The bouncy trading continues in the electric vehicle sector with the flood of developments from Lordstown Motors and Nikola impacting how investors view other startups.
Another big factor is the surprising speed at which auto heavyweights like General Motors (GM +0.7%), Volkswagen (OTCPK:VLKAF) and Ford (F +1.8%) are flipping the switch to an electric-heavy portfolio, which could add competitive risk for the new players. Analysts have been more vocal in the last few weeks in saying that not all the new EV entrants are likely to survive.
Decliners on the day include Ayro (AYRO -7.8%), XPeng (XPEV -4.2%), Electrameccanica Vehicles (SOLO -5.1%), Canoo (GOEV -4.7%) and Arrival (ARVL -3.8%). Meanwhile, Tesla (TSLA -0.5%) is faring a little better, but is feeling some Bitcoin gravity.
UBS says a key takeaway from meetings with shipping industry experts is that supply chain pressures will remain in place for the near term as it pertains to the retail sector.
The bottlenecks are linked in part to port disruptions, labor shortages and a lack of available warehouse space to store products.
Analyst Michael Lasser: "Even if these issues are solved, the tightness in the market will likely remain elevated due to backlogs from demand outpacing supply for a prolonged period. Plus, peak season is right around the corner (August/September) which will add another wrinkle. This is likely to lead to a continuation of the heightened shipping costs for retailers, for at least in the near term."
Container rates will likely continue to be a headwind for retailers into 2022. Looking even further ahead, shipping experts also believe that rates will not see much of a correction until 12 to 18 months from now. And even then, an elevated "new normal" for container prices could be part of the market.
While that is a potential profit drag for the retail sector (NYSEARCA:XRT) broadly if costs cannot be passed on to consumers, shipping companies and lessors could both benefit from that "new normal" including names like Atlas Corp (ATCO +2.1%), Maersk (OTCPK:AMKBY +2.5%), Matson (MATX +2.1%), Euroseas (ESEA +0.8%), Costamare (CMRE +2.1%), Global Ship Lease (GSL +1.8%), Danaos (DAC +1.2%), Capital Product Partners (CPLP +2.7%), Golden Ocean (GOGL +3.7%), Scorpio Tankers (STNG +0.8%), Diana Shipping (DSX +3.0%) and Star Bulk Carriers (SBLK +1.7%) and Navios Partners (NMM +1.0%) to name a few.
The U.S. dollar index witnessed its best trading week in over a year, fourteen months to be exact. The dollar index finished last week +1.89%, the last time it closed higher on the weekly charts was back on the week of April 3rd, 2020 where it closed +2.33%.
Last week the U.S. dollar index advanced against the basket of major currencies, rising from the 90.51 level to the 92.22 handle. So far in Monday's trading session, the dollar index has slid from 92.32 to 92 the figure.
The recent topside move for the dollar came as the Federal Reserve indicated more of a hawkish sentiment towards future rate hikes. Before last week's FOMC statement, more than half of the Federal Reserve officials estimated that rates would remain near zero into 2024. However, now officials envision rates rising to 0.6% by the end of 2023. The Fed has also now suggested that they expect two interest rate increases by the end of 2023.
Furthermore, there appears to be a difference in opinions among Fed officials as regional Fed presidents Bullard and Kaplan favor earlier rate hikes. In contrast, others maintain the view that a rate hike may not be necessary until 2024. The investment community must decipher which viewpoint they believe will stick as it has a significant impact on the dollar's direction.
Future rate decisions will impact the U.S. dollar index and USD currency pairs, but they also will ripple their effects to the bond market and commodities space impacting oil and gold as both have strong ties to the dollar.
From a technical analysis viewpoint, the investment community can see the recent break in resistance due to last week's announcement. The dollar index should be watched closely to see if it retouches the recent level or continues to break higher.
Market participants interested in learning more about the U.S. dollar index and what the future may hold may be interested in analyzing a few exchange-traded funds.
Bullish dollar funds: Invesco DB U.S. Dollar Index Bullish Fund (NYSEARCA:UUP) and WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEARCA:USDU).
Bearish dollar fund: Invesco DB U.S. Dollar Index Bearish Fund (NYSEARCA:UDN).
General Motors (NYSE:GM) expects to commercialize hydrogen fuel cells for real world solutions soon as part of its broad electrification plan.
Last week, the automaker announced a deal with Liebherr-Aerospace to develop a hydrogen fuel cell power generation demonstrator system for aircraft and inked a memorandum of understanding with Wabtec to supply battery and hydrogen fuel cell systems for freight locomotives. In addition, GM has hydrogen-related agreements running with Navistar, Nikola and the U.S. military.
"We use kind of a land, sea and air approach," says GM global fuel cell chief Charlies Freese. "It's energy storage density for long missions, quick refueling and quiet stealth, low thermal initiatives. Those are things that are very important in those applications. And those carry over to some of the other [industries]." he adds.
The volatility in the crypto market is showing no signs of abating. At the time of writing, Bitcoin (BTC-USD) is off 7.7% to $32,641, continuing a selloff that ensued following the Fed's surprise hawkish turn last Wednesday. That means Bitcoin is down by more than half of its April peak of nearly $65,000, but has still gained over 10% YTD.
Latest bear catalyst: China has intensified its crackdown on crypto mining, with authorities in Sichuan ordering projects to close following similar developments in Inner Mongolia and Yunnan. The Sichuan southwest province hosts China's second-largest mining community, according to data compiled by the University of Cambridge, with miners shifting production there in the rainy summer season to take advantage of hydropower resources. Last month, China's State Council pledged to clamp down on Bitcoin mining as part of a series of measures to control financial risks and energy consumption.
It's big... The latest ban means that more than 90% of China's Bitcoin mining capacity (which accounts for 75% of the world's capacity) is estimated to be offline, according to the Communist Party-backed newspaper Global Times.
On the move: Smaller rival Ether (ETH-USD), the second largest cryptocurrency by market cap, dropped 7% to below $2,000 for the first time in nearly a month. Ripple (XRP-USD) also tumbled, down 6% to $0.68. In premarket action: Marathon Digital (NASDAQ:MARA) -7.7%; Riot Blockchain (NASDAQ:RIOT) -7%; MicroStrategy (NASDAQ:MSTR) -5.6%; Coinbase Global (NASDAQ:COIN) -3%.
Will Landon Cassill rethink his decision? On Friday, the NASCAR driver said he decided to receive pay from a sponsor in cryptocurrency because that's "where the market is headed."
Opening lower to start the week, U.S. stock index futures are now in the green, up 0.5% in overnight trade. The move higher comes after some investors were quick to dismiss the "reflation trade," a bet on companies that stand to do best in an environment of solid economic expansion and rapid inflation. Meanwhile, the yield on the 10-year Treasury fell another 2 bps to 1.43%, marking its lowest point since early March.
Quote: "I would tend to tilt towards the message communicated at the FOMC, rather than a sole Fed governor," said John Woods, Asia Pacific chief investment officer at Credit Suisse. "I do think the reflation story - from the fundamentals perspective - remains firmly in play. It seems to me only natural that we would anticipate moderately higher bond yields from current levels and clearly that has an impact on a whole range of risk assets. My sense is the Fed continues to focus more on the labor market than inflation - right here right now."
Credit Suisse was one of several Wall Street banks predicting the Fed would move in 2023, even before its announcement last Wednesday. It still predicts a period of choppy sideways trade, given the volatility associated with the Fed debate, but it is also a big believer in the Fed's "transitory" theme, expecting price pressures to moderate in the coming quarters. Once that happens, concerns about yields and inflation will likely calm down. Woods also expects the U.S. to grow at "China levels" this year, with GDP expanding at a whopping 7% pace, in which it is almost inevitable for inflationary pressures to take place.
Stark warnings: Not everyone is on board with Credit Suisse's thesis. "The headwinds are building for the equity market," Moody's Analytics Mark Zandi declared, expecting a more hawkish Fed to spark a 10% to 20% pullback. 'Big Short' investor Michael Burry has also recently warned of the "mother of all crashes," with "#MainStreet losses approaching the size of countries," given the FOMO for unsustainable asset prices, meme stocks and crypto. Robert Kiyosaki, the author of Rich Dad Poor Dad, is on that train as well. "Biggest bubble in world history getting bigger," he tweeted on June 19. "Biggest crash in world history coming."
The tech sector looks like it may be coming to a crossroads, with funds still selling, but it may be an opportunistic place to park cash after the Fed hit longer-term bonds.
Travel has returned with a vengeance as airlines struggle to rebuild networks that were ravaged by the COVID-19 pandemic. Nearly 50M U.S. airport passengers were registered in May - up 19% from April - and so far in June, the TSA has recorded nearly 35M travelers. But that's causing some disruptions, with carriers and transportation operators struggling to keep up with the ramp up in demand, especially with the lifting of travel restrictions.
Case in point: American Airlines (NASDAQ:AAL)cancelled about 120 flights on Saturday and 176 on Sunday (about 6% of its mainline operation that day). While some were called off a few days in advance, about half of those were because of "unavailable flight crews." Other reasons included maintenance and other disruptions, like inclement weather.
"The bad weather, combined with the labor shortages some of our vendors are contending with and the incredibly quick ramp up of customer demand, has led us to build in additional resilience and certainty to our operation by adjusting a fraction of our scheduled flying through mid-July," American Airlines spokeswoman Sarah Jantz said in a statement. "We made targeted changes with the goal of impacting the fewest number of customers by adjusting flights in markets where we have multiple options for re-accommodation."
Fixing the situation: The Allied Pilots Association, which represents American's roughly 15,000 pilots, said the carrier should offer more overtime in advance to cover staffing shortages. The current situation is also daunting given that American Air has taken an aggressive approach throughout much of the pandemic to fly much more than its closest competitors - United (NASDAQ:UAL) and Delta (NYSE:DAL). All the while, it has been racing to train the aviators it furloughed after the two federal coronavirus aid packages that prohibited layoffs, as well as its pilots who are due for periodic training.
Many had eyed hedge fund billionaire Bill Ackman's special-purpose acquisition company since its launch last year as the SPAC rage reached record heights. Word of a deal finally came several weeks ago as Pershing Square Tontine Holdings (NYSE:PSTH) announced an approach for Universal Music Group (UMG), the world's largest music company. The tie-up would see it take a 10% stake in the company from owner Vivendi (OTCPK:VIVHY) for $4.1B, though Ackman had more details to share about its complicated structure over the weekend.
