Before the Open (Apr 18-22)

Good morning. Happy Friday.

The Asian/Pacific were mostly weak. China did okay, but Japan, South Korea, India, Taiwan, Australia, Indonesia and the Philippines were weak. Europe, Africa and the Middle East are mostly down. The UK, France, Germany, Poland, Russia, South Africa, Norway, the Netherlands, Italy and Sweden are posting big losses. Futures in the States point towards a positive open for the cash market.

————— VIDEO: Using TICK to Call Intraday Turns —————

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…

75 basis points

Happy Earth Day! Check out original Seeking Alpha show The Weekend Bite! This week we discuss investing in the Earth through REITs, solar panels and long-duration energy storage. With Alex Snyder, Portfolio Manager at CenterSquare Capital Management, and Jonas Wallmander, CEO of Azelio.

Seventy-five basis points is the new 50 basis points. A relentlessly hawkish Federal Reserve is ramping up market expectations for big interest rate hikes that would have been considered unthinkable (and market crippling) just two months ago.

Nomura says today that the FOMC will hike the fed funds rate by 75 basis points in June and July after a 50-basis point rise in May. That would bring the rate up to 2.25%, a phenomenal amount of tightening given that the Fed was still easing by buying assets as recently as March.

The shift in market expectations for even more tightening came after Fed Chairman Jerome Powell said at an IMF debate Thursday that a 50-basis-point hike in May was “on the table.” Perhaps even more pertinent to the markets, he said there was some merit in front-loading tightening with the current upside risks to inflation and a historically tight labor market.

Traders quickly priced in more aggressive hiking as Powell spoke, with CME FedWatch now pricing in an 85% chance the benchmark rate will rise to a range of 1.5%-1.75% after the June meeting. That would mean a 75-basis point hike in June if May gets the expected half-point boost.

Chatter of a hike of as much as 75 basis points started last week when St. Louis Fed President James Bullard said that he wouldn’t rule one out. Before Powell spoke yesterday, San Francisco President Mary Daly added some fuel to the fire, saying she would be talking to colleagues about whether a hike of 25, 50 or 75 basis points was needed.

In fed funds futures, the market is now pricing in about 270 basis points of tightening for 2022, topping the 250 seen in 1994, with expectations now for the rate to hit 3% by March 2023, according to Deutsche Bank.

Deutsche Bank’s chief economist said yesterday that the Fed could hike rates to as high as 5% by the time it’s done tightening, a level not seen since 2006.

“Our U.S. team has changed their Fed call,” Rob Subbaraman, Nomura head of global markets research, wrote in an email seen by Bloomberg. “They now expect the FOMC to be even more front-loaded with rate hikes, in order to get the funds rate back to neutral as expeditiously as possible to avoid a wage-price spiral.”

“We recognize Fedspeak has not outright endorsed a 75 basis point hike yet, but in this high inflation regime we believe the nature of Fed forward guidance has changed – it has become more data dependent and nimble,” he said.

“We are in a new environment, dancing to a new tune, and the incremental mean reversing way of thinking about inflation and rates is likely to be misleading,” Deutsche Bank chief economist David Folkerts-Landau said. “Inflation is seeping into expectations, and labor markets are historically tight.”

What this means for stocks and bonds: The selloff in Treasury bonds accelerated as expectations for even more hawkish policy rose.

The 10-year Treasury yield (TBT) (TLT) hit 2.95% at the high of the day Thursday and is back up at that level this morning. The 2s10s curve flattened and the 2-year yield (SHY) is up 7 basis points to 2.76% in early trading today.

Stocks started Thursday with a rally, but the big rise in rates (especially real rates) reversed the trend and the S&P (SP500) (SPY) fell 1.5%, while the Nasdaq 100 (NDX) (QQQ) lost 2%.

Worries will increase in the equities market if the Fed slams on the brakes as Nomura predicts.

Investors “are in a new investing world,” eToro strategist Ben Laidler said. “The sharp and never-ending repricing of Fed interest expectations and high-for-longer inflation has driven bond volatility twice that of equities, and a tightening US financial conditions index.”

