Good morning. Happy Friday.
The Asian/Pacific markets were mixed. Japan, Australia, New Zealand and the Philippines did well while China, Hong Kong, Taiwan, Malaysia, Indonesia and Thailand were weak. Europe, Africa and the Middle East are currently mostly up. The UK, Denmark, Poland, Turkey, the UAE, Switzerland, Norway and Hungary are up; Russia is weak. Futures in the States point towards a positive open for the cash market.
————— VIDEO: State of the Market —————
The dollar is down. Oil if flat; copper is down. Gold and silver are down. Bonds are mixed.
Stories/News from Seeking Alpha…
A conviction
Former President Donald Trump has been found guilty on all 34 charges of falsifying business records in a hush-money trial, just as the 2024 campaign cycle kicks into high gear. A sentencing hearing is scheduled for July 11, only days before the Republican National Convention, but don’t expect any time behind bars. At 77 years old, Trump is a first-time offender and has been convicted of a non-violent crime, while the appeals process is sure to take many months or even years to play out, and won’t be resolved before the election.
Quote: “This was a disgrace. This was a rigged trial by a conflicted judge who was corrupt,” Trump declared following the decision. “We will fight for our Constitution. This is long from over. The real verdict is going to be Nov. 5 by the people. They know what happened, and everyone knows what happened here.”
It’s just the beginning of several cases that Trump has coming down the pipeline. Separate lawsuits in Georgia and Washington relate to conspiracies to overturn the 2020 election, while another in Florida surrounds mishandling classified documents, but two out of the three are federal charges that could be shut down if he enters office. Trump also recently staved off a $464M civil fraud judgment in a corporate case in New York after an appellate court agreed to a smaller $175M bond while the ruling is appealed. Wall Street and some prominent CEOs are now weighing in on the hush-money trial, but many of the voices are likely to back Trump in the general election.
Tracking movement: Broader market volatility stemming from the verdict is likely to be overstated, but one stock linked to the fortunes of Trump is on the move. Down heavily following the jury decision, Trump Media & Technology Group (NASDAQ:DJT), which owns the social media platform Truth Social, has pared losses to 3% in premarket trading to near $50/share. Note that DJT has been a popular meme stock that has attracted attention without much regard to its fundamentals. Trump owns about 70% of the company’s stock, but interestingly, cannot access any of the capital until after the summer due to lockup provisions. (35 comments)
PCE preview
Inflation will take the spotlight this morning as markets prepare for personal consumption expenditures price data before the bell. Expectations signal slow progress in the Fed’s inflation fight, with core PCE expected to have risen 2.8% in April, the same level as the prior three months. The data comes a day after the Q1 GDP growth estimate was revised downward to reflect lower consumer spending. SA Investing Group Leader Mott Capital Management believes the PCE report will likely set the course of monetary policy for the next 6-9 months as the Fed wants a few months of favorable data, “and at this rate, that doesn’t appear to be coming anytime soon.” (2 comments)
Quality control
Boeing (BA) has submitted a plan to improve the safety of its products, with CEO Dave Calhoun meeting with FAA Chief Michael Whitaker in Washington, D.C. The agency has capped Boeing’s (BA) output of the 737 MAX to address safety issues, which has negatively affected Boeing’s (BA) cash flow, a key metric followed by investors to evaluate the company’s ability to increase earnings and pay down debt. Whitaker said the restrictions won’t be lifted until Boeing shows a “strong and unwavering commitment to quality and safety that endures over time,” and pledged to put more safety inspectors in the planemaker’s facilities. (2 comments)
Production cuts
Oil prices will be in focus this weekend as the market looks to Sunday’s OPEC+ meeting, where the cartel will decide whether to extend output cuts beyond Q2. OPEC+ is working on a complex deal that will allow the group to extend some or all of its deep production cuts into 2025, and some of the voluntary cuts into Q3 or Q4 of 2024. Meanwhile, crude futures fell again Thursday as a bullish draw in U.S. crude stocks was offset by surprise builds in gasoline and diesel inventories, adding to concerns about fuel demand as the summer driving season gets underway. (19 comments)
Today’s Economic Calendar
8:30 Personal Income and Outlays
9:45 Chicago PMI
1:00 PM Baker Hughes Rig Count
3:00 PM Farm Prices
6:15 PM Fed’s Bostic Speech
What else is happening…
Nvidia (NVDA) earns over 10% of revenue from mystery customers.
