A daily market update from FS Insight — what you need to know ahead of opening bell
“Here’s a news flash for the fools out there: if you don’t build any stuff, there is no stuff.” – Elon Musk
Overnight
The cat is in the bag box: physicists capture a clear image of individual atoms transforming into quantum waves, just as Schrödinger predicted (LS)
FOMC holds interest rates steady (Barron’s)
U.S. and Saudi Arabia said to be near historic pact (BBG)
Exxon to close $60 billion takeover; Pioneer CEO to be barred from Exxon board in deal with FTC (WSJ)
U.S. crude oil inventories post big build amid lower refinery runs (WSJ)
Johnson & Johnson to pay $6.5 billion to resolve nearly all talc ovarian cancer lawsuits in U.S. (CNBC)
Eight newspaper publishers sue Microsoft and OpenAI over copyright infringement (CNBC)
Senate passes the Russian Uranium Import Ban, sending it to Biden (BBG)
Cruise operator Viking’s IPO values company at $10.36 billion to mark biggest deal of year (MW)
AI cloud computing startup CoreWeave valued at $19 billion in new funding round (WSJ)
Goldman promotes partner to senior deal role (WSJ)
RSMR awards rating to £300m AXA Global Short Duration Bond fund, calling it a ‘low-risk’ income solution for cautious investors (IW)
Frontier, a group that includes Stripe, Shopify, and Alphabet and pools resources to buy carbon-removal credits, signs a commitment to buy $58.3 million of credits from the biomass-sequestration startup Vaulted Deep (CM)
BlackRock’s plan for your retirement: a 401(k) with a monthly check (WSJ)
Archegos founder Bill Hwang, who erased a paper fortune in the tens of billions and helped bring down Credit Suisse, heads to trial next week (BBG)
Verizon’s Data Breach Investigations Report shows the human factor is still the weakest spot, although people are getting better at spotting phishing attempts (Verizon)
Danish maker of slimming drug could become too big to fail: Novo Nordisk’s market value, $570 billion, eclipses Denmark’s economy, which has grown ~2% because of it (Fortune)
Teamsters Canada says strikes at railroads could begin May 22 (WSJ)
Mastercard beat Q1 profit estimates on higher card spending by U.S. consumers but lowered its FY forecast citing unfavorable FX headwinds (RT)
Qualcomm rose ~4% after beating Q1 earnings estimates and providing strong Q2 revenue guidance on strong demand for AI-smartphone chips (CNBC)
Pfizer jumped ~6% on a Q1 beat-and-raise thanks to its cost-cutting program and a smaller-than-expected sales drop (CNBC)
CVS shares dove ~17% after slashing its FY profit forecast and flagged challenges for next year’s health insurance plans (RT)
KKR beat Q1 earnings estimates after changing financial result reports to emphasize recurring earnings (BBG)
KKR sees PE deal flow accelerating as credit market loosens (WSJ)
Carlyle shares fell ~9% despite reporting better-than-expected Q1 profit due to a flagship fund falling below the threshold return to reap carried interest (WSJ)
Coca-Cola reports a Q1 beat-and-raise on strength in its Fanta and Fairlife beverages (CNBC)
McDonald’s misses Q1 EPS estimates due to a pullback in consumer spending and hit from Middle East boycotts (CNBC)
Another Boeing-involved whistleblower dies (ST)
Australian business strength is taking everyone by surprise (BBG)
Fed will slow pace of QT (RT)
U.S. job openings hit a three-year low (BBG)
ETFs tracking Congress member trades are outperforming indexes (FT)
Citi CEO sees U.S. consumers becoming more cautious (RT)
AMD, Super Micro tumble as AI earnings fall short (RT)
AI fuels cloud-computing boom for tech giants (RT)
Goldman poaches JPMorgan’s ETF head (FT)
Blackstone hires Morgan Stanley’s head of securitized products trading to lead European credit (BBG)
Huge supply shortages put cocoa market under strain (FT)
HF Graham Capital wants New York office as others cut space (FT)
JPMorgan expects its Russian assets to be seized (RT)
JPMorgan to pay $100M fine for reporting incomplete trading data (RT)
Microsoft will invest $10B with Brookfield in data-center power deal (FT)
NYCB short sellers see $42M in losses after post-earnings rally (RT)
Trump raises stake in media firm to 65% (RT)
One-third of Americans potentially impacted by UnitedHealth cyberattack (CNBC)
First news
- Bringing down the cost of AI via more hardware – or smarter software
- The U.S. is finally re-shoring polysilicon, a key ingredient in solar panels, which it had once invented (in 1954, at Bell Labs) before ceding leadership in manufacturing to China.
