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

“The past always looks better than it was; it’s only pleasant because it isn’t here.” — Finley Peter Dunne

Over the Weekend

Claudia Sheinbaum, a leftist-leaning engineer and ex-mayor of Mexico City, wins the Mexican presidency with ~58% of the vote (AP)

OPEC+ extends global oil production cuts into 2025; decision would be ‘incremental negative’ for oil prices (MW)

U.S. oil and gas M&A hit ~$200B in the past year (FT)

Nvidia’s CEO Jensen Huang announces Rubin, the company’s next generation of AI chips, saying the company is “on a one-year rhythm” for new releases (TG)

Revised Skydance offer gives Paramount shareholders opportunity to cash out at roughly $15 a share (WSJ)

Waste Management near deal to buy Stericycle (WSJ)

A cyberattack on Spanish lender Santander compromises employees’, millions of customers’ data (Semafor)

Jamie Dimon and Elon Musk are making peace (WSJ)

The Japan Energy Summit & Exhibition takes place in Tokyo, focusing on future renewable energy development (JEE)

Tech CEOs give opening keynotes at Taiwan’s COMPUTEX conference (TR)

Asics stock catches fire along with its dad sneakers (WSJ)

You bought gold at Costco; what are the taxes when you sell it? (WSJ)

Winning the Stanley Cup is more taxing than ever (WSJ)

London stock market bucks IPO drought with rush of FPOs (FT)

Stock buybacks in May were the fifth-most ever (BBG)

Corporate bond funds see seven straight months of inflows, longest since 2019 (RT)

Vista Equity writes off entire PluralSight equity three years after $3.5B LBO (AX)

Latest $350B Nvidia rally attributed to options ‘gamma squeeze’ (FT)

Facebook is attracting most young adults in three years (RT)

Tesla shareholder sues Musk for alleged $7.5B insider trading (RT)

Emirates president sees years for Boeing turnaround (BBG)

AI is increasingly being used for investment decisions (FT)

Boom in U.S. penny stock trading prompts warnings of frothy markets (FT)

Fed-favorite PCE index rose 2.7% YoY in April (RT)

Wall Street trade failure rate rose in third day of faster settlement (RT)

Japan’s $62B support for yen provides little reprieve (FT)

TikTok pauses e-commerce push into Europe to focus on U.S. (BBG)

Carl Icahn builds a sizable stake in Caesars Entertainment (BBG)

The CEO trying to smooth U.S.-China tensions in farm country (WSJ)

Indian PM Narendra Modi’s party is set for a decisive victory in the country’s national elections, exit polls suggest  (Semafor)

China successfully lands a spacecraft on the moon’s far side for the second time Sunday (Semafor)

In Miami, jobs are plentiful, and you might need two to afford life there (WSJ)

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Equities gained more than 5% in May – the best May performance in nearly 2 decades. This surge caught many by surprise, as many pundits turned cautious given the weakness in April, and stuck with the adage “sell in May.” There is a lot of macro news this week and our expectations remain that June is a particularly positive month for stocks.

• This week:
  – 6/3 Mon 9:45 AM ET: May F S&P Global Manufacturing PMI    50.9e
  – 6/3 Mon 10:00 AM ET: May ISM Manufacturing PMI    49.6e 
  – 6/4 Tue 10:00 AM ET: Apr JOLTS Job Openings    8392ke 
  – 6/5 Wed 9:45 AM ET: May F S&P Global Services PMI    54.7e 
  – 6/5 Wed 10:00 AM ET: May ISM Services PMI    51.0e 
  – 6/6 Thu 8:30 AM ET: 1Q F Nonfarm Productivity   0.30%e 
  – 6/6 Thu 8:30 AM ET: Apr Trade Balance    -$74be 
  – 6/6 Thu 8:30 AM ET: 1Q F Unit Labor Costs  4.45%e 
  – 6/7 Fri 8:30 AM ET: May Non-farm Payrolls  186ke 
  – 6/7 Fri 9:00 AM ET: May F Manheim Used Vehicle Index 

Of these, the most important is the May jobs report, released Friday at 8:30am ET.

Click HERE for more. 

TECHNICAL

Stocks should be near a trading bottom following a difficult couple of weeks for the U.S. Equity market. While Technology’s outperformance has disguised some of this recent selling pressure across multiple sectors, recent weakness hasn’t proven too extreme and should be nearing a low. U.S. Treasuries and the U.S. Dollar both should be on the verge of turning down more sharply in the days/weeks ahead, which might coincide with less inflationary economic data over the next couple of weeks. (May proved to be the best month for Treasuries all year.) However, until further economic weakness leads yields lower, it’s difficult to make a compelling case that a broadening out in the equity rally is imminent. Overall, bullish June seasonality, combined with a cyclical bottom following lack of material technical deterioration, spells opportunity for U.S. Equities in the month of June.

