Bonds Make A Big-Time Comeback

Job market softens, $HPE reaches new heights, and elections slam two foreign stock markets.

NEWS
Bonds Make A Big-Time Comeback

The market was mixed today as meme stocks took a back seat to economic data and the strong move in bonds. Still, plenty of stocks are on the move as earnings trickle in and the major indexes markets churn near all-time highs. Let’s see what you missed. 👀

Today's issue covers the hubbub over today’s jobs data, why $HPE may be home-free, and two foreign stock markets rocked by election jitters. 📰

Here's today's heat map:

6 of 11 sectors closed green. Real estate (+0.95%) led, & materials (-1.11%) lagged. 💚

GameStop shares were down about 6% today as Massachusetts securities regulators began a probe into “Roaring Kitty’s” recent GameStop trades as concerns about manipulation spread. 🚨

Paramount Global shares gave back gains after its leadership team outlined a future for the company if its sale to Skydance Media doesn’t materialize. 😟

Intel fell on news that it entered into a joint venture agreement with Apollo Global Management, leading an $11 billion investment for a 49% equity stake in the chipmaker’s Fab 34 manufacturing facility. 🏭

Boston Beer shares slipped on news that cannabis producer Green Thumb Industries sent a letter expressing a strong interest in merging as the Canadian-based company looks to hop onto a U.S. exchange. 🍻

Bath & Body Works dipped 13% after topping first-quarter expectations but providing disappointing earnings guidance for its current quarter. 🫠

Cruise stocks remain in focus, with Carnival rising 6% on the news it’s folding P&O Cruises Australia into its flagship brand as it looks to expand its capacity. 🛳️

Cybersecurity firm CrowdStrike rose 7% after its quarterly results and guidance topped Wall Street’s expectations. 🛡️

Guidewire Software rose 8% after the insurance-focused software maker raised its full-year revenue guidance and beat third-quarter results. And analytics firm Verint Systems rose 9% after its earnings and revenues topped estimates. 💪

Other active symbols: $VKTX (-9.70%), $JDZG (-85.97%), $ANNX (+30.79%), $WIMI (+25.58%), $HOLO (+32.00%), & $MLGO (+670%). 🔥

Here are the closing prices: 

S&P 500

5,291

+0.15%

Nasdaq

16,857

+0.17%

Russell 2000

2,034

-1.25%

Dow Jones

38,711

+0.36%

ECONOMY
Did Bonds Just Break Their Bearish Trend?

Interest rates have been rising since December, with many expecting them to hit their November highs again and potentially continue onward.

However, today’s action suggests we may be seeing something different happen, and it’s all because of the jobs market. 💼

If you’ve been following along, we’ve discussed the labor market’s softening at length. But one key measure we’ve focused on has been total nonfarm job openings, which fell again in April and are now just above their pre-pandemic peak.

More importantly, the ratio of jobs available per unemployed worker dipped from 1.30 to 1.24, its lowest level since June 2021. 🔻

This is great news for the Fed and its fight against inflation, given that a tight labor market keeps upward pressure on wages. And for the last few months and quarters, upward pressure on wages has abated such that they’re still growing faster than inflation but not at historically high levels.

This is likely why we saw a rebound in the bond market today, and technical analysts everywhere pointed out the noticeable change in character. 🕵️

The 20+ Year Treasury ETF ($TLT) is one of the more popular vehicles for betting on interest rate direction because its duration gives it a higher beta than its shorter-duration peers.

And right now, ETF is breaking out above two significant levels. The first is the downtrend line from its December highs, and the second is its 200-day moving average (which many market participants use to track an asset’s long-term trend). 📈

Now, does this mean that interest rates are done rising forever? Certainly not. But what it suggests is that in the near term, momentum may have shifted to the downside in rates (and to the upside in bonds).

Should this move stick, the playbook for which sectors of the market are performing best might switch up…which is why it’s worth highlighting today. 👍

EARNINGS
$HPE Might Just Be Home-Free…

For the last six years, Hewlett Packard Enterprise Company’s share price has gone nowhere, leaving investors and traders equally frustrated. 😡

However, that could be changing very quickly as artificial intelligence (AI) helped fuel a 3% YoY revenue growth in the current quarter…a huge improvement from the 14% YoY decline in the previous period.

Cumulative AI systems orders totaled at $4.60 billion, with CFO Marie Myers referencing “a pipeline that has…multitudes of the current orders.” 🤖

The strength in AI servers should help offset the cyclical pressures its seeing in networking and other areas of its business, albeit with a lower gross margin.

Management’s upbeat outlook helped get investors bulled up about the company’s future, with Stocktwits community sentiment pushing into “extremely bullish” territory as shares soared 15% after hours. 🐂

Additionally, technical analysts will be watching this stock to see if its share price can stay at current levels or rise into the weekend.

The stock has struggled to sustain a breakout above the $17-$18 level, but if this is the real deal, its breakout pattern suggests an upside price target near $31 over the coming quarters and years. 📈

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STOCKS
Election Results Rock Foreign Stocks

Mexican and Indian stocks fell following similar political issues this week, so let’s quickly review them. 👇

Both Mexico’s Bolsa index and India’s Nifty 50 index fell 6% following their election news this week, adding uncertainty to markets that were previously trading at all-time highs. 🙃

Mexico’s Claudia Sheinbaum secured a landslide victory in Sunday’s presidential election (as expected), but the scale of gains for the Morena party and its allies took the market by surprise. 😮

Some fear the results could allow the ruling coalition to pass constitutional reports without opposition support. AKA, one party will call all the shots.

Meanwhile, Indian Prime Minister Narendra Modi will be reelected, but it's unlikely that his alliance secured the overwhelming majority. That means his Bharatiya Janata Party (BJP) will not have free reign to execute its continued push for investment-led growth.

So, in one country, the market is worried about the winning party having too much control, and in the other, it is worried it won’t have enough. 🤦

In either case, the markets are watching to see if these elected officials and their parties can provide predictable, investment-friendly policies and regulatory frameworks in which to operate. 📝

Bullets From The Day

❄️ Snowflake’s competition just got even tougher. Its competitor, Databricks, is buying Tabular, the small startup that helps companies optimize the data they store in the cloud with the Apache Iceberg format. Snowflake and Confluent were also bidding on the startup but have lost out to the more than $1 billion offer from data analytics software maker Databricks. CNBC has more.

🤖 An AI-powered virtual physical therapy startup’s valuation just soared to $3 billion. Sword Health’s $130 million round will raise the company another $30 million while letting employees sell $100 million worth of equity to new and existing investors. The round represents a 50% increase from its Series D valuation in November 2021. While the company will be profitable by year-end and didn’t need the capital, management liked the signal an updated valuation would send. Plus, a cash cushion is always a good thing. More from TechCrunch.

📰 Decades-old tech news site Gizmodo sold to Keleops. G/O Media has been steadily selling media properties for over a year, with its latest sale being Gizmodo. European online tech-media company Keleops is the buyer, though the financial terms of the deal are unknown. The company plans to keep Gizmodo’s entire staff intact and allows G/O Media to get out of its position at a price higher than it paid Univision in 2019. Variety has more.

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