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

“The greatest gains and values are farthest from being appreciated. We easily come to doubt if they exist.” — Henry David Thoreau

Overnight

Facilitators’ proposal for ceasefire in Gaza unilaterally accepted; terms unknown; Israel continues its operation in Rafah “to exert military pressure on Hamas” but is also sending a delegation to meet with mediators “to exhaust the possibility of reaching an agreement” (Semafor)

Oil rebounds from the lowest levels in a month after Saudi Arabia signals confidence in demand by hiking prices for Asia (BBG)

Russia orders nuclear weapons drills to deter the West (Semafor)

Sen. Warren calls Russia’s access to Starlink in Ukraine a ‘serious national security threat’ in missive (WSJ)

One of the biggest hospital failures in decades raises concerns for patient care (WSJ)

More working-age women employed in the U.S. than ever, per Friday’s jobs report Axios

Simon & Schuster signs deal to buy Dutch publisher Veen Bosch & Keuning (WSJ)

Lawmakers make final $7 billion push to save $30 monthly internet discounts (WSJ)

GM posts $106 million Q1 loss in China – its third quarterly loss there in at least 15 years, and the largest ex-pandemic (CNBC)

Rocket Cos. taps former Thomson Reuters executive to lead companywide AI efforts (WSJ)

Bill Gates-backed battery maker Ambri files for bankruptcy, with plans to sell itself (WSJ)

Battery developer Enovix lays off roughly one-third of its staff (TI)

Robinhood stock falls as SEC moves toward enforcement action against crypto arm (Barron’s)

GameStop’s stock slides 12% after being up 29% Friday (WSJ)

Palantir beat Q1 revenue estimates and met on earnings thanks to remarkable success in marketing its AI products but nonetheless issued weak FY guidance (CNBC) 

Spirit Airlines fell ~10% after reporting a larger-than-expected Q1 loss and forecasting a Q2 loss citing grounding of jets and bloated industry capacity (RT) 

Lucid beat Q1 revenue estimates as price cuts boosted sales but reiterated below forecast FY production (RT) 

Regulators resume plan to make finance exec pay more sensitive to risk (RT)

PE steps up plans to edge banks out of low-risk lending (FT)

Last Credit Suisse CEO Ulrich Körner will depart UBS (FT)

Macquarie CEO sees deal volumes rising as confidence returns (BBG)

ECB grows more confident about cutting rates (RT)

At $2M/min, treasuries mint cash like never before (BBG)

U.S. active mutual funds are losing out to index trackers (FT)

U.S. banks report weaker loan demand (RT)

Cerberus eyes India private credit growth as shadow banks retreat (BBG)

Medicare insurance fund extends viability to 2036 (BBG)

Citigroup CEO sees low-income consumers turning extra-cautious (CNBC)

Nomura targets 20% revenue growth from global markets arm (BBG)

Goldman criminal case over 1MDB formally ends (RT)

FAA opens a new Boeing inquiry (WSJ)

Global housing shortages are crushing immigration-fueled growth (BBG)

MrBeast splits from talent agent (BBG)

Apple-Google search deal valid until at least 2026, DOJ says (TI)

First news

• Fed presidents speak candidly
• How to make what is effectively an equity investment in a whole country.

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Earnings are the focus this week, but the backdrop for stocks is strengthening given a fall in yields, crude, and VIX – corroborating a buy for May.

Click HERE for the video.

TECHNICAL

Four sectors rose more than 1% to kick off the new week, and Industrials, Financials, Communication Services, and Technology all led performance on Monday. 

As shown below, the act of the Equal-weighted S&P 500 (RSP 0.10% ) regaining its two-month downtrend, along with rallying back above its late-April highs, is encouraging for the prospects of this rally getting more broad-based in the days and weeks to come.

Both Industrials and, more importantly, Financials (more important given the sector’s size within SPX) rose back above late-April peaks on a closing basis. Moreover, Energy also made a convincing stand and recouped its former lows that were broken from mid-April.

