Before the Open (Jul 19-23)

Good morning. Happy Friday.

The Asian/Pacific markets leaned down. Japan did well, but China, Hong Kong, Indonesia and the Philippines were weak. Europe, Africa and the Middle East are also doing great. The UK, France, Germany, South Africa, Finland, Switzerland, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are posting big gains. Turkey and Hungary are weak. Futures in the States point towards a positive open for the cash market.

My interview with

The dollar is up. Oil is flat; copper is up. Gold and silver are down. Bonds are down. Bitcoin is up.

Stories/News from Seeking Alpha…

Brexit Tensions Resurface

The Brexit drama is far from over, with the U.K. and EU on a collision course over the rules for Northern Ireland. It was only seven months ago that the two sides came to an agreement on a Brexit deal, but Britain now wants to overhaul the trading system for the territory. The special arrangement was previously inked to avoid a hard border on the island of Ireland and prevent a backdoor for smuggling into the bloc, but the protocol has subsequently resulted in a fractious relationship.

Why is it still an issue? Northern Ireland’s status is somewhat of a hybrid as it is still part of the United Kingdom, as well as the European Single Market. That means checks need to be done on goods that are traveling from Great Britain to Northern Ireland to block items from leaking into the EU. Most of the checks are carried out on the Irish sea border, which has caused tensions among the pro-U.K. unionist community in Northern Ireland, which doesn’t like the idea of a barrier with the mainland.

U.K. Brexit Minister David Frost now sees the situation as untenable and has proposed a plan to substantially rewrite the Northern Ireland protocol. The deal would largely be based on a light-touch regime and the honesty of traders, whereby businesses would register their transactions and agree to inspections of their supply chains. Meanwhile, a deadline is looming at the end of September, when a series of so-called grace periods come to an end and the full weight of checks are supposed to be applied across Irish sea traffic.

Going further: Frost wants to extend the waiver periods indefinitely, and if the EU doesn’t put the current arrangements on hold, he’s holding back the option of overriding the entire treaty unilaterally. If that would happen, the EU would likely retaliate with tariffs and sanctions, while the relationship would deteriorate even further. European Commission President Ursula von der Leyen said the EU will be “creative and flexible,” but has ruled out renegotiation.

Rally goes on

A three-day winning streak on Wall Street – that followed a sharp selloff on Monday – is showing no signs of slowing down as futures continued to climb in overnight trading. At the time of writing, contracts linked to the Dow and S&P 500 were up 0.5%, while the Nasdaq tacked on a gain of 0.6%. Tech strength is continuing to power the latter index as shares of Snap (SNAP) and Twitter (TWTR) soared on stronger-than-expected Q2 numbers.

By the numbers: All three of the major averages are on track to close the week solidly in the green. That would mark the fourth positive week in five and a rebound from last week’s losses.

“The earnings results have continued to be strong and guidance is showing that the Delta variant isn’t impacting the recovery, so far at least,” said Esty Dwek, head of global market strategy at Natixis Investment Managers. “That is giving confidence to the market that the recovery can continue.”

Signs from the bond bazaar: “People are comforted by 10-year bond rates, it’s a sign of the recovery play,” added Peter Tuz, president of Chase Investment Counsel. “There’s flight away from safety today.”

Chip niche

Shares of Intel (INTC) fell back 2% in AH trading on Thursday after reporting Q2 results that beat analyst expectations on continuing PC strength and a data center recovery. Revenue for the quarter was up 2% on the year to $18.5B, about $700M higher than analyst expectations, while adjusted earnings of $1.28 per share topped consensus by $0.19. The semiconductor giant even raised its full-year forecast to $73.5B in revenue (from $72.1B), with adjusted EPS of $4.80 (from $4.60).

What gives? Intel guided to non-GAAP gross margins of 55% in Q3, a notable drop from 59.2% in Q2. The decreased margin was due to supply constraints, as well as costs related to building chips via a new process technology. Some investors could also be nervous about ramping up production to hefty levels in the face of the global semiconductor shortage. In 2018, high chip demand quickly turned into a supply glut after customers overbought silicon as prices rose and chipmakers kept on rolling out product.

“Chip shortages will likely bottom out in the second half of the year,” according to CEO Pat Gelsinger, but “it will take another one to two years before the industry is able to completely catch up with demand. We have a long way to go yet. It just takes a long time to build capacity.”

Outlook: Intel has committed to spend $20B to improve its manufacturing capabilities, including two new facilities in Arizona. Reports also suggest the company could shell out around $30B for GlobalFoundries, but on a conference call, Gelsinger said he couldn’t comment on the rumors. “Our view is that industry consolidation is very likely. The intense R&D, the need to move to modern and leading-edge nodes, the massive capital investments required, we just simply view that smaller players simply won’t be able to keep up and foundries without leading-edge capabilities will be left behind.”

Next big

Nasdaq (NDAQ) is teaming up with a consortium of giant banks, including SVB Financial Group (SIVB), Citigroup (C), Goldman Sachs (GS) and Morgan Stanley (MS), for a new project that might be the next big thing: The go-to platform for buying and selling stock in private companies. While there’s competition in the space (think EquityZen, Carta, ClearList and Forge Global), no one venue has yet dominated the asset class.

