Stocks slip as US economy starts to show cracks

Live10 updates

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  Tue, June 4, 2024 at 9:15 AM MST

  GameStop falls as latest meme rally fizzles again

  GameStop (GME) shares fell as much as 7% on Tuesday, reversing some of the meme stock’s 21% gains from the prior session that was ignited by a social media post late Sunday from an account believed to be tied to the video game retailer’s most public supporter.

  Shares of the video game retailer rose as much as 75% Monday after the user behind “Deep F—ing Value” posted a screenshot on Reddit’s Superstonk subreddit late Sunday, which purported to show they paid nearly $175 million building a position in GME shares and call options.

  Late Monday, The Wall Street Journal reported that executives at Morgan Stanley’s trading platform E-Trade had discussed a potential ban on the account believed to be tied to individual investor Keith Gill.

  GameStop was also one of the numerous stocks impacted on Monday by a technical glitch at the New York Stock Exchange.

  Read more here.

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  Tue, June 4, 2024 at 8:30 AM MST

  Ford’s US sales soar 11.2% in May, powered by hybrids, trucks, and even EVs Inbox

  Yahoo Finance’s Pras Subramanian reports:

  Ford (F) reported May US auto sales that jumped considerably, once again powered by hybrid vehicle and truck sales.

  For the month, Ford sold 190,014 vehicles, an 11.2% increase from a year ago and up 6.4% sequentially from April. Ford delivered 17,631 hybrid vehicles for the month, driven by the new F-150 hybrid and Maverick hybrid.

  The Maverick was a standout, with sales jumping nearly 96% to 13,616 trucks sold in May. The hybrid version of the Maverick saw sales jump 111% to 7,687 trucks. Ford said Maverick pickup and hybrid sales hit a sales record in May.

  Read more here.

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  Tue, June 4, 2024 at 7:45 AM MST

  Oil extends slide amid weak manufacturing data, concerns of oversupply

  Oil futures extended their decline on Tuesday as the markets continued to digest the latest output decision by OPEC+ while weaker than expected manufacturing data raised concerns over the health of the US economy.

  West Texas Intermediate (CL=F) slid more than 1 % to trade just above $73 per barrel, while Brent (BZ=F), the international benchmark price, also fell 1% to hover just above $77 per barrel.

  The slide in crude futures follows a decline on Monday after the oil alliance led by Saudi Arabia extended most of its output cuts into 2025, but will unwind additional and voluntary reductions starting in October of this year. Analysts had expected those reductions to remain in place through the fourth quarter of this year.

  Traders have been reluctant to buy the dip amid concerns about oversupply in the market and waning demand heading into 2025.

  “The US economy also looks to be wavering with the Atlanta Fed Reserve showing a fifth consecutive downward estimation of GDP growth,” Dennis Kissler, senior vice president at BOK Financial said in a note on Tuesday.

  The latest ISM manufacturing report for May came in short of expectations at 48.7. New orders of 45.4 were the weakest since May 2023, while production came in at the lowest levels since February.

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  Tue, June 4, 2024 at 7:06 AM MST

  Job openings fall to lowest level in more than three years

  Job openings fell in April to their lowest level since February 2021 as the labor market shows further signs of rebalancing.

  New data from the Bureau of Labor Statistics released Tuesday showed there were 8.05 million jobs open at the end of April, a decrease from the 8.35 million job openings in March, which was revised lower from 8.48. Economists surveyed by Bloomberg had expected the report to show 8.35 million openings in April.

  The Job Openings and Labor Turnover Survey (JOLTS) survey also showed 5.6 million hires were made during the month, little changed from March.

  The hiring rate held at 3.6%, unchanged from March. Also in Tuesday’s report, the quits rate, a sign of confidence among workers, held at 2.2%.

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  Tue, June 4, 2024 at 6:34 AM MST

  Stocks open lower led by decline in Energy sector

  Stocks opened in the red on Tuesday amid increased concerns over the health of the US economy following weaker-than-expected manufacturing data.

  The S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) both fell about 0.3% after closing modestly higher on Monday during a bumpy session for the three major gauges. The Dow Jones Industrial Average (^DJI) decreased about 0.2% after losing more than 100 points in the prior session.

  The S&P 500 Energy Select ETF (XLE) led the declines as oil hit a four-month low on Tuesday. Traders continued to assess the latest output cut plan by OPEC+ amid concerns of oversupply towards the end of the year. The oil alliance plans to extend most of its production reductions into 2025 but will start phasing out additional voluntary cuts starting in October.

  Recent data shows activity cooling across a variety of metrics, dampening expectations that US economic growth could accelerate for a second straight year.

  April job openings due later this morning may be another indication about how the economy is holding up. The labor market update serves as a precursor to the crucial May jobs report on Friday.

