On today’s episode of Catalysts, co-hosts Seana Smith and Madison Mills explore market reactions to economic data, company announcements, and the latest developments in the AI sector.
Market dynamics take center stage as the show dissects the ripple effects of Wednesday’s Consumer Price Index (CPI) print and the resurgence of the meme stock frenzy. Yahoo Finance’s Jared Blikre breaks down the market response to the meme trade resurgence. Rabobank Senior Cross-Asset Macro Strategist Christian Lawrence joins the discussion to shed light on the implications of the CPI print for market outlooks. Additionally, Loomis Sayles Head of Full Discretion Team Matt Eagan and Nuveen Head of Municipals Dan Close offer their insights on market outlooks after the CPI release.
The show also spotlights a several trending tickers, including Netflix (NFLX), which will now stream two holiday NFL games, Alphabet (GOOG, GOOGL), which unveiled new AI features at its Google I/O conference, and SunPower Corporation (SPWR), the recipient of a downgrade from Wolfe Research.
Furthermore, BCG Global Chair Rich Lesser joins the discussion to explore the growing investments in generative AI from tech companies.
This post was written by Angel Smith
Video Transcript
It’s 10 a.m. here in New York City.
I’m Madison Mills alongside Shana Smith and welcome to catalyst.
It’s Wednesday May 15th.
Let’s dive into the catalyst moving the markets today.
First up, it’s all about inflation.
April CP I showing signs of slowing price growth.
Of course, CP I print cooling for the first time in six months and that could be in as welcome news for the fed, the data causing and pushing stocks up here with the and be hitting new all time high and the mean stock rally fly now here game stop is falling today after soaring over 300% in the last month.
Does this mark the end of the current frenzy around the stocks in China vowing to retaliate after President Biden announced sweeping trade tariffs that would impact $18 billion and and imported Chinese goods.
The Ministry of Commerce saying that the US should immediately quote correct its wrong actions and canceled the additional tariff measures against China the big story of the day and that is the latest data that we are getting out on inflation.
We got a softer print here for the month of relief from the three hotter than expected reports that we got to start the year.
But is this moderation in prices?
Is it enough to ease some of the feds concern?
One of the areas that we are seeing prices remain sticky is shelter.
The largest factor in April’s monthly increase.
Thanks mostly to high rent prices.
I asked Steve, you know, the Bank of America securities us economist when we could start to see some relief and here’s what he had to say.
We’re looking for firmness over the next few months.
I think the second half of the year is probably where you start to see a little bit better improvement.
So instead of zero point fours on shelter on o on rent, maybe you’re in the 0.3 region.
So you’re getting kind of that step in the right direction and that’s gonna be a source of relief for the Fed.
So we’re getting a step in the right direction and Steven Juno put it out to me last hour, Matty.
But when it comes to exactly what the Fed needs to see, we heard Powell talk about this time and time again, Treasury Secretary Janet Yellen, also weighing in on the sticky parts of inflation, obviously rent to being a huge driver of that.
They expected to see some moderation now for quite some time, some stabilization here.
But I think when you take a look, at least at the market and we’ll talk about this a little bit more in one second.
But when you at least take a look at the market’s reaction to it to this print here this morning.
The fact that we are seeing gains when it came in in line with expectations, I think really shows just how on edge investors are right now about the risk of a re acceleration that we could see an inflation and anything that just came in to ease some of those fears at least for now seems to be enough for the market today.
Absolutely, definitely seeing a lot of optimism here.
It’s interesting on Shelter.
It’s moved down on a year over year basis for the past 13 months.
So that could be an indication of some more good news to come for the Federal Reserve.
But sticking with that market action, the S and P 500 hitting another all time high this morning as new data showing signs of inflation moderating and consumers cutting back on their spending as well, even with some progress shown today on consumer prices.
Our next guest says we may not get down to 2% inflation even in the next few years.
So what impact could that have moving forward?
Joining us now, we’ve got Christian Lawrence Rob, a Bank Senior Cross Asset macro strategist, Christian, thanks for coming in person.
We appreciate it.
So markets very happy about the CP I print is a little bit too much happiness for see, I think so.
And the reaction is somewhat complicated by the retail sales print because that came in much weaker than expected.
So I think that that was actually the main driver of the move lower in yields and that move lower in yields certainly welcomed by the equity market and explains that all time high in the S and P 500.
Do you think this move that we’re seeing today is just a blur?
How do you expect to see this play out here over the trading session?
And then of course, as investors have a little bit more time to digest the reports that we got out this morning, the sensitivity data releases is going to continue and we will see these very large reactions.
We see it pan out in the rates world where moves of 10 basis points in a day.
We saw that yesterday as well.
These will become and will remain very common features.
And I think we’re seeing a little bit more sensitivity also to the activity data than previously.
We know the inflation numbers.
