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

“Luck is a very thin wire between survival and disaster, and not many people can keep their balance on it.” — Hunter S. Thompson

Overnight

New York set to restrict social-media algorithms for teens (WSJ)

Technical glitch caused ~50 stocks including Berkshire to show 99% loss (CNBC)

Tried to buy the dip after the Berkshire Hathaway glitch? Be ready for some bad news. (CNBC)

Mexico’s peso tumbles as ruling party sweeps election; the country’s ETFs faring worst in 4 years (WSJ) (MW)

U.S. manufacturing sector contracts in May as new orders slow (MS)

European gas price jumps 13% after Norwegian outage (FT)

Turkish inflation hits 75%, yet minister says worst is over (FT)

Nigeria grinds to a halt as labor strikes shut down essential infrastructure (Semafor)

Paramount and Skydance agree to terms of a merger deal (CNBC)

Bill Ackman sells 10% stake in Pershing Square for $1.05bn (FT)

Shein to kick off plans for £50bn UK float (BBC)

Ex-Millennium trader Megia debuts hedge fund with $5 billion (BBG)

GameStop stock surges after ‘Roaring Kitty’ reveals $116 million position; E*Trade considers kicking Keith ‘Kitty’ Gill off platform (WSJ)

GSK shares fall 10% after Zantac ruling (YF)

Australia orders Chinese-linked funds to sell rare-earth stakes in ‘national interest’ (FT)

Becton Dickinson to acquire Edwards Lifesciences’ unit for $4.2 billion in cash (WSJ)

A U.K. grocery committed to paying farmers more for cocoa; chocolate bar sales skyrocketed (WSJ)

Why Saudi Aramco stock is a tough sell on Wall Street (WSJ)

Maersk lifts guidance again on surging freight rates (WSJ)

Japan auto safety scandal widens as Toyota halts some shipments (RT)

U.S. manufacturing sector shows signs of contraction (RT)

Executive pay surged to a record last year (AP)

Logistics operators are looking to break sector’s IPO logjam (WSJ)

Hedge fund short sellers burnt by flurry of U.K. takeover bids (FT)

Nvidia led global large caps in May with 25% MoM gain (RT)

Spotify increased U.S. prices again as demand proves inelastic (TV)

New hot spot for Russia trade starts to emerge in Middle East (BBG)

TikTok-parent ByteDance hires new general counsel amid U.S. legal battles (BBG)

JPMorgan payments chief Georgakopoulos to depart (RT)

Demand for private healthcare hits record high in U.K. (FT)

HF Dymon Asia Capital expands in Hong Kong, bucking trend (BBG)

Epoch Times CFO charged in $67M global money laundering scheme (CNBC)

U.S. students face recruitment challenges after college campus protests (FT)

The opaque investment empire making OpenAI’s Sam Altman rich (WSJ)

The insurance market is flirting with natural disasters (WSJ)

It’s crunch time for a new generation of climate startups (WSJ)

Crypto billionaire Michael Saylor pays $40M to settle DC tax fraud case (NYP)

This CEO caused a nearly $3.6 billion swing in market cap between chip rivals (MW)

Law firm’s bankruptcy ouster casts shadow on private-equity ties (WSJ)

CalAmp, a fleet-tracking software maker, files for bankruptcy (WSJ)

Khosla Ventures backs weather balloon startup that uses AI to upend forecasts (CNBC)

Ford’s new 30-acre tech campus – anchored by the century-old Michigan Central Station, once a symbol of Detroit’s blight – to open Thursday after a $950 million restoration spearheaded by Ford Chair Bill Ford Jr. (CNBC)

Honoring Leo Melamed, the man who made the futures markets (WSJ)

World Athletics unveils plan for new competition with record $10mn prize pot (FT)

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

We see a high probability that June is a positive month for stocks, supported by favorable economic and inflation data, as well as quite light/pessimistic positioning and sentiment. We want to stick with what is working, such as AI-related names, GLP-1/Ozempic, Bitcoin and proxies, as well as cyclicals broadly, and small-caps.

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

TECHNICAL

Monday’s roller coaster ended with Equities higher at the end of the session, and it seems like risk assets paid attention to the ISM data while Manufacturing also missed expectations as yields dropped sharply across the curve. The drop in yields also pulled the U.S. Dollar lower, and both EURUSD and GBPUSD look very close to upside breakouts.

However, there remain some issues with the lack of broad-based recovery just yet, as only three sectors finished positively today, Consumer Discretionary, Communication Services, and Healthcare. At the same time, Equal-weighted Technology trimmed its losses to just -0.14% by end of day, a +0.25% gain which was a bigger boost to the main Equity gauges.

Overall, the hourly SPX chart tells the story, as it’s largely been unchanged since the middle part of May. Despite some fractional evidence of Healthcare and Consumer Discretionary trying to bottom out, it’s still going to be important to see a push higher in Financials and Industrials, which have lagged lately.

Click HERE for more.

