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

“Balance is not something you find, it’s something you create.” — Jana Kingsford

Overnight

Mexico is about to elect its first female president (WSJ)

Goldman Sachs partner Beth Hammack to succeed Mester as Cleveland Fed leader (CNBC)

ConocoPhillips has agreed to acquire Marathon Oil in an all-stock deal valued at $22.5 billion (YF)

Merck reaches $1.3 billion deal for eye-drug company EyeBio (WSJ)

BHP abandons bid to takeover Anglo American after multiple rejections (CNBC)

ExxonMobil CEO Darren Woods survived a campaign by activist investors and some of the world’s biggest institutional investors to unseat him from the company’s board (Semafor)

PE execs tout industry comeback, but hiring lags (WSJ)

Dimon warns ‘could be hell to pay’ if private credit sours (BBG)

Europe bond sales exceed €1T in record time (BBG)

U.S. firms grow more pessimistic on economy (RT)

US bank profits jump 80% as lenders shake off failed bank costs (RT)

BoE QT blamed for cash shortage (FT)

HSBC making Mideast wealth push after hiring 100 bankers (BBG)

Wells Fargo CEO blames asset cap for stagnant growth (RT)

Banco Sabadell rules out M&A defense against BBVA bid (RT)

BOJ hints at rate hike if yen value leads to inflation (RT)

Food delivery apps have racked up $20B in losses since going public (FT)

Exxon prevails in shareholder revolt (FT)

Invesco launches fixed maturity bond ETFs in Europe (FT)

PwC set to become largest ChatGPT enterprise customer (WSJ)

Visa and Mastercard will settle consumer ATM fee lawsuit for $197M (RT)

Activist Peltz sells entire Disney stake after losing proxy battle (CNBC)

New big nuclear reactors get support from Biden administration (BBG)

Salesforce shares plunge 17% on weak forecast, first revenue miss since 2006 (CNBC)

Lenovo expands Mideast ties with $2 billion convertible bond, Saudi Fund deal (WSJ)

HP beats revenue estimate on recovering PC demand (YF)

Abercrombie & Fitch’s stock extends record run after Q1 sales top $1 billion (MS)

Goldman Sachs raises $20-plus billion for direct lending (RT)

Hedge funds have never been more long the Magnificent 7 stocks, exceeding last summer’s peak exposure (CNBC)

IMF sees rosier prospects for China’s economic growth (WSJ)

Blinken signals U.S. may allow Ukraine to strike inside Russia with American weapons (WSJ)

Blacklisted Chinese companies rebrand as American to dodge crackdown (WSJ)

Stellantis CEO says $25,000 Jeep EV coming to the U.S. ‘very soon’ (CNBC)

Winklevoss twins’ crypto exchange Gemini returns $2.2 billion to users after pausing withdrawals in Nov. ‘22 (CNBC)

Jim Chanos calls suit accusing him of embezzling funds ‘baseless and defamatory’ (CNBC)

Walgreens announces price cuts on 1,300 items amid ongoing consumer spending fatigue (CNBC)

Dick’s Sporting Goods stock surges 15%, as retailer says shoppers are spending more on sneakers, apparel and athletic gear (CNBC)

Satellite-to-phones service provider AST SpaceMobile partners with Verizon; deal effectively includes a $100 million raise for AST, whose stock surged ~70% on the news (CNBC)

American Airlines stock dives after guidance cut (Barron’s)

Shares of Faraday Future Intelligent Electric – arguably the real meme stock of the moment – crashed Wednesday post earnings, down ~50% on the day (Sherwood)

Hedge funds return to bond trade with checkered past (BBG)

Tyson Foods accused of hiring migrants over U.S. citizens (RT)

Yale names Stony Brook’s Maurie McInnis as new president (BBG)

The oil price cap imposed by Group of Seven countries in 2022 “is clearly not working,” an Atlantic Center report concluded last week (Semafor)

$2 billion eatertainment chain Dave & Buster’s betting gambit marks a new era of casino-fying everything (BBG)

Biggest, fastest, most wide-ranging rise since WWII: Global debt is at $315 trillion (CNBC)

Former OpenAI board member explains why CEO Sam Altman was fired (CNBC)

A running list of all the news organizations partnering with or suing OpenAI (Sherwood)

France is an AI hub, but a wrinkle in tax policy, and high electricity prices, are holding it back (Semafor)

Hardly anyone is using AI tools like ChatGPT, study says (TR)

Elon Musk urges Tesla shareholders to vote on pay with special offer (FB)

Will South Park mark the top for weight-loss stocks? Once a company or product is featured on the show, things tend to go badly (Sherwood)

Kim Jong Un’s balloon barrage: bags of refuse fly into the south (WSJ)

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Ten companies are reporting this week.

