Stocks wobble with inflation data in focus

US stocks were mixed Monday following a string of market gains as attention turned to the coming inflation report seen as a potential starting gun for interest rate cuts.

The S&P 500 (^GSPC) hugged the flatline, while the tech-heavy Nasdaq Composite (^IXIC) moved up about 0.2%. The Dow Jones Industrial Average (^DJI) dipped as much as 0.2%, coming off the best week of the year for the blue-chip index.

Stocks have come back strong in May on the back of better-than-expected earnings and a revival of optimism for a Federal Reserve easing in monetary policy. The Dow notched eight straight daily wins in a row on Friday — though a dearth of economic releases likely played a part.

After recent hot inflation data, markets have been more skittish as investors have increasingly priced in “no landing,” where price increases don’t come down to the Fed’s target but the economy keeps growing.

This week brings a flood of economic releases as potential catalysts, with the Consumer Price Index update on Wednesday the star. The CPI update for April will shed light on whether inflation is staying sticky into the second quarter amid some belief on Wall Street that the report will mark a faster descent and set the stage for more than one rate cut this year.

In individual stock movers, GameStop (GME) shares jumped roughly 70%, adding to a recent run-up for the video game retailer as meme stocks grab headlines again. The gains came as the social media star credited with kick-starting the 2021 meme stock frenzy, “Roaring Kitty,” returned from a three-year break.

Live12 updates

Mon, May 13, 2024 at 5:55 PM GMT+1

Trending tickers Monday

GameStop (GME)

GameStop shares gained more than 70% Monday. They rose as much as 110% during the session, prompting numerous trading halts reminiscent of the meme short squeezes that garnered national attention during the pandemic.

The stock’s meteoric rise came after social media star ‘Roaring Kitty’ posted on X for the first time since 2021.

Short sellers lost more than $938 billion in mark-to-market losses during Monday’s monster rally, according to data compiled by S3 Partners.

AMC (AMC)

Shares of the theater operator soared more than 40% as GameStop and other meme related stocks also rallied.

Short interest on AMC sits at roughly 18% of the float, making it susceptible to short squeezes.

Year-to-date AMC shares are down 32%.

Alibaba (BABA)

Tech giant Alibaba rose more than 5% ahead of the company’s fiscal fourth-quarter earnings due out Tuesday. Chinese stocks have rallied in recent weeks.

Tencent Music Entertainment Group (TME), and JD.com (JD) also gained during Monday’s session.
Mon, May 13, 2024 at 5:10 PM GMT+1

Apple stock rises on potential OpenAI deal, shares help lift Nasdaq

Apple (AAPL) shares rose more than 1.5% as the tech giant is reportedly nearing a deal with OpenAI to include its technology on iPhones.

The companies are set to finalize the terms of an agreement to include OpenAI’s ChatGPT service on iOS 18, according to a Bloomberg report.

As iPhone sales slumped last quarter, the partnership with OpenAI could be Apple’s latest move to innovate the iPhone and increase sales.

Apple shares helped lift the Nasdaq Composite (^IXIC) higher on Monday as Information Technology related stocks rose.
Mon, May 13, 2024 at 4:40 PM GMT+1

GameStop stock soars, slapping short sellers with $1.3 billion in losses in May

GameStop shares soared as much as 110% Monday, prompting heavy losses for short sellers.

“Including today’s losses, GME shorts are now down -$1.34 billion in May month-to-date losses, and now down -$952 million for the year,” Ihor Dusaniwsky, managing partner at S3 Partners, told Yahoo Finance Monday.

Short interest on the video game retailer’s stock is relatively high, hovering just north of 24% of the float.

Other meme stocks rose along with GameStop Monday after social media star “Roaring Kitty”, seen as the kickstarter for the GME short squeeze in January 2021, posted online for the first time in about three years.

Shares of theater operator AMC (AMC) gained 20% while Trump Media & Technology Group (DJT) increased 8% during the session.

