Good morning. Happy Friday.
The Asian/Pacific markets leaned up. Japan, South Korea, India, Taiwan and Australia did well; Hong Kong and New Zealand were weak. Europe, Africa and the Middle East are currently mostly up. Denmark, Poland, France, Germany, South Africa, Finland, Switzerland, Norway and Hungary are leading. Futures in the States point towards a positive open for the cash market.
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VIDEO: The Movement of Individual Stocks Will Lead the Way
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The dollar is up. Oil is up; copper is down. Gold and silver are down. Bonds are unchanged. Bitcoin is down.
Stories/News from Seeking Alpha…
Hefty budget
Ahead of Memorial Day, we want to express appreciation to the brave men and women who have made the ultimate sacrifice for our freedom. Seeking Alpha wishes all our subscribers a beautiful holiday weekend and let us remember those who courageously gave their lives. Wall Street Breakfast won’t be published with markets closed on Monday, but tune back in Tuesday.
President Biden is scheduled to release his fiscal year 2022 budget today at 2 p.m. ET, which will serve as a blueprint for the administration’s fiscal priorities. Documents obtained by the NYT showed a proposal that totaled $6T, which would take the U.S. to its highest sustained levels of federal spending since World War II. Funding for the agenda would be obtained by raising taxes on corporations and the ultra-wealthy, while consumer prices wouldn’t rise faster than 2.3% per year and the Fed would slowly raise rates from their current rock-bottom levels.
What’s in the request? The package is being driven by the American Jobs Plan and American Families Plan – two proposals that are estimated to cost more than $4T. The first piece of legislation centers around physical infrastructure like roads, bridges, broadband internet and EV charging stations. The second covers what the administration calls “human infrastructure,” or social programs, such as affordable childcare, universal prekindergarten and a national paid leave program. It would also increase federal spending to $8.2T per year by 2031, meaning annual deficits of over $1.3T (and $1.8T in 2022).
The budget additionally contains funding for scientific research combating climate change, as well as investments in public service agencies like the CDC and EPA. Defense spending would also grow, especially the military’s cyber force, though it would decline as a percentage of the overall economy. With regards to student loan forgiveness, Biden excluded the campaign promise from the proposal despite pressure from progressives to cancel up to $50,000 in debt per borrower.
Outlook: With Democrats in control of both chambers of Congress, Biden has better odds than any president in recent history for passing his agenda, especially if he can negotiate with lawmakers on parts of his infrastructure package. This time around, Democrats might also seek to pass the legislation under budget reconciliation if members in the House and Senate can pass an identical package. That would allow the budget to sail through the Senate via a simple majority, rather than the 60 votes needed for most bills or spending measures.
Breaking pandemic records
Is travel making a comeback? It sure looks like it, based on forecasts for Memorial Day weekend. More than 37M Americans are expected to travel from Thursday to Monday, which is up 60% from last year, according to AAA. The need to get out follows a successful coronavirus vaccination campaign, as well as a reduction in COVID-19 cases, and comes despite gas prices that have skyrocketed across the country (90% of travelers will be driving).
Bigger picture: Security lines have been stretched at the busiest U.S. airports, with 2.5M people expected to travel this weekend. Helping supply the ferocious demand is the launch of new U.S. budget carriers: Avelo Airlines and Breeze Airways. The two are targeting smaller airports and underserved routes, and could put more pressure on larger carriers like JetBlue (NASDAQ:JBLU), Southwest (NYSE:LUV), American (NASDAQ:AAL) and Delta (NYSE:DAL) if they survive. The last U.S. airline to launch, Virgin America, folded in 2018.
“It is night and day, compared to 2020,” said Henry Harteveldt, an airline industry analyst at Atmosphere Research Group. “Hotels are booked full, companies like Airbnb (NASDAQ:ABNB) and Vrbo (NASDAQ:EXPE) say they are sold out in many communities, and rental cars are all but impossible to find.”
Market movement: General Electric (GE) shares notched their highest close in three years on Thursday, surging 7.1% to lead the S&P 500, as Boeing (BA) and its suppliers rallied in response to news that rival Airbus (OTCPK:EADSY) was preparing to gear up production of its A320-series jets beyond pre-pandemic levels. Boeing is GE’s second-largest customer while Airbus ranks third. The broad aerospace rally also touched Triumph Group (TGI), Spirit AeroSystems (SPR), Honeywell (HON), L3Harris (LHX) and Raytheon (RTX).
Inflation reading
The stock market continued to tick higher on Thursday, and the gains held overnight, as the number of weekly jobless claims came in lower than expected. The U.S. Labor Department said there were 406,000 initial jobless claims last week, below the 425,000 figure forecast by economists. Dow Jones futures are currently ahead by 0.5%, while contracts linked to the S&P 500 and Nasdaq are up 0.4% and 0.3%, respectively. Meanwhile, the Russell 2000 is set to close out May with its eighth straight monthly win as small-caps continue to shine in the post-pandemic recovery.
The other question mark surrounding the recovery centers around inflation. The Fed has said it will let the figure run hot, as rising price pressures would be “transitory,” but many investors are still nervous about the prospect of the central bank tightening monetary policy if the economy overheats. The Fed’s preferred measure of inflation, Personal Consumption Expenditures, is set to be released this morning, and may go some of the way in clarifying near-term investing sentiment.
What to expect: Core PCE, which excludes volatile food and energy prices, is expected to have climbed 2.9% Y/Y, a sharp increase from the 1.8% figure seen in March. The jump is due in part to base pandemic-related effects from 2020, but would also bring the core PCE well above the Fed’s 2% target, and to levels that have not been seen since the 1990s.
Don’t forget the meme trade: WSB/Reddit-favorite AMC Entertainment (AMC), soared another 35% on Thursday, putting YTD gains at 1,200%. It’s up another 23% this morning at $32.49/share and has dealt investors betting against the movie theater chain roughly $1.3B in losses, according to financial analytics firm S3 Partners. Beyond Meat (BYND) has also joined the party, rallying 12% on Thursday, after appearing on the Reddit Top 20 mentions list in the last couple of weeks.
