Good morning. Happy Friday.
The Asian/Pacific markets did poorly. Japan, China, Hong Kong, South Korea, Australia, Malaysia and the Philippines posted moderate or big losses. Europe, Africa and the Middle East are currently mostly down. Denmark, Poland, Turkey, the UAE, Russia, Finland, Spain, Portugal, Austria, Sweden and the Czech Republic are down the most; Hungary is up. Futures in the States point towards a positive open for the cash market.
————— Free Online Course: Mini Masterclass in Trading —————
The dollar is down. Oil and copper are down. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
Back on the menu
The burger wars are escalating, with Restaurant Brands’ (QSR) Burger King bringing back its $5 value meal, which will likely include a sandwich, chicken nuggets, fries and a drink. The move follows reports that McDonald’s (MCD) will launch a $5 value meal in the U.S. beginning on June 25, and more are joining in on the action. Wendy’s (WEN) just announced a $3 morning meal deal that’ll include a breakfast sandwich, as well as a small batch of seasoned potatoes.
Cost-conscious: Many Americans squeezed by higher food costs have changed their habits by visiting restaurants less often, even if those are fast food chains. It has also made deals and discounts a bigger part of overall consumer decision-making. Value meals look to provide those options to customers who have grown fatigued by the current environment, and continue to feel wallets before heading to the drive-thru or grabbing a quick bite.
Note that Burger King (QSR) plans to run its new offer for several months, while the promotion from McDonald’s (MCD) will likely last four weeks. That’s not a long time, which means the discounted meals may not be sustainable, especially with the Golden Arches asking Coca-Cola (KO) to chip in and mitigate some of the costs. Instead, the value offerings will seek to bring back momentum, with the aim of converting the increase in customers into a steady stream of traffic with higher sales.
From the SA comments section: “This is part of a wider story. Target is lowering their prices, other restaurants are also realizing that they have overreached with excessive increases,” wrote Investor since ‘73. References to “shrinkflation” were mentioned by user ajvanatta, while jojob852 points out that some chain restaurants have been “really clobbered” due to “wage and food inflation” and starts the discussion on top sector picks when things “finally settle down and people circle back to these names.” (39 comments)
Hollywood AI
As the media industry changes tack when it comes to artificial intelligence, with multiple content licensing deals being announced of late, Hollywood may be next. Alphabet (GOOGL) and Meta (META) have reportedly held talks with major Hollywood studios on licensing content for use in AI video generation software, offering tens of millions of dollars. Warner Bros. Discovery (WBD) is keen on licensing some of its programs to train AI models, while Netflix (NFLX) and Disney (DIS) are interested in other types of collaboration. Microsoft (MSFT)-backed OpenAI has held similar discussions on Hollywood partnerships. (4 comments)
More than a ticket
Live Nation (LYV) sank around 8% on Thursday after the DOJ filed an antitrust suit looking to split up what it called an illegal monopoly that has pushed ticket prices higher. “The complaint attempts to portray Live Nation and Ticketmaster as the cause of fan frustration with the live entertainment industry,” the company responded, blaming elevated costs on production, artist popularity, and online ticket scalping. “This case will probably take years to materialize,” noted SA analyst Yuval Rotem, cautioning that it could pressure the stock whether or not the breakup succeeds. (12 comments)
Crypto win
Security? Commodity? Does it matter anymore? Less than six months after approving the first spot bitcoin ETFs, the SEC is again broadening the reach of the crypto world. The agency has approved applications from Nasdaq (NDAQ), NYSE (ICE), Cboe (CBOE) and five others to list exchange-traded funds that invest directly in ether (ETH-USD). The issuers still need a separate greenlight from the agency before the products can go live, with the deadline yet to be determined. Ether, which rose 20% this week amid ETF optimism, fell 4% following the approval in typical “buy the rumor, sell the news” fashion. (27 comments)
Today’s Economic Calendar
8:30 Durable Goods
9:35 Fed’s Waller Speech
10:00 Consumer Sentiment
1:00 PM Baker Hughes Rig Count
SIFMA Early Close at 2:00 PM
What else is happening…
A costly JFK strike over Memorial Day may have been prevented.