“This drives lower valuation and a Growth to Value rotation,” he added. “Equities are being stress-tested by surging bond yields. But there is a limit to how high yields will go. The Fed has more yield control now with its huge balance sheet runoff, whilst high debt levels, and wide yield gap with global markets are constraints.” (6 comments)

Disney vs. Florida

Florida’s Republican-led House gave its approval to a bill that would put an end to Walt Disney’s (DIS) special tax district, which grants the theme-park owner heavy autonomy over its land.

That 70-38 vote follows Wednesday’s Florida Senate passage by a vote of 23-16 – quick action after Florida Gov. Ron DeSantis said Tuesday that he was adding the effort to the legislature’s special session. The measure now heads to DeSantis for signature. Disney shares fell to a new 52-week low in response, dropping below $122. (786 comments)

GameStop-shorting fund is done?

Melvin Capital, the hedge fund that was crushed by the GameStop (GME) short squeeze last year, is said to be considering a plan to return investors their capital, while giving them the ability to invest in a new fund.

Under the plan being discussed by Melvin Capital founder Gabe Plotkin, the hedge fund would shut at the end of June, according to a CNBC report. The fund fell 21% at the end of the first quarter. Melvin would start a new fund on July 1 with the money his investors decide to reinvest. (60 comments)

Bravo Musk?

Elon Musk is said to be in talks with private-equity firm Thoma Bravo about partnering on a potential Twitter (TWTR) takeover bid. Twitter is up 1% in premarket trading.

Thoma Bravo executives are said to be mixed on a potential partnership due to Musk’s behavior and controversial politics, according to a New York Post report.

The report comes after Musk earlier Thursday said he will explore a potential tender offer for Twitter, having secured $46.5B committed financing for the deal. Musk’s filing says entities related to him have received commitment letters committing to about $46.5B. (25 comments)

Snap challenges

The word of the day for Snap (SNAP) is “challenging”: CEO Evan Spiegel made his description of the operating environment as challenging front and center in his remarks on the earnings call, and Chief Financial Officer Derek Andersen used the word to describe why the company expects a 30% run rate in business growth quarter-to-date to likely fade as the quarter rolls on.

He also highlighted the impact of the war in Ukraine, saying the company could expect additional campaign pauses or advertiser budget reductions. A large number of advertisers paused their ad campaigns in the days following Russia’s invasion of Ukraine in late February – and while the majority of advertisers resumed their campaigns, many remained concerned about inflation and continuing geopolitical risk, he said. (7 comments)

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

What else is happening…

Carl Icahn says large asset managers should back him in McDonald’s (MCD) fight.

Heavily shorted name Redbox (RDBX) gains 29% on heavy volume.

Australia’s financial regulator unveils cryptocurrency policy roadmap.

Boston Beer Company (SAM) serves up skunked earnings.

Solar stocks slide after NextEra (NEE) cites tariff probe for project delays.

U.S. oil services firms push for revamped Venezuela license.


Good morning. Happy Thursday.

The Asian/Pacific were split. Japan, India and Indonesia did well; China, Hong Kong and the Philippines were weak. Europe, Africa and the Middle East are doing well. France, Turkey, Germany, UAE, Finland, Hungary, Spain, the Netherlands, Austria and Sweden are leading while Portugal and Saudi Arabia are posting are down. Futures in the States point towards a positive open for the cash market.

————— VIDEO: Using TICK to Call Intraday Turns —————

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

Stories/News from Seeking Alpha…

Streaming sea change

Netflix (NFLX) lost more than a third of its value yesterday, shedding more than $50B in market capitalization as shares tumbled 35%.The last time the stock fell like that was nearly 18 years ago, on Oct. 15, 2004. Netflix (NFLX) stock slipped nearly 41% that day, all the way to a split-adjusted $1.47 from $2.49 the session before. It’s a staggering loss for a company that is an original FAANG stock, considered a bedrock of growth stocks.

