Tuesday Morning Reads
- $30 Billion Market Challenged by China
- Is the U.S. Economy Too Hot or Too Cold? Yes.
- ‘Every Time, It’s Messy:’
- Biden to Name a Critic
- U.S. Mortgage Applications Decline
- Bankers Need 72-Hour Week to Master Job
- Surprise Award
- Netflix to Add Mobile Video Games
- Disney Is Chipping Away
- Hypersonic-Weapons Era
- Space Tourism Tax
- Supply Shortages
- Not Working for Us
Open Interest Changes:
While it has since pulled back above $30,000, Bitcoin (BTC-USD) broke below the key support level on Tuesday, weighing on the rest of the crypto space. Some are pointing to a consolidation phase and shakeout of the weaker hands, though others are suggesting further losses could lie ahead. Whatever the case may be, short-term traders who invested in Bitcoin at its highs are feeling a lot of pain right now (the crypto touched a record $65,000 back in April).
Buy and hold: "It's important to reconcile the time horizon in which we're analyzing Bitcoin," said Katie Stockton, founder of Fairlead Strategies. "If we see a rebound by the end of this week, that would suggest Bitcoin has seen some false breakdowns and could resume its long-term uptrend. If we also see a breakout above the 50-day moving average (around $34,500), that would be a convincing turnaround for Bitcoin."
Warning signs: "Bitcoin is the ultimate risky asset right now and it could see intense selling pressure if Wall Street enters into panic selling mode," added Edward Moya, senior market analyst for the Americas at OANDA. "It is critical that the digital coin regains ground above the $30,000 level, as a significant breach could result in a massive technical selloff," added Naeem Aslam, chief analyst at AvaTrade.
Stay tuned: Coming up at noon ET is "The ₿ Word" launch, an "initiative that aims to demystify and destigmatize mainstream narratives about Bitcoin, explain how institutions can embrace it, and raise awareness around areas of the network that need support." It will feature a live discussion between Cathie Wood (who recently filed for a Bitcoin ETF), Jack Dorsey (who appears to have more than a surface-level understanding of Bitcoin) and Elon Musk (let's not even get started). Will the Technoking of Tesla (TSLA) abandon his bearishness on Bitcoin as it relates to things like energy usage and block size? Or maybe sell/add to some of the company's $1.5B stash of Bitcoin? (169 comments)
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Stocks continue to recover from an early-week selloff that was prompted by fears surrounding the rapidly spreading Delta variant. The major averages rose about 1.6% on Tuesday, as investors jumped back into equities, while futures climbed again overnight. At the time of writing, contracts linked to the Dow are up 0.6%, while the S&P 500 and Nasdaq are ahead by 0.5% and 0.2%, respectively.
Quote: "A lot of our client conversations have really been people trying to look to find time to put money to work," said Mike Stritch, chief investment officer at BMO Wealth Management. "People step in, and they don't want to get caught missing an opportunity to buy at a few points lower."
Treasury yields, which also sunk at the beginning of the week, are climbing again after the 10-year rate hit a five-month low below 1.2%. The note's yield tacked on another 5 bps overnight to 1.26% as investors continue to assess their views on COVID variants and inflation. Elsewhere, a $1.2T bipartisan infrastructure bill will face an initial procedural floor vote in U.S. Senate today, which aims to upgrade roads and bridges, water systems and expand broadband Internet.
On the calendar: Corporate earnings are yet another area traders continue to size up as quarterly results pour in, including beats/misses, revisions and upcoming forecasts. This morning, we'll get prints from Coca-Cola (KO), Verizon (VZ) and Johnson & Johnson (JNJ). About 85% of S&P 500 firms that reported have so far beaten estimates, according to FactSet, with around 8% of companies in the index publishing results over the past week.
Netflix (NFLX) is finding it getting harder to live up to Wall Street's expectations. Evidence of that was seen late Tuesday, as the company forecast Q3 streaming TV subscriber gains that fell far short of analysts' expectations (3.5M vs. 5.9M). While Netflix did add 1.54M subscribers for the period that ended June 30 - compared to estimates of 1.12M new paid members - total first-half subscriber growth was the worst since 2013. Profit also came in at $2.97 a share, missing analysts' expectations of $3.14, though revenue of $7.34B inched ahead of consensus estimates for $7.32B.
Comparisons could be difficult: "We hope we are at the tail end of this COVID choppiness," Netflix CFO Spence Neumann said on a conference call. He also noted that during the second quarter of 2020, Netflix added more than 10M new members as pandemic stay-at-home policies went into effect, which "distorts year-over-year comparisons." "If we deliver on our [third-quarter] guide, our growth pattern in our business is remarkably steady [and] averaging 27M [new subscribers] a year over the last two years," Neumann added, helping shares rise slightly in AH trading.
However, for a company that depends on subscriber fees in order to fuel its ongoing forays into original and exclusive content, Netflix's results hint at possible rough road ahead. The company lost 430K subscribers in the U.S. and Canada during Q2, and added just 190K paid members in Europe, the Middle East and Africa. "Combined, they shrunk in their two most-profitable markets," said Wedbush analyst Michael Pachter. "That suggests [market] saturation to me. All the recent moves by Peacock, Disney, Hulu and HBO suggest that competition for content will become more fierce."
Outlook: Netflix confirmed it was in the "early stages" of expanding into video games, viewing it as "another content category for us, similar to our expansion into original films, animation and unscripted TV." Last week, Netflix even hired a former Electronic Arts and Facebook executive to lead the effort. While a time frame wasn't given for launching the new vertical, games will be included in current subscription plans at no additional cost. (44 comments)
President Biden has nominated Jonathan Kanter to be Assistant Attorney General for the Antitrust Division at the Department of Justice, the top position in the DOJ's antitrust unit. The move is being hailed as a major win for progressives, who accuse the agency of failing to aggressively pursue the anti-competitive behavior of Big Tech. If confirmed by the Senate, Kanter would head the DOJ division that filed a suit against Google (GOOG, GOOGL) in October, which was the first federal complaint against a tech giant since action against Microsoft (MSFT) in the '90s.
Backdrop: Kanter, a longtime critic of Google, is currently a partner at The Kanter Law Group LLP, a boutique antitrust law firm that advocates in favor of federal and state antitrust law enforcement. He has also served as an attorney for the U.S. Federal Trade Commission’s Bureau of Competition and was co-chair of the antitrust practice at Paul, Weiss, Rifkind, Wharton, and Garrison LLP.
"At this critical time, the DOJ must be equipped to take on giant tech companies and monopolistic corporations in any sector that," Senator Elizabeth Warren (D-Mass) said in a statement. "Jonathan will reinvigorate antitrust enforcement - both civil and criminal - and strengthen the DOJ’s scrutiny of the anti-competitive abuses that threaten our economy, our society, and our democracy."
Go deeper: Big Tech critic Lina Khan took the reigns as chair of the FTC in June, and earlier this month, Biden signed a new antitrust executive order aimed at strengthening antitrust authority over U.S. technology giants. Progressive tech critic and former Columbia University law professor Tim Wu also joined Biden's National Economic Council back in May, influencing the administration's policies with regards to large tech firms. (56 comments)
In Asia, Japan +0.6%. Hong Kong flat. China +0.7%. India closed.
In Europe, at midday, London +1.7%. Paris +1.3%. Frankfurt +1.9%.
Futures at 6:20, Dow +0.6%. S&P +0.5%. Nasdaq +0.2%. Crude +1% at $67.90. Gold -0.4% at $1804.20. Bitcoin +3.4% at $30847.
Ten-year Treasury Yield +5 bps to 1.26%
Today's Economic Calendar