epic Games CEO Tim Sweeney.
Backdrop: The legal fight started last year when Epic created its own direct payment method within popular game Fortnite, circumventing fees paid for App Store purchases. Apple then issued a warning to Epic regarding the workaround, but the latter refused to remove it, and Apple kicked the developer off its platform. The current lawsuit then emerged, while companies like Spotify (SPOT) and Match Group (MTCH) have also accused the App Store of being anti-competitive.
While Tim Cook has testified before Congress in the past, today will mark the first time he has ever taken the witness stand in a trial. Apple seems to have the edge in terms of legal precedent in the case, but a loss could inflict heavy casualties on the tech giant’s lucrative App Store operation. In fact, Apple’s Services Segment, which includes the App Store, Apple Music, iCloud and Apple TV+, brought in an eye-popping $53.7B in revenue during 2020.
Flashback from July 2020: The last time Cook appeared before the House Judiciary subcommittee on antitrust, commercial, and administrative law, he had the following to say. “Apple does not have a dominant market share in any market where we do business. That is not just true for iPhone, it is true for any product category. Our commissions are comparable to or lower than commissions charged by the majority of our competitors and we have never raised the commission or added a single fee.”
Rebound mode?
A market comeback on Thursday helped the major averages break a three-day losing streak, while U.S. stock index futures tacked on another 0.3% overnight. Some “buy the dip” action may be happening, though fresh data showed the lowest level of jobless claims since the start of the pandemic in March 2020. According to figures from the Labor Department, 444,000 Americans applied for first-time unemployment benefits in the week ending May 15, down from 478,000 in the previous seven days.
Worries remain: “I think people are still concerned by the volatile moves that we’re having in our market,” said Jonathan Corpina, senior managing partner at Meridian Equity Partners. “In reality, people are still apprehensive about what the economy will look like one month from now, two months from now, six months from now.” Rising inflation and an overheated recovery could trigger the Fed to pare back easy-money policies, while tapering talk was head at the latest FOMC meeting.
Another thing on the minds of investors is the global minimum tax proposal just announced by the Treasury Department. The new corporate level would be at least 15%, less than the 21% rate it has proposed for the overseas earnings of U.S. businesses. “It is imperative to work multilaterally to end the pressures of corporate tax competition and corporate tax base erosion… discussions should continue to be ambitious and push that rate higher,” the U.S. Treasury said in a statement. Secretary Janet Yellen today is also scheduled to preside over a meeting of the Financial Stability Oversight Council.
Outlook: While many countries have endorsed a minimum tax (there’s been talk at the OECD for years), others may not embrace one unless they can claim a bigger stake in the profits of U.S. tech companies. The debate also touches on the ongoing friction in international taxation: whether to tax companies based on the location of their income or the location of their headquarters. The U.S. didn’t have a pure system before or after the 2017 tax act, which leaned toward taxes based on where revenues are generated, though the Biden administration appears to be focusing more on the latter.
IPO Access
In line with its motto to democratize financial markets, Robinhood (RBNHD) is rolling out the opportunity for its app users to get in on IPOs through its new product called IPO Access. Traditionally, most IPO shares go to financial institutions or the very wealthy or well-connected. With IPO Access, retail traders will get the chance to buy shares at the IPO price (the product will be gradually introduced to all customers in the coming weeks).
How does it work? App users can request to buy shares of companies at their initial listing price range. “When the final price is set, you’ll be able to review, edit, or cancel your request, before shares are allocated to Robinhood customers,” according to its blog. The company did warn that IPO shares can be very limited, but added that all Robinhood customers get an “equal shot” at shares regardless of order size or account value.
Footnote: “Here’s to democratizing IPOs for all!” Robinhood added in the post that ends with a disclaimer: “IPOs can be risky and speculative investments, and may not be appropriate for every investor.” Robinhood, itself, is poised to go public, with Bloomberg reporting that it may file its IPO prospectus next week with an aim to go public toward the end of June.
WeLose
Earlier this week, WeWork (WE) told Bloomberg that demand and sales have returned to pre-pandemic levels. But according to records obtained by the FT, WeWork losses almost quadrupled to $2.1B in the first quarter. A source said a settlement with WeWork co-founder and former CEO Adam Neumann accounted for about $500M of the Q1 2021 loss, but even removing that impact, the loss would still have nearly tripled on the year.
Bigger picture: The losses were largely driven by lockdowns and a remote working environment. Revenue dropped nearly 50% to $598M as WeWork shed about 200,000 customers, leaving the company with 490,000 customers in Q1. Some however think that WeWork will do well after the pandemic as people, startups and corporations look for short-term flexible space or satellite hubs for their businesses.
Go deeper: The latest news comes as WeWork tries to go public through a reverse merger with SPAC BowX Acquisition (BOWXU). The $9B deal follows a failed IPO in 2019, when its prospectus raised questions about whether the office-sharing company could turn a profit (it has lost $2B in 2018). Major investor SoftBank (OTCPK:SFTBF) then stepped in with a bailout and WeWork’s current chairman is also SoftBank’s COO.
Tax crackdown
Things seem to be calming down in the crypto market following a serious plunge and some wild swings seen earlier in the week. Bitcoin (BTC-USD) rose another 2.1% overnight to $40,763, while Ether (ETH-USD) climbed 2% to $2,777 and Dogecoin (DOGE-USD) advanced 9% to $0.40. Even a monkey wrench thrown by the U.S. Treasury on Thursday – calling for stricter crypto compliance with the IRS – didn’t seem to dent sentiment for too long.
