Top News  Shutterstock The stock market got the jobs report it apparently was waiting for, as May's payrolls growth came in short of expectations and led investors to conclude that the Fed would not trim its bond buying anytime soon. A strong jump in hourly wages briefly boosted U.S. Treasury yields before dip buyers stepped in, sending the 10-year yield seven basis points lower for the week to 1.56%. The Nasdaq led the major market benchmarks Friday with a 1.5% gain, driven by gains in mega-caps including Microsoft and Apple, capping its third straight weekly gain. The Dow Jones and S&P 500 averages advanced 0.7% and 0.6%, respectively, for the week. Meme stocks continued their wild price swings on Friday, with AMC Entertainment falling 6.7% but still surging more than 80% for the week, while BlackBerry slipped 12.7% Friday to trim its weekly gain to 37%    | TOGETHER WITH  |
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| | Top News Shutterstock The stock market got the jobs report it apparently was waiting for, as May's payrolls growth came in short of expectations and led investors to conclude that the Fed would not trim its bond buying anytime soon. A strong jump in hourly wages briefly boosted U.S. Treasury yields before dip buyers stepped in, sending the 10-year yield seven basis points lower for the week to 1.56%. The Nasdaq led the major market benchmarks Friday with a 1.5% gain, driven by gains in mega-caps including Microsoft and Apple, capping its third straight weekly gain. The Dow Jones and S&P 500 averages advanced 0.7% and 0.6%, respectively, for the week. Meme stocks continued their wild price swings on Friday, with AMC Entertainment falling 6.7% but still surging more than 80% for the week, while BlackBerry slipped 12.7% Friday to trim its weekly gain to 37% | |
| Energy U.S. crude oil hit its highest level in more than two years after OPEC+ decided to continue the existing pace of gradually easing oil supply curbs while forecasting a tightening global market. The group led by Saudi Arabia and Russia said it will boost production in July in accordance with its April decision to return 2.1M bbl/day to the market between May and July, and agreed to a previously planned increase of ~450K bbl/day starting next month. The Saudis will also continue easing separate, unilateral cuts of 1M bbl/day that it enacted earlier this year.
Backdrop: In April, OPEC+ chose to return 2.1M barrels per day to the market from May to July, anticipating rising global demand despite surging COVID cases in India. Since the announcement, crude prices have risen from $60 toward the $70 level, and are up more than 30% in 2021 alone. Oil has still been trading in the tight $60-70 range for the past three months as talks continue on the future of the JCPOA. A deal revival would lead to higher output from Iran - the world's fourth-largest crude producer - though OPEC Secretary General Mohammad Barkindo doesn't expect the additional supply to cause problems, saying exports "will occur in an orderly and transparent fashion."
Thought bubble: Western oil majors are under pressure to cut carbon emissions faster, especially after the courtroom and boardroom defeats seen last week at Exxon (XOM), Chevron (CVX) and Shell (RDS.A, RDS.B). New energy policies proposed by the Biden administration are also discouraging the production of fossil fuels, meaning more business for OPEC+ and the likes of Saudi Aramco (ARMCO), Adnoc and Rosneft (OTCPK:RNFTF). "It looks like the West will have to rely more on what it calls 'hostile regimes' for its supply," joked a high-level executive from Russia's Gazprom (OTC:GZPMF).
While it will take time to boost America's renewable power grid - which could lead to higher oil prices in the interim - some say the U.S. may have the last laugh. If fossil fuel-dependent economies fail to shift away from oil and gas in the future, they could be susceptible to economic instability and stagnation in the decades to come. However, many wealthy countries have still outsourced a large chunk of their carbon pollution overseas for quite some time and that could continue in a future world where price differentials play out in the energy mix. (86 comments) | |
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| Consumer The latest cyberattack on an American supply chain was felt this week after JBS (OTCQX:JBSAY) - the biggest meat producer in the U.S. (and the world) - reported a ransomware breach that shut down all its beef facilities. The company's meatpacking plants also experienced some level of disruption due to the hack which was attributed to a notorious criminal gang based out of Russia. JBS sells beef and pork under the Swift brand, and is also the owner of Pilgrim's Pride (PPC), the second-largest U.S. chicken producer.
Just in time for grilling season... Meat market analysts said plant closures from the JBS hack could soon lead to higher consumer prices, which have increased for many cuts this year because of high demand and hiring troubles. In fact, cattle-futures trading in Chicago fell on Tuesday, with the most-active contract closing down 1.9% to nearly $1.17 a pound. It also prevented the U.S. Department of Agriculture from releasing daily wholesale prices for beef and pork that are heavily relied on by agriculture markets.