Flip flop? Elon Musk not in favor of U.S. tariffs on Chinese EVs.
Norfolk Southern (NSC) reaches settlement over Ohio derailment.
Boeing (BA) deliveries are not likely to rise from prior levels.
Nvidia (NVDA) is worth more than AMZN and TSLA combined.
Is BHP’s merger talk objective to access Anglo’s books?
Petrobras (PBR) seen paying out full extra dividends in 2024.
CDC researchers flag increasing ADHD diagnoses in children.
23andMe (ME) not providing guidance amid strategic review.
‘Overbought’ gold adds to losses after tough Fed talk on rates.
—————
Good morning. Happy Thursday.
The Asian/Pacific markets leaned to the upside. Japan, India, New Zealand, Malaysia, Singapore and the Philippines did well; China, Hong Kong and Australia were weak. Europe, Africa and the Middle East currently lean up too. Denmark, South Africa, Norway, Hungary, the Netherlands and Italy are up; the UAE, Russia and Saudi Arabia are down. Futures in the States point towards a relatively big gap up open for the cash market.
————— Free Online Course: Mini Masterclass in Trading —————
The dollar is down. Oil is up; copper is down. Gold and silver are down. Bonds are up.
Stories/News from Seeking Alpha…
Can’t beat ’em, join ’em
The way publishers are approaching generative AI is changing as the media industry evolves its outlook on the technologies of the future. Questions had initially centered around how it would impact their workforce or operations, as well as how they could benefit from, or be harmed by, the new developments. Some of those answers are now becoming apparent in many parts of the publishing space, ranging from movies and music to online content and the printed word.
Backdrop: In the early innings of the AI revolution, firms banded together to stave off any threats to their bottom line. Hollywood actors and writers went on strike in part over fear that they might lose or share revenue with machines, while news and media companies started talks to establish a united front against Big Tech over “content scraping” and training their AI models on data produced by their organizations. It now looks like each industry and company will reach separate deals with internet giants that wield tremendous power over distribution and visibility.
Microsoft (MSFT)-backed OpenAI just signed a major content licensing deal with News Corp. (NWSA), which could be worth more than $250M over five years, sending shares of the latter up 7% in premarket trading. That’ll give OpenAI access to The Wall Street Journal, Barron’s and MarketWatch, and follows similar deals with The Financial Times and Axel Springer – the parent company of Business Insider and other publications. Google (GOOG) (GOOGL) also inked a deal with Reddit (RDDT) earlier this year to use the platform’s content to train its AI models, while Meta (META) is reportedly looking to follow suit.
Outlook: Things aren’t only evolving in the world of content licensing, but are also beginning to change in the world of content writing. Journalists and writers are experimenting with generative AI for article outlines, headlines and even text. Over at The Washington Post, a new strategy announcement reportedly declared that the paper has to have “AI everywhere in our newsroom” as it seeks to find a way out of its financial hole. The vast majority of Wall Street Breakfast subscribers believe that publishers should currently be required to use a disclaimer when using AI, but will that change as things evolve? Join the discussion in the comments section.
Superpower unleashed
Nvidia (NVDA) surged 6% AH on Wednesday, breaking through the $1,000 level, after the semiconductor giant reported quarterly results and guidance that topped Wall Street’s expectations. That wasn’t all. The AI darling announced a 10-1 stock split, more than doubled its quarterly dividend, and sent the market on a ride with Nasdaq futures up 1% in overnight trading. “The next industrial revolution has begun,” CEO Jensen Huang declared. “Companies and countries are partnering with Nvidia to shift the trillion-dollar traditional data centers to accelerated computing to produce a new commodity: artificial intelligence.” (344 comments)
Stronger protections
Looking to bring more oversight to the fast-growing space, the Consumer Financial Protection Bureau has issued an interpretive rule that will treat “buy now, pay later” lenders essentially the same as credit card issuers. BNPL providers like Affirm (AFRM), PayPal (PYPL) and Block’s (SQ) Afterpay will now be required to refund returned products, investigate merchant disputes, and provide bills with fee disclosures. Credit card firms currently comply with such rules under the decades-old Truth in Lending Act, but the CFPB has been clamping down on the space, most recently finalizing a rule to cap credit card late fees. (3 comments)
Breaking up
DuPont (DD) is joining sprawling conglomerates like General Electric (GE) and Johnson & Johnson (JNJ) in splitting its businesses into more focused companies. The chemical giant – which was formed in 1802 – will separate into three publicly traded entities, sending its shares up about 5% in premarket trading. DuPont CEO Ed Breen said the break-up plan will unlock incremental value for shareholders and customers, and announced that current CFO Lori Koch will succeed him in his current role, effective June 1. Breen will transition to full-time executive chairman. (14 comments)
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
9:45 PMI Composite Flash
10:00 New Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
3:00 PM Fed’s Bostic Speech
4:30 PM Fed Balance Sheet
What else is happening…
Fed minutes: Data didn’t increase confidence toward inflation goal.
