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Woah, that’s a lot of jobs

MONDAY MARKET UPDATE
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Woah, that's a lot of jobs

MONDAY MARKET UPDATE

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U.S. banks could face 20% hike to capital requirements this month. Regulators want banks to have larger buffers to absorb losses.

This will burden businesses and borrowers at the wrong time.  

Credit is about to dry up.

💰 President Biden’s signing of the debt limit deal over the weekend bought the debt ceiling saga to a close, but it also brings forth the latest concern for markets: liquidity.

  • Starting today, the US Treasury will begin issuing a large number of bonds to replenish its funds.

  • Paying for those new bonds—and acting as a drain on liquidity—will be bank deposits.

  • As a result, JPMorgan expects overall liquidity to fall by some $1.1 trillion which could lead to a 5% drop in the combined performance of stocks and bonds.

  • According to BofA, the consequent economic impact felt from this new issuance could be equivalent to a 25bps hike in interest rates.

🏦 In the wake of March’s string of bank failures, US regulators will soon propose new rules that call for large banks to increase their overall capital requirements by ~20%.

  • The goal is to force banks to maintain a bigger cushion for potential losses, thereby improving the resiliency of the banking system.

  • The new rules are expected to apply to banks with at least $100 billion in assets.

  • Critics argue the proposal would raise costs for consumers, result in fewer services offered by banks, and potentially stunt economic growth.

👷🏼 Friday’s jobs report blew away Wall Street’s estimates as the economy unexpectedly added 339,000 jobs in May.

  • The figure was the most in 4 months and marked the 14th consecutive month payrolls came in above market expectations.

  • This puts the total number of jobs gained so far in 2023 at over 1.5 million–certainly not what the Fed wants to see.

  • On the other hand, the unemployment rate—which is calculated using the separate household survey—rose to 3.7% from 3.5%.

  • Wage growth also slowed, with average hourly earnings rising 0.3% in May and 4.3% annually, down from 0.4% MoM and 4.4% YoY in April.

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📈 Markets surged following Friday’s jobs numbers and pushed the Volatility Index (VIX) down to its lowest close in more than 3 years.

  • This reflects an increasingly confident outlook for stocks among investors.

  • Positioning, however, continues to reflect uncertainty as speculator bets against the S&P 500 remain at their most bearish since 2007.

  • At the same time, bullish wagers on tech stocks are approaching the highest level since late 2022.

⏸️ The jobs report also increased market expectations of a Fed pause this month.

  • Probabilities of a 25bps hike in June have dropped to ~20% from nearly 65% just a week ago.

  • But that doesn’t mean tightening is over: traders still expect an interest rate hike in July.

  • Looking further down the timeline, however, markets continue implying a high probability that the Fed will ease rates by the end of 2023.

🤵🏼 More corporate insiders bought shares in the last 30 days than at any time since March 2020.

  • Even as selling momentum picked up, the ratio of insiders to buyers fell to its lowest level in a year.

  • Specifically, insiders at banks—especially smaller banks—are buying shares in their own companies at an increasing pace.

  • The buyers-to-sellers ratio for banks is currently at a record high of 14.7 to 1.

  • Since 2011, the average quarterly ratio for bank insiders has been 1.8 to 1.

🛢️ Against a backdrop of volatile prices and uncertain demand, OPEC+ met over the weekend to discuss production levels.

  • In a bold move, Saudia Arabia announced it would bring its production to the lowest level since 2021 by cutting oil supply by an additional 1 million barrels per day in July.

  • On the flip side, the United Arab Emirates secured a higher production quota for 2024 at the expense of African members who will be giving up part of their unused quotas.

  • The rest of the group—including Russia—pledged to extend existing cuts until the end of 2024.