Dell Technologies (DELL) drops after margin guidance disappoints.
Google (GOOG) partners with Magic Leap to explore opportunities.
Tesla (TSLA) pushes for Full Self-Driving software approval in China.
Gap (GPS) rallies as company raises guidance after reviving brand.
Department stunner: Kohl’s slides on surprise loss, guidance cut.
Best Buy (BBY) improves profitability despite declining sales.
Aramco (ARMCO) confirms sale that could raise more than $13B.
Report: Skydance Media sweetens offer for Paramount (PARA).
Apple (AAPL) plans major Siri AI update for more control over apps.
—————
Good morning. Happy Thursday.
The Asian/Pacific markets were weak. Japan, China, Hong Kong, South Korea, India, Taiwan, New Zealand and Indonesia posted moderate losses. Europe, Africa and the Middle East are currently mixed and little changed. Denmark, Spain, Italy and Portugal are up; South Africa, Hungary and Saudi Arabia are down. Futures in the States point towards a moderate gap down open for the cash market.
————— VIDEO: State of the Market —————
The dollar is down. Oil and copper are down. Gold and silver are down. Bonds are up.
Stories/News from Seeking Alpha…
Private credit
There’s an emerging asset class that has grown from around $250B in 2010 to about $2T today, and is set to expand by double-digit percentages in the coming years. The private credit market consists of private loans made by funds to privately owned companies, with money originating from sources like pension funds, insurance companies, endowments and foundations. Private credit also leans heavily on direct lending and one-to-one relationships compared to traditional loans, where money that is lent out is funded through bank deposits or is syndicated among a group of investors.
Why so popular? In the aftermath of the banking crisis in 2008, the Fed drove interest rates to zero, driving all the players in the market to compete for the same small number of assets that had any yield. This created an environment where alternative investments could gain an edge, while at the same time, the big banks pulled back on the riskier areas of lending due to increased regulation, and higher capital and liquidity rules. It was part of a plan to move risks out of the banks where taxpayers have protection, and eventually saw private credit morph into one of the hottest investments on Wall Street.
As investors want more of it, the warnings have grown louder. Back in November, UBS (UBS) Chairman Colm Kelleher said there was “clearly an asset bubble going on in private credit… what it needs is just one thing to trigger a fiduciary crisis.” The IMF also warned that the market needs more scrutiny due to liquidity demands, as well as the quality of borrowers. The latest to weigh in on the industry is JPMorgan’s (JPM) Jamie Dimon, who noted that “there may be problems here,” but “I don’t think it’s systemic” and the bank would even contemplate investing up to $200B in private-credit deals off its balance sheet.
What to watch: Private credit wasn’t disturbed when rates took a turn higher in the fight against inflation, as the loans carry floating interest rates. However, there are fears that this can eventually hurt borrowers overwhelmed by higher payments, especially if there is a severe recession, or if it is compounded with other governance risks like weak underwriting standards in a less liquid or not-so-transparent environment. Those in the private credit industry say their matched funding model is more secure compared to traditional banks that lend long/fund short with deposits – and can experience a run in moments of crisis – while it is also a source of credit creation that can support the U.S. economy. See private credit stocks here.
Selling out
Nelson Peltz has reportedly sold his entire stake in Walt Disney (DIS), making about $1B on the position, just weeks after the activist investor lost the most expensive proxy contest ever. Disney’s proposed slate of directors was re-elected to the board at its annual meeting in April, beating a pair of rival slates from Peltz’s Trian Fund Management and Blackwells Capital. “While we are disappointed with the outcome… We are proud of the impact we have had in refocusing this Company on value creation and good governance,” Trian had said after the vote. Disney shares are up 12% YTD, compared to the 10% return of the S&P 500. (46 comments)
Power projects
The White House is throwing its support behind building large-scale nuclear reactors, announcing new measures intended to accelerate their development. The last commercial-scale nuclear reactor built in the U.S., Southern Co.’s (SO) Vogtle project, was more than $16B over budget and seven years behind schedule. The Biden administration said nuclear energy is needed to meet climate and clean power goals, but a dozen reactors have closed since 2013, losing out against cheaper power from natural gas and renewable energy sources. (110 comments)
Still searching
Google (GOOG, GOOGL) has confirmed to The Verge that the 2,500 leaked internal documents with details on data tracked by the search giant are authentic. The files contain info on Google’s secret algorithm for ranking search results, which – along with its testimony in the DOJ antitrust case – shed more light on the kind of data the leading search engine collects and uses. “We would caution against making inaccurate assumptions about Search based on out-of-context, outdated, or incomplete information,” Google spokesperson Davis Thompson noted in a statement. (2 comments)
Today’s Economic Calendar
8:30 GDP
8:30 International Trade in Goods (Advance)
8:30 Initial Jobless Claims
8:30 Corporate Profits
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
12:05 PM Fed’s Williams Speech
4:30 PM Fed Balance Sheet
5:00 PM Fed’s Logan Speech
What else is happening…
Salesforce (CRM) plummets on weak sales and forecast.
Other direction: C3.ai (AI) soars as outlook tops estimates.
T-Mobile-US Cellular (USM) deal may see antitrust issues.
U.S. cracks down on customs brokers used by Shein, Temu.
Sony (SONY) in talks to buy Queen catalog in $1B deal.
BlackRock’s IBIT surpasses GBTC as largest Bitcoin fund.
More earnings: Abercrombie (ANF) rallies on record results.
HP’s (HPQ) PC sales rise after seven quarterly declines.
UiPath (PATH) plunges as CEO steps down., ex-boss to return.
Unprecedented gap between Nvidia (NVDA) and S&P 500 (SP500).
—————
Good morning. Happy Wednesday.
The Asian/Pacific markets posted big losses. Japan, Hong Kong, South Korea, India, Taiwan, Australia, Indonesia, Thailand and the Philippines dropped more than 1%. Europe, Africa and the Middle East are currently down big. Denmark, Poland, France, Turkey, Germany, Greece, Russia, Finland, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are down more than 1%. Futures in the States point towards a relatively big gap down open for the cash market.
————— Free Online Course: Mini Masterclass in Trading —————
The dollar is up. Oil is up; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Energy boom
The consolidation wave in the oil and gas sector is not letting up, with ConocoPhillips (COP) agreeing to acquire Marathon Oil (MRO) in a $22.5B all-stock deal. The latter was already climbing on reports overnight, but the deal’s confirmation sent shares of MRO up 6% in premarket trade. The footprint of ConocoPhillips will expand tremendously following the acquisition, with assets in Eagle Ford, the Bakken Formation, and as far away as Equatorial Guinea.
Drill, baby, drill! The U.S. is currently producing over 13M barrels of crude per day, which is way more than any country on the globe, including Saudi Arabia. The output growth has helped tame gas prices and, perhaps more importantly, undermined the influence of OPEC and Russia following the invasion of Ukraine in 2022. This has clashed with the Biden administration’s clean energy agenda, though for the time being, inflation concerns and energy independence seem to be the top priorities, especially if they can be paired with climate spending towards the green transition.
Producers also know that while times are good, demand can come down or eventually plateau, especially with the U.S. currently exporting more oil than nearly every member of OPEC. One doesn’t have to look too far to the 2014-16 downturn, which hammered the industry and was largely driven by a supply glut. Boom-bust cycles are normal for the oil sector, but many are preparing in advance this time around, turning to mergers and consolidation to squeeze more profits from their production and raise their competitiveness as the cheapest barrels on the market.