Challenging China
Boosting U.S. economic competitiveness and confronting China’s rise is going hand-in-hand again as the U.S. Senate moves toward passing the U.S. Innovation and Competition Act of 2021 (USICA). The bill would sink more than $100B into U.S. research and development and provide $52B to advance domestic semiconductor manufacturing. It also includes a wide range of measures directly targeting China, such as its human rights record, a day after a Beijing-drafted resolution effectively ended open elections in Hong Kong.
The latest? Taking on China is a rare area of bipartisan support, but some hurdles to the bill’s passage remain in the House, as well as a series of amendments under consideration. The Senate has already voted on 18 revisions, 14 of them from GOP senators, but Majority Leader Chuck Schumer still hopes to pass USICA before senators leave Washington for the holiday weekend. President Biden is also ready to sign the bill as the administration wraps up an initial supply-chain review on computer chips, EVs batteries, pharmaceuticals and minerals used in electronics.
Earlier this week, the U.S took a significant policy shift in its approach toward China. “The period that was broadly described as engagement has come to an end,” said Kurt Campbell, the U.S. coordinator for Indo-Pacific affairs on the National Security Council, adding that the new “dominant paradigm is going to be competition.” Remarks by President Biden over the origins of COVID-19 (jump from animals to humans or lab accident) also angered officials in Beijing.
Excerpt from the bill: “While the U.S. represented 37% of global semiconductor manufacturing capacity in 1990, today just 12% of semiconductors are manufactured in the U.S… The Chinese Communist Party is aggressively investing over $150B in semiconductor manufacturing so they can control this key technology… At the same time, halted domestic production lines for consumer technology, auto manufacturers, truckers, and other critical industries underscores the vulnerability the U.S. faces.”
What else is happening…
J&J (NYSE:JNJ) nears deal to reopen troubled Baltimore vaccine plant.
SolarWinds (NYSE:SWI) hackers targeting new government agencies and NGOs.
Pioneer Merger (NASDAQ:PACX) announces SPAC merger with investing app Acorns.
Cruella debuts in theaters and on Disney+ (NYSE:DIS) Premier Access.
Tesla (NASDAQ:TSLA) loses top safety pick status for Model 3 after radar decision.
Jamie Dimon won’t stop JPMorgan (NYSE:JPM) from offering crypto services.
Kinder Morgan (NYSE:KMI) planning to enter petroleum fuels trading.
House committee presses social-media CEOs on COVID-19 disinformation.
Apple (NASDAQ:AAPL) led Q1 wearable shipments driven by Watch strength.
Virgin Galactic (NYSE:SPCE) soars again as investors latch on to rocket story.
Thursday’s Key Earnings
Costco (NASDAQ:COST) -0.6% AH despite strong comparable sales growth.
Dell (NYSE:DELL) -0.7% AH even as consumer demand remained strong.
Gap (NYSE:GPS) -0.7% AH as investors ignored a forecast raise.
HP (NYSE:HPQ) -5.9% AH despite FQ2 beats, upside profit guidance.
Salesforce (NYSE:CRM) +4.2% posting the ‘best Q1’ in company history.
Ulta Beauty (NASDAQ:ULTA) +4.7% AH boosting guidance across the board.
Today’s Economic Calendar
8:30 International trade in goods (Advance)
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
8:30 Personal Income and Outlays
9:45 Chicago PMI
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
3:00 PM Farm Prices
SIFMA close 2:00 PM
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Good morning. Happy Thursday.
The Asian/Pacific markets leaned up. China, Malaysia, Singapore, Thailand and the Philippines did well; Japan and New Zealand were weak. Europe, Africa and the Middle East are currently mostly up. Poland, France, Greece, South Africa, Norway, Italy, Portugal, Austria, Sweden and the Czech Republic are up; Denmark and Turkey are down. Futures in the States point towards a flat open for the cash market.
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VIDEO: The Movement of Individual Stocks Will Lead the Way
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The dollar is down. Oil is down; copper is up. Gold and silver are down. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
Blow to Big Oil
The reputation of black gold got more tarnished yesterday as a trifecta of trouble hit the oil industry. While environmental groups and activist investors have stepped up the pressure in recent years to address concerns about climate change and fossil fuels, some of these historic defeats are being looked at as a watershed moment that will shift the oil-and-gas landscape. Shareholders, investment giants and lawmakers are increasingly raising their voices about a sustainable future, while some even see the transition as a way to secure future profits given changing trends and an ESG world.
Exxon – Activist hedge fund Engine No. 1 won at least two board seats on the company’s board, which will likely force it to confront growing concerns about climate action. While it’s still too soon to gauge what the green-tinged members will do, fundamentally, it was a blow to the oil major and shows that shareholders are no longer buying a permanent future in the oil-and-gas arena. The Exxon (XOM) battle was one of the biggest proxy shocks in Wall Street history, especially for a campaign that only began last December.
Chevron – Shareholders voted 61% to cut emissions from the end-use of its fuels, while the firm barely lost a non-binding vote calling for a report on the business impact of achieving net-zero emissions by 2050. The decision signals a “new sense of urgency,” said Mark van Baal, who leads a climate advocacy group that placed resolutions calling for emissions cuts at Chevron (CVX) and elsewhere. Earlier this month, ConocoPhillips (COP) shareholders also rejected the company’s board to support a similar push for a full-scope emissions reduction target.
Shell – Emissions goals were deemed insufficient by a Dutch court, which ordered the oil major to curb its carbon outflows by 45% by 2030 compared with 2019 levels. It also said that Shell (RDS.A, RDS.B) was not only responsible for lowering its own direct emissions from drilling and other operations, but also those of the oil, gas and fuels eventually burned by consumers. While Shell said it will appeal the ruling, Rystad Energy feels it has a “negligible chance” in court, and it also raises eyebrows on the company’s decarbonization agenda that was considered one of the stricter plans in the industry.
Fed policy debate
Up, down, up, down… Stock futures are pointing slightly lower this morning, keeping up with a trend seen this week of tepid gains and losses. Nasdaq futures are off by 0.5%, while contracts tied to the S&P 500 and Dow Jones are down 0.3% and 0.1%, respectively. The wavering of equities this week came as fears over runaway inflation eased, but Fed taper talk picked up pace, resulting in mixed sentiment on Wall Street.
