Good morning. Happy Friday. Happy Employment Numbers Day.
The Asian/Pacific markets were mostly weak. Japan, China, Hong Kong, South Korea, India, Taiwan, Australia, Malaysia, Indonesia and the Philippines were all down big. Europe, Africa and the Middle East lean to the upside but are mostly quiet. Poland, France, Germany, South Africa, Italy and Portugal are up; Spain is down. Futures in the States point towards a slight positive open after the latest employment data was released. This could change by the open.
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The dollar is down. Oil and copper are up small amounts. Gold is up; silver is flat. Bonds are down.
Stories/News from Seeking Alpha…
Making sense of it all
All eyes will be on the Labor Department’s nonfarm payrolls report this morning as the Labor Department publishes the figure at 8:30 AM ET. Economists expect the U.S. economy to have added 225K jobs in June, down from the surprise 339K increase in May, which represented the second-strongest month for job creation so far this year. Note that the monthly figure has beaten every estimate over the past year (except for one), while the current projection would trail the six-month average of 314K, highlighting just how hot the labor market has been.
Fed is watching: Jerome Powell has explained that the central bank’s inflation fight had yet to be resolved, as “this economy is very strong, and what’s driving it is a very strong labor market.” As such, it will take “some softening of the labor market for inflation to come down” closer to the Fed’s 2% inflation goal. Aside from the lingering labor shortage, the Fed will also keep an eye on wage growth. Average hourly earnings are expected to rise 0.3% M/M in June, unchanged from the prior month, though it should tick down to 4.2% from 4.3% on a Y/Y basis.
Despite the Fed’s resolve to squash inflation, having jacked up its benchmark rate to a target range of 5.0%-5.25% from near-zero over a year ago, a slew of data this week has pointed to a tight labor market. Thursday’s ADP’s measure of private hiring smashed expectations and the Challenger Job Cuts Report signaled a sizable drop in job cuts, which sent Treasury yields soaring. Conversely, the JOLTS report showed a fall in job openings, while the quits rate ticked up to 2.6%, and the number of Americans filing for initial jobless claims rose over the past week.
SA commentary: A lower-than-expected NFP reading could drive a “substantial rally” that “leads to new local highs,” said SA analyst Christopher Robb, but for “there to be a major selloff, I think what would be needed would be a miss that is way outside of expected numbers like that which occurred in the ADP report.” Eric Basmajian, Investing Group Leader of EPB Macro Research, also notes that investors should divide the labor market report into three segments: cyclical economy, total economy and non-cyclical economy. “If we see more weakness in the Cyclical Employment baskets, we know with a higher level of confidence that recessionary conditions are biting, and there is grave business cycle risk imminently ahead. However, if the Cyclical Employment sectors do not show an increasing pace of deterioration, then that could certainly prolong the onset of the recession.”
Cage fight
Twitter is threatening Meta (META) with legal action over its Instagram Threads launch, as Elon Musk tries to take off his gloves following a sparring match with Mark Zuckerberg. Twitter lawyer Alex Spiro has accused Meta of poaching former Twitter employees with access to trade secrets to build the competitor app, which has garnered 30M downloads within 24 hours. Many analysts have lauded Threads, with some projecting a long-term sales boost for Meta, while Investing Group Leader Daniel Jones acknowledged some risks associated with the launch, but believes the good outweighs the bad. (114 comments)
Chip glut
While the recent AI frenzy is expected to boost memory chip sales, the time hasn’t come yet. Samsung Electronics (OTCPK:SSNLF), the world’s largest memory chip maker, expects second-quarter operating profit to plunge about 96% Y/Y as the memory chip downturn continues amid persistent oversupply. The downbeat outlook comes despite Samsung cutting its memory chip production following a global demand slowdown that weighs on prices. The production cut will likely take place in the third quarter, which could prop up prices, according to Daiwa Capital’s SK Kim. (4 comments)
Show of force
In an announcement expected to come later today, the U.S. will outline the supply of cluster bombs in a new Ukrainian military aid package worth up to $800M. U.S. defense companies have moved away from the controversial munitions, which can cause civilian casualties long after a conflict comes to an end, with Textron (TXT) – the last U.S. manufacturer of cluster bombs – ending production in 2016. Northrop Grumman (NOC) also backed out of a government maintenance contract in 2021. Cluster bombs would upgrade Kyiv’s firepower as it gets a long-planned counteroffensive underway, and would add to the supply of more advanced weapons like M1 Abrams tanks and heavy artillery. (4 comments)
Today’s Economic Calendar
8:30 Non-farm payrolls
10:30 EIA Natural Gas Inventory
1:00 PM Baker Hughes Rig Count
What else is happening…
Biogen (BIIB), Eisai (OTCPK:ESALF) win FDA nod for Alzheimer’s drug.