Netflix (NFLX) lost a net 200,000 subscribers for the quarter and forecast that it would shed 2M more in the current quarter. That’s launched talk of whether the company is saturating its total addressable market. On the earnings call the company seemed ready to throw a kitchen sink at the problem (including monetizing free-riding viewers and creating an ad-supported tier).

Quote: The results were a “sea change quarter” that “essentially conceded to every key point of the bear thesis,” J.P. Morgan analyst Doug Anmuth said.

“The bigger factor is management’s acknowledgment of relatively high household penetration when including account sharing, increased competition, and COVID pull-forward giving way to fundamental weakness,” Anmuth wrote in a note to clients. “We’re moving to the sidelines as we look for greater confidence in restoring subscriber growth & reaccelerating revenue, while also increasing development velocity in account sharing and advertising,”

Go deeper into the changing landscape: The stumble in the long-time dominant force in streaming may open the door for competitors to take the lead. But Wall Street is cautious, with other major streaming stocks all tumbling yesterday.

Walt Disney (DIS), HBO Max parent Warner Bros. Discovery (WBD) and Paramount (PARA) all fell more than 5% yesterday. There was also downward pressure for some smaller streamers often named in merger and acquisition chatter, with Lions Gate Entertainment (LGF.A), AMC Networks (AMCX) and fuboTV (FUBO) sliding.

There have been three chapters in the Netflix saga, according to Rameez Tase, co-founder of Antenna Data, which tracks the subscription economy. In Chapter 1 Netflix disrupted TV, in Chapter 2 TV fought back and clawed back market share and in Chapter 3 TV eats its own profits because hurting Netflix isn’t a business model, Tase tweeted.

“Yes, they weakened Netflix … but at what cost?” he said. “Each of Netflix’s competitors now faces 2 existential challenges: retention and monetization. Will they be able to prevent churn? Will they be able to charge more?”

“The implications? Get ready to see an all-out war for retention and monetization, prices are going up, up, up, (but) will consumers bear it? Wall Street shifts from Subscribers to Customer Lifetime Value (and) Growth Marketers are the new saviors of TV.” (115 comments)

Tesla margins impress

Tesla (TSLA) is rallying premarket after powering through supply chain issues and late-quarter disruption in Shanghai to comfortably top estimates with its Q1 earnings report.

The company generated $3.3B in GAAP net income during the quarter and $3.7B in non-GAAP net income. The automaker reports it produced 305,407 vehicles in Q1 (+69% Y/Y) and delivered 310,048 vehicles (+68%).

Operating margin shot up to 19.2% of sales to improve from last quarter’s mark of 14.7%. Automotive gross margin excluding regulatory credits was 30.0% vs. 27.7% consensus and 29.2% last quarter.

Tesla said it plans to grow its manufacturing capacity as quickly as possible and reiterated that over a multi-year horizon, it expects to achieve 50% average annual growth in vehicle deliveries. (125 comments)

Beige book

U.S. economic activity has expanded at a “moderate” rate since mid-February amid strong inflationary pressures, according to the Federal Reserve’s Beige Book.

Strong demand but limited supply: Manufacturing activity was solid for most Fed districts, though supply chain disruptions, a tight labor market and higher input costs continue to put pressure on firms’ abilities to meet demand.

As real (inflation-adjusted) disposable income growth contracts to record lows, some Fed contacts noted “early signs that the strong pace of wage growth had begun to slow,” the Beige Book said.

Consumer spending accelerated among retail and non-financial firms, as businesses passed down higher input costs. For prices, “inflationary pressures remained strong since the last report, with firms continuing to pass swiftly rising input costs through to customers.” (2 comments)

Ackman abandons ship

Bill Ackman sold his large stake in Netflix (NFLX) after the company reported a surprise drop in subscribers and looked to tilt toward an ad-supported service.

The fund manager said in a letter to investors that he decided to sell the shares, and take a big loss in the process, instead of sticking with a company where he has lost confidence to predict its future.