Bigger picture: Nasdaq is banking on a dynamic it knows well – traders will drift to the platform with the best liquidity and greatest client book. It also wants to make sure the future trading system will stay within the confines of Wall Street, rather than Silicon Valley. Trading in pre-IPO shares has heated up in the last few years among accredited investors – people who meet certain wealth criteria (like a net worth of more than $1M or an annual income above $200,000) – and some are even looking to bring the capability to the retail crowd. Robinhood (HOOD) recently jumped in the game by unveiling a new program called IPO Access.

“The banks that we’re working with will bring a massive amount of distribution,” commented Nelson Griggs, an executive vice president at Nasdaq.

How will it work? Nasdaq will spin out Nasdaq Private Market into a separate, standalone company that will receive strategic investments from SVB, Citi, Goldman, and Morgan Stanley. Nasdaq had acquired the platform – then called SecondMarket Solutions – back in 2015 after feeling competition to its Private Market initiative. According to a press release, the new venture will create an “institutional-grade, centralized secondary trading venue for issuers, brokers, shareholders and prospective investors of private company stock.”

Today’s Economic Calendar
9:45 PMI Composite Flash
1:00 PM Baker-Hughes Rig Count

What else is happening…

Senate bill looks to strip social-media protection for health misinformation.

Twitter (NYSE:TWTR) posts strongest revenue growth since 2014.

Tune in to Roku (NASDAQ:ROKU), NBC (NASDAQ:CMCSA) as Tokyo Olympics kick off.

Mercedes-Benz (OTCPK:DDAIF) unveils plans to go all-electric.

Big Oil is ‘years away’ from energy transition gains – HSBC.

Snap (NYSE:SNAP) jumps after user growth hits four-year highs.

DiDi (DIDI) could be hit by ‘unprecedented’ penalty in China.

ECB: Rates could move lower, pick up purchase pace.

AT&T (NYSE:T) tops Q2 estimates on WarnerMedia, mobility strength.

Cathie Wood is bullish on the online sports betting marketplace.


Good morning. Happy Thursday.

The Asian/Pacific markets posted solid gains. Japan, Hong Kong, South Korea, India, Australia, Indonesia, Singapore and the Philippines led. Europe, Africa and the Middle East are also doing great. The Denmark, France, Germany, Russia, Greece, South Africa, Finland, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are leading. Futures in the States point towards a flat open for the cash market.

My interview with

The dollar is unchanged. Oil and copper are up. Gold and silver are down. Bonds are up. Bitcoin is up.

Stories/News from Seeking Alpha…

Mask Revival?

Shares of mask makers are on watch again as the White House and CDC debate whether they should urge vaccinated Americans to wear masks in more settings. Delta variant infections are spiking across the country, with more than 40,000 new coronavirus cases a day (up from a low of 11,000 in June). The rate of vaccinations is also slowing nationwide, dropping to about 500,000 per day, while hospitalizations have reached levels not seen since the early spring.

Backdrop: The CDC eased its mask guidelines for the fully vaccinated two months ago, saying they didn’t need to use them or practice social distancing. But this week, CDC Director Dr. Rochelle Walensky told a Senate hearing that the agency is actively reviewing its mask and public health policies as the virus and pandemic continue to evolve. “A lot has changed since May 13. We now have a variant circulating in this country that at the time was 3% (of new cases) and is now 83% and much more transmissible.”

Health officials in California have already recommended or required that residents in 17 counties resume wearing masks indoors, while a new mask mandate has gone into effect for employees in Clark County, Nevada, which houses Las Vegas casinos. New Orleans has also issued an “indoor mask advisory” regardless of vaccination status. According to an Axios-Ipsos poll released Tuesday, 52% of Americans say they are regularly wearing a mask in public, down from 84% in early May.

Mask up your portfolio? While it could be more of a short-term trade, PPE manufacturer Lakeland Industries (NASDAQ:LAKE) surged 7% on Wednesday. Other mask makers were also on the move, including Alpha Pro Tech (NYSE:APT) and Allied Healthcare Products (NASDAQ:AHPI), which climbed 4% and 3%, respectively. “LAKE should benefit as fears of a COVID re-emergence cause sales of protective clothing to rise,” writes SA Marketplace Author Ranjit Thomas, saying the stock should “generate a steady amount of revenue even after COVID is defeated.”

Green for the week

Stocks are continuing to rebound following a retreat on Monday as traders don’t appear to see an immediate risk to the economic recovery. U.S. equity futures are all pointing 0.2% higher this morning, with strong corporate earnings prints continuing to help the investing landscape. Coca-Cola (KO) and Johnson & Johnson (JNJ) both logged gains following their results on Wednesday, and we’ll hear from other Dow components today, including Dow Inc. (DOW) and Intel (INTC).

Analyst commentary: “We expect a continuation of sloppy trading through the seasonally-weak summer months; however, our base case remains that the primary trend over the next 12 months remains higher,” noted Keith Lerner, chief market strategist at Truist. “The S&P 500, which just made a new record high last week, has gone one of the longest periods of the past decade without so much as a 5% pullback [since October].”

