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Stock indexes are mostly flat with not much in the way of NEW news so far this week.
The situation between Israel and Hamas is little changed with Israel continuing a push into the city of Rafah while cease-fire talks are still ongoing. There's been little noise out of Middle Eastern terror groups, although the Houthi group in Yemen is vowing to target more ships passing through the Red Sea.
Oil traders don't seem worried at the moment. There are several Federal Reserve officials scheduled to speak today, including Vice Chair Philip Jefferson and Fed Governor Lisa Cook. Interestingly, Minneapolis Fed President Neel Kashkari said yesterday that he can’t rule that the next move from the central bank will be a "rate hike". The bar to raising is quite high, but it is not infinite, Kashkari said in a talk at the Milken Institute 2024 Global Conference in California. Kashkari said he would support a hike if inflation starts to look entrenched but added quickly that a rate hike wasn’t his base case.
He said the most likely scenario would be that the Fed will stay put for an extended period of time and continue to hold rates at the current 5.25%-5.5% level and allow them to bite. Similar to other officials that have spoken recently, including Fed Chair Jerome Powell, Kashkari also noted that a” marked" shift to weaker job creation could justify an interest rate cut.
Interestingly, Kashkari noted that the housing market is proving more resilient to tight monetary policy than it has been in the past. According to Kashkari, this could mean that the “neutral rate”, aka the “target” rate of inflation that the central bank deems is right for price stability. Right now, the target rate is +2%. Still, Kashkari’s remarks did not reveal anything new and it’s unlikely that other Fed speakers this week will diverge from the script as there is really no new information.
The next round of market-moving data won’t come until next week, which will include the highly anticipated Consumer Price Index (CPI) for April on Wednesday, May 15. A lot of Wall Street insiders think stocks may be moving into a consolidation phase now that the bulk of Q1 2024 earnings results have been delivered, at least the majority of big headline names.
The bigger influence on the market is likely to be Nvidia, which doesn’t report until May 22. Airbnb and Uber report today. I did see some interesting data floating around that tried to better explain why this is not as much of a "rate-sensitive" US economy as we have seen historically... this is actually the first time in over +40 years the Fed funds rate is higher than the average mortgage rate currently being held by US consumers (3.8% average mortgage being held). In other words, money in the bank is earning more than money being charged on most American's mortgages.
Keep in mind, those who don't have mortgages own their homes outright and are earning respectable interest from the banks. In other words, perhaps the "wealth effect" is in play as most Americans are felling fairly wealthy as their homes and stock market accounts are at or near all-time highs and they are earning more in the banks than they are paying on their biggest loans. Interesting to think about...
Reddit is Red Hot! Reddit released its first quarterly report following its IPO in March. Revenue increased +48% to $243 million for the first quarter. The company reported $222.7 million in ad revenue for the period, up +39% year over year. Digital advertising companies have started growing again at a healthy clip after brands reeled in spending to cope with inflation in 2022. Meta’s ad revenue jumped +27% in the first quarter, followed by +24% growth at Amazon and +13% growth at Google parent Alphabet. Reddit reported 82.7 million daily active users for the period. As of late last year, Reddit was the 18th most-visited website in the world. Reddit, which hosts millions of online forums on its platform, was founded in 2005. by University of Virginia roommates Steve Huffman and Alexis Ohanian, as well as Aaron Swartz. In October 2014, Reddit raised $50 million in a funding round led by Sam Altman and including investors Marc Andreessen, Peter Thiel, Ron Conway, Snoop Dogg, and Jared Leto.[9] Their investment valued the company at $500 million at the time. In March of this year, Reddit began trading under the ticker symbol “RDDT” on the New York Stock Exchange. The company priced its IPO at $34 per share, which valued the company at around $6.5 billion. Today the stock is trading closer to $60 per share. CNBC
Great Wealth Transfer May Not Be All It's Cracked Up to Be: There’s a massive wealth transfer underway as baby boomers are set to pass more than $68 trillion on to their children. And yet, some millennials and Generation Z may not be inheriting as much as they think. Recent reports show a growing disconnect between how much the next generation expects to receive in the “great wealth transfer” and how much their aging parents plan on leaving them. To that point, 68%, of millennials and Gen Zers have received or expect to receive an inheritance of nearly $320,000, on average, USA Today Blueprint found. Additionally, 52% of millennials think they’ll get even more, at least $350,000 according to a separate survey by Alliant Credit Union. However, 55% of baby boomers who plan to leave behind an inheritance said they will pass on less than $250,000, Alliant found. Still, over the next decade, this intergenerational transfer could make millennials “the richest generation in history,” according to the annual Wealth Report by global real estate consultancy Knight Frank. The Edelman Report found: 90% of parents intend to leave an inheritance to their children but 48% do not have a specific plan in place. Source CNBC