Tesla (TSLA) reportedly sacks some battery workers at Shanghai factory.
Amazon (AMZN) CEO confident on delivery upside ahead of Prime Day.
Levi Strauss (LEVI) falls on dimmed outlook as U.S. shoppers spend less.
GTCR to buy major stake in Fidelity National Information’s (FIS) Worldpay.
Online food delivery apps battle New York City over minimum wage law.
JetBlue (JBLU) hits some turbulence after ending American (AAL) alliance.
AbbVie (ABBV) updates full-year earnings forecast below consensus.
Shell (SHEL) CEO says cutting oil production now would be ‘dangerous.’
Google (GOOG, GOOGL) delays customized smartphone chip till 2025.
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Good morning. Happy Thursday.
The Asian/Pacific markets were mostly weak. India did well, but Japan, China, Hong Kong, South Korea, Taiwan, Australia, Singapore and Thailand posted notable losses. Europe, Africa and the Middle East are mostly weak. The UK, Denmark, France, Greece, Germany, South Africa, Finland, Switzerland, Hungary, Spain, the Netherlands, Italy, Austria and Sweden are suffering big losses. Futures in the States point towards a relatively big gap down open for the cash market.
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The dollar is down. Oil and copper are down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Twitter killer
Instagram has launched Threads, its short-posting text app, as Meta Platforms (META) CEO Mark Zuckerberg takes on Elon Musk and Twitter. After signaling a launch expected for Thursday, with preorder links set up only for the iOS Threads app, Meta released its app Wednesday evening on Apple’s App Store as well as an Android app for Google Play. “Let’s do this,” Zuckerberg declared. “Welcome to Threads.” The response from Elon? “It is infinitely preferable to be attacked by strangers on Twitter, than indulge in the false happiness of hide-the-pain Instagram.”
Snapshot: As with Twitter, users can post short text, links, pics and videos, as well as repost messages from others and reply to items. Threads subscribers can additionally use their existing Instagram usernames to bring over information, including lists of followers. The timing of the launch is fortuitous for Meta, as recent technical changes at Twitter have frustrated some longtime users of the platform. A rate-limit feature restricting how many posts could be viewed on Twitter left a number of its features broken. Musk also directed that users could no longer view tweets without being logged in to the service themselves.
“The Family of Apps segment consists of products such as Facebook, one of the world’s largest social networks, Instagram, and two messaging apps, Messenger and WhatsApp,” SA analyst Nathan Aisenstadt wrote in What To Expect From Meta Platforms In 2023. “Interest in Threads is heating up thanks to a verbal skirmish between Elon Musk and Mark Zuckerberg, which, although unlikely, can lead to a fight between them. On a larger scale, we expect that the number of users of the company’s platforms will continue to grow not only due to the launch of new services but also the growth of the world’s population.”
Getting competitive: Once upon a time, the biggest tech giants staked out their own territory by growing their own market share. They largely expanded within their own designated niches like internet search, operating systems, e-commerce and consumer electronics, but recently those lines have become more blurred. Apple’s privacy features wiped out billions in revenue from Meta’s targeted advertising model and the two now compete on mixed reality headsets. Amazon Web Services, Microsoft Azure and Google are also duking it out in the cloud, while the latter two companies are continuing to butt heads in the emerging AI space. (100 comments)
New members?
With only 13 countries currently part of the oil producer group, OPEC is looking to recruit new members to the alliance. Secretary General Haitham al-Ghais wouldn’t reveal the names of the candidates, but mentioned four countries he recently visited. “They have to be a net [oil] exporter, they have to have similar goals as OPEC,” he replied, when asked about the requirements for becoming an OPEC member. “I think many countries I just named actually fit this profile. So… work in progress.” Ministers attending the conference in Vienna also didn’t announce any new policies, but lauded new production cuts by Russia and Saudi Arabia. (1 comment)
FOMC minutes
Some officials at the Federal Reserve’s June meeting favored raising the key policy rate by 25 basis points, according to FOMC minutes, which cited a still-tight labor market, stronger-than-expected economic activity, and persistently high inflation. On the other hand, “almost all participants judged it appropriate to maintain the target range at 5.00%-5.25% at this meeting” to give them more time to assess the impact of the tightening cycle on the economy. The minutes did little to move markets, with Wall Street’s major averages ending slightly lower. “The Fed may have a more hawkish stance on the issue of raising interest rates than previously anticipated,” said Investing Group Leader Daniel Jones. (59 comments)
Fortifying NATO
Amid objections from Turkey and Hungary, Sweden’s bid to join NATO continues to be stalled, despite the U.S. reiterating its support for the Nordic country’s membership. Turkey’s holdup could impact its bid to buy F-16 fighter jets from the U.S., produced by Lockheed Martin (LMT), as President Biden has suggested that Sweden’s membership should be endorsed first. In the meantime, officials from Sweden and Turkey will meet at NATO headquarters today to evaluate Ankara’s objections. President Erdogan has accused Stockholm of being too lenient on groups that his government views as terrorist entities and for allowing protests that include the burning of the Quran. (5 comments)
Today’s Economic Calendar
OPEC Meeting
Auto Sales
7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
8:30 Initial Jobless Claims
8:30 International Trade in Goods and Services
8:45 Fed’s Logan: “Policy Challenges for Central Banks”
9:45 PMI Composite Final
10:00 ISM Service Index
10:00 Job Openings and Labor Turnover Survey
11:00 EIA Petroleum Inventories
4:30 PM Fed Balance Sheet
What else is happening…
Will Microsoft (MSFT) join the $3T club in 2024? These analysts think so.
JetBlue (JBLU) shifts focus to Spirit (SAVE) merger after DOJ ruling.
UPS (UPS) slips after union talks over new labor contract break down.
Nike (NKE) among top Dow losers as post-earnings selloff continues.
Moderna (MRNA) signs deal in China to develop mRNA medicines.
Cassava Sciences’ (SAVA) Alzheimer’s drug outperforms in small trial.
Bank of America (BAC) plans 9% dividend hike, talks with Fed continue.
Intel (INTC) seems on target to regain tech leadership, Northland says.
Exxon’s (XOM) meager bonuses make attracting more traders difficult.
BlackRock (BLK) seeks to make bitcoin trading less costly – Larry Fink.
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Good morning. Happy Wednesday.
The Asian/Pacific markets were mostly weak. Indonesia did well, but China, Hong Kong, South Korea, Taiwan and Singapore posted notable losses. Europe, Africa and the Middle East are mostly weak. The UK, Poland, France, Greece, Germany, Finland, Hungary, Spain, the Netherlands, Austria and Sweden are down the most. Futures in the States point towards a moderate down open for the cash market.
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The dollar is up. Oil is up; copper is down. Gold is up; silver is flat. Bonds are down.
Stories/News from Seeking Alpha…
Critical technology
Call it a trade war, a tech war, or even a chip war, but the fight between the world’s two largest economies is ratcheting up to the next level. China has unveiled a set of national security restrictions that are likely to further disrupt the global supply chain by placing export controls on metals like gallium and germanium. The ingredients are key to semiconductors, electric vehicles and aerospace manufacturing, with shares of rare element players like AXT (AXTI) and MP Materials (MP) rising about 9% on the news premarket. Any broadening of the restrictions could be even more problematic, with China stepping up countermeasures if the U.S. imposes more tech curbs.
Backdrop: Last summer saw the passing of the CHIPS Act, which allowed the federal government to pour billions of dollars into the semiconductor sector to “lead the world in future industries and protect national security.” The Biden administration followed up 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 (it also prohibited U.S. nationals from working with Chinese chip companies to slow their technological advances). As it looks to isolate the country, the U.S. even lobbied the Netherlands and Japan to curb exports of certain advanced chipmaking equipment, though some analysts still believe that time is on China’s side (also read how semiconductors play into the situation in Taiwan).
Chips are used in just about everything today, making the modern economy possible, but the bigger concerns here are those used in sensitive military technologies. The most advanced integrated circuits let nations stay far ahead of their rivals in terms of weapons systems and intelligence gathering, and more broadly, are a statement of geopolitical power. As China grows its influence, the country has been making strides towards producing its own advanced chips, and has even surprised the U.S. with its latest military developments. Remember the Chinese hypersonic missile test that went around the world in 2021?
To the rescue? Treasury Secretary Janet Yellen, the top U.S. economic policymaker, will head to China tomorrow, just weeks after Secretary of State Antony Blinken visited the country. Ahead of the trip, Chinese leader Xi Jinping said he wanted to work with other nations to “reject the moves of setting up barriers, decoupling, and severing supply chains.” “We should make the pie of win-win cooperation bigger,” he added, and “ensure that more development gains will be shared more fairly by people across the world.” Things are increasingly turning sour, however, with the U.S. considering curbs on Chinese companies’ access to cloud-computing services, as well as a new advisory that warns Americans to reconsider travel to Mainland China. (3 comments)
Second half
The stock rally in the last two days of June pushed the broad market out of the historical sweet spot for second-half performance, according to BMO strategist Brian Belski. Investing Group Leader Bret Jensen also says the stock market has become increasingly overbought, with the S&P 500 (SP500) climbing 15.9% in the first half of 2023, and sees a reckoning on the horizon. Over in the bullish camp, SA analyst Michael James McDonald believes the current market rally is not over. “A 5% market correction may occur, but the longer-term uptrend will remain intact until there are more bulls and fewer bears.” (5 comments)
Mustard Belt
Following a weather delay that pushed off the event for several hours, Nathan’s Famous (NATH) Fourth of July Hot Dog Eating Contest got underway Tuesday afternoon on the corner of Surf and Stillwell avenues in Coney Island. Many more watched the ESPN telecast of the event, which has been going on formally since 1972. Defending men’s champion, Joey “Jaws” Chestnut, ate 63 hot dogs during the gluttonous showdown – winning the coveted Mustard Belt for the 16th time – while Nathan’s stock has also had some luck over the past year, rising 36% since July 4, 2022. “The company’s generally solid results are expected to continue into FY 2023,” writes SA analyst Mike Zaccardi, CFA, “with EPS predicted to rise by 45%.”
Yahoo!
One of the oldest internet search giants is planning a comeback two years after it was spun out from Verizon (VZ). Yahoo CEO Jim Lanzone is eyeing an IPO, believing the firm is ready financially following a stint as a private entity that helped it make necessary structural changes. “While the company has had struggles in different points in time, we’re still huge in traffic, and we have our best days ahead of us product-wise,” he declared. Apollo Global (APO) acquired Verizon Media, which included AOL and Yahoo, for about $5B in 2021. (107 comments)
Today’s Economic Calendar
OPEC Meeting
Auto Sales
7:00 MBA Mortgage Applications
10:00 Factory Orders
2:00 PM FOMC Minutes
4:00 PM Fed’s Williams: “Monetary Policy: Lessons and Challenges”
What else is happening…
WSB survey results: Pay back your student loans… in full!
Saudi Arabia to extend oil production cuts by an extra month.
Apple (AAPL) slashes Vision Pro target amid production woes.
Disney (DIS), Universal (CMCSA) duke it out at the box office.
Instagram’s (META) Twitter rival available for preorder on App Store.
BlackRock (BLK), Fidelity refile spot bitcoin ETF applications.
Trump SPAC (DWAC) reaches in-principle settlement with SEC.
Illumina (ILMN) faces record fine from EU over Grail deal.
Moderna (MRNA) applies for EU approval of updated COVID jab.
Paycom (PAYC), Chipotle (CMG) among Goldman’s Rule of 10 screens.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets posted big gains. Japan, China, South Korea and Malaysia rallied more than 1%. Europe, Africa and the Middle East posting across-the-board gains. Turkey, the UAE, Greece, Finland, Norway, Spain, the Netherlands, Italy, Portugal and the Czech Republic are leading. Futures in the States point towards a flat open for the cash market.
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The dollar is up. Oil and copper are up. Gold and silver are down. Bonds are up.
Stories/News from Seeking Alpha…
Relief or responsibility?
Seeking Alpha wishes our subscribers a Happy Fourth of July! Wall Street Breakfast won’t be published tomorrow, but tune back in on Wednesday.
