Morning Reads


Todays Open Interest Change




Fed policymakers will conclude their May policy meeting today with an assessment on whether they've done enough to cool down the hottest inflation seen in 40 years. Market participants are betting that the Federal Open Market Committee isn't finished yet in its rate-hiking moves, with an 88% probability of a 25-bps hike, according to the CME's FedWatch Tool. That would bring the federal funds rate target range to 5.0%-5.25%, marking the first time it topped the 5% mark since the lead-up to the global financial crisis.

Data to consider: Indeed, most economic reports over the past week appear to back up the argument for another rate hike, like the recent resolution of the First Republic Bank (FRC) deposit withdrawal stress. Another point that makes this case is Initial Jobless Claims, which unexpectedly fell on Thursday, in the face of a labor market that has been persistently resilient. The Q1 GDP report made central bankers' decision more complicated, however, while the FOMC has also been watching the Employment Cost Index and Personal Income and Outlays.

RSM U.S. Chief Economist Joseph Brusuelas will be focusing on the Fed statement for any change to its expectation of "some additional policy firming" that it included in its March statement. "The committee will likely alter that phrase by changing 'some' to 'any', signaling flexibility on the future course of rate hikes and setting the stage for a possible strategic pause in the central bank's efforts to restore price stability," he wrote in a post. And if Fed Chair Jerome Powell does signal a willingness to pause the rate hikes, he's almost certain to add that the central bank isn't yet declaring victory on its inflation fight.

What about markets? Investors are apparently ignoring the Fed's inflation-fighting resolve, writes SA analyst Logan Kane, while John Mason takes a deeper dive into just how much depends upon Jay Powell. Mott Capital Management and Cavenagh Research also go head-to-head on the coming direction of U.S. monetary policy. See The Fed's May Rate Hike Will Likely Not Be Its Last and The Fed May Cut In May, June, And July To 4.0%. (74 comments)

Crisis rekindled

Regional bank stocks are trading at their lowest level since 2020 as investors debate whether the sector will see broader contagion following the second-largest bank failure in U.S. history. Even market movement is being debated, like the severe losses concentrated at PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL), which tumbled 27% and 15%, respectively, on Tuesday (the selloff is continuing premarket). Some say that there has been no change in the fundamentals, and the only reason why the stocks are plunging is because of their venture-focused business models, which mirror those of recently failed lenders like Silicon Valley Bank. Both PacWest and Western Alliance also posted earnings results in April that indicated their deposit bases had stabilized, but others feel that shareholders and depositors running for the exit at the same time is a recipe for disaster. (11 comments)

Take the Fourteenth?

A standoff over the debt limit has prompted administration officials to once again explore the constitutionality of the ceiling as the U.S. inches closer to a catastrophic default. While President Biden has repeatedly said it is the job of Congress to raise the ceiling, what happens if a compromise cannot be reached? One such theory, which would surely expose the government to lawsuits, would see new debt continue to be issued under the 14th Amendment, which maintains that the "validity of the public debt of the United States... shall not be questioned." Lawyers at the White House, Treasury and DOJ have never issued formal opinions on the question, but financial markets would be roiled if the option - once deemed as unthinkable - was used. Also see why Congress first instituted a debt ceiling and if the U.S. has ever defaulted. (7 comments)

Activist battle

Icahn Enterprises (NASDAQ:IEP) lost a fifth of its value yesterday following a new report from Hindenburg Research. The short seller alleged the IEP units are "inflated" and Carl Icahn "made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well." The Wall Street legend was quick to respond and defended his holding company that consists of seven primary businesses in energy, investment, automotive, food packaging, real estate, home fashion and pharmaceuticals. Hindenburg is one of the most high-profile short sellers in the past few years, and is well known for its calls on Nikola (NKLA) and Lordstown Motors (RIDE), as well as this recently targeted tech company. (454 comments)

Today's Markets

In Asia, Japan closed. Hong Kong -1.2%. China closed. India -0.3%.
In Europe, at midday, London +0.3%. Paris +0.8%. Frankfurt +0.8%.
Futures at 6:30, Dow +0.1%. S&P +0.2%. Nasdaq +0.2%. Crude -2.7% to $69.72. Gold +0.1% to $2024.80. Bitcoin +2.3% to $28,633.
Ten-year Treasury Yield -3 bps to 3.41%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Composite Final
10:00 ISM Services Index
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:30 PM Jerome Powell Press Conference

Companies reporting earnings today »

What else is happening...

Investing millions, Ben Shapiro joins board of Oramed Pharma (ORMP).

Pfizer (PFEreaffirms FY23 outlook as COVID franchise outperforms.

AMD (AMD) CEO says chipmaker still dealing with a 'mixed' sales market.

Upbeat bookings outlook from Uber (UBER), talks about the competition.

Energy stocks crushed along with crude as economic outlook sours.

Despite Q1 beat, slower pace of BP (BP) buybacks hits sentiment.

Bud Light backlash: Anheuser-Busch (BUD) said to offer free beer.

Starbucks (SBUX) falls after setting cautious guidance on conference call.

Ford (F) cruises past expectations, but the stock still falls.

White House calls a meeting of tech CEOs for AI safety measures.

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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