Conflicting Signals and the Return of Roaring Kitty

June 10, 2024

Conflicting Signals and the Return of Roaring Kitty – June 7 Market Recap

Indices

Dow 38,798, +112 or +0.29%.
Nasdaq 17,133, +398 or +2.38%.
S&P 5,346, +68 or +1.29%.
MSCI EAFE 2368.97, +13.3 or 0.56%.
USD10Y 4.514%, -8.4bp or -1.86%.
WTI Crude $75.38 bbl, +$1.16 or +1.56%.

Markets cheered the fewest job openings since February 2021 on Tuesday with the release of April’s JOLTS report (Job Openings and Labor Turnover Survey) and continued to celebrate through Wednesday as both the S&P and Nasdaq closed at record highs after May’s ADP Private Payrolls report revealed fewer jobs were created than expected. However, investor’s should have known better as the ADP Private Payrolls report seemingly has very little correlation to the Non-Farm Payrolls report and that held true on Friday when the Department of Labor announced very strong job growth in May to the tune of 272,000 new jobs created when only 190,000 had been expected. Even worse, May’s Average Hourly Earnings crept up to +0.4%, which was higher than expected and a full two tenths higher than last month’s figure. All of which is to say that the CME FedWatch tool now gives nearly a zero probability of a rate cut this week, only a 10% probability of a rate cut at the July meeting, less than even money for a rate cut in September, and nearly a 60% chance of a rate cut in November.

“Roaring Kitty,” aka Keith Gill, posted his holdings of GameStop on Reddit on Monday showing that he still owns well over $150 million of the company. Gill, who was the subject of Netflix’ “Dumb Money” has been a GME supporter since July 2020 and is widely credited with the social media inspired movement to buy “meme” stocks GME, BBBY, and AMC to name a few. The post sent GME up +21% on Monday alone. On Thursday, Gill announced that he would host a YouTube Livestream event, the first he had done in four years. GME traded up +47% intraday, another +31% post-close, and on paper, made Gill a billionaire (on an original $53,000 investment). However, on Friday, before Gill went live, GME stole his thunder, pre-announcing their quarterly earnings ahead of schedule (and it was not good news) and disclosing a stock sale to take advantage of the recent run up in share price; GME traded down 39%. To be continued…

This Week: June 10 – June 14

Earnings reports slow to a trickle this week with Broadcom (AVGO), Oracle (ORCL) and Adobe (ADBE) headlining the few notable names.

Wednesday is the big day for economic data as the May Consumer Price Index (CPI) will be released and Fed Chair Powell will host his press conference after the Fed will almost certainly decide not to change interest rates at this meeting. On Thursday, the Producer Price Index (PPI) will be published.

Economic Calendar

Monday – N/A.
Tuesday – N/A. Earnings: Oracle (ORCL).
Wednesday – May Consumer Price Index (CPI), FOMC Interest Rate Decision, Fed Chair Powell News Conference. Earnings: Broadcom (AVGO).
Thursday – Initial Jobless Claims, May Producer Price Index (PPI). Earnings: Adobe (ADBE).
Friday – N/A.

If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.

Last Week‘s Daily Trading Recap…

Monday – Dow -115 to 38,571, Nasdaq +93 to 16,828, S&P +5 to 5,283, USD10Y -11.2bp to 4.402%.

Six of eleven S&P sectors traded down today, led lower by Energy, Utilities, and Industrials.
May S&P U.S. Manufacturing PMI was better than expected at 51.3 vs 50.7 and vs 50 last month.
May ISM U.S. Manufacturing was below consensus at 48.7% vs 49.6% and vs 49.2% last month.
OPEC+ Members led by Saudi Arabia, Russia announced they will end their voluntary production cuts and bring 2.2 million bbl/day back to the markets over six months, beginning in October.
Meme stock GameStop (GME) continued its incredible climb, up +21% in the normal session and another +7% in the extended session. The rally came after Keith Gill, aka “Roaring Kitty,” posted on Reddit showing that he still owns well over $150 million of the company. Gill, who was the subject of Netflix’ “Dumb Money” has been a GME supporter since July 2020 and is widely credited with the social media inspired movement to buy “meme” stocks GME, BBBY, and AMC to name a few. The Wall Street Journal is now reporting that E-Trade/Morgan Stanley is having internal discussions as to whether to ban Gill from its trading platform.

Tuesday – Dow +140 to 38,711, Nasdaq +28 to 16,857, S&P +8 to 5,291, USD10Y -6.6bp to 4.336%.

Six of eleven S&P sectors traded higher today, led by Real Estate, Consumer Staples, and Technology.
April Job Openings and Labor Turnover Survey was 8.1 million, down -300,000 from last month and the lowest figure since February 2021.
India’s stock market fell -5.7%, wiping out the entire year’s gains after Prime Minister Modi’s BJP party failed to win as many seats as expected.

Wednesday – Dow +96 to 38,807, Nasdaq +331 to 17,187 (record high), S&P +62 to 5,354 (record high), USD10Y -4.7bp to 4.289%.

Seven of eleven S&P sectors traded higher today, led by Technology, Communication Services, and Industrials.
The May ADP Employment report was lower than expected at 152,000 vs 175,000 jobs added and vs 188,000 last month.
The May S&P Services PMI was in line with expectations and unchanged from last month’s 51.8 print.
May ISM Services rebounded from last month’s 49.4% print and beat expectations at 53.8% vs 50.7%.

Thursday – Dow +79 to 38,886, Nasdaq -15 to 17,173, S&P -1 to 5,352, USD10Y -0.8bp to 4.281%.

Seven of eleven S&P sectors traded higher today, led by Consumer Discretionary, Energy, and Consumer Staples.
Jobless claims rose to 229,000 vs 220,000 forecast and vs. last week’s slightly revised higher print of 221,000 (originally 219,000).
The European Central Bank cut rates for the first time since 2019.
GameStop (GME) skyrocketed +47% intraday and another +31% post close after Keith Gill aka “Roaring Kitty” scheduled a YouTube livestream for tomorrow, his first in four years. At these valuations Gill, whose initial investment was $53,000, is worth nearly $1 billion on paper.

Friday – Dow -87 to 38,798, Nasdaq -40 to 17,133, S&P -6 to 5,346, USD10Y +14.9bp to 4.43%.

Seven of the eleven S&P sectors traded down today, led lower by Utilities, Materials, and Real Estate.
May Non-Farm Payrolls were strong at 272,000 jobs created vs 190,000 expected and vs 165,000 last month.
May Average Hourly Earnings were also strong at +0.4% vs +0.3% expected and +0.2% last month.
The May Unemployment Rate rose slightly to 4.0% vs expectations and last month’s 3.9% figure despite the strong jobs number.
GameStop (GME) pulled the rug out from under Keith Gill, publishing their earnings (not good) earlier than expected and announcing a sale of stock to take advantage of the recent run up in the company’s stock price. Despite Gill’s YouTube livestream, the stock fell -39% from Thursday’s close.

If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.

Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ACHR, AVGO, BITB, ETHE and GBTC.