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

“The skill in attending a party is knowing when it’s time to leave.” — Michael Stipe

Overnight

Biden to release 1 million barrels of gasoline to reduce prices at the pump ahead of July 4 (CNBC)

Janet Yellen urges Europe to join U.S. in crackdown on Chinese exports (FT)

Apple fights €1.8 billion E.U. antitrust fine for curbs on Spotify (BBG)

Ether jumps 16% on US ETF approval speculation (FT)

India’s Adani suspected of fraud by selling low-grade coal as high-value fuel (FT)

Asia Dragon trust hunts for potential new manager months after merger (IW)

Lazard AM expands UCITS range with ‘AI-enhanced’ US small-cap equity fund (IW)

Franklin Templeton U.K. head Martin Gilbey to exit in distribution leadership overhaul (IW)

Fluent Bit vulnerability threatens almost all popular cloud platforms, including Amazon AWS, Google GCP, Microsoft Azure (TR)

China’s XPeng gets supercharged by Volkswagen (WSJ)

Amazon changes plans to order Nvidia ‘superchip’ to await updated model (FT)

Google reportedly discussing an acquisition of HubSpot (TI)

Macy’s new-but-old makeover strategy has legs thanks to new CEO; stock up ~5% on a Q1 beat-and-raise (WSJ)

Robinhood lowers margin investing rates (WSJ)

AI data-labeling startup Scale valuation doubles to $14bn (FT)

Ares targets AUM of $750 billion by 2028 (WSJ)

JPMorgan’s consumer business, the largest lender in the nation, sees borrowers trading down but still spending (WSJ)

In a 1st, HIV vaccine triggers rare and elusive antibodies in human patients (LS)

China’s $8.5 billion in steel spurs Latin America toward tariffs (BBG)

Banks now targeting some of private credit’s riskiest debt (BBG)

Singapore’s MAS steps up green-finance partnership with China’s Central Bank (WSJ)

Pixar to cut 14% of workforce in shift away from streaming series (WSJ)

Why Nvidia’s favorite cloud startup got $7.5 billion from Blackstone, others (TI)

NY seeks to limit hedge funds from pursuing defaulted sovereign bonds (FT)

Blackstone to grant equity to most employees in future U.S. LBOs (WSJ)

Finfluencers loom large in world of ETFs (FT)

PIMCO Australia shifts focus to alternatives to lure pensions (BBG)

Eli Manning wants his own team as PE targets NFL (BBG)

Skadden’s top dealmaker and co-head of FIG poached by Paul Weiss (FT)

RFK Jr. invested $24k in GameStop in solidarity with retail investors (CNBC)

JPMorgan and consumers have divided view on consumer health (WSJ)

Rite Aid creditors asked bankruptcy advisors to cut fees amid liquidity concerns (BBG)

Mastercard and Visa face crackdown over merchant fees in U.K. (FT)

Samsung fires its co-CEO / head of semiconductor (WSJ)

Google to bring ads in AI search results (RT)

Microsoft promotes new tools for making AI software (FT)

AI startup Anthropic hires Airbnb veteran Krishna Rao as first CFO (RT)

Nestle will sell $5 protein foods for Ozempic and Wegovy users (RT)

Open-and-shut: Shell investors back weaker emissions targets at meeting (BBG)

Lululemon product chief to exit in restructuring (WSJ)

WEF founder Klaus Schwab to step down (FT)

Europeans at risk for tropical illnesses due to climate change (FT)

96% of NYC rents are unaffordable for average NYC worker (BBG)

First News

• Automotive startups and their problematic founders
• Guaranteed-income programs and their problematic application.

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

We expect an NVDA and broader rally post-NVDA results, pulling cash off sidelines. CDNS and SMCI are attractive corollary plays.

While many investors are, logically, sidelined ahead of Nvidia (ticker: NVDA 1.84% ), the marquee AI company, fiscal 1Q25 (after the close Wed.) earnings – in our view, probabilities favor an NVDA and broad equity rally post results. We do not have insights into whether the company will exceed Street expectations, but our view is anchored in the seemingly cautious positioning ahead of results.

Click HERE for more.

TECHNICAL

The S&P 500 Equal-weighted index, along with the DJ Transportation Avg. and many Small and mid-Cap Averages, remain below all-time highs, and this larger broad-based rally will take time. Overall, short-term trends remain bullish, and momentum and breadth are supportive of further gains into June. NVDA’s earnings today could prove to be a technical catalyst for the U.S. stock market, given its 5% weighting in SPX and ongoing standing as an AI bellwether.