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  Tue, June 4, 2024 at 3:07 AM MST

  The unsavory fast food trade

  Fast food stocks have been, well, ice cold.

  The Street has really soured on the likes of McDonald’s (MCD), Restaurant Brands (QSR), Yum! Brands (YUM), and many others in recent months amid sticky inflation and new $5 price wars.

  In short, there is just no catalyst in place to drive the stocks higher in the near term.

  This was underscored by Evercore ISI analyst David Palmer this morning, who has cut his same-store sales estimates for the aforementioned names.

  I wanted to highlight two sections of interest from his report:

  “US drive-thru chains are experiencing weakness across most income groups, but the weakness is most pronounced with households earning less than $50,000/year. This cohort is benefitting less from rising asset prices and suffering more from higher interest rates. Lastly, it is these consumers that most experience the regressionary tax of inflation itself with 30%+ COVID-era food cost inflation combining with the higher restaurant meal costs (over 4x higher than at-home prepared) to create an affordability problem. In addition, increased media and social media scrutiny of fast food pricing has added to pressure on McDonald’s, in particular.”

  And:

  “In the past, compelling value menus were often anchored by a hero item — often viewed by the consumer as a loss leader. These included the $1 double cheeseburger (McDonald’s 2003- 2012), the $1 any size soft drink (McDonald’s 2017-2020), the $5 footlong (Subway), the $5 mix-and-match (Domino’s), and the $1.50 hot dog (Costco). The question of the day — will a $5 bundle be enough to stabilize McDonald’s traffic and will the higher food cost of the meal prove worth it enough to keep around the rest of the summer (or longer)? If the $5 meal is not a long-term solution, will a BOGO $1 menu do the trick for McDonald’s? We suspect the answer will come in the advertising effectiveness — will it leverage McDonald’s $1 billion national advertising budget? Should McDonald’s be able to stabilize traffic with value in 3Q the steady stream of new products in 2H24 and 2025 should kick off a substantial brand recovery.”

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  Tue, June 4, 2024 at 2:53 AM MST

  Good point on stocks from Goldman

  And I awoke to a 16-page research report on stocks from Goldman Sachs. Great train reading.

  Good point by its team on stocks:

  “However, given the rise in valuations, and the recent corresponding rise in investor sentiment, equities are more vulnerable to disappointments. Stocks have largely, so far, shrugged off the delay in interest rate cuts because growth has been holding up — cyclical sectors of the main markets have been outperforming defensives leaving them exposed to any signs of economic activity faltering (particularly around the labour market).”

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  Tue, June 4, 2024 at 2:47 AM MST

  Citi spent some time with Nvidia’s CFO

  While Nvidia (NVDA) CEO Jensen Huang gets all the attention, his longtime CFO is also important to track if you are invested in the name.

  Colette Kress has been Nvidia’s CFO for 10 years and is viewed in Wall Street circles as one of the best in the game.

  Citi got to spend time with her this week and is out with a note. I think what they said below (based on their meeting with Kress) about a little-discussed demand driver for the chipmaker is of interest.

  “Sovereign AI demand is strong in various parts of the world. In Europe, Nvidia is seeing some work being done by countries such as France, Germany and Italy, with France leading the way. The Middle East is also an area investing heavily in AI. It is also the case in South East Asia. Nvidia clarified that not all investors are directly tied to the government. Some entities are just government-backed, not owned. In general, sovereign AI clients already have specific use cases to use their products for. Generally speaking the entities look to build models based on their own characteristics.”

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  Tue, June 4, 2024 at 2:40 AM MST

  Stifel’s call on the markets

  I have no problem with strategists making bold calls as long as they are rooted in reality.

  I think that’s what we are getting from Stifel’s Barry Bannister this morning.

  Bannister says he is looking for a 10% correction in the S&P 500 to about 4,750, occurring between the second and third quarters.

  Why:

  • “Sticky (and slightly higher) inflation in the second half of the year, starting early 3Q24E.”

  • “No Fed rate cuts in 2024, despite sluggish cyclical economic growth.”

  • “S&P 500 price to earnings ratio to decline about 2 multiples (about 500 points) by the end of the third quarter.”

  Below is what Stifel’s CEO Ron Kruszewski told me about the Fed and markets recently:

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  Tue, June 4, 2024 at 2:33 AM MST

  Bottom line on GameStop

  GameStop (GME) shares are flatlining in the early going today after a 21% pop (well off the 103% gain seen around the open).

  I think my longtime markets go-to Steve Sosnick from Interactive Brokers said it best to me via email on the move here:

  “It can’t be explained by normal, rational means.”

  Be careful here, folks, in chasing this one.

  Some coverage of GameStop mania this week from Yahoo Finance: