Morning Reads


Todays Open Interest Change




A mountain of credit card debt is piling up as Americans turn to plastic to counter their dwindling purchasing power. According to the Federal Reserve Bank of New York, consumers now owe a record $988B on their cards, up 17% from a year earlier, or about $5,700 per person. While the steadily rising figure took a break during the pandemic years, the number is causing renewed nervousness as it flirts with the fast-approaching $1T milestone.

Driving the spike: High inflation is pushing more consumers to put non-discretionary spending on cards, while others may be having a harder time paring back their lifestyles despite the price pressures. Interest rates are compounding the issue, with the average annual percentage rate now over 20%, making it a really costly debt for consumers. It's also higher than at any point since the Fed started tracking card APRs in 1994, contributing to the overall U.S. household debt that topped $17T in Q1.

"The first few years of the 2020s have seen a number of acute economic, financial, and geopolitical disruptions on a worldwide scale, and it will take time for the ultimate consequences of these shocks to be fully felt," PIMCO writes in a new article called The Aftershock Economy. SA analyst Wolf Richter also discusses the current landscape, but says that "despite Fed tightening and bank collapses, it's still an astoundingly loose financial situation." Looking at individual stocks, investors can discover the latest SA analysis on credit card giants such as Visa (NYSE:V), Mastercard (NYSE:MA), American Express (NYSE:AXP) and Discover (NYSE:DFS).

What's next? While economists have been predicting a recession for over a year, it has not yet appeared, in part due to consumer spending. Some are more concerned about squeezed budgets as the Fed has not yet abandoned its hiking cycle - but is set to take more of a "skip" this week - and are closely watching carrying balances, delinquency rates and wage comparisons to determine the direction of the economy. Others see things settling down, with companies foregoing further price increases (or even cutting prices) as consumer sales cool off. That would help tame inflation and rising bills, as well as the support seen from continued resilience in the labor market. (24 comments)

Recession watch

Rising credit card debt is just one of the factors in sizing up economic growth, but is the U.S. still headed for a recession in 2023?

· Yes (the conditions are finally sinking in)
· No (story of the economist who cried wolf)

Take the survey and share your thoughts in the WSB comments section.

Right on schedule

UBS (UBS) has completed its $3.25B deal to buy troubled rival Credit Suisse (CS), about two months after the deal was brokered by the Swiss government to avoid the smaller bank's bankruptcy. UBS is also reportedly imposing strict curbs on Credit Suisse bankers to address risks, including banning new clients from high-risk countries and the launch of new products without UBS' approval. SA analyst Anna Sokolidou believes UBS will face more challenges ahead, even though the deal looks like a bargain. "UBS still can't fully estimate the cost of impaired assets, capital outflows, and other resulting losses. Retaining staff will be an issue, whilst more legal proceedings are likely ahead."

Side effects?

BioNTech (BNTX) is said to be facing hundreds of lawsuits seeking compensation over the alleged long-term side effects of its COVID-19 vaccine, which was developed in conjunction with Pfizer (PFE). The first hearing scheduled today involves a German medical worker who is seeking damages for symptoms including heart arrhythmia and brain fog that she claims were caused by getting vaccinated. "The positive benefit-risk profile of Comirnaty remains positive and the safety profile has been well characterized," BioNTech responded in a statement, noting that 1.5B people had received the shot across the globe. Bulk orders for COVID vaccines in the EU also contain certain legal liability waivers, which could put EU governments on the hook for some of the costs. (1 comment)

Generative AI

As generative AI continues to grab headlines, Needham highlights some underappreciated stock plays aside from bellwether names such as Nvidia (NVDA) and Microsoft (MSFT). The firm sees generative AI upside for consumer tech players through new revenue streams and pricing power, as well as market share gains for early adopters. Cost savings from automation efficiencies through AI are expected to take off in the next few years for the companies that get it right. Sleeper stock picks include Compass (COMP), Redfin (RDFN), Shutterstock (SSTK) and nearly a dozen others. (40 comments)

Today's Markets

In Asia, Japan +0.5%. Hong Kong +0.1%. China -0.1%. India +0.2%.
In Europe, at midday, London flat. Paris +0.7%. Frankfurt +0.6%.
Futures at 7:00, Dow +0.9%. S&P +1.2%. Nasdaq +1.7%. Crude -2.2% to $68.63. Gold +0.1% to $1,979.60. Bitcoin +0.8% to $25,972.
Ten-year Treasury Yield flat at 3.75%.

Today's Economic Calendar

11:30 Results of $40B, 3-Year Note Auction
1:00 PM Results of $32B, 10-Year Note Auction
2:00 PM Treasury Statement

Companies reporting earnings today »

What else is happening...

Air taxi interest heats up as FAA shines light on milestones.

Nasdaq (NDAQ) to buy Adenza in $10.5B cash-and-stock deal.

Federal judge tosses 3M (MMM) earplug unit's bankruptcy filing.

Netflix (NFLX) sees spike in subscribers after password crackdown.

Jefferies weighs in on Microsoft (MSFT)-Activision (ATVIdeal closing.

JetBlue (JBLU), American Airlines (AAL) try to rework Northeast Alliance.

Glencore (OTCPK:GLCNF) eyes buying Teck's (TECKcoal business.

U.S. solar tallied best-ever Q1, with usage seen doubling in five years.

Alzheimer’s disease market expected to reach $14B globally in 2030.

Illumina (ILMN) CEO Francis deSouza quits in win for Carl Icahn.

Lobby group sues U.S. government over drug pricing program.

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.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)