Morning Reads


Todays Open Interest Change




Johnson & Johnson (JNJ) unit LTL Management, which was created to file for bankruptcy as a way to handle lawsuits related to its talc baby powder, refiled for Chapter 11 bankruptcy protection after its first attempt was thwarted. LTL also offered to pay $8.9B over 25 years to resolve all current and future talc claims, higher than the $2B offer in its first bankruptcy filing in 2021. J&J, which has support from over 60K claimants for the latest offer, clarified that the second bankruptcy filing is not an admission of guilt and it stands behind the safety of its talc products. "Resolving this matter through the proposed reorganization plan allows claimants to be compensated in a timely manner," said J&J Worldwide Vice President of Litigation Erik Haas.

Background: J&J is facing multiple lawsuits over allegations that its baby powder products contain asbestos, which is known to cause various cancers. The company has maintained that its products are safe and has denied wrongdoing. However, to shield itself from mounting lawsuits, J&J created LTL exclusively to declare bankruptcy as a way to resolve the litigation. Note that J&J will discontinue talc-based baby powder products globally this year, and switch to an all cornstarch-based baby powder portfolio.

SA commentary: Mark Roussin, investing group leader of 'iREIT on Alpha', believes the lawsuits have added opportunity for long-term investors. "The lawsuits could cost J&J billions, but it is a money printing machine with strong cash flows, making any large settlement something the company can handle," he said. However, SA contributor Hunting Alpha thinks the talc liabilities - which could be as large as three years of free cash flow - is a major overhang on the stock.(23 comments)

Rates to top 5%

Cleveland Federal Reserve Bank President Loretta Mester is sticking with expectations of rates topping 5% to curb inflation, even after recent banking instability. "In my modal projection, to put inflation on a sustained downward projection to 2% and to keep inflation expectations anchored, monetary policy moves somewhat further into restrictive territory this year with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time," she said. “Precisely how much higher the federal funds rate will need to go from here and for how long policy will need to remain restrictive will depend on how much inflation and inflation expectations are moving down." Rida Morwa, investing group leader of ‘High Dividend Opportunities’, is of the view that a soft landing is still possible as recent data does not suggest the need for an enormous amount of additional tightening.(10 comments)

Cloud duopoly

The U.K.'s communications regulator recommended an in-depth probe into the country's cloud market, as hyperscalers Amazon (AMZN) and Microsoft (MSFT) have cornered the lion's share of the market, thereby limiting competition. "High levels of profitability for AWS, and substantial consistent growth in Microsoft's profits, indicate there are limits to overall competition," said the Office of Communications. "We're concerned that constraints on customers' ability to use more than one provider could make it harder for smaller cloud providers to win business." It cited egress fees, restrictions on interoperability and committed spend discounts as barriers to competition. Ofcom called on the Competition and Markets Authority to investigate the nature and extent of these barriers. Meanwhile, SA contributor Junius believes Microsoft is the better cloud play compared to Amazon, given wide margins and resilient enterprise demand. (8 comments)

BofA's top 10 stocks

Netflix (NFLXhas outperformed the broader market handily this year, up more than 17%. But bulls can remain confident as its password crackdown leads to more signups, according to Bank of America. Netflix is among the top 10 best ideas BofA's Alpha Generation Research team has identified for Q2, its list features eight Buys and two Underperforms. Tom Lloyd, leader of the 'Daily Index Beaters’ investing group, said Netflix's strong bounce off a deeply oversold bottom has stalled. (2 comments)

Today's Markets

In Asia, Japan -1.7%. Hong Kong -0.7%. China +0.5%. India +1%.
In Europe, at midday, London +0.4%. Paris -0.2%. Frankfurt -0.3%.
Futures at 6:30, Dow -0.1%. S&P -0.1%. Nasdaq -0.1%. Crude -0.2% to $80.54. Gold flat at $2038.80. Bitcoin +0.5% to $28,507.
Ten-year Treasury Yield +3 bps to 3.36%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Goods and Services Trade
9:45 PMI Composite Final
10:00 ISM Service Index
10:30 EIA Petroleum Inventories

Companies reporting earnings today »

What else is happening...

Bank of England clears UBS' (UBS) $3.25B takeover of Credit Suisse (CSin the U.K.

JPMorgan (JPM) CEO Dimon says repercussions from bank failures will last for years.

SEC charges founder of Frank for misleading JPMorgan (JPMin takeover deal. (AI) shares drop after short seller warns auditor on alleged accounting issues.

California grid needs $9.3B in upgrades to support shift to renewable energy.

Exxon Mobil (XOM) expects lower Q1 profit as oil and gas prices cooled off.

FedEx (FDX) set to outline plans for billions of dollars in cost-savings today.

U.K. privacy regulator fines TikTok $16M for failing to protect children’s data.

SPAC Digital World (DWAC) drops after Trump's arraignment, delayed 10-K filing.

Pfizer (PFE), BioNTech (BNTX) sued by Arbutus over COVID-19 vaccine patents.

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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