Investors may also be taking some comfort in the latest comments on price pressures. “There will be near-term inflation because everything is now trying to be picked back up,” President Biden said Wednesday night at a CNN town hall in Cincinnati. “But the vast majority of the experts, including Wall Street believe that it’s highly unlikely that it’s going to be long-term inflation that’s going to get out of hand.”

On the economic calendar: The ECB’s first policy announcement since raising its inflation target to 2% is due today, with President Christine Lagarde promising “interesting variations and changes.” In the U.S., weekly jobless claims are expected to come in at 350,000, a week after falling to the lowest level since March 2020. Senate Republicans also blocked an effort to begin debate on a bipartisan infrastructure deal on Wednesday, but lawmakers expect to near a final agreement by early next week.

Nord truce

Ending a longstanding dispute between the two allies, the Biden administration has reached an agreement with Berlin that allows for the completion of the Nord Stream 2 natural gas pipeline between Russia and Germany. Previous U.S. administrations opposed the link under the Baltic Sea, feeling it would give the Kremlin more political leverage over transit countries that have carried its gas exports to Europe for the last four decades. In fact, Ukraine said it stands to lose $2B in annual payments from Russia as part of a gas contract that is set to expire in 2024.

Fine print: Since construction of the Gazprom-led (OTCPK:OGZPY) project was almost done when Biden came into office (it should be finished next month), the administration went for a diplomatic agreement instead of sanctions. Under the deal, Berlin has promised to deal with Russia if it threatens European energy security. Germany has also promised support for Ukraine, like investment in green technology infrastructure, though Kiev is still not happy with the agreement, saying it doesn’t provide enough protection.

“Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions to limit Russian export capabilities to Europe in the energy sector,” according to a joint statement from the U.S. and Germany. Western partners were also involved in the building of Nord Stream 2, including Royal Dutch Shell (RDS.A, RDS.B), Germany’s Uniper (OTC:UNPPY) and BASF (OTCQX:BASFY), Austria’s OMV (OTCPK:OMVJF) and France’s ENGIE (OTCPK:ENGIY).

Go deeper: Some are pointing to a book called Ally Versus Ally: America, Europe, and the Siberian Pipeline Crisis, which Antony Blinken, now U.S. secretary of state, wrote in 1987. In it he argues for alliance maintenance, rather than adversary containment, after the Reagan administration imposed sanctions on a similar pipeline from Soviet Siberian gas fields to Europe in 1981. Echoes of Nord Stream 1 may also be at play, with Germany’s neighbors moving on from their opposition to the pipeline which was completed in 2011.

The ₿ Word

CoinDesk columnist Nic Carter kicked things off at the A-list, ‘B Word’ event that also featured some in the C-suite crowd. Carter began by explaining the crucial importance of Proof of Work for Bitcoin (BTC-USD), and why Proof of Stake (less energy intensive) is inferior. He also noted that more transactions doesn’t necessarily mean more energy expenditure (that’s rather dependent on securing the network), which was in direct contrast to Elon Musk, who two months ago helped set off Bitcoin’s collapse by claiming transactions use too much energy.

Seeking Alpha contributor Lyn Alden took to the floor to try and debunk “Bitcoin Can Be Displaced Easily” FUD. Bitcoin has three “irreplaceable attributes,” said Alden – security, scale, and decentralization. She also took note of the oft-used comparison of Bitcoin to MySpace. Bitcoin, she reminded, hit a $1T market cap 13 years after coming into existence – it’s a level of scale and market dominance that MySpace never even sniffed.

Meanwhile, Coin Metrics author Nate Maddrey discussed whether “Bitcoin Ownership is Concentrated.” He first explained that all Bitcoin transactions are transparent to anyone who wished to view them, including the addresses of wallets that hold Bitcoin. While yes, the top 10% of addresses hold 99% of supply, “addresses” is the key word. Addresses, said Maddrey is not individuals. An address can represent thousands of individuals (think exchanges like Coinbase (COIN) and institutions). In fact, he says, five of the top 10 largest Bitcoin addresses are exchanges.

Movement: Bitcoin notched a session high of $33K during the event, but has since returned to the $31K level, and has stayed there for most of the night. Don’t forget the THE talk:

Cathie Wood: “Our focus on disruptive innovation” attracted her to Bitcoin and crypto in general and she offered her thoughts about how Bitcoin fits within the ESG investing landscape. “Bitcoin’s limit of 21M coins ever means its primary use right now is store of value,” she added. “Purchasing power will go up over time.” She also passed on the research to economist Arthur Laffer, who threw up his hands, and said at last, a rules-based monetary system.

Elon Musk: “I might pump, but I don’t dump,” he declared, while wearing a shirt about Bitcoin being the evolution of money. “I think about money as an information system, and there’s an opportunity for something better than ACH and credit card networks.” He further noted that he’s an owner of Bitcoin through not just Tesla (TSLA), but through SpaceX (SPACE), and he personally owns Bitcoin, Ether (ETH-USD), and Dogecoin (DOGE-USD). Once Musk is convinced more than 50% of Bitcoin mining was based on renewables, Tesla will again accept the crypto for purchases.