Target (TGT) falls after pointing to consumer discretionary softness.
Bird flu fears: Vaccine makers see double-digit percentage gains.
Biden cancels $7.7B more in student debt for 160,000 borrowers.
In orbit: SpaceX spy satellites and new Russian ‘space weapon.’
Snowflake (SNOW) revenue and outlook shatter expectations.
Anglo American rejects new BHP (BHP) offer, but extends deadline.
British Prime Minister Rishi Sunak calls for national election in July.
Live Nation (LYV) sinks on report DOJ antitrust action is ready.
Solar benefits: An end to China’s profit-slashing price war?
—————
Good morning. Happy Wednesday.
The Asian/Pacific markets were mixed and little changed. Taiwan and Indonesia did well; Japan was weak. Europe, Africa and the Middle East are currently mostly down. The UK, Denmark, Poland, France, Greece, Israel and Austria are down the most. Futures in the States point towards a down open for the cash market.
————— BLOG: A Summary of Metals Setups —————
The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
AI superpower
The chipmaker at the center of the AI revolution will capture the camera this afternoon, with many making big bets before the release of Nvidia’s (NVDA) earnings after the bell. It’s one of the most talked-about stocks in the financial world, and for good reason. The company is helping to build out all the infrastructure needed to power generative artificial intelligence, selling advanced processors to all the tech bigwigs that are splashing out on hardware like its the 1990s.
Snapshot: Getting all this infrastructure in place will likely take several years, meaning Nvidia is still primed for exponential growth (at least that is the hope). The potential has excited investors, who have sent the stock soaring since last year. Shares just hit fresh all-time highs on Tuesday at over $950 and have nearly doubled year-to-date. NVDA is also up over 550% since the beginning of 2023 and has become the most popularly traded stock on Wall Street.
Nvidia’s consensus EPS estimate for Q1 comes in at $5.58 (+412% Y/Y), with a revenue forecast of $24.6B (+242% Y/Y), up from $7.2B in the prior year. That’s a staggering difference, with the AI darling making nearly as much revenue per quarter as it used to do on an annual basis. If there is any guide to how shares will trade after earnings, keep an eye on forward guidance, accompanying commentary, and the outlook for the artificial intelligence boom.
Making moves: The options market is pricing in an 8% move either way after earnings, but it could be way more than that, given that Nvidia (NVDA) soared 24% after its last Q1 report. The firm is also now the third-biggest U.S. company by market cap, with a valuation of $2.3T, meaning its influence extends to broader market indices like the Nasdaq 100 (NDX) (with a weight of 6.5%) and S&P 500 (SP500) (with a weight of over 5%). All of that AI enthusiasm has helped propel the bull run in U.S. stocks, leading the major averages to hit record highs this month. Are more in the making?
