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

“Culture, opportunity, & rewards retained our folks, not some lousy contract.” — Dug Song, co-founder of Cisco-acquired cybersecurity firm Duo Security, in an X post about why his company never used noncompete agreements, which the FTC has moved to ban

Overnight

Biden signs foreign aid bill, clearing way for more military gear for Ukraine (WSJ)

McKinsey under criminal investigation over opioid-related consulting (WSJ)

Business groups race to block FTC’s ban on noncompete agreements (WSJ)

Airlines required to refund passengers for canceled, delayed flights per new DOT rules (ABC)

DOJ requests 36-month sentence for Binance founder Changpeng Zhao (Axios)

Mortgage rates reach new high for 2024 (Axios)

TikTok is gearing up for a First Amendment battle with the U.S. after President Joe Biden signed a measure that presents the gravest threat yet to the app’s future (Semafor)

Japan to deploy an interpreter and ‘Trump whisperer’ who helped former PM Shinzo Abe bond with the former president over golf (RT)

Cocoa price swings are the wildest since the 1970s (BBG)

Nvidia to buy two Israeli startups that make its AI chips cheaper to use (TI)

Rubrik, the third notable venture-backed tech IPO of the year in the U.S., following Reddit and Astera Labs in March, prices IPO at $32 per share, above the expected range (CNBC)

Six-month-old Cognition Labs raises $175 Mn from Founders Fund at $2 Bn valuation (AIM)

Blackstone to buy franchiser Tropical Smoothie Cafe (WSJ)

Hasbro shares gain as cost cuts boost margins (WSJ)

Days ahead of Xi’s visit, E.U. investigations add to pressure on strained China relations (WSJ)

Meta shares plunge ~16% despite beating Q1 earnings and revenue estimates due to a light Q2 revenue forecast (CNBC) 

Boeing reports its first revenue drop in seven quarters but nonetheless beat analyst estimates that were lowered due to recent safety incidents (RT) 

Ford beat Q1 earnings estimates but slightly missed on revenue as truck sales offset losses in EVs (CNBC) 

IBM shares fall ~8% as a Q1 revenue miss overshadowed their announcement to acquire HashiCorp (CNBC) 

Chipotle reports better–than-expected Q1 earnings and revenue driven by higher traffic despite a rise in prices (CNBC) 

Europeans ‘less hard-working’ than Americans, says $1.3T Norway SWF CEO (FT)

KPMG U.K. cancels foreign graduate job offers in wake of tighter visa rules (FT)

Goldman and Bank of America shareholders reject proposals for CEO-chair split (RT)

Morgan Stanley Asia PE unit to reorganize as CEO retires (RT)

Goldman taps two senior BofA bankers for India dealmaking roles (RT)

HSBC says growing Chinese wealth fuels client investments in U.S. (RT)

Jefferies CEO sold $65M in stock to buy a client’s yacht (FT)

U.K.’s largest asset manager Schroders launches search for a new CEO (FT)

UBS analyst who took on Evergrande now bullish on China property (BBG)

UBS faces new lawsuit by HF Appaloosa over Credit Suisse $17B bond wipeout (RT)

NYCB faces tough choices on CRE loans, balance sheet diversification (RT)

Chicago City Council advances $1.25 billion bond plan (BB)

Florida home insurance industry may be in deep trouble (BBG)

Russian court orders seizure of $440M from JPMorgan (FT)

Foxtrot abruptly ceases all operations (WP)

AI has an urgent power problem (WSJ)

Whirlpool to cut 1k jobs globally (RT)

Biden signs the TikTok sell-or-ban bill into law (CNBC)

China is winning the energy battle in the South China Sea, blocking an abundance of oil and natural gas that Vietnam and the Philippines see as crucial to ending their energy shortages (Semafor)

King’s horses run amok in London, escaping monarch’s birthday-parade practice (WSJ)

Senior Russian military official held on corruption charges involving defense deals (WSJ)

Portrait of Miss Lieser, an unfinished Gustav Klimt painting thought to be lost for the last century, sells for $32 million at auction (Semafor) 

First news

• Technologists take a page from ecologists in a proposal to bulletproof a single-point-of-failure internet
• “More natural gas, please!” says generative AI to humans all too glad to feed its needs
• Stereotypically hard-working Asian and soft-bellied American engineers are on opposite sides of a virtual barricade preventing them from working together well to build TSMC’s chips in the Arizona desert.

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Some soul searching might happen post-META, but the core drivers of positive/risk reward remain in place, and a 2% rally does not relieve that.

While META 0.87%  results disappointed, the company’s competitive advantages remain enviable and the drivers of a rally remain intact.

Click HERE for the video.

TECHNICAL

The rally which started Monday likely should carry SPX back to 5400. A five-wave advance higher represented the first real positive structural effort off the lows, and both U.S. Dollar and Treasury yields look close to turning back lower. While META’s after-market plunge on soft guidance might have set a high bar for Tech earnings, given that its profits more than doubled in the first quarter, I feel that Technology as a sector is near support and should not have much more downside. Furthermore, earnings from MSFT and GOOGL might set the tone for the start of an advance back to SPX-5200 and ultimately 5400.

Minor stalling out in Equity indices doesn’t represent any real concern for market bulls, and the advance from Monday into Tuesday’s close still set the tone for what should be a stellar rally back to new all-time highs.

Near-term, the consolidation that began Wednesday might continue briefly into Thursday, as META’s outsized presence in indices might cause some ripples throughout Technology and Communication Services.

