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

Today’s First To Market is being published later than usual due to a technical issue. We apologize for the inconvenience.

“Strive not to be a success, but rather to be of value.” — Albert Einstein

Overnight

U.S. inflation falls more than expected to 3% in June FT

Power outages hinder Hurricane Beryl recovery, delay port, infrastructure restarts RT

BP raises forecasts for oil and gas demand as clean energy switch slows FT

FTC to sue drug managers over insulin prices WSJ

Archegos founder Bill Hwang found guilty over fund’s collapse FT

AMD to buy Finnish start-up Silo AI for $665mn in drive to compete with Nvidia FT

Microsoft ditches OpenAI board observer seat to stave off antitrust scrutiny RT

Honeywell to buy Air Products’ LNG unit for $1.81 bln as deal-making spree continues RT

Intuit to lay off 1,800 as part of an AI-focused reorganization plan AP

Wall Street becoming more skeptical of the AI hype helping to power stocks MW

Gen Z consumers rely on parents amid inflation squeeze RT

Visa and Mastercard shares draw downgrades as BofA analyst breaks from the pack MW

U.S. regional banks to face increased scrutiny as CRE exposure stifles buybacks RT

Judge trims First Citizens claims that HSBC poached Silicon Valley Bank workers RT

HSBC reshapes investment banking to look more like rivals BBG

Bill Gross says Tesla is the new meme stock CNBC

As its sales fall while competitors’ sales rise, Tesla loses U.S. EV market majority LI

Morgan Stanley bullish on Tesla’s energy-storage business RT

U.S. retailers try to move back-to-school shopping to July RT

CBS News president to step down as Paramount eyes cost cuts amid merger RT

Biotech investor behind Moderna raises $3.6bn for new ventures FT

U.S., Mexico move to thwart China circumvention of tariffs RT

Temu wants to become Amazon before Amazon becomes Temu Sherwood

Beijing eyes more investments from Saudi sovereign wealth fund RT

Argentina rolls out aviation reform in bid to bring in foreign airlines RT

E.U. approves Air France-KLM pandemic aid after lengthy legal wrangle RT

How UBS fell out with Switzerland’s establishment after rescuing Credit Suisse FT

ETF investors shrug off election jitters and pump cash into Europe as earnings indicate end to 10 years of stagnation on continent FT

Shoppers have fewer choices; brands and retailers like it that way WSJ

Will shock therapy revive Nigeria’s economy or sink it further? FT

Outliving your peers is now a competitive sport WSJ

Peter Thiel-backed Enhanced Games, a doping-friendly Olympics alternative, is raising another $300 million Sherwood

NASA’s 1st year-long, volunteer-staffed mock Mars mission wraps up in Houston LS

Ed Stone, top scientist – and salesman – for the Voyager mission, dies at 88 WSJ

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

There are five reasons why we expect equities to rally post-June Core CPI, supporting a rotation into Small-caps, Industrials, and Financials.

More in our latest Macro Minute Video, linked HERE.

TECHNICAL

Most of the market commentary on TV and on X (“Fin-Twit” (Financial Twitter)) revolves around the commonly known fact that markets remain dominated by a few select stocks, which have represented most of this year’s S&P 500 returns. In fact, in our latest monthly report we showed that the top 20 largest SPX companies have represented 82% of this year’s gains.

However, facts like that shouldn’t be interpreted as being bearish, nor seen as a possible catalyst for a potential stock-market correction of any kind. As we’ve frequently discussed in these reports in recent weeks, the lack of meaningful relative strength in sectors outside of Technology is only useful to mention if Technology has begun to wane and turn lower.

This year, as most investors are aware, Semiconductors (as a Level 2 GICS Sector) have returned 80%+ and are outperforming all other groups meaningfully, as NVDA, MU 6.16% , AVGO 1.99% , and TSM 1.40% , are all up more than 90% in the rolling 12 months. (NVDA, of course, is up 219% since 7/10/23, one year ago.) Meanwhile, sectors like Industrials and Financials continue to look appealing, with the possibility of pushing higher given recent attempts at bottoming after the recent consolidation.

Click HERE for more.

CRYPTO

We are seeing more encouraging flows data today. As noted in last night’s crypto comments video, ETF investors have remained resilient despite recent concerns over supply overhangs, with inflows surging. Yesterday marked the second consecutive day of aggregate inflows exceeding $200 million, with $121 million directed into IBIT. Additionally, there has been an uptick in stablecoin creations over the past few days, with the aggregate stablecoin market cap increasing by approximately $1.1 billion, or 0.70%, over the past 7 days, driven largely by a significant increase in USDC 0.01% supply. This positive data indicates that capital is buying at these levels despite the supply overhang concerns that have permeated the space.

