Stock investors have a pretty quiet week ahead that will be interrupted by the “Juneteenth” holiday, which will keep stock, bond, and commodities markets closed on Wednesday (6/19).

The Nasdaq and S&P 500 remain near record highs while the Dow is still lagging as tech stocks and AI optimism continue to dominate the market. The Nasdaq is up nearly +18% for the year so far, the S&P 500 is up just shy of +14%, while the Dow is up +2.4%.

Stock bulls hope to keep last week’s upward momentum going but may struggle to find a new catalyst with the data and earnings calendars on the sparse side. Wall Street is anxious to see May Retail Sales tomorrow amid growing concerns that US consumers are starting to pull back in earnest.

There has been only mild evidence of this in economic data, the most notable probably being the April Retail Sales read that came in far below Wall Street expectations.

Investors also heard a string of warnings from retailers during Q1 2024 earnings season that were all singing a similar tune about strained consumers. Many retailers have announced price cuts to lure shoppers, something that ultimately should be a good thing in terms of getting inflation down. It may not be so great for the profit margins of the companies making those price cuts, though, which is a factor that’s likely to keep weighing on the consumer goods sector.

Wall Street has been inclined to treat soft economic data as “good” news during the Federal Reserve’s inflation fight because a slower economy should equate to lower inflation and interest rates. However, with anxieties rising about whether the US economy and consumers can realistically keep plugging away, soft data is starting to become more of a downside risk.

I have also started to hear more talk about a possible “deflationary spiral”, something that can occur when consumers start putting off purchases in anticipation of lower prices ahead. That in turn can put even more downward pressure on prices and create a vicious cycle where consumers keep holding out for deeper price cuts. This is something that typically occurs in oversupplied markets as well as during an economic downturn.

Some economists think downward price spirals can create such downturns as they ultimately lead to lower production, decreased labor demand, and lower wages. Others, however, argue that deflationary spirals are merely a symptom of an economic crisis, rather than the cause. The next major data dump is in about two weeks - the first week of July - which brings the June jobs report and ISM gauges for manufacturing and services.  On the earnings front, Lennar is today’s highlight.

Elon Musk Wins Shareholder Battle to Keep Record-Breaking Pay: Tesla said 72% of votes cast by shareholders, excluding Musk and his brother Kimbal, were in favor of a $56 billion compensation package that was awarded in 2018 and then voided this year by a Delaware judge. That pay plan is now valued at roughly $48 billion. The voting count was 84% for a reincorporation in Texas instead of Delaware, a move made in reaction to the January ruling against Musk's pay. That total also excluded shares owned by Musk and his brother. Musk said Friday on X, that he would send a cake to Delaware with the Latin phrase "Vox Populi, Vox Dei" as a "parting gift.  Source Yahoo Finance

Weight Loss Drugs Providing Big Boost to Apparel Industry as Skinnier People Want NEW Wardrobe:  Some 15.5 million people, or 6% of U.S. adults, say they have tried injectable weight loss drugs to slim down, and apparel retailers are discovering that weight loss is their gain. While blockbuster drugs like Ozempic that lead to significant weight loss have dented demand for diet plans and caused food companies to prepare for people eating less, clothing sellers are finding that millions of slimmed-down Americans want to buy new clothes. The newly svelte aren’t just restocking their wardrobes, many are also gravitating to more body-hugging shapes and risqué designs, according to industry executives and shoppers. Some brands are responding by replacing zippers with adjustable corsets and adding more sheer looks. Sales of the three largest sizes of women’s button-down shirts fell 10.9% in the first three months of 2024 compared with the same period in 2022 at a dozen brands, according to Impact Analytics, which helps retailers manage their inventory and size allocations. Sales of those same button-down shirts in the three smallest sizes grew 12.1% over that period. Impact Analytics analyzed purchases in physical stores located on Manhattan’s Upper East Side. It focused its research on this area because it has the highest concentration of individuals in New York City taking these drugs specifically for weight loss, according to market research firm Trilliant Health. A similar trend played out for women’s dresses and sweaters, as well as men’s polo shirts, sweatshirts and T-shirts, according to Impact Analytics. Source WSJ

Tensions Between Israel and Hezbollah Stir Fears of Wider Conflict: A barrage of missiles last week exchanged between Israel and Hezbollah in Lebanon have made U.S. officials increasingly concerned that the escalation could spiral the war-torn region into a broader conflict between the U.S. ally and Iranian-backed militia. U.S. officials expressed concern about several scenarios. Some told CBS News they interpret the recent deeper strikes by Israel inside of Lebanese territory as preparing the battlefield for a sweeping assault by Israel Defense Forces. Hezbollah has responded by launching larger rocket attacks into Israel. These officials are increasingly concerned that Israel will start a war against Hezbollah in Lebanon that it cannot finish without American support. Other U.S. officials tell CBS that their apprehension is focused on Hezbollah and described a scenario in which the volume of the rocket strikes into Israel could result in unintended consequences that trigger an event Israel feels compelled to respond to and which could then result in an unintended war. The increased tit-for-tat cross border exchanges between Israel and Hezbollah make it harder for the U.S. to ease tensions in the region, particularly if the Biden administration's efforts to broker a hostage and cease-fire deal in Gaza founder. The administration views the cease-fire talks and the Israel-Hezbollah tensions as intertwined.  Source CBS News

