Things you need to know
- The S&P and Equal Weight S&P notch new highs….now that’s interesting.
- Iran? Yes? No? What’s the deal or is there no deal?
- SpaceX supposedly prices the offering before the road show? Is Elon changing the rules?
- Oil is up, bonds are down, Yields are up, while Gold remains stuck.
- Eco data will be key over the next 3 days.
- Try the Risotto
And the bulls keep charging… (not sure that’s such a great idea after nine straight up days, but it is what it is for now.) Yesterday marked the ninth consecutive gain for the S&P as stocks once again pushed their way to fresh record highs. Four major indexes notched new all-time highs, including the Equal Weight S&P — and that’s significant because it suggests participation is improving.
The Dow tacked on 229 pts, the S&P added 10 pts, the Nasdaq added 8 pts, the Russell added 26 pts, the Transports lost 60 pts, the Equal Weight S&P added 30 pts while the Mag 7 lagged – falling 360 pts.
But remember what we discussed yesterday. Monday’s action gave us reason to question the breadth of the advance. While the major averages were making records, only 2 of the 11 sectors finished higher and most stocks actually lost ground. It was a rally driven primarily by Tech and Energy.
And yesterday? It was different…..The Equal Weight S&P joined the party, 7 of the 11 sectors gained ground, suggesting that investors went looking for other opportunities…. opportunities beyond the Mag 7 and the other mega-cap AI names. That’s important because while one or two sectors can ignite a rally, they can’t carry it forever.
Now, does that mean all is clear? Not at all. After nine straight up days and record highs across the board, some consolidation would be perfectly normal and we might just see that today…US futures are lower, European markets are lower – all because the headlines suggest that the negotiations with Iran are in stall mode….the Iranians are not giving up, the fighting continues and in fact Iran launched ballistic missiles at Kuwait and Bahrain trying to take out US military forces – they were intercepted so the damage was minimal, but what it says is that Iran is not giving up yet.
So, I guess the idea that the negotiations with Iran are close to a deal, are in fact ‘not so close’. So, don’t be surprised if we see some of the most recent euphoria fade…. but again – do not get sidelined…. Remember – geopolitical headlines are great at creating short term chaos, but do not price stocks in the long term…
There is a breaking headline at 6:45 – “Trump says that Iran agreed to NOT have nuclear weapons, but they can change their mind” Really? Futures remain negative even after that headline hit…..
But if you’re a bull and want to find a reason to remain bullish, yesterday’s action was a step in the right direction because it suggests the foundation underneath this rally continues to strengthen.
Chips continue to rip higher…the Semi’s up nearly 6%, Investors are in a frenzy – taking MRVL up 33% or $71 after Jensen called it a ‘future Trillion-dollar company’. HPE surges as they too raised their AI guidance – suggesting that this chip boom just won’t quit!
And there is news about SpaceX…..This morning we learned that SpaceX is reportedly looking to price 555.6 million shares at $135 per share — a transaction that would raise a staggering $75 billion and value Elon Musk’s rocket-and-satellite empire at roughly $1.75 trillion.
Now think about that for just one second. The headline suggests that they are reportedly setting the price BEFORE the roadshow. That’s NOT how this usually works.
Normally, a company gives investors a price range, (something like $100/$150 to assess demand across the range) management hits the road, institutions kick the tires, orders come in, and the final price gets determined through the book building process. (where supply meets demand).
Now, let’s not be foolish – this conversation has been happening for months with institutions, Goldman and Morgan (lead bankers) are well aware of where the bodies lie….. But Elon appears to be doing what Elon does best – he isn’t flirting, he is skipping the foreplay, going right for the ‘entrée’…. telling investors: “Here’s the price. Take it or leave it.”
Can it change? 100%. Will that be the opening price on IPO day- June 12th…. Absolutely NOT. Remember – June 12th will be when everyone else gets to throw their interest into the hat….and supply & demand change.
The roadshow was supposed to begin tomorrow – June 4th, the deal wasn’t’ expected to price until June 11th, with trading beginning on June 12th under the ticker SPCX. There is also a 15% greenshoe option attached to the deal, meaning the final raise could end up well north of $75 billion if demand is strong enough.
But be careful, while the story appears credible, it remains provisional until the Fat Lady Sings and the deal is priced.
Now let’s talk valuation. At those numbers – investors would be paying about 94 times revenue for a company that reportedly lost nearly $5 billion. Ninety-four times revenue.
