Before the Open (May 16-20)

Good morning. Happy Friday.

The Asian/Pacific markets posted solid gains. Japan, China, Hong Kong, South Korea, India, Australia, Singapore, Thailand and Singapore each rallied at least 1%. Europe, Africa and the Middle East are currently down big. The UK, Denmark, France, Germany, Greece, Finland, Norway, Hungary, Spain, the Netherlands, Italy, Austria and Sweden are up 1% or more. Futures in the States point towards a moderate gap up open for the cash market.

————— BLOG: Details of Recent Stock Trades —————

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

Stories/News from Seeking Alpha…

Outsized losses

Check out original Seeking Alpha show The Weekend Bite! This week we cover interest rates markets, TIPS, stock market worries, and swap rates with Nancy Davis, Chief Investment Officer at Quadratic Capital Management.

While stocks are trying to grab back some gains this morning, the S&P 500 fell even closer to a bear market on Thursday, now down 18.6% from its record closing high set in early January. If things turn around again this session, there is a good chance the benchmark could fall into bear territory for the first time since 2007 (barring the month-long freakout that occurred in March 2020). However, this time around, a small group of names account for much of the decline, prompting some discussion in the investing community about their influence and power.

Trillions in value erased: Only eight companies (of the 500 in the index) are responsible for nearly half of the weighted benchmark’s year-to-date losses. Declines at Netflix (NFLX) have reached 70%, Meta (FB) and Nvidia (NVDA) are each down 43%, while Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) and Tesla (TSLA) have fallen between 23% and 36% YTD. Under a theoretical model, if S&P Dow Jones Indices (SPGI) (CME) designed an equal weighting to the entire S&P 500, the index would only be down 13% in 2022 (but investors would also not have experienced the massive gains they notched in previous years).

“They’re taking a huge chunk out of the S&P return,” noted Anne Wickland, senior analyst at Easterly Investment Partners. “It’s really lopsided because of how many of those big names make up the top part of the S&P 500.”

Outlook: Some say it’s too early to call the end of Big Tech dominance, but value and energy stocks like Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP) have been supporting the S&P 500 this year. Commodities and related shares are being used as an inflation hedge, especially as Russia’s war in Ukraine exacerbates energy prices globally. Dip buyers should also be on watch, according to Tony Roth, chief investment officer at Wilmington Trust, who feels Big Tech will continue to “provide the infrastructure or the backbone for the digital economy and do really well for many, many years going forward.” (5 comments)


Besides running Tesla (NASDAQ:TSLA), SpaceX (SPACE), The Boring Company and Neuralink, as well as trying/not trying to take over Twitter (NYSE:TWTR), Elon Musk has another thing to deal with. Insider has reported that SpaceX shelled out $250,000 in severance to a flight attendant who had accused the billionaire of sexual misconduct. The alleged incident occurred in Musk’s room aboard a SpaceX jet in late 2016 during an in-flight, full-body massage that is apparently not unusual among company executives.

The reports: In addition to exposing himself, Musk allegedly rubbed the flight attendant’s thigh and offered to buy her a horse if she would “do more” during the in-flight massage. She rejected his proposition and went on to file a complaint with SpaceX’s human resources department in 2018, claiming her career opportunities had been hurt by her refusal and she was being retaliated against when her shifts were cut back. SpaceX took the issue to a mediator, and the woman signed a restrictive non-disclosure and non-disparagement clause that included a promise to never discuss the severance payment or divulge any information of any kind about Musk and his businesses.

Insider said it contacted Musk for comment, but he emailed back to ask for more time to respond, saying there was “a lot more to this story.” “If I were inclined to engage in sexual harassment, this is unlikely to be the first time in my entire 30-year career that it comes to light,” he wrote, calling the story a “politically motivated hit piece.” The account was leaked by the flight attendant’s friend, who felt that “remaining silent would make her complicit.”

Response via Twitter: “For the record, those wild accusations are utterly untrue. I have a challenge to this liar who claims their friend saw me “exposed” – describe just one thing, anything at all (scars, tattoos, …) that isn’t known by the public. She won’t be able to do so, because it never happened. The attacks against me should be viewed through a political lens – this is their standard (despicable) playbook – but nothing will deter me from fighting for a good future and your right to free speech. Finally, we get to use Elongate as scandal name. It’s kinda perfect.” (95 comments)

Security threats

Joining the rest of the Five Eyes intelligence-sharing network, Canada is banning China’s Huawei Technologies and ZTE Corp (OTCPK:ZTCOY) from providing 5G (and even 4G) services in the country. Providers who have already installed the gear will also be required to remove it without compensation or reimbursement. With regards to deadlines, 5G machinery must be taken out by June 2024, while companies using related 4G equipment must clear them from their networks by the end of 2027.

Snapshot: The decision follows a nearly four-year national security review, prompted by the U.S. due to espionage concerns. Washington has cited fears over the potential use of 5G equipment as a backdoor for spying by the Chinese government, even warning allies it would limit intelligence sharing with countries that use Huawei equipment. “This is very much in line with what our allies have been doing in order to protect a critical piece of infrastructure,” said François-Philippe Champagne, Canada’s Minister of Innovation, Science and Industry.