Yes, they are down from the absolute peak, but I still think we’re going to see some sticky pressures.
Look at that shelter inflation there.
That’s a real key point.
And of course, shelter is one of the main expenses for households.
Well, I just want to go back to what you said about retail being the catalyst for this upside movement that we’re seeing today because as you mentioned, consumers are spending a lot on things that are not measured by the retail sales print.
So why should we be putting so much weight on that data point?
I think in order to see real slowdown in inflation, particularly, it’s the services measure we really need to focus on and you know, that’s still printing at that 0.4% rate that it has done for quite some time.
And without that easing, without seeing consumption start to slow, we’re not going to get that 2% target.
And I think there are other reasons why that 2% is going to be hard to achieve more structural global factors, particularly related to more in the way of domestic production and more in the way of trade barriers going forward as we’ve seen already.
There seems to be a lot of questions just about how much stock we should put in the CP I for interest in terms of what this is really telling us about the deflationary story.
If anything at all, how are you viewing or what are your expectations in terms of inflation and maybe any sort of improvement that we could see in the coming months, it’s so important to dig below the surface, right?
And when it comes to shelter inflation, I don’t see much relief in the coming months whatsoever.
And that’s going to keep that core services measure high.
And actually when it comes to goods, we had core goods deflation I actually think in the next couple of months, some of the shipping costs we saw earlier this year that’s going to start filtering through and we could actually get a little bit more upward pressure on that good side of things as well.
What’s it going to take to see more improvement stabilization within the rental part, within the services part of this?
Well, I think that’s going to be very difficult.
Indeed, the structure of the house market essentially means there is deadlock because nobody wants to sell at the moment.
And you know, most people that have a mortgage are fixed at very low rates and we have one of the highest proportions of people not even having a mortgage at the moment and owning their house outright.
So I think this is a real structural factor.
That means to be blunt, rental inflation is not going back to the levels, it was pre COVID.
So are high rates, inflationary.
Well, that’s, that’s a very controversial topic.
I think at this moment with the way the economy is right now, there’s a strong argument to be made for that.
So what does that tell us about what you think the Fed?
What would make the most sense in terms of the Fed’s path forward, the timeline of rate cuts and exactly what we should expect to play out.
Then given the fact that it almost seems like by the week, the narrative is changing surrounding the Fed not too long ago we were talking about, hey, maybe we could potentially see another hike now that now the sentiment and now the conversation has really turned to the likelihood of cuts, which I think makes the most sense.
But what are you expecting to see in that playbook?
Well, I mean, when you look at the fed’s dot plot and you see at the end of next year, one member has right to double another member, it shows you that level of uncertainty out there.
So way, way back in September 2022 our view was three rate cuts starting in the middle of 2024.
And we’ve only just changed that to two rate cuts.
I think the risk to that is actually they don’t go twice.
But what I will say is that for next year, we only have two more 25 basis point rate cuts penciled in and we have nothing for 2026 based on the idea that we are going to see a lot more in the way of tariffs.
Actually, inflation is going to be perhaps heading a little bit higher.
How much of the tariffs piece plays into your thesis there?
Yes, that’s a huge part.
But as we’ve just seen, that is now a bipartisan issue.
So we will see more tariffs.
We will see essentially it’s not de globalization, but it’s a change in globalization.
It’s a re globalization and that’s structurally inflationary does that pose a risk to the economy.
Uh Yes, certainly.
It also poses a long term positive.
Um We could see a lot more in the way of manufacturing investment we already have.
I think that that’s going to continue and it could set up for a healthy economy further down the line.
But we know in the short term tariffs can be quite painful and they’re almost certainly inflationary all Christian Lawrence.
Great to have you.
And thanks so much for coming in on set and joining us here, Robert, be a senior process at Mass Macro strategist.
Thanks for having me turning now to mean stocks, the rally fizzling out at least for now and then this move lower coming on the heels of what has been a massive gain in some of these stocks over the last two trading days.
Let’s get over to our colleague, Jared has a closer look at this movement that we’re seeing, Jared.
If it’s two steps forward, one step back today is the back and you can’t see it necessarily on this board real well until I sort by performance here, how much red have on the screen.
And in fact, a lot of those bigger names to the left uh are simply not participating in the meme trade anymore.
But I’ve been, I’ve been focusing on gamestop and A MC and costs and some of the other OG members here.
And you can actually see these at the bottom of our list, here’s gamestop down 25% cost 25% and A MC down 22%.
But what I was writing about in the morning Brief today is there’s a market difference from what’s happening today.
From 2021 when we saw a lot more retail participation back then.
Uh Wall Street was caught flat footed.
They did not expect that.
But as happens in human nature, they’ve adapted.
And so now we’re seeing this is just uh really limited to some uh to a handful of tickers.
Let me show you the three day total because you can see once we account for the two days, it’s a much different picture games stop up over 100 5% A MC up 83%.
