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.

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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.

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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.

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