Fearing an eventual ban, Bell Canada (NYSE:BCE) and Telus (NYSE:TU), two of the nation’s largest wireless players, had already started to exclude Huawei from their network buildouts, opting for alternative gear from Sweden’s Ericsson (NASDAQ:ERIC) and Finland’s Nokia (NYSE:NOK). The Chinese embassy in Canada was quick to slam the announcement, calling it politically motivated and a violation of the principles of free trade and market economies. “China will take all necessary measures to protect the interests of Chinese companies,” according to a spokesperson.

Go deeper: Huawei has sold over $700M worth of telecommunications equipment to Canada since the security review was first initiated in 2018. The firm has also “diversified its network by spending $300M/year on Canadian R&D and by selling consumer products, so this so-called 5G ban only targets one small and declining aspect of our business in Canada,” said company executive Alykhan Velshi. “While we are disappointed by the decision, Huawei will still be part of Canada’s telecommunications network, and even 5G, because of the software that we are currently in the process of deploying with our partners.” (7 comments)

End of an era

Western food diplomacy was one of the first things that flourished in Russia after the Iron Curtain fell in 1989. In fact, the opening of the first McDonald’s (MCD) in Moscow’s Pushkin Square the following year came to “symbolize the entire opening of the USSR to the West,” according to Marc Carena, former managing director of the company’s Russian operations. The fast food giant went on to plow millions of dollars into the country, eventually growing into a network of 850 restaurants and 62,000 employees.

Update: That’s all coming to an end. Mickey D’s is selling its entire Russian restaurant portfolio to Alexander Govor, who has served as a McDonald’s licensee through his firm GiD LLC. Govor has been with the chain since 2015 and helped it expand into remote Siberia, where he currently operates 25 restaurants. Financial terms of the deal weren’t disclosed, but McDonald’s has said it would take a non-cash charge of up to $1.4B following a sale.

In early March, the Golden Arches temporarily closed all its locations in Russia, but continued to pay staff in the interim, spending about $55M per month on rent and wages for its local employees. While Russian operations only accounted for 3% of McDonald’s operating income, they make up 9% of its annual revenues. Mickey D’s also owned a large share of its restaurants in Russia (84%) and was the largest taxpayer to Russia in the food industry.

Other sales on the way? Soon after McDonald’s suspended operations, other well-known food companies made similar announcements. Starbucks (SBUX) said it would close all of its locations in Russia, while Coca-Cola (KO) and PepsiCo (PEP) (which has even been there since the 1970s) said it was halting most sales there. Yum! Brands (YUM) additionally suspended operations at 70 company-owned KFCs and all 50 franchise-owned Pizza Huts in Russia, while consumer and food giant Unilever (UL) has paused all imports and exports into and out of the country. (28 comments)

Today’s Economic Calendar
10:00 Quarterly Services Report
1:00 PM Baker-Hughes Rig Count

What else is happening…

SIGA (SIGA), Emergent (EBS), Tonix (TNXP) soar amid Monkeypox outbreak.

CDC recommends Pfizer (PFE) COVID booster for children 5-11 years old.

Twitter (TWTR) turns positive as execs say Musk deal won’t be renegotiated.

Reports: Apple (AAPL) shows mixed reality headset to its board of directors.

Microsoft’s (MSFT) Bing censors names tied to Chinese politics – WSJ.

Cyber security stocks boosted by Palo Alto Networks (PANW) results.

Trouble ahead: Cisco (CSCO) dives on weak Q3 results and guidance.

Third time’s a charm as Boeing’s (BA) Starliner blasts into orbit.

Kohl’s (KSS) falls on report that sales process likely won’t lead to deal.

The rise and fall of Gabe Plotkin’s Melvin Capital – a timeline.


Good morning. Happy Thursday.

The Asian/Pacific markets posted solid losses. China did well, but Japan, Hong Kong, South Korea, India, Australia, Singapore and Thailand each dropped at least 1%. Europe, Africa and the Middle East are currently down big. The UK, Denmark, Poland, France, Germany, Greece, the UAE, South Africa, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Israel, Sweden and Saudi Arabia are down big. Portugal is up. Futures in the States point towards a moderate gap down open for the cash market.

————— BLOG: Details of Recent Stock Trades —————

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

Stories/News from Seeking Alpha…

Retail drubbing

Investors were already nervous after Walmart (WMT) raised the earnings alarm on Tuesday, but those fears were compounded yesterday as Target (TGT) upped the threat level by a few notches. Shares of the discount chain slumped 25% as Q1 results came in far from the bullseye, hammering the entire retail sector from Costco (COST) and Dollar Tree (DLTR) to merchandise haulers like Saia (SAIA) and Old Dominion Freight Line (ODFL). Things then spiraled into a broad market selloff, with the Dow Jones plunging almost 1,200 points, and the S&P 500 and tech-heavy Nasdaq tumbling 4% and 4.7%, respectively.

What happened? The big earnings miss (and halving of profits) at Target was driven by a shift away from higher-margin goods such as kitchen appliances and TVs to basics like food and toiletries. Margins felt pressure from the consumer pullback as shoppers got selective about spending on goods. In fact, operating margins were reported to be 5.3% during the quarter, falling heavily from the 9.8% seen in same period last year and below the company’s long-term goal of 8%.

Elevated fuel and freight costs also dented profits, with expenditures on those items now forecast to be “$1B higher this year” than Target management had previously estimated. Not expecting the swift change in consumer sentiment, the company further stocked up on too many discretionary categories, leading to a higher level of markdowns as quarterly inventory grew 43% Y/Y. “We did not anticipate the rapid shifts we’ve seen over the last 60 days,” CEO Brian Cornell declared, adding that Target would “have some of the same challenges in the second quarter” as it continues to set prices based on “value and affordability.”

