A daily market update from FS Insight — what you need to know ahead of opening bell
“Plus ça change, plus c’est la même chose.” — Jean-Baptiste Alphonse Karr
Overnight
Musk’s xAI is close to raising $6 billion from Sequoia, others (TI)
Foreign aid package comes with new sanctions risks for companies (WSJ)
Energy Department gets power over big grid projects to speed upgrades and provide access to clean-energy projects (WSJ)
Haiti: Former PM Ariel Henry formally resigns; new transition council takes office, but long road awaits (WSJ)
Donald E. Petersen, who boosted quality at Ford Motor, dies at age 97 (WSJ)
U.S. GDP growth slows to 1.6% (CNBC)
U.S. fertility rate falls to record low (WSJ)
Rubrik shares jump 21% in market debut (WSJ)
Anglo American considers sale of diamond unit De Beers (WSJ)
Mining giants weigh $39 billion megadeal that could reshape global industry (WSJ)
Toyota makes $1.4 billion EV investment in Indiana facility (WSJ)
Airbus sticks to plane-delivery goal, ramps up A350 production (WSJ)
S&P cuts Boeing’s ratings outlook to negative (WSJ)
Javier Milei fuels wild rally that makes peso No. 1 in world (BBG)
Argentina to offer new debt instruments to allow companies to send dividends abroad (BBG)
Nasdaq profit falls most since 2010 amid elusive IPO revival (BBG)
A record $8.8B pulled from U.S. sustainable funds in Q1 (RT)
Flows to European ESG ETFs halved in Q1 (FT)
U.S. white-collar job growth stalls, even in Covid boomtowns (BBG)
Bill Gross says ‘stick to value stocks, avoid tech’ as U.S. yields soar (BBG)
PwC picks Marco Amitrano as next U.K. senior partner (FT)
Japan feels inflation heat from Fed’s ‘higher for longer’ shift (FT)
PIMCO expects BOJ to raise rates higher than markets expect (BBG)
Indonesia raises rates to support sliding rupiah (FT)
FDIC pauses plans to scrutinize big investors in banks (FT)
CFPB raises alarm over credit card megadeals (FT)
Room & Board to grant ESOPs to all workers (WSJ)
Cboe to merge digital assets unit with derivatives and clearing arm (RT)
Rob Walton to retire from Walmart’s board (RT)
FCC restores net neutrality (RT)
Lazard beat Q1 profit estimates, buoyed by strength in North America deal-making across healthcare, industrials, tech, and financial institutions (RT)
Alphabet shares jump ~12% after beating Q1 earnings and revenue estimates on soaring profits in its cloud division; it also announced its first-ever dividend (CNBC)
Microsoft shares rise ~4% after reporting better-than-expected Q3 earnings on the back of AI-driven cloud growth, although its Q4 revenue forecast was below expectations (CNBC)
Intel shares fall ~8% after missing on sales estimates and providing a weak Q2 forecast, which overshadowed its Q1 earnings beat (CNBC)
Snap Inc. shares soar ~25% on a surprise adjusted profit and better-than-expected revenue demonstrating a return to double-digit revenue growth (CNBC)
American Airlines posts a Q1 loss but topped estimates for Q2 forecast and reiterated FY earnings guidance (CNBC)
Newmont surges ~12% after beating Q1 profit estimates as the gold-mining giant benefited from robust production and higher prices (RT)
The shares of Caterpillar, a perennial bellwether of the state of the economy, slump ~7% after reporting Q1 results that showed a YoY slowdown in machinery sales that are expected to continue into Q2 (CNBC)
Hertz shares plunge to record low as it unwinds Tesla fleet (BBG)
Thames Water debt insurer taps advisers as crisis deepens (BBG)
The finance chiefs of four G20 countries call for a global wealth tax on the world’s billionaires (Semafor)
The Rolling Stones kick off their 2024 Hackney Diamonds tour in Houston, Texas (Semafor)
First news
- Regional banks still under pressure from high rates, increased capital requirements
- Net neutrality makes a comeback
- The city of Paris sells its first Olympics in a century hard.