Pershing Square lost about $435M on its 3.1B share stake in the company, based on Wednesday’s closing price, according to Bloomberg.

“While we have a high regard for Netflix’s management and the remarkable company they have built, in light of the enormous operating leverage inherent in the company’s business model, changes in the company’s future subscriber growth can have an outsized impact on our estimate of intrinsic value,” Ackman said in the letter. “In our original analysis, we viewed this operating leverage favorably due to our long term growth expectations for the company.” (155 comments)

Meta weakness

Meta Platforms (FB) saw sharp selling yesterday as chatter around the company came in reaction to a negative note from Cleveland Research, whose channel checks indicate that current-quarter business has tanked.

The firm has apparently cut its estimates well below Street consensus, based on a slowdown in everything from its e-commerce efforts to a breakdown in its targeting to share loss to rivals.

The first quarter looks weak and April’s to-date business is slowing even more than that, the firm notes. Advertiser return on investment is weaker from inflation in CPM rates, a drop in conversion rates, and targeting changes – and nearly half of the agencies are set to miss their ROI goal, Cleveland says. (103 comments)

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Jerome Powell Speech
12:30 PM Fed’s Bullard: U.S. Economy and Monetary Policy
1:00 PM Jerome Powell Speech
4:30 PM Fed Balance Sheet

What else is happening…

Russia tests new ICBM.

Dept. of Justice files notice of appeal over federal transportation mask mandate.

United Airlines (UAL) lifts off on optimistic guidance.

Real rates on the 10-year hit positive territory for the first time since 2020.

Carvana (CVNA) crashes post-market on big profit miss.

‘Stop it’ with the takeover talk for Rite Aid (RAD), analyst says.

Atlanta Fed’s Bostic sees healthcare, education as keys to supporting labor force.

Google (GOOG, GOOGL) receives second request from DOJ for planned purchase of Mandiant.


Good morning. Happy Wednesday.

The Asian/Pacific mostly did well. China and Hong Kong were weak, but Japan, India, Taiwan, New Zealand, Malaysia, Indonesia, Singapore and the Philippines did great. Europe, Africa and the Middle East are doing well. France, Germany, Russia, Switzerland, Greece, Finland, Hungary, Spain, the Netherlands, Italy, Austria, Sweden and Saudi Arabia are posting solid gains. Futures in the States point towards a positive open for the cash market.

————— VIDEO: Using TICK to Call Intraday Turns —————

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

Stories/News from Seeking Alpha…

Elon Musk’s favorite day

Elon Musk has made no secret of his affinity for “420” references and today is April 20, or 4/20, with Tesla (TSLA) set to report earnings after the bell.

The numbers are a cannabis culture reference to the supposed best time to get high and Musk had Wall Street Googling the term again recently as he bid $54.20 per share for Twitter.

Tesla shares were up about 2% in the first quarter, but down more than 14% year to date. And the stock could see a big earnings-day move based on positioning data compiled by Goldman Sachs. Tesla stock has a 55.6% probability of an up move today, with an implied move of 12.6%, according to John Marshall, Goldman’s head of derivatives strategy.

What to watch: The dominant focus is expected to be on what the outlook is for Shanghai production in Q2 amid the lockdowns. The electric vehicle leader just started production back up at its Shanghai factory after an extended COVID-19 lockdown in the region kept the plant effectively closed since March 28. Reports have indicated employees will be living onsite at the Gigafactory, where they will get catered meals, a small daily stipend, access to showers, and entertainment options.

That leads to the main question around the TSLA earnings report being clarity on the current and expected pace of China production, as well as the overall view on the impact of zero-tolerance COVID policies in China. Any surprises could reset expectations across Wall Street. China has been the biggest topic with analyst comments into the report.

What the analysts say: Wedbush Securities analyst Dan Ives (Buy rating): “We estimate that roughly 50k units are now reduced for the June quarter for starters given the last three weeks of shutdown and depending on how aggressively Tesla can ramp back production could be impacted further over the next month. Musk & Co. are in a tough spot, as there are so many variables around 2Q China production that will certainly weigh on guidance for the rest of the year and thus has been a clear overhang on the stock over the past month.”

