Before the Open (Jun 21-Jun 24)

Good morning. Happy Friday.

The Asian/Pacific markets did great. Japan, China, Hong Kong, South Korea, Taiwan, Australia and the Philippines led with solid gains. Europe, Africa and the Middle East are currently doing well too. The UK, Denmark, Poland, France, Germany, Switzerland, Spain, the Netherlands, Italy, Portugal and Austria are up while Russia is down. Futures in the States point towards a positive open for the cash market.

————— BLOG: Signs Inflation is Subsiding —————

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

Stories/News from Seeking Alpha…

Up in smoke

The FDA is ordering JUUL products off the shelves in the U.S., dealing a major blow to the once high-flying company whose products have “played a disproportionate role in the rise in youth vaping.” The official market denial order restricts the sale of its remaining Virginia tobacco and menthol-flavored pods, and only pertains to the commercial distribution, importation and retail sales of these products. That means no enforcement for individual consumer possession, or the use of JUUL and other vaping accessories.

Press release: “After reviewing the company’s premarket tobacco product applications (PMTAs), the FDA determined that the applications lacked sufficient evidence regarding the toxicological profile of the products to demonstrate that marketing of the products would be appropriate for the protection of the public health. As with all manufacturers, JUUL had the opportunity to provide evidence demonstrating that the marketing of their products meets these standards. However, the company did not provide that evidence and instead left us with significant questions.”

Marlboro owner Altria (MO) bought a 35% stake in Juul for $12.8B in late 2018 to diversify its portfolio and join forces with a company that was threatening its traditional cigarette business. Things didn’t go so well, with the FDA banning flavored e-cigs in 2020, prompting JUUL’s market share to tumble from 70% to 42%, and then to 36% as of March 2022. Earlier this year, Altria valued its JUUL stake at $1.6B, an eighth of its original investment, and that’s before the FDA threatened its entire U.S. business (Altria shares are down more than 20% since the acquisition).

Commentary: Bank of America analyst Lisa Lewandowski expects the company to appeal the FDA decision since key competitors like British American Tobacco (BTI) and Japan Tobacco (OTCPK:JAPAY) have been granted U.S. market access. Additionally, Imperial Brands’ (OTCQX:IMBBY) blu product is presently appealing a market denial order akin to the one reportedly facing JUUL. Even if filed, such legal action could get drawn out and will leave products off of store shelves for a long period of time. (86 comments)

High volume

Friday might witness one of the heaviest trading days of the year as FTSE Russell (OTCPK:LDNXF) completes the annual rebalancing of its indexes. These include market cap benchmarks like the Russell 2000 (IWM) and Russell 3000 (IWV), as well as other indexes based on investment styles, such as the Russell 1000 Growth (IWF) and Russell 1000 Value (IWD). The popular products are benchmarked to nearly $12T of investor funds, spanning those managed by hedge funds and 401(k) providers to other institutional fund managers and even retail investors. The frenzy of buying and selling saw total trading volume on the day of the 2021 reconstitution top 16B shares, making it last year’s busiest trading session.

How it works? Given the volume and number of stocks involved, FTSE Russell takes some steps ahead of time to be transparent about coming movements. The process starts during “Rank Day” in May – which determines the market cap bands for a stock to be eligible for inclusion – and is followed up with preliminary lists in subsequent weeks, before the actual rebalancing occurs on the fourth Friday of June. Funds and institutional investors that track the various benchmarks are forced to scoop up or ditch stocks that are added or removed from the indexes, and it all takes place just moments before the market closes (some traders even seek to trade any price dislocations that could result from the readjustment).

“We’ve found that fully reconstituting the indexes annually, plus adding eligible [initial public offerings] quarterly and applying daily adjustments maintains the representative nature of the Russell U.S. Indexes while avoiding the unnecessary turnover that a more frequent rebalancing could cause,” said Catherine Yoshimoto, director of product management for the Russell U.S. Indexes.

Interesting times: Popular “growth” players in tech, like Meta (META), Netflix (NFLX) and PayPal (PYPL), are set to move to the Russell 1000 Value Index, which is typically a domain reserved for companies trading at a discount to their fundamentals. That’s due to the recent price drops of the stocks, which are down 50-70% YTD. Meanwhile, the energy sector is set to see a heavier weighting in Russell growth indexes, with related shares being part of one of the only industries to outperform in 2022. “Growth managers that have not had to pay attention to energy for several years, now have to pay attention to the sector,” explained Steve DeSanctis, equity strategist at Jefferies.

Ready, aim, fire!

