A daily market update from FS Insight — what you need to know ahead of opening bell

“Modesty is the only sure bait when you angle for praise.” — Lord Chesterfield

First news

• A billion-dollar result nets bank CEO… ‘many-mistakes-still’ attitude of modesty and humility
• Neuralink uses FDA approval to make first human implant, but is it more PR stunt or breakthrough?

Overnight

• BOE holds key rate in three-way split vote; signals it’s edging toward cutting. link
• House passed bipartisan $78 billion tax bill Wednesday night, 357-to-70. link
• Fitch: wider effects of Evergrande liquidation; high recovery uncertainty for offshore creditors; homeowners’ claims probably prioritized; construction of pre-sold homes not likely affected immediately. link
• Communications Decency Act, Section 230, protecting tech companies from liability for content on their platform, likely significantly weakened by Wednesday’s senate hearing starring social media CEOs. link
• EU leaders unanimously agree to a €50 billion support package for Ukraine. link
• U.S. disrupts state-sponsored Chinese hacking operation targeting critical infrastructure. link
• Families of U.S. victims of Hamas’ Oct. 7 attack on Israel sue Iran, Syria, crypto giant Binance. link

MARKET LEVELS

MORNING INSIGHT

Good morning!

Here are three reasons the Fed FOMC press conference was more dovish than stocks reflected. but reinforces a tricky period until the first cut.

More in today’s Macro Minute Video, linked here.

TECHNICAL

SPX and QQQ look to have begun minor pullbacks with Wednesday’s decline, which happened during a significant week including an FOMC meeting, Magnificent 7 earnings, as well as cycle confluence. However, technically, we expect a U.S. Equity pullback to prove short-lived at this time before suggesting prices pull back to new highs. Defensive strength has been apparent for the last week, and Healthcare ETF XLV 0.18%  nearly made a new monthly all-time high close as January came to a close. Minor weakness in Technology and Industrials should be buyable, while Industrials and Healthcare play catch-up. U.S. Dollar and Treasury yields have shown some minor decoupling from SPX in recent weeks, but expect that both should turn back higher into February/March, which will be important to monitor in terms of duration and velocity. Overall, Equities should be entering a choppy period in February, which tends to be, seasonally, a worse month during election years. However, as discussed prior, SPX requires a close back under 1/12/24 peaks to arguably be of even short-term concern. (SPX-4802.40). Upside resistance could materialize in the short run at 4937-4995.

Click HERE for more.

CRYPTO

The JUP -60.34% token’s value surged following a significant $700 million airdrop by Jupiter to Solana wallets, marking one of the largest airdrops on the Solana blockchain. The distribution to nearly a million wallets proceeded smoothly, with the Solana network handling the increased activity without major disruptions. Price rose from an initial $0.41 to $0.72, pushing its fully-diluted market cap over $6 billion. The airdrop’s success was notable for the stability it demonstrated of the Solana blockchain, which efficiently processed the high volume of claims and trades on decentralized exchanges. Despite the overall success, there were initial challenges, particularly with RPC nodes struggling to manage the surge in user activity, leading to difficulties for users in the initial 30-45 minutes. Jupiter had conducted extensive testing, including two other airdrops earlier in the month, to ensure the system’s resilience. These tests were part of preparations to mitigate potential disruptions from the large-scale airdrop. The event also highlighted the benefits for validators, who earned significant fees from maximal extractable value (MEV) bots, with one notable instance of a $50,000 tip for processing a large trade. Overall, the airdrop was a lucrative event for many, with even small-time traders receiving substantial token amounts.

Hackers recently stole approximately $112 million worth of the XRP -2.46% cryptocurrency from personal crypto wallets belonging to Chris Larsen, co-founder and executive chairman of Ripple. Larsen revealed the breach on X (formerly Twitter), stating that the unauthorized access was quickly detected, leading to the freezing of the affected accounts by exchanges and the involvement of law enforcement. The stolen XRP was reportedly laundered through various cryptocurrency exchanges, including Binance, which has acknowledged the incident and is aiding the investigation. The ownership of the compromised wallet, known as “Ripple (50),” is unclear, but it was linked to Larsen’s accounts and activated in 2018. Ripple, established in 2012 and known for its payment and enterprise infrastructure solutions, confirmed that the company itself was not affected by the hack. Following the incident, there have been calls within the XRP community for increased transparency regarding the crypto holdings of Ripple’s co-founders. This hacking incident is notable as the largest cryptocurrency theft in 2024 to date and ranks among the top twenty in the history of cryptocurrency thefts, with around $2 billion stolen in similar hacks last year.