Pensions Piled Into Private Equity but Now They Can’t Get Out: Private-equity and pension funds seemed like a match made in heaven. U.S. companies and states handed over control of some worker retirement savings. In exchange, they got a promise of high returns after a decade—and often received healthy cash payouts in the years before that. Now the honeymoon is over. The payouts have dried up, creating an expensive problem for investment managers overseeing the savings of workers retired from big corporations and state and city governments. To keep benefit checks coming on time, those managers are unloading investments on the cheap or turning to borrowing—costly measures that eat into returns. U.S. companies and state and local governments manage around $5 trillion in pension money. Large public pension funds have an average 14% of their assets in private equity, while large corporate pensions have almost 13% in private equity and other illiquid assets such as private loans and infrastructure, according to data from Boston College and JPMorgan Chase. Much of the money was committed when low bond yields were dragging down retirement portfolios. But as private equity has grown, its lead over traditional stocks has narrowed. And during the decade before the investments pay out, it can be hard to trust interim estimates provided by fee-seeking managers. Unable to sell without denting returns, private-equity managers are keeping workers’ retirement savings locked up for longer—sometimes past the promised maturity date. Nearly half of private-equity investors surveyed by the investment firm Coller Capital earlier this year said they had money tied up in so-called zombie funds—private-equity funds that didn’t pay out on the expected timetable, leaving investors in limbo. Source WSJ

Apple Gives Banks a Bigger Bite of Its Payment Features: Apple is sometimes called a disrupter to banks. But relationships in financial technology are much more complicated than that. Announcements out of the tech company’s latest product showcase included enhancements to Apple Pay, the digital wallet whose size and stature has rapidly expanded in recent years. They included a feature that will enable banks to offer buy now, pay later installment payments via their cards loaded into users’ Apple Pay wallets. One of the threats to banks’ credit-card businesses are buy now, pay later options offered by other lenders, including Apple itself. So for banks, it is a win to be able to offer customers the option to convert a card purchase into an installment-payment option right at the point of purchase. Apple also is introducing the ability to pay for a purchase with card rewards, adding that much more value to those points, and giving banks another opportunity to win a transaction. Source WSJ

Foreign Investors Have Been Propping Up US Bond Markets: Credit investors have spent much of the year wondering when foreign demand for high-grade US corporate bonds will wane, but so far it is showing signs of strengthening as the macro outlook for the American economy improves. During the first quarter of 2024, overseas investors poured $187 billion into US company notes, according to Torsten Slok, chief economist at Apollo Global Management. That’s a 61% jump from the same time last year. Overseas investors may still be getting encouragement from an improving macroeconomic outlook for the US. Spending has proven resilient, and a report this week showed inflationary pressures moderating. The odds of the US economy contracting have dropped to 13% in the latest Bloomberg survey of economists from 38% in March. At the same time, market turbulence has emerged in France after President Emmanuel Macron’s decision to call a snap election, hitting bank bonds for the nation, among others. Demand from Asian investors and to a lesser extent Europeans has been a key support for US dollar corporate bonds, stocks and money-market funds this year. For company debt, the voracious appetite has helped absorb this year’s near record supply, up about 20% from this time last year. Source Bloomberg

Cities Considered “Impossible to Afford”: Anyone with half an eye on the housing market over the last two decades will know that in many countries, not least the United States, it’s become much more difficult to buy a home. But a new report sums up the feeling of many potential home buyers by creating a category that labels some major cities as “impossibly unaffordable.” The report compared average incomes with average home prices. It found that pandemic-driven demand for homes with outside space, land use policies aimed at limiting urban sprawl, and investors piling into markets had sent prices soaring.  In the United States, where there is the greatest gap between the most expensive and least expensive housing markets, more than 85% of the cost-of-living difference between the most expensive markets is due to higher housing costs. US cities on the West Coast and Hawaii occupied five of the top 10 most unaffordable places, according to the annual Demographic International Housing Affordability report, which has been tracking house prices for 20 years. Perhaps unsurprisingly, the US cities on the list are in California, where San Jose, Los Angeles, San Francisco, and San Diego have all made the top 10. “The middle-class is under siege principally due to the escalation of land costs. As land has been rationed in an effort to curb urban sprawl, the excess of demand over supply has driven prices up,” the report said. The report also identifies the most affordable cities of the 94 surveyed worldwide. In the US, those include Pittsburgh, Rochester, and St Louis. Source YahooFinance

1-Jun-17-2024-11-37-36-2921-AM
1-Jun-17-2024-11-45-41-6140-AM
NO FALLEN HEROES FOUNDATION

Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.

Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.

The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.

It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.

Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.