Before the Open (Jun 3-7)

Good morning. Happy Friday.

The Asian/Pacific markets were split. South Korea, India and Australia did well; Hong Kong, New Zealand and Indonesia were weak. Europe, Africa and the Middle East are currently mostly down. Russia, Greece and Hungary are doing well, but the UK, Poland, France, Turkey, Germany, Spain, Italy, Portugal and Israel are down. Futures in the States point to a moderate gap down open, thanks to the employment report. .

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

Stories/News from Seeking Alpha…

The fine print

The Fed still wants more hard data to decide on monetary policy, and it will get more of that today. The non-farm payrolls report for May will be published at 8:30 AM ET, following other data this week that showed job openings softening in April and the ADP’s take on private employment signaling a slower-growth scenario. Elsewhere, Challenger’s Job Cuts Report revealed that year-to-date announced job cuts are at the third-highest level since May 2009 and that hiring rates have weakened.

By the numbers: Economists, on average, expect the U.S. economy to have added 182K jobs in May, up from the Bureau of Labor Statistics’ initial estimate of 175K jobs added in April. Watch for any revisions in the April number, and with inflation being the Federal Reserve’s main focus, data on average hourly earnings will also be important. Meanwhile, the unemployment rate is expected to stay unchanged at 3.9%, which remains near record lows.

The U.S. labor market is strong and remains resilient, but is easing, said Nick Bunker, director of North American Economic Research at Indeed. “Demand for workers continues to moderate, even if it’s still elevated,” he told Seeking Alpha in an interview. “So it’s a labor market that’s still quite strong, but increasingly has come into better balance between demand for workers and the supply of workers.”

SA commentary: Weighing in on the situation, analyst Logan Kane sees the labor market weakening significantly. “While unemployment claims show little cause for concern, job openings are rapidly falling, indicating a continued, substantial slowdown in hiring,” he declared. Other softening signs include the type of hiring over the past year, which has largely been restricted to specific sectors of the economy, like leisure and hospitality, healthcare, and the public sector. (79 comments)

Divergence

The European Central Bank cut its policy rates by 25 basis points, as expected, on Thursday, its first cut in almost five years amid signs of weakening price pressures. It’s the third major central bank to embark on a new easing cycle, following the Swiss National Bank’s move in March and the Bank of Canada’s cut on Wednesday. Will the Federal Reserve fall behind the curve? Some U.S. lawmakers are speaking out, like Sen. Elizabeth Warren (D-MA), who urged the central bank to follow in the ECB’s footsteps. “Jerome Powell needs to get with the program,” she wrote on X. (10 comments)

Buckle up

GameStop (GME) has seemingly pulled out the rug from under Keith Gill, known online as Roaring Kitty, just before the influential trader was scheduled to broadcast his first YouTube livestream in three years. Gill helped propel the stock this week with a series of reported trades in the hundreds of millions, with shares more than doubling in value and trading at $62/share for the first time since the meme craze of 2021. GameStop also wanted to cash in on its popularity, with an early release of its earnings and a plan to sell 75M new shares. At the time of writing, GME is off 10% to $42/share. (39 comments)

Pay over time

“Buy now, pay later” options continue to expand as demand continues to rise for such offerings in an age of higher interest rates and inflation. Affirm Holdings (AFRM) has just launched Pay in 2 and Pay in 30 in a bid to draw more customers who get paid semi-monthly or monthly. “Adding options… allows us to better meet consumers’ individual preferences, enabling them to pay for purchases large or small that work best for their budgets,” said Vishal Kapoor, head of product at Affirm. “I Like BNPL, Just Not This Stock,” writes SA Investing Group Leader Michael Wiggins De Oliveira in a recent article on the industry.

Sentiment Survey Results

Thanks to everyone who participated in Wall Street Breakfast’s new sentiment survey! There were many interesting findings. The Fed easing cycle is seen starting in September, the AI rally still has room to run, and the weakest “Mag 7” picks are Tesla (TSLA) and Meta (META). See the full results here.