Evercore ISI analyst Chris McNally (In Line rating): Keep “in mind that every week of closure (3+ so far), is 16-18k units of production lost, $80- $100MM of Rev, $24-$35MM of lost EBIT and 18-23c of lost EPS. Potential new catalysts now include hard data on extent of China production setbacks or restart (a major exporter for TSLA to EU) as well as any legislation loosely related to the former ‘Build Back Better’ US reconciliation bill which increases manufacturer caps for federal tax credits on consumer.”

Morgan Stanley thinks investors might start looking at the stock as a play on renewable energy onshore infrastructure. “We believe recent geopolitical events are working to accelerate the market for stationary storage at the grid/industrial/household level,” noted analyst Adam Jonas. (1 comment)

Twitter tender?

Musk is also stoking “420” excitement among his supporters with another cryptic tweet that could indicate he will make a tender offer for Twitter.

Musk tweeted “_ is the Night.” The fill-in-the-blank could be a reference to “Tender Is the Night,” the 1934 novel by F. Scott Fitzgerald. Musk already created speculation that he may make a tender offer directly to TWTR investors when he tweeted out “Love me Tender.”

Twitter has adopted a poison pill to thwart Musk’s hostile bid of $43B for the company. There is also speculation that Musk’s tweet could be “Tonight is the Night” since there are seven character spaces in the blank, although he sent the tweet out at 11:32 p.m. ET on Tuesday. (12 comments)

Nuclear plant bailout

The Biden administration is launching a $6B program to rescue nuclear power plants at risk of closing, opening a certification and bidding process for a civil nuclear credit program to aid financially distressed owners or operators of nuclear power reactors.

The U.S. Department of Energy said it will take applications for the first round of funding in its program until May 19, prioritizing reactors that have already announced plans to close. (63 comments)

Netflix with ads

Netflix (NFLX) stock is losing nearly a quarter of its value in premarket trading after it lost 200,000 subscribers on a net basis, well short of its scaled-back guidance for additions of 2.5 million subscribers. And the earnings call set the stage for a lower-cost, ad-supported service.

Netflix’s first subscriber loss in a decade left the company down to 221.64 million global subscribers compared to 221.84 million at the end of 2021. And the streaming service is also forecasting a drop of 2 million net subscribers for the second quarter of this year.

Netflix acknowledged on the call that growth wasn’t what it wanted and pegged the decline to four “inter-related” factors: Pace of growth into broadband homes is partly dependent on factors out of its control; competition has ramped up heavily in the past three years; macro factors (economy, inflation, Russia’s invasion of Ukraine); and notably, unpaid password sharing – a concern that execs used to blow off as not especially relevant.

As far as increasing the “pipe spread” with advertising on lower-priced plans, CEO Reed Hastings noted people know he’s been against it. “I’m a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m a bigger fan of consumer choice, and allowing consumers who would like to have a lower price and are advertising-tolerant, to get what they want, makes a lot of sense.” The company will try to figure that out over the next year or two, he says, but “think of us as quite open to offering even lower prices with advertising.” (138 comments)

IBM earnings impress

IBM (IBM) reported better-than-expected first-quarter results led by strong performance in its software and consulting services businesses. IBM said that for the first three months of the year it earned $1.40 a share, excluding one-time items, on $14.2B in revenue. The results topped the estimates of Wall Street analysts, who had forecast the company to earn $1.39 a share, on sales of $13.84B.

IBM CEO Arvind Krishna said demand for hybrid cloud artificial intelligence led the growth in the company’s software and consulting services, and showed that IBM has become “a more focused business.” Late last year, it spun off its Kyndryl (KD) managed services business as part of a strategy aimed at putting more emphasis on software and consulting. (22 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
10:30 Fed’s Daly Speech
11:30 Fed’s Evans: Monetary Policy
1:00 PM Fed’s Bostic Speech
1:00 PM Results of $16B, 20-Year Bond Auction
2:00 PM Fed’s Beige Book

What else is happening…

Florida’s DeSantis threatens to punish Twitter (TWTR) for thwarting Musk takeover.

