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

“Better to have bad news that’s true than good news we made up.” — Eric Ries

Overnight

Fed minutes show disagreement over slowing balance-sheet runoff, agreement on holding rate target range steady at 5.25% to 5.50% for longer (Barron’s)

Pro-crypto FIT21 bill passes in House by 279-136, heads to Senate (Axios)

Home sales fell again in April after high mortgage rates damp activity (WSJ)

U.S. crude oil stockpiles rose last week by roughly the amount by which analysts said they would fall (WSJ)

Most Americans falsely think the U.S. is in a recession, poll shows (CNBC)

Nvidia’s sales triple, signaling AI boom’s staying power; 10-1 forward stock split announced (WSJ)

U.K. PM Rishi Sunak calls for general election on July 4 (CNBC)

Foreign purchase of U.S. ammo maker sparks national-security battle (WSJ)

Target sales decline to start the year, but it sees improvement (AP)

Some corporations seek to silence ‘Trojan Horse’ activists (WSJ)

OpenAI, Wall Street Journal owner News Corp strike content deal (WSJ)

AI-translation startup DeepL announces $300 million investment at $2 billion valuation (WSJ)

Nvidia challenger Groq enlists Morgan Stanley to raise $300 million (TI)

Permira seeks €750 million for new credit fund (WSJ)

SEC’s $10 million fine of NYSE owner shows focus on cyber disclosures (WSJ)

Citi fined ~$78 million by British regulators over 2022 fat-finger trading, control errors; 711 warning messages (CNBC)

Nebraska sues TikTok for allegedly harming minors (WSJ)

Oaktree seizes control of Inter Milan after Chinese owner fails to repay a €400mn loan (FT)

Anglo American to enter talks With BHP after rejecting $50 billion bid (WSJ)

Stock awards push median CEO package for 2023 to a record $15.7 million; tech executives top the list (WSJ)

Premium paid by high-yield debt falls to near pandemic-era lows (WSJ)

CPP investment board CEO warns about undermining fund with domestic mandates (WSJ)

Bankruptcy judge Jones asked Jackson Walker to make false statement, law firm alleges (WSJ)

BuzzFeed shares soar as Ramaswamy takes stake, seeks talks (BBG)

Why bond returns could hit double digits in 2025 (MW)

College sports about to turn pro; PE wants in (WSJ)

TNT strikes deal with ESPN to share rights to college football playoff (WSJ)

Average U.S. vehicle age hits a record 12.6 years (+3 years since 2002) as high prices force people to keep cars longer (CNBC)

Stellantis CEO: EV tariffs won’t allow Western automakers to avoid restructuring to meet the challenge from lower-cost Chinese imports (CNBC)

Skyrocketing demand for new transformers outstrips supply, endangering U.S. electrical transmission and distribution infrastructure (Sherwood)

Executives bemoan stifling bureaucracies, exhausted bosses (WSJ)

Bumble looks to friendship to reinvigorate its stock price (Sherwood)

Lender drops plan to auction Graceland after judge blocks sale amid fraud claims (RT)

First News

• Google publicizes Microsoft’s cyber failures in a baldfaced effort to take its customers
• The CFPB gets an unlikely assist from SCOTUS; may still have to fight for its life if a future POTUS doesn’t like it.

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

We see NVDA’s results as being good enough to pull cash off the sidelines. Broader market multiples are likely to expand as well.

When considering the global labor shortage, it seems that these are the early days of AI.

Click HERE for the video.

TECHNICAL

The Semiconductor Index might temporarily find resistance near all-time highs.

Semiconductor stocks remain the focus, given NVDA earnings yesterday and the fact that its recent sharp outperformance successfully lifted this sub-sector higher, to within striking distance of all-time highs.

Post-market activity showed NVDA shares trading higher, briefly above former all-time intra-day highs, as 2Q revenue guidance exceeded estimates and first-quarter numbers did the same.

SOX (Philly Semiconductor Index) shows a DeMark 8 count (out of a possible 9) on its Daily TD Sell Setup count. Normally these signals, when complete (and this is not complete, by 1 day) tend to lead to stall-outs in a current trend (and/or a slowdown (in very short term only)) before the trend can likely continue. 

Given that SOX is near its all-time highs from March, one could expect that these former all-time highs might offer some near-term resistance to gains into today’s opening print, and potentially into Friday.

Click HERE for more.

CRYPTO

HUGE regulatory news: The House passed the FIT21 Act 279-136 with enormous bipartisan support last evening. The bill provides crypto with comprehensive market structure reform and guidance on regulatory jurisdiction between the SEC and CFTC. The bill now heads to the Senate, where it likely awaits a slightly tougher battle, but, regardless – this is a massive step in the right direction, in our view.

