US stocks are up, fueled by AI hope for chipmakers and broad tech. Treasuries are up, as traders cross their fingers that the debt deal gets passed to stop a default. Nvidia’s CEO showcased some AI products and services and forecasted that AI will transform everything we know, from farming to factories. In Europe, tech also was up. Congress needs to pass the debt deal this week. The forward multiple for the S&P is around 18.5x, at this cycle’s upper bound.
The US Treasury may sell >$1 trn of bills through the end of 3Q23 to raise cash, if the debt deal passes. So, 12 entities (banks and companies) rushed to tap Europe’s bond market today, to get ahead of these potential sales which could increase borrowing costs.
Tues: US consumer confidence
Wed: US job openings, China PMI
Thurs: China Caixin PMI, Eurozone PMI/CPI/unemployment, US construction, initial jobless claims, ISM, light vehicle sales
Fri: US unemployment/nonfarm payrolls
Nestle and Unilever were down because they both announced new CFOs. These are two of the largest consumer staples companies in the world. Analysts were upset that they were surprised by Nestle’s move, but they’re getting LSE’s CFO, and that is a fantastically run company. For Unilever, though, it’s a bit more of a risk—because the company’s CEO is also leaving. Expect a kitchen sink moment when the new CEO Schumacher arrives.
BBG is out with a story about Gemini, the Winklevoss twins’ crypto exchange, to which they gave a $100mm loan to fund operations in recent months. It’s trading operations are down heavily. Binance, Coinbase and Kraken have done much better. JPM bailed as its partner. Employees are gone. Customer trust is waning. The SEC is suing them. Customers are trying to get their money. So, now the twins are seeing if they can have better luck outside of the US.
Musk is over in China shaking hands. Companies with big revenue share in the country have to kiss the ring. From Apple to Mercedes to GM, CEOs need to maintain positive ties with the government, as there is a more patriotic purchasing trend that is supported by the government, and we’ve seen what they do to companies that get a little too proud (Alibaba, Tencent, etc.).
Hedge funds may have to chase this rally, but at the first sniff of trouble, they’ll be out. So, they don’t make great neighbors when fueling a rally. Because of such narrow market leadership, a lot of long-short firms are behind their benchmarks this year. If they have to buy in, they certainly won’t be wedded to the positions. So buy vol when it’s cheap.