NEWS
Memes Matter More Than Inflation (For Now)

U.S. stock market indexes are pushing toward new all-time highs, with meme stocks at the center of attention and semiconductors starting to perk up again. Animal spirits are alive and well, with traders overlooking concerning inflation data to take advantage of the momentum while it’s intact. Let’s see what you missed. 👀

Today's issue covers meme stock fundamentals and where the Stocktwits community is finding opportunity, Alibaba’s baba-bad day, and why the semiconductor sirens are calling traders back again. 📰

Here's today's heat map:

9 of 11 sectors closed green. Technology (+0.89%) led, & consumer staples (-0.19%) lagged. 💚

U.S. household debt rose to $17.70 trillion during the first quarter, up 1.10% QoQ. Notably, credit card delinquency rates are beginning to rise towards pre-pandemic levels, with roughly 3.20% of outstanding debt in some stage of delinquency. 💳

Meanwhile, the producer price index showed that wholesale prices rose 0.50% MoM and 2.20% YoY, its biggest annual jump in a year. Once again, services prices boosted the reading, with their 0.60% rise accounting for about three-quarters of the headline number’s gain. 🌡️

While stocks initially fell on that news, soothing comments from Federal Reserve Chair Jerome Powell reassured investors that a hike is not on the table, noting that the market is getting more comfortable with higher-for-longer rates. 👍

Anglo American shares remain volatile after it rejected a $43 billion takeover from mining industry leader BHP. It’s now looking to restructure to relieve some takeover pressure by considering a spinoff of diamond giant De Beers. 💎

Adobe shares came under pressure after Google announced its new generative AI video model, Veo, which analysts say could eat into its market share. 😬

Shoemaker On Holding rose 24% after reporting an adjusted profit that beat analyst expectations, while net sales jumped nearly 20%. On the other hand, Boot Barn fell 7% after issuing weak full-year earnings and revenue guidance. 👟

And Uruguayan fintech company dLocal plunged 20% after reporting earnings and revenue that missed analyst estimates. 📉

Other active symbols: $TSLA (+3.29%), $PLUG (+19.03%), $BB (+11.94%), $SPWR (+59.64%), $SNDL (+9.17%), & $BIG (+26.95%). 🔥

Here are the closing prices: 

STOCKS
Meme Stocks Are Having Their Moment

It was another wild day for the “meme stock” crowd, with traders waking up to massive gains in GameStop, AMC, and other names. 😵‍💫

With it clear that this moment is more than just a flash in the pan, we thought it’d be helpful to provide a quick refresher on what a meme stock is and where traders on Stocktwits are looking for their next big opportunity. 👇

What is a meme stock?

A meme stock can be roughly defined as anything with widespread retail investor attention and participation, where there tends to be a significant disconnect between what’s occurring in the security’s price and the underlying business.

In today’s world, activity on Stocktwits, Reddit, Wall Street Bets, X, and other social media platforms creates an environment where information moves faster than ever. Add that anyone can now trade from their phone for free, and you get situations where groups of people can quickly act together to buy or sell a security and ultimately impact its price. ⏩

So the next question is, what types of stocks have the potential to get caught up in that social virality loop and become a true “meme stock?”

They tend to have several things in common:

• They’re an iconic brand or well-known company

• There’s a high short interest showing many people/institutions betting on the stock going to zero (or close to it)

• There’s some sort of catalyst that puts the stock back on people’s radars and/or creates an opportunity for a business turnaround (bankruptcy, restructuring, etc.)

These primary types of meme stocks, such as GameStop, AMC, Tupperware Brands, etc., have played out to varying degrees over the last few years.

But there’s also a secondary type of meme stock driven less by brand recognition and more by the stock’s public market structure. 🤔

In these situations, there are very few shares available for the public to trade, and the stock begins to move rapidly upward on little to no news, drawing people into the upward momentum. Lots of demand and little supply make the price rise rapidly, but the lack of underlying substance causes it to unwind eventually.