Breakdown: The U.S. Treasury is proposing a requirement that any crypto transfers over $10K be reported to the IRS, among other plans, given that crypto markets pose a “significant” tax-evasion risk. The news is part of a broader Biden plan to raise $700B in revenue over the coming decade by stepping up IRS scrutiny of Americans, including doubling the size of the IRS workforce by hiring 87K additional employees by 2031. Reporting of the crypto transfers would be set to begin in 2023.
In a speech yesterday, Jerome Powell said the Fed will also issue a discussion paper this summer on the possibility of a U.S. central bank digital currency. The key focus is on how a CBDC could improve the current American domestic payments system, while the Boston Fed is working on more technical projects, focused on tools and infrastructure.
Quote: “We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks,” Powell said in a video message. “The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis – including input from the public and elected officials.”
What else is happening…
KC Southern (NYSE:KSU) expected to nix Canadian Pacific (NYSE:CP) deal – WSJ.
Exxon (NYSE:XOM), Chevron (NYSE:CVX) slam Australian levy to clean up offshore field.
Three Carnival (NYSE:CCL) lines set to resume U.S. cruises in July.
Cathie Wood still a big buyer of Coinbase (NASDAQ:COIN), owns $1B worth of shares.
Morgan Stanley (NYSE:MS) reshuffles ranks, setting up for CEO succession.
Tesla (NASDAQ:TSLA) plans to finally deliver Model S Plaid in June.
California regulator passes EV mandate for nearly all UBER, LYFT rides.
Ford (NYSE:F) considers SPAC or spinoff play for Spin electric scooter business.
Virgin Galactic (NYSE:SPCE) sees heavy volume after test flight announcement.
Good news for major burger/sandwich chains in latest Evercore survey.
Thursday’s Key Earnings
Applied Materials (NASDAQ:AMAT) +0.2% AH on Q2 beats, upside guidance.
BJ’s Wholesale Club (NYSE:BJ) -5% as operating income, gross profit declined.
Kohl’s (NYSE:KSS) -10.2% despite strong Q1 numbers, robust guidance.
Palo Alto Networks (NYSE:PANW) +6.1% AH raising full-year outlook.
Petco (NASDAQ:WOOF) -1.1% despite adding more than 1M customers in Q1.
Ralph Lauren
(NYSE:RL) -7% amid general retail fatigue.
Ross Stores
(NASDAQ:ROST) +1.8% AH forecasting sizzling same-store sales.
Today’s Economic Calendar
9:30 Fed’s Kaplan Speech
9:45 PMI Composite Flash
10:00 Existing Home Sales
1:00 PM Baker-Hughes Rig Count
1:30 PM Fed’s Daly Speech
4:55 PM Fed’s Kaplan Speech
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Good morning. Happy Thursday.
The Asian/Pacific markets leaned to the downside. New Zealand, Australia and Indonesia did well, but Hong Kong, India, Taiwan, Malaysia, Thailand and the Philippines were weak. Europe, Africa and the Middle East are currently doing well. Denmark, France, Germany, Switzerland, Norway, Hungary, Portugal, Israel, Sweden and the Czech Republic are leading. Futures in the States point towards a flat open for the cash market.
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VIDEO: State of the Market
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The dollar is down. Oil is down; copper is up. Gold and silver are down. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
Fickle crypto
The crypto community is once again divided on how to digest the latest Bitcoin (BTC-USD) crash, with the digital currency falling as much as 30% at one point on Wednesday to as low as $29,000. Some are attributing the crash to China’s crackdown on crypto transactions, Tesla’s (TSLA) recent decision to stop vehicle purchases with the crypto and J.P. Morgan citing moves by institutional investors that have swapped their Bitcoin positions for gold. Others in the FUD crowd (fear, uncertainty and doubt) say the finger pointing is not of much use, as the crypto scene is generally a volatile environment, and traders must be prepared to buckle up once there is a shift in sentiment.
The bulls: “For investors that are thinking long term, this is actually a great opportunity to buy at prices you may not see for a while,” said Delano Saporu of New Street Advisors. “Seeing these big drops is common,” further explained Ganesh Swami, CEO of blockchain data provider Covalent. “The last time we saw a bull run, bitcoin dropped at least half a dozen times by 20-30% before it went to the then all-time high.”
The bears: “The high volatility of cryptos makes them an unreliable store of value. Weekly moves of more than 10% in Bitcoin are common. In the week to 14 May, Bitcoin fell 24%, which would be a high level of volatility for a small-cap stock, let alone a currency,” wrote Mark Haefele, CIO of UBS Global Wealth Management. “A more than 50% decline from the highs within a month is certainly damaging the outlook for Bitcoin,” added Julius de Kempenaer, senior technical analyst at Stockcharts.com.
At the time of writing, Bitcoin is currently holding steady at $39.6K, but it’s worth mentioning the crypto’s long history of volatility.
2011 – Bitcoin soars from $1 in April to a peak of $32 in June. By November it’s worth $2.
2013 – Starting the year at $13, Bitcoin jumps to $220 by April, only to change hands at $70 two weeks later. The crypto then climbs from $123 in October, to $1156 by December, then tumbles to $760 in three days.
2017 – Trading around $1K in January, Bitcoin reaches nearly $20K by the end of the year.
2018 – Prices steadily decline, eventually tracking back to the $3,500 level.
2019 – Bitcoin tops $10K again over the summer, but ends the year at $7K.
2020 – Dropping to a low of $5,200 as the pandemic set in, the crypto goes on to reach $30K.
2021 – Momentum picks up as Bitcoin breaches $40K, $50K and $60K, before the most recent crash.