Inflation nation: “Retailers are starting to reveal the impact of eroding consumer purchasing power,” explained Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, which has predicted a recession around year-end into early 2023. “The consumer’s ability to spend is eroding at a faster pace than it was a month or two ago. We think that pace is going to accelerate further.” (163 comments)

Blood in the streets

The market selloff (or bubble) is showing no sign of abating (or deflating) as U.S. stock index futures continue to stumble. Contracts linked to the Dow (DJI) and S&P 500 (SP500) fell another 1.6% overnight, while the Nasdaq (COMP.IND) slid an additional 2%. Worries are particularly intensifying with the S&P 500 benchmark index on the brink of a bear market, down more than 18% from the all-time high reached last November.

Commentary: “The other day we were down 19.9 on the S&P and about 27 on the Nasdaq,” legendary fund manager Jeremy Grantham told CNBC. “I would say that at minimum we are likely to do twice that and if we are unlucky, which is quite possible, we will do three legs like that and it may take a couple of years, as it did 2000. This bubble superficially looks very much like 2000, focused on U.S. tech, led by Nasdaq going to incredible highs.”

“We should be in a recession, mild or severe, is the question,” he continued. “But we should be in some sort of recession fairly quickly and profit margins, from a real peak, have a long way that they can decline. I think this kind of 2000 bubble that we had is dangerously likely to morph into the 1970s, where inflation is always a part of the background discussion and where growth rate starts to dwindle away.” Note that while Grantham’s resume includes predictions of the market crashes in 2000 and 2007, the permabear has been predicting epic crashes for much of the last decade, leading some to reference the famous saying “even a broken clock is right twice a day.”

Next moves? Forecasts for market direction through the end of 2022 span the gamut, but all agree that the Fed will have to fight off stagflation fears before things can turn around. “What’s clear to me is that there is no market put, and I think we’re all waking up to that fact now… we’re going to be meaningfully lower this year in stocks before we find a bottom,” said Guggenheim Partners Global Chief Investment Officer Scott Minerd. “We can climb out of this hole,” countered Marko Kolanovic, co-head of global research at J.P. Morgan. “There will be no recession this year, some summer increase in consumer activity on the back of reopening, China increasing monetary and fiscal measures.” (37 comments)

Tesla trouble

As the market continues to crater, many of the once-loved names on Wall Street are getting hammered, like tech darling and retail favorite Tesla (NASDAQ:TSLA). Sliding another 2.8% to $690/share in premarket trade – following a 7% plunge on Wednesday – the EV and clean energy pioneer is off 45% over the past six months. With sentiment souring, many key players are weighing in, which comes in addition to those fearful of Elon Musk’s devoted energies toward the chaotic $44B takeover of Twitter (TWTR).

Not helping the situation: S&P Dow Jones Indices gave Tesla the boot during the annual rebalancing of its S&P 500 ESG Index. “While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens,” commented Margaret Dorn, head of ESG indices, North America. “A few of the factors related to Tesla’s (lack of) low carbon strategy and codes of business conduct… A Media and Stakeholder Analysis identified two separate events centered around claims of racial discrimination and poor working conditions at Tesla’s Fremont factory, as well as its handling of the NHTSA investigation after multiple deaths and injuries were linked to its autopilot vehicles.”

“Ridiculous,” tweeted Tesla bull and once-disruptive fund manager Cathie Wood, while Elon Musk had his own fair share to say on his upcoming privately-owned social media platform. “A clear case of wacktivism. Exxon is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list! ESG is a scam. It has been weaponized by phony social justice warriors.”

Do something! Billionaire Leo Koguan, who claims to be the third largest individual shareholder of Tesla, is calling on the company to support its stock price via a buyback as shares continue to tumble. “Tesla must announce immediately and buy back $5B of Tesla shares from its free cash flow this year and $10B from its free cash flow next year, without affecting its existing $18B cash reserves with ZERO debt. Fremont, Shanghai, Austin and Berlin money printing machines are running in full speed, Tesla can invest in FSD, bot and factories while buying back its undervalued stocks. Shock and wake up few braindead analysts to their senses. Tesla is a Phoenix rising from the ashes.” (35 comments)

Operation Fly Formula

The baby formula shortage continues to make headlines after President Biden invoked the 1950 Defense Production Act in an effort to increase supply. The order will mandate manufacturers to “direct needed resources to infant formula manufacturers before any other customer who may have ordered that good.” The president is also allowing Defense Department air cargo contracts to fly in baby formula from overseas that meets U.S. health and safety standards.

Backdrop: Abbott Nutrition (NYSE:ABT), the nation’s largest baby formula manufacturer, shuttered its production facility in Sturgis, Michigan, in February following reports of contaminated formula that was linked to the deaths of at least two infants. The FDA reached an agreement with Abbott to reopen the factory on Monday, though it will take about two weeks to restart production and up to eight weeks for formula to arrive in stores across the country. Recent reports out of Memphis stated that two young children were even hospitalized after their parents couldn’t find the specific formula they needed (both kids have short-bowel syndrome).

Last night, the U.S. House passed a $28M emergency funding bill for the FDA to address the formula shortage and provide tighter oversight of the industry, though the fate of the legislation in the Senate isn’t yet clear. Meanwhile, Sen. Ron Wyden (D-Ore.), chairman of the Senate Finance Committee, has launched an investigation into the tax and stock buyback practices of Abbott (ABT), which may have spent additional funds on repurchases instead of factory improvements. Later today, FDA Commissioner Robert Califf will appear before a subcommittee of the House Appropriations Committee to answer questions regarding the nation’s baby formula shortage.