Think VinFast Auto back in the summer of 2023 or any of the many Chinese equities that were listed in the U.S. and saw crazy (though short-lived) moves of their own. 🤪

But ultimately, they all have high short interest and high retail investor/trader participation in common. That combination enables the “short squeeze” mechanism in the market to occur.

What is a short squeeze and how do market mechanics play into this?

And if you’re confused by what happens when a short squeeze occurs, think about it this way. When prices begin to rally sharply, you lose a lot of natural sellers during the process. Existing shorts need to cover their losses, longs want to add to their positions, and new longs are looking to get involved in the move…creating lots of demand and not a whole lot of supply. 🤑

The options market also adds a significant twist to things too. When traders make directional bets via call options, they’re being sold them by market makers who don’t take directional risk. So in order to hedge their exposure and remain “delta neutral,” these market makers have to go out and buy the underlying stock to stay fully hedged. And as the price rises further, they have to buy more stock to hedge their short call option positions.

In other words, the upward momentum in these stocks creates a ton of short-term demand and exacerbates the already crazy market action even further.

It’s how we’re able to see triple-digit moves in GameStop, AMC, and other names in a day. And it’s also why things can quickly unwind when the momentum stops heading in the right direction, as all that marginal demand becomes marginal supply real quickly… 😬

What does it mean for the businesses?

For businesses struggling with structural fundamental issues, an artificial jump in their stock price is an opportunity for some much-needed financial engineering. Management’s job is to use these higher equity prices to raise equity capital and lengthen their remaining runway.

Some have been able to pull it off, while others have not. 👨‍💼

AMC is still around because of this, with the company issuing millions more in stock at the market yesterday. But ultimately, that can only work for so long. Eventually, the core business needs to become profitable for these stocks to maintain their elevated prices. If you need evidence of that, just ask Bed Bath & Beyond.

So, how are people making money (or attempting to)?

Ultimately, volatility like this attracts many traders looking for a significant short-term win. It also provides an exit opportunity for longer-term investors who have been holding onto their bags or potentially adding to their positions the whole way down.

The playbook is clear for traders specifically. Look for highly shorted, beaten-down, well-known stocks vulnerable to being squeezed. 💡

Markets & Mayhem on X provided a list of heavily shorted stocks in the Russell 3000 that he’s looking at for potential squeeze candidates, and many in the comments agreed with his approach.

However, at Stocktwits, we’re uniquely positioned to see which stocks retail investors and traders are talking about the most. 👀

The chart below shows the top 10 symbols on our site that saw the largest 24-hour % change in message volume as of 7:00 pm ET yesterday and today. 📊

To save space, we’ve only provided the top 10 from the last two days, but you can access a complete list of 50 symbols here. You probably wouldn’t expect many of the names currently popping up on retail’s radars, I know I didn’t. 🧐

What’s next?

Time will tell how this emerging saga plays out. But for now, the U.S. stock market indexes are hitting new all-time highs, and the animal spirits are alive and well. As long as the momentum continues, traders will look to capitalize on it and take advantage of the latest “meme stock” market move.

P.S. Today, I learned that I’m one of just 92 people that Roaring Kitty follows on X. I don’t know how (or why or when) this happened, but that does mean I’m able to DM him… So if you’ve got any ideas on what I should ask or say, hit me up with your suggestions and we’ll see if I can try to connect.

And if by some crazy chance you’re reading this, Roaring Kitty, thanks for stopping by and making all our lives a bit more interesting this week. 🫡

STOCKS
The Siren Call Of Semi Stocks Is Back

While many traders are focused on meme stocks, others have pointed to the recent consolidations in Nvidia and other semiconductor stocks as a sign that the sector is ready to make new highs. 🤔

On our social handles, we highlighted a great share from Stocktwits user @evanmedeiros, who was one of several traders flagging Nvidia’s tight consolidation near the top of its recent trading range.