Jack Dorsey: “Bitcoin reminds me of the early Internet. If the internet gets a chance to be a native currency, it’s Bitcoin because of its resilience, and community driving it.” He also has high hopes for the currency. “We have all these monopolies off balance and the individual doesn’t have power and the amount of cost and distraction that comes from our monetary system today is real and it takes away attention from the bigger problems. My hope is that it creates world peace or helps create world peace.”

Today’s Economic Calendar
8:30 Jobless Claims
8:30 Chicago Fed National Activity Index
10:00 Existing Home Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Fed Balance Sheet

What else is happening…

Bullish analysts name Nvidia (NASDAQ:NVDA) a top pick and Dow contender.

Johnson & Johnson (NYSE:JNJ), drug distributors reach $26B opioid settlement.

Non-Chinese supply… Tesla (NASDAQ:TSLA) signs nickel deal with BHP.

Natural gas futures notch another high as temps heat up.

AT&T (NYSE:T) to offload Latin satellite unit with $4.6B impairment.

Chip shortage forces GM (NYSE:GM) to suspend pickup production.

RIGZ, the new crypto mining & semi ETF, is up 15% in 48 hours.

New England Journal of Medicine study reports vaccine efficacy vs. Delta.

U.S. mortgage delinquency rate hits lowest since onset of pandemic.

Wildfires… PG&E (NYSE:PCG) to bury 10K miles of electric lines, costing up to $20B.


Good morning. Happy Wednesday.

The Asian/Pacific markets were split. Japan, China, New Zealand and Australia did well; Hong Kong, South Korea, India and the Philippines were weak. Europe, Africa and the Middle East are currenly up big. The UK, Denmark, Poland, France, Germany, Greece, Finland, Spain, Italy, Portugal, Israel, Austria and Sweden are up 1% or more. Futures in the States point towards a positive open for the cash market.

My interview with

The dollar is up. Oil is up; copper is down slightly. Gold is down; silver is flat. Bonds are down. Bitcoin is up.

Stories/News from Seeking Alpha…

The B Word

While it has since pulled back above $30,000, Bitcoin (BTC-USD) broke below the key support level on Tuesday, weighing on the rest of the crypto space. Some are pointing to a consolidation phase and shakeout of the weaker hands, though others are suggesting further losses could lie ahead. Whatever the case may be, short-term traders who invested in Bitcoin at its highs are feeling a lot of pain right now (the crypto touched a record $65,000 back in April).

Buy and hold: “It’s important to reconcile the time horizon in which we’re analyzing Bitcoin,” said Katie Stockton, founder of Fairlead Strategies. “If we see a rebound by the end of this week, that would suggest Bitcoin has seen some false breakdowns and could resume its long-term uptrend. If we also see a breakout above the 50-day moving average (around $34,500), that would be a convincing turnaround for Bitcoin.”

Warning signs: “Bitcoin is the ultimate risky asset right now and it could see intense selling pressure if Wall Street enters into panic selling mode,” added Edward Moya, senior market analyst for the Americas at OANDA. “It is critical that the digital coin regains ground above the $30,000 level, as a significant breach could result in a massive technical selloff,” added Naeem Aslam, chief analyst at AvaTrade.

Stay tuned: Coming up at noon ET is “The ₿ Word” launch, an “initiative that aims to demystify and destigmatize mainstream narratives about Bitcoin, explain how institutions can embrace it, and raise awareness around areas of the network that need support.” It will feature a live discussion between Cathie Wood (who recently filed for a Bitcoin ETF), Jack Dorsey (who appears to have more than a surface-level understanding of Bitcoin) and Elon Musk (let’s not even get started). Will the Technoking of Tesla (TSLA) abandon his bearishness on Bitcoin as it relates to things like energy usage and block size? Or maybe sell/add to some of the company’s $1.5B stash of Bitcoin?

Rebound continues

Stocks continue to recover from an early-week selloff that was prompted by fears surrounding the rapidly spreading Delta variant. The major averages rose about 1.6% on Tuesday, as investors jumped back into equities, while futures climbed again overnight. At the time of writing, contracts linked to the Dow are up 0.6%, while the S&P 500 and Nasdaq are ahead by 0.5% and 0.2%, respectively.

Quote: “A lot of our client conversations have really been people trying to look to find time to put money to work,” said Mike Stritch, chief investment officer at BMO Wealth Management. “People step in, and they don’t want to get caught missing an opportunity to buy at a few points lower.”

Treasury yields, which also sunk at the beginning of the week, are climbing again after the 10-year rate hit a five-month low below 1.2%. The note’s yield tacked on another 5 bps overnight to 1.26% as investors continue to assess their views on COVID variants and inflation. Elsewhere, a $1.2T bipartisan infrastructure bill will face an initial procedural floor vote in U.S. Senate today, which aims to upgrade roads and bridges, water systems and expand broadband Internet.

On the calendar: Corporate earnings are yet another area traders continue to size up as quarterly results pour in, including beats/misses, revisions and upcoming forecasts. This morning, we’ll get prints from Coca-Cola (KO), Verizon (VZ) and Johnson & Johnson (JNJ). About 85% of S&P 500 firms that reported have so far beaten estimates, according to FactSet, with around 8% of companies in the index publishing results over the past week.

