The Rally Is Broadening

June CPI inflation came in below expectations at 3.0% versus estimates of 3.1% and down from 4.0% in May. The core index came in below 5% which is great news. I think the FED still raises rates in July but it could be the last hike this year!

Market

Prices as of 4 pm EST, 7/11/23

Macro

New data from the NFIB points to improving conditions for small businesses.

The Small Business Optimism Index rose by the most since August 2022 to a 7-month high in June.
The lowest share of businesses reported higher selling prices since March 2021.
Nearly a third, however, plan to raise prices over the next 3 months.
The outlook on business conditions also improved sharply and more firms expect higher earnings in the next 3 months.

Home prices are bottoming out, according to CoreLogic.

Despite single-family home price growth hitting its lowest annual level since 2012 in May, the firm predicts an acceleration over the next year.
Its Home Price Index Forecast sees home prices rising 4.5% through May 2024.
Separately, by Black Knight’s measure, US home prices rose to a record high in May after rising 0.7%.

CoreLogic

Stocks

A US judge denied the FTC’s attempt to block Microsoft’s MSFT $75 billion Activision Blizzard ATVI acquisition.

The judge ruled Microsoft had little incentive to pull Call of Duty—the game at the heart of regulatory hurdles—off any platform.
According to TD Cowen, the deal now has a roughly 80% chance of going through (up from 40% pre-ruling).
It’s a big loss for the FTC, but don’t expect it to deter Linda Kahn and Co. from pursuing other cases against Big Tech.

The Nasdaq 100 is set for a “special rebalance”.

With 6 companies currently accounting for over 50% of the index, the move will look to redistribute their weightings.
While selling pressure is expected, history (similar events in 1998 and 2011) suggests the bull market is not under threat.
New weightings will be announced on July 14 and take effect 10 days later on July 24.

The rally in stocks looks to be broadening out.

The equal-weight S&P 500 RSP has outperformed its market cap-weight counterpart over the past month (1% vs -0.4%).
Cumulative advance/decline line readings (chart) are strongest for Discretionary and Industrials (two of the most cyclical sectors).
And small caps have seen back-to-back weeks of inflows just as the Russell 2000 IWM notches a golden cross (its second of the year).

Bespoke

Energy

The Energy Information Administration EIA expects power consumption in the US to fall in 2023, according to its latest Short-Term Energy Outlook report.

It projects power demand will decrease 1.5% from last year’s record 4,048 billion kilowatt-hours.
It estimates a rise in the shares of natural gas and renewable energy sources in power generation.
It also predicts coal’s share will fall steadily through 2024.

EIA STEO

Top Headlines

Auto negotiations: Ford FORD, GM GM, and Stellantis STLA are facing off with a union representing more than 400k of their workers.
Bank fine: BofA has been fined $150 million for engaging in deceptive practices that harmed customers.
Another one: Merryl Lynch will pay $12 million for failing to file ~1,500 suspicious activity reports over a +10-year period.
USD dominance: The S&P Global’s chief economist says the US dollar’s dominance as the global currency is diminishing.
Global risk: The Bank of England is warning that hedge funds’ leveraged trades in US Treasury futures pose a risk to financial stability.
AI vs. jobs: According to the OECD, 27% of jobs are at high risk of automation due to AI.
Bubble Characters: Google has quietly abandoned plans for an AI-powered chatbot targeted at Gen-Z users.
Less bling: Prices for secondhand Rolexes are at their lowest since 2021.

Crypto

Prices as of 4 pm EST, 7/11/23

Tax guidance: The US Senate Finance Committee has asked the crypto industry for input on tax rules.
MiCA law: The EU has issued its first set of detailed proposals on how crypto companies should be authorized.
Skittish hedgies: The percentage of hedge funds investing in crypto assets has fallen to 29% this year from 37% in 2022.
ARK x COIN: Cathie Wood’s ARKK sold 135,152 shares of Coinbase yesterday as the stock rallied by almost 10%.
BTC futures: Bitcoin futures liquidations are at their lowest since April, suggesting declining interest among futures traders.

Deals

Chip anchor: Nvidia NVDA is in talks to become an anchor investor in Arm’s IPO.
AI partnership: Microsoft and KPMG announced a $2 billion partnership to co-develop cloud and gen-AI tools.
AI raise: AI-powered market research firm Alphasense is raising $150 million at a $2.5 billion valuation.
Nuclear SPAC: A Sam Altman-backed nuclear-fission startup, Oklo, plans to go public via SPAC merger.
Dead deal: Go Global Retail’s deal to acquire Buy Buy Baby from Bed Bath & Beyond fell apart in the final stages.