Economies of scale: Dealmaking in recent months has seen Hess (HES) shareholders approve a $53B sale to Chevron (CVX), as well as Exxon’s (XOM) all-stock transaction for Pioneer Natural Resources, which was valued at $60B. It didn’t stop there, as energy-hungry companies looked to snap up important resources despite increased threats of antitrust scrutiny. Endeavor Energy Partners confirmed a $26B offer from Diamondback Energy (FANG), Occidental Petroleum (OXY) announced a $12B agreement to buy West Texas producer CrownRock, while APA (APA) inked a deal to purchase smaller rival Callon Petroleum for $4.5B. (6 comments)
End of pursuit?
Speaking of merger activity, Anglo American (OTCQX:AAUKF) has rebuffed BHP’s (BHP) request for even more time to discuss its takeover proposal. The news came just hours ahead of the deadline to finalize an agreement, signaling the potential end to BHP’s pursuit of the British miner. “BHP has not addressed the board’s fundamental concerns relating to the disproportionate execution risk associated with the proposed structure and the value that would ultimately be delivered,” according to Anglo American. Shares of BHP rose 2.7% in premarket trade after the response.
To the polls
South Africans are voting in what is seen as the most pivotal general election since the end of apartheid, with polls indicating that the ruling African National Congress party could lose its majority in parliament for the first time in 30 years. If that were to happen, the ANC would have to form a coalition with other parties to stay in the government. There is growing discontent among South Africans over the country’s economic prospects. The unemployment rate remains above 30%, while there has been a rise in violent crime, power cuts, and the collapse of government services amid rampant corruption.
Market cap leader
Nvidia (NVDA) shares jumped 7% on Tuesday, taking the AI darling’s market value to $2.81T, only $100B away from surpassing Apple (AAPL) – the second-most valuable listed company. The stock also topped Interactive Brokers’ (IBKR) weekly list of most-active symbols and helped push the tech-heavy Nasdaq Composite (COMP:IND) past 17,000 points for the first time. Nvidia’s shares have more than doubled in value this year, notching four monthly gains, as investors continue to bet on the company’s prospects after its stellar earnings. In contrast, Apple has been underperforming other Big Tech players, with its shares slipping 1.3% YTD. (4 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:00 Richmond Fed Mfg. Index
11:00 Survey of Business Uncertainty
11:30 Results of $28B, 2-Year FRN Auction
1:00 PM Results of $44B, 7-Year Note Auction
1:45 PM Fed’s Williams Speech
2:00 PM Fed’s Beige Book
7:00 PM Fed’s Bostic Speech
What else is happening…
WeWork (OTC:WEWKQ) co-founder drops restructuring bid.
Robinhood (HOOD) launches $1B share buyback plan.
Resilient consumers prompt CAVA (CAVA) to raise outlook.
Amazon’s (AMZN) Canadian workers will vote on labor union.
Merck (MRK) to buy eye-care startup EyeBio for up to $3B.
Turbulence as American Airlines (AAL) cuts profit guidance.
Alphabet talks for a HubSpot (HUBS) acquisition are true.
T-Mobile is acquiring UScellular’s (USM) wireless operations.
Wheat hits highest since last July on Black Sea harvest worries.
Meme no longer? Faraday Future (FFIE) gets non-compliance letter.
—————
Good morning. Happy Tuesday. Hope you had a good weekend.
The Asian/Pacific markets leaned down. Indonesia did well, but China, India, New Zealand and the Philippines were weak. Europe, Africa and the Middle East currently lean down. Russia and Israel are up; Poland, France, the UAE, Greece, Sweden and Saudi Arabia are down. 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 up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Back on the menu
Time to cut?
It is now nearly certain that the European Central Bank will lower interest rates before the Federal Reserve, bucking the trend of the U.S. central bank leading the way in terms of monetary policy. ECB officials have pretty much confirmed that the first cut will happen at its meeting next week, as inflation has moved closer to its 2% target. This contrasts with Fed officials’ lack of confidence in easing any time soon.