Challenges ahead

Netflix (NFLX) is finding it getting harder to live up to Wall Street’s expectations. Evidence of that was seen late Tuesday, as the company forecast Q3 streaming TV subscriber gains that fell far short of analysts’ expectations (3.5M vs. 5.9M). While Netflix did add 1.54M subscribers for the period that ended June 30 – compared to estimates of 1.12M new paid members – total first-half subscriber growth was the worst since 2013. Profit also came in at $2.97 a share, missing analysts’ expectations of $3.14, though revenue of $7.34B inched ahead of consensus estimates for $7.32B.

Comparisons could be difficult: “We hope we are at the tail end of this COVID choppiness,” Netflix CFO Spence Neumann said on a conference call. He also noted that during the second quarter of 2020, Netflix added more than 10M new members as pandemic stay-at-home policies went into effect, which “distorts year-over-year comparisons.” “If we deliver on our [third-quarter] guide, our growth pattern in our business is remarkably steady [and] averaging 27M [new subscribers] a year over the last two years,” Neumann added, helping shares rise slightly in AH trading.

However, for a company that depends on subscriber fees in order to fuel its ongoing forays into original and exclusive content, Netflix’s results hint at possible rough road ahead. The company lost 430K subscribers in the U.S. and Canada during Q2, and added just 190K paid members in Europe, the Middle East and Africa. “Combined, they shrunk in their two most-profitable markets,” said Wedbush analyst Michael Pachter. “That suggests [market] saturation to me. All the recent moves by Peacock, Disney, Hulu and HBO suggest that competition for content will become more fierce.”

Outlook: Netflix confirmed it was in the “early stages” of expanding into video games, viewing it as “another content category for us, similar to our expansion into original films, animation and unscripted TV.” Last week, Netflix even hired a former Electronic Arts and Facebook executive to lead the effort. While a time frame wasn’t given for launching the new vertical, games will be included in current subscription plans at no additional cost.

Antitrust victory lap

President Biden has nominated Jonathan Kanter to be Assistant Attorney General for the Antitrust Division at the Department of Justice, the top position in the DOJ’s antitrust unit. The move is being hailed as a major win for progressives, who accuse the agency of failing to aggressively pursue the anti-competitive behavior of Big Tech. If confirmed by the Senate, Kanter would head the DOJ division that filed a suit against Google (GOOG, GOOGL) in October, which was the first federal complaint against a tech giant since action against Microsoft (MSFT) in the ’90s.

Backdrop: Kanter, a longtime critic of Google, is currently a partner at The Kanter Law Group LLP, a boutique antitrust law firm that advocates in favor of federal and state antitrust law enforcement. He has also served as an attorney for the U.S. Federal Trade Commission’s Bureau of Competition and was co-chair of the antitrust practice at Paul, Weiss, Rifkind, Wharton, and Garrison LLP.

“At this critical time, the DOJ must be equipped to take on giant tech companies and monopolistic corporations in any sector that,” Senator Elizabeth Warren (D-Mass) said in a statement. “Jonathan will reinvigorate antitrust enforcement – both civil and criminal – and strengthen the DOJ’s scrutiny of the anti-competitive abuses that threaten our economy, our society, and our democracy.”

Go deeper: Big Tech critic Lina Khan took the reigns as chair of the FTC in June, and earlier this month, Biden signed a new antitrust executive order aimed at strengthening antitrust authority over U.S. technology giants. Progressive tech critic and former Columbia University law professor Tim Wu also joined Biden’s National Economic Council back in May, influencing the administration’s policies with regards to large tech firms.

Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:30 EIA Petroleum Inventories
1:00 PM Results of $24B, 20-Year Bond Auction

What else is happening…

Virgin Galactic (NYSE:SPCE) slides after Blue Origin (BORGN) hits higher altitude.

Tesla (NASDAQ:TSLA) confirms it will open Supercharger network to other EVs.

U.S., Germany to announce deal on Nord Stream 2 in coming days.

Ben & Jerry’s (NYSE:UL) stops selling ice cream in West Bank settlements.

J&J (NYSE:JNJ) vaccine less effective against Delta – bioRxiv study.

Fossil fuel retreat… BHP considers exiting oil and gas.

Drug distributors near $26B opioid settlement with U.S. states.

Nvidia (NASDAQ:NVDA) stock drops in first trading day after share split.

JPMorgan (NYSE:JPM) tempts Jamie Dimon with ‘special award’ worth millions.

Comcast (NASDAQ:CMCSA), ViacomCBS (NASDAQ:VIAC) discuss streaming partnership.


Good morning. Happy Tuesday.

The Asian/Pacific markets closed mostly down. Japan, Hong Kong, India, Taiwan, Indonesia, Singapore, Thailand and the Philippines posted the biggest losses. Europe, Africa and the Middle East currently lean up. The UK, France, Greece, South Africa, Switzerland, Norway, Israel and Austria are up the most. Futures in the States point towards a moderate gap up open for the cash market.