Thought bubble: The last two years have shown the downsides of globalization as the COVID pandemic and geopolitical threats upended the supply chain. On the other hand, there are also risks associated with protectionism, like in the case of U.S. baby formula, of which 98% is produced domestically by a trio of companies: Abbott (ABT), Gerber (OTCPK:NSRGY) and Mead Johnson (OTCPK:RBGLY). Import duties and restrictions have eliminated competition from Canada and Europe, while nearly two-thirds of all formula is purchased through federally-funded WIC, which only does business with these three domestic manufacturers.

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:00 Fed’s Barr Speech
10:00 Existing Home Sales
10:00 E-Commerce Retail Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:00 PM Fed’s Kashkari Speech
4:30 PM Fed Balance Sheet

What else is happening…

GameStop-plagued Melvin Capital wind downs, return cash to investors.

Prepare for $6.00 gasoline prices at the pump – J.P. Morgan.

Chevron (CVX) pulls application for California carbon capture project.

Could quants chase energy stocks higher? BlackRock’s (BLK) ETF rebalance.

Snowflake (SNOW) sinks despite inking data cloud deal with Stripe.

Kohl’s (KSS) loses two top executives amid hunt for a buyer.

Under Armour (UAA) CEO Patrik Frisk to step down, effective June 1.

Proxy fight: Hasbro (HAS) digs in as board battle heats up.

Juniper Networks (JNPR) hits the skids due to Cisco’s (CSCO) business pain.

Block (SQ) outlines prospects for Bitcoin hardware wallet, ASIC miners.


Good morning. Happy Wednesday.

The Asian/Pacific markets did well. Japan, Taiwan, Australia, New Zealand, Indonesia, Singapore and the Philippines posted solid gains. Europe, Africa and the Middle East are currently mixed. Denmark, Russia, Norway, Hungary, Austria and the Czech Republic are up; Poland, Germany, South Africa, Switzerland, the Netherlands and Sweden are down. Futures in the States point towards a moderate gap down open for the cash market.

————— BLOG: Details of Recent Stock Trades —————

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

Stories/News from Seeking Alpha…

Pushed into default

As the war drags on in Ukraine, Western nations are looking to add to their sanctions roster, which had started to dry up in recent weeks. The U.S. is now considering a full block to Russia’s ability to pay American bondholders, as the Kremlin navigates a web of sanctions by tapping domestic dollar reserves to make coupon payments (its funds are frozen in the West). Things could happen quickly if the Biden administration lets a temporary exemption expire next week that had allowed for payments that originate from non-U.S. accounts to be made through American financial institutions.

Snapshot: Some officials at the Treasury Department had previously argued that allowing Russia to pay its debt would further “drain its remaining valuable dollar reserves” that would otherwise be spent on funding the war of Ukraine. The thinking now is to intensify the pressure as Moscow looks to stave off a financial crisis via a set of emergency measures and strict capital controls. The ruble has already pared all the losses seen since the invasion to become the world’s best performing currency this year, while economic activity is improving as Russia continues to make revenue on gas flows to the EU.

“It continues to be our baseline scenario that a default will happen,” said Carlos de Sousa, emerging markets strategist at Vontobel Asset Management. “It is an interesting one,” added Matthew Vogel, head of sovereign research at FIM Partners. “The move would leave Russia as a debtor seemingly desperate to make payments, but not allowed to do so.”

Upping the ante: With a limited number of economic sanctions left in the pipeline, the West is also looking to strengthen the relationships of its armed forces. Finland and Sweden formally applied to join the NATO alliance today, breaking longtime defense doctrines of military neutrality. While NATO partner Turkey has voiced objections to their membership – citing ties to opposition groups that Ankara considers terrorists – the applications are expected to eventually get over the finish line with some concessions. (18 comments)

Powell transcript

“If we have to go past neutral, we won’t hesitate,” Federal Reserve Chair Jerome Powell reiterated during the Wall Street Journal’s Future of Everything Festival on Tuesday, without saying what he thinks the neutral interest rate is. Recall that the neutral rate is the point at which interest rates neither boost nor hinder economic growth. “We need clear and convincing evidence that inflation is coming down” before the Fed slows its pace of rate increases, he added, after consumer prices soared another 8.3% in the 12 months through April.

Quote: “The underlying strength of the U.S. economy is really good right now. The U.S. economy is strong, the labor market is extremely strong. It is still at very healthy levels. Retail sales numbers, the economy is strong. Consumer balance sheets are healthy. Businesses are healthy. The banks are well-capitalized. This is a strong economy. We think it is well-positioned to withstand less accommodative monetary policy and tighter monetary policy. Of course, we do monitor global events, and global events have been important to our economy. The war in Ukraine is something that has upset the global commodity picture, while also threatening the global world more broadly.”

“As a policymaker, the way I’m thinking about it right now, we are raising rates expeditiously to what we have been seeing is a more normal level, which is something that we will reach maybe in the fourth quarter. But it is not a stopping point. It is not a looking around point. We don’t know with any confidence where neutral is. We don’t know where tightening is. We just know in this market, higher inflation and very strong growth. What we are going to be looking at, meeting by meeting, data reading by data reading, is what is happening in the financial conditions, what is happening with the economy.”