But I should note that a lot of these gains have been fleeting and that’s something that’s really, that does seem similar to the original uh movement that we had last year.
Now, let me just show you the two day po uh total here.
I’m gonna show you some breaks in the action.
We’ve had a lot of um uh volatility halts and in fact, I counted 16 yesterday.
We’ve already had four today.
So that’s something that stayed with us kind of interrupt the action.
And I see these comment coming across the terminal.
I see these being posted on X.
And the question is, how much like this are we going to repeat from 2021?
I don’t think we’re going to have these reprisals the way we did in 2021.
And I think the magnitude probably going to be a little bit more muted this time around.
All right.
Thank you so much.
We really appreciate it as always.
Now, President Biden announcing new tariffs on certain Chinese goods this Tuesday including $18 billion worth of tariffs on Chinese electric vehicles.
Beijing’s Foreign Ministry Representative responded by saying that China opposes the lateral imposition of tariffs which would violate World Trade Organization rules and will take all necessary actions to protect against, to protect its legitimate rights there.
President Biden giving his thoughts on how he thinks China will respond when he spoke exclusively with our own.
Brian.
The fact is China already is what you might say way over, way over their, their skis on this.
What they’ll do?
I don’t think it will lead to any international conflict or anything like that, but I think they’ll probably try to figure out how they can raise tariffs maybe on products that are unrelated for more on the fallout from yesterday’s announcement and what impact it might have on November’s election.
We’re going to bring in Terry and policy founder, Terry, thanks so much for being here.
I want to start on your reaction to what the president was saying exclusively Yahoo Finance about the idea that this is not necessarily going to boil over into a t for tat with China.
Do you agree with that.
Well, I think you can expect a tit for Tat Madison, I did, the, the Chinese have never, have never gone without responding to United States tariff action and I imagine they’ll continue today.
Uh That’s really what the president said between the lines.
Uh So, you know, for markets, I mean, what you’ve got here is a continuation of an existing regime.
So, you know, it’s, it’s not a, it’s not really a big deal.
Uh In fact, uh it, it probably helps some uh some stocks, autos and the like.
So there’s that, but what you, you know, what you’re looking at here is a long struggle and I want to be real careful with markets to say, you know, don’t, don’t fall for the tariffs noise, which is relatively small.
What you’re going to see in Washington over the next year or two is a, is a continued move towards shoring up the defense industrial base and that’s really what’s behind a lot of the tariffs, uh politics and politics aside.
So Terry talk to us just a little bit more about that backlash, the risk here of an escalation.
What exactly could that look like?
What are some things that investors should keep in mind when we talk about how it could ultimately impact a handful of these US companies here down the road?
Well, I would look at a combination of things, you know, I, I would look at uh firstly, firstly, market actions, uh you know, the, the Chinese will either uh will, will either uh keep in place or, or increase tariffs that already exist.
They might go an extra mile.
I, I wouldn’t know what that would be but, you know, they will at least do a tit for tat, I would imagine.
I think it’s reasonable to expect.
And beyond that, I think you’re going to see geopolitically, you’re going to continue to see an upping of pressure in a lot of different places, including the South China Sea where uh where things are very tense and markets, I think, don’t understand how quite how tense they are.
I mean, we’ve got uh United States special forces on an island off of uh Taiwan right now.
Uh you know, just a few miles from the Chinese mainland and uh and that plus the bases we’ve already got there.
Uh you know, keep the Chinese themselves on high alert and uh and more aggressive.
So I think you’re likely to see a ramp up in geo political risk, not just the market for.
I’m glad you bring up some of the tensions that we see in the South China Sea.
It brings up this larger picture of tension, Brian.
So he was able to speak with the United States Trade Representative Katherine T on the importance of these tariffs in relation to some of those geopolitical tensions.
Let’s take a listen to what she had to say.
They are significantly out of step with the norms, the standards and the rules that the international trading system has been built on, which is one that assumes and expects that markets and economies will behave on basis of the logic of demand and supply.
Instead, what we’ve seen from the PR CS economic policies and practices is a sustained and um a very targeted approach at establishing industrial dominance in sector after sector.
And it’s interesting, Tara, we’ve also heard the ambassador some switching course saying that tariffs aren’t necessarily inflationary.
Do you agree with that?
Uh No, I don’t, neither does anybody else.
But you know, she works for Biden.
And you got to say that in the White House, the last thing you want to do is be, is, is politically, is being caught saying that administration policies are contributing to inflation.
So they’ll continue to deny that regardless of whether it’s true or not.
I I also want to say a little bit more directly uh something that uh uh MT is uh uh alluding to which is that it’s awfully rich that the uh the, the Chinese are talking about uh violating trading standards set in the WTO uh China for China.
Today, China for 20 years has been classed as a developing economy in the WTO and has fought every uh every effort uh to uh to, to reclassify it otherwise.