Gen Z Sinks Deeper Into Debt: Young Americans are starting out with more credit-card debt than generations before them. That financial burden can have long-lasting effects. The rising debt load largely reflects a surge in prices for food and shelter at the start of their careers, coupled with a larger percentage of Gen Z who graduated with student loans. The average credit-card balance for 22- to 24-year-olds was $2,834 in the last quarter of 2023, compared with an average inflation-adjusted balance of $2,248 in the same period in 2013, according to new data from credit-reporting agency TransUnion. The median annual wage for recent college graduates was $60,000 in 2023, little changed from $58,858 in 2020, according to the Federal Reserve of New York. At the same time, rent, which typically takes up at least one-third of the average worker’s monthly paycheck, has soared. The median rent in the U.S. was $1,987 as of January, a nearly 22% increase over the past four years, according to research from Rent, an online rental marketplace. About one-third of households rent and tenants tend to be either young professionals or lower-income families. Gen Z members opened new credit-card lines at a faster rate than other generations during the pandemic. Nearly 5% of consumers 27 or younger had opened at least one new credit-card account in March 2020, according to data from VantageScore. By March of this year, that figure had dropped to 3%. Source WSJ
Unionized Workers Seeing Faster Wage Gains than Non-Union Peers: The labor movement had some big moments this past year — and that’s fueling faster pay gains for unionized workers, while other employees lag behind. In the first quarter, total compensation for unionized private-sector workers was up 5.3% from a year ago, compared to a 3.9% gain for nonunion workers, according to the Department of Labor’s most recent employment cost index report. Pay gains for union workers have been picking up steam for the last year, while nonunion employees have seen total compensation growth slow since 2022. T he first quarter’s steep compensation increase might be partly due to volatility in quarterly ECI data as well as annual cost-of-living pay increases built into existing union contracts. But Kate Bronfenbrenner, a professor at Cornell University’s School of Industrial and Labor Relations, said the jump is a direct result of the U.S. labor movement’s growing momentum over the last year. Source MarketWatch |
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Apple Promises AI Features In New IPad Pro Chips: Apple’s new line of iPad Pros will include a processor the company claims is an “outrageously powerful chip for AI,” as the tech giant laid the groundwork for long-anticipated generative AI features across its products amid investor concern that it’s falling behind in the race to harness the new technology. The new M4 chip represents an upgrade over the M2 chips that powered the last generation of iPads and the M3 chips that power Apple’s current generation of MacBook laptops, the company said in an announcement Tuesday. Tuesday’s announcement didn’t offer specifics about potential AI features that could be built into Apple tech. On Tuesday, Apple announced a new line of iPad Pros that the tech giant called its thinnest yet, coming in 11-inch and 13-inch models with OLED screen technology starting at $999 for the 11-inch model Source Forbes
This Company Wants You To Rent Your Credit History: Individuals with strong credit histories can make money by adding total strangers as authorized users on their credit cards. These authorized users don’t actually gain access to the card; instead, they get what’s called a “tradeline,” aka what the credit bureaus (Equifax, Experian and TransUnion) call each credit card account listed on an individual’s credit history report. Meaning they are paying for the benefit of the card’s favorable characteristics—its long account history, high credit limits, and impeccable on-time payment record—to appear on their own credit reports. The richer the card’s history and the larger its credit line, the higher the fee it commands. After a few months, the seller removes the buyer from the card and opens up the spot for the next customer to piggyback off their sterling credit profile. Tradeline Supply Company, a San Diego based broker, recently listed a three-year-old Capital One card with a $5,000 limit at $322. Meanwhile, a 19-year-old Chase card with a $69,700 limit was priced at $1,955. However, there are some serious downside risks, including the potential for identity theft and danger of committing bank fraud
Boy Scouts Rebranding as “Scouting America”: For the first time in its history, Boy Scouts of America is changing its name to the more inclusive Scouting America. The scouting organization announced the name change in a release on Tuesday, noting the rebrand reflects the "ongoing commitment to welcome every youth and family in America to experience the benefits of Scouting." The name change will go into effect Feb. 8, 2025, on the organization's 115th anniversary. The organization in recent years has opened its doors to girls, gay youth and gay leaders to join. Gay youth were allowed to join 2013, with a ban on gay leaders ending in 2015. Then in 2017, Boy Scouts announced that girls would be accepted into Cub Scouts the following year and into a separate Scouts division in 2019. In 2021, the first group of nearly 1,000 girls and young women around the country had achieved the prestigious rank of Eagle Scout. Source USA Today
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