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

“Some of us wake up. Others roll over.” — Mark Twight

Overnight

Fire at lithium-battery factory kills at least 22 in South Korea (WSJ)

Nvidia slides 13% in three days after briefly becoming most valuable company (CNBC)

Dow closes at a one-month high as investors broaden portfolios (RT)

Microsoft faces mega fine after E.U. takes issue with the bundling of Teams and Office (CNN)

Large U.S. banks expected to be cautious on shareholder payouts after stress tests (RT)

U.S. Treasury to devote extra $100 mln over 3 years to affordable housing (RT)

Alnylam stock soars on surprising results from key heart disease drug (Barron’s)

Alumis readies $300 million IPO ahead of Phase 3 trial for plaque psoriasis drug (MW)

Novo Nordisk to build $4.1 billion North Carolina facility to boost output of Wegovy, Ozempic (CNBC)

Eli Lilly weight-loss drug data spurs selloff in sleep apnea stocks (BBG)

Jain Global raises $5.3 billion, secures cash from Abu Dhabi (BBG)

Countries’ inability to agree on what counts as ‘sustainable aviation fuel’ leaves investors in a bind (WSJ)

Hedge funds turn most bearish on U.S. gasoline in five years (BBG)

Pringles packaging maker buys Eviosys for $4bn in rare buyout windfall (FT)

OpenAI walks back controversial stock sale policies, will treat current and former employees the same (CNBC)

UPS sells freight broker Coyote Logistics to RXO for $1 billion (Barron’s)

Trucker U.S. Logistics Solutions shuts down in bankruptcy (WSJ)

Paladin’s uranium deal signals M&A push for rich Canadian deposits (BBG)

Top China lithium firm files international claim against Mexico (BBG)

Riot Platforms seeks three Bitfarms board seats in bitcoin miner takeover fight (BBG)

Dell staff reject return-to-office push despite threat of ineligibility for promotion (Semafor)

Brookfield’s plan to turn malls into mini-cities falls short (WSJ)

Corona brewer Constellation is set to grab more prime real estate at stores, driving sales and its stock (CNBC)

Real estate bets gone wrong roil $1.24 trillion Canadian funds (BBG)

Former EIB president Werner Hoyer under E.U. corruption investigation (FT)

Are there any mutual funds left that are better than ETFs? (Barron’s)

No one wants to sound clueless about AI, especially your boss (WSJ)

Kenya deploys police to Haiti amid protests at home (Semafor)

Beijing intervenes in China’s solar industry as overcapacity dries up profit (Semafor)

E.U. charges Apple with violating bloc rules on Big Tech (Semafor)

The London Tunnels, seeking to raise capital to build tourist attractions in WWII-era tunnels, ditches London IPO for Amsterdam listing (IW)

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

The year-ago Case-Shiller home prices were rising ~0.80% MoM April thru Sept, and the pace in 2024 is more like +0.30% MoM. This means home prices YoY are set to rollover hard = affirming future shelter inflation falling.

More in today’s Macro Minute Video, linked here.

TECHNICAL

Catch a replay of Mark Newton’s appearance on Fox Business with Maria Bartiromo this morning, Tuesday, June 25th (8:10 am).

S&P and QQQ have now sold off for three straight days, while the Equal-weighted S&P 500 and DJIA have rallied for five straight days. Thus, it remains an unusual market, although, ultimately, it has fared better than what the major averages reflect in recent days. There’s been some definite evidence of strengthening in Financials, Healthcare, Discretionary, Energy, and Communication Services over the last week despite the SPX falling, and this is helping to kick off a broad-based rally, which will become a bit more noticeable once the pullback in Technology runs its course. At present, U.S. Dollar and TNX look to be on the verge of large declines into August, and we suspect that a rally back to all-time highs should get underway into July, which shows more evidence of participation. Overall, the recent SPX and QQQ declines should prove temporary and likely conclude this week.

Equal-weighted S&P 500 looks to have broken out following five straight days of gains. As shown below, Invesco’s Equal-weighted S&P 500 ETF (RSP 0.09% ) has rallied now for five straight sessions and just reached the highest levels since the final day of May.

Click HERE for more.

CRYPTO

In a letter to creditors, Mt. Gox Rehabilitation Trustee Nobuaki Kobayashi said that preparations for distributions of Bitcoin and Bitcoin Cash have been made, and payments can commence from the beginning of July. Mt. Gox was exploited in 2014 for 850,000 Bitcoin, and creditors have patiently been waiting for their repayments. Mt. Gox has 142,000 BTC (~$8.6 billion) and 143,000 BCH (~$51 million) to distribute by October 2024. Kobayashi iterated that Mt. Gox has taken sufficient time to ensure safe and reliable repayments to creditors, including technical remedies for safe payments and compliance considerations across different countries. The repayments will be made to crypto exchanges in the order that they completed the required steps. Although Bitcoin has sold off following the news, in our view, it is likely that many creditors have already hedged their positions or are long-term believers in Bitcoin and the immediate market impact of distributions will be less severe than many anticipate.