My interview with

The dollar is up. Oil is flat; copper is up. Gold is up; silver is flat. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

The Final Frontirr

Just 11 days after Richard Branson flew to space on Virgin Galactic’s (NYSE:SPCE) spaceplane, Jeff Bezos will make his own attempt aboard Blue Origin’s (BORGN) New Shepard rocket. He’ll fly with a crew of three, including his older brother Mark, female aviation pioneer Wally Funk and 18-year-old Oliver Daemen, a fill-in for the winner of a $28M charity auction. The passengers will experience a few minutes of weightlessness, before their capsule parachutes onto the desert just 10 minutes after liftoff, which is scheduled for 9:00 a.m. ET.

Quote: “To see the Earth from space, it changes you. It changes your relationship with this planet, with humanity,” Bezos said before the flight. “It’s a thing I’ve wanted to do all my life.”

Backdrop: Bezos founded Blue Origin in 2000 and has been funding the company by selling $1B in Amazon (NASDAQ:AMZN) stock a year. His high school girlfriend even once remarked, “Jeff started Amazon just to get enough money to do Blue Origin,” to which Bezos exclaimed, “I can’t prove her wrong.” Since 2015, Blue Origin has completed 15 test flights, carrying up experiments and the company’s test dummy named Mannequin Skywalker. Besides a booster crash landing on the maiden flight, all the trips were successful.

Differences: As mentioned earlier, Bezos’ capsule sits atop a rocket (compared to Galactic’s VSS Unity which takes off on a jet plane and is released at 50,000 feet). Test pilots and flight engineers will also not be aboard the Blue Origin journey from West Texas, as the capsule is entirely automated (Galactic requires two pilots to get to space and back). Meanwhile, Bezos’ flight will shoot above the Kármán line, a boundary commonly referred to as the beginning of space, with an altitude of about 66 miles vs. Branson’s 53.5 miles.

Outlook: Congress has restricted the FAA from regulating the safety of commercial space flights since 2004 to help the sector develop without heavy compliance costs. The policy has been extended several times over the years and now runs until 2023. Crews today fly under a regime known as “informed consent,” meaning potential astronauts take on similar risks to skydivers and bungee jumpers. Bezos is fighting for a share in the space market that will triple in size to more than $1T in annual sales by 2040, according to Morgan Stanley, whose forecast assumes rapid developments in space tourism, moon landings and satellite broadband Internet.

Banking on higher yields

Treasury yields tumbled yesterday, pushing the benchmark 10-year below 1.2% for the first time since February. That had a knock-on effect on reflation plays, with the Dow (DJI) (NYSEARCA:DIA) seeing its biggest down day since October. This morning, yields are ticking up a little, with the 10-year Treasury (NYSEARCA:TBT) (NASDAQ:TLT) up 3 basis points to 1.21%. A sharp decline in yields coincidental to a rise in COVID Delta variant cases indicates economic growth concerns. But technical factors are also at play.

“It’s a battle between the fundamentals and the technicals,” says Myles Bradshaw, J.P. Morgan Asset Management head of global aggregate fixed income strategies. “The fundamentals, we all know. The economy is strong, the economy is recovering, inflation is rising, so why are bond yields falling? It seems bizarre, doesn’t it?”

“Bond yields are falling, I think, critically because of a lot of positions issues,” he says. Bradshaw said on Bloomberg that prior to the most recent Fed meeting “there was a lot of positions, short position in the long bond sector, and therefore you had short covering. You’ve also had increased buying from liability-driven investors that has meant there has been no marginal sellout on the long end.”

“I think the technicals are extremely positive, there’s a demand for a safe asset as equities move higher and that’s been beating fundamentals of late.”

Another transitory phenomenon?: Just as the Fed has been banging the drum on inflation being transitory, Wall Street strategists still look convinced that the path for rates is higher this year. Halfway into 2021, the median 10-year yield forecast among 30 analysts was 1.75%. The predictions ranged between 1.5% and 2%.

The probability of a recession next year is just 7%, “far below the 20% that has forecast nearly every recession back 60 years,” BTIG’s Julian Emanuel writes. “What has the bond market bid in our view is the Wall of Money,” he says. “Monetary and fiscal policy enacted and proposed equal to 55% of GDP; the Fed’s balance sheet, government debt, money supply, and money market balances all moving skyward. This same Wall has bid up stocks, commodities, crypto, houses and goods of all kinds – inflation.”

“We think the market’s focus on rate hikes and the flattening of the yield curve is a bit premature,” Subadra Rajappa, fixed income strategist at Société Générale, writes. “We believe risks are skewed towards higher yields and recommend positioning for it by way of positive carry steepeners in cash and conditionally via swaptions.”

“We think the fall in yields partly indicates confidence that – inflation will prove fleeting,” UBS says. “But it also reflects technical factors in the Treasury market that we expect to fade and worries over growth that we think are overdone. As a result, we see 10-year yields rising back to 2% over the coming year.”

Statin study

Statins, a popular class of cholesterol-lowering drugs, may also lower the risk of death from COVID-19, according to new findings.

