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

“You cannot swim for new horizons until you have courage to lose sight of the shore.” — William Faulkner

Overnight

Yellen faces tough road on China’s vast overproduction problem (RT)

Bank of Mexico board members warn against rushing rate cuts (RT)

Goldman investors told to vote ‘no’ on executive-pay plan (BBG)

Google speaking with advisors on possibility of acquiring HubSpot (RT)

Ford to delay production of an all-electric SUV and truck, will focus on hybrids (CNBC)

Sell-side coverage of Reddit begins with concerns about profitability (RTT)

Boeing and Airbus working toward a coordinated deal to split up Spirit AeroSystems (RT)

Retailers’ payment status with their vendors may be signaling some consumer stress (CNBC)

Iranian officials say retaliation for Israeli strike will be limited (Times of Israel)

Biden tells Israels’ Netanyahu an “immediate ceasefire” is essential (WH)

Israel pauses combat-unit leave as it prepares for Iranian retaliation (RT)

Blinken says Ukraine will eventually join NATO (RT)

Activist fund Sachem Head to build stake in Delivery Hero (BBG)

Copper hits a 14-month high on supply disruptions as well as recovery hopes (BBG)

Commodity trading profits hit record $104B last year (FT)

Burglars take as much as $30 million in one of L.A.’s largest, most elaborate cash heists (LAT)

Fed’s Kashkari floats possibility of no rate cuts this year (BBG)

JPMorgan named new heads of IB and capital markets in leadership reshuffle (RT)

Layoffs increased 7% to highest level since January 2023 (RT)

Commodity trading profits hit record $104B last year (FT)

Actively managed US equity funds saw best out-performance since 2007 in Q1 (RT)

YouTube said OpenAI training Sora with its videos would break rules (BBG)

Elon Musk boosts AI engineer pay in ‘craziest talent war’ (WSJ)

BlackRock to face vote on splitting chair and CEO role (FT)

BlackRock CEO pay fell 18% to $27M in 2023 (RT)

European house prices fall for first time in a decade (FT)

Jefferies and Sumitomo expand IB alliance into Canada (RT)

Nomura aims to boost U.S. credit portfolio to $50B in 10 years (RT)

SEC accepts pause on climate rule (WSJ)

Cboe seeks SEC approval for ETF share class of mutual funds (RT)

Eurozone private sector returned to growth last month, with Germany and France lagging (WSJ)

Canada saw its strongest export growth in six months (WSJ)

Zimbabwe will launch a ‘gold-backed’ currency 

Amazon relied on Indian contractors to identify purchases in AI stores (BBG)

First news

• For all the reasons, the time to take the CFA exam is… soon
• Having done what it can in search and ads, Google now sets its sights on CRM
• True to form, global PR giants talk the climate-change talk, forget the walk.

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Equities have struggled over the past week, with the S&P 500 down -2% in the past week. The hair-trigger nervousness really started with the ISM manufacturing report, which showed a rise in prices paid (Monday). Over the course of the week, the rise in oil, along with further inflation/Fed concerns, amplified the weakness.

Thursday, markets came under pressure from a constellation of factors, but it started with the Fed’s Kashkari suggesting the Fed might not even cut rates in 2024 (he is not a voting member, and was in a LinkedIn live interview). This was 1:15pm ET Thursday. While these comments are generally not given much weight, given the market’s mixed momentum, along with the surge in oil, they were enough to trigger risk-off.

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TECHNICAL

Metals and Mining stocks are starting to play catchup.

Precious and base metal stocks look to be finally “joining the party” after having lagged the move in metals in recent months.

The SPDR S&P Metals and Mining ETF achieved a meaningful breakout this week above December 2023 highs, on a weekly closing basis (with one more trading day to go in the week) and should bode well for further upside progress to challenge 2022 highs.

This looks like a real positive for precious and base metals stocks, and this recent uptick in relative strength has helped the Materials sector turn up in a sufficiently meaningful way vs. S&P to warrant upgrading this sector in the short run.

Overall, XME 0.53%  looks bullish and should push higher, to $67, over the next month. One should view any minor consolidation down to the high $50s as making XME even more attractive from a risk/reward point of view.

S&P Metals & Mining

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CRYPTO

In today’s video, we discuss the Coinbase premium in further detail, give you updates on flows into ETFs and stablecoins, and examine the divergence between Bitcoin and equities amid rising geopolitical tensions.

Click HERE for more.

