Top News  Shutterstock The major stock market averages closed mixed for the week following a choppy day of trading Friday. The week saw the stock market bounced around by the volatile trading in bitcoin and potential Fed taper talk before retracing those moves. The S&P 500 and Dow ended the week lower while the big rebound in tech shares Thursday pushed the Nasdaq into the green despite the selloff earlier in the week. The 10-year Treasury yield ended the week roughly where it began at 1.63%, but it was an eventful roundtrip, with the yield topping 1.69% after the latest Fed minutes showed some members looking to discuss reducing asset purchases at upcoming meetings.    | TOGETHER WITH  |
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| | Top News Shutterstock The major stock market averages closed mixed for the week following a choppy day of trading Friday. The week saw the stock market bounced around by the volatile trading in bitcoin and potential Fed taper talk before retracing those moves. The S&P 500 and Dow ended the week lower while the big rebound in tech shares Thursday pushed the Nasdaq into the green despite the selloff earlier in the week. The 10-year Treasury yield ended the week roughly where it began at 1.63%, but it was an eventful roundtrip, with the yield topping 1.69% after the latest Fed minutes showed some members looking to discuss reducing asset purchases at upcoming meetings. | |
| M&A On Monday, AT&T (T) announced a deal to merge WarnerMedia with Discovery's (DISCA) media assets, which would create a more formidable competitor to Netflix (NFLX) and Disney (DIS). Under the terms of the agreement, AT&T would receive $43B in a combination of cash, debt securities, and WarnerMedia's retention of certain debt, while AT&T's shareholders would receive stock representing 71% of the new standalone company (Discovery shareholders would own the rest).
Plenty to click through: The "pure play" content company will own one of the deepest libraries in the world with nearly 200K hours of programming. It would also bring together over 100 of the most cherished, popular and trusted brands in the world under one global portfolio. Among them: HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC, Animal Planet, ID and many more.
Citi is positive on the deal from AT&T's perspective, maintaining a Buy rating and a $34 price target. "It puts the company in a better position to grow the core communications busines, especially with wireless performance on the upswing," analysts Michael Rollins and Jason Bazinet added, though the guided post-deal dividend cut is an "obvious disappointment." Shares fell a cumulative 15% from the $33 level after the transaction was announced, but ended the week back near $30.
Go deeper: Those investors well attuned to the John Malone-a-verse could see the Discovery player and cable titan's fingerprints all over the deal. For one thing, the tie-up is being accomplished via a Reverse Morris Trust, a complex (but tax-efficient) approach to combining the entities via all stock that's frequently used by Malone. In fact, years ago he used the approach to spin off a 54% stake tax-free in DirecTV - now up for sale by AT&T. "After over 30 years of being involved in developing Discovery as a global information and entertainment company, the opportunity to combine with WarnerMedia to create the ultimate consumer offering in its space is compelling," Malone said in a statement. (242 comments)
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| Trending Early in the week, Tesla (TSLA) shares were the weakest among the Big Six megacaps, sinking back below their 200-day simple moving average. Pressure came from a few directions, related to and unrelated to its core business of selling cars, as well as growth names falling out of favor. The biggest news though was the disclosure of a large short position on the stock by Michael Burry, who is famous for his calls on the housing bubble in The Big Short.
More details: Burry's Scion Asset Management holds 8,001 put contracts, bearish options on 800,100 Tesla shares, although there were no information on strike price or expiry in the regulatory filing. Burry had disclosed a Tesla short in December in a since-deleted tweet and has expressed his concern about the valuation. Burry was one of the catalysts for the retail investor interest in GameStop (GME), although he closed out his long position before the big squeeze. The disclosure adds some more credence to the theory that Tesla shares have come too far too fast after a year of cash from fiscal and monetary stimulus chasing returns in Big Tech and momentum names.
"Tesla is currently trading at an enterprise value multiple of about 11x based on its expected 2021 revenues, hardly a bargain, but Tesla will continue to report impressive growth figures for the next 3-4 years and possibly beyond," wrote Seeking Alpha contributor The Outsider, warning about buying on the current pullback. "This justifies to some extent its premium valuation, but even when compared to technology companies this valuation seems to already incorporate much of the future growth."