“Short sellers may be in for a bumpy and bloody ride in these stocks,” said Dusanniwsky.
Mon, May 13, 2024 at 4:35 PM GMT+1

Cocoa futures tank 18% Monday, sharply off April’s all-time highs

Cocoa (CC=F) futures tanked as much as 18% Monday, their biggest one day drop since 1960.

The commodity was trading below the $7,400 level during the session.

Cocoa has drastically come off its all-time high of more than $12,000 per metric ton last month.
Mon, May 13, 2024 at 4:09 PM GMT+1

Fed’s Jefferson calls for holding rates steady until inflation cools further

Yahoo Finance’s Jennifer Schonberger reports:

Federal Reserve vice chair Philip Jefferson on Monday became the latest central bank official to call for holding interest rates at current levels until inflation shows more signs of cooling.

“We continue to look for additional evidence that inflation is going to return to our 2% target,” Jefferson said during a question and answer session at the Cleveland Fed.

“Until we have that, I think it is appropriate to keep the policy rate in restrictive territory.”

Jefferson said he changed his view after hotter-than-expected inflation data in the first quarter.

The Fed decided on May 1 to keep its benchmark interest rate in a range of 5.25%-5.50%, a 23-year high. Its next policy meeting is not until June 12, when the central bank is again expected to hold rates steady.

Read more here.
Mon, May 13, 2024 at 3:21 PM GMT+1

GameStop soars 70% after social media star ‘Roaring Kitty’ post

GameStop (GME) shares soared as much as 80% Monday and were temporarily halted for volatility after “Roaring Kitty”, seen as the kickstarter of the meme frenzy during the pandemic, posted for the first time since 2021.

Sunday’s post on X included a meme of a video gamer leaning forward, a sign that things are getting serious.

Monday’s rise comes amid a recent rally in meme stocks. GameStop shares are up 90% year-to-date. Short interest on the stock is about 24% of the float.

Roaring Kitty, identified in 2021 as Keith Gill, became a prominent figure followed on the WallStreetBets forum and on YouTube for his bullish stance on GameStop.

He posted videos about why GameStop was poised to go higher. In February 2021, he testified before Congress as lawmakers looked into a massive short squeeze spurred by an army of retail traders.

Hedge fund Melvin Capital, at the center of a massive bet that GameStop shares would fall, lost billions of dollars during the meme frenzy. The phenomenon attracted millions of retail traders and prompted greater scrutiny over payment for order flow, a way in which some trading platforms make money.
Mon, May 13, 2024 at 2:31 PM GMT+1

Stocks rise to begin CPI-focused week, with Dow eyeing 9th straight win

Stocks opened higher Monday as investors turned their attention to the latest monthly inflation report due out this week for clues to how the Federal Reserve will move on interest rates this year.

The S&P 500 (^GSPC) rose roughly 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) moved up about 0.3%. The Dow Jones Industrial Average (^DJI) also added about 0.3%, eyeing a ninth straight daily win. The blue-chip index notched its best week of the year on Friday.

On Wednesday, investors will find out whether the stickier-than-expected inflation trend continued into the second quarter with the release of the Consumer Price Index (CPI) reading for April.

On the retail spending front, quarterly results from Home Depot (HD) due out Tuesday and Walmart (WMT) on Thursday may give insight into the health of the US consumer.
Mon, May 13, 2024 at 11:40 AM GMT+1

Netflix stock rallies ahead of Upfront event

Here’s an interesting, fun fact on Netflix (NFLX) you probably didn’t realize.

The stock has rallied 12% since May 1 and is now trading at the levels seen before the company’s disappointing earnings day in late April.

In a new note this morning, JPMorgan analyst Doug Anmuth credits the rebound to “1) increased comfort with both the 2024 reported revenue outlook and NFLX’s decision to no longer report subscribers beginning in 2025; 2) recognition that NFLX is not subject to heavy AI-driven capex intensity like Meta, Alphabet, and Amazon; and 3) excitement into the Upfront presentation on May 16.”

The annual Upfront presentation is when TV networks and streaming services pitch their programming and ad products to advertisers and agencies.

