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

“No matter how calm you are, no matter how long term an investor you are, no matter what your horizons, when the market is jumping around, you feel uncertainty in your gut and it’s hard to resist that.” ~ Peter Bernstein

Overnight

U.S. job switchers are increasing their compensation demands. (BBG)

The Department of Justice is reportedly planning on filing an antitrust lawsuit against Live Nation. (WSJ)

Flames engulfed the 17th-century historic building that formerly housed the Copenhagen Stock Exchange, now headquarters for the Danish Chamber of Commerce, while it was being renovated. (Reuters)

State and district attorneys general are opening a new front in the legal battle facing RealPage, a property software company, which is accused of helping landlords across the country fix apartment-rental prices. (WSJ)

The FBI has reportedly opened a criminal investigation into the circumstances surrounding the collapse of Baltimore’s Francis Scott Key Bridge on March 26. [BBC]

The European Parliament has approved migration reforms that would speed up both asylum requests and deportation of those whose requests are denied. [Semafor]

The Biden administration has awarded more CHIPS Act grants to encourage U.S. chipmaking, this time to Samsung to subsidize new semiconductor operations in Texas. [NYT]

Samsung reclaimed the lead in global smartphone shipments in 1Q 2024, shipping 60.1 million units, but both it and Apple are losing share to Chinese brands. (AP)

Goldman Sachs beat revenue and earnings expectations by a wide margin in 1Q 2024. [CNBC]

U.S. retail sales rose more than expected in March, rising 0.7% MoM and dampening rate-cut expectations. (Reuters)

US regional banks dramatically step up loans to oil and gas (BBG)

House to vote on China’s Iranian oil imports after Israel attack (BBG)

Sarasin & Partners names head of investment strategy in leadership team shake-up (IW)

Salesforce shares fell on reports it plans to acquire Informatica, a data analytics and AI company (CNBC)

Shrub in poor Nepal now supplies raw material for bank notes used in Asia’s most sophisticated financial system (NYT)

Germany in new push to get China behind Ukraine peace efforts (WSJ)

Intel unveils flurry of new Arc GPUs designed for edge/embedded systems such as IoT, autonomous vehicles, and AI applications (TR)

First news

• China reported 1Q 2024 GDP rose 5.6% YoY, beating analyst expectations of 4.6%.
• Tesla announced it would lay off more than 10% of its global workforce, which would amount to approximately 14,000 jobs. 
• The London Metals Exchange stopped accepting delivery of newly produced aluminium, copper, and nickel from Russia on Monday, causing volatile trading. 
• Singaporean Prime Minister Lee Hsien Loong will resign on May 15, with current Deputy Prime Minister and Finance Prime Minister Lawrence Wong expected to take over as the country’s fourth leader. 

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

We had previously advised that we want to buy this dip. However, concerns over the Israel-Iran conflict have escalated, and the surging VIX is telling us that we want to approach this extra slowly.

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TECHNICAL

The recent selloff took a turn for the worse with the break of multi-week lows in QQQ, representing the worst two-day selloff since October 2023. 

Unfortunately, all of the positives about Technology resilience, lack of Defensive strength, cyclical tendencies and sectors like Healthcare and Financials nearing support couldn’t do much to help markets stabilize today, and the break in QQQ looks damaging in the short run.

The pullback in Ishares Aerospace & Defense ETF (ITA 0.65% ) makes this appealing technically to consider after recent weakness. Given the noticeable ramping up in rhetoric between Israel and Iran, this minor weakness hasn’t been damaging and should provide an appealing entry for many of the Defense stocks within ITA.

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CRYPTO

Hong Kong has approved applications for multiple spot Bitcoin and Ethereum ETFs. In our view, the Ethereum approval carries more significance given many investors already have access to Bitcoin via other investment products, and the lack of clarity on whether the U.S. will approve pending Ether ETF applications. Bitcoin ETFs have had resounding success in the U.S. since launching, and we could potentially see a similar flows dynamic with the launch of an Ethereum product.

Solana developers have released a network upgrade to address the congestion issues that have been plaguing users over the past few weeks. Increased memecoin activity has driven an increase in Solana users and transactions, and there have been many reports of users having transactions fail or increased confirmation times.

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FIRST NEWS

Growth with worries. China reported 1Q 2024 GDP rose 5.6% YoY, beating analyst expectations of 4.6%. The data released by China’s National Bureau of Statistics shows the country meeting its stated growth targets of around 5%. Yet behind the sanguine number are some worrying ones: Industrial output for March grew 4.5% YoY, below the 6% expected by economists. Retail sales also missed expectations, disappointing those who hoped for reinvigorated consumer demand. It grew 3.1% YoY versus 4.6% expectations. Meanwhile, new-home prices accelerated their decline as well, falling 2.65% YoY in March (compared to 1.9% YoY in February.) Much of the growth in China’s economy last quarter was attributed to export volume, though European port operators, clogged as they are with shipments of Chinese EVs, might have something to say about that.

Easing up on the, um, gas. Speaking of EVs, Tesla is laying off over 10% of its workforce – approximately 14,000 employees, following a disappointing first quarter with lower-than-expected deliveries. In an e-mail reportedly sent to staff, Elon Musk said the layoffs are necessary to reduce costs and increase productivity.

This comes after rumors that Tesla might have missed analyst expectations and built up excess inventory. Tesla is expected to report earnings on Tuesday, April 23, and will likely provide more commentary on the layoffs, their impact on its financials, and the company’s near-term demand.

Dan Ives at Wedbush Securities warned the layoffs were a negative sign for Tesla, for which he has a $300 price target and Buy rating. Ives described the news as an “ominous signal,” noting softer global demand and a softer growth outlook. Tesla (TSLA -1.40% ) stock closed down 5.6% on Monday. Yahoo! Finance

Metal mayhem. Metals markets saw volatile trading as new restrictions on the trading of Russian aluminum, copper and nickel took effect on Monday. The London Metal Exchange and the Chicago Mercantile Exchange have stopped accepting delivery of new supplies produced in Russia anytime after April 13 in compliance with new US and UK sanctions. 

The LME plays a crucial role in setting benchmark prices used in numerous contracts worldwide, and many traders view the ability to deliver on the LME as essential. Consequently, traders as a whole are likely to become less willing to handle Russian metal. Although the sanctions do not prevent non-US entities from purchasing physical Russian copper, nickel, or aluminum, Russian metal may thus trade at wider discounts, reducing Russia’s revenue.

The aluminum giant Alcoa (AA 3.18% ) was among the companies that traded higher on Monday after the new rules took effect, surging 3.9%. BBG

Singapore 4G. Singapore Prime Minister Lee Hsien Loong announced that he will step down on May 15 after 20 years leading the country his father, Lee Kuan Yew, helped to found in 1965. The younger Lee had intended to resign earlier, but those plans were disrupted by the COVID-19 pandemic.

Lawrence Wong, who has held a variety of government posts while rising through the ranks, was co-leader of the country’s pandemic response. His performance in that role won him praise and respect, and in 2022, he was named finance minister, and later, deputy prime minister as well. These roles signaled his designation as heir-apparent. 

Wong, 51, is slated to become just the fourth prime minister in modern Singaporean history, and as such is regarded as the leader of a political cohort known as Singapore 4G. If all goes as planned, Wong will take the helm of one of Asia’s major financial hubs. Many observers view Wong’s ascension as a reassuring continuation of rule by the long-dominant People’s Action Party (PAP), though of late, the party has seen its preeminence erode ever-so slightly.

Wong has a master’s degree in economics from the University of Michigan and a master’s degree in public administration from Harvard’s Kennedy School. The Straits Times