Paid the ransom? JBS announced it made "significant progress" to resolve the cyberattack, resulting in the "vast majority of [its] beef, pork, poultry and prepared foods plants" getting back online on Wednesday. "Our systems are coming back online and we are not sparing any resources to fight this threat," the company added in a statement. According to Steiner Consulting Group, which researches the meat industry, "even one day of disruption will significantly impact the beef market and wholesale beef prices."
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Go deeper: The JBS attack comes just three weeks after Colonial Pipeline Co., operator of the nation's biggest gasoline pipeline, was
targeted in a ransomware attack, which crippled fuel delivery and sent prices soaring in the U.S. Southeast. It's an even bigger problem when hackers target industries dominated by one of a handful of companies (JBS, Cargill and Tyson control about two-thirds of America's beef). While the White House has advised companies in the past not to pay criminals over ransomware attacks, that stance may be changing given vulnerabilities in the supply chain and the lack of investment in robust cybersecurity. The federal government's own agencies were hacked not too long ago, in the SolarWinds (
SWI) attack that
penetrated thousands of organizations. (
12 comments)
| On The Move The meme picked up pace this week as retail favorite AMC Entertainment (AMC) continued to make headlines. A 95% gain to $62/share on Wednesday - following four trading halts - left the movie theater chain with a market capitalization of $31.3B, making it more valuable than half of the companies in the S&P 500. It also led to a 3,600% return since the beginning of the year, before the stock plunged back to earth.
Diving deeper: Much of the price gains have been attributed to swarm trading, as well as gamification, where traders pile into popular names, ignoring fundamentals, technicals and other catalysts. We've seen the trend many times over the past year, ranging from the GameStop (GME) short squeeze frenzy (AMC was also involved then) to the Hertz (OTCPK:HTZGQ) bankruptcy bid-up and Kodak (KODK) craze that preceded it. Many Wall Street pros point out that these swarms only survive until the last "gambler" is left holding the bag, but these recent moves are also influencing real-world capital, as well as fresh ways for companies to trend in the markets.
Just a day after taking a renewed embrace of retail traders, offering them special screenings and free popcorn, AMC Entertainment (AMC) used the spike in its stock to raise even more capital by selling 11.5M shares. It also came with a stark warning: "The market prices and trading volume of our shares of Class A common stock have recently experienced, and may continue to experience, extreme volatility, which could cause purchasers of our Class A common stock to incur substantial losses." Meanwhile, Jefferies and Raymond James blocked sales of AMC shorts, adding to the news that saw the stock tank 18% on Thursday, and 6.7% on Friday to below the $50 level.
YouTube appearance: In an interview on social media, Aron said proceeds from another equity sale, if approved, would be used to reduce debt and to help the company negotiate with landlords who are owed $400M. The funds will also go to chase acquisitions. "If you arm us with the tool, meaning stock as the tool, to go find value-creating opportunities for AMC shareholders, we can do that," he told Trey's Trades. "If we are not armed with this tool, then you're tying our hands behind our back and you'll make it just that much harder for us to land some of these attractive opportunities that could benefit us all." (90 comments)
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| SPACs Hedge fund billionaire Bill Ackman's special-purpose acquisition company is finally nearing a deal, after much speculation surrounding the vehicle since its launch last year. It's pursuing a tie-up with Vivendi (OTCPK:VIVHY) over the French media conglomerate's Universal Music Group (UMG), the world's largest music company. According to current discussions, Pershing Square Tontine Holdings (PSTH) would acquire 10% of the ordinary shares of UMG for about $4B - implying an enterprise value for UMG of about $42.4B - and distribute those UMG shares to its own shareholders later this year. PSTH would remain a publicly-traded company with $1.5B in cash and it would also look for a new business combination with another partner.
Why it's notable: The deal would be the largest SPAC transaction on record, topping the $35B that ride-hailing app Grab was recently valued at in a similar transaction with Altimeter Growth Corp. (AGC). It also come at a time when the SPAC market is cooling. Issuances have slowed following a record first quarter, while the industry hit a roadblock after the SEC proposed an accounting change that would classify SPAC warrants as liabilities instead of equity instruments.
In fact, SPAC sentiment traditionally saw the vehicles surge after a deal announcement, but many of those have turned south recently given nervousness over lofty financial targets and regulatory scrutiny. Pershing Square Tontine Holdings even fell over 10% in premarket on Friday.