Also get used to hearing about the Proof-of-Work (PoW) vs. Proof-of-Stake (PoS) debate in coming months. The Cliff’s Notes: PoW (think Bitcoin) uses massive amounts of energy, while PoS does not. To Bitcoiners, massive use of energy is a feature not a bug, while PoS collapses the whole idea of decentralization.
Another day of losses
The selloff in high-flying assets (like growth stocks and crypto) continues to extend to the broader market, with U.S. stock index futures falling overnight by 0.6%. While the major averages pared big early session losses on Wednesday, they still registered a third straight day of declines as cryptocurrency-linked shares plunged. In fact, the Nasdaq Composite Index is off by more than 5% over the last few weeks, on pace for its worst monthly performance since September 2020. Sell in May?
Taper talk: In a move that did not help sentiment, the Federal Reserve’s minutes from April hinted at the possibility of tapering QE in upcoming FOMC meetings. “A number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”
Yesterday’s session also raised doubts about prospects of a commodity “supercycle.” Silver, copper, oil, and soybeans all traded to the downside amid growing fears about inflation, as well as a risk-off mindset among traders. There’s further concern about the resilience of demand in China, where officials are trying to temper prices after sounding off about the cost of raw materials.
On tap for today: Kohl’s (KSS), Ralph Lauren (RL), Ross Stores (ROST) and Petco (WOOF) release quarterly results in the latest slew of retail earnings. The latest weekly jobless claims numbers will also be released, providing an insight into the labor market recovery. New claims for unemployment benefits are forecast at 450,000 for the week ending May 15, continuing a steady decline from the 473,000 figure seen in the prior week.
Electrifying the Blue Oval
Ford (F) showed off its new electric F-150 Lightning model during a live event last night after giving President Biden a sneak preview on Tuesday. Pricing for the vehicle will range from about $39,974 for a work truck version to $52,974 for a consumer version that runs all the way up to $90K for the fully-loaded model. Tax credits can also be applied to the EV purchase.
Specs: The F-150 Lightning will be able to travel up to 300 miles per battery charge and race from zero to 60 mph in 4.5 seconds. Ford executives also highlighted the truck’s towing capabilities and the ability for the vehicle to provide charging capabilities on worksites, campgrounds or for homeowners that might lose electricity. The truck is said to be “Ford tough” and the most technically advanced truck ever produced by the automaker.
Fine print: The automaker expects to produce 40K electric F-150s or more when production ramps up in 2023. Crucially for investors, Ford anticipates the new electric F-150 Lightning pickup will be profitable when it arrives at U.S. dealerships next year (online reservations are available with a $100 deposit). During the previous session, Ford also warned on production cuts due to the global chip shortage and caught a new analyst upgrade.
‘Wow No Cow’
Oatly priced its highly-anticipated IPO at a top-of-range $17/share late Wednesday, valuing the firm at more than $10B. The plan calls for the stock to begin trading this morning on the Nasdaq under ticker symbol “OTLY” after raising $1.43B in the offering. The Swedish-based company produces a variety of vegan foods with oats, including milk, yogurts and spreadable cheeses, and its products are available in more than 20 countries.
By the numbers: Revenue more than doubled last year to hit $421.4M, though its net losses widened to $60.4M (compared to $35.6M in 2019) as it spent heavily on product development, new factories and marketing. During 2020, oat milk sales in the U.S. also soared over 300% to $213M, becoming the second most consumed plant milk after almond milk ($1.5B in 2020 sales). Soy milk fell down a spot, with sales declining 4.5% to $202M (a decade ago, they topped $1B).
Oatly counts TV legend Winfrey among its pre-IPO investors, along with rapper Jay-Z, actress Natalie Portman and former Starbucks CEO Howard Schultz. Institutional backers include Blackstone Group (BX) and others. The celebrity involvement has attracted lots of attention to the IPO, with analyst firm Hedgeye recently writing that the offering seemed “reminiscent of the great consumer growth stories we’ve seen IPO in recent decades,” such as Chipotle (CMG), Lululemon (LULU) and Under Armour (UAA). Others, like Seeking Alpha contributor Noah Wilson, recently looked at the IPO and concluded that money-losing Oatly has “no clear path to profitability.”
Go deeper: Pricing at the high end of the range is a positive sign for the company given the recent market environment, which has shunned growth companies, especially those that have gone public. Consumer preferences have also been shifting toward more plant-based foods, especially among the younger crowd, and could mirror the successes seen with Beyond Meat (BYND). “Generation Z and Millennials will become the dominant global generations in the coming years, bringing to the market a new set of values and expectations,” Oatly wrote in its prospectus. Another theme of the company is its environmental effects compared to cow products, and it could attract some interest from ESG funds.
Latest contender in the chicken wars
Burger King is storming into the market with a new Ch’King item to be added to the menu in June. Popeyes, a sister chain that’s also owned by Restaurant Brands (QSR), started the rage back in August 2019, with a blockbuster chicken sandwich that sold out in two weeks. The popularity of the item resulted in double-digit sales growth for Popeyes quarter after quarter, while similar successes were attempted at McDonald’s (MCD), KFC (YUM) and Wendy’s (WEN).
Backdrop: Burger King first announced a new chicken sandwich strategy in February and has been working on the concept since 2019. “With all the fanfare around QSR chicken sandwiches, BK took its time to get it right… so right that the brand started to see posts on social during the market tests that the Ch’King might be better than the Whopper,” according to the chain.
