Commentary

The rally seemed to lose some steam yesterday with investors likely needing a minute to process the major shift in sentiment this week. Remember, just last week Wall Street was ready to give up hope on Fed rate cuts this year. Now, pullbacks in both job gains and inflation have restored expectations to about where they were before the April sell off with Wall Street once again penciling two or perhaps even three -25 basis point rate cuts.

The one key difference is that most now expect the first cut in September rather than June or July previously.

Wall Street may also be a little on edge about the Russia-Ukraine war after The New York Times reported that NATO may be moving closer to sending troops into Ukraine to train Ukrainian forces. To be clear, US officials are not calling for this, though Gen. Charles Q. Brown Jr., the chairman of the Joint Chiefs of Staff, did say, “We’ll get there eventually, over time.” The NYT’s article mostly refers to a small number of EU NATO members that have said they are considering sending support troops independently of NATO. Still, having NATO troops in Ukraine is something Russian President Vladimir Putin considers a “red line” that could lead to a more widespread conflict, so investors are paying attention.

Turning to next week, the top data highlight will be the “minutes” from the Fed’s most recent policy meeting on Wednesday. Existing Home Sales is also due out on Wednesday, followed by New Home Sales on Thursday and Consumer Sentiment on Friday.

Next week also brings earnings results from Nvidia on Wednesday, which is one of the most highly anticipated reports of the season. Nvidia is sort of the de facto “poster child” for artificial intelligence as the company’s chips dominate the industry, meaning its results can have a huge impact on the wider tech sector. Nvidia’s stock has already nearly doubled this year (up +91%) and Wall Street expectations are equally lofty with earnings and revenue seen climbing more than 240% and 400%, respectively.

Retail companies this week have reported mixed results, though the disappointments outweighed the upward surprises. Walmart yesterday was a standout as being among the few retail companies that topped Wall Street’s expectations across the board, including forward guidance. Walmarts credits the solid quarter to growth in its online business as well as attracting new customers, particularly higher-income consumers. Like other retailers, Walmart also said it sees signs that consumers’ budgets are stretched with shoppers making fewer discretionary purchases as they prioritize the basics.

Ray Dalio Believes There’s a 35-40% Chance of a Civil War in the US - Bridgewater Associates’ founder Ray Dalio told the Financial Times that he believes the U.S. is on the brink of an internal conflict breaking out. Dalio, however, explained that while the civil war he envisions might not necessarily be one in which people grab guns and start shooting, it will see a fracturing of the U.S., whether it’s violent or not. He said that this could see people start moving to states that align with their political views while refusing to abide by rules made by federal authorities whose politics they disagree with. The billionaire hedge fund founder, nonetheless, refused to rule out the possibility of a violent conflict, as he said we don’t yet know if we will cross over into much more turbulent times. Dalio added that he also believes the upcoming U.S. elections will be the most important in his lifetime in deciding whether existential risks including artificial intelligence and climate change run out of control. He argued the U.S. elections, scheduled for November 2024, will be a test for democracy, meaning, will there be an acceptance of the rules and an ability to work well under those rules? he asked. Source Market Watch

Mirage Hotel and Casino in Las Vegas Closing in July: After more than three decades of business, Las Vegas' famed Mirage Hotel and Casino is shuttering its doors. From what I understand, the Mirage will be ceasing operations on July 17. In its place will be the Hard Rock Las Vegas, which is scheduled to open in 2027. Don't forget, the Tropicana Las Vegas, which was once a crown jewel on the Strip, closed its doors for good back on April 2, 2024, just two days shy of its 67th anniversary, to make way for a planned $1.5 billion, 33,000-seat domed stadium for Major League Baseball's Oakland Athletics. Source USA Today

