NEWS
Nasdaq Composite Closes Above 17,000

U.S. stocks had another mixed session, with the rise in oil and interest rates not deterring buyers from pushing the Nasdaq Composite index to a new record high. Let’s see what else you missed. 👀

Today's issue covers a new gambling tax, post-holiday M&A activity, and T+1 settlement’s first official day. 📰

Here's today's heat map:

3 of 11 sectors closed green. Energy (+1.03%) led, & industrials (-1.22%) lagged. 💚

Case-Shiller’s home price index showed a 6.50% YoY increase in March, maintaining its fast rate likely on the back of easing mortgage rates and a tight housing supply. San Diego home prices posted the highest YoY increase, jumping 11.10% YoY, with the Northeast region topping the rest. 🏘️

The Dallas Fed manufacturing survey showed a slight downtick in May, adding to the sector’s uncertainty. Meanwhile, Federal Reserve Bank of Minneapolis President Neel Kashkari said he sees a risk of “big losses” from commercial real estate and that he cannot fully rule out rate hikes yet. ⚠️

U.S. consumer confidence recovered above 100 during May, as the strong labor market bolsters consumers’ assessment of current and future conditions. 🙂

Robinhood shares jumped 5% after announcing a $1 billion share buyback program that it expects to execute over the next two to three years. Meanwhile, PayPal is hopping on the banking ad bandwagon, building an ad network based on users’ PayPal and Venmo data. 🤑

Tesla shares fell marginally on news that proxy advisory firm Glass Lewis recommended that shareholders reject a proposal to reinstate CEO Elon Musk’s $56 billion pay package when it was awarded in 2018. Given his many other commitments, this could incentivize Musk to shift his focus from Tesla. 🗳️

Insmed shares soared 118% after its experimental drug eased symptoms of patients with a rare lung condition during its final-stage study. The company plans to file for U.S. market clearance in the fourth quarter of 2024 and launch the drug in mid-2025. 💉

American Airlines plunged 8% after cutting its revenue outlook and said its chief commercial officer will leave the company next month. It now expects second-quarter revenues to fall as much as 6% YoY, bucking the positive trends its rivals set during the current travel boom. 🛬

Medical technology stock Semler Scientific is looking to get in on the “meme” madness. Its shares jumped 24% after it adopted Bitcoin as its primary treasury reserve asset. It purchased roughly 581 bitcoins for $40 million. 🙃

And Sea Ltd. shares fell sharply before recovering much of their decline on news that Indonesia’s antitrust regulator is investigating two of its e-commerce platforms for violating its competition rules. 🕵️

Other active symbols: $GME (+25.16%), $NVDA (+6.98%), $CELH (-12.85%), $GWAV (-7.42%), $OKLO (+6.30%), & $PEGY (+46.04%). 🔥

Here are the closing prices: 

POLICY
New Gambling Tax Smacks Betting Firms

History has taught us that the government doesn’t mind if you have vices as long as they get their piece of the action. And as gambling permeates all areas of our society, one state’s legislators are upping the ante. 💵

Illinois senators passed a new budget today that includes a tax increase on sports betting operators like DraftKings, Flutter Entertainment, Penn Entertainment, and more.

According to reports, the new tax hike would make Illinois the second most expensive state for online sports gambling companies to operate in, just behind New York. And on a progressive scale, companies with the highest adjusted gross revenue would pay a 40% tax! 🤯

With Illinois firing the first shot, the fear among investors is that other states will follow suit with their own increases. For example, New Jersey Senator John McKeon introduced a bull in April that would double the existing tax rate to 30%.