We’ll also be parsing through the hot theme suggestions for our next poll. Stay tuned!

Today’s Economic Calendar
8:30 Non-farm payrolls
10:00 Wholesale Inventories (Preliminary)
12:00 PM Fed’s Cook Speech
1:00 PM Baker Hughes Rig Count
3:00 PM Consumer Credit

What else is happening…

Nvidia (NVDA) set to complete 10-for-1 stock split after market close.

Robinhood (HOOD) ramping up global expansion with Bitstamp buy.

Meta (META) to deploy free AI chatbots for businesses on WhatsApp?

New York power grid faces shortfalls as new clean energy supply lags.

Auto drama: European decision on Chinese EV tariffs coming soon.

TSMC (TSM) may be included in antitrust probe of top AI players.

Vail Resorts (MTN) hits multi-year low as poor climate drags results.

SpaceX (SPACE) reaches goals with Starship’s re-entry, splashdown.

Earnings: DocuSign (DOCU) slips despite results topping expectations.

ARKK well positioned for AI despite selling NVIDIA shares – Cathie Wood.

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Good morning. Happy Thursday.

The Asian/Pacific markets leaned up. Japan, India, Taiwan, Australia, Indonesia and the Philippines did well, while China and Thailand were weak. Europe, Africa and the Middle East currently lean to the upside. Denmark, Greece, South Africa, Switzerland, Hungary and the Czech Republic are up; Russia and Israel are down. Futures in the States point to mixed and mostly flat open for the cash market.

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

Stories/News from Seeking Alpha…

Big AI

The exclusive $3T market cap club has a new member… and a new antitrust investigation. The fresh probe into Nvidia (NVDA), Microsoft (MSFT) and Microsoft-backed OpenAI will explore the dominant roles the companies play in the artificial intelligence industry, according to The New York Times. Both the Department of Justice and the Federal Trade Commission will be involved in the investigation as advances in generative AI threaten to upend the world as we know it (or so they say).

Backdrop: The probe follows the meteoric rise of Nvidia (NVDA), which is up 150% YTD and +770% since the beginning of 2023. It adds to several other recent regulatory inquiries surrounding artificial intelligence, including consumer protection risks at OpenAI and in-depth deal examinations with AI startups. Previously, the DOJ and FTC had been at the forefront of reining in Big Tech, with claims that other Magnificent 7 players like Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL) and Meta (META) all violated anti-monopoly laws.

As they flex their power and share prices rally, the weightings of the new AI giants are giving them more sway in the market. Microsoft, Nvidia, Alphabet and Apple now account for nearly a quarter of the S&P 500 (SP500), prompting countless investor discussions about concentration. “Nvidia is making money on AI right now, and companies like Apple and Meta are spending on AI,” noted Jake Dollarhide of Longbow Asset Management. “There’s a lot of retail money that’s piling in on what they see as a straight shot up.”

What to watch: In the past, Apple (AAPL) had also been a member of the $3T club, and the stock is on the cusp of regaining admission once more. The iPhone maker, which has lagged in the AI race, will reportedly unveil a partnership with OpenAI at WWDC on Monday that’ll integrate ChatGPT into the iPhone’s operating system. Are more antitrust suits on the horizon? We’ll soon find out, but for now, Big AI appears to be only getting bigger. Take WSB’s Sentiment Survey which explores the “Mag 7” stocks and AI. (12 comments)

Rate cuts begin

A day after Canada cut its benchmark interest rate for the first time in four years, investors are bracing for a similar one from eurozone. The ECB is expected to trim its deposit rate by 25 basis points to 3.75% at its meeting today as inflation eases to slightly above the 2% target. The cut would be the first since September 2019, though the outlook for further easing remains cloudy. It would also mark a significant divergence from the Federal Reserve, which isn’t yet confident about rate cuts given sticky inflation. (1 comment)

Blastoff!