Chart of the Day
MARKET LEVELS
Overnight |
S&P Futures +34
point(s) (+0.7%
) overnight range: +30 to +52 point(s) |
APAC |
Nikkei +0.81%
Topix +0.86% China SHCOMP +1.17% Hang Seng +2.12% Korea +1.05% Singapore -0.23% Australia -1.39% India -0.74% Taiwan +1.32% |
Europe |
Stoxx 50 +0.61%
Stoxx 600 +0.59% FTSE 100 +0.46% DAX +0.75% CAC 40 +0.21% Italy +0.85% IBEX +0.85% |
FX |
Dollar Index (DXY) +0.04%
to 105.64 EUR/USD +0.06% to 1.0736 GBP/USD +0.01% to 1.2515 USD/JPY +0.67% to 156.69 USD/CNY +0.1% to 7.247 USD/CNH +0.09% to 7.2617 USD/CHF -0.04% to 0.9118 USD/CAD -0.04% to 1.3651 AUD/USD +0.32% to 0.6539 |
Crypto |
BTC -0.61%
to 64404.44 ETH -0.85% to 3147.22 XRP -1.17% to 0.5241 Cardano -1.58% to 0.4677 Solana -0.5% to 144.11 Avalanche -0.28% to 35.49 Dogecoin -1.44% to 0.1508 Chainlink -0.88% to 14.64 |
Commodities and Others |
VIX +1.82%
to 15.65 WTI Crude +0.34% to 83.85 Brent Crude +0.25% to 89.23 Nat Gas -3.36% to 1.58 RBOB Gas +0.29% to 2.766 Heating Oil +0.6% to 2.566 Gold +0.69% to 2348.54 Silver +0.91% to 27.68 Copper +1.47% to 4.584 |
US Treasuries |
1M -1.5bps
to 5.3448% 3M -5.2bps to 5.3539% 6M -1.0bps to 5.366% 12M -3.7bps to 5.1519% 2Y -1.0bps to 4.9871% 5Y -1.8bps to 4.7012% 7Y -2.6bps to 4.7017% 10Y -2.2bps to 4.6816% 20Y -2.4bps to 4.9084% 30Y -2.3bps to 4.7891% |
UST Term Structure |
2Y-3
M Spread narrowed 2.4bps to -44.5
bps 10Y-2 Y Spread narrowed 1.2bps to -30.8 bps 30Y-10 Y Spread narrowed 0.1bps to 10.5 bps |
Yesterday's Recap |
SPX -0.46%
SPX Eq Wt -0.21% NASDAQ 100 -0.55% NASDAQ Comp -0.64% Russell Midcap -0.18% R2k -0.72% R1k Value -0.28% R1k Growth -0.62% R2k Value -0.83% R2k Growth -0.6% FANG+ -0.54% Semis +2.0% Software -0.93% Biotech -2.05% Regional Banks -1.1% SPX GICS1 Sorted: Materials +0.69% Energy +0.5% Indu +0.29% Utes +0.27% Tech +0.15% Cons Disc -0.2% Cons Staples -0.29% SPX -0.46% Fin -0.5% REITs -0.52% Healthcare -0.62% Comm Srvcs -4.02% |
USD HY OaS |
All Sectors +0.2bp
to 354bp All Sectors ex-Energy +0.2bp to 339bp Cons Disc -1.9bp to 288bp Indu -0.7bp to 244bp Tech +3.1bp to 451bp Comm Srvcs +6.8bp to 626bp Materials -0.8bp to 309bp Energy -1.4bp to 265bp Fin Snr +1.1bp to 314bp Fin Sub -1.5bp to 240bp Cons Staples +0.1bp to 310bp Healthcare -3.0bp to 401bp Utes -1.0bp to 211bp * |
Date | Time | Description | Estimate | Last |
---|---|---|---|---|
4/26 | 8:30AM | Mar PCE m/m | 0.3 | 0.3 |
4/26 | 8:30AM | Mar Core PCE m/m | 0.3 | 0.26 |
4/26 | 8:30AM | Mar PCE y/y | 2.6 | 2.5 |
4/26 | 8:30AM | Mar Core PCE y/y | 2.7 | 2.78411 |
4/26 | 10AM | Apr F UMich 1yr Inf Exp | n/a | 3.1 |
4/26 | 10AM | Apr F UMich Sentiment | 77.9 | 77.9 |
4/30 | 8:30AM | 1Q ECI QoQ | 1.0 | 0.9 |
4/30 | 10AM | Apr Conf Board Sentiment | 104.1 | 104.7 |
5/1 | 9:45AM | Apr F S&P Manu PMI | 49.9 | 49.9 |
5/1 | 10AM | Apr ISM Manu PMI | 50.1 | 50.3 |
5/1 | 10AM | Mar JOLTS | 8725.0 | 8756.0 |
5/1 | 2PM | May 1 FOMC Decision | 5.5 | 5.5 |
5/2 | 8:30AM | 1Q P Nonfarm Productivity | 1.5 | 3.2 |
5/2 | 8:30AM | Mar Trade Balance | -69.0 | -68.901 |
5/2 | 8:30AM | 1Q P Unit Labor Costs | 2.0 | 0.4 |
5/2 | 10AM | Mar F Durable Gds Orders | n/a | 2.6 |
MORNING INSIGHT
Good morning!