Rip off the Band-Aid? When asked if the Fed isn’t moving fast enough in raising rates, Powell defended the central bank’s decision to tighten policy starting in March. “By the standards of central bank practices in recent years, we’ve moved about as fast as we have in several decades,” he said. As to why the Fed isn’t raising rates by more than 50 basis points per meeting, Powell referred to the importance of communicating to the public and the markets. “Monetary policy works through expectations,” he added, outlining that “financial conditions, overall, have tightened significantly.” (90 comments)

Keep those prices rollin’

First quarter results from Walmart (WMT) rattled the retail sector on Tuesday, with a slew of other chains set to report earnings this week. Investors were shocked to hear about Walmart’s 25% drop in earnings from January to April, sending the stock down more than 11% during the session for its biggest drop since 1987. Another black eye for the company was a major guidance cut, which now forecasts Q2 EPS and consolidated operating income to be “flat to up slightly” and full-year EPS to be “down about 1%.”

CEO Doug McMillon: “Bottom line results were unexpected and reflect the unusual environment. U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than expected. We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future.”

Sales at stores opened at least a year at Walmart’s U.S. division rose 3% Y/Y, below the Q4 clip of 5.6% and the 9.2% growth seen in Q3. Online sales only rose 1% Y/Y, slowing tremendously from the pandemic boost in early 2021, and down from the 8% advance in Q3. However, total revenues came in at $142B, up 2.4% Y/Y and beating consensus estimates on Wall Street.

Inflation winner? Bank of America looked past the guidance disappointment from Walmart to reiterate a Buy rating on the retailer. Analyst Robert Ohmes and team think the firm is well-positioned for high inflation compared to retail sector peers due to its ability to stand tall if consumers are more price sensitive. BofA also expects improving results through the balance of FY23 due to the impressive momentum with food/consumables sales, improving general merchandise momentum on more favorable weather, and shoppers expected to continue to favor WMT’s variety of value-priced offerings including private label in food and rollbacks in general merchandise. (61 comments)

Executive pay

Executive pay has come under the microscope in recent years, with top brass increasingly making hundreds of times the pay of the average worker. Awareness of the pay scale is now prompting some shareholders to take action, though others caution that inflated compensation is what is needed to secure talent in the current environment. According to the AFL-CIO annual Executive Paywatch report, the average S&P 500 CEO made 299 times the average worker’s pay in 2020, when factoring in salary, stock and bonuses.

Stinging rebuke: Only 31% of investors at JPMorgan’s (NYSE:JPM) annual shareholder meeting yesterday voted in favor of a $52.6M stock option award that was part of CEO Jamie Dimon’s 2021 compensation package. It was the first time the bank’s board lost such a vote since it was introduced in 2009, and was significantly lower than the previous weakest level of investor support, which came in at 61.4% in 2015. While the shareholder vote is non-binding, the bank’s board said it would take the feedback “seriously” and intended for the bonus to be a one-time event.

“The special award was extremely rare – the first in more than a decade for Mr. Dimon – and it reflected exemplary leadership and additional incentive for a successful leadership transition,” said JPMorgan spokesman Joe Evangelisti. He also noted that the package was designed to keep Dimon at the helm for another five years by pegging the award to the bank’s share price appreciation. Dimon would only be awarded if JPMorgan’s stock rose above $148.73 in the coming years (it’s currently trading at $122.18, but hit a high of $172.96 back in November).

Disapproval is spreading: Shares of Intel (INTC) climbed 3% on Tuesday after investors voted against the compensation of some of its top executives, including part of a $178.6M payout for CEO Pat Gelsinger. While the motion was also advisory and won’t take immediate effect, it does send a signal to those that are closely watching the semiconductor giant’s performance. Shareholders at AT&T (T) and General Electric (GE) also voted against hiking executive compensation packages this year following lackluster first-quarter results. (54 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Housing Starts and Permits
10:30 EIA Petroleum Inventories
1:00 PM Results of $17B, 20-Year Bond Auction
4:00 PM Fed’s Harker: Economic Outlook

What else is happening…

U.K. inflation hits 40-year high of 9%, fueled by food and fuel.

Home Depot (HD) unveils earnings beat and improved outlook.

Apple (AAPL) postpones plans to return to the office 3x per week.

China Eastern flight (CEA) black box points to intentional nosedive.

Layoffs are underway at Netflix (NFLX), though in small numbers so far.

Twitter (TWTR) loses three more senior employees, including two VPs.

Robinhood (HOOD) introduces self-custody wallet for crypto and NFTs.

Alibaba (BABA) gets boost as Chinese Vice Premier calms tech fears.

Pfizer (PFE) gets FDA nod to expand booster use in children aged 5-11.

Flight attendants’ union supports Spirit (SAVE)-Frontier (ULCC) merger.


Good morning. Happy Tuesday.

The Asian/Pacific markets did great. China, Hong Kong, South Korea, India, Taiwan, Thailand and the Philippines led. Europe, Africa and the Middle East are currently posting big gains. Denmark, Poland, France, Turkey, the UAE, Russia, Greece, South Africa, Finland, Hungary, Spain, the Netherlands, Italy, Portugal, Israel, Austria, Sweden and the Czech Republic are up 1% or more. Saudi Arabia is down. Futures in the States point towards a relatively big gap up open for the cash market.