It finally happened. Boeing’s (BA) CST-100 Starliner lifted off Wednesday morning on its first crewed mission, carrying astronauts Barry Wilmore and Sunita Williams to the International Space Station. The launch was a final test before certifying the spacecraft for regular manned trips to the ISS. To note, Boeing’s program is seven years behind schedule, compared to the success of SpaceX (SPACE), which has recorded nine crewed launches since 2020. Both vendors were hired under similar NASA contracts in 2014. (9 comments)

Lone Star Stocks

Texas is seeking to steal some of New York’s financial thunder, with TXSE Group planning to launch the Texas Stock Exchange. The company completed its initial capital raise with the participation of more than two dozen investors, including BlackRock (BLK) and Citadel Securities. The fully electronic national securities exchange aims to provide more stability and predictability around listing standards and associated costs compared to Nasdaq (NDAQ) and NYSE (ICE), which have been criticized for adding more rules and increasing compliance costs. (14 comments)

Today’s Economic Calendar
7:30 Challenger Job Cut Report
8:30 International Trade in Goods and Services
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet

What else is happening…

Alphabet (GOOG) taps Eli Lilly (LLY) executive as new CFO.

CrowdStrike (CRWD) results stand out from cybersecurity pack.

Bird flu death is linked to strain previously not seen in humans.

NBA TV rights deals said to be worth $76B over 11 years.

Contract talks: Amazon Labor Union joins forces with Teamsters.

Lululemon (LULU) delivers strong earnings, hikes guidance.

U.S. curbs: China solar firms stop Southeast Asia production.

Zoox (AMZN) expands robotaxi testing to Austin and Miami.

AMC (AMC) jumps as shareholders reject executive comp plan.

MSIM lists stocks with largest market cap from 1950s to today.

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Good morning. Happy Wednesday.

The Asian/Pacific markets leaned to the upside. South Korea, India, Taiwan, New Zealand and the Philippines did well; Japan, China and Indonesia were weak. Europe, Africa and the Middle East currently lean up. France, Germany, Greece, Russia, Switzerland, Spain, the Netherlands, Italy and Sweden are up; Turkey, Israel and Saudi Arabia are down. Futures in the States point towards a up open for the cash market.

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

Stories/News from Seeking Alpha…

Oil slick

Hear ye, hear ye! Be on the lookout tomorrow for a new survey that will focus on market sentiment, including hot themes, the macro landscape and various asset classes. Stay tuned!

A big announcement from OPEC+ on Sunday has been rattling through the energy sector over the past several days. The group detailed a series of production cuts and extensions, giving participants a clearer tapering schedule through the end of 2025. Despite the proclamation, oil prices have struggled in recent sessions, with Brent crude (CO1:COM) falling under $80/bbl for the first time this year and WTI (CL1:COM) moving closer to $70, which is way off the $100 mark that OPEC+ is targeting with its new roadmap.

What’s going on? When delving deeper into the details of the agreement, there is a lot to consider aside from the headlines. Collective group cuts of 3.7M barrels per day were extended by a year until the end of 2025, but additional cuts of 2.2M bpd – which were supposed to expire this month – were only extended until Q3 of 2024. The latter grants OPEC+ the leeway to roll additional barrels back into the market, giving the group flexibility to restore more supply when conditions warrant their release.

It also means the market is only a quarter away from potentially higher output, which comes at a time when there are already concerns about the oil demand growth outlook. While OPEC+ has very bullish forecasts, many other agencies and analysts are bearish, especially given fading geopolitical risk premiums, which previously failed to generate any significant reaction despite tensions in the Middle East. Many big nations like China and India are also getting their crude from shadow fleets, while the output roadmap from OPEC kingpin Saudi Arabia may buy some political goodwill in Washington by helping the U.S. craft its own energy policy.