That, combined with Stocktwits community sentiment pushing from neutral into bullish territory and another analyst upgrade, has many believing the next move for Nvidia is new all-time highs. 🤩

And Nvidia isn’t the only semiconductor stock seeing an uptick in activity around it. About half of the trade ideas shared in today’s “Chart Art” newsletter were in the semiconductor space as traders look to capitalize on the continued strength in the technology sector.

We’d encourage you to check out the charts and decide for yourself. If you like what you see, make sure to subscribe to receive the best trade ideas and analysis from the Stocktwits community to your inbox daily by 8 pm ET. 📬

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EARNINGS
Alibaba Disappoints The Bulls

The recent rebound in Chinese stocks hit a snag today after Alibaba delivered some baba-bad news to markets. The Chinese tech giant posted an 86% drop in profit despite its revenues of $30.70 billion topping expectations.

The significant decline comes after a rocky 2023 when it attempted its largest-ever corporate structure overhaul, which included several high-profile management changes. However, its master plan to split the company into six different companies hit a snag as U.S. and Chinese geopolitical and regulatory tensions flared up.

As a result, the company has been left to fight off increasing competition in its core businesses at a time when consumer spending in China remains cautious, and overall economic growth is tepid. ⚠️

Still, executives blamed the earnings drop primarily on mark-to-market changes in their public equity holdings. They also said recent investments in reigniting e-commerce growth are beginning to show signs of working. 🛒

Additionally, they touted the potential of artificial intelligence (AI) to help drive growth well into the future, with its AI segment seeing triple-digit revenue growth YoY this quarter. 🤖

Overall, the company's quarter was “meh.” And after a significant run over the last month, some investors used today as an opportunity to take profits.

Time will tell if Alibaba’s bounce and the broader Chinese equity rebound can continue. Still, retail investors and traders remain excited about the stock’s future, with Stocktwits community sentiment sitting in “bullish” territory despite today’s drop. 🐂

Bullets From The Day

☢️ The U.S. is moving to increase domestic uranium production. A new law has just been signed barring the U.S. from importing uranium from Russia and unlocking $2.70 billion in federal funding to shore up our country’s domestic supply chain. Russia has historically been one of the largest suppliers of uranium. However, it’s clear that our nation’s clean energy future cannot rely on Russian imports, especially in light of its continued hostility towards Ukraine and other Western nations. The Verge has more.

❌ Meta’s shutting down its enterprise communications business. While the social media giant once had major ambitions to become a dominant player in enterprise communication and productivity, that chapter of its story is ending today. The company is shuttering Workplace, its version of Facebook built to enable communication among business teams and wider organizations. It’s unclear how many employees will be impacted by the closure, with the platform operating normally through September 2025 before being completely decommissioned in May 2026. More from TechCrunch.

📺 Comcast to launch streaming service bundle at a “vastly reduced price.” With growth slowing and much of the domestic streaming market reaching saturation due to the insane amount of services and continued price increases, some media giants are pulling out a new playbook that looks much like the old one. A cable-like three-way bundle of Peacock, Netflix, and Apple TV+ will soon be offered as a deep discount to Comcast broadband and TV customers under the name “StreamSaver.” CEO Brian Roberts said, “We’ve been bundling video successfully and creatively for 60 years, and so this is the latest iteration of that.” It appears the latest leg of the bundling to unbundling to bundling transformation of media is officially in motion... Variety has more.

Links That Don’t Suck

👀 Google I/O 2024: Here’s everything Google just announced

🛢️ Bumble anti-celibacy ad campaign backlash: a controversy timeline

🚫 Biden hikes tariffs on Chinese EVs, solar cells, steel, aluminum — and snipes at Trump

🕵️ Waymo and Zoox are under federal investigation as self-driving cars allegedly behave erratically

✂️ Walmart is cutting hundreds of corporate jobs, relocating majority of remote office staff

🫨 Students borrowing from the federal government this fall will face the highest interest rate in more than a decade

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