————— BLOG: Recent Stock Trades —————

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

Stories/News from Seeking Alpha…

Another day, another tweet

Twitter (NYSE:TWTR) shares are on the move again this morning as Elon Musk confirmed that his $44B deal for the platform cannot move forward until he has more clarity on how many accounts are fake. The stock fell 3% to $36 in premarket trading on the news – down a total of 25% over the past week – with the completion of the transaction looking increasingly uncertain. In fact, the stock has lost all its gains since closing at $39.31 on April 1, which was the last session before the billionaire disclosed his minority stake in Twitter.

Latest tweet: “20% fake/spam accounts, while 4 times what Twitter claims, could be much higher,” wrote Musk. “My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.”

The reference was to a thread from Twitter chief Parag Agrawal, who also took to the “digital town square” on Monday, saying “the most advanced spam campaigns are sophisticated and hard to catch.” Estimates are based on “multiple human reviews (in replicate) of thousands of accounts” that could not be “performed externally, given the critical need to use both public and private information (which we can’t share).” Musk tweeted a poop emoji in response, adding, “so how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter.”

Fine print: Musk cannot legally walk away from the $44B acquisition unless he proves breach of contract, which in this case would be centered around misleading information (like disclosures about fake accounts or bots). If Musk simply abandons the deal, Twitter could sue him for billions in damages along with collecting the $1B breakup fee stipulated in the agreement. Instead, it looks like he is trying to renegotiate his takeover of Twitter, even commenting on Monday that a lower price wouldn’t be “out of the question” after putting the deal “temporarily on hold.” (27 comments)

Retail health

It might be the middle of May, but the retail stretch of the Q1 earnings season is on the calendar. Investors will be keeping a close watch this week on comments about runaway inflation and spending power, as well as higher shipping fees and other supply chain costs. Retail sales data for April will also be released at 8:30 a.m. ET, providing some clues to how well the average consumer is holding up after the Fed decided to embark on a monetary policy tightening cycle.

On deck: Home Depot (HD) and Walmart (WMT) unveil their first quarter results this morning, while Target (TGT), Lowe’s (LOW) and TJX Companies (TJX) will report tomorrow. The figures will come during a choppy trading environment for stocks, with many concerned that the economy could soon fall into a downturn.

“We see clear late-cycle indicators, and while the risk of economic growth contraction or recession has risen steadily through the first four-and-a-half months of this year, we are now beginning to cross over a probability level that makes recession a base case for the end of this year and beginning of next,” said Darrell Cronk of Wells Fargo Investment Institute.

Coming up: A lot will be on investors’ minds over the next few sessions as Fedspeak coincides with retail earnings. Fed Chair Jerome Powell is scheduled to take the stage at The Wall Street Journal’s Future of Everything Festival at 2 p.m. ET, while a number of speaking engagements from other central bank officials will take place through Friday. (8 comments)

Protectionist measures

Chicago wheat futures jumped by their 6% limit on Monday after India banned exports of the grain citing concerns over “food security.” The move has the potential to drive food prices even higher and add to the current inflationary environment, while further weighing on the tight global supply chain. Since its invasion on Feb. 24, Russia has sealed off Ukraine’s Black Sea ports to conquer its coast, hurting the county’s economy which is known as the “breadbasket of Europe” (together with Russia it accounts for a third of global wheat exports).

Backdrop: India had been helping to fill the wheat supply gap following a plentiful harvest in 2021 until it experienced a blazing heat wave in March and April. The searing temperatures prompted concerns about wheat supply and spiked domestic prices by 20%-40%. India even said the country’s wheat production dropped by 3M tons from 106M tons last year, but would allow exports covered by already issued letters of credit and grant support to countries seeking to meet food security needs.

“India is not a big wheat exporter, but the fact that a big country scrambles to secure food supply left the market anxious,” according to analysts at Danske Bank. There are also fears of a domino effect if other nations follow suit with their own export bans. Indonesia, which accounts for over half of global palm oil production, recently halted trade of the widely-used ingredient and feedstock.

First decline in four years: “Global wheat production [in 2022-23] is forecast at 775M tons, down 4M from the previous year,” according to Grain: World Markets and Trade report released last week by the USDA. “The largest cut to production is in Ukraine, which is projected to have a crop one-third smaller than the prior year with reduced harvested area and lower yields due to the ongoing war with Russia.” (14 comments)


It’s 13F season, where hedge funds with at least $100M in assets under management reveal their holdings. The flurry of filings gives investors a chance to see what they bought and sold during the quarter, including long positions, and call and put options, though shorts aren’t disclosed on the statements. Besides detailing where the “smart money” is being put to work, some may seek out vulnerabilities they can profit from… remember last year’s GameStop saga? It all started when a Reddit user flagged Melvin Capital’s heavy puts on GME, which eventually spiraled into the notorious short-squeeze enabled by WallStreetBets.