Traders pulled the trigger on Smith & Wesson (SWBI) on Thursday as shares of the firearms manufacturer went on a wild ride. The stock climbed nearly 10% following a favorable Supreme Court ruling on gun rights, but then fell back 2% AH after reporting quarterly earnings. Sales slumped 31% in FQ4 from a year ago, returning to more normalized levels of demand following the pandemic surge, though the shares pared some of the slight losses after S&W hiked its quarterly dividend by 25%.

Over in Washington: The Supreme Court struck down a restrictive century-old gun law enacted in New York, ruling that the state’s system for issuing concealed-weapons permits – in which applicants must demonstrate “proper cause” and “good moral character” – violates the Second Amendment. The 6-3 decision and majority opinion authored by Justice Clarence Thomas marks the widest expansion of gun rights since 2010, when the high court applied a 2008 ruling nationwide that established individual rights of armed self-defense within the home. The latest ruling could challenge similar laws in at least eight other states and the D.C., where authorities wield significant power over issuing concealed carry permits.

“Because many people face a serious risk of lethal violence when they venture outside their homes, the Second Amendment was understood at the time of adoption to apply under those circumstances,” Justice Alito wrote in a concurring opinion. “The Court’s exhaustive historical survey establishes that point very clearly, and today’s decision therefore holds that a State may not enforce a law, like New York’s Sullivan Law, that effectively prevents its law-abiding residents from carrying a gun for this purpose.” He also explicitly added that Judge Breyer’s lengthy invocation of gun death statistics was irrelevant to the court’s decision.

That’s not all: A bipartisan package of gun safety measures passed the U.S. Senate late Thursday, weeks after mass shootings in Uvalde and Buffalo that killed more than 30 people, including 19 children. The $13B bill would toughen background checks for the youngest firearm buyers, beef up penalties on gun traffickers and close the so-called boyfriend loophole. It would also help states enact red flag laws and fund local programs related to school safety, mental health and first responder training. (94 comments)

EU candidate status

It has now been four months since Vladimir Putin sent Russian forces across the border into Ukraine, triggering the biggest conflict in Europe since the end of World War Two. Fighting continues to rage in the eastern Donbas region, where Putin laid claim to two independent proxy states in February – the Luhansk and Donetsk people’s republics. Looking to avoid encirclement, Ukraine early Friday ordered its troops to withdraw from their remaining foothold in Severodonetsk, a key city of 100,000 that served as the administrative center of Ukrainian-controlled parts of Luhansk.

Snapshot: While Ukraine still holds more than a third of the Donetsk region, including the cities of Slovyansk and Kramatorsk, a capture of Severodonetsk and neighboring Lysychansk would prompt Moscow to announce the full “liberation” of at least one of the two people’s republics. Putin shifted military efforts there following setbacks in seizing Kyiv, and a failed attempt to install a pro-Russian government in the Ukrainian capital. Moscow also continues to occupy most of the country’s southern regions as it seeks to form a land bridge between mainland Russia and the Crimean Peninsula.

As the war drags out, Ukraine is beseeching Western nations for heavy weapons, but is also angling for stronger ties with the European Union to “preserve its freedom and unity.” EU leaders last night granted “candidate status” to Ukraine and Moldova (another former Soviet state), paving the way for the two countries to potentially join the bloc. “It is a decision for freedom and democracy and puts us on the right side of history,” European Parliament President Roberta Metsola said before the final decision.

Next steps: Joining the EU is a process that usually takes years, or even decades, but Ukrainian President Volodymyr Zelenskyy is hoping to fast-track the negotiations. Countries have to meet strict criteria, from economic stability and a functioning market economy to rooting out corruption and respecting human rights. The most recent nation to join the EU was Croatia in 2013, which took nine years to move from candidate status to membership upon getting approval from all 27 EU governments.

Today’s Economic Calendar
6:15 Fed’s Bullard Speech
10:00 New Home Sales
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
4:00 PM Fed’s Daly Speech

Companies reporting earnings today »

What else is happening…

All 34 banks in Fed’s stress test would weather a severe recession.

FedEx (FDX) fueled higher by in-line earnings and strong guidance.

Exodus: Ken Griffin’s hedge fund Citadel is leaving Chicago for Florida.

Energy stocks slide as inventories highlight demand destruction worry.

Cisco (CSCO), Nike (NKE) are completely exiting the Russian market.

Freeport-McMoRan (FCX), copper miners crushed on rising recession fears.

Tesla (TSLA) partners with PG&E (PCG) on virtual power plant in California.