The sandwich is being described as a freshly hand-breaded chicken filet that is crispy on the outside and juicy on the inside. It’s served on a toasty, potato bun with crisp pickles and a savory signature sauce.
Outlook: All the competition in the fast-food market with chicken sandwiches is seen as a positive by some analysts for Tyson Foods (TSN) and Pilgrim’s Pride (PPC). In fact, one of the reasons it took Burger King so long to roll out the sandwich was due to limited chicken supplies. “We have used the time … to lock up our supply chain,” said Ellie Doty, chief marketing officer for Burger King North America. “We feel confident in our ability to supply our launches.”
What else is happening…
Colonial Pipeline CEO explains why he paid $4.4M ransom to hackers.
Web-hosting firm Squarespace (NYSE:SQSP) sinks after direct listing.
Apple (NASDAQ:AAPL) made over $100M off of Fortnite; Epic Games made $700M.
ByteDance (BDNCE) CEO steps down as China cracks down on sector.
Plug Power (NASDAQ:PLUG) receives expected Nasdaq notice for non-compliance.
ARK Invest buys more Coinbase (COIN) on rough day for crypto.
Tweets don’t stop… Musk says Tesla (NASDAQ:TSLA) has diamond hands.
BP (NYSE:BP) sees growing investor interest in energy transition strategy.
Self-driving Waymo (NASDAQ:GOOGL) in talks to raise $4B in outside funds – Bloomberg.
Advanced Micro Devices (NASDAQ:AMD) announces $4B share repurchase program.
J.P. Morgan believes its top chip pick has locked up Google AI business.
Wednesday’s Key Earnings
Cisco (NASDAQ:CSCO) -5.6% AH posting a light profitability forecast.
JD.com (NASDAQ:JD) +1.2% continuing pandemic momentum.
L Brands (NYSE:LB) -1.7% AH prepping for a business split in August.
Lowe’s (NYSE:LOW) -1.1% as report lacked specific guidance.
Target (NYSE:TGT) +6.1% on sizzling comp sales, market share.
TJX Companies (NYSE:TJX) -5.3% warning on an uncertain environment.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:00 Leading Indicators
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
6:05 PM Fed’s Kaplan Speech
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Good morning. Happy Wednesday.
The Asian/Pacific markets leaned to the downside. Hong Kong and South Korea did well, but Japan, New Zealand, Australia, Malaysia, Indonesia and Singapore were weak. Europe, Africa and the Middle East are currently getting hit hard. The UK, France, Germany, Russia, South Africa, Finland, Norway, Hungary, Spain, the Netherlands, Italy, Austria and Sweden are all down at least 1%. Futures in the States point towards a big 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 and copper are down. Gold and silver are down. Bonds are down. Bitcoin continues to get crushed.
Stories/News from Seeking Alpha…
Retail earnings parade
Futures movement overnight suggests another down day for the U.S. stock market as inflation fears continue to weigh on sentiment and prompt investors to cut exposure to riskier assets. At the time of writing, contracts linked to the Nasdaq are 1.3% lower, while the Dow and S&P 500 are off 0.7% and 0.9%, respectively. Minutes published today from the Fed’s April meeting could shed some light on recent price pressures, while bubble risks may be surfacing across a number of speculative asset classes, including crypto, SPACs and meme stocks.
Don’t forget about earnings season! While we’re on the tail end of Q1 quarterly results, this week is a big one for the retail sector. Walmart (WMT), Home Depot (HD), Macy’s (M) already announced sets of impressive results on Tuesday, though their accompanying stock performances were varied (see Key Earnings section below). Retail earnings shift into high gear today, with reports from Lowe’s (LOW), Target (TGT), TJX Companies (TJX) and L Brands (LB).
Target is attracting a lot of attention ahead of its quarterly report. Deutsche Bank named Target a top idea into the earnings print and UBS is predicting a resounding earnings beat. Target laps some easy compares in the apparel and home furnishing categories for the quarter and is likely to have seen a stimulus boost. Also watch the earnings call for commentary on inflation and wage pressures (see Wall Street Breakfast: The Week Ahead)
It doesn’t end there: Kohl’s (KSS), Ralph Lauren (RL), Ross Stores (ROST), Petco (WOOF) and Foot Locker (FL) are set to release earnings tomorrow and Friday. “We are about to enter one of the strongest prints on a quarterly basis,” said Adrienne Yih, senior e-commerce analyst at Barclays. “I think this is just the beginning of a four to six quarter very successful run for these retailers, especially given the child tax credits and stimulus on the way.”
Crypto crash
The crypto craze is no longer ablaze as the traders assess recent happenings in the volatile market. Over the last 24 hours, Bitcoin (BTC-USD) plunged another 12.6% to $39,407, while Ether (ETH-USD) – which is linked to the ethereum blockchain network – dropped 16% to $2,924. Bitcoin has even fallen below its 200-day moving average and is now down 40% from its all-time high of $64,895.22 on April 14.
Are 2020’s big trades unwinding? The popular winners of yesteryear, including Tesla/growth stocks and Bitcoin/crypto, have been under pressure in recent months and weeks as money continues to move elsewhere. While a rotation has been seen into reopening and cyclical plays, as well as more stabler names, several headline stories have shaken the cryptosphere in the last few days.
Warning from Beijing: Besides environmental concerns sparked by Elon Musk – and Tesla (TSLA) stopping to take payment in Bitcoin – the People’s Bank of China has banned financial institutions from facilitating cryptocurrency transactions. The statement was coupled with a warning to investors against “speculative crypto trading,” which “seriously infringes on the safety of people’s property and disrupts the normal economic and financial order.”