After all is said and done, PSTH shareholders will receive publicly traded securities in three separate companies: UMG, PSTH, and SPARC. UMG will be publicly listed on Euronext Amsterdam in September 2021, with shares expected to be distributed to PSTH shareholders before year-end 2021. PSTH will meanwhile continue to seek another business combination under a unit called RemainCo, which will have $1.5B in cash and $1.4B of an unexercised forward purchase agreement. Lastly, investors will receive warrants to purchase shares in another acquisition company called Pershing Square SPARC Holdings, which will soon file a registration statement with the SEC.
Will the details help allay investor concerns? Shares of PSTH were trading firmly around the $25 level before word of the deal broke on June 3. Since then, the stock has tumbled 10%, trading at levels last seen in November 2020. Ackman was quick to highlight that UMG will be one of the largest companies on the Euronext Amsterdam exchange and will become a member of several major global indices. The statement also emphasized UMG's operating profit growth of more than 20% per annum since 2017, as well as "powerful endorsements" from investors like Tencent (OTCPK:TCEHY), which own a fifth of the company.
Pershing Square Tontine's prospectus from 2020: "We believe that our unique structure and our willingness to acquire a minority interest in a company will help facilitate the completion of a transaction on attractive terms. We are willing to accept a high degree of situational, legal, and/or capital structure complexity in a business combination if we believe that the potential for reward justifies this additional complexity, particularly if these issues can be resolved in connection with and as a result of a combination with us."
In this week’s trading session, market participants witnessed the S&P 500 finishing in negative territory, and it had its worst closing week since February 22nd, nearly four months back. Furthermore, as it pertains to the U.S. fund flows insight report by Refinitiv Lipper ending June 16th, 2021, the investment community were net redeemers of fund flows, including ETFs and traditional funds of -$30.1B.
SPDR S&P 500 Trust ETF (NYSEARCA:SPY) finished the week in the red -2.29% and is +12.86% YTD. See below a breakdown of the eleven sectors of the S&P 500 and their weekly performance. Additionally, see how the accompanying SPDR Select Sector ETF performed from the open on June 14th to the close of June 18th.
#1: Information Technology, +0.19% and the Technology Select Sector SPDR ETF (NYSEARCA:XLK) -0.12%.
#2: Consumer Discretionary, +0.03% and the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) -0.61%.
#3: Health Care, -0.72% and the Health Care Select Sector SPDR ETF (NYSEARCA:XLV) -0.61%.
#4: Communication Services, -1.13% and the Communication Services Select Sector SPDR Fund (NYSEARCA:XLC) -1.62%.
#5: Real Estate, -2.51% and the Real Estate Select Sector SPDR ETF (NYSEARCA:XLRE) -2.46%.
#6: Consumer Staples, -2.89% and the Consumer Staples Select Sector SPDR ETF (NYSEARCA:XLP) -2.95%.
#7: Utilities, -3.23% and the Utilities Select Sector SPDR ETF (NYSEARCA:XLU) -2.96%.
#8: Industrials, -3.75% and the Industrial Select Sector SPDR ETF (NYSEARCA:XLI) -3.69%.
#9: Energy, -5.08% and the Energy Select Sector SPDR ETF (NYSEARCA:XLE) -5.88%.
#10: Financials, -6.09% and the Financial Select Sector SPDR ETF (NYSEARCA:XLF) -6.08%.
#11: Materials, -6.20% and the Materials Select Sector SPDR ETF (NYSEARCA:XLB) -5.90 %.
While that's still a long way off, Fed thinking has clearly gone from continuing to pump the recovery, to caution about overheating. It's hitting risk assets of all sorts, including bitcoin, now down about 7% on the session, and barely above $35K.
Before getting to the fundamental reasons for the greenback's streak of gains, let's give a nod to the technicians, who again and again have reminded that 90 is a key level for the dollar index. Dropping like a stone since the market panic ended in April of 2020, the dollar index has hit and bounced off of about 90 a number of times. The action over the past number of sessions is thus just a repeat of the chart action.
Turning to fundamentals, the Fed's abrupt reversal from not even "talking about talking" about tightening, to acknowledging rushing inflation and the need to deal with it sooner rather than later has encouraged dollar gains. As if Fed Chair Jay Powell's press conference wasn't enough, the generally dovish St. Louis Fed President Jim Bullard is making the rounds this morning, talking about a tilt to hawkishness and the first rate hike coming in 2022.
The dollar index is up another 0.2% this morning to 92.08. A few days ago it was a hair below 90.
The Invesco DB USD Bullish ETF (NYSEARCA:UUP) and Invesco DB US Dollar Index Bearish Fund (NYSEARCA:UDN) are popular ETF-related trading vehicles.
St. Louis Fed President Jim Bullard said Friday that the central bank has to remain "nimble" in the face of a "booming" economy and a growing inflation risk, noting that policy has "tilted a little more hawkish" since the beginning of the year.
In an interview with CNBC, Bullard said that while the taper discussion is now open, it will take "several meetings" to get organized. He noted that the central bank is committed to giving markets "plenty of time" to react.
Commenting on the general economic outlook, Bullard said Fed members have been "surprised to the upside" in the last six months about the speed of the post-COVID recovery.
As a result, the head of one of the central bank's 14 branches said policy has "tilted a little more hawkish" in order to keep inflation under control.
Giving his personal view of inflation, Bullard said he sees inflation rates reaching 3% in 2021 and then drifting down to around 2.5% in 2022.
As a result, Bullard believes a rate hike would likely be necessary toward the end of 2022.
On the topic of tapering, the St. Louis Fed president said he was "leaning towards the idea" of moving out of mortgage-backed securities first. He noted concern that buying MBSs would feed into the "housing froth" the market has seen lately.
Volkswagen (OTCPK:VLKAF) announces that it plans to use a new 3D printing process in vehicle production in the coming years.
The German automaker will use a new process called binder jetting to manufacture components at the company’s main plant in Wolfsburg, Germany.
"Whereas conventional 3D printing uses a laser to build a component layer by layer from metallic powder, the binder jetting process uses an adhesive. The resulting metallic component is then heated and shaped. Using the binder jetting component reduces costs and increases productivity – for example, the components weigh only half as much as those made from sheet steel."
Volkswagen is noted to be the only car maker using the 3D printing technology. HP (NYSE:HPQ) is providing the high-tech printers needed and Siemens (OTCPK:SIEGY) the special software for additive manufacturing.
The move into 3D by the world's biggest automaker could be a positive for ARK Invest's 3D Printing ETF (BATS:PRNT) with more attention on potential uses.
Top holdings in the 3D Printing ETF include 3D Systems (NYSE:DDD), ExOne (NASDAQ:XONE) and Straumann Holding (OTCPK:SAUHF).
Some peculiar market activity has been taking place since the latest Fed meeting, with investors unwinding some of this year's dominant reflation trades and the tech-heavy Nasdaq 100 rising to a record high. Commodities are also stumbling, with oil on the decline and gold tumbling to below $1,800 an ounce. Soybean futures have meanwhile wiped out their gains for 2021, while the rallies in corn, lumber, platinum and nickel are losing steam.
Many are pointing to a Federal Reserve that recognizes it might have to raise rates - earlier than expected - to deal with a possible inflationary threat. While the current dot plot signals hikes that are two years away, the sentiment may be helping undercut the reflation trade that had been dominant since January. Overnight, Dow and S&P 500 futures hugged the flatline, while contracts tied to the Nasdaq rose 0.2%.
Weren't higher rates supposed to dent growth and tech? Why are they on the way up? Investors could be honing in on the pace at which rates are expected to rise, which the central bank signaled would be slow even after 2023. The fact that Powell also did not discuss tapering (even taking it out of the vocabulary), could signal expansionary policy is here to stay for the next while. That's in addition to the "transitory" inflation outlook, which is starting to take root among the investing community.
Go deeper: Over the last two sessions, the spread between 5- and 30-year Treasury yields continued to widen and is now below where it started the year. That news helped drive cyclical shares to the backseat, with money flowing into defensive names like healthcare and consumer staples. Tightening from the Fed could also temper GDP growth, a concern expressed by Goldman Sachs. "Investors may be interpreting the Fed's hawkish tilt Wednesday as a sign that an extended U.S. post-pandemic economic expansion may be a bit harder to achieve in a potentially emerging environment of less accommodative monetary policy."
That flattened yield curve is sending a chill through the borrow short, lend long crowd, with Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), U.S. Bancorp (NYSE:USB), PNC Financial (NYSE:PNC), Annaly Capital (NYSE:NLY), and AGNC Investment (NASDAQ:AGNC) among the names down in the 3%-5% range. The S&P 500 is off only 0.3%.
The iShares 20+ Year Treasury Bond ETF (TLT +2.5%), and its leveraged inverse cousin, the ProShares UltraShort 20+ Year Treasury ETF (TBT -5.0%).
The move suggests markets having a bit of a conniption over the Fed's threat to tighten a bit earlier than expected. Old hands will remember Jay Powell got burned at the start of his Fed chair career by turning a blind eye to a tightening cycle tantrum. He quickly learned his lesson in 2018, and reversed to an easing stance.
The 5-30 year Treasury spread is a "function of the Fed's credibility," Joseph Brusuelas, chief economist at RSM US. tweets. "30 year bond now at 2.08% as that spread narrows to currently 121bps. I expect taper talk at Jackson Hole, with formal integration into statement at September meeting."
Justices Alito and Gorsuch were the two dissenters.
The ruling marks the third time the High Court has upheld the law that went into effect in 2010.
The majority opinion was penned by Justice Breyer, who wrote that Texas and other states didn't have any standing to sue because they hadn't suffered any harm when Congress removed a provision of the law that eliminated a penalty for failing to have health insurance.
The decision largely left aside addressing the core of the law.
Health insurers in morning trading: Cigna (NYSE:CI) -0.6%; UnitedHealth (NYSE:UNH) up a penny; CVS Health (NYSE:CVS) -0.5%; Anthem (NYSE:ANTM) -0.1%.
Petco Health and Wellness Company (NASDAQ:WOOF) and B&G Foods (NYSE:BGS) are the two latest additions to the hot Reddit mentions list, according to tracking by Bank of America.
BofA says while conversations generally accelerated for most stocks on its Reddit screen last week, overall WallStreetBets conversations have barely risen in recent weeks and retail options usage remains well below Q1 levels. "Additionally, using AMC as a case study, the latest rally saw more short-dated call strikes available for trading and a more balanced volume between calls and puts, suggesting a reduced capacity for gamma squeezes via call options in pushing up shares during the latest rally," notes the firm.
The top trending stocks on Reddit based on mentions in top 100 posts are AMC Entertainment (NYSE:AMC), Clean Energy Fuels (NASDAQ:CLNE), GameStop (NYSE:GME), Cleveland-Cliffs (NYSE:CLF) and Workhorse Group (NASDAQ:WKHS).
