July 10, 2023

S&P 500 Surges on Consumer Strength

📰 News Organizations

  • Twitter Accuses Meta of Trade Secret Theft Over Threads App Launch. Twitter has raised allegations against Meta, claiming the hiring of Twitter employees and their involvement in the development of the Threads app constitutes the theft of trade secrets. Advertising executives speculate that if Threads incorporates advertising, it may possess an inherent advantage over other platforms because of Meta's ecosystem.

  • Buy Buy Baby Auction Canceled. Bed Bath & Beyond has canceled the auction for Buy Buy Baby due to a decline in the chain's value, but there are still interested parties willing to acquire its assets. Dream on Me Industries, a former supplier, has offered $15.5 million to purchase Buy Buy Baby's intellectual property, securing a potential lifeline for the chain if no higher bids emerge.

  • Alibaba Unveils AI Tool for Image Generation. Chinese tech giant Alibaba has introduced Tongyi Wanxiang, an artificial intelligence tool capable of generating images based on textual prompts. With tech giants in China and the U.S. competing in the advancement of generative AI technology, Tongyi Wanxiang marks Alibaba's latest offering in this field.

  • Ant to Buy Back Shares at 70% Lower Valuation Than at IPO. Jack Ma-backed Ant Group Co. aims to retain talent and offer an opportunity for investors affected by the prolonged regulatory scrutiny to reduce their stakes, allowing them to sell up to 7.6% of their equity instead of completely cashing out.

  • Samsung Reports Steepest Sales Decline in Over a Decade. Samsung Electronics recorded its most significant drop since 2009, raising uncertainties about the duration of the ongoing slump in demand for memory chips. The company reported a larger-than-expected 22% decrease in sales, amounting to 60 trillion won ($46 billion), while operating profit plummeted 96% to 600 billion won, surpassing average estimates.

🐦 Twitter

  • Energy’s the biggest winner today but still remains YTD worst performer. Cons Staples and Health Care biggest losers; small caps outperformed led by Russell 2000 Value; month off to a weak start for all. Source.

  • Among the 100 largest markets, only 1 market (Austin) saw a seasonally adjusted month-over-month home price decline in May. The other 99 markets posted an increase. Source.

  • Although the CBOE Volatility Index is near multi-year lows, the $VVIX remains elevated. The ratio of the $VVIX to $VIX hovers near 2-year highs which could imply that market participants don't expect the market calmness to continue. Source.

  • 'Taiwan's exports plunged 23.4% YOY in June, the fastest pace since 2009, exacerbating concerns about the slump in global demand for electronics and its impact on the economy.' Source.

  • The labor force participation rate among 25-54 year olds (prime working age) has moved up to 83.5%, the highest rate we've seen since May 2002. Source.

  • Employment in residential construction is holding strong, just slightly below its highest level this cycle. This is a good leading indicator of strength in the new home market. Source.

Avoid doing deals where your upside is less than life-changing and your downside is personal bankruptcy.

📓 Online Publications

  • New Home Listings Hit Lowest Point in a Year, Slowing Home Sales. The week ending July 1 marked a significant milestone as new home listings dropped by 21% compared to the previous year, resulting in 52 consecutive weeks of fewer fresh listings. The pace of home sales has also slowed with homes spending an additional 13 days on the market compared to last year.

  • Builder Hiring Surges as Real Estate Brokerages Keep Pace. In June, builders and residential contractors added nearly 60,000 jobs, surpassing expectations for this time of year. Despite a general trend of declining job and wage growth, both sectors continue to outperform and exceed the pace required to meet the Federal Reserve's inflation target.

  • Heavy Truck Sales Rise 15% Year-over-Year in June. The BEA reported that heavy truck sales in June reached an estimated 547,000 at a seasonally adjusted annual rate, marking a 15% increase compared to June 2022. This robust sales performance contradicts the typical pattern of heavy truck sales declining prior to a recession, indicating a strong market demand.

  • DigitalOcean Makes $111 Million Investment in AI. DigitalOcean is set to acquire GPU cloud computing platform Paperspace for $111 million, providing its developer-centric platform with enhanced capabilities for training and deploying AI models. The acquisition of Paperspace is expected to fuel DigitalOcean's growth starting in 2024.

🎧 Podcasts

  • Ant Group Fined Nearly $1 Billion by Chinese Regulators, Alibaba Shares Were Up. The fines with a total of 7.123 billion yuan ($982 million) were imposed due to violations of laws and regulations related to banking, insurance activities, and payment and settlement businesses conducted by Ant Group in previous years. VTM says investors sees this as a step in the right direction for Alibaba which is a 33% owner of Ant Group. Source(1:02)

  • High Inflation Distorts Consumer Confidence Surveys, Masking Strong Spending Trends. Andreas Steno Larsen says surveys capturing consumer confidence during times of high inflation can be misleading indicators of actual consumer spending. While pessimistic survey results suggest low confidence, the expectation of rising prices can actually drive consumers to make purchases sooner, leading to higher levels of consumption than the surveys imply. Source(20:46)

  • Hiring Slows As Complex Economic Landscape Unfolds. Peter Boockvar says the economy is experiencing a slowdown in hiring, evident from the increase in jobless claims. However, the expected recession following the Fed's rate hikes has not materialized yet, partially due to the impact of fiscal government spending, creating a complex and unique economic situation. The flow of fiscal government spending has served as a cushion. Source(2:01)

  • S&P 500 Surges on Consumer Strength. The S&P 500 had its strongest first-half start since 2019, with a 6.6% increase in June and a year-to-date total return of 16.9%. Despite initial bearish sentiments, nearly all major asset classes rallied, except for Commodities, driven by consumer strength and the addition of 500,000 private sector jobs in the U.S. economy in June alone. Source(17:30)