Caution from the SEC: “Investors should understand that Bitcoin, including gaining exposure through the Bitcoin futures market, is a highly speculative investment,” the regulator wrote in a recent notice, adding it will “closely monitor” whether mutual funds that invest in Bitcoin futures comply with federal securities laws. That kind of thinking may not bode well for some highly anticipated Bitcoin ETFs, according to Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research. “I view the additional concerns about how an ETF cannot close to new investors and that it could become big over a short period of time to make it unlikely that the SEC approves a dedicated Bitcoin ETF in 2021.”
Mining concerns: Nvidia is reducing the hash rates on the new GeForce RTX 3080, 3070, and 3060 Ti graphics cards that will start shipping before the end of May. The decision will make more supplies available for the core gaming audience amid a widespread GPU shortage. Back in February, Nvidia also announced its GeForce RTX 3060 graphics cards would ship with a reduced hash rate to discourage Ethereum mining.
Lightning strikes
“The future of the auto industry is electric. There’s no turning back,” President Biden said during a visit to Ford’s (F) new Rouge Electric Vehicle Center in Dearborn, Michigan. He later jumped into the all-new F-150 Lightning, driving around an empty lot that’s used as a test track. “This sucker’s quick,” Biden told reporters, saying the electric truck goes 0 to 60 mph in about 4.4 seconds before speeding away.
vQuote: “The real question is if we’ll lead or fall behind in the race to the future, or whether we’ll build these vehicles or the batteries that go in them here in the United States or rely on other countries. We used to invest more in research and development more than any country in the world… and China was no. 9. We are now no. 8 and China is no. 1. We have to move fast.”
The stopover came ahead of today’s splashy introduction of the all-electric F-150 Lightning, which is the second mass-market EV from Ford (following the Mustang Mach-E). Ford says the pickup will bring stunning innovation, technologies and capabilities to the popular F-Series, without sacrificing power, payload and towing capability. CEO Jim Farley has also revealed that the F-150 Lightning will be able “to power your home during an outage, it’s even quicker than the original F-150 Lightning performance truck, and it will constantly improve through over-the-air updates.” Full pricing and specifications will come at 9:30 p.m. tonight.
Pitch for infrastructure: “We’re going to put Americans to work, which will include 50,000 charging stations along our roads and highways, homes and apartments,” Biden remarked. “We’re also going to boost our manufacturing capacity, as well as grants and tax credits to boost manufacturing of these clean vehicles, batteries, semiconductors and small computer chips.” His administration’s recently unveiled $2T infrastructure package, known as the American Jobs Plan, includes $174B to “win the EV market.”
Who is replacing Dimon?
JPMorgan (JPM) is shaking up its top leadership after Gordon Smith, co-president, chief operating officer and CEO of Consumer & Community Banking, said he would retire at the end of the year. The move will result in Daniel Pinto becoming the sole president and COO of the firm, but also leaves two executives battling to take over Jamie Dimon at some point in the future: Marianne Lake, CEO of Consumer Lending, and Jennifer Piepszak, JPMorgan’s chief financial officer.
The two women, both 51 years old, will become co-heads of Consumer & Community Banking, effective immediately. The division services half of all U.S. households, accounts for roughly 40% of profits for America’s largest bank and did over $50B in revenue in 2020. Jeremy Barnum, head of Global Research for the Corporate & Investment Bank, will also succeed Piepszak as CFO, effective immediately.
When will Dimon step down? The power CEO has led the bank since 2006 and is one of the last major investment bank chiefs still on the job from before the Global Financial Crisis. While the board has asked him to stay on for a “significant number of years,” he did suffer a health scare in 2020 when he had emergency heart surgery. Whenever asked about his retirement plans, Dimon has also always given the generic “five years away.”
What he’s saying about the reshuffle: “We are fortunate to have two such superb executives in Marianne and Jenn – they both are examples of our extremely talented and deep management bench,” Dimon said in a statement. “Both have proven track records of working successfully across the firm and both are well known and respected within the financial industry for their exceptional character and capabilities.”
What else is happening…
#AMCSqueeze… ‘Meme stock’ trade gains renewed momentum.
Malone offers support to AT&T/Discovery (T, DISCA) media merger.
Shopify (NYSE:SHOP) jumps after Google (NASDAQ:GOOGL) touts partnership expansion.
Lumber futures, homebuilder stocks dip after housing starts slip.
Study shows AstraZeneca (NASDAQ:AZN) booster shot induces “high antibody response.”
Microsoft (NASDAQ:MSFT) confirms that Windows 10X won’t be released.
Lamborghini (OTCPK:VLKAF) to spend $1.8B to electrify range by 2024.
No new oil and gas projects for world to reach net-zero by 2050 – IEA.
Boeing (NYSE:BA), FAA records on 737 MAX pursued by House lawmakers.
Record prices? Palladium supply deficit could hit 1M oz.
Tuesday’s Key Earnings
Baidu (NASDAQ:BIDU) -0.2% posting non-marketing sales gains.
Home Depot (NYSE:HD) -1% reversing after housing starts data.
Macy’s (NYSE:M) -0.4% despite surprise profit, boosting guidance.
Walmart (NYSE:WMT) +2.2% holding the line on price.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:00 Fed’s Quarles Testifies on Supervision and Regulation
10:00 Fed’s Bullard: U.S. Economy and Monetary Policy
10:30 EIA Petroleum Inventories
1:00 PM Results of $27B, 20-Year Bond Auction
2:00 PM FOMC Minutes
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Good morning. Happy Tuesday.