These are all encouraging moves from a sector standpoint, that visually help demonstrate why the RSP breakout (below) is so helpful to U.S. Equities. Overall, SPX targets initially lie near 5265.

Click HERE for more.

CRYPTO

Robinhood Markets (HOOD) disclosed that its crypto unit, Robinhood Crypto, received a Wells Notice from the SEC disclosing plans to file an enforcement action regarding securities violations. Robinhood issued a statement reflecting its disappointment in the SECs behavior after the company’s concerted effort to comply with regulations and set up a special purpose broker deal with the SEC. The SEC continues to go down a war path against the crypto industry as it’s actively engaging in litigation with Coinbase and has issued Wells Notices to other good actors including Uniswap and Consensys in recent weeks. Robinhood stated that there will be no product interruptions and that they “look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.” Robinhood’s stock (HOOD 11.90% ) has been relatively unfazed by the news, declining 0.45% in Monday’s trading.

Last week, LayerZero announced the completion of its first airdrop snapshot. They have released additional information addressing “sybil activity.” Sybil activity is the act of a single user creating multiple fake accounts to collect airdrops in numerous wallets. LayerZero stated that almost 6 million unique wallets have interacted with LayerZero since launching about two years ago, and that they want to identify the optimal user base to bootstrap the network. To do so, they have created a set of criteria identifying sybil activity including, any entity with tens, hundreds, or thousands of addresses, anyone transferring insignificant amounts or valueless NFTs across chains with no purpose, and anyone utilizing sybil farming tools. LayerZero is giving sybil users an opportunity to self-report by May 17^th in exchange for 15% of their intended allocation. After May 17^th, LayerZero will release their own list of sybil users – those who did not self-report will receive nothing. Secondly, LayerZero is opening a bounty program where users can submit detailed reports of sybil activity, with a successful report resulting in the bounty hunter receiving 10% of the sybil user’s allocation. Together, LayerZero believes they will achieve their goal of rewarding the most durable users who will continue to help LayerZero succeed. 

Click HERE for more.

FIRST NEWS

You Don’t Say. Chicago Fed President Austan Goolsbee has suggested that policymakers might improve how they talk about the economy and interest rates. Echoing the opinion of many on Wall Street, he said that the dot plot, which shows policymakers’ rate projections, means little without a clear connection made to economic conditions. Discussing the Fed’s Summary of Economic Projections, which forecasts growth, inflation, unemployment, and interest rates, Goolsbee proposed that policymakers should link their forecasts to show how economic changes might affect policy decisions. Also speaking at the event, New York Fed President John Williams stressed the Fed’s commitment to hitting its inflation target and said inflation is likely to go down. Bloomberg

Countrywide Financial. Surely those among us organically inclined to approach anything and everything with a financial bent have had occasion to wonder (perhaps while coming down from an adrenaline high of yet another Glengarry Glen Ross session with like-minded enthusiastic ‘capitalists’ and putative ‘closers’) – “what if we could buy stock in a country?” Turns out the fact that the people’s coffee is for closers was well known way back in Renaissance times, when Genoa issued bonds that paid interest based on tax receipts.* These days, Sri Lanka is considering issuing GDP-linked bonds to restructure its current debts. The incentive alignment on offer is best understood by thinking of the debt trap that would ensue otherwise.

Not very fixed income

A lender to a small, impoverished country with a persistent current account deficit such as Sri Lanka would need to be offered a serious sum to take credit risk – and at a rate attractive enough to compensate for the taking of that risk. The problem is that there might not be enough ways for the country to spend the money borrowed so as to produce the kind of return that would successfully service the debt. On the other hand, if the debt instrument is attached to GDP, it becomes closer to an equity investment: i.e. if the country’s economy improves, investors do well; if it doesn’t, the lenders look in the mirror and tell themselves they weren’t ever going to collect much anyway.

A–B–C (“Always Be Closing”)? More like “Always Be Compensating”. TheDiff

^{* Since GDP is better thought of as a proxy for the taxable piece of the economy than the economy itself, what was technically a bet on taxes rather than GDP may be equivalent to today’s bet on GDP, i.e. buying stock in a country.}