Markets await the Fed's interest rate decision next Wednesday

Pre-Market -

Key US economic events next week -

Key Market Data -

• Good Evening. U.S. futures are flat as markets await the Fed's interest rate decision next Wednesday (6/12) and other key economic data.

• CNN's Fear & Greed Index stands at 45 out of 100.

• The top five trending stocks on Reddit in the last 24 hours are Nvidia, SPY, GameStop, VOO, and Tesla. The full list is here.

Front Pages -

• NVIDIA's announcement of a 10:1 stock split on May 22, 2024, has led to a surge in its stock price, with predictions suggesting it could reach $150 by the end of the summer. Analysts point to NVIDIA's strong position in the AI market and the high demand for its advanced chips as key factors driving this optimism. Read more

• Bloomberg outlines three reasons the markets are cruising while the Fed holds the rate hikes. An increasing share of financing has come from private, not public, markets due to the tighter regulation of larger financial institutions. As per an estimate, the private credit amounts to $1.7 T, but no official estimate exists. As this lending is outside the public markets, problems that may develop have less chance of turning into contagion. However, the IMF has raised concerns about private credit. Second, government spending and investment contributed their highest share to GDP growth in 2023, which is expected to continue. It's hard to gauge the limit to how much debt outstanding can be. Third, the Fed balanced the risk well and showed it could act quickly during the SVB collapse. Read more

• OpenAI is expanding its partnerships, including a significant alliance with Apple to integrate its generative AI into Apple hardware. This partnership will expose OpenAI's technology to a vast user base. OpenAI also targets large enterprise customers, securing deals with firms like PwC, which will provide its employees with OpenAI’s enterprise product. Additionally, OpenAI has inked content-licensing agreements with major publishers such as the Financial Times and News Corp to mitigate regulatory concerns and support its AI development efforts. Read more

• Most analysts expect the federal funds rate will remain unchanged at this week's meeting, keeping the target range at 5‑1/4 to 5-1/2 percent. Market participants expect the next Fed move to be a 25-bp cut announced at the November FOMC meeting. The market is almost pricing in a second cut in December. Read more

Earnings Update -

• CrowdStrike Shares Surge as Revenue Soars. The company reported a significant increase in subscription revenue, a key metric for software-as-a-service (SaaS) companies like CrowdStrike. The strong financial results were attributed to the growing demand for cybersecurity solutions amid increasing cyber threats globally. Additionally, CrowdStrike raised its guidance for the fiscal year, indicating confidence in its future growth prospects. Read more

• GameStop missed Q1 CY2024 revenue estimates, reporting $881.8 million, a 28.7% year-over-year decline. It also reported a non-GAAP loss of $0.12 per share, worse than expected. Despite the poor results, GameStop's stock soared by 22.8%, likely due to the announcement of a stock sale plan. However, same-store sales have declined, and the company did not provide guidance. Read more

• Lululemon Athletica reported strong financial results for Q1 2024, beating earnings and revenue expectations. The company posted earnings per share (EPS) of $2.54, surpassing the consensus estimate of $2.38. Read more

• DocuSign reported strong financial results for the first quarter of fiscal 2024. The company's revenue increased 7% year-over-year to $709.6 million, surpassing the consensus estimate of $707.1 million. Read more

Calendar -

Earnings Preview -

• Tuesday (6/11) - ORCL

• Wednesday (6/12) - AVGO

• Thursday (6/13) - ADBE

Curated Insights -

• The relationship between the US 10-year Treasury yield and inflation appears to be in flux, with divergent movements suggesting a complex interplay influenced by various economic factors, raising questions about the reliability of traditional indicators in forecasting market trends. Read more

• AQR explores the rationale behind diversifying investments beyond 100% equities, delving into the benefits and risks of incorporating other asset classes into investment portfolios to achieve greater risk-adjusted returns and mitigate volatility. Read more

• "Which Economic Surprises Matter?" is a thought-provoking article that examines the significance of various economic surprises and their impact on financial markets, offering valuable insights for investors seeking to navigate market fluctuations and make informed decisions. Read more

• The June 2024 FRED Blog post explains three ways to measure the U.S. economy: GDP, GVA, and GDI. These metrics offer different perspectives on economic activity and, when used together, provide comprehensive insights. Read more

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This newsletter's content is for informational and educational purposes only and should not be considered trading or investment recommendations.