There is no P/E ratio to discuss because there are no earnings to measure. Which tells you everything you need to know. This isn’t a valuation story. This is a belief story. A belief in Elon Musk. A belief in Starlink. A belief that satellite communications become a dominant global utility. A belief that artificial intelligence, data centers, autonomous systems, space infrastructure and Musk’s xAI ecosystem all converge into something far larger than what exists today.
And investors appear willing to pay almost any price for that possibility. This deal is the poster child for the next phase of the AI and innovation boom. Between SpaceX, OpenAI and Anthropic, we’re talking about nearly $4 trillion of potential market value looking for a home. That’s a lot of optimism.
Maybe it’s justified. Maybe it’s not. But one thing is certain… This is not about today’s earnings. It’s about tomorrow’s dreams. And who doesn’t love a good dream?
Bonds did very little yesterday…leaving yields essentially unchanged…but today is a different story…..the headlines are creating a bit of angst – bonds under pressure sending yields higher – the 2 yr is up 3 bps at 4.07%, the 10 yr is up 3 bps at 4.48% while the 30 yr is up 3 bps at 4.98%
Oil? You guessed it….it is not going down…and in fact is now trading at $96.41 up $10 since last week’s low at $86 – when the thinking was “this is almost over’….well, what a difference a day makes…it is not almost over and it does not appear to be anywhere close to being over…so do not expect that quick decline…Oil remains in the $90/$105 trading range…and if that is true – do not expect to see CPI, PPI or the PCE to move lower at all….and if that is true – there will be ‘NO rate cut’ for you.
Gold? It remains stuck in the triangle….Down $24 this morning at $4,460 – support at $4,420/resistance at $4,630.
The VIX? Remember what I said – I always become a bit concerned when the VIX suggests complete and utter complacency…and that is exactly what it has been suggesting. This morning it is a bit higher, and if the headlines do not suddenly change, I suspect we will see it move higher over the coming days….and if that happens, expect stocks to pull back – which would be ok, it will shake the branches a bit – let’s see who falls out? Can you say, ‘the Momo guys?”
Yesterday’s eco data reinforced the narrative that has been driving this market higher. The economy is cooling—but it is not cracking. JOLTS showed employers are still looking for workers, factory orders suggested manufacturing remains sluggish but stable, and consumers continue to spend despite higher borrowing costs. In other words, the data did not point to recession. It points to a slower-growth environment that still supports corporate earnings and gives the Fed room to remain neutral – not hawkish and not dovish. For the bulls, that’s about as good as it gets.
The real test comes today and later this week with ADP, ISM Services, and Friday’s Non-Farm Payrolls report. If those reports confirm a gradual cooling trend without a sharp deterioration in employment, the market is likely to view that as another green light. If it does not, then there will be a repricing.
European markets are mostly lower on the geo-political headlines. Germany is down 0.9% while Spain is up 0.5%. The other market centers are negative and down about 0.4%.
US futures are now mixed…. Dow futures -190, S&P’s -10 pts, the Nasdaq +45 while the Russell is -16.
The S&P closed at 7,609 – up 10 pts putting it in another new century…. The Dow, S&P, Nasdaq and the Equal Weight S&P are all kissing overbot…….and I know I keep saying this and stocks move higher – until they don’t…. And all that means is don’t be emotional…. Make smart, disciplined decisions with your money.
Give me a call at 561-931-0190 to discuss your goals and your timeline. Let’s assess the risk in your portfolio and your tolerance for volatility – happy to do a complimentary portfolio review and risk assessment.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Risotto w/Fresh Fava Beans and Pancetta
Risotto is always an easy meal and is good for those who are vegetarians and or need to be gluten free. This one celebrates fresh fava beans enhanced with pancetta. – Truly a great dish.
For this you will need: Butter, Olive Oil, Finely Chopped Onion, Finely Chopped Pancetta, Arborio Rice, White Wine, 6 Cups Vegetable or Chicken Broth, Fresh Shelled Fava Beans, Chopped Parsley, Grated Pecorino Romano Cheese.
Begin by heating the butter and olive oil in a heavy saucepan. Add the onions and cook until translucent. Add the pancetta and sauté for 3 or 4 mins….
Add the rice and stir until it is well coated. Next add the wine and stir continually over medium heat until it is absorbed.
Once absorbed add in a ladle of hot broth – stirring constantly until absorbed…Repeat – adding ladles full of hot broth and stirring continuously.
About 10 minutes into the cooking time, add the fava beans and continue adding broth and cooking. You want the rice to be firm to the bite – but not hard.
Remove from the heat, add another dollop of butter and the pecorino cheese. Serve in warm bowls and enjoy your favorite white wine.
Buon Appetito