Cartel no longer? OPEC+ is pulling off a delicate balancing act, aiming to preserve its unity at a time when some in the group are building out production capacity. Two-thirds of the latest cuts are voluntary from individual nations, with members like the UAE feeling that it has to do more of the heavy lifting amid campaigns for higher quotas. Also remember that the total amount of current OPEC+ cuts is about 5.9M barrels per day, or 5.7% of global demand, which can somewhat be made up for by countries outside of the group like the U.S., Canada, Brazil and others. (5 comments)

Thumbs down

A panel of advisors to the FDA has declined to endorse Lykos Therapeutics’ application to market psychedelic drug MDMA, also known as ecstasy, as a treatment for post-traumatic stress disorder. The panel voted 9-to-2 against the treatment when asked if data showed MDMA’s effectiveness, and 10-to-1 against when asked if the benefits of MDMA outweighed its risks. Lykos had proposed three sessions of MDMA administration along with psychotherapy for a single four-month course of treatment. Related movement in the alternative therapy space was seen following the decision, with MindMed (MNMD) plunging 15% in premarket trading. (2 comments)

Testing, testing

China has approved nine local automakers to test their self-driving tech, including BYD (OTCPK:BYDDF) and NIO (NIO), marking the first time that the country has cleared testing of level 3 and level 4 autonomous technologies. The pilot program will cover passenger cars, buses and trucks, with testing to be carried out in seven cities including Beijing and Shanghai. The approved automakers must first refine their testing and safety plans, which need to be green lit by authorities, after which they can carry out testing on roads. The approval follows reports of Tesla (TSLA) nearing the registration of its Full Self-Driving software in China.

AI spending

Tesla (TSLA) is also looking to take robotaxis to the next level in the U.S., revealing the south extension of Giga Texas is almost complete, which will house 50,000 Nvidia (NVDA) H100s for Full Self-Driving training. In fact, CEO Elon Musk expects the electric vehicle company to spend around $3B-$4B this year on Nvidia’s (NVDA) AI chips. Musk also clarified a recent media report that revealed H100 chips booked for Tesla were being sent to xAI. The automaker “had no place to send the Nvidia chips to turn them on,” he tweeted, “so they would have just sat in the warehouse.” (93 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Composite Final
10:00 ISM Service Index
10:30 EIA Petroleum Inventories

What else is happening…

Dollar Tree (DLTR) is exploring a sale of its Family Dollar business.

Will Boston Beer (SAM) merge with this cannabis company?

Roaring Kitty’s GameStop trades under probe in Massachusetts.

Looking to regain market share, Intel (INTC) unveils new processors.

Shari Redstone said to be unhappy with offer for Paramount.

JOLTS: Job openings were softer in April; quits rate unchanged.

AI powers HP Enterprise (HPE) results, guidance top estimates.

Boeing (BA) CEO search: Dave Calhoun will support board’s choice.

WWDC might start the ‘AI driven growth cycle’ for Apple (AAPL).

This EV stock is up 100% YTD and analysts and quants still love it.

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Good morning. Happy Tuesday.

The Asian/Pacific markets were mixed. China, Hong Kong, Malaysia and Indonesia did well; South Korea, Taiwan and the Philippines were weak. India plunged 6%. Europe, Africa and the Middle East are currently mostly down. Denmark and Russia are up, but the UK, Poland, Turkey, Greece, South Africa, Finland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Israel, Austria, Sweden, Saudi Arabia and the Czech Republic are down moderately or big. Futures in the States point towards a moderate gap down open for the cash market.

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

Stories/News from Seeking Alpha…

Immigration and the economy

More than 6 million migrants have crossed into the U.S. illegally under the Biden administration, which is now prepping an executive order to stem the flow at the U.S.-Mexico border. The action, which will likely be unveiled at the White House today, will rely on an authority in the U.S. Code known as Section 212(f). It would temporarily shut down the border to asylum seekers when a daily threshold of crossings exceeds 2,500, but would reopen when the number falls below 1,500, putting a spotlight on publicly traded operators of detention centers like CoreCivic (CXW) and GEO Group (GEO).

