PSA: Cramer says stay invested

THURSDAY MARKET UPDATE

May 18, 2023

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Nvidia stock is up 106% this year. That means CEO Jensen Huang's net worth has increased to $27.3 billion, a 98% increase in just 5 months 🤯

That's the fastest growth rate for any billionaire in the world this year.

❌ Jamie Dimon and other top bank execs met with Senate Majority Leader Chuck Schumer yesterday to discuss the debt limit.

After the meeting, Dimon said the US “probably will not default”. Comforting…
Separately, President Biden expressed confidence that an agreement could be reached ahead of the X-date before departing for the G7 summit in Japan.
The GOP has not been shy about bashing the president’s decision to travel at this time.
Meanwhile, the US Treasury’s cash balance has dwindled to ~$87 billion from ~$140 billion last week.

🏘️ The construction of new homes in the US increased in April, rising 2.2% to an annualized rate of 1.4 million.

The gain was driven mainly by growth in the number of single-family homebuilding which rose by the most all year.
On the other hand, building permits—a proxy for future construction—fell 1.5% for the second consecutive monthly decline.
Total levels of housing starts and building permits are currently back down to pre-Covid levels.
Keep an eye on construction jobs, which remain elevated despite the decline in new home construction.

🏢 US commercial real estate (CRE) prices have fallen for the first time since 2011.

The drop was less than 1%, but it foreshadows additional headwinds for regional banks which hold significant amounts of CRE loans.
Additional declines in property values would add more pressure to an already vulnerable sector.
In Q4, banks held over 60% of the $3.6 trillion in outstanding CRE loans

🏦 Regional banks rallied yesterday after Western Alliance announced a +$2 billion increase in deposits.

The SPDR Regional Banking ETF (KRE) jumped by over 7% for its best day in over 2 years.
Even so, the benchmark remains down some ~33% this year.
Adding to the pressure: short interest as a percentage of shares outstanding in the index jumped to 92% from 74% last week.

📈 On the other side of the spectrum, homebuilders are thriving.

An index of homebuilding stocks hit a new 52-week high yesterday.
It’s also closing in on its December 2021 all-time highs.
The YTD outperformance reflects the gradual recovery in home construction and marks a sharp rebound from last year’s +40% decline.

🤖 The hype around the year’s new buzzword is still gaining steam.

There have been more than 1,500 mentions of artificial intelligence (AI) on US and EU Q1 earnings calls.
According to Goldman Sachs strategists, AI could potentially boost net profit margins by 400bps over a decade.
Steven Cohen—the billionaire founder of hedge fund Point72—thinks the impact of AI is reason enough to look past recessionary fears and believes “we’re going up” thanks to the new tech.
In fact, according to Societe Generale, the hype is so strong that without AI the S&P 500 would be down 2% this year rather than up +8%.

🛢️ US crude oil inventories increased by just over 5 million barrels last week.

Markets were expecting a 0.92 million draw.
Prices, however, rallied on optimism over a resolution of the debt limit crisis.
Meanwhile, the US government released another 2.4 million barrels from the Strategic Petroleum Reserves last week for the 7th straight weekly drain.
Earlier this week, the Biden administration expressed its intent to refill reserves by 3 million barrels.

📊 Yesterday’s highlights:

TGT 0.00 Target: $2.05 EPS (vs. $1.76 expected), $25.32 billion in sales (vs. $25.29B expected).

Net income dropped by 6% on flat YoY revenue.
The retailer expects sales to remain slow in the current quarter as consumers cut back on nonessentials and stick to basics like groceries.
The company reiterated its full-year outlook of flattish comparable sales and an EPS range of $7.75-8.75.

👀 What we’re watching today:

WMT 0.00 Walmart
BABA 0.00 Alibaba
AMAT 0.00 Applied Materials
ROST 0.00 Ross Stores
BEKE 0.00 KE Holdings
GRAB 0.00 Grab Holdings
BBWI 0.00 Bath & Body Works
WMS 0.00 Advanced Drainage Systems

Full earnings here.

Towering debt: Global debt has reached a near-record high of $305 trillion.
Pay gap: A little-known savings plan is widening the gap between executive and worker salaries.
Hard times: Around 39% of US adults—some 90 million people—are struggling to make ends meet.
Teen riders: A new Uber feature lets teenagers under 18 request and take rides independently.
Banned: Montana became the first state in the US to officially ban TikTok.
Epstein suit: Deutsche Bank will pay $75 million to settle a lawsuit linked to Jeffrey Epstein’s sex-trafficking ring.
EM value: Emerging markets are trading at a discount not seen since the late 1990s.
Public service announcement: Jim Cramer has advised his audience to stay invested in stocks.

Clawback: Alameda Research is seeking to recover millions in connection with deals struck by SBF ahead of FTX’s collapse.
Donations: The DOJ has instructed US lawmakers to return political donations received from FTX.
Mining hedge: Facing heavy tax pressure in the US from the Biden administration, crypto miner Bit Digital is expanding its operations to Iceland.
ETH ETF: Both Grayscale and Bitwise have halted plans for Ether futures ETFs amid regulatory scrutiny.
Liquidation plan: Customers of bankrupt firm Voyager Digital could recover 35% ($1.3 billion) of funds.

Check out GritCRYPTO for more.

Spin-off: Sony is considering a partial spin-off and listing of its financial services unit.
Uphill battle: The FTC faces challenges in its attempt to block Amgen’s $27.8 billion acquisition of Horizon Therapeutics.
EU LBOs showdown: Banks and private credit funds are competing to finance potential acquisitions in European leveraged buyouts.
Luxury cars: Chinese group Geely has doubled its stake in Aston Martin to 17%, becoming its third-largest shareholder.
Events market: British events organizer Informa will acquire B2B events group Winsight for $380 million.

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