Good morning. Happy Friday.
The Asian/Pacific markets leaned to the upside. India and Taiwan did great; New Zealand and the Philippines were weak. Europe, Africa and the Middle East are currently doing well. Denmark, Poland, Turkey, Russia, Greece, Hungary, the Netherlands and Sweden are leading. Norway and Portugal are down. Futures in the States point towards a positive open for the cash market.
————— Leavitt Brothers Open Access —————
The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
No surprise
Debt talks appear to be nearing the end amid reports that a potential deal would raise the U.S. government’s $31.4T debt ceiling and limit spending on most items for two years. A deal is expected to be hammered out by today afternoon, U.S. Representative Kevin Hern (R-Oklahoma), who leads the largest Republican caucus, said.
Dig deeper: Republican negotiators have reportedly agreed for a smaller 3% increase in defense spending. Non-defense discretionary spending is expected to be maintained at current levels. The White House is said to be mulling scaling back on increased funding for the Internal Revenue Service, cutting $10B from an $80B budget increase for the agency that was planned under the Inflation Reduction Act to target wealthy individuals. White House and Republican debt limit proposals now differ by around $70B on discretionary spending.
Contingency plan: The Biden administration is looking at a contingency plan that was created after the 2011 debt-ceiling impasse. Under the plan, federal agencies would submit payments to the Treasury no sooner than the day before they’re due. By contrast, under the current system payment files may be submitted well before their due dates. If the Treasury doesn’t have enough funds to make a full day’s worth of payments, it would likely delay paying them until it does. The Treasury has been preparing for possibly delaying some payments after June 1.
SA commentary: ANG Traders, Investing Group leader of ‘Away From The Herd’, said the best outcome would be the debt ceiling being raised without spending cuts. “A clean debt-ceiling raise would maintain the flow rate which could push the stock market to new highs,” he said. Contributor James Picerno said Treasury yields will remain a crucial real-time measure of how the market is pricing in debt ceiling risk. “For the moment, the implied takeaway via the crowd is that a deal that averts default is still the baseline assumption,” he said. (36 comments)
Tracking inflows
The iShares 20+ Year Treasury Bond ETF (TLT) currently sits atop the capital flow leaderboard for exchange traded funds in 2023. The ETF has now amassed more investor cash than any other ETF so far this year, taking its total assets under management to $37.30B. TLT has been able to accumulate $10.37B year to date, topping the inflows for the iShares MSCI USA Quality Factor ETF (QUAL), Vanguard S&P 500 ETF (VOO) and JPMorgan Equity Premium Income ETF (JEPI), which have seen the second, third and fourth most significant inflows in 2023. These ETFs have attracted $9.40B, $9.04B and $8.36B, respectively. SA contributor Johnny Zhang believes TLT can still generate positive returns through coupon payments if the U.S. experiences a soft landing. If the U.S. slips into a severe recession, TLT can rally as a hedge against market turmoil. “In all scenarios, a tactical allocation strategy, such as gradually selling TLT during a severe recession, can be attractive.” (19 comments)
Supercharger access
Ford Motor (F) has struck a deal with Tesla (TSLA), through which its customers will gain access to more than 12,000 Tesla Superchargers across the U.S. and Canada. The arrangement will double the number of fast-chargers available to Ford electric vehicle customers starting Spring 2024. A Tesla-developed adapter will provide Ford F-150 Lightning, Mustang Mach-E and E-Transit vehicles fitted with the Combined Charging System port access to Tesla’s V3 Superchargers. Notably, Ford said it will start equipping future EVs with the NACS charge port in 2025 to remove the need for an adapter for direct access to Tesla Superchargers. Seeking Alpha contributor The Asian Investor believes Ford has the strongest EV line-up in its history. “With production ramping up for the F-150 Lightning, I expect Ford to experience a gradual rebound in EV deliveries throughout the remainder of the year.” (127 comments)
Hardline stance
The New York City Banking Commission voted unanimously to freeze the city’s deposits in Capital One (COF) and KeyBank (KEY) for up to two years as they failed to submit plans showing efforts to root out discrimination. The banks will be able to service existing contracts for one year. According to the commission’s rules, banks seeking to hold public funds must file certificates on their non-discrimination policies. The commission said Capital One, which held $7.2M in NYC’s deposits at April-end, and KeyBank, which held $10M in NYC’s deposits at April-end, refused to submit the required policies. Both banks disagreed, saying they have made the necessary submissions. NYC Comptroller Brad Lander also voted against designating three other banks to hold public funds – International Finance Bank, PNC Bank (PNC), and Wells Fargo (WFC). (54 comments)
Today’s Economic Calendar
8:30 Durable Goods
8:30 International Trade in Goods (Advance)
8:30 Personal Income and Outlays
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
10:00 Consumer Sentiment
1:00 PM Baker Hughes Rig Count
What else is happening…
Dollar Index (DXY) hits highest level since mid-March as debt-ceiling debate drags on.
