Closing Recap

Friday, June 07, 2024

After a yo-yo session, stocks finished the week on a down note. US equities traded slightly higher pre-market after some roller coaster action overnight, but then came payrolls. US nonfarm payrolls jumped by 272k versus expectations of +180k and prior +175k. For those old enough to remember, you probably heard something like, “Down goes Frazier, down goes Frazier, down goes Frazier!” in your head as the market decided good news may be bad news today and futures rolled. After testing a dip below their respective support pivots, both the spuz and Nasdaq futures pared losses into the open and were only off modestly in early regular trading. By mid-morning, we saw a tick to green in both the S&P and Nasdaq but ongoing weakness in small caps with IWM -0.37% versus SPY +0.15% and QQQ +0.10%. Sector-wise, Financials, Energy and Industrials led the gainers, while Real Estate and Materials were the largest laggards across the S&P sector ETFs. Breadth remained nearly 2:1, favoring decliners.

In datapoints of interest today, @KobeissiLetter notes the trading volume of US stocks worth less than $1 is now about 14% of total market volume, a record high and more than 3x the level five years ago. Similarly, @charliebilello highlights per WSJ, bets tied to GameStop and, “other degen favorites” helped push average daily volumes in options to almost 47 million this year, the highest on record. Staying on theme of large versus small, @bespokeinvest again notes the performance gap between the S&P 500 cap-weighted and equally-weighted indices over the last two years reached its widest in nearly 24 years. Thank you big tech. Separately, on a big payrolls day, @LizAnnSonders points out May full-time employment was -625k, the largest drop since December, while part-time employment was +286k. Maybe the labor market is not quite as strong as the headline number and initial move in yields implies?

Heading into the final hour of trading, stocks had both given up midday gains and recaptured early afternoon losses to sit around flat. Breadth had expanded to almost 5:2, still in favor of decliners as small caps continued to lag with IWM -1.14% versus SPY +0.04% and QQQ -0.05%. Sector performance continued to be mixed with Financials (XLF, +0.71%) and Industrials (XLI, +0.40%) leading to the upside, while Real Estate (XLRE, -0.86%), Materials (XLB, -0.80%) and Utilities (XLU, -0.77%) led the decliners.  Growth and value both held small gains and were pretty much a dead heat, with the Russell 1000 Growth +0.07% and its Value counterpart +0.03%.

• US May unemployment rate ticked up slightly to 4% versus the estimate and prior, both at 3.9%.
• US May labor force participation 62.5% with average hourly earnings +4.1% versus consensus +3.9%.

• July WTI crude futures traded in a range between flat and the $76.21 resistance pivot through the morning, then held a tighter range for much of the remainder of the session before settling down just $0.02/bbl, or -0.03%, to $75.53. Brent slipped slightly more to settle down $0.25/bbl, or -0.31%, to $79.62. The day exhibited the same struggle as equities over whether good news was good news or bad news in the economic data. Soft landing versus Fed watchers. Today there was no clear winner, at least not in the oil market.
• The 10-year yield popped early on better payroll data, then held a tight range for the remainder of the day as better payrolls data dimmed hopes for rate cuts. The September probability now stands at 49.2% for no action, so certainly a lack of conviction but plenty of time and economic data points (and Fed speaker commentary) stand between now and then.

• LYFT shares faded off of early trading gains following yesterday’s feel good Investor Day. The riding sharing company was double-upgraded to Buy at BofA and upgraded to Buy at several other shops.

• TJX announced a plan for a joint venture in Mexico with Grupo Axo, an operator of global brands in Mexico and South America that includes both full- and off-price formats.
• ODD shares gapped higher after the online beauty retailer announced a $150M share buyback.

• C shares of outperformed the general market today partially because the strong jobs number signaled that interest rates would stay higher for longer.

Bitcoin, FinTech, Payments:

·     BTC Bitcoin gave back some of this week’s gains during Friday’s trading. Overnight, CoinDesk reported that Bitcoin investments reached a peak of $37 billion, driven by record ETF inflows. Additionally, data indicates that the long-short ratio has been favoring bulls since Wednesday, with some traders anticipating Bitcoin to reach new all-time highs in the coming weeks.

·     BKKT shares initially rose then moved into negative territory following news the crypto marketplace company was weighing a possible sale.

• OSCR shares were lower after the healthcare company reaffirmed its 2024 forward guidance.

• BBCP shares of the waste management company declined following missed earnings estimates and lowered guidance. Concrete Pumping was also downgraded to Market Perform from Outperform at William Blair.

• LMT shares climbed after the defense contractor was the focus of a Barron’s article entitled: Lockheed Martin Stock Has Disappointed Investors. It’s Time to Buy

• DOCU shares fell modestly after the electronic signature company released mixed earnings Thursday night along with $1B stock buyback.
• GEN shares of the cyber safety firm edged lower after a downgraded to Equal Weight at Morgan Stanley.

• AAPL shares ended the week at their highest levels since December going into their much-anticipated Worldwide Developers Conference (WWDC) from June 10 – 15. Apple investors are expecting “a ton” of new AI features across all Apple’s operating systems.
• YEXT shares ascended today safter the software developer said it had hired investment bankers to explore strategic alternatives including a sale.
• PI shares remained depressed all day after Morgan Stanley orchestrated a 1M share block trade priced at $156 overnight for the RFID company.

• SSNLF Samsung workers went on the chipmaker’s first strike after multiple rounds of negotiations over wage increases and bonuses broke down.