Of the 485 companies that have reported so far (97% of the S&P 500):

• Overall, 81% are beating estimates, and those that “beat” are beating by a median of 8%.
• Of the 18% missing, those are missing by a median of -5%.
• On the top line, overall results are beating estimates by a median of 4% and missing by a median of -4%, and 61% of those reporting are beating estimates.

Click HERE to view this report in PDF format. 

TECHNICAL

The last couple of weeks certainly have proven to be a lot choppier than the initial election year seasonality projections illustrated, but they directly fit in line with what the S&P cycle composite said might be a possibility.

While the SPX and QQQ largely have stalled out in the near-term, the Equal-weighted S&P 500 has proven more negative since 5/15 and many sectors like Consumer Discretionary, Financials along with Industrials and Healthcare have traded lower.

Overall, the domination of Technology performance to help this sector roar back into the lead on a 1-month and 3-month basis performance-wise hasn’t helped the market advance much since mid-May.

While some investors might expect that Technology might lead for the balance of the year while other sectors underperform, it’s still difficult to envision that scenario technically speaking.

Click HERE for more.

CRYPTO

In a piece in late April, we noted a high likelihood that Mt. Gox repayments would begin toward the end of May or in early June. On Tuesday, the transfer of nearly 142k BTC, valued at approximately $9 billion, from Mt. Gox wallets to an unknown address generated a bearish market reaction. This transfer, likely part of a plan to repay creditors by October 31st, began in the early Asian morning hours. The immediate market response featured Bitcoin dropping to a low of $67,680 after reaching a high of over $70,000 on Monday. Concerns about potential selling pressure from such a large amount of BTC caused traders to pull back risk.

In any other market, we would say that this supply is “priced in,” but this is crypto, and the market is not always as efficient as others, as information disseminates to different participants at differing rates. Thus, it is worth assessing the near-term risks, as 142k BTC equates to roughly 20% of daily volume across all exchanges.

Click HERE for more.

FIRST NEWS

A Controlled Descent for Deregulation. For decades Americans were told by a panoply of neoliberals, free marketers, libertarians, et al that the only good regulation was a regulation that was dead in the water. The purpose of the regulation in question was almost moot as deregulators measured regulation by the number of pages it took up in the federal register – the fewer, the better.

That approach wasn’t optimal policy-wise, as no politician lives to shrink the federal register willy-nilly. Unsurprisingly, as researchers began to examine the idea, they found that the volume of regulation alone was a very poor predictor of microeconomic outcomes.

Naturally, not all regulation is benign and beyond reproach. It’s just that ‘regulation’ as an umbrella term encompasses a far too generic policy category to be simply good or bad. Fortunately, many people not devoid of nuance are digging into the specifics of regulations to ascertain the help/harm ratio. For example, a Niskanen Center report on site-based billing for Medicare, arguing that it causes the government to overpay for healthcare services and worsens monopoly power in the healthcare space – all while not improving health outcomes for patients.

Another case is a Commerce Department report on reducing permitting and other regulatory burdens on manufacturing. Reviving the nation’s industrial base hinges on addressing these obstacles. The report solicited input from numerous manufacturers and related companies to identify the most burdensome regulations – around 20 sets of rules, primarily environmental and permitting requirements. The next step is reviewing these rules to find ways to protect the environment while enabling efficient, cost-effective factory construction.

Thomas Hochman’s article in American Affairs lends support, arguing that the hastily written Clean Air Act could be rewritten more judiciously to maintain air quality standards without weighing unduly on factories, power plants, and housing development.

These are just a few examples of a broader renaissance in rethinking U.S. regulations – not simply slashing them indiscriminately, but reducing, rationalizing, or even adding new rules where needed. This intellectual ferment offers vast opportunities for rigorous policy analysis; the outcomes could prove crucial for the prosperity and environmental sustainability of the U.S.

If the larger goal is to promote efficient, well-functioning markets and to protect public interests such as environmental quality and consumer safety, rather than adhering to dogmatic anti-regulatory ideology, a more comprehensive approach systematically evaluating the costs, benefits, and unintended consequences of regulation is vital – and, by some accounts, already afoot. NoahPinion