JPMorgan (JPM) won’t give 1,000 First Republic (OTCPK:FRCB) workers job offers.
Bunge (BG) gains as it is said to be in merger talks with Glencore’s Viterra.
Stratasys (SSYS) to buy Desktop Metal (DM) in $1.8 billion all-stock deal.
Proxy advisers urge replacing of Alphabet (GOOG, GOOGL) board chair.
Costco (COST) slides after U.S. sales come in lighter than anticipated.
Paramount (PARA) jumps as owner NAI secures $125M investment.
FDA issues full approval for Pfizer’s (PFE) for oral COVID therapy.
Elon Musk’s Neuralink gets FDA nod for brain implant human trial.
Unpaid cannabis taxes pile up at Canadian marijuana companies.
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Good morning. Happy Thursday.
The Asian/Pacific markets were weak. Taiwan did well, but China, Hong Kong, South Korea, Australia, Indonesia and the Philippines were weak. Europe, Africa and the Middle East are currently mixed. Denmark, Greece, Norway, Hungary and Czech Republic are up; Poland, Finland, Portugal and Austria are down. Futures in the States point towards gap up for the S&P 500 and a huge gap up for the Nasdaq.
————— Leavitt Brothers Open Access —————
The dollar is up. Oil is down; copper is up. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
The next big thing
As investing trends come in and out of fashion, it can be difficult to navigate what is real and will power the future, and what is hype and will eventually fade. Trading companies that are in the thick of the trends can also be tricky, especially when trying to recognize value ahead of the broader market and appraising how the given technology will play out. Others that are looking for a quick buck might want to jump on the train in any event, even if it’s for a quick ride, though the short-term strategy can quickly leave a bag holder with a screen full of red at the end of a big run-up on a stock price.
Enter Nvidia: The company, a leader in artificial intelligence hardware and software, saw its shares soar 24.6% to $380 in AH trading on Wednesday, bringing its YTD gain to over 160%. The latest movement came after the firm posted Q1 results that topped expectations and blew away forecasts for the upcoming period. “Demand [related to generative AI and large language models] has extended our data center visibility out a few quarters and we have procured substantially higher supply for the second half of the year,” Nvidia (NASDAQ:NVDA) executives said on an earnings call. “The easiest way to think about that is over the next four or five, 10 years, most of that trillion dollars, and compensating adjusting for all the growth in data center still, it will be largely generative AI.”
In fact, Nvidia is indicated to open today with a market-cap gain of more than $185B, making it worth more than Meta (META) or Tesla (TSLA), and it might even turn into the biggest single-day record (Apple (AAPL) rose by $191B in November 2022). Peers are riding the sentiment higher, such as rival chipmaker Advanced Micro Devices (NASDAQ:AMD) +8.5%, AI software maker C3.ai (NYSE:AI) +9.3% and Palantir (NYSE:PLTR) +7.7%. Bigger players like Microsoft (MSFT) and Alphabet (GOOG, GOOGL), which are incorporating generative AI into their platforms, rose as well, while the AI rally sent Nasdaq futures up nearly 2% overnight.