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CRYPTO

The crypto market is pulling back from its recent surge, with BTC -3.35% falling below $65,000, ETH -2.94% trading under $3,200, and SOL 1.23% fighting to stay above $150. As expected, altcoins are also generally declining, although a few notable performers are scattered across the market. Currently, BONK -5.59% and WIF -9.35% , two prominent memecoins on Solana, are showing resilience, up 12% and 6%, respectively. Additionally, HBAR -1.60% initially doubled in price following reports that Blackrock selected the chain to tokenize a US treasury money market fund. However, the token surrendered most of its gains after it was clarified that Blackrock was not involved in the decision-making process. Long-term interest rates have reversed the trend observed over the past few days and are moving higher, possibly in anticipation of tomorrow’s GDP data. Equities are mixed as investors await major companies’ earnings this week, including META today, MSFT, and GOOGL tomorrow.

Bitcoin spot ETFs have experienced their third consecutive day of net inflows, signaling a positive trend in flows. However, it’s important to note that these inflows are relatively small compared to some of the larger inflows observed in Q1. In related ETF news, Hong Kong is poised to launch six crypto-based spot ETFs on April 30th, including three BTC and three ETH funds. Despite expectations that these ETFs will attract significantly less capital compared to similar funds in the U.S., this development is still seen as a positive for the industry. We anticipate potential inflows that may exceed analyst expectations.

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FIRST NEWS

The Self-healing Net. Two technologists are arguing that the internet should be remodeled in the way ecologists revive a dying ecosystem. In a fascinating analogy, the experts are likening the current web to a barren, increasingly monocultural city ruled by top-down powers. Just as ecologists ‘rewild’ an environment via improved biodiversity, the internet, they say, should have more services and platforms for global discourse: “There won’t be just one or two numbers to call if leaders of a political coup decide to shut the internet down in the middle of the night. … No one entity will permanently be on top,” write the authors in Noema Magazine. They point to the popularity of RSS feeds, blogs, and newsletters as already showing a collective desire to avoid “a single point of failure and control.” Semafor

Gas Demand for AI to Balloon. 8.5 billion is the maximum estimated amount of additional cubic feet per day of natural gas likely needed to meet the rising energy demands of AI data centers in the second half of this decade, per Tudor Pickering Holt, an investment bank focusing on the oil & gas industry. This while Salesforce is calling for policymakers to create rules for AI emissions disclosures.

U.S. power and technology companies have raised concerns that the country’s electrical infrastructure is struggling to keep pace with rapidly increasing energy demands, particularly from data centers powering emerging technologies like generative AI. As a result, data center operators are increasingly bypassing utilities and striking direct deals with power producers or developing their own energy supply to meet their growing needs.

The surge in overall power demand has led to a nationwide backlog of requests for new power generation and energy-storage projects seeking to connect to the grid. Per data from the Lawrence Berkeley National Laboratory, this queue swelled from 2,000 gigawatts in 2022 to 2,600 gigawatts in 2023.

Analysts anticipate that natural gas will play a crucial role in meeting the rapidly expanding energy demand, with prices projected to average around $4 per million BTUs in the latter half of the decade. Despite a recent dip to $1.61 per million BTUs in February due to mild winter weather, prompting production cuts, pipeline operators like Kinder Morgan, Williams, and Energy Transfer, along with producers such as EQT and Chesapeake Energy, are expected to benefit from the increased gas demand.

The report estimates current power consumption from data centers at 11 gigawatts, which could soar to 42 gigawatts by 2030 under the base-case scenario. To meet this projected demand, an additional 2.7 billion cubic feet per day of natural gas would be required by 2030. Reuters

Big Trouble in Little Taiwan: Culture Clash Chips In. As TSMC struggles to build its U.S. semiconductor fabrication facilities on time, one can’t help noticing that it seemed to avoid similar problems earlier this year, when launching its latest plant in Japan. Construction of its Kumamoto factory started one year later than its first Arizona facility, but more than caught up. What gives?

Chalk it up to the differences in work culture between East and West.

Roughly half of the 2,200 employees working at TSMC’s Arizona plant have been transplanted from Taiwan, armed as they are with critical know-how. The other half are Americans. Getting the two groups to work together has been like herding cats. Hardened Taiwanese engineers are inured to long shifts, military-style, while soft American engineers value work-life balance (which their Asian colleagues might be tempted to put in quotation marks) and are less agreeable.

And then there’s the language barrier. Have we mentioned the culture clash?

The result? A divisive workplace and slow progress. A local woman engineer had to ask a Taiwanese colleague to remove the image of a bikini model from his computer wallpaper, while a Taiwanese employee’s wife complained that the U.S. was: “Great mountains, great rivers, and great boredom”.

She may have a point. After all, what is there to do in the Arizona desert, except make chips?

Indeed, TSMC is expected to make the most advanced chips in the world in its U.S. factories, which will power everything from smartphones to AI. As things stand, working conditions are less than ideal, but may improve over time if the Taiwanese workers learn to relax, while Americans push themselves a little.

A delay on a second $40 billion facility has gone from 2026 to 2027 or 2028. Whatever happens, the U.S. government is giving TSMC more money to build more chip fabs in Arizona, with the aim of strengthening supply chains and boosting manufacturing. There are plans to construct a third factory with $6.6 billion more funding from the CHIPS Act. Semafor, Rest of World