Economic data: There’s no shortage of figures today that can spark discussion over when monetary stimulus could begin to be scaled back. Durable goods numbers are scheduled to be released at 8:30 a.m. ET and are likely to reflect strong demand for cars, appliances and other factory goods. Initial jobless claims, a proxy for layoffs, will be released at the same time, as well as a revision to the 6.4% annualized GDP growth figure seen in Q1.
“Equity markets are quiet as investors continue to anticipate the Fed’s next move,” said Mark Hackett, chief of investment research at Nationwide. “Low volatility and low trading volume are a frequent occurrence in the week leading into a holiday.”
Don’t forget the meme trade! The WallStreetBets crew has returned with fervor, driving up so-called “meme stocks” on Wednesday. Shares of AMC Entertainment (AMC) rose nearly 20% and GameStop (GME) climbed 16%, and the two are up more than 60% and 37%, respectively, this week alone. “These people don’t have unlimited firepower,” Mad Money’s Jim Cramer noted, “but they’ve got enough firepower to engineer a short-squeeze any time a bunch of professionals decide to bet against this thing.”
Amazon goes to Hollywood
Amazon (AMZN) is putting up the big bucks in the streaming wars, reaching a deal to acquire MGM (OTCPK:MGMB) for $8.45B. The purchase is the second largest in the tech giant’s history, behind its $13.7B transaction for Whole Foods in 2017. With MGM, Amazon will get a library of more than 4,000 films, including franchises like James Bond and Rocky, classics such as The Silence of the Lambs and 12 Angry Men, as well as critically acclaimed shows like The Handmaid’s Tale.
Big pockets: While Amazon hasn’t had the massive creative successes seen at Netflix (NFLX) and newcomer Disney+ (DIS), it does have the spending power to boost its position in the industry. On top of bolstering its Prime Video offerings, Amazon struck a recent deal with the NFL for exclusive rights to Thursday Night Football at a price of $1.2B a season over 11 years. In total, Amazon spent $11B on content last year, up from $7.8B in 2019.
One of the fastest-growing parts of Amazon’s business is advertising and the MGM acquisition will allow the company to attach all sorts of ads to its new content. It could also create a fresh vertical with endless possibilities of what Amazon can do with a movie studio. Some say it won’t change the face of Hollywood, though others are more skeptical given Amazon’s dominance and the sway it has in many marketplaces.
Analyst commentary: In the race for scale that has ensued with every major media company jumping into streaming, the transaction “will likely distance Amazon’s Prime service from rivals that will (or do) offer a similar service,” writes Citi’s Jason Bazinet. “For a reasonable multiple, the deal ensures that Amazon has access to high-quality content as more media firms accelerate their direct-to-consumer pivot. In the aftermath of several streaming launches, Prime Video, Disney+ and perhaps Paramount Plus (VIAC) are the rivals arguably seen with enough scale to keep up with leader Netflix in the space.”
HSBC exits U.S. retail banking
You may be getting a new bank account if you’re still a customer at HSBC (NYSE:HSBC). The company is ending its mass-market retail banking business in the U.S., selling much of the operations to Citizens Bank (NYSE:CFG) and Cathay Bank (NASDAQ:CATY), as it pivots towards wealth management and international banking. The change of strategy means HSBC will go from 1.4M customers to about 300K, after expanding into U.S. retail banking in the 1980s to diversify its geographical focus.
Details: The bank will offload 90 of its 148 American branches and wind down another 35 to 40 locations. Two dozen other sites will be converted into international wealth centers that will only service high-net-worth clients with balances over $75,000. HSBC will also sever ties with its retail business customers, meaning it will no longer transact with small businesses that have turnover of $5M or less.
“They are good businesses, but we lacked the scale to compete,” CEO Noel Quinn declared. “Our continued presence in the U.S. is key to our international network and an important contributor to our growth plans.” The lender lost nearly $550M on its U.S. wealth and personal banking division in 2020, compared to a profit of $573M on its global banking and markets division.
Outlook: HSBC is more than a year into an overhaul to refocus its operations in Asia, where it makes most of its profit and has pledged to invest about $6B over the next five years. It has meanwhile been walking back its U.S. investment over the last decade, selling nearly half of its U.S. branches in 2011 and its credit card business to Capital One in 2012. HSBC has also been looking to sell its French retail banking operations as part of the same strategy and has reportedly entered final negotiations to sell the division to private equity firm Cerberus.
What else is happening…
Ford (NYSE:F) ups EV investments, targets 40% electric car sales by 2030.
Gold closes above $1,900 as fundamentals ‘have never been better.’
Coinbase (NASDAQ:COIN) sets up ‘Fact Check’ to fight crypto misinformation.
Amazon (NASDAQ:AMZN) to make presence in physical pharmacy space.
Jeff Bezos will hand Andy Jassy the Amazon (AMZN) reins on July 5.
Walmart (NYSE:WMT) to introduce first-ever home collection from Gap (NYSE:GPS).
CureVac (NASDAQ:CVAC) to finalize regulatory submission for COVID-19 vaccine.
Bayer (OTCPK:BAYRY) reviews Roundup’s future in U.S. after court setback.
Janet Yellen, a no-show, at House hearing on COVID aid programs.
GM (NYSE:GM), Lockheed (NYSE:LMT) hope to develop lunar rover for NASA.
PG&E (NYSE:PCG) slapped with $150M in penalties for wildfires, outages.
Wednesday’s Key Earnings
American Eagle (NYSE:AEO) +5.7% with teens heading back to the mall.
DICK’S Sporting Goods (NYSE:DKS) +16.9% due to a sports and fitness boom.
Nvidia (NASDAQ:NVDA) -0.9% AH as investors shook off a blowout report.
Okta (NASDAQ:OKTA) -2.8% AH on CFO departure, guidance miss.
Snowflake (NYSE:SNOW) -3.1% AH despite a raised product revenue forecast.
Workday (NASDAQ:WDAY) -1.1% AH as tech fell in extended trade.