CRYPTO

President Biden vetoed a resolution to overturn the SEC’s controversial Staff Accounting Bulletin 121, which requires financial institutions holding crypto for customers to include these assets on their balance sheets. This mandate can make it too costly for federally regulated banks to offer crypto custody services due to the need to maintain capital ratios. Biden emphasized the need for “appropriate guardrails” to protect consumers and investors while leveraging the benefits of crypto-asset innovation. Despite bipartisan support in Congress, Biden argued that repealing the bulletin would weaken the SEC’s ability to maintain a comprehensive financial regulatory framework, leading to financial instability and market uncertainty. Critics, including many in the industry, believe SAB 121 imposes unfair standards on crypto, potentially preventing banks from safeguarding digital assets and placing customers in the more risky unsecured creditor group in the event of bankruptcy. While Biden’s veto aligns with his previous commitments, it could damage the recent perception that Democrats are softening their stance toward crypto and further galvanize the industry ahead of the upcoming election.

Flows from ETFs continue to be positive, and volumes are rebounding. If there is one data point that suggests a mixed flows story, it’s the stablecoin outflows the market has witnessed over the past couple of weeks, with the lion’s share of outflows attributable to USDC 0.01% . One stablecoin that has not had any issues with flows is USDe, the synthetic dollar issued by Ethena Labs (ENA 0.69% ). USDe recently has reached a $3 billion supply, a mere four months after its public launch in February. As a reminder, USDe maintains its peg through arbitrage mechanics and a yield-returning cash-and-carry trade. It is essentially a tokenized basis trade. Currently, USDe comprises only a small fraction of the overall stablecoin market, ranking fourth behind USDT -0.01% , USDC 0.01% , and DAI 0.02% . However, its early parabolic growth has been nothing short of impressive.

Click HERE for more.

FIRST NEWS

$$ Ex Machina. Saudi Arabia, which used to derive essentially all of its GDP from hydrocarbons exports, is on a kick-the-oil-revenues kick, seeking to diversify its income sources. Sure, not every country with a one-trick economy that’s looking for its next source of steady revenue has a USD-trillion-plus GDP, but that scarcely means that Riyadh’s example can’t be taken up by treasuries far and wide. And if sexy AI can be added to the picture, so much the better.

What’s in a name? Where domain names are concerned – everything, and when country-code top-level domains (ccTLDs) are on the docket, the two-letter abbreviations can be digital rhodium (eight times the price of gold, although we must admit: ‘digital gold’ has a kind of golden ring to it). Artificial intelligence used to be known as machine learning, but AI has forced out ML in most conversations, and so when AI entrepreneurs began registering their startups, they scoured the list of the 200 or so ccTLDs out there and beheld .ai – assigned to a British Overseas Territory in the Caribbean named Anguilla.

One of the most northerly of the Leeward Islands in the Lesser Antilles, lying east of Puerto Rico and the Virgin Islands and directly north of Saint Martin, Anguilla, whose main island is roughly 16 miles (26 km) long by 3 miles (5 km) wide, has a total land area of 35 square miles (91 sq km) and a population of ~15,753, give or take a straggler or two who’s on the fence re tourism vs immigration. Once all those registrations from AI enthusiasts started rolling in a few years ago, that’s when the island fathers of Anguilla, heavily dependent on one industry – with tourism activities accounting for 37% of GDP – knew that the .ai domain registration boom is their ticket to meaningful diversification of the economy.

Since the launch of ChatGPT in November 2022, registrations of .ai domain names have skyrocketed, surging from 144,000 in 2022 to 354,000 in 2023, when they generated ~US$32 million in revenue (just over 20% of the government’s total for the year). This marks a dramatic increase from previous years, when revenue from .ai domain registrations hovered around 5%. Looking ahead, the government expects revenue from .ai domain registrations to stabilize at ~15% of total government income, as the initial rush of registrations gradually slows.

Anguilla’s experience is shared by other Small Island Developing States that have capitalized on fortuitous country code top-level domains allocated by the International Telecommunication Union in the 1990s and overseen by the Internet Corporation for Assigned Names and Numbers (ICANN). While leveraging this virtual endowment has posed hurdles for some, Anguilla’s pricing strategy of charging $140 for a two-year .ai domain registration has been a success, with ~90% of domains renewed after the initial two-year period – hence, recurring income. Expired .ai domains have also proven to be highly lucrative, with the domain “litigate.ai” fetching an arguable windfall of $13,000 at auction last year.

Given this fiscal boon, Anguilla’s government has wisely adopted a prudent financial strategy, paying down debt and prioritizing capital expenditures. The influx of revenue from .ai domain registrations will work hand in hand with what remains the main income producer – tourism – catalyzing crucial infrastructure developments, such as upgrades to the island’s airport. Still, ever diversification-minded, the administration intends to channel these proceeds into long-term, sustainable initiatives focusing on renewable energy sources.

Aligning with the ways of many Caribbean neighbors, the government’s medium-term priorities revolve around what’s known as the Blue Economy, encompassing sustainable fisheries and biodiversity conservation efforts. The International Monetary Fund, among others, has commended Anguilla’s judicious approach to leveraging its virtual endowment in the form of the .ai TLD. IMF