Bulls are an ‘endangered species,’ which is bullish.

Atlanta Fed’s Bostic says central bank should be careful with fast rate hikes.

Precious metals, miners mauled amid talk of more aggressive Fed rate hikes.

Goldman Sachs (GS) CEO, deputies said to get private-equity-like compensation.

U.S. junk bond spreads widen as debt market prices in slower economic growth.

CNN parent (WBD) suspends marketing spending on CNN+, lays off finance chief.


Good morning. Happy Tuesday.

The Asian/Pacific markets leaned down. Japan and South Korea did well, but China, Hong Kong, India and Indonesia were weak. Europe, Africa and the Middle East are currently weak. Greece and South Africa are up, but the UK, Poland, France, Germany, Russia, Switzerland, Norway, Spain, the Netherlands, Italy, Portugal, Sweden and Saudi Arabia are down. Futures in the States point towards a flat open for the cash market.

————— My interview with —————

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

Stories/News from Seeking Alpha…

Housing inflection point

Investors will get more data on the U.S. housing market today as analysts point to signs of cooling in the red-hot sector. Housing starts and building permits numbers for April are due. Economists expect groundbreaking on new homes to drop to an annual rate of 1.745M, while permits are seen edging down to 1.825M.

Demand for homes is strong, with many properties for sale going for well above asking price. But with a hawkish Fed and the Treasury yields jumping, the 30-year fixed-rate mortgage just topped 5% for the first time in a decade.

“Rising rates are starting to show up in housing data,” Schwab’s Kathy Jones tweeted. That could further dent demand, although “housing starts have historically been unresponsive to changes in mortgage rates in a supply-constrained environment, likely because homebuilders are able to continue building with little fear that homes will sit vacant after completion,” Goldman Sachs said.

Yesterday, the NAHB Housing Market Index fell to a seven-month low of 77 for April. “The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” NAHB Chief Economist Robert Dietz said.

Redfin reported last week that home sales fell 4% in March as buying costs shot up. “We expect the combination of surging mortgage rates and record-high home prices to cause more homebuyers to drop out of the market,” Redfin chief economist Daryl Fairweather said. “Unfortunately, homeowners are turning their back on the market too. Instead of being motivated to list before prices weaken, potential home sellers may be choosing to wait-out the impending market cooldown.”

Stock impact: The “inexorable rise in back end rates is having a meaningful impact on interest rate sensitive areas of the economy and market, like housing,” Morgan Stanley equity strategist Mike Wilson said.

The SPDR Homebuilders ETF (XHB) is down nearly 30% year to date and off 15% from its near-term peak in mid-March. The S&P 500 (SP500) (SPY) is down about 8% year to date. The sector is also vulnerable to the risk of the Fed orchestrating a hard landing with its rate hike, possibly leading to a recession. But Citi says that a replay of 2008 isn’t in the cards.

“We believe the housing risk is much less severe than occurred during the Great Financial Crisis since credit quality is healthy, home equity levels are high, and there is higher structural demand for the home than pre-pandemic,” analyst Steve Zaccone wrote in a note. (5 comments)

75-basis-point rate hike?

St. Louis Fed President James Bullard said he wouldn’t “rule out” a 75 basis-point increase, “but it isn’t my base case.” The market has priced in a 50-basis-point hike for the May meeting, kicking off a ramped-up tightening cycle.

Bullard emphasized that the fed funds rate should be lifted to 3.5% at a minimum by the end of this year. That would be more than 300 basis points above the effective rate of 0.33% – recall the Federal Open Market Committee, during its March meeting, hiked the interbank lending rate by 25 basis points off the effective zero lower bound. (6 comments)

Earnings worries

Signs are emerging that Q1 earnings season will be more disappointing than expected, especially with regards to forward estimates and guidance, Morgan Stanley says.