Quote: "Universal Music Group is one of the greatest businesses in the world," Ackman declared. "Importantly, UMG meets all of our acquisition criteria and investment principles as it is the world's leading music company, with a royalty on the growing global demand for music. We are delighted to work with Vivendi on this iconic transaction, and look forward to its consummation." (28 comments) | |
| Economy It's becoming harder to find goods and services that haven't increased in price in recent months, with the U.S. Consumer Price Index rising by another 4.2% Y/Y in April. Case in point: Kimberly-Clark (NYSE:KMB) began June by raising prices on consumer goods by 4% to 9%, Scotts Miracle-Gro (NYSE:SMG) will follow suit this summer, and Procter & Gamble (NYSE:PG) has said it will mark up prices in the fall. Price tags on appliances from Whirlpool (NYSE:WHR) and others have meanwhile risen by double-digit percentages from a year ago, while Costco (NASDAQ:COST) is raising labels by 20% or more for beef and up to 10% for clothing. Restaurant costs are rising too - Chipotle (NYSE:CMG) just upped delivery prices by 4% - while raw materials like lumber, steel and semiconductors are still near record highs.
What's happening? Many consumers are emerging from the pandemic with padded wallets, thanks to stimulus checks and savings that were accumulated during coronavirus lockdowns. In a simple sense, that's creating more demand for many items than industries can currently supply, and subsequently created a "reopening theme" that has drifted into the stock market. That's not all. A combination of rock-bottom interest rates and aggressive fiscal spending may be compounding the problem, against a backdrop of labor shortages, surging transportation costs and supply chain disruptions that have been seen across many areas of the economy.
While manufacturers have been hesitant to pass on rising costs to consumers - especially in the thick of the pandemic - others have been less hesitant to do so in recent months as COVID-19 cases decline nationwide. Another trend being seen in the retail sector is known as "shrinkflation," where companies slim down their product sizes but keep prices the same. "Consumers check the price every time they buy, but they don't check the net weight," said Edgar Dworsky, a consumer advocate and former assistant attorney general in Massachusetts.
How long will it last? "Policymakers at the Fed and in the [White House] need to recognize that the risk of a Vietnam inflation scenario is now greater than the deflation risks on which they were originally focused," declared former Treasury Secretary Lawrence Summers, who served under the Clinton administration. "Whatever was the case a few months ago, it should now be clear that overheating - not excess slack - is the dominant economic risk facing the U.S. over the next year or two." Current administration economists feel different, anticipating near-term bursts of inflation that will recede as the economy returns to normal. President Biden is also not holding back on additional stimulus, unveiling a $6T budget for FY2022 last Friday that would translate into annual deficits of over $1.3T (and $1.8T in 2022). (87 comments) | |
| U.S. Indices
Dow +0.7% to 34,756. S&P 500 +0.6% to 4,230. Nasdaq +0.5% to 13,814. Russell 2000 +0.8% to 2,288. CBOE Volatility Index -2.% to 16.42.
S&P 500 Sectors
Consumer Staples +1.%. Utilities +0.3%. Financials +1.2%. Telecom +0.6%. Healthcare -1.2%. Industrials +0.2%. Information Technology +1.2%. Materials +0.6%. Energy +6.7%. Consumer Discretionary -1.%.
World Indices
London +0.7% to 7,069. France +0.5% to 6,516. Germany +1.1% to 15,693. Japan -0.7% to 28,942. China -0.3% to 3,592. Hong Kong -0.7% to 28,908. India +1.3% to 52,100.
Commodities and Bonds
Crude Oil WTI +4.7% to $69.41/bbl. Gold -0.6% to $1,894./oz. Natural Gas +3.8% to 3.098. Ten-Year Treasury Yield -0.5% to 132.21.
Forex and Cryptos
EUR/USD -0.17%. USD/JPY -0.24%. GBP/USD -0.19%. Bitcoin +9.2%. Litecoin +11.4%. Ethereum +22.9%. Ripple +19.2%.
Top Stock Gainers
Washington Prime Group (NYSE:WPG) +143%. Vertex Energy (NASDAQ:VTNR) +120%. Semileds (NASDAQ:LEDS) +115%. Global Telcom & Technology (NYSE:GTT) +110%. Mosys (NASDAQ:MOSY) +100%.
Top Stock Losers
1847 Goedeker (NYSE:GOED) -56%. Shineco (NASDAQ:TYHT) -50%. Provention Bio (NASDAQ:PRVB) -35%. Immunovant (NASDAQ:IMVT) -34%. Tian Ruixiang Holdings (NASDAQ:TIRX) -29%.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section. | |
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