  • Oil prices rose on the news:

*This is sponsored advertising content and the disclaimer at the bottom of this email MUST be read carefully.
The most anticipated earnings releases scheduled for the week are NIO #NIO, GitLab #GTLB, GameStop #GME, Ciena #CIEN, DocuSign #DOCU, SAIC #SAIC, Academy Sports + Outdoors #ASO, J.M. Smucker #SJM, Sprinklr #CXM, and THOR Industries #THO.

📊 Q1 earnings update:

  • With 99% of the S&P 500 reported, companies have reported their best performance relative to expectations since Q4 2021.

  • On the other hand, the blended earnings decline is -2.1%, marking the second consecutive quarter of a decrease in earnings.

  • The 4.1% blended revenue growth rate is the lowest since Q4 2020.

👀 What we’re watching today:

  • Science Applications

  • GitLab

  • HealthEquity

  • Sprinklr

Full earnings here.

  • Carbon credits: A United Nations draft document has sparked debate over what should be considered a carbon offset.

  • Phantom credits: The CEO of Verra–a top carbon credit certifier–has stepped down after a report exposing the issuance of “phantom credits”.

  • VR at WWDC: Apple’s long-awaited virtual reality headset is set to be unveiled today at the company’s developer conference.

  • Hawkish IMF: The International Monetary Fund does not see a significant slowdown in lending and suggests the Fed needs to take further tightening action.

  • CRE losses: Some US banks are preparing to sell off property loans at a discount in order to reduce exposure to the struggling commercial real estate market.

  • Earnings drop: Morgan Stanley predicts a 16% drop in corporate earnings ahead.

  • Logistics disruption: The largest terminal at the Port of Long Beach, California will remain closed today amid labor turmoil and disputes over wages.

  • Hollywood strike: The Directors Guild of America has reached a tentative agreement with Hollywood studios on a 3-year contract.

  • Monday: S&P Global Services PMI, ISM Services PMI, factory orders

  • Tuesday: IBD/TIPP economic optimism, API crude oil stock change

  • Wednesday: US trade deficit, EIA stocks change, consumer credit change

  • Thursday: Initial jobless claims, wholesale inventories

  • Friday: WASDE report

  • Halving demand: JPMorgan predicts strong retail demand for Bitcoin leading up to the next halving event which will double production cost to ~$40k.

  • Price volatility: At 32%, Bitcoin’s annualized price volatility is lower than that of tech giants like Amazon and Meta.

  • Transaction fees: Ethereum’s daily average gas fee is tending toward a two-month low after surging in May.

  • Claims battle: FTX is refuting Genesis’ claims it owes it no money, alleging the firm owes over $3.9 billion in cash and crypto.

  • Wallet hack: Atomic Wallet users were hacked over the weekend to the tune of $35 million worth of various tokens.

Check out GritCRYPTO for more.

  • Sandwich auction: The bidding for Subway is coming down to the wire with the chain expected to fetch more than $9 billion.

  • Aquaculture: Goldman Sachs has offered $600 million in cash to acquire a 72% stake in Norwegian aquaculture group Froy.

  • Filmmaking real estate: Real estate firm Axa Investment Managers has acquired French film studio Bry-sur-Marne for €150 million.

  • Private credit: Blackstone and Goldman Sachs are leading a $1.6 billion direct lending deal to support EQT’s recent acquisition of Dechra Pharmaceuticals.

  • Medical devices: Novo Nordisks is in talks to acquire a controlling stake in Biocorp in a deal that values the medical device designer at €154 million.

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*This is sponsored advertising content and the disclaimer at the bottom of this email MUST be read carefully.

