Morning Reads

Morning Reads




The Federal Reserve is taking center stage today, and with inflation proving stickier than expected, the central bank finds itself balancing between a hawkish and dovish view. While the policy-setting FOMC is widely expected to hold interest rates steady at the 5.25%-5.50% range for a fifth straight meeting, the bigger item to watch will be the so-called dot plot. Policymakers will update their rate and economic projections for the first time since December, potentially deviating from the three rate cuts they previously penciled in by the end of 2024.

Snapshot: A months-long standoff between markets and the Fed has drawn to a close, as a slew of economic data in recent weeks has reinforced the monetary authority's case for caution. In January, fed funds futures traders had priced in six to seven quarter-point rate cuts by the end of the year. Now, with inflation falling slower than expected, traders see three reductions starting in June or July, aligning with the Fed's December Summary of Economic Projections.

Earlier this month, Fed Chair Jerome Powell emphasized in congressional testimony that the central bank’s inflation battle has made good progress towards its 2% goal, though "just a bit more evidence" is needed before implementing the first rate cut. "We're not far from it," he declared at the time, setting up investors to pay close attention to any follow-up commentary in today's post-meeting press conference at 2:30 PM ET. Reporters may ask how the combination of this year's sticky inflation prints and weaker retail sales data affects his thinking, while taking into account the central bank's dual mandate of stable prices and full employment.

Risk of acting too late: Should the Fed make a hawkish shift, markets will take that as a higher-for-longer stance, which could be interpreted as "higher-until-recession," according to SA analyst Damir TokicLogan Kane also sees a risk of a recession, citing state-level economic data from the Philly Fed, and other figures from high-income countries that show their business cycles are ahead of the U.S. and suggest that the global economy is cooling. For another take on the rate dilemma, check out Fed Must Risk A Small Recession Now by Investing Group Leader James Kostohryz. (14 comments)

Cutting the burrito

What do you do when your company's stock price is worth thousands of dollars? Implement a 50-for-one stock split. The news, which sent shares of Chipotle (CMG) up 6% in premarket trade, will be subject to shareholder approval at its annual meeting on June 6. If approved, the company's shares are expected to begin trading on a post-split basis on June 26. Chipotle also announced a special one-time equity grant for all restaurant general managers as well as crew members with more than 20 years of service. (35 comments)

Silicon rush

The U.S. government is awarding Intel (INTCabout $20B in grants and potential loans, which includes up to $8.5B in direct funding through the CHIPS and Science Act. All that money will advance Intel's commercial semiconductor projects across Arizona, Ohio, New Mexico and Oregon. "It's a huge deal," Secretary of Commerce Gina Raimondo declared. "It means bleeding-edge semiconductors made in the USA, keeping the USA in the driver’s seat of innovation." It also follows Intel's plans to invest over $100B in America over five years to boost domestic chipmaking capabilities critical to emerging technologies like AI. (9 comments)

Going private

New ownership in the retail space? It sure looks like. Two major department store chains are exploring private options against a backdrop of macro challenges and low foot traffic. Nordstrom's (JWNfounding family has been involved in several reports, while Macy's (M) might be going down a similar route. The latter has even opened its books to Arkhouse and Brigade Capital to allow due diligence that could lead to a raised take-private offer. High inflation is another factor in the decision making, with budget-conscious consumers shopping at discount retailers such as T.J. Maxx (TJX) and Burlington (BURL).

Today's Markets

In Asia, Japan closed. Hong Kong +0.1%. China +0.6%. India +0.1%.
In Europe, at midday, London -0.1%. Paris -0.6%. Frankfurt +0.2%.
Futures at 7:00, Dow -0.1%. S&P -0.1%. Nasdaq +0.1%. Crude -1.3% to $81.63. Gold -0.1% to $2,156.60. Bitcoin -0.1% to $63,008.
Ten-year Treasury Yield -2 bps to 4.28%.

Today's Economic Calendar

MBA Mortgage Applications
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:30 PM Chairman Press Conference

Companies reporting earnings today »

What else is happening...

Unilever (UL) to separate ice-cream business, slash 7,500 jobs globally.

Dividend watch: JPMorgan Chase (JPM) raises dividend by 10%.

Planet Fitness (PLNT) faces boycott over transgender incident.

Slowing EV shift: Fuel economy ratings scaled back; emissions next.

JetBlue (JBLU) reduces flights to focus on 'bread and butter' routes.

Super Micro Computer (SMCI) issues clarification after CEO interview.

Huang: Nvidia will gain larger data center share than other firms.

Intel (INTC)-backed Astera Labs (ALAB) prices IPO at $36 per share.

Boeing (BA) mulls sales of defense assets to bolster balance sheet.

Saudi Arabia plans to create $40B fund to invest in AI technology.

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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