Netflix (NFLX) confirms talks for ad-supported service with ‘all’ the partners.

Intel (INTC) says Ohio expansion may be scaled back as CHIPS Act stalls.

United (UAL) cuts flights out of Newark to improve on-time performance.


Good morning. Happy Thursday.

The Asian/Pacific markets were split, with big movers in both directions. China, Hong Kong, India and New Zealand did well while South Korea, Taiwan and the Philippines did poorly. Europe, Africa and the Middle East are currently mostly down. Germany, the UAE, Finland, Hungary, the Netherlands, Austria, Sweden and the Czech Republic are down notably. Futures in the States point towards a down open for the cash market.

————— BLOG: Oil Will Tells Us When the Market Crash is Coming —————

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

Stories/News from Seeking Alpha…

Stressed out

Later this afternoon, the Federal Reserve will release the results of its 2022 bank stress tests, which were established under Dodd-Frank regulations following the global financial crisis. All 34 U.S. banks with over $100B in assets will be checked against a series of doomsday scenarios to ensure their balance sheets can withstand a hypothetical downturn. The results – which will particularly focus on stress in commercial real estate and corporate debt markets – come amid growing fears of a looming recession, meaning an economic spiral may not be all that hypothetical.

Snapshot: In the first session of a two-day testimony on Capitol Hill, Fed Chair Jerome Powell emphasized that the central bank plans to keep raising interest rates until it sees clear proof that inflation is slowing, even if that means causing a recession. “It’s not our intended outcome at all, but it’s certainly a possibility,” he told the Senate Banking Committee. “We are not trying to provoke and do not think we will need to provoke a recession, but we do think it’s absolutely essential” to bring down price pressures. Stocks edged lower following the testimony, while U.S. equity index futures wavered between gains and losses overnight.

“The events of the last few months around the world have made it more difficult for us to achieve what we want,” Powell continued. “We’ve never said it was going to be easy or straightforward.” The messaging is a notable departure from his stance on March 2, when Powell stated it is “more likely than not that we can achieve what we call a soft landing.” The Fed has already raised rates three times since then, and most recently upped the federal-funds benchmark by 75 basis points in the largest hike since 1994.

More on stress tests: The annual health checks dictate the required size of each bank’s “capital buffer,” which refers to the extra cushion of capital that’s set aside on top of the regulatory minimum needed to support daily business. The checks also determine how much lenders can return to shareholders in the form of share buybacks and dividends (which could only be announced from June 27). This year’s tests might be harder because the actual economic baseline is healthier, while spikes in unemployment or a drop in GDP would be felt more acutely. However, all of the banks are still expected to pass, but could be told to set aside slightly more capital than last year. (10 comments)

Sounding the alarm

A troublesome energy crisis is escalating across the globe, as a myriad of factors continues to impact flows, output, supply and production. The latest warning bell went off this morning as Germany announced it would move to the so-called “alert stage” of its emergency gas plan, seeing a high risk of long-term gas supply shortages. The crunch has been exacerbated by sanctions and Russia’s Vladimir Putin turning off the taps, and comes amid a similar situation in the U.S. that saw President Biden release a four-point plan to lower prices at the pump (including a federal gas tax holiday).

Quote: “This will affect industrial production and become a major burden for many consumers. It’s an external shock,” German economy minister Robert Habeck declared. “We will defend ourselves against this, but it will be a rocky road that we as a country now have to walk. Even if you don’t really feel it yet, we are in a gas crisis.”

Germany announced the first phase of its emergency gas plan on March 30, when the Kremlin’s demands for payment in rubles prompted Germany to prepare for a potential cutoff in supply. Local suppliers were subsequently invited to advise the government as part of a crisis team and Habeck called on consumers to reduce their consumption. While the second phase doesn’t call for state intervention measures, it could trigger a change in the law that passes along price increases to industry and households.

Outlook: Over the past week, Moscow has slashed capacity to Germany via Nord Stream 1 by 60%, leading to outsized moves for gas contracts as the country attempts to refill its storage before wintertime. If Germany ups its gas plan to the third and last “emergency” level, the government would assume control over the entire nation’s distribution network. Germany has already reopened several coal-fired power stations to shore up supply, which could dent European support for climate efforts or push Ukraine into an unfavorable settlement with Russia. (3 comments)

Metaverse spending

How will the economy work in the metaverse? Meta (META) CEO Mark Zuckerberg addressed some of those questions during an interview with Mad Money’s Jim Cramer, emphasizing a big role for creators and their digital goods. That compares to previous strategies executed by Zuckerberg, in which he tried to build out connected services like Facebook, Instagram, Messenger and WhatsApp that were only followed by company-orchestrated monetization.