Up for sale
The U.S. Department of Energy is releasing 1M barrels of gasoline (42M gallons) from the Northeast Gasoline Supply Reserve to help “lower prices at the pump as Americans hit the road this summer.” The reserve was authorized in 2014, two years after Hurricane Sandy damaged refineries, but the cache had never been used and was due to be closed in line with a law Congress passed in March. While gas prices are up about 15% YTD, some say the release will not make a significant difference in the East Coast region, which burned through more than 3M bbl/day of gasoline last June alone. (54 comments)
Time running out
The clock is ticking on BHP’s (BHP) ambitious bid to acquire rival Anglo American (OTCQX:AAUKF), as the world’s biggest miner has until 12 PM ET to make a binding takeover offer. Anglo American already rejected two proposals from BHP and instead revealed a major company overhaul that included plans to sell or demerge its steelmaking coal, nickel, platinum, and diamond businesses. If BHP decides to stop pursuing a deal, it will have to stay away for at least six months, according to U.K. takeover rules. (4 comments)
Tactical nukes
The defense sector is on watch after Russia’s military started exercises to simulate the use of tactical nuclear weapons, which include the Kinzhal missile, the first hypersonic weapon to be used in the Ukraine war. The exercises, ordered by President Vladimir Putin, were said to be in response to “provocative statements” by Western Europe officials, including French President Emmanuel Macron. Tactical nuclear weapons are less destructive than what are known as strategic bombs that can level a city, but they still have significant power. Russia’s estimated arsenal of the warheads stands at around 1,500. (1 comment)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
9:40 Fed’s Goolsbee Speech
10:00 Existing Home Sales
10:00 Atlanta Fed’s Business Inflation Expectations
10:00 Quarterly Services Report
10:30 EIA Petroleum Inventories
1:00 PM Results of $16B, 20-Year Bond Auction
2:00 PM FOMC Minutes
What else is happening…
EU Council approves AI Act: Will it become a world benchmark?
Disney’s (DIS) Pixar lays off staff amid ongoing cost cuts.
Lowe’s (LOW) backs guidance on solid start to spring.
Macy’s (M) lifts outlook even as comparable sales fall.
Tesla (TSLA) highlights electric Semi potential at conference.
Regulatory review: Mastercard (MA), Visa (V) face no competition.
Lululemon sees consumer tastes shift, revamps product teams.
Children’s Place (PLCE) plunges after departure of its CEO.
Apple (AAPL) asks New Jersey court to toss DOJ antitrust lawsuit.
Top Novavax (NVAX) investor ends proxy fight after Sanofi (SNY) deal.
—————
Good morning. Happy Tuesday.
The Asian/Pacific markets were weak. China, Hong Kong, South Korea, New Zealand, Indonesia, Thailand and the Philippines posted moderate or big losses. Europe, Africa and the Middle East are currently mostly down. Turkey is up, but Poland, France, Germany, Greece, Russia, South Africa, Finland, the Netherlands, Italy and Portugal are posting the biggest losses. Futures in the States point towards a down open for the cash market.
————— VIDEO: Recent Trades —————
The dollar is up slightly. Oil is down; copper is up. Gold and silver are down. Bonds are up.
Stories/News from Seeking Alpha…
The winning medal
The metal Olympics are taking place in the wild world of commodities, with gold, silver and copper-based bronze all scoring a place on the podium. New highs continue to be notched in the latest games, though there is skepticism about the results and the possibilities of a rigged performance. However, for those betting on which medal might be awarded next, there is plenty to consider for all the competitors:
Gold: The yellow metal just hit levels of over $2,450 per ounce despite a strong American economy and U.S. dollar. Analysts have pointed to a coming Fed pivot on interest rates, as well as geopolitical tensions that have increased demand for the safe haven. Not only are investors getting involved, but there has been a large amount of buying from central banks, while the retail crowd is even getting in on the action with gold bars from Costco (COST).
Silver: The metal has outperformed gold in recent weeks, bringing its total gain to 32% YTD, compared to gold’s 18% return. It also benefits from all the safe haven attributes of its shiny cousin, such as a popular hedge against inflation, along with some distinctive practical qualities of its own. Silver is used for industrial purposes, like solar panel cells, and is relatively cheap in ounces when compared to pricey gold.
Copper: The latest rip has made numerous headlines after hitting all-time highs on exchanges across the globe. Fear of supply shortages and trade disputes has helped generate buzz around the industrial bellwether, which is also key for the green transition and rising electrification needs. Copper is used in EVs, wind turbines, power transmission and AI data centers, meaning there are actual supply and demand fundamentals to assess when evaluating the worth of the red metal.