“Earnings revisions breadth for the S&P 500 has resumed its downtrend over the past 2 weeks and is once again approaching negative territory (which would mean more downward than upward out-year EPS revisions),” strategists wrote. (66 comments)

Private equity eyes Twitter

Apollo Global (APO) is reportedly considering participating in a bid for Twitter (TWTR). Apollo is said to have had discussions about backing a potential deal for Twitter and could provide Elon Musk or another PE bidder with equity or debt for a bid, according to a Wall Street Journal report.

CNBC reporter Leslie Picker confirmed the possible Apollo participation, though said it would only be in a financing capacity. Twitter is expected to officially reject Musk’s $54.20/share offer in the coming days, the WSJ also reported. The social media platform is scheduled to report its earnings April 28 and may lay out its response at that time. (24 comments)

Apple wages

Some Apple (AAPL) retail workers in New York state are looking to organize and those organizers are reportedly looking for their wages to be boosted to at least $30 per hour, CNBC reported.

The news outlet, citing changes from the website of the group known as Fruit Stand Workers United, also reported that the organizers have several other demands, including increased tuition reimbursement, more vacation time, more retirement options and higher 401(k) matches, among others. (182 comments)

Judge nixes mask mandate

A federal judge in Florida voided the Biden administration’s national mask mandate applicable for planes and other forms of public transportation, arguing that the health officials had exceeded their authority.

In her ruling, U.S. District Judge Kathryn Kimball Mizelle said that the Centers for Disease Control and Prevention (CDC) had not adequately explained its decision and violated the procedures for proper rulemaking about the mandate. (118 comments)

Today’s Economic Calendar
8:30 Housing Starts and Permits
12:05 PM Fed’s Evans Speech

What else is happening…

Netflix (NFLX) Q1 preview: Focus on subscriber growth amid Russia ban.

NFL Sunday Ticket package may already be headed Apple’s (AAPL) way.

Shell (SHEL) takes top spot in BloombergNEF green rating of oil and gas majors.

Peloton (PTON) loses speed amid price target trimming.

Barclays (BCS) gets rid of bullish Treasury bet as yields keep rising.

U.S.-made steel must be used in infrastructure bill projects, Biden says.

Activist questions Hasbro (HAS) management ahead of earnings.


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

The Asian/Pacific markets leaned down. Japan, India and Singapore were weak. The Europe, Africa and the Middle East markets are mostly closed. There are no standout movers among those open. Futures in the States point towards a negative open for the cash market.

————— VIDEO:What’s Hot Right Now —————

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

Stories/News from Seeking Alpha…

Recession risks

The Goldman Sachs economics team says that there is now a 35% chance of a U.S recession over the next two years, with the labor market a particular problem for the Federal Reserve. The large gap between jobs and workers, which keeps wage growth elevated, has historically only declined during periods of economic contraction, chief economist Jan Hatzius and team wrote in a note out on Sunday. Predictions for a recession have been growing as the Fed tries to negotiate a soft landing for the economy at a time when inflation is at a level not seen in four decades.

Deutsche Bank was the first big Wall Street bank to forecast a recession, saying in the first week of April a recession in late 2023 is now their base case.

Quotes: “Taken at face value, these historical patterns suggest the Fed faces a hard path to a soft landing,” Hatzius said, according to Bloomberg. But other strategists are more cautious.

Wells Fargo stock strategist Chris Harvey said in a note last week that despite “daily calls for a recession from anyone with a megaphone, we do not expect one of the next 12 months. Rather, stagflation (high inflation/slower growth) likely will prevail.”

Credit Suisse says it is not underweight equities (SPY) (QQQ) because: “i) equities are fair value (not overvalued) with equities being an inflation hedge compared to bonds; ii) monetary conditions are very loose; iii) we only tend to get recessions 9 months after 3-month money inverts relative to 10-year.”

Go deeper on yields: The Fed’s hawkish signaling, with 50-basis-point rate hikes expected over the next few meetings has sent Treasury yields sharply higher. An inversion in the 2-year and 10-year Treasury yield curve was pointed to as a signal of an upcoming recession. But the inversion was short-lived and that curve has started steepening again.