Analysts say the higher tax rates would be offset by online sports betting becoming legalized in more states. But nonetheless, it’s a higher cost that these companies will now have to deal with. 👎

As a result, we saw DraftKing’s shares fall 10% on the day. With that said, the Stocktwits community looks interested in buying the dip, as sentiment remains in “extremely bullish” territory. 🐂

M&A
An Artificial M&A Monday

Given yesterday's holiday, today is basically Monday, which means many deals were announced. Let’s quickly review them. 👇

T-Mobile is buying U.S. Cellular’s wireless operations for $4.40 billion, including customers, stores, and 30% of its spectrum assets. U.S. Cellular will retain ownership of about 70% of its spectrum, its equity-method investments, and 4,400 telecom towers. However, T-Mobile will become a long-term tenant on at least 2,600 towers as it looks to expand its coverage. 📡

Energy Transfer LP will buy WTG Midstream in a $3.25 billion deal to expand its network in the Permian Basin. It will fund the deal with $2.45 billion in cash and 50.80 million in newly issued Energy Transfer common units. It’s the latest takeover in the pipeline space, as growing opposition to new projects makes it difficult to drive organic growth. 🛢️

Atlantica Sustainable Infrastructure is going private for $22 per share, about 6% below Friday’s closing price. The renewable energy company will sell itself to private equity firm Energy Capital Partners after a “thorough and comprehensive strategic review process.” 😐

While not a deal per se, activist investor Elliott Investment Management has taken a $2.50 billion stake in chipmaker Texas Instruments. The firm is criticizing its underperformance relative to its peer group and pushing it to improve its free cash flow generation. 👎

POLICY
The Stock Market…The Place Where Settling Is A Good Thing

One of the key issues brought about by the last “meme stock mania" was how long it took securities to settle under the T+2 standard. 

This meant that the “trade date plus two days” settlement cycle required market participants’ funds to be received by their brokerage no later than two business days after the trade was executed. 💸

That caused some issues during the pandemic when millions of new customers were onboarded to financial markets and began trading more than Wall Street had ever seen.

As a result, years of work have been taking place to pick up the pace of trading by reducing the settlement cycle to T+1, making it one business day faster as of today. 👍

The transition should be seamless for retail traders, who will benefit from seeing their funds a day sooner. However, institutions that trade larger sizes in markets that aren’t aligned on settlement timeframes could face issues.

Nonetheless, analysts see this move as the continued progress in the direction of the “always on” markets we tend to be trending towards. 😵‍💫

It was just seven years ago that we moved from T+3 to T+2, so now the question is, how long will it take us to reduce the settlement process even further? Or to keep markets open 24/7/365?

Time will tell. ⏱️

Bullets From The Day

🦺 OpenAI creates oversight team amid internal turmoil over safety. The artificial intelligence (AI) giant has created a safety and security committee led by senior executives just weeks after disbanding its previous oversight board. The group will recommend “critical safety and security decisions for OpenAI projects and operations” to the board. Over the next 90 days, the group will evaluate processes and safeguards to share their recommendations. CNBC has more.

🤖 Elon Musk’s xAI just raised $6 billion to fund its battle against OpenAI. The company claims to be valued at $18 billion during its latest funding round, reportedly seeking to build its own AI supercomputer by late next year. It says the new funding will help bring its “first products to market, build advanced infrastructure, and accelerate the research and development of future technologies.” Pretty vague, but as we know from other AI startups, these things cost a lot of money to get up and running. More from The Verge.

⚡ The U.S. may finally take its electrical grid system seriously. The White House said it will announce steps to modernize a major roadblock in the clean energy transition: the country’s aging electrical infrastructure. The new initiative between the federal government and 21 states aims to make faster fixes and improvements to the grid, modernizing it to help reduce power outages and increase electrical transmission capacity. CNN Business has more.

Links That Don’t Suck

🌞 Heat up your portfolio this Memorial Day—get 1 year of IBD Digital for $160. That’s over 50% off*

😡 Elon Musk is fighting with Meta’s Chief AI Scientist

🤷 Adam Neumann gives up on his plan to buy back WeWork

🧳 U.S. screens record 2.95 million airline passengers in single day

🧑‍⚖️ FTX exec who turned on Sam Bankman-Fried sentenced to 7.5 years in prison

😬 Company that posted discriminatory 'whites only' job ad settles with federal government

*3rd Party Ad. Not an offer or recommendation by Stocktwits. See disclosure here.

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