Examining data from the American Heart Association’s COVID-19 Cardiovascular Disease Registry, researchers at the University of California San Diego School of Medicine found that patients taking statin medications had a 41% lower risk of in-hospital death from COVID-19. Statins’ anti-inflammatory effects and binding capabilities may potentially hinder progression of COVID-19

No deal for Intel?

Thomas Caulfield, CEO of semiconductor manufacturer GlobalFoundries, shot down reports that Intel (NASDAQ:INTC) was in talks to buy the company in a $30B deal.

“There’s nothing to that story,” he bluntly told CNBC in an interview Monday. Caulfield also gave an upbeat forecast for the chip-making industry, saying that an increase in capacity won’t create a boom-and-bust cycle for the sector because current demand can support a massive expansion in output.

IBM tops forecasts

Led by gains in its hybrid cloud business, IBM (NYSE:IBM) reported second-quarter earnings results that topped Wall Street analysts’ forecasts, and revenue that edged upward from the same period a year ago.

IBM reported a second-quarter profit of $2.33 a share, on revenue of $18.7 billion, excluding one-time items. Analysts that cover IBM had forecast Big Blue to earn $2.29 a share, on $18.3 billion in revenue.

Today’s Economic Calendar
8:30 Housing Starts and Permits
8:55 Redbook Chain Store Sales

Monday’s Key Earnings
IBM (NYSE:IBM) tops Wall Street forecasts +3.8% PM on strong cloud business revenue.
PPG (NYSE:PPG) Industries plunges -5.7% AH as supply disruptions, cost inflation drive Q2 miss.
Steel Dynamics (NASDAQ:STLD) slips -1.2% AH despite record Q2 results, continued strength seen in Q3.


Good morning. Happy Monday. Hope you had a good weekend.

The Asian/Pacific markets got hit hard. Vietnam dropped more than 4%; Japan, Hong Kong, South Korea, India, Indonesia, Singapore, Thailand and the Philippines also got crushed. Europe, Africa and the Middle East are currently suffering huge losses. The UK, Denmark, Poland, France, Germany, Greece, Russia, South Africa, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Israel, Austria and Sweden are all down at least 2%. Futures in the States point towards a huge gap down open for the cash market.

VIDEO: Managing Trades with MACD and MACD Histogram

The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

Delta Fears

It’s “Freedom Day” in the U.K., which just lifted the majority of its remaining coronavirus restrictions, but investors seem to be more nervous there, as well as across the globe. The rise of the rapidly spreading Delta variant is threatening to derail many efforts towards a full economic reopening as worsening outbreaks continue to cloud the once-promising outlook. U.S. stock index futures are also joining the global selloff after the major averages posted their first negative week in four: Dow -1.1%; S&P 500 -0.8%; Nasdaq -0.4%.

Mixed feelings: “If we don’t do it now we’ve got to ask ourselves, when will we ever do it? This is the right moment, but we’ve got to do it cautiously,” British Prime Minister Boris Johnson said in a statement. It’s a continuing argument that’s playing out worldwide. Some have warned that hospitalizations could rise substantially over the coming weeks, jeopardizing the progress made in containing the pandemic, while others have put more of a focus on personal responsibility, saying there were worse consequences for the economy, livelihoods and mental health.

Just weeks after they celebrated their “Freedom Days,” the Netherlands and Israel reimposed COVID restrictions as Delta variant cases rose throughout the countries. Over in Australia, Sydney and Melbourne are tightening lockdowns, while more athletes are testing positive for COVID-19 upon arrival in Japan, challenging the Tokyo Olympics in a region that just declared a coronavirus state of emergency. In the U.S., more states are also reinstating restrictions that had been lifted since late April, including Arizona, California, Colorado, Florida, Louisiana, Michigan, New Mexico and Texas.

Go deeper: Delta isn’t the only thing weighing on investors’ minds. Inflation fears resurfaced on Friday after data from the University of Michigan showed that consumers believed prices would jump 4.8% over the next year, marking the steepest climb since August 2008. There’s also worries about a peak in economic activity, tapering talk, the Q2 earnings season and whether the bullish sentiment in markets has reached a tipping point.

War of words

Facebook (FB) is pulling out the big guns following continuous comments from the Biden administration over coronavirus vaccine misinformation. On Saturday, the president told reporters the social media networks are “killing people,” while press secretary Jen Psaki said that health misinformation is “leading to people not taking the vaccine, and people are dying as a result.” Surgeon General Dr. Vivek Murthy has even called online vaccine misinformation “an urgent threat to public health” in his first formal advisory.

Response from FB: “At a time when COVID-19 cases are rising in America, the Biden administration has chosen to blame a handful of American social media companies. While social media plays an important role in society, it is clear that we need a whole of society approach to end this pandemic. And facts – not allegations – should help inform that effort.”

Doesn’t stop there: Facebook cites data that shows 85% of users in the U.S. have been or want to be vaccinated against COVID-19. “President Biden’s goal was for 70% of Americans to be vaccinated by July 4. Facebook is not the reason this goal was missed,” reads a zinger from Guy Rosen, Facebook’s VP of Integrity. According to the CDC, deaths from COVID-19 are rising again in the U.S. as Delta hits largely unvaccinated pockets of the country (American vaccinations averaged 530K per day over the past week).