The Asian/Pacific markets did great. Japan, Hong Kong, South Korea, India, Taiwan, Singapore and Thailand rallied more than 1%. Europe, Africa and the Middle East are currently doing well. Denmark, Poland, Turkey, the UAE, Russia, Finland, Norway, the Netherlands, Portugal, Israel, Austria and the Czech Republic are leading. Futures in the States point towards a flat open for the cash market.
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Online Course: Masterclass in Trading
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The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is unchanged.
Stories/News from Seeking Alpha…
Big Tesla short
Tesla (NASDAQ:TSLA) shares were the weakest among the Big Six megacaps in Monday’s trading, declining more than 2% and falling back below their 200-day simple moving average. Other highly-valued stocks have seen weakness lately. Fellow megacap Apple, for example, has also been testing its 200-day SMA, although it has survived that test so far. But Tesla shares are feeling the pressure coming from a few directions, related to and unrelated to its core business of selling cars.
Stock numbers: In Monday’s session, Tesla fell back below the 200-day SMA, which sits at about $584. Last week Tesla fell below that level for the first time since March 2020, at the depth of the COVID-related selling and momentum has been a concern for a month. Shares are now down 35% from their closing high in late January and 24% lower from the recent high on April 13. Just two trading sessions earlier, on April 9, the 50-day SMA crossed below the 100-day in a bearish sign. The price has been consistently below the 100-day since April 27 and the 50-day since May 6.
The relative strength index sits just above oversold territory at 33. The last time it was there was early March, but in a more bullish sign shares sat below 30 for only two sessions before mounting a rally. Also bullish is the chart picture using the less known Ichimoku Cloud, which is used to gauge support and resistance. “For Tesla, the trend is higher based on that cloud,” Katie Stockton, founder of Fairlead Strategies, told Yahoo Finance.
Burry short: Tesla shares got hit with additional pressure yesterday afternoon when Michael Burry of The Big Short fame, disclosed a large short position in the stock. Burry’s Scion Asset Management holds 8,001 put contracts, bearish options on 800,100 Tesla shares, although there were no details on strike price or expiry in the regulatory filing. Burry had disclosed a Tesla short in December in a since-deleted tweet and has expressed his concern about the valuation. Burry was one of the catalysts for the retail investor interest in GameStop, although he closed out his long position before the big squeeze. The disclosure adds some more credence to the theory that Tesla shares have come too far too fast after a year of cash from fiscal and monetary stimulus chasing returns in Big Tech and momentum names.
“Tesla is currently trading at an enterprise value multiple of about 11x based on its expected 2021 revenues, hardly a bargain, but Tesla will continue to report impressive growth figures for the next 3-4 years and possibly beyond,” Seeking Alpha contributor The Outsider wrote yesterday, warning about buying on the current pullback. “This justifies to some extent its premium valuation, but even when compared to technology companies this valuation seems to already incorporate much of the future growth.”
Self-driving headlines: A fatal crash in California involved a Tesla Model 3 driver who had, in the past, recorded TikTok videos lauding the “full self-driving” feature and driving with his hands off the wheel, according to Reuters. Yesterday, the California Department of Motor Vehicles confirmed that Tesla is under review to see if the company misleads customers by advertising its full self-driving capability option.
Crypto controversy: Tesla shares have also seen volatility as CEO Elon Musk battles with supporters arguably as passionate as his own devoted customers and investors: the crypto crowd. Musk, who had been praised for accepting bitcoin (BTC-USD) for transactions and seen Tesla stock rally on the announcement, found himself in the crosshairs after reversing that decision and suspending bitcoin purchases on concerns about the amount of energy used in mining. After then saying he believes in crypto, he ended up in a weekend Twitter war with cryptocurrency fans that led to speculation Tesla may shed its bitcoin holdings. He then had to clarify that Tesla wouldn’t sell.
Cathie Wood’s ARK Investment Management, big Tesla bulls, even came out to disagree with Musk’s contentions, saying that bitcoin mining would benefit the environment in the end. “In reality, we believe very few vehicle purchases took place using bitcoin given the significant capital gains tax liability such transactions could incur,” CFRA analyst Garrett Nelson wrote. “We think TSLA’s foray into cryptocurrency has both weighed on the stock’s valuation and muddled the story, raising a plethora of questions regarding its capital allocation strategy, such as why the return on investment on bitcoin might outweigh that of a new vehicle factory.” With $1.5B in bitcoin on Tesla’s balance sheet crypto questions will keep coming for the company.
And it remains to be seen if Musk will step back from the Twitter battles after anointing himself the “Dogefather.”
Amazon could double to $6,000 in next year, says Morgan Stanley bull
Morgan Stanley analyst Brian Nowak sees a case where Amazon shares could be worth $6,000 in 2023. The analyst notes that Amazon currently trades at 1.2x 2022 on a PEG basis, which is a 30% discount to its median tech peer group.
Valuing Amazon in-line with other megacap tech stocks at a 1.7x PEG would put the company at a 45% discount to Walmart (WMT), and Nowak says Amazon “could warrant a higher PEG.”
Morgan Stanley maintains an Overweight rating and $4,500 price target on Amazon.
Apple reportedly ‘largely ceded control’ of Chinese data centers to government
After a multi-year investigation, The New York Times is out with a report about Apple’s (NASDAQ:AAPL) “hard bargain” in China.
The report says Apple has “largely ceded control” of its data centers in Guiyang and the Inner “Mongolia region” to the Chinese government despite CEO Tim Cook previously assuring that data stored within the region would be safe.