Quote: “We hope to basically get to around a billion people in the metaverse doing hundreds of dollars of commerce, each buying digital goods, digital content, different things to express themselves, so whether that’s clothing for their avatar or different digital goods for their virtual home or things to decorate their virtual conference room, utilities to be able to be more productive in virtual and augmented reality and across the metaverse overall,” he said on the call.

Last Friday, Meta launched a digital clothing store for the metaverse, where users can scoop up designer apparel for their virtual avatars. While initial brand partners included Balenciaga, Prada and Thom Browne, the store also envelops the creator side of the platform, with a mission to be open marketplace where developers can make and sell outfits. Earlier this month, Meta (previously called Facebook) even changed its long-held ticker symbol of “FB” to “META,” as it sheds its identity as a pure social media provider.

Timeline: “Quest 2 has been a hit,” continued Zuckerberg. “I’ve been really happy with how that’s gone. It has exceeded my expectations. But I still think it’s going to take a while for it to get to the scale of several hundreds of millions or even billions of people in the metaverse, just because things take some time to get there. So that’s the north star. I think we will get there. But, you know, the other services that we run are at a somewhat larger scale already today.” (15 comments)

Getting involved?

The U.S. continues to be on edge before some upcoming Supreme Court rulings, especially following the leak of a draft decision in May to overturn Roe v. Wade. No one really knows the exact date that a ruling will come down, but today and tomorrow are marked as “opinion issuance days” on the high court’s calendar. The secrecy offers some benefits to justices by making protests outside the Supreme Court more difficult to organize, while rulings are less likely to impact the stock market if the case is financial in nature.

Snapshot: More than a dozen opinions will need to be issued before the court departs for its traditional summer break, which usually happens by late June or early July. The court also has a history of announcing its most important rulings of the term last, which might center on Roe or other controversial decisions surrounding religious freedoms, gun rights and asylum-seeking migrants. PR experts are divided on how businesses should respond to the latest happenings and the CEOs that listen to them are taking differing approaches as well.

Many companies have so far been quiet on the draft ruling, like Apple (AAPL), Amazon (AMZN), Citi (C), Mastercard (MA), Microsoft (MSFT), Netflix (NFLX) and Starbucks (SBUX), which have instead chose to offer their U.S.-based employees travel reimbursements for out-of-state abortions. The messaging is intended to show support without touching the hot topic, though a handful of firms are urging them to publicly take a stand. “Given what is at stake, business leaders need to make their voices heard and act to protect the health and well-being of our employees. That means protecting reproductive rights,” Levi Strauss & Co. (LEVI) declared, while similar statements were made at Match Group (MTCH) and Yelp (YELP).

Go deeper: There aren’t too many companies that have publicly supported the draft opinion and many PR experts caution that it is best when Corporate America steers clear of divisive political issues (at least as much as they can). Most businesses have taken this approach, especially with the “Don’t Say Gay” tussle between Disney (DIS) and Florida’s legislature remaining fresh in the minds of corporations nationwide. “There is no upside in speaking out alone on this,” added Jeffrey Sonnenfeld, professor and senior associate dean of the Yale School of Management. “Nobody wants to have 40% of the country mad at them.” (24 comments)

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Current Account
9:45 PMI Composite Flash
10:00 Powell testifies before House Financial Services Committee
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
11:00 Kansas City Fed Mfg Survey
4:30 PM Fed Balance Sheet

What else is happening…

Apple’s (AAPL) Cook says ‘stay tuned,’ teasing oft-rumored AR headset.

Altria (MO) slumps with FDA expected to remove Juul e-cigs from U.S. market.

Crypto bailouts: BlockFi secures credit line from Sam-Bankman Fried’s FTX.

Nikola (NKLA) founder is charged with another crime ahead of trial.

JPMorgan Chase (JPM) to lay off hundreds as mortgage rates climb.

Tesla (TSLA) halts production in Shanghai to upgrade Model Y line capacity.

Factories in Berlin and Austin losing billions of dollars – Elon Musk.

FDA reports another death linked to Abbott’s (ABT) baby formula.

Buffett (BRK.B) adds to Occidental (OXY) stake, buying another 9.6M shares.

Kohl’s (KSS) plunges on report that bidder may lower offer to $50/share.


Good morning. Happy Wednesday.