Chart of the Day
MARKET LEVELS
| Overnight |
| S&P Futures +30
point(s) (+0.6%
) overnight range: +10 to +36 point(s) |
| APAC |
| Nikkei -0.1%
Topix -0.03% China SHCOMP flat Hang Seng +2.5% Korea -0.31% Singapore +0.13% Australia +0.22% India +0.18% Taiwan -0.85% |
| Europe |
| Stoxx 50 -0.52%
Stoxx 600 -0.2% FTSE 100 +0.37% DAX -0.02% CAC 40 -0.84% Italy +0.04% IBEX +0.16% |
| FX |
| Dollar Index (DXY) +0.03%
to 105.79 EUR/USD -0.1% to 1.0701 GBP/USD -0.11% to 1.2513 USD/JPY +0.44% to 155.25 USD/CNY flat at 7.2411 USD/CNH -0.02% to 7.2323 USD/CHF -0.35% to 0.9124 USD/CAD -0.15% to 1.3719 AUD/USD +0.14% to 0.6532 |
| Crypto |
| BTC +0.8%
to 57749.06 ETH +0.16% to 2942.2 XRP +0.27% to 0.5148 Cardano +0.87% to 0.4504 Solana -0.93% to 133.23 Avalanche -1.44% to 32.81 Dogecoin +1.34% to 0.1287 Chainlink +1.91% to 13.36 |
| Commodities and Others |
| VIX -2.27%
to 15.04 WTI Crude +0.76% to 79.6 Brent Crude +0.85% to 84.15 Nat Gas +2.23% to 1.98 RBOB Gas +0.61% to 2.593 Heating Oil +0.51% to 2.464 Gold -0.75% to 2302.27 Silver -0.98% to 26.39 Copper -0.32% to 4.538 |
| US Treasuries |
| 1M -5.5bps
to 5.3058% 3M -1.9bps to 5.3876% 6M -0.6bps to 5.3697% 12M -1.4bps to 5.1689% 2Y -2.1bps to 4.9393% 5Y -2.5bps to 4.6231% 7Y -2.1bps to 4.617% 10Y -1.8bps to 4.6099% 20Y -1.4bps to 4.8458% 30Y -0.7bps to 4.742% |
| UST Term Structure |
| 2Y-3
M Spread narrowed 2.5bps to -48.7
bps 10Y-2 Y Spread widened 0.0bps to -33.4 bps 30Y-10 Y Spread widened 1.2bps to 13.0 bps |
| Yesterday's Recap |
| SPX -0.34%
SPX Eq Wt -0.34% NASDAQ 100 -0.7% NASDAQ Comp -0.33% Russell Midcap -0.09% R2k +0.32% R1k Value -0.18% R1k Growth -0.35% R2k Value +0.74% R2k Growth -0.1% FANG+ -0.39% Semis -2.91% Software +0.18% Biotech +3.2% Regional Banks +2.57% SPX GICS1 Sorted: Utes +1.14% Comm Srvcs +0.84% Materials +0.5% Healthcare +0.25% REITs +0.12% Fin -0.02% Cons Disc -0.02% Indu -0.21% SPX -0.34% Cons Staples -0.61% Tech -1.26% Energy -1.6% |
| USD HY OaS |
| All Sectors +2.6bp
to 349bp All Sectors ex-Energy +2.4bp to 333bp Cons Disc +3.5bp to 284bp Indu +2.5bp to 240bp Tech +2.2bp to 441bp Comm Srvcs +4.0bp to 625bp Materials +1.6bp to 304bp Energy +4.3bp to 265bp Fin Snr +0.4bp to 305bp Fin Sub +6.0bp to 237bp Cons Staples +1.5bp to 304bp Healthcare +0.6bp to 387bp Utes +1.8bp to 206bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 5/2 | 8:30AM | 1Q P Nonfarm Productivity | 0.5 | 3.3 |
| 5/2 | 8:30AM | Mar Trade Balance | -69.7 | -68.901 |
| 5/2 | 8:30AM | 1Q P Unit Labor Costs | 4.0 | 0.4 |
| 5/2 | 10AM | Mar F Durable Gds Orders | 2.6 | 2.6 |
| 5/3 | 8:30AM | Apr AHE m/m | 0.3 | 0.3 |
| 5/3 | 8:30AM | Apr Unemployment Rate | 3.8 | 3.8 |
| 5/3 | 8:30AM | Apr Non-farm Payrolls | 240.0 | 303.0 |
| 5/3 | 9:45AM | Apr F S&P Srvcs PMI | 51.0 | 50.9 |
| 5/3 | 10AM | Apr ISM Srvcs PMI | 52.0 | 51.4 |
MORNING INSIGHT
Good morning!
Here are 5 key takeaways from the Fed FOMC rate decision that show the Fed was dovish – and this supports higher stock prices in May.