But… the jury is still out on artificial intelligence. There’s no doubt that companies are on the brink of something big, and that it will change many industries and how we do things, but it’s important to separate hype from reality when talking about any emerging technology. Remember the Internet of Things? Web 3.0? The metaverse? DeFi, blockchain, and NFTs? Many shares related to companies operating in these spaces have seen their prices dwindle from the record highs seen when the news cycle was first played up. Contrast that to smartphones, streaming, e-commerce and the cloud, which have had much more lasting impacts on business investment, the labor market and broader economy.
From the comments section: “[NVDA’s] $6B rev and $2B in researching and development. That’s how to build the future. Incredible stock,” writes SA premium user ErikInvest, while chris hafferty adds “AI is as significant as the commercialization of electricity!” Raph86 counters that “from the COVID everything bubble right to the AI bubble… Market demands more of the sweet stuff!” in SA article, Nvidia Fiscal Q1 2024 Earnings: Solid Beat, But Hedge Your Bets. “The valuation does NOT have to be justified,” replies Natturner1966. “It’s the stock market, not a college finance class.” (22 comments)
On negative watch
The United States is in danger of losing Fitch’s top sovereign debt status due to “increased political partisanship that is hindering reaching a resolution to raise or suspend the debt limit.” The “AAA” long-term foreign currency issuer default rating was placed on Rating Watch Negative, though Fitch still expects a resolution before the so-called “X-date,” which can impact the U.S. Dollar Index (DXY). Recall that in 2011, the U.S. lost its top rating at S&P, as the government approached default in a similar standoff. S&P has not restored the country to its highest rating, but the last of the Big Three credit rating agencies, Moody’s, still has its highest “Aaa” ranking on the U.S. (42 comments)
Here comes the sun
Solar is emerging as an energy superpower with this year’s global investment in the sector ($380B) set to surpass spending on oil production ($370B) for the first time. That’s according to Fatih Birol, executive director of the International Energy Agency, who said the development “will soon start to see a very different energy system emerging and we can keep the 1.5C goal alive.” The change is a result of strong subsidies and tax credits like the Inflation Reduction Act, as well as policy alignment among nations towards climate and energy security, and better economics of alternative power sources. “Clean energy is moving fast, faster than many people realize,” Birol added. “For every dollar invested in fossil fuels, about $1.7 are now going into clean energy. Five years ago, this ratio was 1:1.” (9 comments)
Pause in June?
Almost all Federal Reserve officials at the FOMC’s May 2-3 meeting said downside risks to growth and upside risks to unemployment had increased due to banking stresses, according to the minutes published from the gathering. Participants “generally expressed uncertainty about how much more policy tightening may be appropriate,” while some noted that additional “policy firming would likely be warranted at future meetings.” That means the bank is still divided on whether to continue raising interest rates, especially if progress in bringing down inflation to the Fed’s 2% target remains “unacceptably slow.” The policymaking committee in May increased its key rate by 25 bps to a range of 5.00%-5.25%, representing its 10th straight rate hike, while odds rose of the Fed pausing in June following the release of the minutes. (56 comments)
Today’s Economic Calendar
8:30 GDP Q1
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
8:30 Corporate profits
9:50 Fed’s Barkin Speech
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $35B, 7-Year Note Auction
4:30 PM Fed Balance Sheet
What else is happening…
Final GDP data shows Europe’s largest economy entered recession.
Microsoft (MSFT) says Chinese hackers attacked ‘critical’ infrastructure.
Meta Platforms (META) wraps up spring layoffs, deepest in tech.
The implications of Apple’s (AAPL) deal with Broadcom (AVGO).
Snowflake (SNOW) plunges as lowered forecast outweighs Q1 results.
Kohl’s (KSS) pops on earnings topper, reaffirms guidance.
FTC is probing bidding collusion for these baby-formula makers.
Breakthrough innovation: Nike (NKE) reshuffles C-suite responsibilities.
Icahn Enterprises (IEP) continues slide as Ackman fans the flames.