And the idea that the second largest economy in the world is a developing economy, which is, you know, is kind of risible and logic is risible in, you know, kind of basic uh basic verbal understanding.
But uh you know, this is uh this shows you how weak the WTO is and how much China is taking advantage of it.
So the United States from its perspective, feels like it has very little else it can do other than take unilateral action.
Terry.
When it comes to this, A lot of people are saying that this is simply symbolic.
This move here from President Biden.
My question to you is this obviously coming ahead the November election?
How much do voter do voters care?
And why are, why not?
Well, I think uh I think Sean, I think an awful lot of the economic narrative is baked in.
It’s Washington’s instinct to want to continue to try to do everything it can to uh to actively help the the incumbent or, you know, the other campaigns will attack it.
But uh the economic narrative here is pretty well baked in which is that inflation is ST high and more importantly, prices are very high, that hurts the president a lot in a lot of states where he that he needs to carry.
And it is a dynamic that shadows his campaign in a lot of those swing states.
So, you know, but it’s very difficult the idea unless there was a big dive in prices, say three or four months ahead of the uh the election, this narrative is not going to change and it’s not positive for the president regarding the upcoming election.
We heard from President Biden and former President Trump this morning that they’re willing to debate one another.
I’m curious from your perspective, as we see the election start to heat up and become more part of the daily dialogue here.
What impact does that have on some of these broader foreign policy moves from the current administration?
Well, it’ll keep the uh let me address it two ways.
Firstly, it will keep the aggressive foreign policy stance from from the current administration up.
Uh It will also uh you know, they, they will be perceived by the Trump people as trying to out Trump Trump.
So there will be a lot of tit for tat about uh uh about toughness on China, toughness on the world economy, toughness on uh geopolitical risk.
So, you know, expect the market should expect that for the next six months.
They should not discount it entirely though because you know, there’s a the the the the reality of this is, you know, China policy is among the most bipartisan parts of the United States politics.
So you know, that that will continue.
It’s not all just uh it’s not all just uh on the timing of the debates themselves.
What is, what is interesting is two things.
One is that the one takes place before the party conventions, uh the second after and you know, and outside of the traditional uh voting, uh the presidential uh uh the voting Presidential Debates commission, um both of these uh main challengers see an advantage.
Biden sees an advantage in making Trump look, look weak and all over the place.
And hot headed Trump sees an advantage in making Biden look old and feeble and out of touch.
And beyond that, both of them are succeeding in their own self interest by keeping Kennedy out whose third party candidacy I think is descending into a niche candidacy, but they’re still worried about the impact on votes.
So keeping him out benefits both of them.
That’s what you’re seeing.
Who’s most at risk.
Terry, I’m sorry, say it again.
Who’s most at risk from Kennedy just in terms of whose votes he’ll likely take more of, uh, depends on the state.
I think actually there’s a lot of, uh, back and forth about whether he’s, uh, whether he takes votes from Biden or takes votes from Trump.
I think it’s a little bit of both frankly.
Uh, but in a, in a, in an electoral college race where it’s down to 7 to 10 states.
Firstly, uh and secondly, the, the individual political dynamics in those states are very different.
I mean, Wisconsin and Nevada, let’s say, are two very different states politically.
Uh You know, you’re gonna get a situation where a Kennedy candidacy might benefit, uh might benefit Biden, uh, more by keeping votes away from Trump in one place uh but have the opposite effect elsewhere.
So it’s not easily blown up into a national uh conclusion.
Terry Haines, always great to talk to you.
Thanks so much for having on with us and giving us your insight here this morning Pangaea policy founder.
We appreciate it.
Well, coming up the NFL on Netflix, the streaming giant closer to making its first big sports deal.
It’s got the deal.
We’ve got the details for you.
When we come back, the hype is continuing this earnings season as tech giants boosting their spending in the technology of that Microsoft reporting big Capex spending in their latest results as they fight to win the A I arms race.
Now, a bipartisan group of senators led by Chuck Schumer are recommending that Congress spend at least $32 billion over the next three years to develop its own artificial intelligence.
So what is the next big catalyst for this technology?
Joining us now to discuss this is rich, lesser BC G global chair rich.
Thanks for coming on with us.
I mean, we talk all the time about how companies are chatting it up about A I and their earnings prints and makes them sound good, but it’s not always clear how they’re actually utilizing it.
So what can you tell us that you’re seen in terms of how companies and how many companies are really starting to utilize A I to beef up their efficiency.
So I think we’re in a really exciting transition right now where for the first year or so through most of 23 many, many companies were focused on just understanding the technology and what it could possibly do.
I think now, more and more companies are realizing there’s a major opportunities here.
And the challenge is if you take 1000 flowers bloom approach, you don’t translate anything into real outcomes at scale.