There's never a dull day when Jerome Powell comes to town, with the market hanging on to his every word from the public square. On Wednesday, the Fed raised its expectations for inflation considerably, saying the headline figure could reach 3.4%, marking a full percentage point higher than its forecast in March. While Powell still feels the price pressures are "transitory," it may now take some comforting numbers to reassure investors.
Interest rates: The central bank also brought forward the time frame on when it will next raise rates. The so-called dot plot of individual FOMC member expectations pointed to two hikes in 2023, after Powell said in March that he saw no increases until at least 2024. Stocks slumped yesterday in reaction to the news, but rallied off their intraday lows after the Fed Chair said the projections should be "taken with a big grain of salt."
Stock futures slipped further overnight, with the Dow and S&P 500 down 0.4%, respectively, and the Nasdaq off by 0.6%. Bond yields headed higher after the press conference, while bitcoin sold off, but both have pared much of their recent moves. Interestingly enough, traditional inflation hedge gold tumbled as far as $1,835/oz on Wednesday and fell another 3% overnight to the next support level at $1,800.
Taper talk: Powell also did not issue guidance on when the central bank will begin tapering its bond-buying program, though many speculate that could come at Jackson Hole in August. "You can think of this meeting that we had as the 'talking about talking about' meeting, if you'd like," Powell said when asked about tapering. "I now suggest that we retire that term, which has served its purpose." The FOMC also disclosed it would extend dollar-swap lines with global central banks through the end of 2021, which was one of the last COVID-era programs the Fed undertook to stabilize world markets.
Interest in space is heating up in the public markets as companies and countries sink billions of dollars into the next frontier. Just this week, Richard Branson looked to take Virgin Orbit public through a SPAC merger with NextGen Acquisition II, while Jeff Bezos' Blue Origin (BORGN) auctioned off a seat on its first spaceflight for $28M. Cathie Wood also recently launched the ARK Space Exploration ETF (BATS:ARKX), which includes companies that support products, services or technology that occur beyond the surface of the Earth.
The latest? China this morning launched three astronauts to its upcoming space station called "Tianhe" as it looks to rival to the U.S. in space. Beijing will carry out 11 missions over the next two years to complete the construction of the orbital outpost, and expects the three-module station to be fully operational by 2022. It's part of a broader ramp-up for China's space program, which continues to operate a rover on the far side of the moon and just put another one on Mars.
China is excluded from International Space Station coalition, which operates the only other space station in orbit. American law has prohibited NASA and the White House Office of Science and Technology Policy from working with China on space activities since 2011, unless such activity has been approved by Congress. That has fueled Beijing's drive to create its own space station, which is expected to remain in operation for at least a decade (the ISS could be retired in 2024).
Go deeper: China is also accelerating plans for government-sponsored satellites to beam the internet from space. It's looking to launch 10,000 satellites in the next five to ten years as part of its "StarNet" constellation, using a similar strategy that it took on Earth with Huawei and 5G. That would put it on course to compete with private sector companies in the U.S. - like SpaceX's Starlink (STRLK) and Amazon's (NASDAQ:AMZN) Kuiper - which are looking to blanket the globe with internet connectivity.
The major averages bounced back from their post-Fed-statement swoon this afternoon, with Federal Reserve Chairman Jerome Powell doing his best to take the sting out of a hawkish shift in rate hike expectations.
Bonds were harder to tame, with yield rising sharply.
The Nasdaq (COMP.IND) -0.2% was the best performer and managed to push slightly into the green near the end of Powell's press conference.
Megacaps were mixed, with Amazon and Tesla climbing.
The Dow (DJI) -0.8% trailed, with Boeing and Visa price drops weighing.
Cognizant of the market reaction to what was a big change in expectations for rate hikes, with the dot plot predicting at least two in 2023, Powell did his best to ease market worries, stressing that the dot plot wasn't discussed too much and isn't a "great forecaster of future rate moves."
"Powell is so very done with the dot plots," Grant Thornton Chief Economist Diane Swonk tweets. "He accurately worries how people interpret the shift up in liftoff from 2024 to 2023. It is not something the Fed actually discusses to form a consensus. Note that the dots are submitted before the meeting."
Sven Henrich, founder of NorthmanTrader and a sharp critic of the Fed, was more blunt: "Powell knows markets are not liking the 2 rate hikes plotted for 2023 so he's doing everything he can to declare the votes of other FOMC voters as meaningless."
The jawboning had a better effect on the stock market than the Treasury market, with a flattening yield curve.
The 10-year Treasury yield rose 8 basis points to 1.58%. (NYSEARCA:TBT)(NASDAQ:TLT)
The 2-year rose 4 basis points to 0.21%, the highest it's been since June 2020. (NASDAQ:SHY)
The 5-year saw the most action, up 11 basis points to 0.9%. (NASDAQ:IEI)
The big surprise for the market was the big jump in inflation expectations and "that's about the market repricing the Fed liftoff and that hits the 5-year," which is "the fulcrum of Fed policy expectations," Jeff Rosenberg, BlackRock portfolio manager said on Bloomberg.
"Possible policy mistake by the @FederalReserve has migrated up to become one of the top risks that could undermine a durable, strong, inclusive, and sustainable economic recovery," Mohamed El-Erian, adviser to Allianz tweets. "Indeed, it may be the joint top risk along with Covid virus variants that reduce vaccine effectiveness."
When it comes to asset purchases, Powell said it was time to retire the term "talking about talking about tapering," which he said had served its purpose well, But he still says the timing of any announcement, while given with "a lot of notice," will depend on the data and that the U.S. is a "ways away from substantial further progress."
Scott Minerd, CIO at Guggenheim, tweets on tapering: "The quickest timetable for the #Fed: Start talking about talking about #tapering at Aug #FOMC; start talking about it in Sept; announce it in Dec; start tapering 2Q22; finish tapering 2Q23; first rate hike 2Q24. But this is the quickest it could come, it will likely take longer."
The Federal Reserve is backing away at least a little from its "transitory inflation" rhetoric, with Jay Powell opening his post-FOMC press conference by noting the risk that price increases could be more persistent than expected.
That's sent stocks lower and bond yields higher. It's also taken a chunk out of the price of bitcoin (BTC-USD), now down 5.3% to $38.4K. Ethereum (ETH-USD) is down a similar amount. The Grayscale Bitcoin Trust (OTC:GBTC -5.8%).
Also having a rough session now is Gold 1.0 (XAUUSD:CUR), down 1.25% to $1,835 per ounce. The SPDR Gold Trust (GLD -1.3%).
Risks to the economy continue, but the Fed no longer says the virus is weighing on the economy, according to the Federal Open Market Committee's (FOMC) statement.
Amid progress from COVID vaccinations "and strong policy support, indicators of economic activity and employment have strengthened," the statement said.
The central bank acknowledges the strengthening of the economy since the April meeting. As a result, most Fed officials expect a rate hike sometime in 2023, according to the closely-watched dot plot.
The major stock averages drop on the new; the Nasdaq falls 0.7%, the Dow -0.8% and the S&P 500 -0.7% at 2:07 PM ET. The yield on the 10-year Treasury jumps to 1.51%, about 3 basis points higher than today's low.
The forward guidance in the statement remains the same as after the previous meeting: The committee "expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time."
Also, it will maintain its current rate of asset purchases "until substantial further progress has been made toward the Committee's maximum employment and price stability goals."
In three weeks, when the minutes from the meeting are released, we'll find out if the policymakers talked about if they're starting to think about tapering asset purchases — a question that's sure to be asked at the upcoming press conference.
To be specific, the federal funds rate target range stays at 0.0%-0.25% and the central bank will continue to purchase at least $80B per month of Treasury securities and at least $40B per month of agency MBS.
Eilers & Krejcik Gaming is out with a detailed report on sports betting.
The firm notes that single-game sports betting is now legal in 31 states and 56% of the U.S. population resides in a state where betting on games is legal. Another 9 states have sports betting bills pending.
Total sports betting revenue in the U.S. this year to date is estimated at $1.24B to mark 360% Y/Y growth. Eilers & Krejcik Gaming forecasts revenue of $19.0B if all 50 states legalize sports betting.
Flutter Entertainment (OTCPK:PDYPY) is the leading sports betting operator in five states (Illinois, Pennsylvania, New Jersey, Virginia and West Virginia) over a trailing three-month period. DraftKings (NASDAQ:DKNG) is leading in Indiana, Iowa and New Hampshire, while BetMGM (NYSE:MGM) is first in Michigan, Colorado and Tennessee. Caesars Entertainment's (NASDAQ:CZR) William Hill leads in Nevada.
A large list of companies could potentially benefit from legislation pushing in various jurisdictions and sports betting becoming operational on a large scale. Stocks touching the sports betting world include DraftKings (DKNG), FanDuel/Flutter Entertainment (OTCPK:PDYPY), Caesars Entertainment (CZR), Penn National Gaming (NASDAQ:PENN), Wynn Resorts (NASDAQ:WYNN), MGM Resorts (MGM), Entain (OTCPK:GMVHF), Pointsbet (OTCQX:PBTHF), Rush Street Interactive (NYSE:RSI), GAN (NASDAQ:GAN), fuboTV (NYSE:FUBO), Churchill Downs (NASDAQ:CHDN), International Game Technology (NYSE:IGT), Scientific Games (NASDAQ:SGMS), Golden Nugget Online (NASDAQ:GNOG), Skillz (NYSE:SKLZ), Bally's (NYSE:BALY), Golden Matrix Group (OTCPK:GMGI), Bragg Gaming Group (OTCQX:BRGGF), Playtech (OTC:PYTCF), dMY Technology Group (DMYD), Esports Entertainment (NASDAQ:GMBL), IG Acquisition (NASDAQ:IGAC), Boyd Gaming (NYSE:BYD) and the Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ).
The four new ETFs are as follows: Dimensional U.S. Equity ETF (NYSEARCA:DFUS), Dimensional U.S. Small Cap ETF (NYSEARCA:DFAS), Dimensional U.S. Targeted Value ETF (NYSEARCA:DFAT), and Dimensional U.S. Core Equity 2 ETF (NYSEARCA:DFAC).
This historic transition can be the start of a new wave for others to convert away from the mutual fund space and over to the tax-favored ETF marketplace.
Peggy Vena, Director of ETF Product Development for North America at Citi, stated: “This was a monumental conversion for Dimensional, Citi and the ETF Industry,” she continued with “The scope of the conversion is unprecedented, and we expect this transaction to pave the way for many more mutual fund to ETF conversions in the coming years.”
Per Bloomberg Intelligence, over the coming decade, organizations can potentially convert more than $1T worth of mutual funds to ETFs. Although $1T does appear to be a large figure, it should be noted that it would represent roughly only 10% of the mutual fund universe.