Yields are up again and the 2s/10s are steepening again this morning. The 10-year Treasury yield (TBT) (TLT) is up 6 basis points to 2.87% and the 2-year (SHY) is up 5 basis points to 2.49%. Real rates, which the Fed also wants to see rise, are climbing as well, with the 10-year inflation-protected yield about 10 basis points away from positive territory.

“Despite the embarrassing panic about the wrong yield curve measures flattening/inverting earlier this year, the curves that actually forecast recessions remain steep and have been steepening,” MKM’s Michael Darda said in a note.

“The long Treasury rate (or 10-year Treasury yield) minus the 3-month Treasury bill yield has inverted before every recession since the mid-1950s.” That spread is now around 200 basis points. Still, traders see little respite from the bond selloff in the near term. “We’re coming out of one of the worst quarters in history … and the big bear market in bonds continues,” Thanos Bardas, global co-head of investment grade at Neuberger Berman, told The Wall Street Journal. (7 comments)

Twitter tender?

Elon Musk appeared to hint at a possible tender offer for Twitter (TWTR) in a tweet on Saturday. Musk tweeted “Love Me Tender” in a cryptic tweet that is not only a famous Elvis Presley song but also may refer to a potential tender offer directly to shareholders he could make for the social media platform that he offered to buy for $43B on Thursday.

The Musk tweet comes after Twitter on Friday announced it adopted a shareholder rights plan – a “poison pill” designed to keep control in the company from being consolidated in the wake of Musk’s surprise effort to take control of the company. The board unanimously adopted a poison pill that’s exercisable if any one entity acquires beneficial ownership of 15% or more of Twitter common stock in a transaction unapproved by the board. (55 comments)

Russia strikes Lviv

Six people were reported dead as Russia aimed strikes on the western Ukrainian city of Lviv. Plumes of black smoke were seen, believed to be caused by missiles, the Associated Press reported. Meanwhile, the port city of Mariupol looked set to fall to Russian forces after Ukrainians refused to surrender by a Sunday deadline set by Russia. (1 comment)

Travel alert shift

Starting Monday, the CDC is changing its Travel Health Notice System for COVID-19 with the biggest impact being that fewer countries will end up classified under the highest level. Countries listed under Level 4 – the highest level – are deemed by the CDC to have a very high level of COVID incidence and should be avoided by all travelers, even if fully vaccinated and boosted.

The agency said that Level 4 will be reserved for “special circumstances, such as rapidly escalating case trajectory or extremely high case counts, emergence of a new variant of concern, or healthcare infrastructure collapse.” (7 comments)

DiDi delisting

Ride-sharing giant DiDi Global (DIDI) has set May 23 for a shareholder vote on its plans to delist from the New York Stock Exchange. DiDi won’t apply for listing of its shares on any other stock exchange before completion of the delisting, according to a statement on Saturday. Shareholders of record as of April 28 will be able to vote at the annual meeting. The board and the company will continue to explore potential listing on another exchange outside the U.S.

In December, DIDI said it planned to delist its shares from the NYSE over concerns expressed by Chinese regulators that its operations were leaking sensitive data. The company said it would instead pursue a listing on the Hong Kong market. (15 comments)

Today’s Economic Calendar
10:00 NAHB Housing Market Index
4:00 PM Fed’s Bullard: U.S. Economy and Monetary Policy

What else is happening…

Today is tax deadline day.

SaaS companies see challenges and opportunities.

J&J (JNJ) COVID-19 shot holds its ground amid breakthrough cases.

Online advertising feeling the weight of macro concerns in 2022.

Pfizer (PFE) draws skeptics amid concerns over outlook for COVID-related sales.

Office occupancy rates still stay under 50% in Kastle’s back-to-work barometer.

Boeing (BA) 737-800 flights resume in China four weeks after fatal crash.

Activision (ATVI) says it will cooperate with insider trading investigation into Microsoft (MSFT) deal.


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