This may surprise many investors, but the S&P 500 is actually up 1% for the week. After weeks of downward pressure, and the selling seen on Wednesday and Thursday, the tape feels “heavier” than a +1% week. Today is the release of March Core PCE deflator (Fed’s preferred measure of inflation) and the Street is looking for +0.29% MoM.
A lot of wariness and fear is likely baked into market expectations ahead of today’s release of PCE. Why do we suggest this?
– Thursday’s release of 1Q24 GDP saw a sharp rise in rates and a decline in equities
– 1Q24 Core PCE Price Index YoY came in at +2.9%, higher than expected for March YoY +2.7%
– But as we know, the key question is how much is due to Jan/Feb revisions.
Click HERE for more.
TECHNICAL
Post-market-close earnings from MSFT and GOOGL looked to have surprised positively on both revenues and earnings, and could set an early positive tone for markets, given the size of both of these constituents within ^SPX 0.41% and QQQ 0.10% . GOOGL -1.28% announcing a quarterly dividend seems to have been a very positive factor for this stock in after-hours trading. (As always, it’s proper to hold off on making too much of after-hours trading data, but, at first glance, both MSFT and GOOGL seem to have delivered what the market wants to see.)
As discussed in recent days, the five-wave advance from this past Monday’s lows looks bullish for SPX and QQQ, and now very well could help to facilitate upside follow-through in the days to come. Movement back over SPX-5090 would confirm that a rally back to 5200 should be underway.
Specifically, Thursday’s reversal following early weakness managed to break the downtrend over the last 24 hours and looks to have formed a successful ABC-type reversal pattern that should be helpful for both SPX and QQQ pushing back to new highs into May.
Only on a break of 5000 on a closing basis would this rally be likely to be postponed, but Thursday’s gains look to be a clear positive for markets.
Click HERE for more.
CRYPTO
- The recovery of memecoins since the deleveraging event a couple of weeks ago suggests that they will have staying power this cycle. We consider memecoins to be call options (without expiry) on speculative flows increasing.
- It appears that Mt. Gox is finally preparing to distribute approximately 138k BTC and 143k BCH to creditors, potentially by late May or early June. We currently discount the magnitude of this risk to BTC due to the seasoned nature of Gox claimants. That said, BCH is likely a name to avoid.
- Core Strategy – Over the intermediate/long-term, recent weakness will prove to be a great buying opportunity. We think it is right for investors to view the QRA and FOMC meeting at month-end to be a potential turning point for crypto markets. As a reminder, performance and changes to the Core Strategy are detailed at the end of every strategy note.
Click HERE for more.
FIRST NEWS
Not out of the Regional (Banking) Woods Yet. The classic Main Street banking model is being squeezed these days, as first-quarter results at regional banks show the uneven toll of higher interest rates, manifested as significant profit declines for Q12024. The traditional deposit-taking and lending model of regional banks has become less profitable due to the increased costs of paying higher rates on deposits.