Illia Polosukhin of the NEAR Foundation has announced that NEAR is focusing on becoming the leading platform for User-Owned AI, emphasizing user privacy and decentralization. The Foundation is investing in AI infrastructure projects, including data curation, compute access, and agentic infrastructure, to create a robust ecosystem for AI applications. The NEAR.AI R&D Lab, led by Polosukhin and Alex Skidanov, will develop tools enabling anyone to build Web3 applications without coding. Leveraging NEAR’s substantial user base, developer ecosystem, and financial resources, this initiative aims to offer a decentralized alternative to centralized AI development and drive global innovation and creativity. This could be relevant to NEAR ahead of NVDA earnings, as a closer relevance to AI could increase NEAR’s correlation to NVDA post-earnings.

Click HERE for more.

FIRST NEWS

My PR of Your Failure = My Gain. Google has been talking up Microsoft’s cyber failures in an effort to take its customers.

As Google’s competition with Microsoft intensifies, the search behemoth has been highlighting the Office godfather’s widespread, well-publicized security flaws with a cherry-on-top of substantial discounts to entice government and corporate clients to switch from Microsoft Office to Google’s productivity software suite.

Through a white paper that critiques its arch-rival’s security shortcomings, Google aims to undermine confidence in Microsoft’s offerings while extending lucrative incentives to potential customers willing to make the transition.

For government agencies moving at least 500 users to Google Workspace Enterprise Plus for three years, Google now offers one year free and a ‘significant discount’ for the remainder of the contract term. Corporate clients signing three-year contracts will also receive 18 months of free service, followed by a substantial discount and access to incident response services from Google’s Mandiant security division. All customers will also benefit from complimentary consulting services.

The idea? Google is betting that Microsoft Corp.’s very public cybersecurity failures – which it is helping become even more public – along with its own deep, possibly loss-leading discounts, will persuade corporate and government customers to use the search giant’s productivity software rather than Office. It probably isn’t a hard sell. Bloomberg

Buy Now, Pay Later, Fund Yesterday. The Consumer Financial Protection Bureau (CFPB) issued an interpretive rule yesterday to the effect that Buy Now, Pay Later (BNPL) customers now have the same protections as credit card users, which effectively means that they can dispute charges and obtain refunds. Last week, the agency’s very ability to make these types of announcements – even its very legitimacy – was reaffirmed by a Supreme Court decision.

Those habitually following the intersection of regulation, finance, and law may have been surprised that the U.S. Supreme Court, in its current composition, would uphold the constitutionality of the Consumer Finance Protection Bureau, a bête noire of conservatives ever since it was created in the wake of the 2008 financial crisis. Although the argument in the case – namely, that the CFPB’s funding mechanism violated the appropriations clause of the Constitution – is seen as weak by some and letter-of-the-law by others, striking it down would have raised the specter of an attack on the constitutionality of the Fed U.S. Central Bank itself – a prospect that, thankfully, remains beyond the pale for a firm majority of the nation’s top court.

A week ago, a 7-2 decision in CFPB v. Community Financial Services Association of America, written by Justice Clarence Thomas, upheld the bureau’s 2017 Payday Lending Rule, holding that the Constitution’s appropriations clause authorizes Congress to fund the bureau with profits from the Federal Reserve. Yet the Fed has no profits.

Congress established the bureau in 2010 as part of the Dodd-Frank Act, which devised a unique funding mechanism for the CFPB: a standing source of funding outside the ordinary annual appropriations process.* The problem is that, for nearly two years, the Fed has been losing money on account of rising interest rates. (As of last Wednesday, the Fed’s ‘deferred asset’ accounting entry, i.e. the cumulative amount by which its costs exceed its income, equals $169 billion.) This would appear to call into question the legitimacy of the CFPB’s funding since September 2022 – as well as all regulations issued during that period, including major ones now under consideration, such as the Credit Card Penalty Fee Rule (which would cap late fees) and the Nonsufficient Funds Fee Rule (which would prohibit charges for many declined-payment transactions).

Challengers to the CFPB have seen success at the Supreme Court before. In 2020, in a case called Seila Law, the court struck down the way Congress protected the leadership of the CFPB from being fired by a hostile president – something that may be relevant again should a once-and-possibly-future president treat the agency with disdain (if not outright hostility). In the meantime, the Fed itself may be put in a position of having to justify how it can fund an agency – and a reasonably necessary one – when it has no real earnings. Bloomberg, SCOTUSblog, WSJ

^{* Each year, the bureau may requisition from the earnings of the Federal Reserve System the amount determined by the bureau’s director to be reasonably necessary to carry on its duties, subject to certain limits.}