Click HERE for the video.
TECHNICAL
Chair Powell’s indication that the bias is still toward easing rates, along with a quicker tapering of Quantitative Tightening (QT) starting in June, combined to send Treasury yields and the U.S. Dollar toward the lows of the day. Stocks rallied sharply on this news and seem to be attempting to carve out a bottom. This FOMC message clearly looks to be a more dovish one than the market was expecting, and trends remain bullish off of 4/19 lows. However, it remains difficult to claim that a push back to March peaks has gotten underway. We suspect that 4/19 lows near 4953 should hold on any backing and filling, while a rally back over 5123 should result in a quick move back to test and exceed 5265.
Click HERE for more.
CRYPTO
Risk markets were selling off before yesterday’s FOMC meeting, where it was unanimously voted to keep interest rates steady. The Fed announced it would be reducing the speed of its balance sheet taper from $60 billion per month to $25 billion per month, a larger than expected reduction. Following the announcements and Chair Powellâs comments, yields turned sharply lower with the US10Y falling 9 basis points while equity indices rose. The SPY 0.54% and QQQ 0.97% have gained by 1.17% and 1.24%, respectively. BTC -2.81% (-2.70%) has pared losses to $59k after reaching a low of $56.5k early this morning, while ETH -2.43% (-0.67%) is trading just below $3k. Despite the large drop in Bitcoin, altcoins are showing relative strength, with Bitcoinâs dominance ratio dropping 1.57%. Layer-2 networks are a few of the leaders in the top-100 tokens today, with OP -2.54% , MATIC -0.35% , and STRK -1.35% all increasing by more than 4%.
Click HERE for more.
FIRST NEWS
Building Stuff: the Hard(ware) Way and the Soft. It’s a good time to be in the business of making AI chips and servers. But even red-hot demand can’t always make supply magically appear.
In its data-center segment that sells chips used to power AI services AMD saw first-quarter revenue surge 80% year-over-year and projected 95% y-o-y growth for that key segment for Q2. Yet Wall Street was already expecting robust numbers, having propelled AMD’s stock price up 77% over the past 12 months ahead of the report. Even though the company boosted its full-year projection for AI chip sales by 14%, the markets were underwhelmed and AMD shares slipped ~9% Wednesday morning.
Sky-high expectations also hurt Supermicro, which makes specialized AI servers using chips from AMD and from Nvidia. Its growth has been on a tear, with Q1 revenue of $3.85 billion triple what it was in the same period a year ago. And still, this fell ~3% below Wall Street’s target for the company’s fiscal third quarter that ended in March. Having more than tripled in value since the start of this year, Supermicro’s stock slid 16% Wednesday morning.
The company noted in its earnings calls on Tuesday that constraints on supply of the company’s MI300 chips (which compete with Nvidia’s popular H100 series) and its latest liquid-cooling systems, much in demand given the computing horsepower of Nvidia’s latest chips, are currently weighing on sales.
Those shortages are expected to be temporary, but Supermicro also has a capital-intensive business model, and said Tuesday it may need to raise more capital if demand keeps picking up, which it likely will, as it shows no signs of abating.
In related news, while last week’s rally in Alphabet stock was attributed to the introduction of a dividend, a serious improvement in operating profit margin, and faster growth at Google Cloud, it could be that investors were also responding to an under-the-radar piece of key good news, namely the fact that Google has managed to lower the cost of showing AI–generated answers to queries by 80% over the last year, as per Alphabet CEO Sundar Pichai.
Whatever new strategic product lines are in the works, for the moment, Google’s search engine accounts for half of the company’s revenue and a large portion of its profits. When Microsoft added an AI chatbot and responses that summarized information from the web to Bing in early 2023, Google investors overworried that Google might have to spend a fortune to protect its market share, suspending a sword of Damocles over profits. It turns out there’s a smarter way to get to cheaper. The Information, WSJ
And speaking of ways to secure one’s position by making things cheaper – or at least more supply-secure…
Polysilicon, a key ingredient in solar panels, is being made in the U.S. again. REC Silicon says it will soon start shipping polysilicon (which has come mostly from China), reviving a Moses Lake, WA factory that had shut down in 2019.
Polysilicon production requires a lot of energy. Most of the energy cost of a solar panel is in the polysilicon; next comes the monocrystalline ingot and wafer. The plant is about 50 miles away from the Grand Coulee Dam, with other hydro dams as well as NW wind farms and transmission nearby. There has been discussion of polysilicon-to-ingots-to-wafers-to-panels factories in that area. China has increased polysilicon production in the Xinjiang region powered by coal as it works to reduce polysilicon imports.
The U.S. also needs to move more quickly in another area, namely secure inverter supply chains. Stay tuned. NYT