The Supreme Court has overturned the Biden administration’s student-debt forgiveness plan in a 6-3 decision, ruling it exceeded the authority Congress granted to the executive branch. The plan, struck down on Friday, would have wiped off $430B in loans from the government’s books, but there are already some alternatives that are in the making. The administration will pursue student debt relief through a longer route via the “Higher Education Act,” while other plans would allow low-income borrowers to pay smaller amounts on the balance of their loans over time, or put a temporary ban on penalties.
Letter of the law: Chief Justice John Roberts said in the opinion that while the Secretary of Education has the authority to “waive or modify” existing statutory or regulatory provisions applicable to financial assistance programs under the HEROES Act, statutes cannot be rewritten from “the ground up.” Earlier, the high court had rejected the first of two challenges against President Biden’s plan to cancel a portion of federal student loans as part of a COVID relief program. Writing the majority opinion, Justice Samuel Alito held that the plaintiffs did not have standing, that is, they failed to establish that they would suffer any injury from the loan forgiveness plan.
“This carries huge implications for inflation, consumer discretionary spending, and the distribution of wealth in the U.S.,” writes SA analyst Logan Kane, analyzing winners and losers from the landmark ruling. The student loan debate also continues to take place among investors. Some say it would correct devious historical loan practices and support the broader economy. Others have flagged it as another contributor to high inflation, or a measure that would hurt those who chose not to go to college because of the cost, don’t have loans, or have already paid them off.
What to watch: Related student loan stocks, including SoFi Technologies (SOFI), Sallie Mae (SLM), Navient (NAVI), and Nelnet (NNI), have been jittery since the announcement by SCOTUS. Once payments resume, the typical student loan payment will be between $210-$314 per month, according to Wells Fargo. In terms of the entire portfolio, the Federal Reserve estimates that Americans owed $1.6T in student loans as of the first quarter of 2023, with the average student loan debt around $38,000 per borrower. (851 comments)
Travel plans
Smoky haze, hot weather and storms… Many flights have been delayed or canceled over the past week in the U.S., posing some problems for travelers ahead of the Fourth of July. United Airlines (UAL) accounted for most of the flight cancellations, but that didn’t stop CEO Scott Kirby from hopping on a private jet to get out of the New York area. He has since apologized, but unions representing airline staff have accused United’s management of planning poorly and operating too many flights. Meanwhile, the Independence Day weekend is set to be the busiest on record, with 4.17M Americans flying to their destinations, up 11.2% from 2022 and 6.6% from 2019. (3 comments)
Record deliveries
Handily beating estimates, Tesla (TSLA) is powering higher before the bell today. Shares are up 6.5% after the automaker registered record electric vehicle deliveries in the second quarter. In fact, the stock has more than doubled in value year-to-date, splitting analysts on what will come next. “We remain sell-rated on Tesla as we believe its rally this year is not driven by fundamentals,” Investing Group Leader Tech Stock Pros warned prior to the delivery report, while Victor Dergunov is doubling down on dip buying. (343 comments)
A new tune
The music industry is set for another heavy structural change as the decade progresses. That’s according to Goldman Sachs, which said the main players will need a “coordinated response” to hold on to sustainable growth and capture new opportunities. The 2030 growth outlook still remains strong, with Goldman raising its CAGR expectations for 2023-2030 to 7.3%. Stocks that are Buy-rated include Warner Music (WMG) and Live Nation (LYV). See the full list of Goldman’s picks here. (9 comments)
Today’s Economic Calendar
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
NYSE early close at 1:00 PM
SIFMA closes at 2:00 PM
What else is happening…
Apple (AAPL) exceeds $3T market cap as analysts heap praise.
Why is social media being blamed for fueling riots in France?
Twitter temporarily fixes limit on tweets users can read per day.
AMC’s (AMC) APE conversion decision more than a week away.
Nintendo’s (OTCPK:NTDOY) ‘Zelda’ lifts videogame sales in May.
What’s next for clinical research firms after pandemic boom?
Israel to buy 25 more Lockheed (LMT) F-35 stealth jets in $3B deal.
Pay hikes expected to remain high in 2024 amid labor shortages.
UBS (UBS) aims to skip $10B backstop from Swiss government.
As northeast U.S. air quality suffers, here are some potential stock ideas.
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