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

“Live each day as if it were your last.” — Marcus Aurelius

Overnight

Cleanup of 2.5-mile-long and half-a-mile wide oil spill underway off Southern California coast (Fox)

Bitcoin hit another record high above $71,000 (CNBC)

High-grade bond funds see biggest weekly inflow since September 2020 (BBG)

Unemployment rate rose to 3.9%, a two-year high (RT)

BOJ leaning toward exiting negative rates (RT)

Japan Q4 GDP revised upwards; economy avoids recession (RT)

Costco stock had its worst day in two years (RT)

Sam Altman will return to OpenAI’s board with three new directors (RT)

Apple retreats in Epic feud, allows Fortnite return in E.U. (RT)

Aramco hiked dividend 30% to $98B despite profit decline (RT)

BP’s carbon emissions rose for the first time since 2019 (RT)

Retail trading platform eToro is seeking a valuation of over $3.5B as it considers a US or UK IPO (Yahoo)

Citigroup held discussions with private credit firms about providing fresh capital to Peloton Interactiveto potentially refinance the company’s debt; proposals include a loan of at least $750M (BBG)

Canadian businessman Doug Putman is exploring a rescue bid for The Body Shop, which filed for bankruptcy in US and Canada (BBG)

Iron ore plunges most since 2022 as inventories pile up in China (Yahoo)

The number of Chinese workers in Africa falls by 64% in less than a decade as Beijing’s investment in the continent plummets (Semafor)

The U.S. airlifted non-essential staff from its embassy in Haiti as the country spiraled further into chaos (Semafor)

FINRA charges NewEdge $135,000 for unfair prices (BondBuyer)

Companies leasing space for the first time leased 455,000 sq. ft. (18%) of Manhattan’s annual leasing volume (Quartz)

With a looming House vote on a bill to force ByteDance to sell Tiktok or face a ban, the pressure campaign is getting intense (Semafor)

Nvidia sued by three authors claiming it used their copyrighted books without permission to train its NeMo AI platform (RT)

Eurogroup finance ministers meet in Brussels (BBG)

U.S. Treasury auctions $56 billion of 3-year notes, and sells 3- and 6-month bills (BI)

Administration seeks to give Americans a $10,000 tax credit for selling their homes (WH)

First news

• Reddit ups valuation for its IPO
• China seeks to get into cutting-edge chips despite U.S. opposition
• Over half of new electricity-generation capacity in U.S. is officially from solar
• Wall Street wants calm for a change
• Employment numbers looking up.

Charts of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Probabilities suggest a “hot” Feb. core CPI above consensus of +0.30%.

A Jan. “hot” CPI drove a 3% sell-off, but, with “gas in the tank,” this is a buy-the-dip moment.

It seems that there is a possibility that a “hot” Feb. CPI print is already socialized. More investors might be bracing for bad news than one might expect. This is anecdotal, but we do not really find investors at levels of optimism that are usually seen near a point where “good news is baked in.”

Click HERE for more.

TECHNICAL

Fractional loss this week represents only the third weekly loss out of the last four-and-one-half months for SPX and NASDAQ, while Value Line’s Friday loss prevented this from reaching new multi-month highs. Both the U.S. Dollar and U.S. Treasury yields have shown some partial weakness in the last couple of weeks, which have been arguably helpful to commodities and Emerging markets. Overall, a broadening out in U.S. Equity markets has been happening in a stealth manner in recent weeks, and now XLF 0.01%  has pushed up to former all-time highs, along with Equal-weighted Healthcare in the last week. Bottom line: this past week’s fractional losses don’t signal any technical damage to SPX, and it’s still expected that further gains above 5200 are likely in SPX in the next couple of weeks. 

Click HERE for more.

CRYPTO

In this video, we discuss the relentless demand for BTC ETFs, including an underappreciated market dynamic, the upcoming Dencun upgrade, and a quick update on our Core Strategy and Active Trades.