Too shiny? The commodity competition can experience chaotic events, with scandals and manipulation hitting items like nickel and cocoa in recent years. There is speculation that this might be going on this time around, triggered by leveraged contract buying, short squeeze momentum, or price premiums on different exchanges. Others see a lot of metal potential that has even resulted in some real-world M&A action, such as BHP’s (BHP) $39B proposed takeover of Anglo American (OTCQX:AAUKF), which would create the world’s top copper producer.
Wall Street leadership
Succession plans are “well on the way” at JPMorgan (JPM), with Jamie Dimon saying it’s up to the board to determine how much longer he’ll remain CEO. “I think when I can’t put the jersey on and give it my full effort, I should leave,” he announced at the bank’s Investor Day, adding that the timetable “is not five years anymore.” Dimon also outlined that the lender will not repurchase a lot of stock at current prices, noting that such a buyback – at a valuation of 2.3 times tangible book value – would be “a mistake.” JPM shares slipped 4.5% following the comments on Tuesday, but are up more than 40% over the past year. (60 comments)
Pulling a 180?
Cryptocurrencies are back in rally mode as traders increasingly bet on the approval of the first spot ether ETF. While the industry previously did not expect the SEC to give the green light, the regulator has reportedly requested that ETF issuers update 19b-4 filings on an accelerated basis. The development signals some progress, but it doesn’t mean it’s a done deal. Ether (ETH-USD) is still up big on the news, soaring 20% to $3,708. The SEC’s decision on VanEck’s spot ether ETF application is expected on Thursday, and one from ARK Invest is due on Friday. (1 comment)
Bear capitulation
One of Wall Street’s prominent bears has finally turned positive on his outlook for the stock market as indexes continue to hit record highs. Mike Wilson, equity strategist at Morgan Stanley, now calls for the S&P 500 (SP500) to rise to 5,400, higher than his previous year-end target of 4,500, which was one of the lowest on Wall Street. The forecast is derived from a 19x P/E multiple on 12-month forward EPS based on June 2026 of $283. “This earnings path is based on our economists’ growth forecasts, output from our earnings models, and our view that AI diffusion will boost margins starting in 2025,” Wilson declared. (48 comments)
Today’s Economic Calendar
9:00 Fed’s Barkin Speech
9:00 Fed’s Waller Speech
9:05 Fed’s Williams Speech
9:10 Fed’s Bostic Speech
11:45 Fed’s Barr Speech
7:00 PM Fed’s Bostic Speech
What else is happening…
WSB survey results: Be aware of risks related to meme rallies.
Gruenberg to quit as FDIC chair after toxic work culture scandal.
Mester: More data needed before Fed cuts as inflation progress stalls.
Palo Alto Networks (PANW) tumbles after lowering billings guidance.
OpenAI to pause ChatGPT voice as it resembles Scarlett Johansson.
EV drama: Tesla shareholders to vote on Elon Musk’s pay package.
China’s Li Auto (LI) postpones all-electric SUV launch until 2025.
Hims & Hers (HIMS) sells cheap versions of GLP-1 weight loss drugs.
Trump Media (DJT) reports hefty quarterly loss on very little revenue.
Calpers to oppose all Exxon (XOM) directors in shareholder dispute.
—————
Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets mostly did well. Japan, China, Hong Kong, South Korea, Australia, Malaysia and the Philippines led; Indonesia was weak. Europe, Africa and the Middle East are currently mostly up. Poland, France, Turkey, Germany, Greece, South Africa, Italy, Portugal and Sweden are up; Russia and Saudi Arabia are down. Futures in the States point towards a positive open for the cash market.
————— VIDEO: Recent Trades —————
The dollar is up. Oil and copper are down. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
Bulls on the loose
It’s settled
Markets are only a week away from a new settlement cycle as the Securities and Exchange Commission (SEC) and the Depository Trust & Clearing Corporation (DTCC) move the industry to “T+1.” Currently, market players are required to physically deposit stock in an account within two days of making a transaction, in a process known as “T+2.” During that time, brokers have to post collateral to the DTCC because equity prices can fluctuate over those 48 hours and some buyers/sellers are using margin/borrowed shares, so the lag can make sure everything turns out all right.