Google (GOOGL) and European Commission to develop AI governing pact.
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Good morning. Happy Wednesday.
The Asian/Pacific markets were weak. Japan, China, Hong Kong and Australia were down the most. Europe, Africa and the Middle East are currently down big. The UK, Denmark, Poland, France, Germany, Greece, Turkey, South Africa, Finland, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are down more than 1%. Futures in the States point towards moderate gap down open for the cash market.
————— Leavitt Brothers Open Access —————
The dollar is unchanged. Oil is up; copper is down. Gold is up; silver is down. Bonds are down.
Stories/News from Seeking Alpha…
National AI strategy
As generative AI systems take many industries by storm, calls have been growing on the need to regulate emerging tools and address the potential downsides of the technology. Just last week, the CEO of OpenAI, the creator of ChatGPT, testified to Congress about the necessity of government intervention for mitigating the risks of increasingly powerful artificial intelligence models. While lawmakers didn’t arrive at any specific proposals at the first AI hearing on Capitol Hill, several ideas were brought up and more are now on the horizon.
Snapshot: In response to “one of the most powerful technologies of our time,” the Biden administration is taking new steps to “advance responsible artificial intelligence.” The first is updating its roadmap, called the National AI R&D Strategic Plan, which outlines key priorities and goals for federal investments in AI research and development. It also released a new request for public input on critical AI issues, like “protecting individuals’ rights and safety, and harnessing AI to improve lives.” A new report on AI trends in education is being addressed as well, which will cover the risks and opportunities related to teaching, learning, research, and assessment.
Social media went through similar scrutiny during its growth stages in the 2010s. Under the microscope were addictive behavior and disorders stemming from social comparison – and later – data privacy and misinformation. The difference this time around is that AI companies are generally calling for increased regulation as they disrupt current models, compared to the once-famous motto of “move fast and break things” of Facebook founder Mark Zuckerberg. The government today also seems to be keenly aware of moving too slowly on the tech front, with U.S. Surgeon General Vivek Murthy even releasing an advisory that covers the dangers of social media on child and adolescent brain development.
SA commentary: “Hype over AI investing has quickly caused a bubble to form in AI stocks,” writes SA analyst Logan Kane in Artificial Intelligence Investing Hype Needs A Reality Check. “History shows dozens of similar examples with each new technological innovation,” citing lessons learned from the dot-com bubble, and similar patterns that have recently played out in cannabis stocks, sports betting and blockchain. He also compares tech innovations that lead to increased growth and corporate profits vs. trends that weigh on labor productivity and margins. (17 comments)
Pay up
Password-sharing days are over if you have a U.S. Netflix (NFLX) account. A crackdown that started in Latin America, Europe, and elsewhere has finally arrived in the streamer’s home market, as it looks to combat slower growth with additional revenue streams. “A Netflix account is for use by one household,” the company wrote in a blog post. “Everyone living in that household can use Netflix wherever they are – at home, on the go, on holiday – and take advantage of new features like Transfer Profile and Manage Access and Devices.” The new model will allow users to buy extra memberships at a lower rate, and many may start seeing the prompts the next time they log in. (26 comments)
Saudi warning
Starting off the month at around $65 a barrel, WTI crude prices have bounced in May by nearly $10/bbl. The latest announcement from Saudi Arabia’s top energy official may add to the rally after he told short sellers to “watch out.” “Speculators, like in any market they are there to stay, I keep advising them that they will be ouching – they did ouch in April,” Prince Abdulaziz bin Salman declared at an economic forum in Doha, referring to the surprise production cuts posted in early April. However, that rally was short-lived, and some are voicing renewed skepticism before OPEC+ meets in Vienna on June 4 to discuss production policy for the second half of 2023. (25 comments)
Just in case
As the debt ceiling continues to take attention, the market still has to contend with whether the Fed can engineer a prized soft economic landing or if a recession is on its way. Goldman Sachs is more bullish on the economy, with economists estimating just a 35% chance of recession, compared with an average of 60% from other major banks. However, if a hard landing does materialize, Goldman’s equity team has picked its favorite stocks to put cash to work. Those stocks have some combination of low valuation, a strong balance sheet and a solid dividend history. Among the picks are Microsoft (MSFT), J&J (JNJ), Coca-Cola (KO) and Hormel (HRL). See the full list here. (61 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
11:30 Results of $22B, 2-Year FRN Auction
12:10 PM Fed’s Waller Speech
1:00 PM Results of $43B, 5-Year Note Auction
2:00 PM FOMC Minutes
What else is happening…
Former rivals, Uber (UBER) and Waymo (GOOGL), partner on robotaxis.