Click HERE for video.

FIRST NEWS

Unicorn and Dinosaur. Reddit announced a planned IPO valuation of as high as $6.5 billion, higher than the previously floated figure of $5 billion. The company is aiming to raise up to $748 million in an IPO, targeting a valuation of up to $6.5 billion. Investors will be selling 22 million shares at $31 to $34 each, while the often snark-filled social-media darling offers 1.76 million shares to early, power, and moderating users – without a lockup period. This IPO is set to be one of the year’s biggest so far, despite the fact that Reddit – somewhat of a relic of those golden internet days when companies with sufficient market share could go public while being deeply loss-making enterprises (often remaining so for years afterward) – reported a net loss of $91 million on revenue of $804 million in 2023, significantly better than a net loss of ~$159 million on revenue of $667 million a year earlier. That’s a Reddit trend many can get behind. CNBC

Chip on China’s Shoulder Gaining in Size. China is rumored to be preparing a $27 billion fund to give oomph to its push into cutting-edge chips. The “Big Fund” will pool capital from all levels of government to get bigger projects off the ground than would be realistic at the province or municipality level. The move is the latest in a series of efforts by Beijing to counter a U.S. push to curb China’s access to cutting-edge semiconductor technology, which has been supplemented by the enlistment of key U.S. allies, whose companies supply advanced chip-making equipment. Chinese officials are increasingly invested in new public-private partnerships seeking to develop key chip-related technologies, and are “worried about future controls”. Semafor

New Hoover Dam Moment. In a sunny development, it turns out that over 50% of new electricity-generation capacity added to the U.S. grid in 2023 was solar. For the first time since World War II, when a massive amount of hydropower was built out, a renewable power source is accounting for most of the country’s new energy. Unsurprisingly, the largest states (with apologies to unsunny Alaska) – both progressive California and conservative Texas – accounted for most of the 32.4-gigawatt increase, showing that the angle of the sun cares little for one’s political slant. Supply-chain constraints did slow deliveries of solar panels, but companies have been able to find workarounds. An official at a major U.S. solar-power trade group told the climate-focused outlet Grist that the 2023 numbers were “monumental”. They certainly look shiny. Semafor

Horses Held. Apar from the artificial-intelligence frenzy, the most-exciting trade on Wall Street at the moment might just be one that bets on boring. As winners of the runup in AI stocks go from record to record, a less noticed phenomenon is happening at the heart of the U.S. market, as investors sink vast sums into strategies whose performance hinges on enduring equity calm. Indeed, billions are pouring into ETFs selling options in a huge bet on a calm in the markets. Bloomberg

Welcome to the Team. The labor market continues to add jobs; per the BLS’s Employment Situation report, released Friday, U.S. employers added 275,000 jobs in February – for the 38th straight month. Total payroll employment is at a record 157.8 million jobs, up a solid 5.5 million from the pre-pandemic high.

The unemployment rate rose to 3.9% during the month, which, though leading the cycle low of 3.4%, is still in the vicinity of 50-year lows. Interestingly, the unemployment rate is defined as the percentage of the American labor pool that identifies as unemployed – which sounds like a fashionable choice of essence, but actually refers to those who would like to work, even if they haven’t searched for a job in the past month (in other words, those not actively seeking work) minus traditional students, i.e. those students not in the labor force, people receiving Social Security and/or SSI, and stay-at-home parents who have chosen not to work. (Unemployment claims remain low as well.) Initial claims for unemployment benefits stood at 217,000 during the week ending March 2, which was unchanged from the week prior. While this is above the September 2022 low of 182,000, it continues to trend at levels historically associated with economic growth.

In related news, we expect to see more revisions of forecasts for year-end S&P 500 levels, as the market’s performance so far has exceeded many strategists’ expectations. Usually, it’s when the most stubborn conservatives finally revise their forecast upward that one knows that the end to a bull market is nigh. TKer by Sam Ro, BLS