Snapshot: Rich countries, especially those with retiring baby boomers and declining birth rates, need greater sources of workers to fill in labor gaps and ease inflation. This is especially true in areas of the U.S. economy like construction, manufacturing, agriculture and transportation, which all generally see lower levels of participation from the native-born population. While many wealthier countries, such as Japan, South Korea, Germany and Spain, are amending laws to bring in foreign manual labor, it’s less of a problem in the U.S., which is experiencing thousands of migrant crossings a day on its southern border.

In 2023, the foreign-born accounted for 18.6% of the U.S. civilian labor force, according to the U.S. Labor Department, which includes legal immigrants, refugees, temporary residents such as students and temp workers, and undocumented migrants in its figures. Those numbers have been surfaced by advocates against illegal immigration, who have warned of Americans losing jobs to outsiders that are willing to work for less money. Warnings have also been issued about the cost of public services for migrants, like healthcare and education, especially if they are paying little to no taxes.

What to watch: Illegal immigration remains a hot topic on the campaign trail and Biden’s new order is likely aimed at addressing those concerns. That doesn’t mean it will be implemented, with a good chance the action will be blocked by federal courts over violations of asylum laws. Even if it would take effect, the order will be difficult to fully implement, as it would require major increases in border agents, detention space and agreements from other countries willing to accept back an influx of migrants.

Trading trouble

The NYSE on Monday witnessed a technical glitch that triggered trading halts in about a dozen companies, like Class A shares of Berkshire Hathaway (BRK.A), which were displayed as down 99%. The issue appeared to be related to a new software release, but follows another recent glitch that had caused financial websites to halt updates of major indices for over an hour. Speaking of volatility, E*Trade (MS) is considering booting meme-stock trader Keith Gill off its platform due to growing stock manipulation concerns after his recent purchases of GameStop (GME). (84 comments)

Falling short

Plans to triple global renewable energy capacity this decade are not in line with the goals agreed to at the COP28 summit, according to the International Energy Agency. “Even if all countries were to fully implement their current ambitions, the world would fall 30% short,” the IEA wrote in its latest report. The 2030 goal is a key factor in the target of achieving net-zero emissions by mid-century and limiting global warming to 1.5 °C. It comes as delegates convene in Germany for climate talks this week, which will influence the major decisions to be made at the COP29 summit in November. (1 comment)

Year of the election

India’s benchmark indices tumbled the most in four years overnight as votes in the world’s biggest election indicated that an alliance led by the ruling party BJP may not win a sweeping majority as predicted by exit polls. The Nifty Index (NIFTY) and the BSE (SENSEX) dropped more than 8% each during the session, marking the biggest intraday declines since the onset of the pandemic in March 2020. The slump reversed the record gains seen on Monday, when a landslide victory for BJP, led by Prime Minister Narendra Modi, was widely expected. (5 comments)

Today’s Economic Calendar
Auto sales
10:00 Factory Orders
10:00 Job Openings and Labor Turnover Survey

What else is happening…

WSB survey results: The U.S. is likely to dodge a recession.

Spotify (SPOT) is raising prices for premium subscribers.

AMD (AMD) unveils new processors as AI race heats up.

Oregon jury awards talc plaintiff $260M in verdict against J&J.

Report: Skydance to announce takeover of Paramount (PARA).

What’s next for Bitcoin (BTC-USD) and Ethereum (ETH-USD)?

Diamondback Energy (FANG) expands footprint in Midland Basin.

U.S. home power bills forecast to jump nearly 8% this summer.

Dealmaking? HubSpot (HUBS) may have hired financial advisors.

Ackman’s Pershing Square seeks to raise $25B for closed-end fund.


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

The Asian/Pacific markets posted big gains. Japan, Hong Kong, South Korea, India, Taiwan, Australia and Indonesia did great. Europe, Africa and the Middle East are currently posting solid gains. Denmark and Russia are down, but Poland, Turkey, Germany, Greece, South Africa, Finland, Norway, Hungary, the Netherlands, Italy, Israel, Portugal, Austria, Sweden and Saudi Arabia are up nicely. Futures in the States point towards a positive open for the cash market.

