Fresh records

The growth trade could be returning as bond yields keep falling, with the rate on the 10-year Treasury falling another 2 bps to 1.48%. The moves helped propel the Nasdaq Composite upward on Monday, closing at a record high as cyclicals took the back seat. Overnight, contracts linked to the index inched higher, while Dow and S&P 500 futures were hovering around the flatline.

This all comes ahead of the Fed's two-day policy meeting. The gathering kicks off today and will be the focal point of the week for the markets. While the central bank is not expected to take any action, investors will be hanging on to every word that mentions interest rates, tapering plans, and of course - inflation. Transitory?

Speaking of inflation: The Producer Price Index - which measures the average price changes received by domestic producers - is set to be published this morning. The index is forecast to have climbed 0.5% in May, while the core PPI, which excludes volatile items like food and energy, is also estimated to increase 0.5%. Stay on the lookout for retail sales data as well, which will also be released at 8:30 a.m. ET.

On the global front: President Biden is continuing his tour through Europe after meeting with the G7 and NATO leaders. Today, he'll sit down with Vladimir Putin in Geneva, marking the first time an American president has met with a Russian president in almost three years. As the Biden administration attempts to focus on its domestic agenda, it may look to contain Russia on the global stage, though that may not come easy. Biden has previously called Putin "a killer," Moscow just categorized the U.S. as an "unfriendly nation" and neither has an ambassador in each other's country.

JPMorgan is stockpiling cash

While Fed Chair Jerome Powell sees current inflation as transient, as supply shocks and reopening demand level out, Jamie Dimon is preparing JPMorgan (JPM) for a different environment.

Quote: "We have a lot of cash and capability and we're going to be very patient, because I think you have a very good chance inflation will be more than transitory. If you look at our balance sheet, we have $500B in cash, we've actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates. I do expect to see higher rates and more inflation, and we're prepared for that."

Go deeper: Dimon also signaled that the pandemic-era trading boom could be coming to a close, While predicting a 38% decline from a year ago, revenues from fixed-income and equities trading would still be "something a little bit north of $6B." Net interest income was also pared down to $52.5B (from $55B) following muted loan demand, though investment banking revenue "could be one of the best quarters you’ve ever seen" due to surging M&A activity. (32 comments)

Trade truce

Transatlantic relations are getting a boost with the U.S. and EU on the cusp of a deal to resolve a 17-year dispute over aircraft subsidies. The breakthrough, set to be finalized today during President Biden's first European meeting in Brussels, would lift the threat of billions of dollars in punitive tariffs via a multiyear accord on subsidy limits. It would also remove a sizable shadow that's been hanging over the planemaking industry, as well as threats that other consumer goods could be targeted with retaliatory levies.

Backdrop: The dispute is one of the longest-running battles at the World Trade Organization. It started in 2004 when the U.S. withdrew from a 1992 aircraft subsidy pact, alleging that Airbus (OTCPK:EADSF) had managed to equal Boeing's (NYSE:BA) share of the jet market due to subsidized government loans, while the EU counter-sued over unfair R&D support and subsidized tax incentives. The case wound through the WTO over the years, but in 2019, it awarded partial victories to both planemakers. While they attempted to work things out over the coming years, billions of dollars in tariffs were progressively imposed by each side, until the two suspended the duties in March 2021, setting a four-month deadline to work out a deal.

The current standstill agreement would likely include a five-year suspension of tariffs and remove claims for compensation. The U.S. would also withdraw a demand that would see it get advanced notice of any future public loans to Airbus. Another critical detail is the benchmark to be used when determining whether the interest on a future loan is market compatible.

Competition is rising: The arrangement would arrive as President Biden pledges to reset relations with European partners, while taking a hard-line stance on China. Beijing has its own ambitions to become a global player in commercial aircraft and even plans on delivering its C919 to its first client at the end of 2021. "There's no question that the rise of China's aircraft industry is... on everybody's proverbial radar," U.S. Chamber of Commerce Senior Vice-President Marjorie Chorlins told reporters on Monday, noting the country's "heavy subsidization" of its industries and threats posed by its state-driven economic model.

