Morning Reads

Morning Reads

Todays Open Interest Change




Investors are bracing for a week of political wrangling in Washington after President Biden and House Speaker Kevin McCarthy inked a deal on the debt limit. Both sides now have to muster enough votes to win Congressional approval, despite some opposition from the likes of the Republican Freedom Caucus and progressives in the Democratic Party. While enough bipartisan support is expected to be eventually garnered, the measure could still run into some procedural obstacles, as the clock ticks down to avoid a catastrophic default by June 5.

Legislative text: The agreement lifts the current $31.4T deal ceiling into 2025, meaning the limit on government borrowing would be extended until after the next presidential election. Non-defense spending will be capped at current levels for the next fiscal year, and only rise by 1% in 2025. Congress would also need to approve 12 annual spending bills or risk facing a snapback to spending limits from the previous year.

Other changes that were central to the compromise included limiting some food stamp provisions to encourage recipients to find jobs. The agreement also halts some funds to hire new IRS agents, claws back billions of dollars in unspent COVID relief, and would speed up big energy projects through permitting reform. In addition, a pause on student-loan repayments will come to an end in August, though Biden's student loan forgiveness plan will end up being decided by the Supreme Court.

Go deeper: U.S. stock index futures advanced following the release of the bill, with SA Investing Group Leader ANG Traders forecasting new market highs, though Mott Capital Management sees the potential for a deal draining a massive amount of liquidity from the market. The measure will be taken up this afternoon by the House Rules Committee, which will determine the framework for considering the legislation before a vote takes place in the House on Wednesday. If approved, a decision in the Senate would follow, and could happen by the weekend. (17 comments)

$1T market cap club

Building on a meteoric rally, shares of Nvidia (NASDAQ:NVDA) are up another 3.5% in premarket trade, putting the stock over $400 to start the week. It also puts the company above a $1T valuation if the gains will hold, as the stock market darling rides a wave of investor exuberance surrounding artificial intelligence. The chipmaker has responded in kind by refreshing its PR feed, publishing seven separate press releases over the last 24 hours. Among them were a slew of products and services tied to artificial intelligence, like an AI supercomputer platform called DGX GH200, that's expected to be used by initial customers like Google (GOOGL), Meta (META) and Microsoft (MSFT). Will the rally go on? SA analysts like Vlad Deshkovich and JR Research hash it out in two new articles Long-Term Growth Gets Priced In and Don't Wait Till Everyone Starts Selling. (12 comments)

Under strain

Tensions are reportedly rising between the world's biggest oil producers, as Russia continues to pump huge volumes of cheaper crude oil into the market and undermine Saudi efforts to boost prices. Last week, the Kingdom's energy minister issued a warning to oil speculators, signaling to the market that a further production cut was possible, but Moscow's deputy prime minister soon contradicted him by expressing doubts about further reductions. Remember that the two OPEC+ heavyweights entered an oil price war in 2020 over proposed crude production cuts, which sent prices crashing. However, don't count out a resolution, with the ties and relationship able to survive difficult dynamics like Russia's invasion of Ukraine. (161 comments)

Got a light?

Meet the newest candidate looking to identify as an ESG stock: Philip Morris (NYSE:PM). CEO Jacek Olczak believes that efforts - like pushing away from cigarettes towards devices like its IQOS heated tobacco stick - could set up the tobacco group for inclusion in one of the fastest-growing segments of the investment management industry. In fact, vapor-based nicotine alternatives accounted for about a third of Philip Morris' revenues in 2022, though others see an ESG classification as an inherent contradiction. Compounding the problem is that there's no standard framework that defines "environmental, social and governance," despite developments in areas like Europe, where many asset managers and pension funds have sold off tobacco stocks in response to ESG mandates. (7 comments)

Today's Markets

In Asia, Japan +0.3%. Hong Kong +0.2%. China +0.1%. India +0.2%.
In Europe, at midday, London -0.6%. Paris -0.4%. Frankfurt +0.5%.
Futures at 6:30, Dow +0.2%. S&P +0.6%. Nasdaq +1.1%. Crude -1.2% to $71.80. Gold +1.5% to $1973.70. Bitcoin +0.1% to $27,893.
Ten-year Treasury Yield -10 bps to 3.72%

Today's Economic Calendar

9:00 S&P CoreLogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 Consumer Confidence
10:30 Dallas Fed Manufacturing Survey
1:00 PM Fed's Barkin Speech

Companies reporting earnings today »

What else is happening...

Debt ceiling deal would speed up Mountain Valley Pipeline (ETRN).

REITs continue downward trajectory even as other major indices gain.

Paramount (PARA): Potential merger arbitrage with downside protection.

Concerns over COVID lockdowns in China may be overstated.

Why 2023 is turning into the year of the healthcare spinoff.

Drug pricing watchdog raises alarm over upcoming liver disease meds.

Next set of COVID boosters to target new Omicron variants.

Disgraced Theranos founder Elizabeth Holmes reports to prison.

ZIM (ZIM): A buy-high-sell-low investment strategy isn't viable.

Rolls-Royce (OTCPK:RYCEY) eyes cutting thousands of jobs in turnaround.

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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