The Asian/Pacific markets suffered big losses. China, Hong Kong, South Korea, India, Taiwan, Malaysia and the Philippines each dropped more than 1%. Europe, Africa and the Middle East are currently mostly down. The UK, Denmark, Poland, France, Germany, the UAE, South Africa, Finland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Austria, Sweden and Saudi Arabia are down 1% or more. Futures in the States point towards a big gap down open for the cash market.

————— BLOG: Oil Will Tells Us When the Market Crash is Coming —————

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

Stories/News from Seeking Alpha…

Goodbye plastic

Canada is moving forward with a comprehensive plan to ban “harmful” single-use plastics, in a sweeping effort to fight pollution and keep them out of the environment. Most plastic bags, disposable cutlery and plastic straws would fall under the new ban, as well as stir sticks, cups and six-pack rings that hold cans together. Few exceptions have been made for medical needs and accessibility reasons, or other recognized specific cases.

Timeline: The order will phase in over the next several years, starting with a ban on the manufacture and import of single-use plastics from December 2022. Sales of the items will be prohibited the following year, while the measure will put an end to the export of Canadian plastics by the end of 2025. “Over the next 10 years, this ban will result in the estimated elimination of over 1.3 million tons of plastic waste and more than 22,000 tons of plastic pollution,” tweeted Prime Minister Justin Trudeau. “That’s equal to a million garbage bags full of litter.”

Banning single-use plastics will be a complex task given that they are abundant, convenient and cheap. Businesses that heavily rely on the material will also need to come up with new solutions, like the restaurant sector, where plastic takeout containers, cutlery and bags are the norm. Many problems have also plagued the global supply chain since the pandemic, so tracking down plastic alternatives and procuring them can be a daunting task especially for industries where margins are not all that high.

Go deeper: Other countries which have put in place various bans on single-use plastic include Chile, the U.K. and the European Union. However, Canada’s neighbor to the south, the United States, ranks as the world’s leading contributor of plastic waste by generating about 287 pounds of plastics per person annually. Some piecemeal efforts have been put in place by some states like New York and California, but the most action taken at the federal level has been to increase the U.S. recycling rate to 50% by 2030 and the phasing out of single-use plastic products in national parks and other public lands by 2032. (18 comments)

Rally fizzles

That didn’t last long. U.S. stocks pulled off a strong rebound yesterday, with the S&P 500 advancing 2.5% for its strongest showing since late May. However, persistent worries about inflation and a potential recession still remain a concern for investors, leading many to describe the rally as a “dead cat bounce.” Bear market blues quickly returned overnight, with the futures contracts linked to the S&P benchmark index falling 2%, meaning stocks have a very good chance of erasing all of Tuesday’s gains during today’s session. Bitcoin also fell under the key $20,000 level again, tumbling as much as 6% to $19,949.

Commentary: “It’s conceivable to expect continued market volatility until it becomes clear that the Fed is not going to force the U.S. economy into contraction in order to tamp down persistent levels of inflation,” noted David Chao, global market strategist at Invesco.

Fed Chair Jerome Powell will be back in the hot seat on Wednesday as he delivers his semi-annual monetary policy testimony before the Senate Banking Committee. Many will be looking for further clues about the current economic environment after the central bank raised benchmark interest rate by 75 basis points for the first time in nearly three decades. Powell also laid out an aggressive path of coming rate increases to cool red-hot inflation, though it will be a careful balancing act as economic growth slows and puts financial pressure on many Americans.

Outlook: President Biden on Monday reiterated that a U.S. recession isn’t “inevitable” following a conversation with former Treasury Secretary Larry Summers, but the high-profile economist continued warning about the risks of stagflation at a speech later in London. “We need five years of unemployment above 5% to contain inflation – in other words, we need two years of 7.5% unemployment, or five years of 6% unemployment, or one year of 10% unemployment,” he declared. “There are numbers that are remarkably discouraging relative to the [Fed] view. Is our central bank prepared to do what is necessary to stabilize inflation if something like what I’ve estimated is necessary?” (13 comments)

‘Unlocking our full potential’

Kellogg (K) is the latest storied food producer to split up its 116-year-old business by announcing a break into three separate companies. One firm would consist of plant-based products, like MorningStar Farms and Gardenburger. Another would take its traditional cereal products, such as Frosted Flakes, Froot Loops and Rice Krispies. The final grouping would include the current company’s global snacking brands, like Cheez-It, Pringles, and Pop-Tarts.