Making inroads

Mixed reviews are pouring in for The Boring Company's first operational tunnel, which opened last week under the sprawling Las Vegas Convention Center. Teslas shuttle visitors from one end of the complex to the other, reducing a 45-minute walk to a two-minute underground ride that's surrounded by glitzy lighting. The 1.7-mile stretch (each tunnel is less than a mile) was built at a cost of $47M, plus another $5.5M paid to third-party inspectors. The project could eventually expand along the Las Vegas Strip, and to Allegiant Stadium and McCarran International Airport.

Flashback: The Boring Company started from Elon Musk's grand vision of revolutionizing transit. In 2016, he got fed up with the gridlock in Los Angeles, tweeting he was "going to build a tunnel boring machine and just start digging." The idea was to design intra-city transit systems (Loop) for passenger vehicles, which could eventually transition to autonomous cars or Hyperloop-based transportation for longer inter-city routes. The Boring Company was initially formed as a subsidiary of SpaceX, before becoming an independent business in 2018.

When first announced, Musk said the Las Vegas Convention Center (LVCC) Loop system would be able to transport people from Point A to Point B at 125 miles per hour, with no restrictions. However, at launch this past week, the network was transporting cars at around 35 mph. "We simplified this a lot," Musk said last October. "It's basically just Teslas in tunnels at this point, which is way more profound than it sounds." At maximum capacity, Boring hopes to bring in a fleet of 62 Teslas capable of holding five people each, with a transport capacity of about 4,400 people per hour.

Outlook: Projects from The Boring Company have been highly publicized, but many of them have gone up in smoke. Those include the Chicago Express Loop (linking downtown Chicago with O'Hare Airport) and the Baltimore–Washington Loop (linking the two cities with future plans to connect NYC), as well as the Westside tunnel concept in LA (parallel to Interstate 405) and the Dugout Loop (bringing Los Angeles Dodgers fans to the ballpark). Other negotiations and discussions are still underway in Fort Lauderdale, Miami, San Jose and San Bernardino.

While The Boring Company is not yet publicly traded, there are a number of tunneling companies that are listed, including Tutor Perini (NYSE:TPC), Granite Construction (NYSE:GVA), Primoris (NASDAQ:PRIM), EMCOR Group (NYSE:EME) and Great Lakes Dredge & Dock (NASDAQ:GLDD).

What else is happening...

AMC shares surge on #AMCDay; Morgan Stanley warns of 'recipe for disaster.'

MicroStrategy (NASDAQ:MSTR) completes $500M junk bond offering to buy more Bitcoin.

Lordstown Motors (NASDAQ:RIDE) sinks as leaders depart company after board probe.

Palantir (NYSE:PLTR), Snowflake (NYSE:SNOW) join the Russell 3000.

U.K. analysis shows COVID vaccines are effective against Delta variant.

Novavax (NASDAQ:NVAX) jab more than 90% effective in U.S. trial.

Oatly (NASDAQ:OTLY) stumbles as analyst ratings include some coolish views.

Citi still confident 10-year yield will hit 2% this year.

Uranium stocks slammed as China nuke plant leak hits sentiment.

Today's Markets

In Asia, Japan +1%. Hong Kong -0.7%. China -0.9%. India +0.4%.
In Europe, at midday, London +0.2%. Paris +0.4%. Frankfurt +0.4%.
Futures at 6:20, Dow flat. S&P +0.1%. Nasdaq +0.2%. Crude +0.5% to $71.22. Gold flat at $1865.20. Bitcoin +2.2% to $40027.
Ten-year Treasury Yield -2 bps 1.48%

Today's Economic Calendar

FOMC meeting begins
8:30 Producer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
8:55 Redbook Chain Store Sales
9:15 Industrial Production
10:00 Business Inventories
10:00 NAHB Housing Market Index
1:00 PM Results of $24B, 20-Year Bond Auction
4:00 PM Treasury International Capital