Recently, developments from CORZ have focused on their HPC services business, but today they made it clear that they are determined to remain the largest publicly traded miner by hash rate. SQ and CORZ announced an agreement for Core Scientific to acquire Block’s new 3-nanometer mining ASICs, developed by Block’s Proto team, which will provide approximately 15 EH/s of hashrate. This agreement, one of the industry’s largest in terms of hashrate, includes an option for additional volume. This additional capacity will bring Core Scientific’s total hash rate to an industry-leading 35 EH/s. Proto’s stated initiative is to increase the decentralization, transparency, and resiliency of the Bitcoin network by building their chips, systems, and software solutions in an open and transparent manner and in partnership with the mining community. CORZ is up nearly 5% on the day.

Click HERE for more.

First News

“I will destroy you”. Earlier this week, Elon Musk said on X that xAI, the company he founded to ‘destroy OpenAI,’ is building its own data center from the ground up. For this noble goal, the AI startup has purchased 100,000 Nvidia H100 GPUs, giving Musk every right to call the resulting aggregation of computing brawn “the most powerful training cluster in the world by a large margin.”

The upshot is that the company – which launched less than a year ago and had worked with Oracle on previous training runs to create the chatbot Grok and the upcoming Grok 2 – already has a data center ten times the size of the one that got GPT-4 going. The downside is that, with each GPU at ~$30,000, this is a ~$3 billion bet (energy costs not included) that yet another one of Musk’s babies with some version of ‘x’ in its name will be able to create the world’s most powerful AI model.

Whatever the future may hold, Musk’s move places xAI in a rarefied group of foundation model companies like Google, OpenAI, Anthropic and Meta. “The reason we decided to do the 100k H100 and next major system internally was that our fundamental competitiveness depends on being faster than any other AI company. This is the only way to catch up,” he explains.

In the meantime, not to be outdone, xAI arch-nemesis and foil OpenAI is building a cluster featuring 100,000 Nvidia BG200 GPUs – more powerful successors to the H100. It won’t be open for business until 2Q25, and who knows what measure of one-upmanship Musk will think up by then. Semafor

Creators All. Given that one of the premises of the big push for AI is the promise that it will eliminate drudgery on the part of humans, allowing them us to concentrate on relatively high-value-added occupations and the fervid/frenetic pursuit of happiness, just 13% of U.S. workers now earn less than $15 an hour. Per new data from Oxfam (which revised its definition of a low-wage worker from those earning <$15 an hour to those earning <$17) that number was 31.9% just two years ago.

Even accounting for inflation ($15 an hour in 2024 buys what ~$14 did in 2022) this is solid progress and a hand up for millions of Americans who need (and tend to spend) every additional dollar they earn. Not quite 1 in 4 U.S. workers now falls into that category, which is 39+ million people, including 34 million who are over age 20, according to the report.

True, wages are higher now in part on the back of inflation, as well as a strong labor market, with lower-wage employees still in high demand. They are also up because of the work of advocates who pushed for minimum-wage increases for more than a decade. Still, the state of affairs has changed so much that, this year, Fight for 15, the group originally formed to raise the minimum wage to $15 an hour, changed its name to Fight for a Union.

With wages up generally, low wages are still quite low. Unsurprisingly, low-wage floors in states that have the highest proportion of low-wage workers (e.g. Mississippi, Oklahoma, and Texas) and hew to the $7.25/hour federal minimum, pull down pay for other lower-wage earners.

On the other side of the spectrum are states with far higher minimum wages, such as Washington state, with a minimum wage of $16.28 and only ~11% of its workforce earning <$17/hour. The other side of this other side is that people living there face much higher prices for essentials like food and housing. Axios

Back to Basics. Returning to AI – in order to maintain a lead in high-tech industries such as semiconductors, software, and advanced manufacturing – all things that are also essential to national defense and major contributors to a burgeoning stock market and national wealth in general –the U.S. will need to attract more than its share of the global human capital.

True, we need to train our own skilled workers and constantly be improving our education system while directing students toward the fields where they’re needed most. Still, no matter how vast its vistas or Pantagruelian its portion sizes, the U.S. represents just 4.2% of the world’s population (while, for comparison’s sake, China has 17.4%). This gives China a much bigger talent pool than America, and the U.S.’s only hope of matching China’s vast pool of human resources is supplementing our natural-born workers by attracting talent from abroad.

Americans tend to be for skilled immigration. We’ve always relied on skilled immigration, from our very inception, whether it was educated and hard-working religious and political dissidents, energetic entrepreneurs looking for new opportunities, or education- and upward-mobility-minded refugees fleeing persecution. (Even the person writing these lines is – you guessed it – an immigrant who is doing his modest bit to add meaning to your day and grow value in your life.) Despite disagreements over the southern border, Americans from both parties want to recruit more skilled foreigners to work in their country.

^{Source: EIG}

Let’s not forget that one of Nvidia’s founders, and its current CEO, is an immigrant. Jensen Huang was born in Taiwan, and moved to the U.S. at age nine.

With the decline of Intel (whose transformational third CEO Andy Grove was also an immigrant) Nvidia is now America’s, and the world’s, chip-industry leader – a bastion of U.S. technological excellence that was made possible through skilled immigration and will only continue keeping America in the lead in fast-moving, promising industries like AI if the U.S. gives priority to attracting some of its best minds from abroad. NoahPinion