Where are the big guys putting their money? With the form required to be filed within 45 days of the end of a calendar quarter, hedge funds usually wait until the last minute to publish their holdings so as not to let the public know what they are doing. Check out some of the top headlines on Seeking Alpha:

Berkshire Hathaway takes 2.5% stake in Citi in Q1, exits Wells Fargo

Gates Foundation exits Alphabet, pares Microsoft, Walmart, Berkshire holdings

Druckenmiller buys a quarter billion worth of oil and gas stocks during Q1

Dalio’s Bridgewater invests in Berkshire Hathaway, exits Tesla in Q1

Dan Loeb’s Third Point adds stakes in CSX, Alcoa; exits Alphabet, Upstart

Tepper’s Appaloosa bumps up Uber stake in Q1, exits Alliance Data

ValueAct adds stake in TopBuild, cuts stake in Trinity Industries

Paul Singer’s Elliott Management exits Santander Consumer, Dell in Q1

Soros Fund Management buys Zynga, exits Activision in Q1

Carl Icahn trims Delek stake, exits Occidental, adds International Flavors & Fragrances

While the transactions can be helpful, it’s important to remember that 13Fs don’t tell the whole story about what funds are doing. As noted above, bearish bets like short-selling are not included on the statement, so visible long core holdings could actually be hedges against those positions. In some instances, the reports can also reflect investment decisions made months ago, since they are only filed up to 45 days after the quarter is complete.

Go deeper: The recent stock market selloff has battered many of the hedge funds listed above, especially those that have bet heavily on high-flying tech shares. Tiger Global, known for making aggressive big bets in the sector, even lost a reported $17B since the beginning of the year, marking one of the biggest dollar declines for any hedge fund in history. The results have been “very disappointing” as “markets have not been co-operative given the macroeconomic backdrop,” according to Tiger Global, which slashed its holdings in companies like Netflix (NFLX), Zoom (ZM), DoorDash (DASH), Roblox (RBLX) and Robinhood (HOOD). (1 comment)

Today’s Economic Calendar
8:30 Retail Sales
9:15 Industrial Production
9:15 Fed’s Harker: “Healthcare as an Economic Driver”
10:00 Business Inventories
10:00 NAHB Housing Market Index
2:00 PM Jerome Powell Speech
2:30 PM Fed’s Mester: “Inflation and Monetary Policy: Parallels to and Differences from the 1970s”
6:45 PM Fed’s Evans: Monetary Policy

What else is happening…

Real rates need to get back to zero within the next year – Fed’s Williams.

Ruble accounts are opened as EU softens its stance on gas supplies.

Boeing (BA) customer China Southern (ZNH) pulls 737 MAX from plans.

Uber (UBER) includes charter buses for its U.S. transport lineup.

Abbott (ABT), FDA agree on steps to reopen baby formula plant.

Truth Social (DWAC) stresses dependence on Trump in SEC filing.

Microsoft (MSFT) makes huge compensation boost in effort to keep top talent.

Amazon (AMZN) van delay? Rivian (RIVN) unveils seat supplier lawsuit.

Paul Ryan and the Romneys get into oil and gas business via SPAC.

PayPal (PYPL) offers to buy up to $2B of notes in debt tender offer.


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

The Asian/Pacific markets were quiet (a few markets were closed) India and the Philippines did well; China was weak. Europe, Africa and the Middle East are currently mixed. Denmark, Russia, Finland, Portugal and Austria are up; Turkey, Germany and Saudi Arabia are down. Futures in the States point towards a flat open for the cash market.

————— BLOG: Recent Stock Trades —————

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

Stories/News from Seeking Alpha…

Going hostile

JetBlue (NASDAQ:JBLU) is launching a hostile takeover attempt for discount carrier Spirit Airlines (NYSE:SAVE) after the latter rejected its $3.6B offer in favor of an existing deal with Frontier Airlines (NASDAQ:ULCC). The move will see JetBlue appeal directly to Spirit’s shareholders by launching a $30 tender offer for their shares, but it would be willing to pay its initial bid of $33 if Spirit comes back to the negotiating table and provides key data that has been requested. SAVE is up 18% to $20/share on the news in premarket trading.

Bigger picture: Both companies have previously accused each other of acting in bad faith, which has held up the discussions. “I have wondered whether blocking our deal with Frontier is, in fact, their goal,” Spirit CEO Ted Christie announced on the company’s earnings call several weeks back, saying he can’t imagine getting regulatory approval for the deal when JetBlue faces antitrust scrutiny over an agreement with American Airlines and overlaps in cities like Orlando and Fort Lauderdale. In response, JetBlue has called the concerns a “smokescreen” and pointed to historical relationships between top brass at Spirit and Frontier Airlines.

The tug of war comes amid a drive to consolidate in the budget airline sector. Any deal which would create the fifth-largest U.S. carrier after United Airlines (UAL), Delta (DAL), American (AAL) and Southwest (LUV). JetBlue also attempted to buy Virgin America in 2016, but lost a contest to Alaska Air Group (ALK).

Go deeper: A serious pilot shortage in the U.S. is prompting many airlines to clamber for solutions, and M&A may be one such answer. The COVID pandemic intensified the situation by slowing training and hiring, as well as triggering a wave of early retirements. Other ideas being considered are raising the mandatory airline pilot retirement age to 67, relaxing training programs, or reducing flight-hour requirements before joining a domestic carrier. (1 comment)

Recession risk

In some research notes that made waves over the weekend, Goldman Sachs (GS) lowered its market forecast for the year, but that baseline assumes no recession. The equity strategy team led by Jan Hatzius cut its end-2022 target for the S&P 500 (SP500) to 4,300 from 4,700, noting investors have been “mauled” since the Jan. 3 peak for the index. However, if there is a recession, it would push the S&P down to 3,600, which would be an 11% drop from current levels.

Commentary: “Our economists assign a 35% probability of recession in the next two years,” added strategist David Kostin. “However, if by year-end the economy is poised to enter a recession in 2023, a combination of reduced EPS estimates and a wider yield gap would drive a lower index level. If the Fed is forced to hike by more than our economists expect and real rates rise to 1%, similar to the peak reached during the last cycle in 2018, our macro model suggests that higher rates will more than offset the lower yield gap. In this scenario, the forward P/E would equal 16x, the lowest level since 2020.”