Earnings: Lowe’s (LOW) management offers optimistic commentary.
Apple (AAPL) inks Broadcom (AVGO) deal for U.S.-made components.
Meta (META) sells Giphy to Shutterstock (SSTK) at a $262M loss.
DeSantis to launch presidential run during an event with Elon Musk.
‘Organized retail crime is definitely a thing’ – BJ’s (BJ) earnings call.
Panera Brands names new CEO as it moves toward IPO.
Bud Light (BUD) sales continue crashing, Coors Light (TAP) sales rise.
Mortgage delinquency rate bounces 13% off March lows – Black Knight.
COVID vaccine stocks light up amid fears of new infections in China.
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Good morning. Happy Tuesday.
The Asian/Pacific markets were weak. South Korea did well, but Japan, China and Hong Kong were weak. Europe, Africa and the Middle East are currently most down. Turkey and Norway are doing well, but Denmark, France, South Africa, Hungary, Italy and Israel are down. Futures in the States point towards negative open for the cash market.
————— VIDEO: Weekly Charts are Leading the Market Higher —————
The dollar is up. Oil is up; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Debt dynamics
While most investors are expecting an 11th-hour deal to be reached over the debt ceiling, interesting market dynamics are at play as the drama unfolds in Washington. Some triple-A corporate bonds from Microsoft (NASDAQ:MSFT) and Johnson & Johnson (NYSE:JNJ) are trading at a yield discount to Treasury bills, which are generally viewed as the most safe investment in the world. In fact, Wall Street just witnessed the busiest week of the year for investment-grade corporate bond issuance, helped by a $31B debt sale by Pfizer (NYSE:PFE) that became the fourth largest on record.
Where things stand: Following a talk on Monday evening, President Biden and House Speaker Kevin McCarthy agreed that both sides will keep negotiating on a debt limit plan to avoid default, though they didn’t reach any agreement. “I believe we can still get there,” McCarthy declared, though he’s not considering the president’s suggestion to cut the deficit by increasing taxes for the wealthy or closing tax loopholes for the pharma and oil industries. Instead, he’s focused on reducing spending in the FY2024 federal budget following a reported agreement to cut unspent pandemic funding.
The chance of a default occurring is “very, very small, but not zero,” explains John Mason in a new SA article that examines the probabilities. SA analyst David Lerner adds that the “scare” could be the “last best chance” to get into this rally, while Investing Group Leader Mott Capital Management writes that a deal may lead to a giant stock market liquidity drain.
What would happen if the U.S. defaults? Moody’s Analytics forecasts “spiking interest rates and plunging equity prices,” as well as the freezing up of short-term funding. Volatility might also send shockwaves throughout the financial system, spreading to the derivative and mortgage markets, where Treasuries are often used as collateral for securing trades and loans. The focus would then turn to the Federal Reserve and its backstop menu of options to avert a calamity, but Chair Jay Powell has repeatedly warned that “no one should assume that the Fed can protect the economy.”
