Friday Morning Reads

Friday Morning Reads



Open Interest Changes:




Wall Street's first decline for the month of June came yesterday in a seesaw session that was highlighted by an unexpected rise in continuing jobless claims, ECB stimulus, economy reopenings and nationwide protests. The Nasdaq joined the S&P 500 in negative territory and the Dow recorded a nominal gain as FAANGs fell back and American Airlines (NASDAQ:AAL) posted its best day on record. S&P 500 futures rebounded nearly 1% overnight, ahead of today's nonfarm-payrolls report forecast to show more than 8M job losses in May and a surge in the unemployment rate to nearly 20%.

Rally goes on

If the job figures mentioned above are seen in today's data, it would mark a new post-WWII record and approach the worst levels since the Great Depression. Why is the market shrugging it off? While layoffs remained very high, they eased considerably in the second half of May as businesses reopened after locking down since mid-March to slow the spread of COVID-19. Manufacturing, services industries and consumer confidence levels are also stabilizing, adding to the hopeful signs of an economic recovery.

More stimulus

In a change of trends, European stocks are now outperforming their U.S. peers in the latest leg of the rebound, lifted by bets of a quick recovery and enormous stimulus plans. The ECB on Thursday approved a stimulus package that surpassed expectations, nearly doubling the size of its Pandemic Emergency Purchase Plan to €1.35T and extending the program to at least June 2021. We'll see what the U.S. has planned next week, when the Fed gathers for its June policy meeting.

New trades

The initial public offering market reopened with a bang this week as Warner Music (NASDAQ:WMG) returned to the public markets after nine years of being private. Others in the U.S. jumped on the bandwagon, including ZoomInfo (ZI) and Shift4 Payments (FOUR), while NetEase (NASDAQ:NTES) and progressed toward listings in Hong Kong as Chinese companies seek secondary listings closer to home amid a U.S. crackdown (see below). Slipping under the radar yesterday was electric heavy-truck maker Nikola (NASDAQ:NKLA) going public after its merger with VectoIQ was approved by shareholders.

Investment tensions

Nasdaq's (NASDAQ:NDAQ) recent decision to tighten listing rules to combat fraudulent accounting practices at China-based companies "should serve as a model for other exchanges in the U.S., and around the world," according to Secretary of State Mike Pompeo. "I applaud Nasdaq for requiring auditing firms to ensure all listed companies comply with international reporting and inspection standards." The statement is the latest flashpoint in U.S.-China relations at a time of friction between the world's two largest economies over trade, the coronavirus pandemic and Hong Kong.
Go deeper: China says the move will severely harm U.S. interests.

Breakthrough for OPEC+

The cartel and its allies are set to extend production cuts through the end of July and could meet this weekend to sign off on the deal, Bloomberg reports. After almost a week of talks, Russia and Saudi Arabia clinched a tentative agreement with holdout member Iraq, which made less than half of its assigned cutbacks last month. Details are still not clear, but a failure to reach an understanding could have brought millions of barrels of oil back on the market.

2 billion doses

AstraZeneca (NYSE:AZN) is aiming to produce 2B doses of a coronavirus vaccine, including 400M for the U.S. and U.K. and 1B for those in low- and middle-income countries. Distribution would likely start in September or October, with the balance of deliveries likely to be made by early 2021. It is not known whether the vaccine, named AZD1222, will prove safe and effective in clinical trials, but "we believe the probability of success is high enough that we are willing to support the manufacturing at-risk," Dr. Richard Hatchett, who is involved with the project, said in a statement.

Chips in play

Casino stocks rose yesterday as gamblers flocked to downtown Las Vegas for reopening parties. Temperature checks, socially distanced slot players and face masks at blackjack tables are now common, and the Nevada Gaming Control Board required casinos to limit gambling floors to 50% occupancy. Buffets, nightclubs, big shows and live entertainment venues will stay shuttered for the time being.

Musk vs. Bezos

In a reply on Twitter, Tesla (NASDAQ:TSLA) CEO Elon Musk called for Amazon (NASDAQ:AMZN) to be broken up, noting "monopolies are wrong!" The comment came days after the entrepreneur said he was "off Twitter for a while" and was in response to an email image of Amazon's restriction on a book that discussed the COVID-19 pandemic. CNBC in a segment highlighted the animosity that may potentially exist between Elon and Jeff Bezos, not to mention their competing interests in space, with the latter's Blue Origin also building spacecraft. Amazon is also invested in Rivian, an electric vehicle manufacturer.

Flagging state-controlled media

Facebook (NASDAQ:FB) has begun labeling state-controlled media organizations like Russia's Sputnik, Iran's Press TV and China's Xinhua News to alert users whether content may be under the influence of a state. "State-controlled media outlets rarely advertise in the U.S.," the company wrote in a blog post. "Nevertheless, later this summer we will begin blocking ads from these outlets in the U.S. out of an abundance of caution ahead of the November 2020 election." Facebook will not label any U.S.-based news organizations, as it determined that even U.S. government-run outlets have editorial independence.

What else is happening...

Slack (NYSE:WORK) sets partnership with Amazon Web Services (AMZN).

Novavax (NASDAQ:NVAX) scores defense funding for COVID-19 vaccine.

J.C. Penney (OTCPK:JCPNQ) to close 154 stores in first post-bankruptcy phase.

NBA to vote on 22-team short-season return.

GM Cruise is trying to poach Zoox (ZOOX) engineers - Reuters.

Thursday's Key Earnings
Broadcom (NASDAQ:AVGO-1.1% AH following in-line fiscal Q2.
DocuSign (NASDAQ:DOCU+5.5% AH posting strong quarter during pandemic.
Gap (NYSE:GPS-6.7% AH with comp sales down 61%.
J.M. Smucker (NYSE:SJM-4.8% giving back strong gains.
Slack Technologies (WORK+5.4% AH seeking partnership with AWS.

Today's Markets
In Asia, Japan +0.7%. Hong Kong +1.7%. China +0.4%. India +0.8%.
In Europe, at midday, London +1.1%. Paris +1.9%. Frankfurt +1.5%.
Futures at 6:20, Dow +1.2%. S&P +0.9%. Nasdaq +0.4%. Crude +1.8% to $38.07. Gold -0.8% to $1713.50. Bitcoin +2.8% to $9820.
Ten-year Treasury Yield +3 bps to 0.85%

Today's Economic Calendar
8:30 Non-farm payrolls
1:00 PM Baker-Hughes Rig Count
3:00 PM Consumer Credit

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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