Commentary |
Wall Street is extremely anxious to see Nvidia’s earnings after the market close today. Nvidia’s stock closed at another record high yesterday, putting shares up around +25% in just the last month and +97% so far this year.
Wall Street expects the chipmaker to blow past estimates that are already high by any measure, with revenue seen rising over +200% and profits climbing more than +400%.
Some Wall Street insiders are concerned that the bullish momentum may start to lose steam following Nvidia’s earnings, which marks the last of major US tech company earnings. The Q1 2024 earnings season has provided a steady stream of AI-related news to keep the bulls well-fed the last few weeks. However, that is likely going to start drying up now, leaving tech bulls struggling to find a new catalyst.
The next big technology event will be Apple’s annual “World Wide Developers Conference” next month, June 10-14. Wall Street is also growing more worried about so many investors crowded onto the same side of the boat.
A Bank of America survey last week showed that fund managers are the most bullish on stocks that they’ve been since November 2021, and are the most overweight equities since January 2022. Keep in mind, the S&P 500 added more than +28% in 2021, then proceeded to give a big chunk of that back in 2022 with a loss of over -18%.
The recent stock buying spree has also reduced funds’ cash levels, which fell as a portfolio share from an average of 4.2% in April to 4.0% currently. Meaning there is less money on the sidelines that could be used to push stocks higher.
Other earnings today include Analog Devices, Snowflake, Target, TJX Companies, and Williams Sonoma.
On the economic data front, the “minutes” from the Federal Reserve’s most recent will be of high interest though not likely to provide any insights as to where central bank policy is headed.
Fed speakers this week have mostly leaned a bit more hawkish as they continued to caution that it may take longer than expected to get inflation down far enough to justify rate cuts. Existing Home Sales for April is also out today.
US Releasing 1 Million Barrels of Gasoline From Northwest Supply Reserves: The Biden administration said Tuesday it is releasing 1 million barrels of gasoline from a Northeast reserve established after Superstorm Sandy in a bid to lower prices at the pump this summer. The sale, from storage sites in New Jersey and Maine, will be allocated in increments of 100,000 barrels at a time. The approach will create a competitive bidding process that ensures gasoline can flow into local retailers ahead of the July 4 holiday and sold at competitive prices, the Energy Department said. The move, which the department said is intended to help “lower costs for American families and consumers,″ follows a mandate from Congress to sell off the 10-year-old Northeast reserve and then close it. The language was included in a spending deal Congress approved in March to avert a partial government shutdown. The Energy Department said the sale of 1 million barrels, about 42 million gallons, was timed to provide relief for motorists as the summer driving season begins. Source Associated Press
Retail Apocalypse in the U.S. is Finally Catching Up to National Drugstore Chains: National drugstore chains, once resistant to the retail apocalypse that swept across the U.S., are finally succumbing to competition from online shopping and discount stores. About 3,000 fewer drug stores were open for business at the start of this year compared with the same period in 2019, according to analytics company RetailStat, which tracks 15 pharmacy chains.CVS Health, Walgreens and Rite Aid have each closed hundreds of stores since the onset of the pandemic. Online shopping has been growing and offers customers a more convenient way to buy household staples. Competition has also increased from discount retailers such as Walmart, grocers such as Aldi, and dollar stores, which all sell many of the same items at lower prices. Financial pressures on the prescription side of the business and rampant thefts are also forcing drugstore chains to close locations. As pharmacy chains continue to struggle and their creditworthiness takes a hit, the previously robust market for building and buying drugstores has slowed. Source WSJ
Elvis' Graceland Faces Foreclosure Auction: Perhaps no entertainer in history is more closely associated with their home than the King of Rock ‘n’ Roll himself, Elvis Presley, whose 13.8-acre Graceland estate in Memphis, TN, is now more mecca than a mansion. That might all change on Thursday when one of America’s most beloved and famous homes is set to be sold at a foreclosure sale, according to a legal public notice. If nothing happens to stop the sale, Elvis’ home and final resting place, in addition to the surrounding property, will be auctioned off to the highest all-cash bidder on the steps to the Shelby County Courthouse on May 23. How could this happen to the home of rock royalty, and will an auction of The King’s home actually take place? Not if Riley Keough, Elvis’ granddaughter and heir to the property, has a say in the matter. According to the legal notice earlier in May, the reason for the sale comes down to Elvis and Pricilla’s daughter, Lisa Marie Presley. The notice alleges that Lisa Marie borrowed $3.8 million in 2018 and used Graceland as collateral. The Missouri-based lenders, Naussany Investments and Private Lending, claim Elvis’ only child failed to repay the money before her death in January 2023. Keough is battling the sale with a lawsuit, saying the talk of an imminent foreclosure sale is fraudulent, and Her grandmother, Elvis’ ex-wife, Priscilla agrees, proclaiming on X, It’s a scam! Source Realtor.com