Anmuth thinks Netflix will have bullish things to say at the event that could be a catalyst to the stock:

“At the Upfront we expect an update to the 23 million plus ad tier monthly active user (MAU) disclosure, with our conversations suggesting investors are looking for 35-40 million plus ad tier MAUs, including the benefit of the T-Mobile bundle. Outside of ad tier metrics, we expect updates on the upcoming content slate and NFLX’s sports strategy, with articles suggesting NFLX could host two NFL games on Christmas later this year. NFLX would bring the NFL large global distribution while the games could serve as a boost to NFLX’s ad tier and enable the company to actively promote upcoming content. Finally, we look for progress around improving the ad product, tech, and sales, with some investors expecting a 3P demand side platform announcement.”
Mon, May 13, 2024 at 11:30 AM GMT+1

Bullish trading call on Walmart into earnings from EvercoreISI

Walmart (WMT) stock has been lagging the S&P 500 the past month as sticky inflation data calls into question the spending power of US consumers.

There has been some chatter on the Street of extra-conservative guidance from Walmart when it reports earnings this Thursday morning.

But Evercore ISI’s retail analyst Greg Melich is putting those worries to the side, adding Walmart to his tactical buy list into the results.

Said Melich this morning:

“We believe the company is executing at a high level while pursuing initiatives such as digital advertising, Walmart Plus, and automation. Even a modest improvement in digital profitability (before considering incremental advertising/alternative profit opportunity) provides a considerable margin capture opportunity. Our sense is that the company will speak to a fairly steady low to middle income consumer, in addition to higher income share capture, with positive traffic and share gain reasons for the commentary to skew constructive through the year. Normally Walmart does not raise full year EPS and comparable sales guidance in 1Q, but we do see them taking a positive tone with respect to underlying momentum in the business. This may prove especially pronounced in international operations — which continue to see positive double-digit percentage comparable sales, with positive industry commentary on Walmart’s continued share capture likely under appreciated by investors.”
Mon, May 13, 2024 at 11:20 AM GMT+1

A look at earnings growth

An interesting dynamic in markets begins to form.

After several years of explosive earnings per share growth for the “Magnificent 7” names, the space is headed for a slowdown this year and next (see the chart on the left from RBC strategist Lori Calvasina). By the same token, after several years of limp growth for the 493 other S&P 500 components, EPS growth is seen accelerating this year and next.

The question on the horizon is this: Do the other 493 S&P 500 companies represent better value than the Magnificent 7 as their profit growth is likely to accelerate again in 2025?

Does it make sense to nibble at the 493 other stocks in the S&P 500? (RBC)
Mon, May 13, 2024 at 11:10 AM GMT+1

Save this date: May 20, JPMorgan investor day

With its stock up a cool 8.7% in the past month on the back of expectations for higher-for-longer interest rates, JPMorgan’s (JPM) May 20 investor day is coming into focus.

Jefferies analyst Ken Usdin is out with a note this morning, sticking with a Buy rating going into the investor day but hiking his price target to $227 from $215. He expects a “focus on market share gains, investment spending and efficiency” on the part of JPM execs.

“While the net interest income guidance seems conservative with higher-for-longer rates, we see JPM continuing to slow-play guide updates,” added Usdin.
Mon, May 13, 2024 at 11:00 AM GMT+1

Goldman not banking on major inflation slowdown

Sticky inflation is likely to stay sticky in 2024.

Ahead of this week’s key CPI Index report, Goldman Sachs is calling out the potential for disinflation in some important categories as the year treks along. Even still, Goldman’s macro team forecasts inflation to stay above the Fed’s preferred 2% target.

Here’s Goldman’s top economist Jan Hatzius:

“We see further disinflation in the pipeline in 2024 from rebalancing in the auto, housing rental, and labor markets, though we expect offsets from continued catch-up inflation in healthcare, car insurance, and housing. We forecast year-over-year core CPI inflation of 3.5% and core PCE inflation of 2.7% in December 2024.”