DHUnplugged #699: Flesh Wound

Markets having a tough time and a big week of data is coming.

Got the 5% correction – is there more?

M&A – Another deal dies

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Warm Up
- Markets having a tough time
- Happy Passover!
- SHOW 700 coming up!
- Happy belated 420 Day to our fine smoky listeners
- Jumping to Conclusions
- We have a limerick!

Market Update
- Big week(s) coming for economics
- Got the 5% correction - is there more?
- M&A - Another deal dies
- Earnings - Tech on deck
- Historic Treasury Auction this week - need to pay the bills since tax receipts not doing it and lots of debt outstanding

Who Would think???
- UK - FTSE 100 at all-time high!

- Microsoft Corp., Meta Platforms Inc., Google parent Alphabet Inc. and Tesla Inc., all of which are among the so-called Magnificent Seven group of tech giants, will report THIS WEEK week.
- Technology stocks are selling off, with the Nasdaq 100 Index registering its biggest weekly drop since November 2022 in the midst of a four-week losing streak, its longest since December 2022.
- Even AI darling Nvidia Corp. is getting hit, plunging 10% on Friday and wiping out $212 billion in market value for its worst day since the Covid pandemic in March 2020.

MAG7 Profit Outlook
- But hope is on the horizon. Profits for the Mag Seven — which also includes Apple Inc., Amazon.com Inc. and Nvidia — are forecast to rise 38% in the first quarter from a year ago, dwarfing the overall S&P 500’s 2.4% anticipated year-over-year earnings growth, according to Bloomberg Intelligence data.
- Around 178 S&P 500 companies — representing more than 40% of the index’s market capitalization — will post results next week. But the biggest expectations are for megacap tech firms.
= = Nvidia, which Goldman Sachs Group Inc.’s trading desk dubbed “the most important stock on planet Earth,” doesn’t report its earnings for another month.

- Stock down a lot - DOWN 43% YTD
- Down 65% from high set November 2021
- Tesla is recalling nearly 3,900 of its Cybertrucks due to an issue with the vehicle's accelerator pedal.
- The recall, announced Wednesday, was prompted by accelerator pedal pads in the trucks that "may dislodge and cause the pedal to become trapped by the interior trim,"
- All of the 3,878 of the 2024 Cybertrucks that Tesla built between Nov. 13 and April 4 are subject to the recall, the electric vehicle maker’s safety recall report said.
- And then: Tesla on Saturday slashed the price of its Full Self-Driving (FSD) driver assistant software to $8,000 from $12,000 in the United States, as CEO Elon Musk reaffirms his commitment to self-driving technology.
- Musk is betting the technology will become a major source of revenue for the world's most valuable automaker. But he has for years failed to achieve the goal of self-driving capability, with the technology under growing regulatory and legal scrutiny.
----- Could be a short squeeze setting up for earnings (Tonight) - READ MORE>>>>>

Tesla Earnings
- Tesla misses by $0.04, misses on revs, gross margin down 199 bps yr/yr, reiterates that in 2024, vehicle volume may be notably lower than the growth rate achieved in 2023
- Total GAAP gross margin of 17.4%, down 199 bps yr/yr.
- Operating expenses up 37% yr/yr to $2.53 bln.
- Total Deliveries down 9% to 386,810.
- Outlook: Co states, "Our company is currently between two major growth waves: the first one began with the global expansion of the Model 3/Y platform and we believe the next one will be initiated by advances in autonomy and introduction of new products, including those built on our next generation vehicle platform. In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next generation vehicle and other products. In 2024, the growth rates of energy storage deployments and revenue in our Energy Generation and Storage business should outpace the Automotive business."

Salesforce M&A
- One week ago, the Wall Street Journal first reported that CRM was exploring a purchase of INFA and that news did not go over well with either shareholder base.
- In fact, not including Monday'ss moves, CRM and INFA are lower by 8% and 9%, respectively, since that initial story broke on April 15
- Deal Dead

PCE Index Report (Friday)
- The PCE Price Index Excluding Food and Energy, also known as the core PCE price index, is released as part of the monthly Personal Income and Outlays report. The core index makes it easier to see the underlying inflation trend by excluding two categories – food and energy – where prices tend to swing up and down more dramatically and more often than other prices. The core PCE price index is closely watched by the Federal Reserve as it conducts monetary policy.
- Looking for somewhere between 0.3 and 0.4 MoM and there is hope that this stays under 3% YoY -

Change From Month One Year Ago
February 2024 +2.8%
January 2024 +2.9%
December 2023 +2.9%
November 2023 +3.2%

 China Playing Hardball
- Apple has removed popular messaging apps like WhatsApp, Telegram and Signal from its iPhone app store in China after the Chinese government ordered the company to do so, The Wall Street Journal reported last Friday.
- Citing a person familiar, the Journal reported that the Cyberspace Administration of China asked Apple to remove Meta-owned WhatsApp and Threads from the App Store "because both contain political content that includes problematic mentions of the Chinese president," but the Apple spokesperson denied that was part of the reasoning.
- This is probably in direct response to the potential for a TikTok ban with the latest legislation making its way through congress.