Today’s Economic Calendar
8:30 Durable Goods
8:30 Initial Jobless Claims
8:30 GDP Q1
8:30 Corporate profits
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $62B, 7-Year Note Auction
4:30 PM Fed Balance Sheet
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Good morning. Happy Wednesday.
Of the Asian/Pacific markets that were open, sentiment leaned up. Hong Kong, India and the Philippines did well. Europe, Africa and the Middle East currently lean to the upside. Poland, Turkey, Russia, Greece, Hungary and Portugal are doing well; Finland, Austria, Sweden and the Czech Republic are down. Futures in the States point towards a positive open for the cash market.
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VIDEO: The Movement of Individual Stocks Will Lead the Way
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The dollar is up. Oil is up; copper is down. Gold and silver are up. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
50% vaxed
Half of the adults in the United States, more than 129M people over the age of 18, are now fully vaccinated against the coronavirus, according to new data from the CDC. Nine states – Connecticut, Hawaii, New Hampshire, New Jersey, New Mexico, Maine, Massachusetts, Rhode Island and Vermont – have even inoculated 70% of their adult population with at least one dose. The milestones come nearly two weeks after the CDC relaxed social distancing and mask requirements for the fully vaccinated, paving the way for many states to ease additional restrictions.
By the numbers: Among people in the U.S. aged 65 and up (a demographic that faces far greater health risks), nearly 74% have been fully vaccinated. The entire nation also opened up jabs to anyone over 16 in the middle of April, and the FDA approved the Pfizer-BioNTech (PFE, BNTX) vaccine for anyone over 12 nearly two weeks ago. Nearly 5M of these adolescents have received at least one dose of the vaccine, according to the CDC.
Meanwhile, tensions continue to surface over tracing the origins of the coronavirus pandemic. Washington is calling for a fresh round of investigations to be conducted with independent and international experts, although Beijing considers the probe in its country to be fully complete. Earlier this year, a team of scientists summoned by the WHO spent a month in China, but the group was largely confined to reviewing Chinese state research and some of the members expressed frustration that they weren’t given full access to data.
Quotes: “The purpose of the inquiry is not to assign blame, but to be grounded in science, to find the origin of the virus, and the outbreak, and to help us all prevent future global catastrophes from happening,” noted Jeremy Konyndyk, executive director for Covid-19 at the U.S. Agency for International Development. While it’s more likely the coronavirus jumped from an animal to humans, “we don’t know 100% the answer to that,” added Dr. Anthony Fauci on Tuesday, saying it was “imperative that we do an investigation.” CDC Director Dr. Rochelle Walensky has also acknowledged a “possibility” that COVID-19 spread through an accidental lab leak.
Feeling the weekend
Markets struggled to find direction yesterday, with stocks jumping earlier in the session, but closing just below the flatline. “Low volatility, flat equities, declining U.S. Treasury yields, and low trading volumes – feels a lot like a Tuesday during a pre-holiday week,” Goldman Sachs managing director Chris Hussey wrote in a research note. Futures ticked up 0.3% in overnight trade, while Bitcoin (BTC-USD) climbed back above $40,000 after a bout of volatility last week.
There are some pockets of the market that have been outperforming in recent sessions, including travel stocks like airlines and cruise companies, as well as homebuilder shares that keep moving higher. The reopening theme has led to market resilience, while the meme trade has resurfaced, with names like GameStop (GME) and AMC (AMC) posting big gains. Inflation fears appear to be ebbing at the moment as a chorus of Fed officials continue to reassure investors that any price rises will be transitory.
Taper talk: “We’re talking about talking about tapering, and that is what you want out of us. You want to be long-viewed here,” San Francisco Fed President Mary Daly told CNBC. “Right now, policy is in a very good place. Policy is supporting the American people.” Fed Vice Chair Richard Clarida also suggested yesterday that the appropriate timing of scaling back should be discussed at upcoming policy meetings and he may shed more light on the matter this morning. The Fed is currently scooping up $120B in assets per month, but Morgan Stanley thinks the central will start tapering its level of bond buying toward the end of 2021.
On the calendar: Wall Street bank chiefs are in for a grilling today in front of the Senate Banking and House Financial Services committees. Jamie Dimon and Co. are set to highlight their role in the pandemic recovery, but will be challenged over a drop in lending over the past year – especially to disadvantaged communities – as well as the racial diversity of their workforces (see below). Some tech earnings are also scheduled for after the bell, including Nvidia (NVDA), Snowflake (SNOW), Okta (OKTA) and Workday (WDAY).
Time for a grilling
Following bumper earnings on Wall Street in the first quarter, the heads of the six largest U.S. banks are set to testify before Congress today and tomorrow. The familiar faces: JPMorgan’s (NYSE:JPM) Jamie Dimon, BofA’s (NYSE:BAC) Brian Moynihan, Morgan Stanley’s (NYSE:MS) James Gorman, Citigroup’s (NYSE:C) Jane Fraser, Wells Fargo’s (NYSE:WFC) Charles Scharf and Goldman Sachs’ (NYSE:GS) David Solomon. Questions will target several hot-button social and economic issues, though the group is set to paint a favorable picture of an industry they say has allowed the economy to recover from COVID-19.
Zoom in: The biggest topic at the hearing will center around a decline in loan issuance over the past year to small businesses and consumers. Congressional reports may be cited showing lenders discriminated against some borrowers when distributing pandemic aid, though bankers feel the slowdown was largely attributable to a lack of demand. Expects some of the usual topics as well, including climate change, sustainable investing, diversity, racial justice, wealth inequality, cryptocurrencies and tax policies.
Democrats: “The pandemic exposed several frailties in the economy and financial system, including pervasive racial inequalities, unequal access to traditional banking products and services and unaddressed systemic risks threatening U.S. financial stability,” according to staff for Rep. Maxine Waters of California, who chairs the House Committee on Financial Services.
Republicans: “While the financial system has proven to be remarkably resilient, I worry that increasing political pressure could lead to distorting credit allocation, which would jeopardize our continued prosperity and undermine public policy making in America,” said Pennsylvania Sen. Pat Toomey, the top GOP member on the Senate Banking Committee.
