Benzinga - CPI inflation for May comes out at 830am. Here are Wall Street estimates:
- GOLDMAN SACHS: 4.2%
- UBS: 4.1%
- MORGAN STANLEY: 4%
- JP MORGAN: 4.2%
- BARCLAYS: 4%
- VISA: 4%
- BLOOMBERG: 4%
- ME: Still too damn high
Market
Prices as of 4 pm EST, 6/12/23
Macro The US government spent more than it earned in May…by a lot.
- Revenues fell 21% YoY to $307 billion while outlays–led by Medicare spending–rose 20% to $548 billion.
- The resulting $240 billion budget deficit for the month was more than double the deficit in May 2022.
- For the fiscal year, the gap has widened to $1.16 trillion, a 191% jump from a year ago.
This year has already seen more debt defaults in the US junk loan market (in number and total value) than all of 2021 and 2022…combined.
- A rapid rise in interest rates over the past year has left junk-rated companies–many of which had loaded up on leveraged loans at floating rates–facing higher interest payments as slowing economic growth caps earnings.
- Last month alone saw $7.8 billion in defaults, the highest since the pandemic.
- Looking ahead, more defaults are expected as the Fed keeps interest rates higher for longer.
Consumers are becoming more optimistic about inflation.
- The NY Fed’s Survey of Consumer Expectations for May revealed short-term (1-year ahead) inflation expectations dropped to the lowest since May 2021 at 4.1%.
- Medium- (3-year) and long-term (5-year) expectations, on the other hand, ticked up by 0.1% each to 3% and 2.7%, respectively.
- The survey also showed consumers are less optimistic about wages with one-year expected earnings falling to 2.8% from 3%.
- Meanwhile, their expected odds of being laid off dropped by 1.3% to the lowest since April 2022.
Stocks Shares of Tesla advanced for the 12th straight day yesterday, marking the stock’s longest daily winning streak ever.
- Driving the gains were announcements from three charge makers–ChargePoint, EVgo, and Blink Charging–who say they will adopt the EV maker’s charging technology.
- This comes after GM and Ford recently agreed to embrace Tesla’s North American Charging Standard (NACS).
- However, according to industry body CharIN–which promotes the Combined Charging System (CCS) standard–Tesla’s charging model is not yet a standard because it doesn’t provide an open charging ecosystem for the industry.
A pair of index-outperforming sectors are poised for continued gains, according to analysts.
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Still well below their pre-pandemic highs, cruise line stocks are gaining momentum.
- Analysts from BofA and JPMorgan point to pent-up demand and strong bookings across the cruise industry coupled with low cancellations as reasons for continued outperformance among cruise operators.
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Among the year’s leaders, homebuilder stocks are also expected to build on their strong YTD performance.
- Analysts at Citigroup cite strong buyer demand, stable home prices, tight inventories, and a potential pause in rate hikes as catalysts for the group.
The S&P 500 and Nasdaq closed at their highest levels since April 2022 yesterday.
- The rally is forcing investors off the sidelines, lest they miss out (aka FOMO is kicking in).
- According to Deutsche Bank, positioning among discretionary investors has emerged into overweight territory for the first time in more than 16 months.
- The same can be said for consolidated equity positioning which is now in the 54th percentile.
- Pair that with increasingly bullish investor sentiment and “risk-on” has been activated across many corners of the market.
Goldman Sachs
Energy Oil traders are still ignoring Saudi Arabia’s production cuts.
- Front-month Brent futures fell yesterday to their lowest since December 2021 as better-than-expected production and weak demand weigh on prices.
- Prices for WTI crude are down ~11% since the end of March (just before OPEC’s surprise production cut).
- Meanwhile, the EIA predicts US oil output will reach a new record in July, rising to 9.38 million barrels per day.
John Kemp
Earnings Yesterday’s highlights:
Oracle (BATS: ORCL): $1.67 EPS (vs. $1.58 expected), $13.84 billion in sales (vs. $13.74B expected).
- The company offered quarterly revenue guidance above analysts’ expectations but fell short of their consensus for earnings.
- Board chairman and CTO Larry Ellison said Oracle would introduce a generative AI cloud service–similar to Microsoft’s Azure OpenAI Service–in partnership with startup Cohere.
What we’re watching today:
- Burford Capital (NYSE: BUR)
- Top Headlines
- Survey says: BofA’s latest Global Fund Manager Survey reveals long Big Tech is by far the most crowded trade.
- Next-gen: Shares of Toyota popped after the company announced plans to introduce a full lineup of EVs with next-generation batteries.
- Google ads: EU antitrust regulators are exploring a breakup of Google’s ad-tech business as part of a new antitrust complaint.
- ESG talk: The number of SPX companies mentioning “ESG” on earnings calls has reached its lowest point since Q2 2020.
- Cardboard indicator: Shipments of empty boxes fell 11% YoY in March, pointing to a slowdown in consumer spending.
- JPM settles: JPMorgan agreed to a $290 million settlement with Jeffrey Epstein victims.
- Growth concerns: China’s central bank surprised markets by cutting a short-term policy interest rate.
- BoE pressure: A surprise jump in UK wage growth and employment puts pressure on the Bank of England to raise interest rates to battle inflation.
Crypto
Prices as of 4 pm EST, 6/12/23
- Dwindling: Binance.US’ market share has plummeted to 5% from 20% in April.
- Delisting: Investing platform eToro will delist 4 major cryptocurrencies for US users next month in response to recent SEC actions against Coinbase and Binance.
- Client distributions: BlockFi is planning to enable customer withdrawals this summer.
- Volumes: Crypto trading volumes on Robinhood were down 43% MoM and 68% YoY in May.
- Tokenized T-bills: Finblox is partnering with OpenEden to bring tokenized US Treasury bills to emerging markets in Southeast Asia.
Deals
- Biotech: Novartis has agreed to acquire US biotech firm Chinook Therapeutics for up to $3.5 billion.
- MSFT x ATVI: The FTC will seek to block Microsoft’s $68.7 billion acquisition of Activision Blizzard.
- O&G M&A: NextTier Oilfield Solutions and Patterson-UTI Energy are in talks for a potential merger.
- Anchor investor: SoftBank is in talks with Intel and others to anchor its upcoming $10 billion Arm IPO.
- Agriculture: Bunge and Viterra closed their $18 billion merger, creating one of the world’s biggest agriculture trading firms.
Meme Of The Day
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