And so we see companies more and more focused on what are the key outcomes that you can drive that meaningfully move overall business performance.
And if I just give you a few examples of those in the Pharma R and D world, we are seeing people use it to actually create new molecules, molecules that may be equally effective but actually safer because they are more targeted to take development and regulatory processes that are filled with paperwork and the time to generate reports and produce protocols by 80% to take claims processing, which is normally takes over a week to do and take it down to hours or a couple of days to take customer service and really empower their customer service reps to be much more able to spend time focusing on the customer and less time having to read and memorize the manual and those are all dependent on business.
You’re in really tangible opportunities that drive both greater customer value and greater financial impact.
And that starts to get pretty exciting for businesses rich in terms of the what ceos need to communicate to their employees, to shareholders of their public company here in terms of why this A I investment makes sense.
What people, what investors want to see, what are the critical questions that they need to answer at this stage of the cycle.
So with investors, we would argue that companies need to highlight that they are not just there to say they are doing generative A I to get to nifty pilots and you know, shows at investor meetings, they are there to meaningfully improve business outcomes, which is often about transforming entire business functions and processes.
Sometimes it’s about creating entirely new business models to drive top line growth and that they are going to learn, but they’re going to learn by doing not by learn by creating a lot of paper.
And, and I think that that’s what investors want here and then within a relatively short space of time, they should get to see tangible business outcomes.
I think with employees that it’s it’s the essential part of the journey.
Actually, we would we have this framework in BC G that we talk about all the time.
1020 70 10% of the work on the algorithms.
20% of the work is on the digital and data platforms.
70% is on people process org leadership culture, all of the things to go from having a very interesting capability to actually deploying it.
And there’s a huge effort around reskilling.
There’s a huge effort around changing how people view the technology and learn to work together with it, how employees work together across functions.
Because A I can actually create massive value when you stop looking at it in a very narrow lens and look at it in a broader based way.
And that requires an enormous amount of investment in people.
And we see it play back.
The companies that are leading and deploying A I are actually getting higher scores from their people on glass door are actually viewed as more positive places to work places that care more about their people and wanting to invest in their skills, not just for the job they have today, but for jobs they might have in the future.
So they are different messages, but they’re both critical messages for investors and for employees well and interested in this rich because in your survey print, you’ve got a mix of consumer sentiment surrounding A I did it surprise you that consumers were a little bit more positive than one might think about.
Something that everyone talks about.
Is this scary elephant in the room that’s going to take everybody’s jobs.
Look, I think we all wear three hats.
We’re consumers, we’re citizens and we’re employees and that’s the vast majority of Americans and sometimes students, it depends on what ages we’re talking about.
But I think if you’re a consumer or frankly a student, you look at this and you say I should be able to get information more easily.
It should be able to navigate my world.
It should be able to help me distill what’s important and what’s not.
I think if your employees, it’s a mixed feeling.
These are skills you want to learn, you know, where the world is going.
But of course, you worry, will a I eventually replace my role or my job or will the skills that I need to acquire the skills that I can acquire?
And then as citizens, of course, there are concerns around misinformation and risks to critical infrastructure or other things.
And so I think each of us wears multiple hats and I don’t think it’s surprising that people view this A I world differently depending on which hat they’re wearing, makes a lot of sense rich, lesser always great to talk to you.
Thanks so much for hopping on with us this morning.
Global Chair of BC G. We appreciate it.
Let’s get to some trending tickers.
We have breaking news out just minutes ago, Netflix pushing further into sports, the streaming giant announcing a deal to stream two NFL games on Christmas day.
This marks the first time NFL or Netflix TV has licensed the rights to a premier sport and the first time it will show live football.
Yeah.
Finances Ali Canal joins us now with the details on this ally.
Hi, Shana.
Yeah, this is a big announcement and it’s a little bit surprising too, especially considering that Netflix has historically said it wants to avoid that investing in traditional live sports.
But clearly this announcement is a big deviation from that co that his quote was always we’re not anti sports were pro profits.
And here are the details of this deal.
They will air to double header games Christmas Day.
Now it’s a three season deal.
So moving forward, they said they will stream at least one holiday game per year as part of that deal.
According to Bloomberg, the company will pay around $150 million per game.
But like I said, this is something that we really haven’t seen from Netflix.
They leaned into sports adjacent content airing different types of programs like the quarterback formula.
One drive to survive.
We’ve seen them dip their toe into live programming.
They aired a live version of The Love Is Blind Reunion.
We saw the Netflix Cup, which was that celebrity golf tournament and they recently did announce a partnership with the WWE that will bring the WWE flagship program raw to the streaming service beginning in 2025.
But even then that and said that the inclusion of that program did not signal a change in its overall sports strategy.
Although analysts across the board have said that Netflix is not going to be able to avoid that sports is really the last frontier when you think about the streaming battle and Netflix has consistently been the leader of streaming.
