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

“I don’t want to stay in the bad place, where no one believes in silver linings or love or happy endings.” — Matthew Quick

Overnight

Iran’s President Ebrahim Raisi killed in a helicopter crash on Sunday, along with foreign minister (NYT)

Taiwan is inaugurating Lai Ching-te as the island’s president today (Semafor)

China attempts to end property crisis with broad rescue package (BBG)

Nickel futures jumped 7% to its highest in nine months amid political violence in New Caledonia (Euractiv)

Microsoft offers cloud customers AMD alternative to Nvidia AI processors (RT)

Mercedes workers at Alabama plant reject unionization in setback for UAW (WSJ)

Expedia ousts CTO and senior engineering leader for policy violation (TI)

RedBird banks $4.7 billion for dealmaking (WSJ)

Russia launched research spacecraft for antisatellite nuclear weapon two years ago, U.S. officials say (WSJ)

ECB pressures banks to speed up Russia exits on fear of U.S. action (FT)

Russia freezes Deutsche Bank, Commerzbank and UniCredit assets (BBG)

GameStop to sell up to 45mn new shares after latest ‘meme stock’ rally (FT)

OpenAI safety leader exits after reaching ‘breaking point’ (TI)

Goldman to expand PE credit lines as dealmaking picks up (RT)

U.S. companies find borrowing conditions improving as markets rally (FT)

Traders are pricing a 68% chance of a Fed rate cut in September (Finimize)

European PE firms are being forced to hold assets longer (FT)

Global investors wake up to cheap U.K. stocks as takeover activity rises (FT)

London remains top Europe pick for investors followed by Paris (BBG)

U.S. equity funds draw largest weekly inflow in eight weeks (RT)

U.S. regulators reconsider capital hike for big banks (WSJ)

BlackRock in talks with governments about investments to power AI (RT)

Bain Capital to boost Japan real estate team as prospects grow (BBG)

Asking prices for U.K. homes hit record high (RT)

OpenAI has disbanded its risk team (WR)

Meta’s plan to win AI race is to give tech away for free (WSJ)

Media giants lean on sports as Hollywood strikes still loom (CNBC)

Snapchat shifts focus to AI after reviving ad business (BBG)

European utilities cut renewable targets as costs and low prices bite (FT)

London insurance market jobs hit highest level in decade (FT)

U.K. imposes sanctions over Russian and North Korean ‘arms-for-oil partnership’ (FT)

Moderna wins Covid jab patent dispute over Pfizer and BioNTech (FT)

Inter Milan refinancing race pits Oaktree against Pimco (FT)

GPU cloud provider CoreWeave raises $7.5 billion in debt (TI)

Wegovy is becoming too essential for its elite price (FT)

‘Reverse Yankee’ deals boom as Europe’s low borrowing costs lure US groups (FT)

Law firms probe best ways to win a head start on using AI (FT)

Issuers to test investor appetite with more than $12B supply (BB)

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

On Tuesday, 5/21, we hold our monthly webinar on the Top 5 (Super) and bottom 5 (Sleeper) ideas within our Large Cap Granny Shot and SMID Granny Shot portfolios. We also provide a Macro Update.

Super Grannies (most timely) and Sleeper Grannies are derived from our core stock list of 36 ideas called Granny Shots.

• The rationale is that many clients ask us to narrow this list of 36 names down to a list of fresh-money ideas.
• We established a criteria of 4 factors to narrow the list to tactical buys:
  – fundamentals using DQM model managed by Tireless Ken
  – IBD momentum rating
  – technical strength measured by Price >20 DMA, 20 DMA vs 200 DMA and combos
  – Mark Newton’s judgement on technical outlook.

To download the slide deck for our Granny Shots Webinar, please click HERE.

Please note that registration is no longer required for webinars. We will email the link to join shortly before the webinar begins.

TECHNICAL

The equity trend is bullish, but we suspect that, until both DXY and TNX break trendline support, the rally could prove somewhat choppier into the end of May before a stronger push higher. SPX and QQQ’s push back to new highs finally led the DJIA to exceed 40k for the first time ever, to cap off a bullish (+~1.5%) week for stocks. Yet the S&P 500 Equal-weighted index, along with the DJ Transportation Avg., along with many Small and mid-Cap Averages, remain below all-time highs, thus a larger broad-based rally will take time. Overall, short-term trends remain bullish, and momentum and breadth are supportive of further gains into June.   