Key quote: “Chinese state employees physically manage the computers. Apple abandoned the encryption technology it used elsewhere after China would not allow it. And the digital keys that unlock information on those computers are stored in the data centers they’re meant to secure.”
Tepper’s Appaloosa exits Square; Buffett takes stake in Aon
It’s 13F season, where hedge funds disclose holdings in regulatory filings. David Tepper’s Appaloosa LP exited Square (NYSE:SQ), Wells Fargo (NYSE:WFC), Tenneco (NYSE:TEN) and Kinder Morgan (NYSE:KMI). It took new positions in Chesapeake Energy (NASDAQ:CHK) and ViacomCBS (NASDAQ:VIAC) and Discovery (NASDAQ:DISCA).
Among other moves, Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) took a new position in Aon plc (NYSE:AON) with a 4.1M-shareholding as of March 31, 2021, according to its latest 13F filing. It closed its positions in Synchrony Financial (NYSE:SYF) and Suncor Energy (NYSE:SU).
Paul Singer’s Elliott Management initiated positions in Discovery (NASDAQ:DISCK), Facebook (NASDAQ:FB), Trade Desk (NASDAQ:TTD), E2open (NYSE:ETWO) and Ryanair (NASDAQ:RYAAY). It cuts its stakes in F5 Networks (NASDAQ:FFIV) and Franco-Nevada (NYSE:FNV).
Amazon in talks to acquire film studio MGM
Amazon.com (NASDAQ:AMZN) is in discussions to acquire MGM Holdings (OTC:MGMB), in what would be its biggest entertainment move yet, The Information reports.
MGM serves as a mini-major film studio today, best known for its James Bond film franchise. But it has a major film library that also includes Rocky and The Pink Panther.
It also owns the Epix channel, and produces television shows including The Handmaid’s Tale (a Hulu hit) and Fargo, as well as reality shows Shark Tank and Survivor.
What else is happening…
Gates Foundation exits Apple (AAPL) and Twitter (NYSE:TWTR), adds Coupang (NYSE:CPNG).
NetEase (NASDAQ:NTES) EPS beats by $0.17, beats on revenue.
Software’s digital acceleration’ of IT spending? UBS doesn’t see it.
Amazon (AMZN) to make entry into medical diagnostics.
WarnerMedia (NYSE:T) chief Kilar negotiating exit in wake of deal.
Peabody Energy (NYSE:BTU), coal stocks soar with natural gas on demand optimism.
Copper resumes upward march on concerns of Chile supply disruptions.
U.K. unemployment rate falls to 4.8% in Q1.
Monday’s Key Earnings
Remark (NASDAQ:MARK) -9.2% AH despite first-quarter rebound on top line.
AcelRx Pharmaceuticals (NASDAQ:ACRX) -4% AH falls on Q1 top line miss.
XpresSpa (NASDAQ:XSPA) +6% AH reports Q1 results.
SG Blocks (NASDAQ:SGBX) +7% AH after beating revenue estimates.
Today’s Economic Calendar
8:30 Housing Starts
8:55 Redbook Chain Store Sales
10:00 E-Commerce Retail Sales
11:00 Fed’s Bostic Speech
11:05 Fed’s Kaplan Speech
12:30 Fed’s Bostic Speech
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets were mixed. China, Hong Kong, India and Singapore did well; Japan, Taiwan and Indonesia were weak. Europe, Africa and the Middle East currently lean to the upside. Denmark, Poland, Turkey, Italy and Saudi Arabia are doing well; the UK and Sweden are lagging. Futures in the States point towards a moderate down open for the cash market.
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VIDEO: Are the ARK ETFs Ticking Time Bombs?
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The dollar is unchanged. Oil is down; copper is up. Gold and silver are up. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
Musk keeps roiling crypto
Cryptocurrency is still under pressure this morning following tweets from Tesla (NASDAQ:TSLA) CEO Elon Musk that rattled the market over the weekend. Bitcoin (BTC-USD) is down 8% to about $45,000, but it’s off its lows today of just below $43,000. Ethereum (ETH-USD) is off 9% to around $3,500, with earlier lows nearing $3,100. Dogecoin (DOGE-USD) is down 5.5% to about $0.59, having hit $0.45 earlier. “To clarify speculation, Tesla has not sold any Bitcoin,” Musk tweeted just before 2 a.m. ET. A Twitter war broke out over the weekend between Musk and bitcoin fans, with Musk suggesting Sunday that Tesla has already or intends to unload its $1.5B in bitcoin holdings.
Musk was “taking on all comers on Twitter over the weekend and caused some chunky gyrations across the coins,” Chris Weston, head of research at Pepperstone Group, writes in a note, according to Bloomberg. Musk began Sunday afternoon by making fun of MicroStrategy’s (NASDAQ:MSTR) Michael Saylor, and things devolved from there. At one point, Musk pointed out that he’s the guy behind PayPal (that’s arguable), and how dare Bitcoiners try to tell him how money works. That provoked the natural response that Bitcoin is the anti-PayPal (decentralized vs. centralized).
Musk’s outsize influence: The Tesla chief executive has found himself, and his huge social media following, as one of the arbiters of cryptocurrency sentiment of late. His mentions of Dogecoin have led to buyers flocking to the meme crypto that was started as a joke and he dubbed himself “Dogefather” in a promo tweet for his appearance hosting Saturday Night Live, which led to intense interest about how the coin would be worked into any sketches. He sent shockwaves through the crypto world last week when he said that Tesla would no longer be accepting bitcoin as payment because of his concerns about the amount of energy used in mining coins. Bitcoiners pointed out the fallacy in Musk’s reasoning, noting mining has nothing to do with bitcoin transactions and everything to do with securing the network. He later expressed his confidence, saying “I strongly believe in crypto.”
