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.

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.

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.

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.

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.