FIRST NEWS

Scandal-hit, Cloud-Covered Trading Desk Turns Into Rain Maker at Wells Fargo. With revenue from currency-trading doubled ahead of schedule, Wells Fargo’s early test of how much it can grow a trading desk by leveraging relationships across corporate America is yielding a nice round answer – $1 billion. That is roughly the annual revenue of its foreign-exchange business – the point of the spear in the bank’s long-planned expansion on Wall Street. The result is up by several hundred million dollars in three years, and ahead of the firm’s own targets.

The man of the hour is CEO Charlie Scharf, as the healthy revenues are a first result in his efforts to turn the fortunes of the only-just-recently-ailing bank around. Last week, Wells Fargo revealed it would have paid its top executive $30.3 million last year – on par with what Bank of America CEO Brian Moynihan made in 2022 – but, strangely-to-the-point-of-surreally, Scharf requested the compensation panel “exercise negative discretion” as “more work remains ahead”, accepting a sedate $29 million instead.

Gregory Varallo, the Delaware corporate lawyer who secured the courtroom victory for a Tesla shareholder who challenged Elon Musk’s astronomic pay package (a story we covered yesterday) interprets the decision in that case as meaning that “the court[s are] still paying attention carefully to how directors oversee CEOs”. In the case of Scharf and Wells Fargo, attention from the court of the CEO’s conscience seems to be sufficient oversight, for the moment. Bloomberg, Banking Dive

Hawking Computer-Enhanced Humans. Elon Musk – where would we all be without him? – once said that increasing the rate at which data is uploaded from our brains to our devices “is the fundamental limitation… we need to address to mitigate the long-term risk of artificial intelligence and also just go along for the ride.” Ambitions may be lofty at Neuralink, his brain-chip implant company, yet its immediate future rests on improving the lives of the bed- or wheelchair-bound.

Neuralink aims to help severely disabled, paralyzed people communicate by using brain activity to remotely control devices. In the future, Neuralink may also help enhance user memory and cognitive abilities, restore a user’s motor, sensory and visual functions, and treat neurological disorders.

First, the company had to convince the FDA that its technology is safe in order to proceed, which it finally did, after extensive tests on monkeys and pigs. (Critics say as many as 1,500 animals perished during these tests.)

Founded in 2016 and forecasting annual revenue as high as $100 million within five years, Neuralink was last valued at $3.5 billion in a round of equity financing raised in November, per data provider PitchBook. The company competes with a clutch of other brain-computer interface companies, including Synchron, whose signature product is a stent-like device it has implanted inside the jugular vein on top of a patient’s brain, and Precision Neuroscience (founded in 2021 by a co-founder of Neuralink) which has temporarily implanted its microelectrode array in six patients to capture test data.

Neuralink’s original ambitions, outlined by Musk at the company’s founding, included meshing human brains with AI; its more immediate aims seem to be in the area of neural keyboards and other devices that people with paralysis already use to operate computers.

Now Neuralink has implanted its brain-computer interface into a human for the first time, and Musk tweeted about it this week, adding that there was promising electrical activity in the patient’s brain cells. No more details are available and, given that the implant is a self-contained system that communicates with a controller via Bluetooth, bandwidth is necessarily limited. Still, the idea is that there is enough of a connection to allow a patient to exert some control of their body via thought. Stimulating parts of the brain in a sufficiently specific way that fine motor control is achieved is very difficult and not likely here yet. Musk’s goals are, as ever, as hyper-ambitious as his announcements are cryptic and short on detail. This one was no exception.

In a previous online post Musk once said that Neuralink’s initial users would be people who have lost the use of their limbs. “Imagine if Stephen Hawking could communicate faster than a speed typist or auctioneer. That is the goal,” he wrote. We imagine Hawking would’ve been excited to try it. CNN, WSJ, Fortune, Scientific American