AAA Forecasts Nearly 44M Travelers for Memorial Day Weekend: The American Automobile Association is projecting nearly 44 million travelers will head 50 miles or more from home over the Memorial Day holiday travel period, which is defined by the organization as the five-day period from Thursday, May 23 to Monday, May 27. We haven't seen Memorial Day weekend travel numbers like these in almost 20 years, said Paula Twidale, senior vice president of AAA Travel, in a news release. We're projecting an additional one million travelers this holiday weekend compared to 2019, which not only means we're exceeding pre-pandemic levels but also signals a very busy summer travel season ahead, she added. The organization projects over 38 million people will travel by car over Memorial Day weekend, over 3.5 million will travel by air and nearly 2 million will travel by other modes of transportation, including buses, cruises and trains. The 38 million drivers is the highest number for Memorial Day since AAA began tracking data in 2000 and is up 4% compared to last year. Source USA TODAY
Not Even Nobel Laureate Paul Krugman Knows Where Rates Are Going: Nobel laureate in economics Paul Krugman said it’s entirely unclear where interest-rate levels are headed over the medium term, with arguments in favor of both a return to pre-pandemic levels and a higher-for-longer outcome. “On interest rates I am fanatically confused,” Krugman said Tuesday on Bloomberg Television’s Wall Street Week with David Westin, with regard to whether borrowing costs will remain above pre-Covid levels. “Anyone who claims to know for sure what the answer is to that, is deluding themselves.” Krugman, now at the City University of New York, said it’s possible that a number of dynamics have “changed the picture” compared with pre-Covid. He cited substantially increased immigration, along with Biden administration industrial policy, “which is inducing a lot of manufacturing investment.” Federal Reserve policymakers, for their part, have slightly increased their median forecast of their benchmark interest rate over the long run to 2.6% as of March. Other economists have said it’s more likely at least 4% due to changes in the economy and fiscal trajectory. Source Bloomberg
Savings Account Rates Are Falling: It isn’t your imagination. Interest rates on deposits in typically high-yielding online savings accounts have fallen in recent months. Ally, American Express, Discover Financial, and Marcus by Goldman Sachs have all pulled back on rates this year. That has contributed to a decline in average rates on online savings accounts from the recent high of 4.486% in January to 4.401% this month, according to data from DepositAccounts by LendingTree. What makes the dip noteworthy is that the cuts have come even as the Federal Reserve has held its own benchmark rate steady since last summer. “Bank rates are not just driven by federal funds rates. They’re driven by funding need—meaning how much does a given bank need in deposits,” says Nathan Stovall, director of Financial Institutions Research at S&P Global Intelligence. The reason that banks lower their yields is largely associated with their desire to fund housing. With new mortgage originations still at historic lows, they may be feeling less of a need for deposits to offset loans. Banks are also seeing smaller margins on deposits, which also include certificates of deposits and money market accounts, as their costs for that money increase in the form of higher yield payouts. Some are now cutting payouts to depositors to try to boost returns. Source Barrons |
Nestlé Debuts New Brand Targeting GLP-1 Drug Users: Nestlé is launching its first major U.S. brand in nearly three decades as the food giant looks to meet the needs of consumers taking GLP-1 medications and other individuals focusing on weight management. The Vital Pursuit frozen product line, which is expected to reach store shelves by October, will include bowls with whole grains or protein pasta, portion-aligned sandwich melts and pizzas with cauliflower crust. More products are expected in the future. The single-serve meals are a response to changes in how consumers are going about losing weight — most notably with an increased dependence on medications such as Ozempic or Wegovy to suppress their appetites and keep them feeling fuller longer. Vital Pursuit prioritizes convenience, taste, portion size and delivering much-needed nutrients. Source FoodDrive
Hedge Funds Face Emerging Market Debt Crackdown in New York: Distressed debt investors may soon find it harder to turn a profit from legal disputes involving defaulted emerging-market sovereign debt as New York lawmakers are moving to change state laws. Legislators are seeking to pass the so-called champerty doctrine, intended to make “clear that it is unlawful for a minority of bad faith creditors to use New York law to sue and profiteer from the distressed debt of struggling countries.” The move seeks to differentiate conventional creditors from “predatory investors” in emerging-market restructurings. In practice, if the legislation is passed, situations like the protracted dispute involving Elliott Management and Argentina — the hedge fund snapped up cheap debt from the country after it defaulted in late 2001 and then embarked on years of legal maneuvers and recovery efforts — more prohibitive. Lawmakers also want to change a decades-old law that sets a 9% interest rate on past-due-coupons after governments default on their debt. Instead, the new rate would match the yield on one-year Treasury bills. Source Bloomberg
Google Threatens to Pause News Investment: Google is warning nonprofit newsrooms that passage of a new California bill would jeopardize the firm's future investments in the U.S. news industry, sources told Axios. This is the second time this year Google has threatened to pull investment in news in response to a regulatory threat in California — but this time, hundreds of publishers outside of California would also feel the impact. Last month, Google said it would pause further investments in California newsrooms — including new partnerships through its news licensing product, Google News Showcase, and planned expansions of its $300 million global Google News Initiative (GNI) program — "until there's clarity on California's regulatory environment." That statement was made in response to a bill, introduced by California Assembly member Buffy Wicks last year, that would essentially tax Big Tech companies for links to news content — a "link tax" — and use the revenue to fund newsrooms. Source Axios
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