So it, it makes sense that they would get involved in the NFL in some way.
Well, I’m interested in the impact might have on their ad T offerings because live content equals ads in my mind.
This indicate that a Cheers may not become an option for Netflix users anymore.
That’s a really good point.
And the company is hosting their upfront presentation later today.
So I’m sure that’s going to be a big question mark for advertisers.
I mean, certainly an attractive opportunity for advertisers.
You think of something like the Super Bowl where you have ads just flooded and that is where people really watch a lot of the advertising on there.
So that could be a unique opportunity.
We know that Amazon Prime, they aired the Black Friday game and they were able to drive a lot of traffic through advertising through product placements.
Maybe that’s something that Netflix could experiment with as well.
But I agree, I think we’re going to have to wait and see what details emerge from this.
Um But you know, in linear TV, you have ads in between games, so it could be the same, a huge opportunity you would think for their ad business.
Absolutely.
Well, I appreciate it as always.
This is a really exciting stories for covering it and bringing it to us here and it’s been quite a busy week for Google as well.
The tech giant unveiling a slew of generative A I products at its IO developer conference in mountain view, California on Tuesday.
Those include its GE and I live assistant and updates for its Android and workspaces platforms.
So what have we learned from one of the biggest tech events of the year?
Yahoo Finance tech editor Dan, how he is live at the conference to explain Dan.
Thanks for joining us.
What do you have?
Yeah, Matty, look, there’s, there’s a couple of things that I think are, are worth looking at here and really it’s kind of a full reinvention, almost of Google itself is kind of the new leader of the A I or at least that’s what they’re projecting after they kind of lost that crown to open A I and Microsoft in 2022 2023 where we saw those companies really just take off as far as GA I goes and then Google kind of stumbled out of the, the, the starting blocks.
They had that bard launch that, that great.
They recently had those issues with its image generative software.
But now coming out of Google IO, it looks like they’re back in a leadership position.
They announced big changes to search where they’re going to have what’s called an A I overview, kind of a short description or short answer rather to the queries that you have along with links to those cited information sources, but directly below those.
So it’s going to be a completely different look for Google Search going forward, at least in the US for now.
And then they said billions of people by the end of the year, there was also a really interesting product that was previewed.
It’s a prototype called Project Astra.
And it’s really this kind of new form of A I assistant that uses both voice live stream video from your phone.
So if you open up your camera and you’re looking at what’s going on in front of you, it’s able to interact with what it sees through your phone’s really interesting stuff there.
In fact, as I was walking around the IO floor, Google co founder, Sergey Brin actually walked out of a booth, uh, checking out the technology and I asked him, you know what his thoughts on the kind of rivalry with Open A I, it’s like, and what he thinks of the company’s new GP T 40 model, which just came out the day before IO, coincidentally, I guess he said he hadn’t been able to try it yet, but that he thinks this, this product Astro would have been great for Google Glass.
That kind of ill fated wearable that came out about a decade ago.
He said it was probably 10 years too early for that.
But, you know, when, when you look at overall what Google is doing here, they’re just infusing more generative A I throughout all of its products and as I said, I think that’s their way of really trying to project the fact that they are back on top as an A I and not kind of the second fiddle to open A I and Microsoft, still Microsoft has their BUILD conference next week and you can guarantee that they’re going to announce some kind of generative A I offerings likely tied to open A I.
All right, Dan, we’re going to have to leave it there, but thank you so much for joining us as always and bringing in us here on the ground reporting.
We appreciate it.
We are also watching the Energy Space Wolf Research downgrading some power to under perform and that’s down from the previous rating, which was that pure perform the stock down over 29% here.
Now Wolf research saying that this stock is the most extreme example of the meme stock resurgence and shot and we know this is a heavily shorted stock.
I was just taking a look at some of the data here.
Short interest on this name climbed 96% on Tuesday.
But the rally in some power allowed this name to race all of their 2024 losses.
And this comes as the entire equipment, solar equipment stocks of space is struggling with higher for longer interest rates.
With the fact that individuals who were going to switch to solar power largely did it during the course of staying at home for a couple of years during the COVID-19 pandemic and it’s got a lot more expensive to do it with those higher interest rates.
So it’s interesting to see the stock continuing to be a Mimi name.
Yeah, it is.
And I think that this just highlights what has been going on in the market the last couple of days.
Some of these not trading within their fundamentals.
We’re certainly seeing that and that’s essentially what this analyst is calling out in this downgrade here that he does have on this name.
Basically saying that right now he’s downgrading the recommendation to underperform because it needs to come back to reality.
He wants a squeeze which we have been seeing play on the markets over the next two days, uh starts to subside a little bit.
He talked about some of the headwinds or some of the challenges that are ahead here for the industry specifically for some power.
What I found was pretty interesting here within this note was that he called out the outlook for rooftop solar in California specifically.