Crypto controversy: Tesla shares have also seen volatility as CEO Elon Musk battles with supporters arguably as passionate as his own devoted customers and investors: the crypto crowd. Musk, who had been praised for accepting Bitcoin (BTC-USD) for transactions and seen Tesla stock rally on the announcement, found himself in the crosshairs after reversing that decision and suspending the purchases on concerns about the amount of energy used in mining. He recently ended up in a Twitter war with cryptocurrency fans that led to speculation Tesla may shed its Bitcoin holdings, but he then clarified that he wouldn't sell out. (88 comments)
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| On The Move The crypto community was once again divided on how to digest the latest Bitcoin (BTC-USD) crash, with the digital currency falling as much as 30% at one point on Wednesday to as low as $29,000. Some are attributing the crash to China's crackdown on crypto transactions, Tesla's (TSLA) recent decision to stop vehicle purchases with the crypto (see above) and J.P. Morgan citing moves by institutional investors that have swapped their Bitcoin positions for gold. Others in the FUD crowd (fear, uncertainty and doubt) say the finger pointing is not of much use, as the crypto scene is generally a volatile environment, and traders must be prepared to buckle up once there is a shift in sentiment.
The bulls: "For investors that are thinking long term, this is actually a great opportunity to buy at prices you may not see for a while," said Delano Saporu of New Street Advisors. "Seeing these big drops is common," further explained Ganesh Swami, CEO of blockchain data provider Covalent. "The last time we saw a bull run, bitcoin dropped at least half a dozen times by 20-30% before it went to the then all-time high."
The bears: "The high volatility of cryptos makes them an unreliable store of value. Weekly moves of more than 10% in Bitcoin are common. In the week to 14 May, Bitcoin fell 24%, which would be a high level of volatility for a small-cap stock, let alone a currency," wrote Mark Haefele, CIO of UBS Global Wealth Management. "A more than 50% decline from the highs within a month is certainly damaging the outlook for Bitcoin," added Julius de Kempenaer, senior technical analyst at Stockcharts.com.
Bitcoin later rebounded to the $40K level, making it worth a mention of the crypto's long history of volatility.
2011 - Bitcoin soars from $1 in April to a peak of $32 in June. By November it's worth $2.
2013 - Starting the year at $13, Bitcoin jumps to $220 by April, only to change hands at $70 two weeks later. The crypto then climbs from $123 in October, to $1156 by December, then tumbles to $760 in three days.
2017 - Trading around $1K in January, Bitcoin reaches nearly $20K by the end of the year.
2018 - Prices steadily decline, eventually tracking back to the $3,500 level.
2019 - Bitcoin tops $10K again over the summer, but ends the year at $7K.
2020 - Dropping to a low of $5,200 as the pandemic set in, the crypto goes on to reach $30K.
2021 - Momentum picks up as Bitcoin breaches $40K, $50K and $60K, before the most recent crash.
Other happenings: The U.S. Treasury on Thursday called for stricter crypto compliance with the IRS, proposing a requirement that any crypto transfers over $10K be reported to the agency. Jerome Powell also said the Fed will also issue a discussion paper this summer on the possibility of a U.S. central bank digital currency. The key focus is on how a CBDC could improve the current American domestic payments system, while the Boston Fed is working on more technical projects, focused on tools and infrastructure. (126 comments)
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| Consumer Ford (F) showed off its new electric F-150 Lightning model during a live event on Wednesday night after giving President Biden a sneak preview a day earlier. Pricing for the vehicle will range from about $39,974 for a work truck version to $52,974 for a consumer version that runs all the way up to $90K for the fully-loaded model. Tax credits can also be applied to the EV purchase.
Specs: The F-150 Lightning will be able to travel up to 300 miles per battery charge and race from zero to 60 mph in 4.5 seconds. Ford executives also highlighted the truck's towing capabilities and the ability for the vehicle to provide charging capabilities on worksites, campgrounds or for homeowners that might lose electricity. The truck is said to be "Ford tough" and the most technically advanced truck ever produced by the automaker.
The automaker expects to produce 40K electric F-150s or more when production ramps up in 2023. Crucially for investors, Ford anticipates the new electric F-150 Lightning pickup will be profitable when it arrives at U.S. dealerships next year (online reservations are available with a $100 deposit). It also said the pickup "won't sacrifice power, payload and towing capability... and will constantly improve through over-the-air updates."