Twitter (NYSE:TWTR) and Square (NYSE:SQ) chief Jack Dorsey has also weighed in, but has had limited impact. Dorsey tweets that Square will “forever work to make bitcoin better” because it changes “everything” for the better in response to a report that Square had halted purchases after a $20M loss.
Frothiness: There is also an argument that Musk has given crypto holders a convenient reason to sell given the lofty heights hit. Riskier assets have faced pullbacks recently, with the Nasdaq falling for the fourth straight week, the first time that has happened since 2019. Tesla lost more than 12% last week. Bitcoin is down nearly 30% from its high in mid-April, but has still quadrupled over the past year.
Seeking Alpha contributor GS Analytics detailed Friday how Musk is a big risk for bitcoin. “If Ethereum, Dogecoin, and other current and future cryptocurrencies continue to emerge as an alternative to Bitcoin and each other, we will have an unlimited supply of cryptocurrencies to invest in,” GS Analytics writes. “They will no longer be a store of value due to this unlimited supply. This should be detrimental to the whole crypto space in the long run but its immediate impact should be reflected in the most established cryptocurrency – Bitcoin – which many investors consider as a store of value and are pricing it like it will maintain its leadership/monopolistic position in crypto space.”
AT&T, Discovery look set to combine media assets
AT&T (NYSE:T) is said to be in talks to combine its media business with Discovery (NASDAQ:DISCA). A transaction may be announced as early as this week, according to a Bloomberg report. The companies are still working on the structure of a deal and details may change. The deal will likely combine Discovery with all of AT&T’s WarnerMedia, which will become a new publicly traded company, co-owned by AT&T and Discovery, according to a CNBC report.
AT&T is expected to own a “big” stake in the new entity and a transaction could come as soon as tomorrow, according to The Wall Street Journal. The companies are looking to combine Discovery’s realty-TV programming with AT&T’s media holdings – including HBO, TBS, TNT and the Warner Bros. studio – to be more of a competitor to Netflix (NASDAQ:NFLX) and Walt Disney (NYSE:DIS). Discovery’s networks include HGTV, Food Network, TLC and Animal Planet.
Microsoft investigated Bill Gates relationship
Microsoft’s (NASDAQ:MSFT) board reportedly concluded in 2020 that Bill Gates needed to step down from the company’s board after looking into a romantic relationship Gates had with an employee 20 years before.
“Microsoft received a concern in the latter half of 2019 that Bill Gates sought to initiate an intimate relationship with a company employee in the year 2000,” a Microsoft spokesman told The Wall Street Journal. “A committee of the Board reviewed the concern, aided by an outside law firm to conduct a thorough investigation. Throughout the investigation, Microsoft provided extensive support to the employee who raised the concern.”
Gates’ spokeswoman acknowledged “an affair almost 20 years ago that ended amicably,” but said that Gates stepping down from the board had nothing to do with it.
Housing market gets sized up as prices skyrocket
Investors will be eyeing several housing market indicators this week, with the real estate sector seeing some of the fastest price growth in more than a decade. The National Association of Home Builders’ monthly index will be published on Monday and is expected to hold steady at April’s robust figure of 83. Building permits and housing starts figures released Tuesday are also forecast to stay strong, given a significant lift from buyer traffic, vaccinations, stimulus checks and the spring season.
Bigger picture: The numbers are expected to show resilient homebuilder confidence and buyer demand despite a near doubling of lumber prices and logistical supply issues. A lack of residential construction over the past decade, as well as pent-up demand from COVID-19 shutdowns, has unleashed a seller’s market nationwide. According to the National Association of Realtors, the median price for a single-family home rose about 18% in March to a record high of nearly $335,000.
It’s not only in the U.S.: Among the 37 OECD countries, real house prices climbed almost 7% between the fourth quarter of 2019 and the fourth quarter of 2020, marking the fastest year-on-year growth in the past two decades. “If you lock up the vast majority of the population for months, they [rapidly reassess] what they want from their homes,” said Richard Donnell, research director at U.K. property platform Zoopla. It also didn’t take long for a “race for space” to take hold as people were forced to transform their houses into offices and classrooms.
Outlook: “Borrowing remains cheap and, once borders reopen, foreign investors will provide even further impetus to property markets, where purchasing activity has been largely driven by domestic buyers,” noted Kate Everett-Allen, head of international residential research at real estate consultancy Knight Frank. Economists also say it will take some time for construction to catch up to demand, especially for entry-level homes.
What else is happening…
At Home’s (NYSE:HOME) largest shareholder plans to vote against take private offer – WSJ.
Sarcos Robotics SPAC remains on target for Q3, CEO Says.
Niu Technologies (NASDAQ:NIU) EPS misses by $0.02, beats on revenue.
PerkinElmer (NYSE:PKI) to acquire U.K.-based in-vitro diagnostics company for $155M.
Google (GOOG, GOOGL) remains the standout megacap as I/O Conference approaches.
Rich banks got richer in the year of the pandemic, Forbes Global 2000 shows.
The ‘new momentum’ stocks to watch.
Today’s Economic Calendar
8:30 Empire State Mfg Survey
10:00 NAHB Housing Market Index
10:00 Fed’s Bostic: Economic Outlook
10:05 Fed’s Clarida Speech
12:30 PM Fed’s Bostic Speech
4:00 PM Treasury International Capital
6:00 PM Fed’s Kaplan Speech
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