Wall Street Breakfast

Tech leads stocks to new highs into July 4

The Nasdaq and S&P gained led by big names in shortened session. (0:17) FOMC minutes show Fed members wanting more data before rate move. (3:48) Jeff Bezos sells $5 billion in Amazon stock. (5:04)

Show Notes
Odds of Harris getting Democratic nomination now even with Biden
JPMorgan chief global markets strategist Marko Kolanovic said to leave bank

Episode transcripts: seekingalpha.com/wsb

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Duration:: 8m
Broadcast on:: 03 Jul 2024
Audio Format:: mp3

Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action news and analysis. Good afternoon. Today is Wednesday, July 3rd, and I'm your host, Kim Kong. Welcome to a special pre-holiday edition of Wall Street Lunch. The market's closed early ahead of the 4th of July, with a broader market rally led by growth stocks. The NASDAQ rose 0.9%, and the S&P 500 rose half a percent, both hitting new highs. The Dow fell less than 0.1%, dragged down by a price decline in United Health. Seven of the 11 S&P sectors closed higher, with info tech at the top, and videoed at a lot of heavy lifting rising 4.5%. Tesla also lent a hand, up 6.6%, and finishing higher for its 7th consecutive session. Daniel Jones, Seeking Alpha investing group leader of Crude Value Insights, says, "We truly live in crazy times, ignoring all the things going on domestically in the political arena internationally when it comes to geopolitical concerns, environmentally, and more, markets are most certainly crazy on their own. This optimism for the market can be attributed to signs of weakness for the U.S. economy." While many people were getting the jump on the festivities with the market closing at 1 p.m. eastern time, there was no rest for those providing economic data, both from the public and private sectors, as a raft of reports hit before, during, and even after market hours. Cutting to the chase, none of the indicators jolted the current market narrative, that while the labor market is still tight, inflation made cool enough for rate cuts in September. Jobs numbers dominated the pre-market news. ADP said June private payrolls rose by $150,000, below the consensus of $167,000, the official June jobs figures hit Friday, with payrolls expected to rise by $160,000 privately, and overall non-farm payrolls rising by $189,000. Weekly jobless claims rebounded after two weeks of declines. Claims rose to $238,000, from an upwardly revised $234,000, and were ahead of expectations of $233,000. And challengers measured June layoffs fell 24% from May, but was still 20% above the year ago level, and the highest June numbers since 2009, excluding the pandemic. Pantheon macroeconomist Ian Sheperdson says, "L layoffs are still trending higher, but the data will be noisy over the coming weeks." So claims usually are choppy in July, as a result of the timing of auto plant shutdowns, which vary every year. Nevertheless, most leading indicators suggest that claims will continue to trend up. On ADP, it has been more accurate to simply assume that last month's initial print will be repeated than to take ADP's estimate of face value, he warned. On this occasion, however, we think the deceleration signaled by ADP's data makes sense, given the pickup and layoffs and recent deterioration of hiring indicators. As of this morning, May factory orders unexpectedly fell 0.5%, versus a rise of 0.2% expected, and the Institute of Supply Management said its services index fell back into contraction territory down to 48.8 in June, from 53.8 in May, and well shy of the 53 consensus. Treasury yields fell after the ISM, with the 10-year yield back down to 4.35%. Wells Fargo economists said, "The mood music is changing, but we expect the overall ISM over states' current weakness. The select respondent comments in the release struck a ton of caution and generally mentioned slower or softer activity relative to a month or a year ago, but there's little indication that the tide is turning fast." Ultimately, an optimist looks at this release and sees much of what the Fed is fighting for, they added, service sector activity is cooling and giving way to a moderating labor market and ultimately softer price pressure. Under the bell, the FOMC released the minutes from its last meeting with members noting a need for more data to change policy. Fed officials at the June meeting emphasized that they did not expect that it would be appropriate to lower the target range for the federal funds rate until additional information had emerged to give them greater confidence that inflation is on its way to the target of 2%. Some officials stressed a need for patients for high rates to tighten monetary policy, but others did not write off a rate hike if inflation stays elevated. During the minutes, several participants specifically emphasized that with the labor market normalizing, a further weakening of demand may now generate a larger unemployment response than in the recent past when lower demand for labor was felt relatively more through fewer job openings. Among active stocks today, a paramount global deal with Skydance Media is expected to be completed by the weekend. CNBC says the transaction to purchase paramount controlling holder national amusements and merchant with Paramount could happen as soon as Friday. The terms of the revised deal are largely the same as the deal that was scuttled last month, except that there will now be $100 million for national amusements and $100 million for indemnification. Paramount controlling holder Sherry Redstone will receive $1.75 billion for national amusements. Amazon executive chairman Jeff Bezos sold 25 million company shares for $4.93 billion according to an SEC filing. He cashed in for an average of $197.20 per share. Bezos has now earned about $7 billion from selling Amazon shares this year after selling $12 million shares in February for more than $2 billion. His plan allows for him to sell up to 50 million shares by the end of January. Constellation Brands posted mixed results for its fiscal first quarter, revenue rose 6% year-over-year to $2.66 billion, comparable EPS of $357 was above the $345 consensus and $3.04 a year ago. Looking ahead, Constellation Brands sees full year 2025 EPS of $1350 to $1380 versus the consensus estimate of $1365. The company expects operating cash flow of $2.8 billion to $3 billion versus $3.1 billion consensus. And the board of directors at Southwest Airlines announced the adoption of a limited-duration shareholder rights plan as it looks to play defense against activist, Elliot Investment Management. The rights plan will be triggered if an entity holds a 12.5% economic interest in the company. In addition, the company highlighted that the rights plan is effective immediately and will expire in one year. Elliot announced that it had accumulated an economic interest in Southwest of about 11%. But it was noted that Elliot has not reported its full purported position in Southwest Airlines on any filings with the SEC and has made regulatory filings with U.S. antitrust authorities that would provide it the flexibility to acquire a significantly greater percentage of Southwest voting power across two of its funds starting as early as July 11. In other news of note, the odds of President Joe Biden getting the Democratic Party nomination of plunged with Vice President Kamala Harris' chance of facing former President Donald Trump jumping sharply. The odds of Biden being the nominee are now at 41% down from around 70% early Monday according to Bloomberg using odds from predicted. Harris has jumped from below 15% to 39%. Biden's debate performance last Thursday led to calls for him to retire from the race, but the odds of him being the nominee didn't really start to sink significantly until late Monday. Across the pond, the U.K. Conservative Party has been embroiled in a scandal on Betts Place that correctly predicted the date of the general election to be held on July 4. Even in the Wall Street research corner, well-known JP Morgan strategist Marco Klonovich is hanging up his spikes. Klonovich, who gained a media following and notoriety for having a PhD in theoretical physics, has struggled with broad U.S. equity market calls over the past couple of years. Siding an internal memo, Bloomberg reports that Klonovich is leaving his position as Chief Global Market Strategist at JPM to explore other opportunities. The memo says Hussein Malek will now be the sole head of global research, a position he had been sharing with Klonovich. Klonovich was consistently bullish on U.S. equities for much of 2022, a year in which the benchmark S&P 500 slumped nearly 20%. He turned bearish as the market bottom and has remained firmly so, even as the S&P remounted almost 25% in 2023 and advanced more than 14% in the first half of 2024. As recently as Friday, Klonovich backed his ultra-barish year-end target of 4,200 points for the S&P. That's all for today's Wall Street lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com/WSB. Enjoying the highest level of discussion of any stock or ETF in our community of serious investors like you? Find us at SeekingAlpha.com/subscriptions. [MUSIC PLAYING]