Strategic rationale: An accompanying document explained that the newly-formed global snacks business is anticipated to be a “higher growth company” compared to the combined unit, with scale in emerging markets being a significant growth lever left to pull. Kellogg is also seeking to stabilize its cereal business that has declined in recent years, with a team that could dedicate a specific focus on the “continued turnaround.” A spinoff of its plant-based foods division would also create a new pure play to rival industry incumbents like Beyond Meat (BYND).

“Bigness for bigness sake doesn’t make a lot of strategic sense,” CEO Steve Cahillane declared, saying it was the “next step in unlocking our full potential.” Following the split, Cahillane will head the $11.4B snacks unit, which accounted for 80% of Kellogg’s net sales last year.

Commentary: Analysts applauded the move, with Kellogg’s stock finishing the session 2% higher on Tuesday. “The breakup will allow each entity to focus on their distinct strategic priorities with financial targets appropriate for the profile of each business,” wrote Stifel strategist Christopher Growe. UBS analyst Cody Ross largely reinforced this view, pinpointing prospective comparisons with Mondelez (MDLZ), Utz (UTZ), and PepsiCo (PEP), and advising that a higher multiple would be appropriate for the snacks business once it operates as a standalone operation. (106 comments)

Bipartisan Safer Communities Act

Weeks after the tragedies in Buffalo, New York, and Uvalde, Texas, the U.S. Senate has taken initial steps towards passing the first major gun legislation in decades. The package cleared a procedural threshold hurdle in a 64-34 vote, marking a rare display of compromise from a chamber that has been at loggerheads on almost every issue. Agreement on the bipartisan 80-page gun violence bill could potentially tee up final passage by week’s end, before Congress goes on a two-week recess for July 4.

What’s in the bill? Federal background checks for gun buyers aged 18 to 20 would include examination of the purchaser’s juvenile and mental health records, while beefing up penalties on gun traffickers. It would also close the so-called boyfriend loophole by blocking gun sales to those convicted of abusing unmarried intimate partners (gun rights would be restored after five years if they didn’t commit another serious crime). A $750M fund would also be established to help states put in place red-flag laws, while millions more would be allocated to community behavioral health centers, training first responders, and investing in school safety and mental health services.

Estimates of the cost of the bill range in the billions of dollars, but lawmakers aren’t demanding a formal estimate before voting on the legislation. Lead Democratic bargainer, Sen. Chris Murphy of Connecticut, said it would be fully paid for, with some expecting to cover costs by continuing to delay the end of a Trump-era rule surrounding rebates that drugmakers give to Medicare middlemen. While the rule never went into effect, it was expected to cost the government money, so Congress can claim the additional savings.

What’s not in the bill? The legislation stops short of banning assault-style weapons or raising the age limit for purchasing the guns from 18 to 21. Both shooters in Uvalde and Buffalo were 18-year-olds who used assault rifles they bought themselves, a profile that matches many recent mass shooters. The new measure also won’t prohibit high-capacity magazines, do away with the internet and gun show loophole, or amend/repeal the federal liability shield that protects gun manufacturers from being sued for violence. (9 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
9:00 Fed’s Barkin Speech
9:30 Jerome Powell Speech
11:30 Results of $22B, 2-Year FRN Auction
12:00 PM Fed’s Barkin Speech
12:55 PM Fed’s Evans Speech
1:00 PM Results of $14B, 20-Year Bond Auction
1:30 PM Fed’s Harker Speech
1:30 PM Fed’s Barkin Speech

What else is happening…

U.S. oil industry extends another olive branch to Washington.

DOJ settles with Meta (META) in landmark suit over housing discrimination.

CRISPR Therapeutics (CRSP) drops nearly 8% on Innovation Day.

Leaving Spotify (SPOT), Obamas find new home at Amazon’s (AMZN) Audible.

Russia vows to respond to Lithuania’s ban on goods transit.

Another record: U.K. inflation rate hits new 40-year high of 9.1%.

DocuSign (DOCU) CEO resigns in wake of weak earnings and outlook.

Tesla (TSLA) vehicles are banned in China near political retreat.

La-Z-Boy (LZB) shares surge on record sales and operating income.

Morgan Stanley sees travel plans easing and these ETFs may take notice.


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

The Asian/Pacific markets were mostly very strong. Japan, Hong Kong, South Korea, India, Taiwan, Australia, New Zealand, Malaysia and Indonesia each gained more than 1%. Europe, Africa and the Middle East are currently mostly up. Poland, France, Turkey, the UAE, Greece, South Africa, Hungary, Israel and Saudi Arabia are up 1% or more. Only Portugal is down noticeably. Futures in the States point towards a big gap up open for the cash market.