Ford investor event
Just a week after unveiling its F-150 Lightning to great fanfare, Ford (F) may have some other big announcements coming at today’s investor day. Reuters suggests the company is developing two dedicated all-electric vehicle platforms – one for full-size trucks and larger SUVs, as well as another for cars and smaller SUVs. The dedicated systems could position Ford, whose shares are up 2% premarket, to compete better in the future with Tesla (TSLA), Volkswagen (OTCPK:VLKAF) and General Motors (GM).
Bigger picture: Ford’s stock price has nearly doubled since CEO Jim Farley took the wheel on Oct. 1. That includes a 12.6% advance last week following the debut of the electric F-150 Lightning. One of the main targets investors also want to see is a long-promised 8% global adjusted profit margin target, including 10% in North America and 6% in Europe, which was promised by previous Ford CEOs, but never materialized.
Ford is projected to invest billions in the new EV platforms that could set it up for large-scale production of electric motors and components. Management is also likely to outline detailed plans for at least nine all-electric cars and SUVs, but will not electrify its entire range, instead choosing to focus on areas “where we are outstanding.” Autonomous news? Ford already announced it would spend $7B on self-driving vehicles through 2025, includes investments in Argo AI, so expect some details.
Analyst commentary: “Since Jim Farley has taken over as CEO, Ford has promised increased transparency and measurable [key performance indicators] so we can track Ford’s progress and execution,” RBC Capital Markets analyst Joseph Spak said in a research note. “We expect those, along with financial targets, to be detailed at the event.”
Who sits on the board?
ExxonMobil (XOM) also holds its annual shareholder meeting today amid a proxy fight against a coalition of activist investors led by Engine No.1. The small hedge fund has proposed eight existing directors and four new green-tinged directors for the board, while ExxonMobil was pushing for its existing 12-director slate until two days ago. Its new plan calls for the appointment of two new directors, one with energy industry experience and one with climate experience, though Engine No.1 urged shareholders “not to let this last-minute tactic influence your vote.”
Backdrop: Activists have accused Exxon of not doing enough in response to seismic shifts brought on by climate change. They’re also hoping to promote a lower carbon strategy similar to the ones adopted by European oil majors like BP (BP), Royal Dutch Shell (RDS.A, RDS.B) and Total (TOT). The vote looks like it will come down to big fund owners BlackRock (BLK), Vanguard and State Street (STT) – which hold more than 20% of Exxon’s stock combined – as well as the company’s huge retail investor base, which accounts for nearly half of its outstanding shares.
Last week, proxy advisory firms Glass Lewis and ISS joined a growing list of pension funds and asset managers in supporting at least some of Engine No. 1’s board nominees. In big news yesterday, Reuters reported that BlackRock voted for three of Engine No. 1’s four candidates to join the company’s board.
Analyst commentary: Exxon Mobil is still the “top major idea” among oil producers at Bank of America, which said the company is poised for a relative recovery after several years of lagging performance. The activist campaign “misunderstands the history, strategy, flexibility and outlook of the company,” writes analyst Doug Leggate, as Exxon is “the only major to emerge with absolute growth, margin expansion and capacity for dividend growth intact from an organic portfolio,” in contrast with some peers that failed on those fronts during the worst oil downturn in a generation. BofA rates shares at Buy, with a $90 price target.
What else is happening…
U.S. home prices surge by double-digit percentages.
ZipRecruiter (NYSE:ZIP) set to go public today via direct listing on NYSE.
WhatsApp (NASDAQ:FB) takes Indian government to court over new privacy rules.
Antitrust… D.C. attorney general sues Amazon (NASDAQ:AMZN) over price contracts.
In blow to U.S. miners, President Biden to look abroad for EV metals.
Tesla (NASDAQ:TSLA) ditching radar on some models, relying on cameras for Autopilot.
Elon Musk ‘passionate believer’ in decentralization – MicroStrategy.
Submission in June? Moderna (NASDAQ:MRNA) vaccine effective in children aged 12 to 17.
Speculation unraveling? Corn futures tumble 6% on larger supply.
Microsoft (NASDAQ:MSFT) teases the ‘next generation of Windows’ is coming soon.
Tuesday’s Key Earnings
AutoZone (NYSE:AZO) -1.9% posting a gross margin rate drop.
Nordstrom (NYSE:JWN) -5.9% AH on a wider-than-anticipated Q1 loss.
Toll Brothers (NYSE:TOL) +0.6% AH expecting continued margin improvement.
Urban Outfitters (NASDAQ:URBN) +7.3% AH as comp retail sales grew 10%.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:00 Fed’s Quarles: “Insurance Regulation”
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
11:30 Results of $26B, 2-Year FRN Auction
1:00 PM Results of $61B, 5-Year Note Auction
3:00 PM Fed’s Quarles: Economic Outlook
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Good morning. Happy Tuesday.
The Asian/Pacific markets did great. China, Hong Kong, South Korea, Taiwan, Australia, Indonesia, Singapore and Thailand posted solid gains. Europe, Africa and the Middle East are currently mostly up. Denmark, Germany, Russia, Switzerland, the Netherlands, Austria, Saudi Arabia and the Czech Republic are leading. Futures in the States point towards a positive open for the cash market.
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Learn How to Trade: Masterclass in Trading
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The dollar is down. Oil and copper are down. Gold is up; silver is down. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
Sentiment change?
Building on the solid gains seen in the previous session, U.S. stock index futures are pointing higher, as a broad rally takes hold ranging from beaten-down tech shares to reopening plays. Nasdaq futures are ahead by 0.6%, while contracts linked to the Dow and S&P 500 tacked on another 0.3% overnight. Helping sentiment is the lowest level of U.S. COVID-19 cases since June 2020 as Americans look toward Memorial Day and traveling this summer.
Fed talk: Lael Brainard, Raphael Bostic and James Bullard all said Monday that they wouldn’t be surprised if prices rise in the coming months, but reiterated that most of those gains should be temporary. “Monday’s lethargy seems to have been shaken off after a chorus of Fed voices delivered dovish statements, downplaying arguments for early tightening,” said Nema Ramkhelawan-Bhana, an analyst at Rand Merchant Bank. “Let’s not forget that it only takes one inflation print to unsettle investors or a strong economic figure to guide nominal yields higher. And so the lesson is to make hay while the sun shines.”