FIRST NEWS

Certified First-time Achiever. It’s true that not everyone who passes the famously difficult three-tiered CFA exam gets to be a high-flying analyst at a fancy Wall Street establishment. Some CFAs work in compliance or marketing. In a sense, though, all CFA charter-holders are equal in that they accede to the coveted secondary title of ‘investment professional’. As most people reading this likely know, far from a generic designation for someone who works in the investment industry, ‘investment professional’ is a title worn with pride, a shibboleth and secret handshake that can shift gruffness into grins, open doors so closed they are hidden to most, and lead to lifelong friendships. Well, maybe not the last one, but you get the idea.

In an instance of encouragement for those who would hold that charter, new data shows that CFA Level 1 pass rates have risen above the historic average. In February, 44% of candidates passed the Level I test, up from 35% for those who sat for the exam in November and 37% in August, and above the 40% average for the past decade. What’s more, first-time testers score above the average pass rates for the decade. But procrastinate not: the CFA Institute says candidates who delay their test pass less often. Bloomberg

Going Galactic: Reuters reports that Alphabet, Google’s parent company, is considering an ambitious acquisition bid for HubSpot, a $32 billion software firm that rivals Salesforce in CRM solutions. Such a move would undoubtedly face intense scrutiny from antitrust regulators, who have ongoing lawsuits against tech giants Google, Apple, and Amazon over alleged monopolistic practices. Yet an argument could be made that venturing into a new market dominated by Salesforce, where Alphabet currently has minimal presence, may alleviate some regulatory concerns. Ironically, Salesforce itself has encroached on Google’s territory in workplace communications through its acquisition of Slack. This potential deal highlights the increasingly blurred lines and fierce competition among tech titans striving to fortify their ecosystems across multiple domains. Still, Washington has been suspicious of any Big Tech M&A and dismissive of the “merge to compete” argument. Semafor

On Bulls**t. The world’s leading advertising and PR firms – Omnicom Group, WPP, Interpublic Group (IPG), Publicis Groupe, Dentsu, and Havas – live a conflict of interest daily. Collectively generating $67 billion in revenue in 2022, with hundreds of subsidiary agencies globally, they dominate the communications industry. As such, they have, on the one hand, publicly pledged to reduce their carbon emissions. On the other hand, per an analysis by the appositely named DeSmog, one-third of these firms’ board members also hold roles in industries that significantly contribute to the generation of greenhouse gases. More precisely, of their cumulative 64 board directors, 22 maintain positions at high-emission companies in the fossil-fuel extraction, aviation, and plastics game.

With the exception of Omnicom, all of these firms have set public net-zero emissions targets and are members of an industry initiative to voluntarily reduce their in-house greenhouse gas emissions, but anti-climate-change campaigners argue that these dual roles present a clear conflict of interest, undermining the firms’ stated commitment to discontinue marketing and PR efforts that promote the fossil-fuel industry or portray climate-damaging companies as environmentally friendly. Although, if the PR firms are already greenwashing their conflict of interest, they are that much better positioned to do some greenwashing for their clients.

Regardless of whether board ties directly contribute to any reluctance to pursue more aggressive climate action, the advertising industry as a whole lags behind comparable sectors. Banks also work with polluting companies and – while actually resisting calls from activists to completely sever ties with fossil-fuel clients – they have established intermediate steps that ultimately pressure their clients to accelerate the energy transition.

In contrast, the PR industry sets low or no expectations for its high-carbon clients and continues to discount a substantial portion of its own carbon footprint. While not necessarily absolving the board links, this suggests a broader industry-wide inertia as to climate action. In addition to inertia, it could also be an addiction to BS. In his seminal essay, On Bulls**t, philosopher Harry G. Frankfurt makes a distinction between bulls**tters and liars, concluding that the former are more insidious: they are more of a threat against the truth than are liars because “the liar cares about the truth and attempts to hide it; the bulls**tter doesn’t care if what they say is true or false”. Semafor

Lecture from Afar Dept.

Der Elefant im Raum. After Botswana’s government reversed a ban on trophy hunting in 2019 on account of exploding elephant populations, countries like Germany have proposed bans on trophy hunt imports from Africa. The southern African nation has 131,000 elephants – far more than any other country in the world, even after sending tens of thousands to neighboring countries – and struggles to contain damage caused by the animals to people, property, and crops. This week, President Mokgweetsi Masisi threatened to ship thousands of the animals to Europe, specifically to Germany, so that Western nations could understand what it’s like to live with the multi-ton animals. “It is very easy to sit in Berlin and have an opinion about our affairs in Botswana,” Masisi told the German tabloid BILD. Semafor