Citigroup stock falls 4.3% ahead of today's Federal Reserve statement and after its CFO, on Tuesday afternoon, warned that trading revenue will likely fall ~30% from a year ago.
China's National Food and Strategic Reserves Administration says it will release reserves including copper, aluminum and zinc in batches to metal processing and manufacturing companies through public bidding.
China also says it is expanding its oversight of commodities trading by state firms to overseas markets.
Freeport McMoRan (NYSE:FCX) -1.5% pre-market after plunging 8% over the past two days.
DraftKings (NASDAQ:DKNG) is being defended after yesterday's short report from Hindenburg Research on exposure for the company to illegal markets via SBTech sent shares lower.
Morgan Stanley notes that "unregulated" market exposure is a common theme for international online gaming/sports betting companies. SBTech's exposure is said to fall more in the grey market area, which the New Jersey Division of Gaming Enforcement views as permissible in the state.
Crucially, analyst Thomas Allen and team also remind that DraftKings' opportunity for upside is around its U.S. business and not SBTech.
"We are Overweight DKNG on the thesis that its customer acquisition advantage through its legacy DFS business will drive outsized US B2C sports betting revenue and in turn, profitability compared to consensus."
Jefferies is also still positive on DraftKings, keep a Buy rating and price target of $75 in place. Analyst David Katz says the SBTech acquisition was primarily for the purpose of owning and developing technology, instead of international revenue.
Meanwhile, ARK Invest took advantage of the downswing yesterday in DraftKings' share price by snapping up 181,597 shares for the ARK Next Generation Internet ETF and 688,702 shares for the ARK Innovation ETF.
Traders are in wait-and-see mode before the latest Fed meeting, with U.S. equity futures hovering close to the flatline for most of the night. While the central bank is not expected to take any action, there will be plenty of accompanying commentary when Chair Jerome Powell takes the stage at 2:30 p.m. ET. See a full breakdown of the meeting here.
Bigger picture: Scott Ruesterholz, portfolio manager at Insight Investment, expects the Fed to strike a "patient tone" at the gathering, "wanting to ensure they do not overreact and slow the pace of recovery." "There is a tremendous amount of uncertainty: how much of the inflation is being driven by transitory factors, like supply chain disruptions, and how much of the slower job growth is being driven by temporary measures like enhanced unemployment benefits." Powell's recent balancing act has emphasized the need for a full rebound before the Fed would consider raising rates, but has also highlighted a strong economic revival, which has maintained investor confidence in the economy.
The latest outlook comes as retail sales dropped in May, marking a shift in pandemic spending, while producer prices rose at their fastest annual rate in nearly eleven years during May, triggering worries about inflation. Others are less concerned. "On a one-year basis, inflation is indeed high," declared Brad McMillan, CIO at Commonwealth Financial Network. "On a two-year basis, which captures the downturn and the upturn, inflation is still in the normal range over the past decade. The one-year numbers are simply misleading. When you dig in, on time frame and components, inflation is not nearly as bad as the headline numbers suggest."
Go deeper: Another area that has been getting a lot of attention is commodities. While everything from lumber to copper and corn have been falling precipitously in recent weeks - denting expectations for a new commodities super cycle - oil continues to hold the line above $70/bbl. That could prompt Chair Powell to say he's monitoring the situation, or shake it off as another "transitory" event. While some of crude's rise may be inflationary, there are signs of stronger demand and tight supplies, with many U.S. companies balking at investment given the transition to a greener economy.
Morgan Stanley says it would not be surprised to see General Motor (NYSE:GM) raise full-year guidance by as much as $1 per share or more to account for previously unanticipated tailwinds from pricing, mix and other items.
Analyst Adam Jonas thinks GM could kick off a "summer auto beat and raise festival" that eventually leads to investor expectations for $10 per share of earnings power for the automaker. Jonas reminds that the current consensus forecast is for GM to produce $5.57 of EPS for FY21 and $6.70 for FY22 and FY23.
Morgan Stanley has an Overweight rating on GM and price target of $80. Looking ahead, Jonas thinks a guidance lift and positive GM updates on company strategy (Ultium, Cruise, BrightDrop, Corvette, Hydrotec, Connected Services, etc.) could justify the high-flying price target.
Updated 3:12 p.m.: Khan has been named the Federal Trade Commission's chairperson, Sen. Amy Klobuchar says in a Senate Judiciary subcommittee meeting on tech antitrust. "I would also note, Sen. Lee, that Lina Khan was just named the chair of the FTC - an interesting development from an antitrust standpoint," Klobuchar said in an interjection before starting witness testimony.
She's the youngest commissioner ever confirmed to the FTC.
And her 69-28 approval points to some bipartisan agreement among legislators that Big Tech - including Amazon.com (AMZN -0.4%), Facebook (FB -0.3%), Alphabet (GOOG -0.3%, GOOGL -0.7%) and Apple (AAPL -0.6%) - needs tighter reins. And Khan could end up voting on whether to bring antitrust complaints against the same companies that she has investigated in the past; she specifically worked on the Google section of a Democratic report on monopoly power.
As a Yale student in 2017, her Yale Law Review article "Amazon's Antitrust Paradox" argued for a new framework to evaluate competitive harm in antitrust, not on consumer welfare alone but also on predatory pricing and the dangers of a company both owning and selling on a marketplace, as Amazon and Apple both notably do.
The exchange traded fund market is growing exponentially as more and more investors are pouring in capital to the market space. ETFs have already pulled in over $400B in investor inflows from a year-to-date standpoint which is more then three-fold investors saw through the end of May one year ago at $121.1B.
There are plenty of ETF issuers in the market, but four that stick out to investors are Vanguard, BlackRock, State Street, and Invesco. These four issuers are the world's largest ETF providers, with a total of 828 different ETFs that investors can choose from.
So far in 2021, Vanguard has amassed more than $186B in investor inflows, which is more than double the 2020 pace. Vanguard's largest ETF is the Vanguard Total Stock Market ETF (NYSEARCA:VTI).
BlackRock in 2021 so far has accumulated $104B, which dwarfs their 2020 inflows of $29B over the same time period. The most prominent BlackRock exchange traded fund is the iShares Core S&P 500 ETF (NYSEARCA:IVV), which has over $279B in AUM.
State Street has seen nearly a four-fold of fund flows this year versus 2020 - $41B in 2021 against about $11B a year ago. The largest global ETF, the SPDR S&P 500 Trust ETF (NYSEARCA:SPY) comes from State Street.
Invesco has seen the most significant growth in year-to-date, with inflows up 5-fold in 2021 versus 2020 - to $23.4B from $4.2B. Invesco's most popular exchange traded fund is the Invesco QQQ ETF (NASDAQ:QQQ).
See below a graphical chart of the four above issuers and their year-to date inflows versus the inflows they received at this point in time in 2020.
Exchange traded funds continue to see growth in different business areas as market participants continue to demand new and different ETFs that fall anywhere from leveraged ETFs to thematic, ESG, inverse, asset class-specific, and more.
+6.6% Y/Y vs. +6.5% consensus and +6.2% prior, the largest increase since 12-month data was first calculated in November 2010.
Core PPI: +0.7% vs. +0.5% consensus and +0.7% prior.
+4.8% Y/Y vs. +4.8% consensus and +4.1% prior.
Within the index for final demand goods in May, prices for nonferrous metals rose 6.9%; the indexes for beef an veal; diesel fuel; gasoline; hay, hayseeds, and oilseeds; and motor vehicles also increased.
Prices for fresh fruit and melons declined 1.9%; indexes for primary basic organic chemicals and for asphalt also moved lower.
Prices for final demand services rose 0.6% last month, the fifth straight increase.
For some context, Total sales for the March 2021 through May 2021 period were up 36.2 percent from the same period a year ago.
Retail trade sales were down 1.7 percent from April 2021, but up 24.4 percent above last year. Clothing and clothing accessories stores were up 200.3 percent from May 2020, while food services and drinking places were up 70.6 percent from last year.
Core Retail Sales: -0.7% M/M vs. +0.5% consensus and +0.0% prior (revised from -0.8%).
Ex-Auto & Gas: -0.8 M/M vs. +0.2% consensus and +0.1% prior (revised from -0.8%).
Ford Motor Company (NYSE:F) dealers this week will start receiving the very first shipments of the long-awaited new Ford Bronco. The model joins the smaller Ford Bronco Sport that hit the market last year.
Ford execs say about 125K Bronco orders have already been received. So far, about two-thirds of Ford Bronco Sport orders are from buyers who previously had vehicles from other automakers.
The Ford Bronco ranges will cost buyers between $30K and $60K.
Crucially, Ford workers confirm that the automaker's semiconductor chip supply is returning back despite industry shortages
Ford is having a Bronco celebration event on YouTube at 10:00 a.m. today.
The growth trade could be returning as bond yields keep falling, with the rate on the 10-year Treasury falling another 2 bps overnight to 1.48%. The moves helped propel the Nasdaq Composite upward on Monday, closing at a record high as cyclicals took the back seat. Overnight, contracts linked to the index inched higher, while Dow and S&P 500 futures were hovering around the flatline.
This all comes ahead of the Fed's two-day policy meeting. The gathering kicks off today and will be the focal point of the week for the markets . While the central bank is not expected to take any action, investors will be hanging on to every word that mentions interest rates, tapering plans, and of course - inflation. Transitory?
Speaking of inflation: The Producer Price Index - which measures the average price changes received by domestic producers - is set to be published this morning. The index is forecast to have climbed 0.5% in May, while the core PPI, which excludes volatile items like food and energy, is also estimated to increase 0.5%. Also stay on the lookout for retail sales data for May, which will also be released at 8:30 a.m. ET.
On the global front: President Biden is continuing his tour through Europe after meeting with the G7 and NATO leaders. Today, he'll sit down with Vladimir Putin in Geneva, marking the first time an American president has met with a Russian president in almost three years. As the Biden administration attempts to focus on its domestic agenda, it may look to contain Russia on the global stage, though that may not come easy. Biden has previously called Putin "a killer," Moscow just categorized the U.S. as an "unfriendly nation" and neither has an ambassador in each other's country.
May 2020 sales had risen 52% from 2019. Now the pro forma comparison from NPD Group shows overall May 2021 sales up 3% from 2020, to $4.45B.
A drop in accessory sales (down 8%, to $142M) was more than offset by gains in hardware (up 5%, to $244M) and physical and digital content (up 3%, to $4.066B).
That brings year-to-date totals overall to $24.02B, up 17% from the same year-to-date period in 2020. YTD hardware sales are up 36% to $1.94B; accessory sales are up 17% to $1.03B; and content is up 15% to $21.05B.
