Wall Street's Biggest Bull Gets More Bullish

Market veteran Ed Yardeni says the U.S. economy has shifted from a “rolling recession” to a “rolling recovery”. He says large parts of the residential real-estate sector had been in a recession for eight quarters. But a sharp rise of 12% in new home sales (among other sectors) in May marked the start of the recovery.

Market

Prices as of 4 pm EST, 7/5/23

Macro

June’s FOMC minutes were released yesterday—here are the main takeaways:

• Almost all participants agreed with last month’s pause, but some division is starting to arise.

• It may be more difficult for Powell to keep the FOMC united in the coming months.

• Almost all see additional rate increases as appropriate.

• They still see a mild, two-quarter recession starting in Q4.

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Student loan debt holders are getting a lifeline, albeit a temporary one.

• According to the Consumer Financial Protection Bureau, 20% of borrowers may struggle once payments resume.

• The Biden administration announced new provisions giving borrowers more flexibility.

• From October 1 to September 30, 2024, borrowers will be protected from severe consequences if they fall behind on payments.

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Factory orders fell short of expectations in May, rising just 0.3% (vs. +0.8% est).

• Excluding transportation, orders dropped 0.5% for the 4th consecutive monthly decline.

• On an annual basis, factory orders have declined for a record 8 straight months.

• They’ve also gone negative for the first time since October 2020.

• The Fed’s higher interest rates are having a clear impact on demand.

Bespoke

Stocks

Years of pent-up demand is fueling better-than-expected auto sales in the US.

• With improvements to semiconductor supply, automakers have increased production and refined supply chains.

• And they’re posting strong Q2 sales numbers across the board: Tesla (83% YoY), Honda (45% YoY), GM (19% YoY), Hyundai (14% YoY), Rivian (59% QoQ).

• It also doesn’t hurt that the average amount paid for new cars has remained near record levels.

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AI is still all the rage but ChatGPT is getting less attention.

• According to BofA, downloads fell 38% MoM in June.

• They estimate website visits were down 11% on a monthly basis.

• Separately, a pair of authors claim OpenAI used their books to train ChatGPT without their consent.

• In what likely won’t be the last suit of its kind, the authors have sued OpenAI for violating copyright law.

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Wall Street’s biggest bull is getting more bullish.

• Fundstrat’s Tom Lee raised his S&P 500 price target to 4,825 from 4,750.

• That implies a ~9% upside from the current level.

• Earnings estimates for the index, meanwhile, have dipped lower in recent weeks: estimates for 2023 and 2024 are down 4.7% and 2.5% this year, respectively.

DataTrek Research/Fact Set

Energy

Organization of Petroleum Exporting Countries: “Help wanted”.

• OPEC is actively recruiting new members.

• Countries recently visited by the group’s secretary-general include Malaysia, Brunei, Azerbaijan, and Mexico.

• To join, members must be net exporters of oil and have goals aligned with those of OPEC (i.e., keep oil prices high).

Earnings

What we’re watching today:

• Levi Strauss LEVI

Top Headlines

• Yellen in China: Janet Yellen arrives in Beijing today where she’ll look to improve US-China relations.

• Work week: Weekly hours worked have declined and are reaching an inflection point.

• Quitters: Americans are not quitting their jobs as rampantly as they were during the pandemic.

• Auto sales: GM reported an 18.8% YoY rise in US auto sales in Q2.

• Sluggish spending: Eurozone retail sales fell 2.9% on an annual basis in May.

• UK rates: Investors in the UK expect interest rates to reach 6.5% by March 2024.

• Zuck lands a punch: Twitter competitor Threads saw more than 10 million signups in its first seven hours.

• Oil production: OPEC expects its market share to increase to 40% by 2040-2045.

Crypto

Prices as of 4 pm EST, 7/5/23

• Democratize crypto: BlackRock CEO Larry Fink wants to democratize crypto and make it cheaper for investors.

• CFTC vs. Celsius: The CFTC says Celsius broke US rules and will vote on bringing a case as soon as this month.

• Fix rejected: BlockFi’s bankruptcy plans are being opposed by FTX, 3AC, and the SEC.

• Everything App: Twitter received approval from 3 US state regulators to serve as a money transmitter.

• Royalties optional: The enforcement of NFT royalty payments has declined to a 2-year low.

Deals

• Follow-ons: Secondary stock offerings rebounded sharply in Q2, raising the most since Q3 2021.

• Insurance: Brookfield Reinsurance will acquire the rest of American Equity in a $4.3 billion deal.

• VC spending: VC funding for new startups in the US fell by almost half in Q2 from a year ago.

• Airlines: JetBlue will end its partnership with American Airlines in the northeastern US.

• Crypto M&A: The number of crypto mergers and acquisitions dropped 50% YoY in Q2.

Meme Of The Day