AI headaches
With algorithms scraping sites and social media for headlines to react to, the rise of AI photos has given investors another headache. On Monday morning, the account Bloomberg Feed (@bloombergfeed) – not associated with Bloomberg but with a blue checkmark – shared a fake image of an explosion at the Pentagon, which quickly went viral. “For all of a few minutes after the U.S. open, the S&P 500 (SP500) shed around a quarter of a percent, whilst yields on 10yr Treasuries (US10Y) moved about 4bps lower [before recovering],” Deutsche Bank’s Jim Reid wrote. “Given the suggestions that the initial photo might have been AI-generated, it just shows the potential pitfalls for markets if fake news driven by AI can cause concrete movements in asset prices.” (10 comments)
Water use
Under pressure of more severe cuts by the federal government, Arizona, California and Nevada have reached a deal to cut water usage from the drought-stricken Colorado River. In return, the Biden administration will compensate cities, irrigation districts, agricultural landowners and farm operators, with funding to the tune of $1.2B that will come from the Inflation Reduction Act. While the agreement will trim water usage by about 13% across the Southwest, or 3M acre-feet of water by 2026, bigger solutions will be needed in the future, especially if dry conditions intensify. SA analyst Vlad Deshkovich discusses what the Colorado River water shortages will mean for investors in the long-term, while AllianceBernstein explains that water scarcity is no longer just a problem for developing countries in desert climates. (6 comments)
Is it constitutional?
Lawsuits were expected and lawsuits have arrived. TikTok is suing Montana over its decision to ban the popular short video app across the state starting in January 2024. The suit alleges that the ban violates the First Amendment and rules governing interstate commerce, as well as laws like federal preemption. “We are challenging Montana’s unconstitutional TikTok ban to protect our business and the hundreds of thousands of TikTok users in Montana,” TikTok, owned by China-based ByteDance (BDNCE), said in a statement. In other legal tech news, Meta Platforms (META) was slammed with a $1.3B fine by the EU, marking the biggest penalty ever levied by Ireland’s Data Protection Commission. (7 comments)
Today’s Economic Calendar
Fed’s Logan Speech
9:45 PMI Composite Flash
10:00 New Home Sales
10:00 Richmond Fed Mfg. Index
1:00 PM Results of $42B, 2-Year Note Auction
1:00 PM Money Supply
What else is happening…
WSB survey results: Economic data cannot be completely trusted.
St. Louis Fed’s Bullard sees two more rates increases this year.
Chevron (CVX) to buy PDC Energy (PDCE) in $6.3B all-stock deal.
Losses prompt ZIM Integrated Shipping (ZIM) to scrap its dividend.
Can India become a new China for Apple (AAPL)? – Bernstein.
Walgreens (WBA) falls to slowest level in almost 11 years.
JPMorgan (JPM) cites reason that helped First Republic acquisition.
Yelp (YELP) gains on report of activist investor push for sale.
PacWest (PACW) offloads real estate loans to Kennedy-Wilson (KW).
Steve Cress, SA Head of Quant, discusses the fall of office REITs.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets mostly did well. Japan, China, South Korea, Hong Kong, India, Indonesia and Thailand posted solid gains; New Zealand, Malaysia and the Philippines were weak. Europe, Africa and the Middle East are mixed. Denmark, Poland, Greece, Hungary and Spain are up; France, Germany, Norway, Italy and Sweden are down. Futures in the States point towards a slight positive open for the cash market.
————— VIDEO: Weekly Charts are Leading the Market Higher —————
The dollar is down. Oil is flat; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
What to believe
Fraudulent jobless claims in Massachusetts have cast a shadow on the nature of economic data gathering and reporting, though there had been no shortage of skepticism beforehand – in terms of statistics published by the federal government. Things have grown increasingly political in recent years, while a drop-off in business participation and declining consumer respondents threaten to dampen the effectiveness of sample sizes. It’s a pretty big deal as many decisions are based on the numbers, like policy choices at the Federal Reserve to C-suite strategies that form the foundation of the U.S. economy.
‘Data dependent’: The phrase is one that’s often used at the central bank, though many are quick to flag subsequent forecasts made by Fed – like Powell’s infamous “transitory” call from 2021 – that didn’t quite pan out. It’s not only that many economic reports have to be sourced from survey and industry sources, but numerous figures are calculated based on past assumptions or derivatives of data. Agencies seek to adjust for imbalances by applying different weights to respondents or including third-party information, which some say makes thing better reflect the general population and others say erode trust in institutions.