Officials’ comments: Olli Rehn, member of the ECB Governing Council and head of the Bank of Finland, said inflation was easing in a sustained way, “and the time is thus ripe in June to start cutting rates.” Francois Villeroy de Galhau, France’s central bank chief, said the first cut next month is a “done deal,” while ECB’s chief economist Philip Lane said there is enough data to support to remove the top level of restriction. Fabio Panetta, the Bank of Italy’s governor, said “a fairly general consensus has emerged on the possibility of a rate cut.”
Expectations: Markets are betting on a 25-basis point rate cut from the ECB next week, and none in July. “We expect the ECB to hold rates steady in July, before delivering another 25 bps rate cut in September,” said Wells Fargo economist Nick Bennenbroek. “Persisting wage growth combined with strengthening recovery supports the case for the ECB to adopt a gradual approach to rate cuts.”
“Eurozone core inflation has been coming down more quickly than similar measures in the U.S. and the U.K.,” CME Group explained in Why The European Central Bank Is Embracing The Idea Of Rate Cuts. “If the euro were to weaken and drop through parity, that might give the ECB pause about cutting rates.” The ECB is likely to cut rates further and faster than its peers.
$24B valuation
Elon Musk’s startup xAI has raised $6B in a series B funding round, pushing the artificial intelligence startup’s valuation to $24B. Before this financing round, xAI’s valuation had been $18B. “There will be more to announce in the coming weeks,” said Musk. The fresh funds will be used to bring xAI’s first products to market and develop advanced infrastructure. Investors included Andreessen Horowitz, Sequoia Capital, Fidelity Management, and Saudi Arabian prince Alwaleed Bin Talal. The investment comes as the AI firm looks to challenge OpenAI’s dominance, with the launch of its chatbot Grok last year to rival ChatGPT. OpenAI is currently valued at around $80B. (149 comments)
M&A watch
Hess (HES) shareholders will decide today on its planned $53B sale to Chevron (CVX), widely expected to be a close vote as investors remain concerned over the ongoing dispute with Exxon Mobil (XOM) for Guyana’s Stabroek Block. While proxy adviser Glass Lewis has recommended that shareholders vote for the deal, Institutional Shareholder Services has told investors to abstain from the vote till more details of the arbitration emerge. At least three shareholders are expected to abstain, but Hess advisers appear confident of securing enough shareholder support. Investing Group Leader Daniel Jones sees an attractive risk/reward opportunity amid the merger drama.
Chip fund
As countries increasingly set aside funds to support domestic chip-making amid fierce competition, China has set up a chip investment fund of around $48B in the third round of the government-backed financing pool. China’s central government and several state-owned banks and enterprises have invested in the fund. The investment push comes amid U.S. curbs aimed at restricting China’s access to advanced chips and equipment, including those used in artificial intelligence work. Other countries that have stepped up efforts to boost domestic chip manufacturing to stay ahead in the AI race include the U.S., Japan and South Korea. (91 comments)
Today’s Economic Calendar
12:55 Fed’s Mester Speech
9:00 S&P Corelogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
9:55 Fed’s Kashkari Speech
10:00 Consumer Confidence
10:30 Dallas Fed Manufacturing Survey
11:30 Results of $69B, 2-Year Note Auction
1:00 PM Results of $70B, 5-Year Note Auction
1:00 PM Money Supply
1:05 PM Fed’s Cook Speech
What else is happening…
EU elections: Meta (META) adds features to misinformation tracker.
Mester: Federal Reserve should use more words, connect the dots.
Apple (AAPL) iPhone shipments in China soar amid discounts.
AWS (AMZN) in talks to invest billions to expand Italy data centers.
Bill Gross: Trump win would be more bearish for bond markets.
BHP (BHP), Rio Tinto (RIO) to test electric haul trucks in Australia.
Evergrande (OTCPK:EGRNF) liquidators eye EV stake sale.
Barrick: Papua New Guinea mine operational after landslide.
Morgan Stanley: AI PCs to comprise 65% of market by 2028.
T+1 Is Wrong-Headed. Market Safety Is An Attitude, Not A Cost.
—————