In May, Nintendo Switch (OTCPK:NTDOY) was again the best-selling hardware platform in both unit and dollar terms, and it leads in those measures year-to-date, even with next-gen consoles on the shelves (sometimes, when they're in stock) from Sony (NYSE:SONY) and Microsoft (NASDAQ:MSFT).
And in accessories, steering wheel sales are up 45% year-over-year, analyst Mat Piscatella notes, with the year's top-selling wheel being the Logitech (NASDAQ:LOGI) G920 Driving Force Racing Wheel.
Turning to content, two new titles debuted atop NPD's dollar sales chart. Resident Evil: Village(OTCPK:CCOEY) logged the best launch month of any title in 2021 so far, and it's already the second-best seller year-to-date.
And it topped another debut, Mass Effect: Legendary Edition(NASDAQ:EA), as well as last month's top three (now 3-4-5): MLB: The Show 21 (SONY); Call of Duty: Black Ops Cold War(NASDAQ:ATVI); and New Pokemon Snap (OTCPK:NTDOY).
Rounding out the top 10 in content dollar sales: No. 6, Mortal Kombat 11(NYSE:T); No. 7, Mario Kart 8 (OTCPK:NTDOY); No. 8, Returnal (SONY); No. 9, Animal Crossing: New Horizons (OTCPK:NTDOY); and No. 10, Minecraft.
Morgan Stanley analyst Adam Jonas says the CEO/CFO management change at Lordstown is an important first step for the company to move forward. "We felt it was untenable for the company to secure necessary new capital with a management team widely seen as potentially not leading the company into the next era of its development," he updates.
The upcoming selection by Lordstown of the new CEO is called critical to setting new commercial and technological strategies for the electric vehicle maker.
However, Jonas and team think the biggest obstacle facing the company is still the dependency of the proposition systems in-hub motors. Former CEO Steve Burns was a proponent of the hub motor system, which MS warns may need to be changed in what could be a one-year to two-year process.
Like volatility? Jonas says investors should expect more as departing managers dispose of some of their positions and updates around pre-orders, pre-production milestones and strategic partnerships either rattle or excite investors.
Lordstown trades about 38% below its 200-day moving average.
"Things are absolute bat-shit crazy right now," says hedge-funder Paul Tudor Jones, appearing on CNBC as the FOMC gets set to meet this week. "This is the most important Fed meeting we’ve had in 5 years." Jones say he'll be watching carefully, and if Fed boss Jay Powell "shrugs off " the perky inflation numbers, that would be a "green light" for heavy bets on every inflation trade.
Jones famously went long Bitcoin (BTC-USD) in 2020, and he says he continues to like it as a "portfolio diversifier." He likes a mix of 5% bitcoin, 5% commodities, and 5% cash, but that leaves 85% that he's unsure of what to do with. "Economic orthodoxy has been turned upside down."
"As we transition to the commercial stage of our business – with planned commencement of limited production in late-September – we have to put in place a seasoned management team with deep experience leading and operating publicly-listed OEM companies" David Hamamoto said on behalf of the board.
Jane Ritson-Parsons, formerly interim Chief Brand Officer, has been appointed as COO.
Traders are beginning the week with the Fed on their minds as the FOMC meets Tuesday and Wednesday to discuss policy monetary. An accompanying press conference from Jerome Powell is likely to reiterate that recent price increases will be "transitory," though it will be interesting to watch if the concerns will have any effect on the central bank's forecasts. Another area of note is quantitative easing, and if tapering talk even makes it into the conversation.
Bigger picture: Investors have so far shrugged off inflation concerns, with equities ending at highs last week despite the CPI expanding at a blistering 5% Y/Y in May. Stock futures inched higher overnight, with the Dow and S&P 500 up 0.1%, respectively, and the Nasdaq ahead by 0.3%. "Because the S&P 500 Index reached yet another new record high last week, investors will be watching to see if this signals even higher levels near term," added Jim Paulsen, chief investment strategist at The Leuthold Group.
Another post-pandemic milestone was notched before the weekend, with more than 2M people passing through U.S. airport security checkpoints on Friday. That's the first time screenings hit that figure since March 2020 and represents a big turnaround for the travel industry. While still losing money, airlines are recalling employees from voluntary leave and planning to hire small numbers of pilots later this year.
How will the meme trade fare this week? Usual suspects AMC (NYSE:AMC), BlackBerry (NYSE:BB) and GameStop (NYSE:GME) are all up in premarket trade, as well as newcomers Clover Health (NASDAQ:CLOV), Clean Energy Fuels (NASDAQ:CLNE) and GEO Group (NYSE:GEO). While sentiment changes quickly in the sector, WallStreetBets founder Jaime Rogozinski is defending the trade. "I mean what is market manipulation? You have people that are buying and you have people that are selling, right? If you have a fraudulent intent - if somebody goes up there and lies and says oh, BlackBerry has this new hologram cellphone that does whatever and it's a lie, that is market manipulation. But people coming together and saying let's just push this price to the moon and being really transparent and no defrauding taking place, that is absolutely what the market is."
At a G7 summit over the weekend, President Biden pressed world leaders to take concrete steps to counter China's rising influence and put a heavy focus on the path toward decarbonization. The result? A global infrastructure project called "Build Back Better for the World" that would kill two birds with one stone. It calls for spending $100B per year to help developing nations' climate change transitions, while sticking to climate standards and labor practices.
Bigger picture: The plan would specifically create a "higher quality" alternative to China's Belt and Road Initiative, which has been criticized over its leverage in creating political goodwill, massive debt and a way to spread Beijing's influence. The new G7 plan, dubbed by some as the "Green Belt and Road" or the "Green Marshall Plan," would be funded by multilateral development banks like the IMF and World Bank, as well as the private sector (think wind farms, railways and other low-carbon projects). The Biden administration also plans to work with Congress to increase U.S. contributions to the G7's Development Financing Toolkit.
Quote: "As the G7, we are united in our vision for a cleaner, greener world. A solution to the problems of climate change," said U.K. Prime Minister Boris Johnson, who chaired the conference. "I think that is what he peoples of our countries now want us to focus on... and that we're building back better together."
Response from China: "Those fanning confrontation are definitely on an ill-advised path... Ganging up, pursuing bloc politics and forming small cliques are unpopular and doomed to fail," Chinese foreign ministry spokesman Wang Wenbin declared. "The days when global decisions were dictated by a small group of countries are long gone," added a spokesman for the Chinese embassy in London. "We always believe that countries, big or small, strong or weak, poor or rich, are equals, and that world affairs should be handled through consultation by all countries."
Other headlines at the G7 summit: Leaders vowed to phase out gas and diesel cars and shut down coal plants that do not apply emissions-capturing technology as soon as possible. They also promised to protect 30% of the planet's land and oceans by 2030. On an interesting note, NATO, which includes many G7 nations, will agree on a climate action plan tomorrow that would make their armed forces carbon-neutral by 2050.
Investors continue to warm up to consumer discretionary stocks as U.S. spending trends stay strong and increased confidence labor and supply chain headwinds can be offset.
Adding to the positive sentiment, the latest forecast from the National Retail Federation is for 2021 retail sales to grow between 10.5% to 13.5% to more than $4.44T this year as the economy accelerates its pace of recovery. Those numbers exclude the auto dealer, gas station and restaurant categories,
Non-store and online sales are expected to grow between 18% and 23% to a range of $1.09T to $1.13T as consumers continue to utilize ecommerce. The numbers exclude automobile dealers, gasoline stations and restaurants.
"Incoming data suggests that U.S. economic activity continues to expand rapidly, and we have seen impressive growth. Most indicators point toward an energetic expansion over the upcoming months and through the remainder of the year," says NRF Chief Economist Jack Kleinhenz.
Consumer discretionary stocks had a strong run last week. In the mall sector, the top performers included J. Jill (NYSE:JILL) +22%, G-III Apparel (NASDAQ:GIII) +11%, Abercrombie & Fitch (NYSE:ANF) +9% and Express (NYSE:EXPR) +9%. E-commerce retail also had a big week, led by Global-e Online (NASDAQ:GLBE) +31%, Blue Apron (NYSE:APRN) +19% and ThredUp (NASDAQ:TDUP) +18%.
The S&P Retail ETF (NYSEARCA:XRT) has smashed the return of the S&P 500 Index over the last six months.
SPDR S&P 500 Trust ETF (NYSEARCA:SPY) finished the week in the green +0.40% and is +13.30% YTD. See below a breakdown of the eleven sectors of the S&P 500 and their weekly performance. Additionally, see how the accompanying SPDR Select Sector ETF performed from the open on June 7th to the close of June 11th.
#1: Real Estate, +1.96% and the Real Estate Select Sector SPDR ETF (NYSEARCA:XLRE) +1.88%.
#2: Health Care, +1.92% and the Health Care Select Sector SPDR ETF (NYSEARCA:XLV) +1.76%.
#3: Consumer Discretionary, +1.60% and the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) +1.35%.
#4: Information Technology, +1.34% and the Technology Select Sector SPDR ETF (NYSEARCA:XLK) +1.46%.
#5: Utilities, +1.07% and the Utilities Select Sector SPDR ETF (NYSEARCA:XLU) +0.99%.
#6: Communication Services, +0.80% and the Communication Services Select Sector SPDR Fund (NYSEARCA:XLC) +0.95%.
#7: Energy, -0.60% and the Energy Select Sector SPDR ETF (NYSEARCA:XLE) -0.52%.
#8: Consumer Staples, -0.73% and the Consumer Staples Select Sector SPDR ETF (NYSEARCA:XLP) -0.81%.
#9: Industrials, -1.78% and the Industrial Select Sector SPDR ETF (NYSEARCA:XLI) -1.93%.
#10: Materials, -2.06% and the Materials Select Sector SPDR ETF (NYSEARCA:XLB) -2.01%.
#11: Financials, -2.43% and the Financial Select Sector SPDR ETF (NYSEARCA:XLF) -2.54%.
Now a five-bill package aims to do that, by making it harder for dominant platforms to close on mergers, and block them from owning businesses where there's clear conflict of interest.
And two of the bills present unique problems for Amazon and Apple, CNBC notes, since they operate marketplaces that include their own products competing with smaller players that rely on their marketplace services.
The bills include the Ending Platform Monopolies Act; the American Choice and Innovation Online Act; The Platform Competition and Opportunity Act; the Augmenting Compatibility and Competition by Enabling Service Switching Act; and the Merger Filing Fee Modernization Act.
Anticipating the bills' arrival, technology industry trade groups have fired salvos at the legislation, saying it will hurt consumers and make it harder for U.S. companies to complete globally.
Brown Brothers Harriman recently surveyed 146 institutional investors, fund managers, and financial advisors across the Greater China region, including Mainland China, Hong Kong, and Taiwan, to understand their views and goals on future exchange traded fund investing.