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

Stories/News from Seeking Alpha…

The ‘r’ word

Treasury yields have now been inverted for the longest stretch on record, with the spread between the 2-year (US2Y) and 10-year Treasury (US10Y) underwater for close to two years. It’s got everyone worrying about a troubling recession, though many of those calls have moderated in recent months as the U.S. economy continues to expand, unemployment remains low, and a soft landing increasingly looks like it will be in the cards. Is the indicator, which has predicted every recession over the past 50 years, faulty or broken?

How it works: Yield curves typically slope upward, so when short-term yields return more than longer-dated ones, it suggests there is reason to worry about the long-term economic outlook. It can also signal that the high levels of short-term yields are unlikely to be sustained as growth slows, which can have an impact on a range of asset prices. Investors usually factor in Fed rate cuts under those dynamics, with easing expectations signaling the potential for a faltering economy.

While some think the yield curve is no longer a reliable indicator, others point out its stark accuracy. The second-to-last time the yield curve inverted was in August 2019, which happened ahead of the pandemic-induced recession, and the 2y10y inverted again in March 2022, just before a technical recession emerged in the second quarter of that year. Any decision on a formal recession is left up to NBER’s Business Cycle Dating Committee, which has been responsible for setting the dates of peaks and troughs of the U.S. economy since 1978, but since it was never formally declared, it kept investors waiting for another one to happen.

Who got it right? The Fed’s infamous “transitory” call on inflation, a stock rally that has confounded Wall Street, and most recently – expectations for rate cuts – are all among recent predictions that have led many investors astray in recent years. Economists and mainstream analysts have to check their report cards, and recession talk might be the next failed projection. Is it different this time around? Or is a recession bound to happen eventually, it may just take more time? Take the WSB survey.

Meming again

GameStop (GME) surged more than 90% in volatile premarket trade after influential trader Keith Gill, known online as Roaring Kitty, revealed what appeared to be a big stake in the company. Gill, who sparked the meme frenzy in 2021, shared a screenshot on Reddit that showed he’d bought millions of GameStop shares, valued at around $116M, as well as call options. This prompted a broader rally for meme stocks this morning. GameStop also soared last month after Gill returned to social media following a three-year hiatus, which was enough to ignite a buying craze that saw the stock more than double in value in May. (91 comments)

Year of the election

Pledging to continue with the policies of outgoing President Andrés Manuel López Obrador, Claudia Sheinbaum has been elected as Mexico’s first woman president in a landslide victory. Her win comes at a time when Mexico is facing slow growth, as well as continued cartel violence, both of which are major concerns for voters (as well as its top trading partner – the U.S.). Elections are also coming to a close in other countries. South Africa will now see unprecedented coalition talks, while the world’s largest election has ended in India, with Prime Minister Narendra Modi projected to win a third term. (1 comment)

Crude cuts

In a bid to boost oil prices, but which did not have much of an immediate effect, OPEC+ has agreed to extend most of its production cuts well into 2025. The group had previously slashed supply by a combined 5.86M barrels a day, of which 3.66M bbl/day were due to expire at the end of 2024, and 2.2M bbl/day voluntary cuts by eight members were set to expire at the end of this month. While many OPEC+ members reportedly need oil prices to be above $80/barrel to balance their budgets, some analysts say the decision was bearish given recent increases in inventories. (92 comments)

Today’s Economic Calendar
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending

What else is happening…

Vermont is requiring Big Oil to pay for climate change damage.

Skydance’s latest offer allows Paramount holders to cash out.

Waste Management (WM) nears deal to buy Stericycle (SRCL).

Nvidia’s (NVDA) next-gen Rubin AI platform coming in 2026.

Stock split: Will Nvidia (NVDA) replace Intel in the Dow (DJI).

Elon Musk and Jamie Dimon are said to be on friendlier terms.

Qatar Airways prepares big order from major planemakers.

Boeing (BA) Starliner’s crewed flight launch scrubbed yet again.

SA Asks: Which weight-loss stocks should investors be watching?

Where Trump and Biden agree: Both are on TikTok despite seeking bans.

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