And why he mentioned this is such a head one for some power versus some of his rivals are more of a challenge, I should say for some power versus some of his rivals is because of their exposure to California, they have a greater exposure to California and then some of the sons than some of their other peers out there.
So that could put them at some risk here at least in the short term.
So you mentioned higher rate, you mentioned the uncertainty surrounding the sector as a whole.
And obviously, this downgrade comes on the heels of what has been pretty astonishing rally for this name and many names over the last few days.
You’re talking about a gain of more than 90%.
You said in one trading day, more than 9% in two trading days is so it’s no surprise that there’s analysts out there saying that, hey, this does not make a heck of a lot of sense and we gotta see this return to reality at some point real.
Where is the reality shot still?
I guess it’s coming in for the A MC.
Is it starting to come in for GM as well?
But it’s just fascinating that we’re still seeing the retail investors pushing up these me names here.
Well, its a higher for longer environment.
You may want to take your cash from the sidelines and invest in get this municipal bonds.
We have more on that coming up next.
Stick with us.
Do a check of the markets here sponsored by tasty trade S and P 500 hitting all time highs as traders start to price in an 80% chance of a fed rate cut by the September meeting.
You’re looking at a lot of green across your screen here.
But I do want to point out this bump up that we saw in the S and P 500.
And this is where we got that little all time high.
Look at that square, I just drew.
How fun.
So that is why we’re seeing a little bit of growth to the upside in markets this morning is really driven by that CP I rank question remaining about whether or not the market should be as excited as they are about that print.
But we are seeing that movement unless we’re also seeing a little bit of a sell off in the bond space with the 10 year note hang around for three this morning.
Some traders were pricing in a 42 handle.
On the 10 year note.
We’re not exactly hitting that level but still seeing a little bit of a sell off in the overall bond space particularly toward the long end of the curve, Shana.
All right, many thanks for bringing that down.
Let’s talk a little bit more about the action that we are seeing lay out in the bond market right now.
Treasury yields are moving lower this morning following that CP I print that we got out this morning showing that inflation is in fact cooling.
It’s allowing investors maybe to gain a little bit more confidence that the fed will likely or could potentially cut rates before the end of the year.
Let’s bring in Matt Eagan.
He’s Luma sales head of full discretion team joining us now, Matt, it’s great to see you.
So talk to me about how you’re looking at today’s print, the reaction that we’re seeing within the bond market and whether or not that makes sense to you.
Well, the numbers came in pretty, pretty much uh more or less right on the, on the screws and uh you know, I felt like the market wanted to rally um with that type of print and that’s what we’ve gotten, uh did show uh continued deceleration in uh the inflation.
So there’s some good news here.
There’s also some not so good news.
Uh We’re still seeing that that super core, that so called super core core services still showing that inflation is still rooted in the system.
And, and uh you know, it’s tougher to uh extract ourselves from that higher level, you know, higher the entire level of inflation that fed would certainly like to see.
Uh So it’s stubborn.
Um Our expectation is that it will continue to trend down this year.
Uh But it’s um it’s been slow going for sure.
OK.
So talk to me about this move that we’re seeing in terms of traders pricing in an 80% chance of the fed rate cut happening by the September meeting.
That’s obviously a big change.
And we’re seeing a lot of movement particularly on the front end of the curve here.
I look to the bond market to give me sanity when equities are overreacting.
So what gives from all this movement we’re seeing?
Well, this is a case where uh good news for the bond market is good news for the risk trade.
Um And that’s because, you know, there’s an expectation that the fed will indeed be able to uh to ease by uh before the end of the year.
And that was called into question not so long ago because as you know, that the economy has been very resilient, despite all of these rate hikes by the Federal Reserve inflation has been kind of sticking on the downside.
Uh So there’s a little bit of a relief rally uh to, to, you know, getting a print that’s showing some uh continued deceleration.
I think there’s, you know, we take a big step back here uh there, you know, to think about it from uh Braley, both stocks and bonds.
There are some structural factors here um As well as cyclical on the structural side.
In our view, we flipped from a regime where we were, we had very low and stable inflation.
You know, this is leading up, you know, past the GFC, leading up to the pandemic.
And uh for the last several years, we’ve seen some emergence of some macro structural factors that on the structural side will keep inflation perkier than it was so more volatile.
What I would say is unstable.
Now, that’s the structural feature cyclically and what this print shows is that we’re still.
So if you think of CP I sort of in a, you know, running in a sort of sawtooth pattern, a cyclical pattern with uh the economy, we’re on the, the trend lower coming down.
One of those saw teeth if you will and we’re bottoming here.
So from a cyclical perspective, there’s still some more uh to ring out.
But what I would say about this is given the structural factors here.
Um we have to keep in mind this is probably gonna be a very shallow rate cycle.