Riot Platforms has announced its requisition of a Special Meeting of Bitfarms’ shareholders to reconstitute the board of directors. The meeting will give Bitfarms shareholders the opportunity to vote on the removal of Bitfarms’ interim CEO Nicolas Bonta and Director Andres Finkielsztain, and Riot has nominated three potential candidates as their replacements. Riot believes Bonta and Finkielsztain bear direct responsibility for poor corporate governance and the inability of the company to realize Bitfarms’ full potential. Over the course of a year, Riot has tried to constructively engage with Bitfarms regarding a potential transaction between the companies, and Riot claims that good faith negotiations are impossible without change to the Bitfarms Board. Riot attempted a hostile takeover bid, accumulating a 14.9% stake in Bitfarms, and also proposed purchasing all Bitfarms common shares for $2.30 / share. Riot has withdrawn its acquisition proposal but remains committed to pursuing a transaction to create the largest publicly listed Bitcoin miner. Riot concluded that it stands ready to engage and deal with a new Bitfarms board to pursue a mutually beneficial transaction.

Click HERE for more.

First News

All Part of the Plan. One non-standard way to describe sectors of the economy is as ‘ecosystems’. An ecosystem describes a set of relationships that organize how matter and energy relate in a certain area: say, the actual energy and matter required to produce or sustain a hectare of jungle or an acre of the Great Plains (when they still existed) or an area of desert. In the first two cases, there’s a certain kind of sediment in the ground and a constant flow of energy from the sun – and in these cases, that solar energy is doing something more productive than warming up sand.

Approaching the stock market as an ecosystem means thinking about what the inputs it needs are, and which entities’ outputs are someone else’s inputs. Nature, seen as a model, features complex supply chains in which every possible process is outsourced, with chains of symbiotes seemingly designed to convert raw materials and sunlight into proteins useful to someone. What’s more, there is an environment of perfect competition, where most processes are either at their maximum extent or hovering around it long-term.

Ecosystems are also a convenient way to isolate a set of living things – a species, say – and pay attention to their interactions internally and with other species, while cognizant of the fact that the global set of inputs can change. One example of this is the Haber-Bosch process, which converts atmospheric nitrogen, hydrogen, and energy into ammonia, creating cheap and abundant fertilizer quite literally out of thin air and thus allowing humans to feed at least twice as many of ourselves comfortably. To use the language of the early 21^st century, this process essentially bootstrapped our species from the relative poverty of the late 19th century into today’s materially-abundant world.

Then there is an example of a darker instance of across-the-board ecological change following the creation of novel inputs – that time cyanobacteria developed photosynthesis, started emitting oxygen as a waste product, and likely killed most life on Earth, since, hard though it is to believe in our oxygen-centric world, oxygen was once directly or indirectly toxic to so many of the species (mostly bacterial) that had covered the Earth up to that point.

A convenient framing device is to divide technologies into 1. Haber-Bosch-style ones, which tend to make the rest of the economy function better, and 2. Great Oxygenation Event technologies, which rapidly kill off any company that doesn’t directly adopt the technology in question or adapt to it.

For example, air conditioning is mostly a Haber-Bosch-style input. When more or less affordable AC was introduced about a hundred years ago, it was a competitive advantage for those retailers who initially adopted it. Then, it became a necessity. It ended up as a general dividend whose upside was captured by everyone, but especially by people who invested in commercial real estate, in volume, in places – say, Singapore, Dubai, Atlanta – where a thriving real estate market would likely not have existed without reliable AC.

Factory electrification was closer to a Great Oxygenation Event. Why? Because it changed where factories should be located – cheap land within commuting distance now mattered more than being close to a river for power. By reducing the minimum increment of growth, electrification also changed how factories expanded. Finally, it made them more fault-tolerant vis-à-vis individual processes – and the resulting efficiency improvement led to organizational changes, making them obsessed with controlling variance. One could say that this helped create the concept of a growth stock. If a company could profitably retain its earnings in order to continually invest them in expansion, the right sort of shareholder no longer insisted on the highest possible dividend at all times. These changes took place over a generation or two, and are invisible today, but back then, entire domains of expertise were rendered obsolete by them.

This is an old but powerful idea, as it presents a framework for deciding what to ignore – and therefore a framework for efficient decision-making. The contexts where AI has been adopted fastest are the ones where it’s a direct substitute for existing jobs: say, creating stock photos that are just serviceable enough, saving highly skilled people precious time. Longer-term, though, there’s an evolution.

A company that uses LLM-driven chatbots should probably merge customer-support teams with product teams, as, if a customer’s question can’t be answered using existing documentation or previous customer reports, it becomes a feature request. The company that sees things in this way and implements these features first is likely to be rewarded with a rising valuation. TheDiff