Bitcoin’s (BTC-USD) recent rout also seems to have stabilized, with the crypto back near the $40,000 level after crashing to below $32,000 on Sunday. Nearly all of the other major cryptocurrencies are also higher. On Monday, Elon Musk tweeted that North American Bitcoin miners had committed to publishing data on their current and planned renewable energy usage, helping to alleviate some concerns over Bitcoin’s impact on the environment.
Economic calendar: While earnings season is winding down, investors will get results today from AutoZone (AZO), Nordstrom (JWN), Toll Brothers (TOL) and Urban Outfitters (URBN). Housing data will also be reported this morning, including the Case-Shiller Home Price Index, FHFA House Price Index and New Home Sales, while consumer confidence figures will offer some insight into current business and employment conditions.
Olympic-sized trouble
Top Japanese officials do not expect a new U.S. travel advisory to affect the Tokyo Olympics, which has already been postponed by a year due to the coronavirus pandemic. Olympic Minister Tamayo Marukawa even noted the guidance did not affect essential travel after the State Department raised Japan’s status to “Level 4: Do Not Travel.” Any decisions surrounding the Games would have to be made quickly, as the event is only two months away (starting July 23).
Bigger picture: Opposition is deepening in Japan. A mid-May poll by the Asahi newspaper found that 83% of people wanted the Olympics to be canceled or postponed, up from 69% in April, while the business community is also coming out against the event. SoftBank (OTCPK:SFTBF) CEO Masayoshi Son sees a situation where athletes and officials trigger a new wave of infections, while Rakuten (OTCPK:RKUNF) boss Hiroshi Mikitani has called the Olympics a “suicide mission.”
While Japan has dodged the large-scale COVID-19 infections seen in many other nations, a fourth wave has triggered states of emergency in Tokyo and other localities. Hospitals in Osaka, Japan’s second-largest city, are even nearing their breaking point as a slow vaccination campaign has added to coronavirus concerns. The country has delivered vaccinations to just under 5% of its population, the slowest among the world’s richer countries.
By the numbers: While international spectators are prohibited from entering Japan to attend the Olympics, a decision hasn’t yet been made on domestic viewers. The ban on overseas audiences will slash the economic boost from the Games by ¥151.1B ($1.39B), but a full cancellation would mean a lost stimulus of ¥1.8T, or 0.33% of GDP, according to the Nomura Research Institute.
Ain’t no square
Square (NYSE:SQ) shares closed up 5.5% on Monday following reports that the company will offer checking and savings accounts to small business customers. The plan appears to have been found in hidden code in an update to Square’s app for Apple’s iPhone and iPad, according to Bloomberg, though it’s not yet clear when the new products will debut.
From the SA comments section: “Just another good way to expand the eco-system. With 2 million merchants accepting Square and 30 million customers, the key is to attract more people on both ends,” wrote Bill Stevenson. “SQ is just going to keep innovating. Tough company to bet against,” adds premium subscriber Rleaton.
Square disrupted the world of finance when it first revealed its card readers in 2010 that offered to process payments at one easy-to-understand price. By adding checking and savings accounts, Square is taking even more direct aim at a business dominated by the Big Banks. It’s also planning to offer a 0.5% interest rate for its savings account through 2021, a rate similar to other online offerings.
Timeline: Square’s industrial bank, Square Financial Services, was officially started in early March. Square’s industrial loan bank charter was conditionally approved by the FDIC in March 2020.
No more cold calling
Bank of America (BAC) is prohibiting trainee brokers at its Merrill Lynch Wealth Management unit from making cold calls to push the latest hot stock, as the firm shifts to more modern methods for bringing in new clients, WSJ reports. Instead, its new adviser-training program will urge them to use internal referrals or LinkedIn messages for finding new clients.
Quote: “We are leaning much more heavily on leads and referrals from the broader company,” Merrill President Andy Sieg said back in April. “There is also an opportunity to be much more modern in terms of the way we are reaching out to prospective clients.”
Different era? While cold-calling affords the opportunity for financial advisors and the like to build a network from scratch, many people today are not answering unknown numbers. While personal referrals lead to a response around 40% of the time, less than 2% of people who are cold called even answer the phone, according to Merrill executives. FA trainees will also get more referrals from the BofA’s pool of 66M retail customers.
Belarus sanctions
Western nations are debating what kind of sanctions to impose on Belarus after President Alexander Lukashenko forced down a Ryanair (NASDAQ:RYAAY) commercial aircraft on Sunday as it was passing through the country’s airspace. Local authorities say they ordered a MiG-29 to escort the aircraft after receiving information about explosives on board, though a dissident journalist named Roman Protasevich was subsequently arrested and terror group Hamas denied it had sent the reported bomb threat. Ryanair CEO Michael O’Leary said he also believed members of Belarus’s secret service were aboard the plane. Belarus government bonds tumbled on the news, hitting the lows last seen during 2020’s disputed election and ensuing political crisis.
Sanctions: EU leaders have barred Belarusian airlines from entering the bloc’s airspace and airports and urged EU-based carriers to avoid flying over the former Soviet republic. They additionally agreed to widen the number of Belarusian individuals registered on an existing sanctions blacklist, as well as adopt a set of punitive measures that would target companies and entire sectors of the economy. Meanwhile, neighboring Lithuania said it would ban flights to and from Minsk, while Poland proposed all flights between the EU and the country be halted.
“I welcome the news that the European Union has called for targeted economic sanctions and other measures, and have asked my team to develop appropriate options to hold accountable those responsible, in close coordination with the European Union, other allies and partners, and international organizations,” President Biden said in a statement.
Outlook: Since the Belarus presidential elections last summer – which most Western countries considered fraudulent – the EU has imposed three rounds of sanctions that targeted government officials, business leaders and entities. Russia has meanwhile backed Belarus’s handling of the current situation and Foreign Minister Sergei Lavrov said Minsk’s explanation was “reasonable.” Belarus was a member of the former Soviet Union, but it’s still connected to Russia via linguistic, cultural and trade ties.
What else is happening…
Cabot Oil & Gas (NYSE:COG), Cimarex Energy (NYSE:XEC) to merge in all-stock deal.