————— BLOG: Oil Will Tells Us When the Market Crash is Coming —————

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

Stories/News from Seeking Alpha…

Shots for tots

Pediatricians, children’s hospitals and pharmacies across the U.S. will begin administering COVID-19 vaccines today to kids between 6 months and 5 years old, after the FDA and CDC authorized the jabs last week for the country’s youngest children under emergency approval. Only 18% of parents say they will vaccinate their kids in the age group as soon as possible, according to recent poll from the Kaiser Family Foundation, due to the lack of “enough information about the vaccines’ safety and effectiveness.” A similar dynamic played out after the shots opened to children aged 5 to 11 last November, with less than a third of that demographic getting vaccinated (compared to the 75% fully vaccinated U.S. population over the age of 12).

Snapshot: Parents of infants, toddlers and preschoolers will have the option of a three-dose regimen from Pfizer-BioNTech (PFE, BNTX) that spans nearly three months, or a two-shot series from Moderna (NASDAQ:MRNA) that takes four weeks. The vaccines use the same mRNA technology given to adults, but differ in their dose sizes. Roughly 18M youngsters are eligible for the jabs, which were shown to have efficacy (in preventing COVID) of between 36.8% and 50.6% for Moderna’s shot. Pfizer’s effectiveness was determined not to be reliable due to the low number of COVID-19 cases that occurred among study participants, though it was found to trigger a comparable immune response seen in adults.

According to the CDC, 480 children under the age of five have died from COVID-19 through May 2022, while more than 30,000 children in the U.S. have been hospitalized, making the disease more dangerous than flu for little kids. Some children can also have lasting symptoms known as “long COVID,” while infections can spread within a household, or to adults that may be more vulnerable. The CDC is even advising vaccination for those who already had COVID-19 to protect against reinfection, with an estimated 75% of children showing evidence of having had the disease.

Not everyone is on board: While Florida doctors can get access through federal distribution channels, the state has been an outlier in not pre-ordering COVID vaccines for kids. Florida’s Department of Health is recommending against giving coronavirus vaccines to healthy children, saying there is “very little benefit” for them and “certain risks may outweigh the benefits.” Others that may be hesitant to jab their younger kids cite natural immunity, limited trial data based on small number of cases, questions about overall effectiveness and unknown long-term side effects from the vaccine. (15 comments)

Crypto volatility

Large swings are hitting the cryptosphere as Bitcoin (BTC-USD) struggles to hold above the key $20,000 level. The popular token plunged 15% to $17,787 on Saturday, before rebounding above $20,000 with a surge of similar magnitude on Sunday (stock futures are also bouncing back from a brutal week). Currently changing hands at around $21,168, Bitcoin is still off about 70% from the all-time high of $67,802 seen in November, which preceded the Fed’s aggressive rate hike cycle that threatens to drain liquidity from markets.

Flashback: Red flags of bigger crypto trouble emerged in May following the collapse of the Terra (UST-USD), a dollar-pegged algorithmic stablecoin project. Growing questions about insolvency ensued after major crypto lending firm Celsius shocked the market last week by pausing all withdrawals, swaps and transfers between accounts. Coinbase (COIN) and BlockFi then announced they would lay off nearly a fifth of their workforce, while crypto hedge fund Three Arrows Capital failed to meet margins calls from lenders amid a spate of bad bets.

“It’s very unfortunate that there was an inflation of financial innovation, which is the real story over here,” said Chad Cascarilla, CEO of blockchain infrastructure platform Paxos. “Instead, we had financial instability because of this opaque leverage. You just couldn’t tell where all these risks were building up. And really, in some ways, it’s just an age-old story: you’re borrowing short, and lending long. I think it’s really unfortunate that people lost money, and I think in some ways it will set back the space, because you will lose some early adopters. On the other hand, the fundamental technology here and the adoption curve of the institutions that are coming in – like how you can get your financial system to operate at the speed of the internet – those are things that need to happen.”

Where do crypto prices go from here? “If the market goes higher, everyone breathes a sigh of relief, things will get refinanced, people will raise equity, and all of the risk will dissipate. But if we move much lower from here, I think it could be a total shitstorm,” said Adam Farthing, chief risk officer at crypto liquidity provider B2C2. “There is a lot of credit being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books which means that the entire amount of credit available in the crypto ecosystem is much reduced. It feels very like 2008 to me in terms of how there could be a domino effect of bankruptcies and liquidations.” (38 comments)

Labor foothold

Unionization drives are heating up across the country following big wins at Starbucks (SBUX) and Amazon (AMZN) since late last year. Apple (AAPL) is the latest S&P 500 company to get its first taste of organized labor in the U.S. following a union win at a store in Towson, Maryland. The vote was 65 to 33 with about 110 employees eligible to cast a ballot, marking a nearly two-to-one margin in favor of the union.