This can impact key reports like nonfarm-payrolls, consumer confidence and sentiment, as well as retail sales, but we’ll examine the popular consumer price index in the age of inflation. CPI uses a “basket of goods” approach that aims to compare the costs of various consumer goods and services, with 80,000 items included in the report. Each month, data collectors from the Bureau of Labor Statistics call, visit, or check the websites of thousands of retail stores, professional offices, and other establishments to assess nationwide price information. Still, several statistical adjustments are made, like accounting for the changes in the quality of goods, substitution, and other weightings.
Grain of salt, or a whole shaker? Earlier this year, the Labor Department put greater importance on the shelter component of CPI, which accounts for more than a third of the overall figure and has been in the spotlight over “owners’ equivalent rent.” It also lessened its focus on things like used cars, which recently underwent its own methodology refresh. The survey last year even incorporated third-party data to ease the burden on respondents, like information from the J.D. Power Information Network that measures changes in vehicle prices, further dividing investors on what should be factored into their decision-making.
‘Major security risk’
Shares of Micron (NASDAQ:MU) are down over 6% in premarket trading after China banned the company’s products from its “critical infrastructure supply chain” following a nearly two-month review. While Micron is the biggest memory chipmaker in the U.S., with more than a quarter of its sales going to China, other semiconductor players will also be in focus amid an opening of a new chapter in the war over silicon. Last summer saw the passing of the CHIPS ACT, which allowed the U.S. government to pour billions of dollars into the semiconductor sector to “lead the world in future industries and protect national security.” The Biden administration also followed up on the measures with serious export controls to prevent American firms – or any global company that uses their tech – from selling chip designs, software and equipment to Beijing. (12 comments)
Back-and-forth
A weekend full of drama saw both sides of the aisle continue to point fingers over the debt ceiling, before things took a positive turn on Sunday night as Air Force One returned from the G7 summit in Japan. “It went well,” President Biden declared, after speaking with House Speaker Kevin McCarthy, while the latter described the call as “productive.” Regarding whether the 14th Amendment would be an effective solution to the crisis, Biden confirmed his belief that “we have the authority” to invoke the article, though a series of legal challenges could still mean the U.S. would default on its debt. Meanwhile, Treasury Secretary Janet Yellen reiterated her warning that a default could take place as early as June 1, and that “hard choices” would need to be made about which “bills will go unpaid” if the debt limit was not raised. (13 comments)
Corporate bankruptcies
Distress in corporate finance is increasing. In the near-zero interest rate environment during the pandemic and through February 2022, corporations could take on more debt or extend existing debt without adding much to their debt burdens. In addition, government support helped keep many U.S. businesses afloat during pandemic lockdowns. That helped keep corporate and personal bankruptcy filings low, but since then, fiscal relief has disappeared. With the Federal Reserve pushing up its policy rate by 500 basis points in 15 months, financing costs have jumped, while month-to-month movement proves choppier. Here are the sectors investors are watching, and the knock-on effects they can have on the economy. (2 comments)
Today’s Economic Calendar
8:30 Fed’s Bullard Speech
10:50 Fed’s Barkin Speech
11:05 Fed’s Daly Speech
What else is happening…
Earnings season: Executives call out rising retail theft hitting profits.
Exxon (XOM) joins the lithium race with drilling rights in Arkansas.
Risk of summer blackouts is rising across most of the U.S.
Large-cap restaurant stocks may be more appetizing than they appear.
American (AAL)-JetBlue (JBLU) alliance blocked on antitrust grounds.
Billions of dollars at stake as FDA shortcut allows half-proven drugs.
Novo Nordisk (NVO) Ozempic sales expected to reach $17B in 2029.
Confusing electric vehicle tax rules may be cutting into demand.
Ford (F) unveils supply chain agreements to bolster EV efforts.
Will ChatGPT prevent a recession or is AI a baby bubble?
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