Pitch for infrastructure: "We're going to put Americans to work, which will include 50,000 charging stations along our roads and highways, homes and apartments," Biden remarked during his stopover in Dearborn, Michigan. "We're also going to boost our manufacturing capacity, as well as grants and tax credits to boost manufacturing of these clean vehicles, batteries, semiconductors and small computer chips." His administration's recently unveiled $2T infrastructure package, known as the American Jobs Plan, includes $174B to "win the EV market." (147 comments) | |
| IPOs Oatly (OTLY) priced its highly-anticipated IPO at a top-of-range $17/share, raising $1.43B in the offering and valuing the firm at more than $10B. Shares rose 18% in a first session pop on Thursday, before tacking on additional gains. The Swedish-based company produces a variety of vegan foods with oats, including milk, yogurts and spreadable cheeses, and its products are available in more than 20 countries.
By the numbers: Oatly's revenue more than doubled last year to hit $421.4M, though its net losses widened to $60.4M (compared to $35.6M in 2019) as it spent heavily on product development, new factories and marketing. During 2020, oat milk sales in the U.S. also soared over 300% to $213M, becoming the second most consumed plant milk after almond milk ($1.5B in 2020 sales). Soy milk fell down a spot, with sales declining 4.5% to $202M (a decade ago, they topped $1B).
Oatly counts TV legend Oprah Winfrey among its pre-IPO investors, along with rapper Jay-Z, actress Natalie Portman and former Starbucks CEO Howard Schultz. Institutional backers include Blackstone Group (BX) and others. The celebrity involvement has attracted lots of attention to the IPO, with analyst firm Hedgeye recently writing that the offering seemed "reminiscent of the great consumer growth stories we've seen IPO in recent decades," such as Chipotle (CMG), Lululemon (LULU) and Under Armour (UAA). Others, like Seeking Alpha contributor Noah Wilson, recently looked at the IPO and concluded that money-losing Oatly has "no clear path to profitability."
Go deeper: Consumer preferences have been shifting toward more plant-based foods, especially among the younger crowd, and could mirror the successes seen with Beyond Meat (BYND). "Generation Z and Millennials will become the dominant global generations in the coming years, bringing to the market a new set of values and expectations," Oatly wrote in its prospectus. Another theme of the company is its environmental effects compared to cow products, and it could attract some interest from ESG funds. (21 comments)
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TOGETHER WITH  U.S. Indices
Dow -0.5% to 34,208. S&P 500 -0.4% to 4,156. Nasdaq +0.3% to 13,471. Russell 2000 -0.3% to 2,219. CBOE Volatility Index +7.1% to 20.15.
S&P 500 Sectors
Consumer Staples +0.1%. Utilities +0.3%. Financials -0.9%. Telecom -0.6%. Healthcare +0.7%. Industrials -1.7%. Information Technology +0.1%. Materials -1.4%. Energy -2.8%. Consumer Discretionary -1.2%.
World Indices
London -0.4% to 7,018. France +0.% to 6,386. Germany +0.1% to 15,438. Japan +0.8% to 28,318. China -0.1% to 3,487. Hong Kong +1.4% to 28,420. India +3.7% to 50,540.
Commodities and Bonds
Crude Oil WTI -2.3% to $63.87/bbl. Gold +2.1% to $1,881.9/oz. Natural Gas -1.9% to 2.904. Ten-Year Treasury Yield +0.1% to 132.49.
Forex and Cryptos
EUR/USD +0.34%. USD/JPY -0.36%. GBP/USD +0.39%. Bitcoin -19.5%. Litecoin -38.8%. Ethereum -32.5%. Ripple -33.3%.
Top Stock Gainers
Annovis Bio (NYSE:ANVS) +148%. PDS Biotechnology (NASDAQ:PDSB) +75%. Aerpio Pharmaceuticals (NASDAQ:ARPO) +74%. Urban One (NASDAQ:UONE) +60%. Gracell Biotechnologies (NASDAQ:GRCL) +59%.
Top Stock Losers
Black Diamond Therapeutics (NASDAQ:BDTX) -51%. Seelos Therapeutics (NASDAQ:SEEL) -37%. Brooklyn ImmunoTherapeutics (NYSE:BTX) -35%. Summer Infant (NASDAQ:SUMR) -34%. China Online Education Group (NYSE:COE) -32%.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section. | |
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