Click HERE for more.

CRYPTO

Terraform Labs and founder Do Kown have reached a tentative settlement with the SEC on fraud charges contributing to the collapse of Luna and UST in 2022. The SEC accused Do Kwon of misleading investors about the stability of its algorithmic stablecoin, which led to the loss of over $40 billion in value for investors. Terraform Labs and Kwon were found guilty of civil fraud charges in April, after which the SEC sought a $5.3 billion penalty to settle the case, along with banning Kwon from dealing in crypto assets. The settlement was announced yesterday without disclosing the terms or details. The judge asked both parties to submit settlement paperwork by June 12th. Do Kwon is currently on bail in Montenegro, expecting extradition to the U.S. or South Korea as he faces criminal charges in both countries. Following the news, the LUNA token surged upwards of 38% before quickly retracing about half the move.

Payments giant Mastercard has gone live with Crypto Credential, its peer-to-peer blockchain payments network. Crypto Credential completed its first pilot transactions, allowing users to transfer digital assets using their Crypto Credential “alias” instead of the typical long blockchain address. Crypto Credential assures that a user has met verification standards and that the recipient’s wallet supports the transferred asset, removing the complexity of worrying about sending the right asset across the proper chain. If the recipient’s wallet does not support an asset, Mastercard will notify the sender and not allow the transaction to proceed, protecting users from potential loss of funds. Crypto Credential is enabled on the Bit2Me, Lirium, and Mercado Bitcoin exchanges, enabling cross-border payments within the LATAM and European regions. Traditional payment players like Mastercard and Visa continue to dive into the digital asset space, recognizing the additional utility blockchains and digital currencies they can bring to the sector.

Click HERE for more.

FIRST NEWS

Eastern Alternatives. Young Asian artists and collectors are very much fueling the contemporary art market. Although contemporary Asian art did not garner much attention as recently as the 1990s, it “is now being bought by art museums and collectors all over the world,” per the director of Japan’s Fukuoka Asian Art Museum. Affluent Chinese in their 20s, 30s, and 40s are becoming more interested in contemporary art, as are increasingly influential and visible Vietnamese tech entrepreneurs. Auction houses are on the ball: Sotheby’s is upgrading its Hong Kong offices and mulling a year-round auction schedule.

^{Source: caia.org}

It’s not a fine time for the overall art market, with sales down globally last year, although they did rise in China after pandemic controls were lifted, yet art as an (alternative) asset class still outperforms the equity markets handily going back at least to the mid-90s. Semafor

Inflated? A recent Harris X Guardian poll says most Americans believe the country is currently in a recession (although, by any measure, it is not); 49% of respondents live in a world in which the S&P 500 is down for the year (although in the phenomenal reality in which most people find themselves, it’s up 11%), while the same percentage swears unemployment is at a 50-year high (although, as pesky numbers would have it, it is certainly not).

The simplest explanation for this disconnect is the “self before all” phenomenon. As most of us are bad at gauging how a multi-trillion economy is doing, we focus on our own financial situation. On a personal level, many people are feeling a strain that just won’t go away: inflation. Hard to believe, and yet – a March Gallup poll found that inflation continues to outrank crime, healthcare, terrorism, energy, the environment, and drug use, among other topics, as Americans’ chief concern. Sherwood

Witches’ Brew. Starbucks wait times are up to as many as 30 minutes (from ~0 pre-COVID) as baristas battle mobile-order mayhem (one-third of U.S. transactions are made on the app; two-thirds during the morning rush) and bossy staffing algorithms that have left teams short-handed during the busiest times. Unsurprisingly, U.S. same-store sales dropped 3% last quarter while overall traffic fell 7%. Unhelpfully, Starbucks cut 29K jobs last fiscal year, while opening 380 locations over the same period. The brew tastes just as bitter up in the C-suite: last month, Howard Schultz, the company’s influential former leader who resigned from his third stint as CEO in 2022, felt the need to publicly criticize successor Laxman Narasimhan, and now Microsoft CEO Satya Nadella has resigned from the Starbucks board ‘effective immediately’ after seven years onboard. To add to all the troubles, Starbucks stock has been in a funk for the last 13 months. Whatever steaming dark-brown calamity* is next? WSJ

^{* We mean Starbucks coffee, naturally.}