Amazon.com (NASDAQ:AMZN) nears $9B deal for MGM Holdings – WSJ.
Comcast (NASDAQ:CMCSA) would have loved to acquire Time Warner – John Malone.
Apple (NASDAQ:AAPL) wraps up Epic trial; announces WWDC schedule.
Pfizer (NYSE:PFE), AstraZeneca (NASDAQ:AZN) jabs found to be effective against Indian variant.
Authentic Brands is said to be exploring potential IPO this year.
Peloton (NASDAQ:PTON) to start manufacturing at first U.S. plant in 2023.
Coinbase (NASDAQ:COIN) hires former Goldman exec to head up regulatory strategy.
Solar power story of rapidly declining costs ‘thrown into reverse.’
Nat gas posts fifth straight loss on milder weather outlook.
Monday’s Key Earnings
Lordstown Motors (NASDAQ:RIDE) -10.6% AH halving 2021 production plans.
Today’s Economic Calendar
8:55 Redbook Chain Store Sales
9:00 S&P Corelogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 New Home Sales
10:00 Consumer Confidence
10:00 Fed’s Quarles Testifies on Supervision and Regulation of Financial System
10:00 Richmond Fed Mfg.
1:00 PM Results of $60B, 2-Year Note Auction
1:00 PM Money Supply
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets were split and little changed. Japan, China and Malaysia closed up; Hong Kong, South Korea and the Philippines closed down. Several Europe, Africa and the Middle East markets are closed today. The UAE and Greece are up; Russia, Italy and Portugal are down. Futures in the States point towards a moderate gap up open for the cash market.
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Online Course: Mini Masterclass in Trading
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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…
Dogs who sniff Covid
Dogs can be trained to detect the majority of COVID-19 infections even when patients are asymptomatic, according to scientists from the London School of Tropical Medicine, Durham University and the group Medical Detection Dogs. Authors of the research, which has yet to be peer-reviewed, hope the screening of clothing and face masks could help replace the need to quarantine airplane travelers after incoming flights. “What we’re suggesting is that dogs would give the first initial screening, and then those (arrivals) that were indicated as positive would then receive a complimentary PCR test,” declared co-author James Logan.
How does it work? The results are said to be more effective than temperature checks as they could detect mild or asymptomatic COVID-19 infections. Dogs that screened arrivals at airport terminals could detect 91% of cases, resulting in a 2.24x lower rate of transmission than with PCR tests alone.
On Friday, Thailand also deployed dogs trained to detect coronavirus infections by sniffing samples of human sweat as the country deals with a severe outbreak of COVID-19. The samples are stored in small metal containers for the dogs to inspect one by one, and about 2,000 specimens have already been sniffed this month. The trained Labradors at Bangkok’s Chulalongkorn University have even shown a success rate of about 95% and the project’s directors hope to extend the trial to airports or boat piers.
Bigger picture: Dogs have long been trained to detect odors associated with drugs or explosives, as well as malaria, cancer and diabetes, but “this is the first time that dogs are able to detect a viral disease in humans,” said Dominique Grandjean, a professor at the National Veterinary School of Alfort in France. Sniffing tests would also cost as little as dollar and take seconds, compared to the expensive prices and time constraints of PCR testing.
Coronavirus testing stocks include Quidel Corporation (NASDAQ:QDEL), Fulgent Genetics (NASDAQ:FLGT), Hologic (NASDAQ:HOLX), Abbott Laboratories (NYSE:ABT), PerkinElmer (NYSE:PKI), Fluidigm (NASDAQ:FLDM) and Quest Diagnostics (NYSE:DGX).
Commodity crackdown
U.S. stock futures are around 0.5% higher to start the week as investors size up the volatile swings in crypto markets, as well as China’s intensifying campaign to rein in raw material prices. Equities are coming off a mixed week in which the DJIA logged its fourth negative week in five, while the S&P notched two consecutive weeks of losses for the first time since February. Meanwhile, the Nasdaq Composite inched up 0.3% last week, snapping a four-week losing streak.
“It’s going to be a very mixed market over the next several months until we get more information on what’s really going to happen with inflation and how the stimulus in the U.S. affects spending there, but also how the coronavirus really progresses,” said JoAnne Feeney, a partner at Advisors Capital Management. “While stocks are absorbing a lot of changes well so far, all the inflection points still have longer to play out,” added Adam Crisafulli, founder of Vital Knowledge.
Commodity crackdown: As costs for raw materials rise to record highs, China announced several new measures to temper prices and skim some of the froth seen in commodity markets. The National Development and Reform Commission, known as the NDRC, will show “zero tolerance” for irregular trading or price gouging, as well as the spread of false information and hoarding. The government will also target monopolies in spot and futures markets, and promised severe punishments for violations. Aluminum futures (LMAHDS03:COM) dropped 2% on the news, while iron ore futures (SCO:COM) slid 4% (China’s producer price index rose 6.8% Y/Y in April, up from the 4.4% growth recorded in March).
Coming up this week: Retail earnings will continue to flow in from Nordstrom (JWN), Urban Outfitters (URBN), Gap (GPS), Costco (COST) and Best Buy (BBY). Be on the lookout for reports from some tech names as well, including Nvidia (NVDA), Salesforce (CRM), Snowflake (SNOW) and Workday (WDAY). On the economic front, data will be released on consumer confidence, new home sales data, the second estimate of Q1 GDP and personal income and outlays.
Price swings
The crypto roller-coaster is still in full swing as extreme volatility continues to whipsaw investors. Over the course of Monday, May 17, through Friday, May 21, Bitcoin (BTC-USD) fell 20% to $32.8K, only to accelerate rapid price moves. On Saturday, it jumped touched as high as $38.8K then fell as low as $31.1K on Sunday, and rose nearly 7% overnight to climb back to $36.8K. In fact, one metric gauging implied volatility on Bitcoin, similar to the VIX index of the U.S. stock market, topped 130, exceeding the VIX’s all-time high.