Quotes: “We did it Towson! We won our union vote! Thanks to all who worked so hard and all who supported!” the Machinists Union’s Coalition of Organized Retail Employees tweeted on Saturday. “Compensation is important, considering the cost of living in general and inflation, but the bigger thing is having a say,” added Christie Pridgen, who has worked at the store for eight years. “That was the most important thing to me.”

The National Labor Relations Board still needs to certify the vote in a process that will likely take around a week. Apple would be required to bargain with the union over working conditions following the certification, but it may drag out the process as it shuns negotiations of union labor contracts. Apple’s head of Retail and People, Deirdre O’Brien, visited the location in May to discourage the recent drive, saying unions were not committed to company employees and establishing one would make it harder for Apple to respond to worker concerns.

Outlook: The Towson store near Baltimore is a smaller location inside a mall, but other high-traffic Apple stores are entertaining similar moves. “Flagship” shops at the Grand Central Terminal and World Trade Center in New York have signaled unionization efforts, but have yet to conduct an official vote. A store in Atlanta, Georgia, was also scheduled to hold an election earlier this month, but it was delayed after the Communication Workers of America union alleged that Apple intimidated its employees. (158 comments)

Gas tax holiday

WTI crude prices have eased from $120 to $110 a barrel over the past week, while the national average gas price dipped under $5 a gallon, but the cost of energy still remains at elevated levels. Biden administration officials are still scrambling to contain the fallout, with the record prices being one of the biggest contributors to inflation. The White House already turned to the Strategic Petroleum Reserve in March, ordering the release of up to 1M barrels of oil a day for 180 days in the hopes of meeting demand, but its intended effect has been negligible.

Next plan: President Biden is considering the idea of a federal gas tax holiday and “hopes to have a decision based on the data I’m looking for by the end of the week.” Any suspension of the 18.4 cents a gallon tax would require action from Congress and would be unprecedented. There has never been a federal gas tax holiday in the history of the U.S., while past breaks on state gas taxes have mostly been limited to a few days.

So far, Democratic-led attempts to temporarily pause collecting the tax have failed to gain traction in Congress. Critics say toil companies could pocket the tax relief without passing the savings on to consumers, or that it only makes up a small fraction of the overall cost of gasoline and goes to fund much-needed road and bridge improvements. Senate Minority Leader Mitch McConnell (R-KY) has also accused Democrats of playing “political games,” with the proposed tax relief expiring soon after midterm elections in November.

Go deeper: Biden is planning to visit Saudi Arabia next month to discuss the energy situation, while Treasury Secretary Janet Yellen said talks are ongoing on how the U.S. and its allies could cap the price of Russian oil exports. Yellen also rejected the idea of reviving TC Energy’s (NYSE:TRP) Keystone XL oil pipeline project, which was canceled by Biden on his first day in office. “I don’t think it’s something that even if it were allowed, would take years to come into completion, so I don’t see it as a short-term measure to address the current situation,” Yellen told reporters in Toronto. “And longer term, we remain committed to our climate change objectives. But, you know, it’s really up to the president to consider.” (38 comments)

Today’s Economic Calendar
8:30 Chicago Fed National Activity Index
10:00 Existing Home Sales
11:00 Fed’s Barkin: “Monetary Policy & Inflation Webinar Series”
3:30 PM Fed’s Barkin Speech

What else is happening…

Apple (AAPL) may have a secret weapon with its Arcade gaming service.

TikTok lines up Oracle (ORCL) cloud services for all U.S. user traffic.

Rate hikes will take a couple of years to bring inflation to 2% – Fed’s Mester.

NATO risk: Lithuania defends ban on some goods to Russia’s Kaliningrad.

Pfizer (PFE) to buy 8.1% stake in Valneva to support Lyme disease vaccine.

JetBlue (JBLU) boosts offer for Spirit Airlines (SAVE) to $33.50/share.

‘Lightyear’ (DIS) does not go to infinity as ‘Jurassic World’ holds No. 1.

Mondelez (MDLZ) eats up energy bar maker Clif Bar in $2.9B deal.

Former employees sue Elon Musk’s Tesla (TSLA) over mass layoff – Reuters.

Netflix (NFLX) halts ‘The Chosen One’ after two actors killed in auto accident.


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