Catalyst to $1 Trillion in Growth?

You don’t have to be a hedge fund guru to know that markets can rise and fall quickly (Dogecoin anybody?). Sometimes, the most attractive growth can be found in some of the oldest of places. Despite being hundreds of years old, the art market is poised for tremendous market capitalization growth. Deloitte projects the total wealth held in art and collectibles to expand from $1.7T to $2.7T by 2026. We largely attribute this to the rise of securitized assets, opening the doors to the art market for all. Founded in 2017, is the leading platform for blue-chip art investing with over 185,000 registered users. They have acquired over $150MM in art from artists like Banksy, Basquiat and Haring with new offerings launching every week.

OPEC+ ends standoff

OPEC and its allies have reached a deal to raise crude production in response to “oil demand showing clear signs of improvement and OECD stocks falling.” Starting in August, they’ll pump out an extra 400K barrels a day through the end of 2022, restoring all the cuts they made at the start of the COVID-19 pandemic. The modest increase suggests that producers are still concerned about the strength of the global economic recovery, but that they’re comfortable with the current price of crude.

Bigger picture: The deal resolves an internal dispute that had tested the unity of the alliance. OPEC+ abandoned talks two weeks ago after the UAE rejected proposed production plans, saying its current baseline was too low. The new agreement saw OPEC leader Saudi Arabia meet the UAE halfway in its demand for a more generous output limit, with other members of the group also being awarded higher production baselines, or the level at which output deals are calculated.

Brent crude futures (CO1:COM) fell 2.7% to $71.64/bbl on the news, while WTI crude (CL1:COM) slipped 2.9% to $69.49/bbl. “The deal reached over the weekend is likely to lead to some further weakness in the short term, as investors unwind positions on the prospects of higher supply,” wrote Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group. “Ultimately, the market is still relatively tight, which should see a relatively short-lived selloff.”

Back on board: “We appreciate the constructive dialogue we had with his highness and OPEC,” Emirati Energy Minister Suhail Al Mazrouei told journalists, referring to Saudi Energy Minister Prince Abdulaziz bin Salman. “I confirm that the UAE is committed to this group and will always work with it and within this group to do our best to achieve the market balance and help everyone. The UAE will remain a committed member in the OPEC alliance.”

Big deal

Zoom (ZM) became a household name during the pandemic as video conferencing became all the more important in a world without social contact. The company even saw explosive revenue growth of 326% in 2020, given the shift to remote work and distance schooling. As the economy reopens amid a broad vaccine rollout, some of those streams drying up and organic growth is unlikely to placate Wall Street. The stock has even tumbled 36% since reaching its peak in October after surging nearly 400% last year.

Where does the company turn? Zoom is spending big on M&A, scooping up Five9 (FIVN) in an all-stock transaction that values the company at $14.7B. Five9 is a provider of cloud-based call center technology, which allows representatives to do their jobs from home. The transaction is expected to close in the first half of 2022, though Five9 stockholders still have to approve the deal and it will require regulatory clearance. FIVN +8% premarket.

“We are continuously looking for ways to enhance our platform, and the addition of Five9 is a natural fit that will deliver even more happiness and value to our customers,” Zoom CEO Eric Yuan declared. The acquisition is Zoom’s first billion-dollar purchase and is the second-largest U.S. tech deal this year, behind Microsoft’s (MSFT) planned $16B deal for Nuance Communications (NUAN).

Cisco in the mix: Zoom CEO Eric Yuan, who founded Zoom in 2011, helped build WebEx, which Cisco (CSCO) bought in 2007 for $3.2B (he ended up staying at Cisco until he left to start Zoom). Five9 CEO Rowan Trollope also joined Cisco in 2012, and eventually became in charge of all of Cisco’s collaboration products (some even saw him as the top deputy to CEO Chuck Robbins). Trollope left the networking giant to take the CEO role at Five9 in 2018, and will remain CEO under the new deal, as well as president of Zoom.

Today’s Economic Calendar 10:00 NAHB Housing Market Index

What else is happening…

J&J (NYSE:JNJ) may put talc liabilities into unit that files for bankruptcy.

Hedge funds shun Netflix (NASDAQ:NFLX) and Facebook (NASDAQ:FB) – Sector Watch.

SPX Flow (NYSE:FLOW) rebuffs Ingersoll Rand (NYSE:IR) takeover bids – WSJ.

Tesla (NASDAQ:TSLA) stands out in BofA list of best covered call options plays.

Interest in “shroom stocks” rises over potential for psychedelic therapy.

Merck (NYSE:MRK) wins FDA approval for new pneumonia vaccine.

AMC Networks (NASDAQ:AMCX) settles Walking Dead producer lawsuit for $200M.

Investors eagerly await Slack (NYSE:WORK)-Salesforce (NYSE:CRM) DOJ approval.

Falling to Earth… Virgin Galactic (NYSE:SPCE) swaps gainer tag for top loser.

Space race: Procure Space ETF (UFO) vs. ARK Space Exploration ETF (ARKX).


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