More crypto volatility: Ethereum (ETH-USD) +8.4% to $2,301. Ripple (XRP-USD) +1.8% to $0.86; Cardano (ADA-USD) +7.5% to $1.47; Stellar (XLM-USD) +18.9% to $0.43; Dogecoin (DOGE-USD) +3.4% to $0.33; Bitcoin Cash (BCH-USD) +5.9% to $621; Litecoin (LTH-USD) +11.2% to $158.
What the crypto crowd is saying on Twitter:
Mike Novogratz: “Weekend illiquidity exacerbated this liquidation… We will see… With hindsight.”
Larry Cermak: “This took much longer than I thought but IMO a big reason for why we’re seeing 60% super quick crashes is that there was just way too many projects stretched to crazy valuations and not enough liquidity to support the prices when new demand dries up. Add leverage and voila.”
Mark Cuban: “I think this is the “Great Unwind”. Traders borrow to buy Eth, used eth to borrow alt/stable coin, used that to LP a high APY Pair, took the SLPs and staked them to maxout yield. The minute Eth drops to their Tragic Number, they had to Unwind. Unstake, Remove Liqudity, Repay.”
Anthony Pompliano: “Can’t believe I even have to say this, but the noise is just FUD. The underlying thesis hasn’t changed at all. This week should be wild. Get some rest while you can :)”
Scott Melker: A lot of bottom signals, and still believe 29k was it…. but I’ve been wrong quite a few times. Either way, anticipating some relief.”
Tyler and Cameron Winklevoss: “Feels oversold. Buying the dip just got better.”
Barry Silbert: “Where the crypto market goes from here is completely dependent on the stock market over the next couple weeks. The ultimate source of value is so ambiguous that it has a lot to do with our narratives rather than reality.”
Outlook: While recent headlines can try to ascribe meaning to the recent selloff, those reasons have been bubbling for some time, while the HODL crowd will dub them FUD (fear, uncertainty and doubt). On Friday, China reiterated its intent to crack down on digital assets, the U.S. Treasury Department announced plans for large crypto transactions to be reported to the government, and Elon Musk continued to post mixed messages over Twitter. A bigger item to consider is just how sensitive markets can be when sentiment changes, or the store of value for a currency that can display daily swings of 10% to 30%.
Galactic milestone
Virgin Galactic (SPCE) conducted a successful test flight of its VSS Unity spacecraft on Saturday after it was carried to 44K feet by the VMS Eve aircraft. From there, it climbed rapidly to the edge of space at three times the speed of sound, while founder Sir Richard Branson was present to watch the liftoff from Spaceport America in New Mexico. Shares of Virgin Galactic advanced 22% in the two sessions prior to the spaceflight test, and are up another 26% to $26.48 in premarket trade on the latest development.
What it means: The flight puts the company one step closer to developing the space tourism industry after a December attempt that was cut short by an electromagnetic interference issue. Galactic needs to pass two remaining FAA milestones before it receives a license for conducting regular spaceflights and has two remaining tests to finish the development of its SpaceShipTwo rocket system. The next spaceflight test will carry four Galactic employees to test the spacecraft’s cabin, while the last test will fly Richard Branson. From there, the company will earn revenues from paying passengers (the first mission has been purchased by the Italian Air Force to conduct microgravity experiments).
“These lay out a pathway to commercial flight operations in 2022, which are paramount for positive EBITDA and create an attractive re-entry point for the stock and supports our Buy rating,” UBS analyst Myles Walton wrote in a research note. “Limited investible options to participate in the growing commercial space economy has created a supply/demand dynamic that has had an outsized effect on [Virgin Galactic’s] performance.”
Go deeper: Virgin Galactic has about 700 customer reservations on its books, most of which were sold at a price of $200K to $250K per ticket several years ago. The company is currently gauging demand on its website, which allows users to register their interest in a future flight. Galactic intends to reopen sales for commercial ticket sales during 2021 following Branson’s maiden space voyage.
Infrastructure compromise?
Looking to get some bipartisan support, the Biden administration has reduced the size of its infrastructure proposal to $1.7T from $2.25T. Funding for the package would remain the same – raising the tax rate on wealthy Americans and large companies that can “afford a modest increase to pay for middle-class jobs.” The counteroffer is still about triple a competing proposal from Senate Republicans, which recently offered a plan to spend $568B over five years, though a separate $300B transportation bill was also unveiled in the Senate over the weekend.
“In our view, this is the art of seeking common ground,” White House Press Secretary Jen Psaki told reporters. “This proposal exhibits a willingness to come down in size, while also staying firm in areas that are most vital to rebuilding our infrastructure and industries of the future, and making our workforce more competitive with China.”
What changed? The Biden administration agreed to cut the funding request for broadband to match the Republican offer and reduce the proposed investment in roads, bridges and major projects to come closer to the number of the GOP. Some original spending areas on research & development, supply chains, manufacturing and small business would also shift to other legislative efforts like the CHIPS Act and the Endless Frontier Act. Psaki said the White House will share the complete specifics of the proposal pending the outcome of current discussions and negotiations.
Go deeper: While both sides agree on the need to update American infrastructure, there’s a stark difference between Democrats and Republicans on how economies grow and what effects or outcomes will result from all the spending. The Biden administration feels that the higher investment will result in higher wages and would restore the U.S.’s competitive edge in the world. The GOP is more fearful of long-term inflation and would rather minimize taxes and other barriers for business so that the lower cost leads them to hire and expand their investment.
What else is happening…
Apple’s (NASDAQ:AAPL) Cook on the stand: App Store is an ‘economic miracle’.
AT&T (NYSE:T) dividend cut steals focus in WarnerMedia-Discovery deal.
Quiet weekend shows cinema bounce back facing early hurdles.
U.S. House plans Monday hearing on SPACs and direct listings.
Cathie Wood says deflation will boost growth stocks next.
Energy producers fear Biden executive order on climate financial risk.
AstraZeneca (NASDAQ:AZN) CEO Pascal Soriot defends COVID-19 vaccine.
Commerce Department moves to double tariffs on Canadian softwood lumber.
U.S. set to downgrade Mexico’s aviation safety rating.
Ford (NYSE:F) could jolt EV sector again with investor event this week.
Today’s Economic Calendar
8:30 Chicago Fed National Activity Index
9:00 Fed’s Brainard Speech
11:00 Fed’s Mester Speech