House Bills
- Lots of money approved over the weekend in the HOUSE for Ukraine, Israel and Taiwan
- Also, the bill is paving the way to a possible TikTok ban in the U.S. passed the House of Representatives on Saturday, as part of a legislative package addressing critical national security concerns with China, Russia and Iran.
- It passed overwhelmingly in a 360 to 58 vote.
- Another high-profile component of the measure is the Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act, which would allow the U.S. government to liquidate seized Russian assets and then give those funds to Ukraine.

Here we Go....
- Latest commentary: The Federal Reserve is stuck in a mode of forecasting and public communication that looks increasingly limited, especially as the economy keeps delivering surprises.
- The issue is not the forecasts themselves, though they’ve frequently been wrong. Rather, it’s that the focus on a central projection — such as three interest-rate cuts in 2024 — in an economy still undergoing post-pandemic tremors fails to communicate much about the plausible range of outcomes. The outlook for rates presented just last month now appears outdated amid a fresh wave of inflation.

Chapter 11?
- Red Lobster, which has 58 stores in Florida, is considering Chapter 11 bankruptcy to recoup $11 million in losses from its endless shrimp promotion, Bloomberg reported.
- Red Lobster’s “Ultimate Endless Shrimp” promotion last year was intended as a limited-time offer but brought in enough new customers that the chain added it to its permanent menu in June. Customers gobbled it up, and the chain reported fourth-quarter 2023 losses of $12.5 million, the outlet reported.

- Error in their ways - some admission here
-Nike CEO John Donahoe acknowledged Friday that the company moved too far away from wholesale partners like Macy's and DSW in its quest to become a retailer that primarily sells merchandise to shoppers through its own stores and website.
- "We recognize that in our movement toward digital, we had over rotated away from wholesale a little more than we intended,"
- We've corrected that. We're investing heavily with our retail partners. They were all here over the last couple of days; they're very excited about the innovation pipeline."

DJT- Tricky
- Trump Media on Friday warned the CEO of the Nasdaq Stock Market of 'potential market manipulation' of the company's stock by "naked" short selling of shares.
- Company is trying every trick in the book
- They are evenr doing outreach to shareholders to teach then how to minimize short selling by not allowing shares to be loaned out - like the old days
- SEC Reply: On its website notes that a failure to deliver shares as part of a short sale trade, which can land a company on the Reg SHO threshold list, does not necessarily reflect improper trading activity such as naked short selling.
- "There are many justifiable reasons why broker-dealers do not or cannot deliver securities on the settlement date," the SEC notes in a section about Regulation SHO.
- Devon Nunes - President is fighting the shorts - and he will probably lose if the company continues on this trajectory

Michael Saylor
- Evangelist for Bitcoin - on TV tellign everyone that his company - Microstrategy is a leveraged Bitcoin Play and the best way to hold bitcoin
- Meanwhile: Saylor entered into a stock-sale plan with his company last summer that allowed him to unload up to 400,000 shares in the first four months of 2024.
--- With the plan more than 90% of the way to completion, Saylor has netted about $370 million from this year's stock sales
- Those assets, equal to about 1% of the total number of bitcoins minted to date, are now worth about $13.6 billion, accounting for the bulk of MicroStrategy's $21.3 billion market cap.

AH Jumped to Conclusion - NVDA
- Japanese tech conglomerate SoftBank is looking to develop a "world-class" Japanese-language-specific generative artificial intelligence model, and plans to invest $960 million in the next two years to bolster its computing facilities, according to a Nikkei report.
- So, AH wondered, why is Softbank talking this up and saying that they are planing top purchase chips from NVDA (from anonymous sources)
- Looked and was proven wrong - as of last update Softbank does not own a significant stake in NVDA  IN FACT: SoftBank sold its entire 4.9% stake in Nvidia for $3.3B in January 2019

- New home sales increased 8.8% month-over-month in March to a seasonally adjusted annual rate of 693,000 units (Briefing.com consensus 670,000) from a downwardly revised 637,000 (from 662,000) in February.
- On a year-over-year basis, new home sales were up 8.3%.
- The key takeaway from the report is that new home sales were up in every region, helped in part by another dip in the median sales price, although average prices were up with a pickup in sales of higher-priced homes, particularly in the West region.
The median sales price decreased 1.9% yr/yr to $430,700 while the average sales price increased 1.0% to $524,800. March marked the seventh consecutive month of a year-over-year decline in the median selling price.
----- New home sales month-over-month/year-over-year by region: Northeast (+27.8%; -13.2%); Midwest (+5.3%; -23.4%); South (+7.7%; -4.5%); and West (+8.6%; +18.8%).
-----At the current sales pace, the supply of new homes for sale stood at 8.3 months, versus 8.8 months in February and 8.1 months in March 2023.
----- The percentage of new homes sold for $399,999 or less accounted for 43% of new homes sold versus 48% in February and 44% one year ago. Homes priced between $400,000 and $749,000 accounted for 43% of new homes sold versus 40% in February. New homes priced at $750,000 or over accounted for 14% of sales in March versus 12% in February.

- Poor environment for M&A
- The U.S. Federal Trade Commission on Monday sued to block Coach parent Tapestry's $8.5 billion deal to buy Michael Kors owner Capri, saying it would eliminate "direct head-to-head competition" between the flagship brands of the two luxury handbag makers.
- "The proposed merger threatens to deprive millions of American consumers of the benefits of Tapestry and Capri's head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing and advertising," the FTC said.


Sticker Shock




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