The survey covered many different areas within ETFs, but the two key fields worth noting were around thematic investing and ESG investing.
The Greater China region saw incredible growth in 2020 when it came to exchange traded funds and continues to expect the same for the future.
When asked, “Do you expect your use of ETFs to increase, decrease, or stay the same over the next 12 months?” the responses were overwhelmingly positive, 92% of the respondents in Mainland China said yes, and 66% of recipients in Hong Kong also said yes, and Taiwan reported 58% confirming yes as well.
Thematic investing is one of the largest growing areas in the Greater China region as 91% of Mainland China, 86% of Hong Kong, and 74% of Taiwan investors reported that they plan to increase their portfolio exposure to the thematic investing space.
When asked: “In five years, what percentage of your portfolio will be in thematic ETFs?” the response demonstrated a much longer-term projection of the space. See below a chart from the report.
Some of the most popular thematic ETF focus areas recorded in the survey were internet/technology, robotics/AI, cannabis, fintech, crypto, and autonomous electric vehicles.
See a handful of popular global thematic ETFs that can potentially fit the above interest area: (NYSEARCA:ROBO), (NASDAQ:BOTZ), (BATS:ARKQ), (NYSEARCA:MJ), and (NYSEARCA:BLOK).
Environmental, social, and governance investing within the exchange traded fund space has become one of the most popular topics among investors as the space appears to be building up a lot of momentum.
Per the survey report, “92% of investors in Greater China plan to allocate more capital to ESG strategies this year. In 5 years, 53% of investors expect to have at least 11% of their portfolio in ESG ETFs.”
When asked: “Do you plan to increase your allocation to environmental, social, and corporate governance investments over the next year?” The responses by subjects in Mainland China, Hong Kong, and Taiwan were all heavily weighted towards “yes,” see below chart.
See a handful of popular global ESG ETFs that can potentially fit the above interest area: (NYSEARCA:FPEI), (NYSEARCA:EFA), (NYSEARCA:VYM), (NASDAQ:PHO), and (NASDAQ:ESGD).
For market participants who want to learn more about the Greater China region, including Mainland China, Hong Kong, and Taiwan, and the future of exchange traded fund investing, see the full Brown Brothers Harriman survey.
All data and charts are per the Brown Brothers Harriman survey.
Goldman Sachs is one of the first firms out of the gate with positive comments on Tesla's (NASDAQ:TSLA) introduction of the Model S Plaid.
"While the market for the Plaid itself is relatively small, we believe it is an important product given that the Model S Plaid helps illustrate Tesla’s technology leadership position, which we consider one of the reasons for its strong share in EVs," updates the firm.
Goldman Sachs reiterates a Buy rating on the electric vehicle stock.
Credit Suisse is also positive on the new model. "The significance of the launch of Model S Plaid is to remind us that while Tesla has grand volume aspirations, the DNA of its brand is performance," notes analyst Dan Levy. However, the firm does not think it moves the meter much in comparison to the Model 3 and Model Y. CS keeps a Neutral rating on Tesla.
Evercore ISI calls the Model S Plaid event a strong marketing event, but is asking questions about the timeline of the company's 4680 cells (which were to be included in the Plaid+).
Shares of Tesla are up 0.26% premarket to $611.70.
Something interesting happened in the stock market on Thursday. Shortly after the release of the Consumer Price Index, which showed sizzling inflation figures for May, the major averages opened higher, with the S&P 500 even setting a record at the close. In another surprise, Nasdaq had a better day than its cyclical peers as the growth trade outperformed value. Dusting off the old textbooks, rising inflation should weigh on corporate profits, reduce purchasing power and trigger fears of higher interest rates, but that's not being felt this time around.
What happened? Some investors may be following the "transient" camp, especially interest rate watchers that are listening to every word of Jay Powell. There is also a lot of buying power still out there and many traders are looking to ride the momentum. For others, new dynamics may be playing out in equities. Some fearful of government spending and a weaker dollar see risks in converting to cash. That could result in some sort of unconventional hedge in the stock market, especially in one that increasingly appears disconnected from the fundamentals (similar sentiment that's boosted crypto?).
"The technical setup for the broader market remains constructive," said Craig Johnson, technical market strategist at Piper Sandler. "Momentum indicators have improved and the majority of SPX stocks remain above their 200-day MAs and in MACE defined uptrends. We reiterate our year-end SPX price objective of 4,625." Overnight, stock index futures inched up slightly and continue to point green ahead of the open.
From the SA comments section: "Not a surprise. Markets rarely sell off on the same news, especially when the news is well anticipated," points out Charles Agbakwu. "Cash is trash. Park it in something that goes up," writes nothing_lasts. "The stock market is indestructible," adds Investing4FIRE, while calvinfroedge asks "Does anyone still think we have free markets?"
A higher-than-expected inflation print in the U.S. yesterday showed prices soaring by 5% in May compared with a year ago, marking the biggest increase since the Great Recession. While it was somewhat distorted by the pandemic, dueling narratives are taking shape to what this will mean for the economy going forward. The Consumer Price Index also showed a gain of 4.2% back in April, calling into question current fiscal policies and the direction of interest rates.
The bulls: The Fed is sticking to its "transitory" inflation thesis, which maintains that supply shocks and production bottlenecks have led to recent price pressures. Many are also quick to point out that the recent inflation print was once again driven by a jump in the cost of used cars and trucks, which accounted for about a third of the CPI's monthly advance. Meanwhile, the Biden administration argues that rising inflation is not only temporary, but it is also a feature of a rebounding economy. A broad vaccine rollout and lower COVID-19 case counts have seen Americans return to their old habits by spending months of pent-up savings.
The bears: Many Republicans and some economists acknowledge the post-pandemic supply problems and surging demand, but also flag the cost of the $1.9T stimulus package President Biden signed in March. They further point to coming proposals from the White House, like spending $4T on infrastructure, as a possible risk that could trigger a full-blown recession. While a large share of May's CPI came from the auto market, prices are jumping for many other categories like furniture, airfare and apparel, while labor costs, transport and raw materials are also skyrocketing.
Outlook: Will inflation be here for the long haul? It could take months before it's clear whether the current upsurge is temporary. As the economy reopens, both sides predict that rising costs will continue until supply chains and consumer demand recalibrate, but the real question is how prices will fare after that against a backdrop of massive fiscal and monetary policy support.
The S&P 500 climbs to a new record high in Thursday’s trading session and closed on the day +0.47%. Market participants appear to shrug off inflation concerns as the largest exchange traded fund by AUM, SPDR S&P 500 Trust ETF (NYSEARCA:SPY), had a record close on the daily charts. SPY finished the day at $423.67 +0.48%.
Consumer Price Index data came in today at 5%, which was above the 4.2% consensus, which continues to fuel the discussion over whether certain price spikes can ultimately turn into longer-term inflation even though the Fed continues to reassure market participants the opposite.
Of all the eleven sectors of the S&P 500, the market finished relatively mixed with seven sectors closing positive and four segments ending to the downside. The top-performing sectors of the day were healthcare, real estate, and information technology. On the other hand, the sectors that were the worst performers were financials and materials.
SPY was able to close out the trading session hitting new highs with a relatively quiet trading volume day. SPY witnessed 35% less daily volume than its usual average as just under fifty million shares were exchanged on the day.
Retail inflation hit 5% and yet the reflation trade took it on the chin, with cyclical stocks struggling, tech and defensive stocks rallying and Treasury yields falling to three-month lows.
The Nasdaq (COMP.IND) +0.8% led the major averages as rates fell.
The S&P 500 (SP500) +0.5% rose enough to close at a new all-time high, something it had been bumping up against in the last couple of weeks.
The Dow (DJI) +0.1% lagged, hit by Caterpillar and Goldman.
"The technical setup for the broader market remains constructive," Craig Johnson, technical market strategist at Piper Sandler, wrote. "Momentum indicators have improved and the majority of SPX stocks remain above their 200-day MAs and in MACE defined uptrends. We reiterate our year-end SPX price objective of 4,625."
The 10-year Treasury yield dropped 5 basis points to 1.44%, trading around levels last seen at the beginning of March.
Even with the May CPI and core CPI topping expectations, bond vigilantes were nowhere to be found. The market did price in sooner tapering in the fed funds curve, though.
"Yields will find support next at 1.40%," Althea Spinozzi, senior fixed income strategist at Saxo Bank says. "If they break below this level, they can fall as much as (to) 1.20%."
Cyclicals were the weakest sectors in the S&P, with Financials (NYSEARCA:XLF) at the bottom on the yields dip, followed by Materials (NYSEARCA:XLB) and Industrials (NYSEARCA:XLI).
Defensives led, with Healthcare (NYSEARCA:XLV) the big gainer, while Info Tech (NYSEARCA:XLK) also rose.
All the megacaps closed up except for Apple.
Looking to the meme stocks, where much of Wall Street's attention has been this week, the trade sputtered.
AMC, GameStop, Clover Health, BlackBerry and Bed Bath & Beyond all fell sharply.
Update 12.12PM EST: According to the CDC, out of hospitalized patients with myocarditis or pericarditis following the second dose of the COVID-19 shot, 15 people remained hospitalized and three required intensive care as of May 31.
Most patients appeared to be men with three to four days of median time to show symptoms. The CDC in coordination with the FDA is conducting the investigations.
Previously: The U.S. Centers for Disease Control and Prevention (CDC) has said that the number of cases of heart inflammation following the second dose of mRNA-based vaccines from Pfizer (PFE +1.1%)/ BioNTech (BNTX -1.3%) and Moderna (MRNA -1.7%) were higher than normal in younger people.
Citing preliminary data from its vaccine safety monitor system, the CDC said on Thursday that there were 275 cases of myocarditis or pericarditis in people aged 16 – 24 years as of May 31, compared to the expected number of cases of 10–102, CNBC reported.
In the presentation prepared for a meeting of an FDA expert panel, the federal agency has pointed to 475 cases of myocarditis or pericarditis in people aged 30 years and younger. Most patients who were hospitalized or 81% of them had fully recovered from the symptoms.
Clean Energy Fuels (CLNE -12.8%) plunges on heavy volume in early trading after disclosing its largest shareholder, TotalEnergies (TOT +0.1%), reduced its stake by more than 10M shares.
In a new SEC filing, Clean Energy said TotalEnergies owned 53.44M shares, or 26.7% of shares outstanding, compared with a separate filing on Monday where the company said Total owned 64.04M shares, or 32% of shares outstanding.
Total remains Clean Energy's largest shareholder, with Dimensional Fund Advisors the second-biggest owner with a 5.6% stake, according to FactSet data.
Ex-food and energy, the core CPI came in at 3.8%, both topping forecasts. The question for the market is whether those pressures look longer lasting than April.
"In services, the price pick-up was less about 'reopening' and more about rents," Renaissance Macro Research tweets. "Airfares rose, but prices for recreation and hotels/motels were tame. Rents, which are sticky, beginning to pick up in earnest. Core goods CPI may slow later this year, but rents probably won't."
The "PCE inflation forecast looks a bit off after today's inflation data," Renaissance adds. "But, the Fed's forward guidance is about employment first and inflation second. So ... it is an open question whether the dots shift up. Passive easing will more or less continue."
Jobless claims dropped to 376K.
Nine out of 11 S&P sectors are higher, with Energy (NYSEARCA:XLE) and Financials (NYSEARCA:XLF) at the top.
Among meme stocks, AMC and Wendy's are down, while Clover Health and ContextLogic are climbing.
A network based on Hxro, a gamified binary futures platform, is "an easy on-ramp to the cryptocurrency space for retail investors" for crypto's "next major frontier" of options trading, BTIG says.
The Hxro Network, pronounced "hero," is set to go live in early July.
Founders Dan Gunsberg and Rob Levy will bring "a decentralized liquidity network being built on the Solana blockchain that will provide the infrastructure for a fully functional decentralized exchange for vanilla, exotic and pari-mutuel options markets," Mark Palmer, BTIG FinTech analyst, writes in a note today.
"Crypto options markets, while nascent, have been growing at an exponential rate," Palmer says. "Deribit (Private), the leading options trading platform for cryptocurrencies, during 1Q21 posted over $2bn in daily bitcoin options volume."
"At the same time, a robust, decentralized options trading solution has yet to materialize despite various attempts, with projects running into various roadblocks including prohibitive trading costs due to high network fees, and automated market makers (AMMs) unable to dynamically manage their liquidity while offering competitive pricing."
The Hxro founders will use the Solana blockchain, "an Ethereum alternative capable of faster transactions and greater scalability, which they viewed as the only distributed ledger with the quality, speed and level of throughput that the Hxro Network would need to avoid the problems that had impeded other efforts to build DeFi options platforms," he adds.
The HXRO token is also "a prime example of a token used to finance and bootstrap the growth of a real business."
Over the last 12 months, the index jumped 5.0% before seasonal adjustment, the largest increase since a 5.4% increase for the period ending August 2008.
The index for used cars and trucks continued its sharp rise, up 7.3% in May and accounting for about a third of the seasonally adjusted all items increase.
Food index rose 0.4% last month, the same increase in April; the energy index was unchanged in May, with a decline in the gasoline index offsetting increases in the electricity and natural gas indexes.
Core CPI: +0.7% vs. +0.4% consensus and +0.9% prior.
The core index, which excludes food and energy, pushed up 3.8% Y/Y, the largest 12-month increase since the period ending June 1992.
Besides the strong rise in used cars and trucks, household furnishings and operations, new vehicles, airline fares, and apparel also notched increases. The medical care index fell slightly.
Bank of America is breaking down the action on Reddit once again.
The top Reddit stocks over the last week in order of mentions in the top 100 conversations are AMC Entertainment (NYSE:AMC), GameStop (NYSE:GME), Clean Energy (NASDAQ:CLNE), Workhorse Group (NASDAQ:WKHS), Wendy's (NASDAQ:WEN), Virgin Galactic (NYSE:SPCE), Academy Sports and Outdoors (NASDAQ:ASO), Athene Holding (NYSE:ATH), Beyond Meat (NASDAQ:BYND), Silvergate Capital (NYSE:SI), Antero Midstream (NYSE:AM), Natus Medical (NASDAQ:NTUS) and Bed Bath & Beyond (NASDAQ:BBBY).
Further down the list, World Wrestling Entertainment (NYSE:WWE) joins the group for the first time. WWE was up 10.89% yesterday and is 2.51% higher in premarket trading today.
BofA says the rallies in the meme stocks are being driven by more than just the Reddit user base.
Analyst Jill Carey Hall and team: "Interestingly, total discussion across all tickers on Reddit’s WallStreetBets forum has not increased much in recent weeks and mentions of AMC & GME are below early ’21 highs. In addition, our proxy for retail demand for equity call options has barely moved the past two weeks. This suggests others beyond just Reddit users may be driving up the stocks."
JPMorgan says it continue to like the trajectory and operating momentum for Las Vegas Strip operators.
Analyst Joseph Greff and team see multiple catalysts ahead with the positive trends resulting in a healthy round of Q2 EPS beats, guidance increases and more upside from sports betting after the fall football season starts. They also point to positive commentary from REIT operators on the Vegas group recovery in general.
"Given this momentum, we are raising our price targets on CZR and MGM, taking into account the potential for un-modeled EBITDA upside, in Las Vegas as well as other U.S. regionals casinos."
JPMorgan hikes its price target on Caesars Entertainment (NASDAQ:CZR) to $129 from $120 vs. the average Wall Street PT of $121.93. "We value CZR’s core/traditional gaming business at ~$89 and its USSB/iGaming opportunity at $38, plus $1 per share credit for a sale of WMH’s non-US operations," updates the firm.
JP lifts its price target on MGM Resorts (NYSE:MGM) to $52 from $47 vs. the average Wall Street PT of $43.84. "Assuming LV Strip revenues return to 2019 levels, there could be an incremental $6 of equity value per share, not in our estimates."
Cryptocurrencies gain after an international group of bank regulators proposes a strict set of regulations for crypto assets.
Also in crypto news, Coinbase Global (NASDAQ:COIN) is expanding the number of states where U.S. customers can borrow cash using bitcoin as collateral. And the crypto exchange is teaming up with ForUsAll, Inc. to provide the option for workers using its 401(k) plans to invest in cryptocurrency, the Wall Street Journal reports.
Coinbase gains 1.1% in premarket trading.
Bitcoin (BTC-USD) rises 8.0% over the past 24 hours to ~$37.8K, ethereum (ETH-USD) +1.3% to $2,572, Binance Coin (BNB-USD) +2.0% to $366.36, Dogecoin (DOGE-USD) +2.1% to 34 cents.
The Basel Committee on Banking Supervision puts forth preliminary proposals on banks' treatment of crypto-asset exposures, an admission that cryptocurrencies are gaining wider adoption.
"While banks' exposures to cryptoassets are currently limited, the continued growth and innovation in cryptoassets and related services, coupled with the heightened interest of some banks, could increase global financial stability concerns and risks to the banking system in the absence of a specified prudential treatment," the committee said in a statement.
The group proposes that some crypto assets, such as tokenized traditional assets and stablecoins, be treated under the existing Basel Framework with some modifications and additional guidance.
Other crypto assets, including bitcoin, would be subject to a new, more conservative treatment. This class of crypto would require a risk weight of 1,250%; in other words, the capital will be sufficient to absorb a full write-off of the crypto-asset exposures.
Other crypto-related stocks on the move: Riot Blockchain (NASDAQ:RIOT) +2.8%, Marathon Digital (NASDAQ:MARA) +2.4%, Bit Digital (NASDAQ:BTBT) +4.2%, SOS Ltd (NYSE:SOS) +3.1%, MicroStrategy (NASDAQ:MSTR) +0.6%.
The day has finally arrived... Investors this morning are set to get a better take on whether inflation is here to stay, or if price pressures could threaten the market rally, as major averages hover near record highs. The consumer price index for May will be published at 8:30 a.m. ET, and is expected to show headline inflation rising by 4.7%. That would mark the biggest year-on-year increase since 2008, when energy prices went through the roof, and would follow the sizzling 4.2% advance seen in April. Core consumer inflation, which excludes food and energy, is anticipated to jumped 3.5% Y/Y, the highest level since 1993.
Quote: "It will be hot. It could be up to 5%," said Diane Swonk, chief economist at Grant Thornton. "The worst of the heat is going to be the second quarter in terms of headline. It will be interesting to see what it looks like when you strip out the extremes. I think we're still going to have a warm summer when you have surge pricing kicking in for everything from airfares to hotels."
While the Fed has pledged not to hike interest rates before 2023, some economists say that is wishful thinking if these levels of inflation keep up. U.S. stock index futures were mixed before the latest CPI, with the Dow up 0.2% and Nasdaq off by the same amount (contracts linked to the S&P were flat). On the other side of the debate, the Fed believes rising price pressures will be "transitory," and many portfolio managers are riding that train, feeling inflation fears have been priced in.
Also on the calendar: The Labor Department will publish its latest weekly jobless claims numbers at the same time the CPI is released. The figures are expected to decline to a seasonally adjusted 370K for the week ended June 5, compared to the 385K seen last week, which marked the lowest level since March 2020. It would also be the sixth consecutive weekly decline as the U.S. economy rebounds from the coronavirus pandemic.
The LCP Group on Wednesday canceled a $200M IPO for its planned special purpose acquisition company, reportedly becoming the first firm to nix a U.S. SPAC initial public offering in nearly two years.
LCP wrote in a brief letter to the U.S. Securities and Exchange Commission that it was withdrawing its October 2020 IPO filing for LCP Acquisition Corp. (LCPU), a SPAC that the firm had planned to list on the Nasdaq.
“We hereby submit this letter to notify the Securities and Exchange Commission [of] our withdrawal of our registration statement … because the company has elected to abandon the transactions subject thereto,” LCP CEO Francis Lively wrote. “The registration statement was not declared effective and no securities have been issued or sold under the registration statement.”
LCP Acquisition Corp., whose executives had backgrounds in commercial real estate and the hospitality industry, wrote in earlier SEC filings that it planned to look for acquisition targets with “a travel, leisure or hospitality component (including, without limitation, a real estate investment or management company, or a business within the hospitality and lodging industry).”
The SPAC’s sponsor gave no reason for the IPO’s withdrawal, and neither the company nor Lively returned messages seeking comment.
However, market watcher Renaissance Capital wrote that LCP’s move represented the first SPAC IPO cancellation since September 2019.
'SPAC Mania' Is Slowing Down
The decision comes as “SPAC mania” appears to be fading on Wall Street following months of hot investor interest.
Professor Jay Ritter, a SPAC expert at the University of Florida’s Warrington College of Business, told Seeking Alpha that completed SPAC IPOs dropped from 298 in Q1 to just 48 so far in Q2.
He also said that 290 SPACs have filed for U.S. IPOs but have not actually completed them, adding that “I expect that a lot of these will never go public.”
“For a $200 million SPAC IPO [like LCP’s], the sponsors typically put up about $7 million,” Ritter said. “They risk losing it all if the SPAC does not complete a merger after the IPO. With 422 SPACs with $133.6 billion in trust that have already gone public that are searching for an operating company to merge with, the space is suffering from too much money chasing deals.”
SPACs Rarely Pop Any More
Perhaps as a result, the big “pops” that many special purpose acquisition companies’ shares previously enjoyed following merger announcements have all but dried up. In recent months, many several SPACs’ shares rose only slightly or even fell after management announced deals to take companies public.
All told, the IPOX SPAC Index, which tracks U.S. special purpose acquisition companies’ post-IPO performance, has shed some 20% since peaking earlier this year.
The Worst Could Be Yet to Come
Ritter thinks LCP’s cancellation is only beginning for the industry.
“Any new SPAC that goes public will face a lot of competition [for merger deals],” he said. “I expect that a lot of the sponsors that have filed to go public are going to have second thoughts and call off the IPO rather than risk losing millions of dollars.”
The watch will feature a display with two cameras that can be detached from the wrist in order to take pictures and videos (easing quick sharing to the platforms, including Instagram), according to the report.
As with smartphones, a front-facing camera is there to enable video calling, while a 1080p autofocus camera on the back can be used while detached.
It also features a heart rate monitor that will allow for positioning as a fitness device.
Notably, Facebook is working with U.S. wireless carriers to support LTE connectivity, meaning the watch would not need to be paired with a phone to operate.
The company has spent about $1B to develop the first version of the watch - which has been discussed as pricing about $400 - and it's reportedly working on the second and third generations for later release.
Swedish electric battery maker Northvolt raised $2.75B in a new funding round that was led by Goldman Sachs (NYSE:GS), Volkswagen (OTCPK:VLKAF), Baillie Gifford and large pension funds out of Sweden and Canada. Sources indicate that the new funding round values Northvolt at $11.75B.
Northvolt plans to use the funding to expand capacity at its factory in Sweden to 60 gigawatt-hours, which is noted to be enough capacity to supply batteries for around 1M electric vehicles. Northvolt aims to achieve 150 gigawatt hours of deployed annual production capacity in Europe by 2030. Production on Northvolt's expansion is expected to start later this year.
Northvolt's overall stated mission is to deliver batteries with an 80% lower carbon footprint compared to those made using coal energy. CEO Peter Carlsson is a former Tesla (TSLA -0.5%) exec. He says that while Northvolt's batteries use a different chemistry than those from Tesla, performance is increasingly similar.
Looking ahead, Volkswagen and BMW (OTCPK:BMWYY) could benefit from Northvolt hitting its targets with their EV ambitions high.
Bitcoin (BTC-USD) bulls looking for some sign that the selloff may be coming to an end might find hope in the market ignoring today's news of further restrictions in China. Most have lost count of how many times China has "banned" or been about to ban Bitcoin over the years, but word of a crackdown on miners a couple of weeks ago sent the crypto tumbling from above $40K to less than $30K in a few hours.
As for today, Bitcoin Magazine reports Baidu and Weibo (China's Google and Twitter, respectively), are censoring keywords related to bitcoin exchanges. A search on Weibo for "Binance," for instance, yields no link to that exchange, but instead a message: "According to relevant laws, regulations and policies, the search results of 'binance' are not displayed." A search for "OKEx" on Baidu yielded no results.
Bitcoin may be its own sort of asset, but old Wall Street hands know that when prices stop reacting negatively to bad news, it's often a sign that bear markets are finished.
Virgin Galactic Holdings (NYSE:SPCE) is on watch after the company is reportedly looking to schedule a second test flight of its VSS Unity SpaceShipTwo rocket plane for the July 4 weekend with Richard Branson aboard.
The Parabolic Arc website says the flight is contingent upon Virgin Galactic landing an operator's license from the Federal Aviation Administration.
The timing would be dramatic of course, with Blue Origin's (BORGN) New Shepard vehicle scheduled to fly Jeff Bezos and his brother on a suborbital flight on July 20.
Virgin Galactic has not confirmed the report.
Recent SPCE statement: "We are in the process of analyzing the data from our successful May 22nd flight. As previously announced, we expect to complete the final test flights this summer through to early fall. At this time, we have not determined the date of our next flight. An objective from the last flight was to collect data to be used for the final two verification reports that are required as part of the current FAA commercial reusable spacecraft operator’s license."
Campbell Soup (NYSE:CPB) slumps in premarket trading after the food giant lowers guidance and misses sales estimates with its FQ3 report.
The company says it faced additional challenges during the quarter on top of the difficulty in matching the comparison from a year ago during the consumer stocking up phase of the pandemic. "Our results were impacted by a rising inflationary environment, short-term increases in supply chain costs, and some executional pressures as we continued to advance our transformation agenda, primarily in our Snacks division," notes CEO Mark Clouse. Gross margin was down to 31.7% of sales from 34.5% of sales in the quarter last year due to higher cost inflation and other supply chain costs.
On the positive side, CPB gained or held market share for about 75% of its portfolio in the quarter, with most core categories having grown at higher rates than pre-pandemic levels.
Looking ahead, Campbell Soup sees FY21 revenue growth of -3.5% to -3.0% vs. a prior outlook for -3.5% to -2.5%. EPS of $2.90 to $2.93 is anticipated vs. $3.07 consensus. A new $250M buyback plan was authorized by the company's board.
The soft outlook on sales arrives with Campbell already having an F growth grade.
Shares of Campbell Soup are down 5.76% premarket to $46.29 following the guidance update.
Bank of America says the amended 10-K filed by Lordstown Motors (NASDAQ:RIDE)warning of a 'going concern' issue should not be considered a major surprise given the commentary on the recent earnings conference call.
Analyst John Murphy notes the electric vehicle maker's insufficient cash level to fund commercial scale production and launch of new models is a function of higher than expected expenditures for parts/equipment, expedited shipping costs and expenses for third party engineering resources.
The filing by Lordstown could also be indicative that incremental financing has still not been arranged by the electric vehicle maker since discussions commenced, which Murphy calls a negative for the company and stock. "Nevertheless, with significant asset value (i.e. former GM Lordstown plant), management focus on securing capital, and still widely available capital for AutoTech entrants, we are hesitant to draw a conclusion that RIDE will not be able to line up additional funding," he updates.
Looking ahead, BofA believes certain aspects of the RIDE's go-to-market and commercialization strategy have merits, but concerns remains that the longer-term growth trajectory may be challenged by what it seen as a relatively narrow addressable market and as significant competition from incumbents and entrants in a segment that has historically been a cash flow cow for major U.S. automakers.
BofA keeps a Neutral rating on Lordstown Motors after yesterday's warning.
Elsewhere on Wall Street, RBC Capital Markets starts coverage on RIDE with an Underperform rating and price target of $5.
Shares of Lordstown are up 1.07% premarket after the late 16.27% plunge yesterday. RIDE is off more than 44% YTD and trades 40% below its 200-day moving average.
Major averages closed near the flatline on Tuesday as stocks remained range bound near record highs. Not much changed overnight, with Dow and S&P 500 futures holding steady and contracts linked to the Nasdaq inching up 0.1%. As mentioned yesterday, some traders are staying on the sidelines before the latest inflation figures on Thursday, to gauge whether higher price pressures are temporary as the economy rebounds from the coronavirus pandemic.
Others have plunged headfirst into the wild world of meme trading. Clover Health (NASDAQ:CLOV) has become the latest target of the WSB/Reddit Army, whose sentiment is rapidly expanding to those looking for some outsized gains. The stock skyrocketed 96% to $22 on Tuesday and is up another 18% in premarket trade. Those looking for some quick cash also jumped into Wendy's (NASDAQ:WEN), which rose another 5% overnight following yesterday's 25% advance. The latter move was notable as Wendy's has relatively low short interest (no squeezes) and is an institutional favorite, compared to AMC (NYSE:AMC), BlackBerry (NYSE:BB) and GameStop (NYSE:GME).
Quote: "It's different than 1999. It’s different in 2008. The number of players today and the amount of capital today is massive compared to what we saw back when it was mostly professionals," said online brokerage pioneer and options legend Tom Sosnoff. "What you're seeing is an entire generation become engaged. So instead of waiting until they're 50 or 60 and trying to figure out what the markets are all about, they're doing it when they're 22 or 23. This is a generational move."
Other happenings: President Biden is looking for a new coalition for his infrastructure bill as talks with key Republican senators collapsed. He'll also depart today on his first trip abroad since taking office. The eight-day mission will seek to strengthen trans-Atlantic ties, including a G7 summit and a NATO gathering, as well as visits with Queen Elizabeth and Russia's Vladimir Putin.
It could be one of the last major bipartisan bills of 2021, but the Senate got it over the line. Late Tuesday, the chamber approved the U.S. Innovation and Competition Act, a $250B package aimed at countering China's technological ambitions. While the bill passed 68-32 in the Senate, it still needs approval in the House, which has been weighing some different approaches but is likely to see wide support. The measure is one of the biggest government interventions in industrial policy in decades, which trounced traditional party differences over economic policy.
What's in the bill? About $190B would be directed at U.S. technology and research to better compete globally, including money for cutting-edge science and artificial intelligence via the National Science Foundation. Another $54B would increase U.S. production and research into semiconductors and telecom equipment, as well as design and manufacturing initiatives. The Commerce Department will also get $10B in funding to designate regional technology hubs for R&D and will be able to match financial incentives offered by states and local governments to chipmakers who expand or construct new factories.
According to some estimates, federal R&D spending in recent years has totaled less than 1% of U.S. GDP, as well as less than 3% of total government spending, the lowest level since the space race in the 1960s. With regards to semiconductor manufacturing, it's been even worse. The Semiconductor Industry Association says the U.S. share of global chip making capacity has tumbled from 37% in 1990 to 12% at the present. "We are in a competition to win the 21st century and the starting gun has gone off, President Biden declared. "We cannot risk falling behind." Commerce Secretary Gina Raimondo added that the funding could result in seven to 10 new semiconductor plants in the U.S.
Response from China: While Beijing has long-embraced a top-down approach to investing in favored sectors, it expressed "strong indignation and resolute opposition" to the U.S. bill, which showed "paranoid delusion of wanting to be the only winner." The measure also banned downloads of Chinese-owned TikTok (BDNCE) on all government devices (not only military and Homeland Security phones) and will block purchases of drones manufactured and sold by companies backed by the Chinese government. It further expanded mandatory sanctions on Chinese entities engaged in American cyberattacks or the theft of intellectual property, while reviewing export controls on items that could be used to support human rights abuses.
Chinese fresh food e-commerce player Missfresh files for an IPO on the Nasdaq under the MF symbol.
The company operates a technology-enabled network for grocery delivery that grew to 631 DMWs across 16 cities in China by the end of Q1. Missfresh says its vision is to become the largest platform to drive digitalization on China's neighborhood retail industry.
The company reported revenue of $935M for 2020 and a net loss of $252M.