Banks like U.S. Bancorp, Truist Financial, M&T Bank, Citizens Financial Group, KeyCorp, Huntington Bancshares, and Comerica have all witnessed profit drops ranging from 20% to over 50% compared to the previous year. In contrast, while the largest banks also experienced rate pressures, their overall profit declines were less severe.
Some regional banks found a silver lining in improved fee income from businesses like wealth management, treasury services, and investment banking, yet, compared to their larger counterparts, most regional and community banks lack substantial fee-based revenue streams.
The Fed’s indication that interest rates may stay high for longer than anticipated due to persistent inflation has exacerbated concerns for regional banks with limited diversification and scale – many of which predicted that their net interest income would decline throughout 2024.
The banking industry remains under scrutiny following the high-profile failures of several regional banks in 2023. Regulators, customers, and investors have prompted many regional and community banks to adopt a more conservative stance, bolstering capital reserves and bracing for potential losses, particularly in the commercial real estate sector.
As the commercial real estate market, especially the office sector, continues to face challenges – albeit without posing systemic risks to the broader financial system – banks navigate the dual pressures of higher interest rates and potential asset-quality deterioration by stressing diversification and prudent risk management.
Bank executives acknowledge the lingering uncertainty but express confidence in the resilience of their business models. It’s true that bank stocks have had a modest rebound this week, but many have yet to fully recover from the volatility of 2023. WSJ
Pulling the Net This Way and That. In a pivotal decision on Thursday, the Federal Communications Commission (FCC) voted to classify internet service as a public utility, reinstating the net neutrality rules repealed during the Trump administration. This move is part of a new framework the FCC will use to regulate broadband networks.
Net neutrality is a set of policies designed to prevent internet service providers (ISPs) from favoring or discriminating against certain websites or online content. The core principles include prohibiting ISPs from blocking or slowing down (throttling) internet traffic to specific websites or services, and banning the creation of fast lanes that would allow prioritized delivery for websites willing to pay a premium.
Proponents argue that net neutrality is crucial to ensuring equal access to digital content and preventing large companies from gaining an unfair advantage over smaller competitors. Critics view these rules as unnecessary and accuse the FCC of regulatory overreach.
The rules were introduced during the Obama administration, scrapped under the Trump presidency, and now reinstated by the current FCC leadership. Despite the shifting regulatory landscape, internet service delivery and pricing for consumers have largely remained unchanged.
Internet providers are expected to challenge the new net neutrality rules in court, potentially delaying their implementation for months. The FCC’s order explicitly avoids rate regulation for now, but ISPs fear it could pave the way for future price controls or state-level regulations. WSJ
Vive la Différence. The French ever did seek to be different. Now, as it gears up for the first summer Olympics to be held on its turf in 100 years, France is moving to whip up enthusiasm by co-opting a national treasure, the Louvre Museum, to host yoga, dance, and workout classes ahead of the 2024 Paris Olympics. It may not be clear to them why, but visitors will be able to work out in 10-minute sessions surrounded by French sculptures from King Louis XIV’s chateau. Other Parisian cultural sites are also part of the pre-games buildup. A stadium built on the iconic Place de la Concorde, will host the Olympic skateboarding and breakdancing events, and Le Monde reports that the glorious Musée d’Orsay will become the site of, so help us, a “breakdance parade and an Olympic ball”.
The Seine will wind its way into the spectacle as boats will pass by the city’s museums during the opening ceremony. The famously unswimmable river – in such a state because raw sewage has been unceremoniously dumped into it since time immemorial – is supposed to be cleaned up in time for the games, and President Macron has vowed to swim it himself in order to illustrate the achievement.
Unveiling a rainwater treatment plant on the Marne, which flows into the Seine just east of Paris, Sports Minister Amelie Oudea-Castera declared that ensuring the two rivers are fit for swimming come summer is “one of the challenges of the century” – which sounds about right, as Paris has had exactly that length of time since the last such Olympics to rise to it. On his X account, Macron said, “the water in the Seine will be cold… but clean… I will be able to confirm it personally.”
Nager la Seine sans maladie? Bon chance, notre ami. Semafor