U.S. Equity markets have shown a bit of stalling out, yet no meaningful evidence of any trend deterioration has occurred. 

Some minor sector rotation that has led many commodity-based stocks higher looked to be the new trend worth discussing following a sharp rebound in Energy and Materials to end the week.

Click HERE for more.

CRYPTO

In our latest video, we discuss encouraging flows across ETFs and stablecoins, a potential ETH ETF denial presenting a buyable low in ETH/BTC, and adding exposure to the Akash Network and memecoins.

Click HERE for more.

FIRST NEWS

In a Non-Sentimental Moo-d. The U.S. has less cattle than it ordinarily does, and given rising input costs and higher interest rates, it sure doesn’t look like ranchers are trying to build back their herds. Pasture quality has been improving this year, but existing drought conditions and high feed costs have driven farmers to sell off cattle over the past few years, rather than attempting to build up bigger herds – as a method of containing costs.

The number of calves is down 2% compared to last year and is the lowest on record going back to 1948. Rather than breeding heifers to make calves, producers are sending them off to slaughter.*

Higher prices and borrowing costs are putting pressure on profit margins for beef producers, which could lead to an extended period of cattle compression. Per the Kansas City Fed, interest rates on farm loans have tripled from the beginning of 2022 to the end of 2023, making it difficult for producers to purchase livestock.

Tight cattle supplies have also compressed margins for meat giants like Tyson Foods. The company’s beef segment recently reported a $35 million quarterly loss driven by higher prices that slowed sales as customers reached for cheaper chicken and pork. FoodDive

^{* Normally, when ranchers are expanding herds, only ~35-37% of the animals they’re selling off are heifers. As it stands now, it’s ~40%.}

Beefstrung. On a related note, efforts to monitor the outbreak of bird flu in U.S. cattle are being hamstrung by poor data collection and reporting. The strain of the virus present in cows lacks the requisite mutation level to spread easily in humans, but it is already changing. Cases have been confirmed in 50 herds of cattle across nine states, with the real number possibly higher. The right response depends on prevalence: if infection is rare, culling the affected herds would work; if widespread, treating that cattle as a disease reservoir and trying to prevent a jump to humans may be the only option. Quality data is essential, but missing so far. Government policy is “based on guesses rather than information that we could get, but are not getting.” Nature

Silver Lining. On a furthermore related note, fewer people die from infectious diseases these days, as the number of people being claimed (dying or becoming seriously ill) by lifestyle- and age-linked diseases worldwide has risen by 50% since 2000. It’s a stark number that hides good news: as people tend not to die of infectious disease or during childbirth, they now live long enough to develop, say, high blood pressure or diabetes. What’s more – researchers are predicting that global life expectancy will rise by five years by 2050, to over 78, driven in large part by a 9.2-year jump in sub-Saharan Africa. Global healthcare services, including pharmaceutical manufacturers, will find themselves redirecting resources from communicable diseases to dealing with the problems of aging and lifestyle. FT

Electric Headwinds. Research suggests that permitting laws could prevent the U.S. from receiving enough copper for the energy transition. Federal policy calls for 100% of new cars to be electric by 2035, and each electric vehicle requires five times as much copper as an equivalent internal-combustion car. Similarly, wind turbines require many tons of copper. To meet demand, the world must produce more copper between 2018 and 2050 than had ever been produced until 2018, opening six new mines a year. And yet the average time between finding a new copper deposit and getting a permit to mine it is about 20 years. Science Daily

Silver Tsunami to the Rescue. On a related note, with green-transition materials scarce and energy needs surging, in part due to Europe’s dramatic-and-traumatic weaning of itself from Russia’s hydrocarbon teat, a much needed revival in the nuclear industry has led to a wave of retirees returning, in however atomized a fashion, to work. The supply of new plants worldwide began to drop after the 1986 Chernobyl disaster, and was hurried along a quarter-century later by the 2011 meltdown at Fukushima. Now, necessitated by demand for reliable low-carbon energy, new reactors are under construction in several countries, but thanks to the decades-long slump, the industry is suffering from a shortage of skilled workers. With the U.S. alone needing 55,000 new nuclear workers by 2030 (and many of those roles to be filled by pensioners) and hundreds of former nuclear experts already trickling out of retirement to enrich the building of a new wave of reactors in France, the skills of nuclear-industry retirees are essentially worth their weight in gold. Make that enriched uranium. FT