Record Number of Fortunes Top $100 Billion: The world’s super-rich club now has 15 members with fortunes over +$100 billion, the most on record, as they ride the waves of artificial intelligence, luxury goods, and geopolitical shifts. The combined net worth for these people is up 13% this year to $2.2 trillion, according to the Bloomberg Billionaires Index, beating the pace of inflation and the broader stock market. Between them, they hold nearly a quarter of the wealth of the world’s 500 richest people. While the 15 have crossed $100 billion before, this is the first time all of them have held fortunes of that size at the same time. L’Oreal heiress Francoise Bettencourt Meyers, Dell Technologies founder Michael Dell and Mexican billionaire Carlos Slim all initially reached the threshold in the past five months and some have fluctuated around that level, crossing it multiple times. Leading the pack is LVMH (Louis Vuitton Moët Hennessy) founder and Chief Executive Officer Bernard Arnault, 75, with a net worth of $222 billion. He derives most of his wealth from his stake in the world’s largest luxury-good maker. Amazon.com Inc founder Jeff Bezos, 60, ranks second with a net worth of $208 billion, thanks to his ownership of the world’s largest online retailer. Tesla Inc. CEO Elon Musk, 52, has a net worth of $187 billion and ranks the third on the index.  Source Bloomberg

America’s Fastest Growing Cities: Atlanta, Fort Worth and Raleigh are America's fastest-growing cities with more than 250,000 residents as of 2023, according to new U.S. Census Bureau data released this week. Atlanta grew by +2.42% between 2022 and 2023, while Fort Worth grew by +2.23% and Raleigh grew by +1.87%. By contrast, the biggest population losers were New Orleans, which shrank -1.56%, St. Louis declined -1.55%, and Philadelphia’s population dipped -1.04%. Southern cities dominate the list of the fastest-growing big metros, with Florida and Texas alone accounting for eight of the top 20. Some of America's fastest-growing places are not cities themselves, but their outer suburbs, or "exurbs." "Fewer of the fastest-growing places between 2022 and 2023 were inner suburbs than in 2019 ... and more were on the far outskirts of metro areas — 30, 40, and even more than 60 miles away from the largest city's downtown," according to a Census Bureau analysis.  Source Axios

US Takes First Steps to Reclassify Cannabis: The Justice Department took a significant step toward rescheduling marijuana Thursday, formalizing its process to reclassify the drug as lower-risk and remove it from a category in which it has been treated as more dangerous than fentanyl and meth. The Biden administration has been signaling that it would move to reschedule the drug from Schedule I — a strict classification including drugs like heroin — to the less-stringent Schedule III, which would for the first time acknowledge the drug’s medical benefits at the federal level. The Drug Enforcement Administration submitted a notice of proposed rulemaking in the Federal Register on Thursday afternoon, triggering a 60-day comment period that will allow members of the public to submit remarks regarding the rescheduling proposal before it is finalized. Source NBCNews

Under Armour Announces Lay Offs Amid Sales Plunge: Under Armour announced a broad restructuring plan on Thursday as it said sales in its largest market, North America, plunged -10% and predicted the trend will get worse throughout its current fiscal year. The athletic apparel retailer also saw profits sink by more than -96% during its fiscal fourth quarter, compared with the year-ago period. It’s unclear how many employees Under Armour will lay off as part of the restructuring, but the plan is expected to cost between $70 million and $90 million, a portion of which will be used for employee severance and benefits costs. The company’s reported net income for the three-month period that ended March 31 was $6.6 million, or 2 cents per share, compared with $170.6 million, or 38 cents per share, a year earlier. Excluding one-time items, the company reported earnings of 11 cents per share. Under Armour said it expects sales to continue to worsen in North America. The company anticipates they will drop between -15% and -17% in its current fiscal year. Source CNBC

Consumer Debt Continues to Pile Up: Americans now owe $1.12 trillion on their credit cards, according to the latest update from the Federal Reserve Bank of New York. The average balance per consumer stands at $6,218, up 8.5% year over year, according to a separate quarterly credit industry insights report from TransUnion. “Consumers continue to use credit, and in particular credit cards, as they navigate the world we face right now,” said Charlie Wise, TransUnion’s senior vice president of global research and consulting. Higher prices and higher interest rates have put many households under pressure and prices are still rising, albeit at a slower pace than they had been. Young adults, especially, have had to stretch financially to cover rising rents, ballooning student loan balances and larger auto loan payments, Wise said. “Rent, when you have it, auto loans, utilities, these are all things consumers prioritize ahead of credit cards,” Wise added. As a result, credit card delinquency rates are higher across the board, the New York Fed and TransUnion found. Over the last year, roughly 8.9% of credit card balances transitioned into delinquency, the New York Fed reported. According to TransUnion’s research, “serious delinquencies,” or those 90 days or more past due, reached the highest level since 2010. Source CNBC

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