Lloyd Blankfein, former CEO and senior chairman at Goldman Sachs, had more to say on the subject, during an interview on CBS’s Face the Nation. The likelihood of a U.S. downturn is a “very, very high risk factor,” but a recession is “not baked in the cake” and the Fed has “very powerful tools” to narrowly avoid it. “If I were running a big company, I would be very prepared for it. If I were a consumer, I’d be prepared for it,” he continued.

Still not done: With equity “valuations now more attractive, equity markets so oversold and rates potentially stabilizing below 3%, stocks appear to have begun another material bear market rally,” according to Morgan Stanley’s (MS) Mike Wilson. “After that, were main confident that lower prices are still ahead. In S&P 500 terms, we think that level is close to 3,400, which is where both valuation and technical support lie.” The bear market will last until either valuations fall to 14-15x “that discount the kind of earnings cuts we envision, or earnings estimates get cut.” (178 comments)

NATO expansion

Joining Finland in its recent quest to join NATO, Sweden has broken a nearly 200-year policy of military neutrality formed in the aftermath of the Napoleonic Wars. The governing Social Democratic Party intends to approve its application to join the alliance today, but would express reservations against the deployment of nuclear weapons and foreign bases on their soil. Meanwhile, Russia has warned that Finland and Sweden would face consequences for their decisions, “both of a military-technical and other nature,” and even cut off all electricity exports to Finland in response (those accounted for about 10% of the country’s consumption in April).

Quote: “The issue at hand is whether military nonalignment will keep serving us well?” Swedish Prime Minister Magdalena Andersson declared. “Europe, Sweden and the Swedish public are living a new and dangerous reality. We’re now facing a fundamentally changed security environment in Europe.”

Public opinion was strongly against joining NATO until the Russian invasion on Ukraine on Feb. 24, when support for membership flipped almost overnight. As mentioned last week, the military buildup is likely to be another boon for stocks like Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC), which have had a phenomenal year on the back of the increases in defense spending. All current 30 NATO nations have agreed to spend at least 2% of their GDPs on defense by 2025, and while only a third of those members have met the threshold, the latest developments should accelerate a drive for achieving their targets.

Wild card: Turkey, which has been a NATO member since 1952, has raised concerns about the two countries joining the alliance, alleging they support the Kurdistan Workers’ Party, or PKK, which Ankara considers terrorists. Turkey particularly accuses Sweden of not doing enough to crack down on PKK financing and recruitment in the country, and condemns the meetings of politicians with representatives of PKK-linked Syrian Kurdish militants that are fighting in Syria. While the grievances could complicate and delay the accession process, Finland and Sweden’s applications are still expected to get over the finish line, albeit with possible concessions that may be wrung out of NATO allies. (10 comments)

Lockdown fallout

Fresh figures out of China show how its zero-COVID policy is weighing on the country as coronavirus controls continue to bite its economy. Retail sales fell 11.1% on year in April, manufacturing slid by 4.6%, industrial output dropped 2.9%, while fixed-asset investment rose 6.8% in the January-April period (slowing from a 9.3% pace in the prior quarter). Meanwhile, the unemployment rate across China’s 31 largest cities climbed to a new high of 6.7% in April as hundreds of millions of people remained under full or partial lockdowns.

Commentary: “Although COVID case numbers have declined markedly from the peak in mid-April, the unwinding of lockdowns has been extremely slow, due partly to the caution among local government officials,” noted Ting Lu, chief economist of China at Nomura. “Therefore, we believe local lockdowns will still severely impact the production-end of the economy in May and view a quick turnaround as all but impossible.”

The Chinese government might be thinking along similar lines as it preps a series of measures to stabilize the economy. Over the weekend, the PBOC cut mortgage base rates for new lending to first-time buyers from 4.6% to 4.4% to support one of the nation’s most important economic drivers. A liquidity crisis that continues to plague China’s highly leveraged real estate developers has triggered a wider property slowdown, with the ailing housing market spelling trouble for domestic growth.

Coming to an end: The strict lockdowns and containment measures can’t last forever, especially when risking increasing backlash among the population. COVID-hit Shanghai just announced a gradual reopening of businesses such as shopping malls and hair salons following a drop in case numbers in the Chinese financial and manufacturing hub. That could give some hope to Chinese investors, as well as those concerned about the deep ramifications for the global supply chain. (4 comments)

Today’s Economic Calendar
8:30 Empire State Mfg Survey
8:55 Fed’s Williams Speech
4:00 PM Treasury International Capital

What else is happening…

Elon Musk says Twitter (TWTR) accused him of violating NDA.

Ford (F) sells another 7M shares of EV maker Rivian (RIVN).

McDonald’s (MCD) starts the process of selling its Russian business.

Soaring oil prices see Saudi Aramco (ARMCO) post record profits.

Big Oil wins shareholder support as energy crisis exceeds climate crisis.

Why does AMD (AMD) keep gaining share over Intel (INTC)?

Pfizer (PFE) to delay EU vaccine deliveries as bloc seeks updated COVID shots.

Videogame sales fall 8% in April, though consoles rebound.

India suspends wheat exports, citing threats to food security.

Bitcoin ‘not immune’ from stock market volatility – Morgan Stanley.


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