Click HERE for more, including a technical writeup of this month’s Super SMID Granny Shot selections.

CRYPTO

This is a historically momentous week, increasing ETH exposure. In our latest video, we discuss the SEC’s sudden shift in stance regarding Ethereum spot ETFs, which could result in 19b-4s being approved as early as this morning. Therefore, we are increasing our Core Strategy allocation to ETH and ETH-adjacent assets.

Click HERE for the video.

FIRST NEWS

Wheels on the Bus Go Round, Come Off. What is it with automotive startups and volatile starter CEOs? Travis Kalanick (Uber), Steve Burns (Lordstown Motors), Denis Sverdlov (Arrival), and now Trevor Milton (Nikola), have all created a famously socially or financially toxic culture at their respective firms, as a result of which either the company they founded went under (Lordstown, Arrival) or they had to be removed from having any degree of operational control (Uber, Nikola). The founders of these last two kept trying to interfere with company operations through employees and board members, which included attempts to sway voting on their replacement. In the case of Nikola’s Milton, even a fraud conviction won’t keep him away from the company. WSJ

Guaranteed to Make Waves. More than 100 pilot programs have been advanced across the US to give low-income residents monthly cash payments. Now some legislatures are blocking them.

After years of growing momentum behind guaranteed-income programs that provide no-strings-attached cash payments, a backlash is emerging. Three Republican-led states – South Dakota, Idaho, and Iowa – have passed laws this legislative session prohibiting localities from launching direct cash assistance initiatives. Legislators in at least six other states have tried or are trying to enact similar bans, arguing that the cash benefits are a waste of taxpayer money and that guaranteed-income programs may discourage people from working. Texas AG Ken Paxton has filed a lawsuit against Harris County over its recently launched guaranteed-income pilot program.

Since 2018, more than 100 guaranteed-income pilot programs have been proposed or launched across the United States by counties and cities, distributing regular cash payments to specific populations in need, such as low-income residents, new mothers, or homeless youth. Unlike in traditional social-safety-net programs, recipients need not meet any conditions or use the money in particular ways. Proponents argue that these programs are more efficient than government programs burdened with bureaucracy and administrative overhead.

The idea of a guaranteed income (and its cousin, universal basic income) has historically attracted support from across the political spectrum, including civil rights leader Martin Luther King, Jr., conservative economist Milton Friedman and, more recently, former presidential candidate Andrew Yang. Now that these programs have proliferated, critics argue against them for the same main reason they oppose other social-safety-net programs – a fear that these programs are not meant to replace existing welfare programs, but to expand them.

South Dakota, Idaho, Iowa, Arizona, Wisconsin, and Mississippi advanced similar legislation this session, though unsuccessfully. Arkansas enacted a law preempting all localities from creating universal basic incomes in 2023, while West Virginia legislators introduced a “Work Protection Act” this year that would achieve the same if passed.

South Dakota State Senator John Wiik, who sponsored his state’s preemption legislation, says he was motivated by concerns that supplementing incomes with regular payments would deter people from working. South Dakota has the second-lowest unemployment rate in the country, and 12.5% of its population lived below the poverty level as of 2022. Other critics have expressed fears that if given free money, people will spend it on vices.

Yet research has complicated those critiques: After a year of receiving $500 per month, participants in a guaranteed-income pilot program in Stockton, California saw greater increases in their full-time employment rates than a control group receiving no payments. Studies also show people use the cash for essentials like rent and food, and participating in pilots has improved some recipients’ physical and mental health. The expanded Child Tax Credit – an example of the unrestricted cash transfer advocates want nationally – helped lift an estimated 3 to 3.5 million children out of poverty in each of its first three months in 2021.

Still, research from the Foundation for Government Accountability (FGA), a conservative group, shows that, as welfare expands, workforce participation shrinks.

The legislation FGA’s advocacy arm supported targets local governments seeking to administer or fund guaranteed income programs. While early pilots were primarily funded by philanthropies, localities are increasingly tapping public funds. According to the Stanford Basic Income Lab, nearly half of existing pilots use public dollars. FGA calculated total U.S. spending on active and concluded pilots to be over $2 billion from private and public sources based on Stanford data.

The increasing public funding shows how mainstream these policies have become. In recent polling commissioned by Mayors for a Guaranteed Income, 43% of Republican respondents supported a federal guaranteed income policy, alongside over 80% of Democrats. Bloomberg