Disclaimer: The publisher does not guarantee the accuracy or completeness of the information provided in this page.  All statements and expressions herein are the sole opinion of the author or paid advertiser.
Grit Capital Corporation is a publisher of financial information, not an investment advisor.  We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.  
THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME.  THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION.  INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.
No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.  
Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable.  They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.  Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein.  The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.
The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities).  To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.
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Gritcapital.substack.com (“Grit”) is a website owned and operated by Substack. Grit is paid fees by the companies that make investment offerings on this website. Be aware that payment of these fees may put Grit in a conflict of interest with the investor. By accessing this website or any page thereof, you agree to be bound by the Terms of Use and Privacy Policy, in effect at the time you access this website or any page thereof. The Terms of Use and Privacy Policy may be amended from time to time. Nothing on this website shall constitute an offer to sell, or a solicitation of an offer to buy or subscribe for, any securities to any person in any jurisdiction where such an offer or solicitation is against the law or to anyone to whom it is unlawful to make such offer or solicitation. Grit is not an underwriter, broker-dealer, Title III crowdfunding portal or a valuation service and does not engage in any activities requiring any such registration. Grit does not provide advice on investments or structure transactions. Offerings made under Regulation A under the U.S. Securities Act of 1933, as amended (the "Securities Act") are available to U.S. investors who are “accredited investors” as defined by Rule 501 of Regulation D under the Securities Act well as non-accredited investors, who are subject to certain investment limitations as set forth in Regulation A under the Securities Act. In order to invest in Regulation A offerings, investors may be asked to fill out a certification and provide necessary documentation as proof of your income and/or net worth to verify that you are qualified to invest in offerings posted on this website. All securities listed on this site are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities. Grit does not verify the adequacy, accuracy or completeness of any information. Neither Grit nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy, valuations of securities or completeness of any information on this site or the use of information on this site. Neither Grit nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising from any error or incompleteness of fact, or lack of care in the preparation of, any of the materials posted on this website. Investing in securities, especially those issued by start-up companies, involves substantial risk. investors should be able to bear the loss of their entire investment and should make their own determination of whether or not to make any investment based on their own independent evaluation and analysis.

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Disclaimer:The publisher does not guarantee the accuracy or completeness of the information provided in this page.  All statements and expressions herein are the sole opinion of the author or paid advertiser.

Grit Capital Corporation is a publisher of financial information, not an investment advisor.  We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.  

THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME.  THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION.  INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.

No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.  

Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable.  They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.  Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein.  The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.

The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities).  To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.

Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.

By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.

For Full Terms of Use Click HERE. For the Privacy Policy Click HERE.

Gritcapital.substack.com (“Grit”) is a website owned and operated by Substack. Grit is paid fees by the companies that make investment offerings on this website. Be aware that payment of these fees may put Grit in a conflict of interest with the investor. By accessing this website or any page thereof, you agree to be bound by the Terms of Use and Privacy Policy, in effect at the time you access this website or any page thereof. The Terms of Use and Privacy Policy may be amended from time to time. Nothing on this website shall constitute an offer to sell, or a solicitation of an offer to buy or subscribe for, any securities to any person in any jurisdiction where such an offer or solicitation is against the law or to anyone to whom it is unlawful to make such offer or solicitation. Grit is not an underwriter, broker-dealer, Title III crowdfunding portal or a valuation service and does not engage in any activities requiring any such registration. Grit does not provide advice on investments or structure transactions. Offerings made under Regulation A under the U.S. Securities Act of 1933, as amended (the “Securities Act”) are available to U.S. investors who are “accredited investors” as defined by Rule 501 of Regulation D under the Securities Act well as non-accredited investors, who are subject to certain investment limitations as set forth in Regulation A under the Securities Act. In order to invest in Regulation A offerings, investors may be asked to fill out a certification and provide necessary documentation as proof of your income and/or net worth to verify that you are qualified to invest in offerings posted on this website. All securities listed on this site are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities. Grit does not verify the adequacy, accuracy or completeness of any information. Neither Grit nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy, valuations of securities or completeness of any information on this site or the use of information on this site. Neither Grit nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising from any error or incompleteness of fact, or lack of care in the preparation of, any of the materials posted on this website. Investing in securities, especially those issued by start-up companies, involves substantial risk. investors should be able to bear the loss of their entire investment and should make their own determination of whether or not to make any investment based on their own independent evaluation and analysis.