Backdrop: For many years, markets operated on a “T+5” settlement cycle, when security transactions were done manually. In the 1990s, the SEC shortened the settlement cycle to three business days, which reduced the amount of money that needs to be collected at any given time. It was only in 2017 that the commission moved to T+2, calling the previous standard an outdated “settlement cycle” due to improvements in technology, emerging new products and growing trading volumes. Note: The move to T+1 will also impact ETFs, certain mutual funds, REITs and MLPs.
One of the biggest catalysts to speed up the clearing timeframe was the meme stock trading frenzy of 2021, which ironically, just resurfaced. Brokers were forced to post collateral during the settlement period and eventually had to restrict trading to ensure they had enough margin in the funds held by the DTCC. Some have even called for real-time settlement, like Robinhood (HOOD) CEO Vlad Tenev, who came away from the GameStop (GME) saga with condemnations from the retail crowd given the platform’s slogan to “democratize finance for all.”
Is it a possibility? The benefits of an even shorter settlement cycle are controversial. This could eventually fail to protect market participants by not giving enough time to detect failed trades, correct settlement instructions or deal with compliance issues. Instant settlement (T+0) would also require expensive updates to almost all market infrastructure and could do away with benefits like settlement netting, strain dealer resources, or weigh on important trading tools like margin purchases of stock. Other alternatives are also being explored, including T+0.5 or T+evening, where market trades would be settled the same day. Take the WSB survey.
Mideast watch
Energy markets are in the spotlight after the death of Iranian President Ebrahim Raisi in a helicopter crash was confirmed, as well as fresh headlines out of Saudi Arabia. Despite uncertainty related to major crude producers, the market impact of the developments has so far been contained. Raisi, who oversaw the acceleration of Iran’s nuclear program, had long been viewed as a potential successor to Supreme Leader Ayatollah Ali Khamenei. Separately, Saudi Arabia’s Crown Prince Mohammed bin Salman postponed a four-day visit to Japan as King Salman is being treated for lung inflammation. (3 comments)
AnEther ETF
Despite the recent success of spot Bitcoin (BTC-USD) exchange-traded funds, the crypto industry does not expect the SEC to approve more similar products. The regulator has until May 23 to announce its decision on VanEck’s spot Ether (ETH-USD) ETF application, but issuers have indicated that there was limited communication and feedback from the SEC regarding their applications. A rejection by the SEC could potentially lead to lawsuits. Recall that Grayscale Investments’ legal win last August paved the way for the approval of spot Bitcoin ETFs.
Under the sea
It’s official! Red Lobster has filed for Chapter 11 bankruptcy after it buckled under mounting losses, costly leases, and rising material and labor costs. The company intends to use the proceedings to drive operational improvements, close restaurants, and pursue a sale of substantially all of its assets as a going concern. Red Lobster also announced a stalking horse bid from its existing lenders and $100M debtor-in-possession financing. The bankruptcy caps off years of financial troubles, which prompted top shareholder Thai Union Group (OTCPK:TUFBY) to look to exit its stake. (4 comments)
Today’s Economic Calendar
Fed’s Bostic Speech
9:00 Fed’s Barr: “Bank Supervision and Regulation”
9:00 Fed’s Waller Speech
10:30 Fed’s Jefferson: “The U.S. Economy and Housing Price Dynamics”
7:00 PM Fed’s Bostic Speech
What else is happening…
Goldman Sachs: The name Magnificent 7 needs to be retired.
OpenAI seeks to address concerns after safety execs’ exit.
Mercedes autoworkers in U.S. vote against union membership.
Delayed again! Boeing’s (BA) first crewed flight of Starliner.
… and is sanctioned by China over arms sales to Taiwan.
Boston Scientific (BSX) succeeds in trial for leadless pacemaker.
U.S. Steel (X) buyout in focus as key Nippon Steel exec to visit U.S.
Biden administration seeks end to coal leasing in Powder River Basin.
Target (TGT) lowers prices on thousands of frequently shopped items.
SA Roundtable: Are Eli Lilly (LLY), Novo Nordisk (NVO) overvalued?
—————