So once they do cut, there, won’t that be that many more cuts that come and that will put a limit to how much lower yields can, can go from here, particularly in the long run of the curve.
So then Matt, what does that, what are you telling clients then that that means about positioning and where you’re seeing that opportunity now?
Right?
So for very simplistic, when you think of bonds and individual bond or a bond portfolio, there’s really two broad types of risk that you have to think about, right?
So you buy bonds for income stability and balance in your overall portfolio today, you’re getting really decent amount of income, certainly a lot better than we saw, you know, not five years ago.
Um So all that’s really good news and I think bonds can really sit in your portfolio function very well.
But when you look at a particular bond or portfolio, you have to think about reinvestment rate risk and principal risk.
Now, when rates are coming down for those long, 3040 years leading up to, you know, this, this spike in inflation, your key worry was reinvestment rate risk.
What do I mean by that?
You get a coupon or principal and you have to roll it into a lower level of yield, a lower level of income.
And that’s really painful over time.
We think that’s behind us and that’s a good thing for bond investors.
Now, we think over time, over a longer period of time, you’ll be able to reinvest your lower coupons into a higher level of yield.
Everybody likes that, they want to earn a higher level of income.
The challenge that we face in this structurally higher and unstable uh inflation regime is principal risk.
So for a longer dated bond that their so called notion of what is the duration of a bond, which is a statistical number that’s quoted in years and the longer a bond is a lot higher, the duration, the more sensitive it is to interest rate volatility.
So a 30 year bond will have a very high degree of risk.
So we’re advising clients to creep out the yield curve to lock in and avoid some of the near term cyclical reinvestment rate risk.
So in other words, if you stay too long in the one year T bill looks really attractive at five plus percent yield, but as the fed gets going, that’s going to go down to a 4% and, and so on, you’re going to reinvest at a lower level of yield.
So you want to move out the yield curve to lock in, you know, the high fours mid forwards that are available at the yield curve, but just not too far.
So when you’re looking at a bond fund, you know, pay attention to that duration.
If you’re bullish on rates, you think inflation has really come down, go for a higher level of duration and vice versa.
All right, Matt, we’re going to have to leave it there.
Thank you so much.
Really appreciate it.
That was Matt Egan Luma sales head of full discretion.
Thank you.
Well, $6 trillion in cash is parked on the sidelines as investors reap some of the benefits of those high interest rates, but its rates continue staying higher for longer.
There’s one investment you might be overlooking to break it down for us.
We d close new head of municipal here in studio and thank you so much for coming in here with us.
I mean, I just wanna start by doing like a big step back for our audience retail investors.
They may not be investing in municipal bonds at the moment.
So what do they need to know about just dipping a toe in and looking for opportunity?
Well, first, thank you so much for having me here.
This is a fantastic to be in the studio.
You know, as, as we’re talking to our high net worth and our uh retail investors right now, uh taking a step back, we are at the highest level of interest rates to start 2024 in the municipal bond market since 2011.
And we’ve only backed up 40 basis points.
So it’s, it’s, I think a much better uh environment than we even had at the beginning of the year.
You know, consider, if you are in the highest tax bracket, you’re earning more than 6% on a taxable equivalent basis for an intermediate AA portfolio and more than 9% on the high yield side.
So we think the opportunity is there, this is an opportunity going back 23 years ago that there really wasn’t much income in fixed income.
And with this back up in rates, uh you know, particularly since the beginning of the year now, certainly since the last FO MC meeting, we’ve had a bit of a rally.
Uh We think the opportunity is there and we think certainly with the tax cut and Jobs Act expiring at the end of 2025 there is a prospect for higher uh higher taxes.
And with the prospect for higher taxes, we think the Muni exemption is worth just that much more given that we’re likely going from a 37 to 39.6% tax bracket.
If we have a divided Congress, if we have, uh you know, whoever comes into the White House, this automatically extends and you have the prospect for higher taxes.
So II I think that opportunity said is what we’re looking at and we’re certainly seeing this as a better opportunity set than really anything else in fixed income.
Given what the rates are on a tax equivalent basis.
Dan, what does this set up look like?
A little bit more short, short term?
We spent so much of today talking about the CP I print that we got out this morning.
What exactly that means for the fed in terms of their fight against inflation?
What it ultimately means for rate cuts?
Are you closely watching that?
And why am I not?
Uh we are closely watching it?
I mean, today was surprising in that it was a good uh inflation number in that it actually came in at expectations.
So, you know, you consider the last three reports where the consensus was widely different from where the print came in.
What we’re most closely watching is the shelter component, which really showed some signs of rolling over at 3.5% month, over month and also core services and that also moderated.
So a combination of I think a really good CP I report and again, good is just uh hitting expectations.
The PP I revisions from yesterday, uh you know, a soft retail sales report, all that has been very good for fixed income.
And if you consider since May 1st the last fo MC meeting, we’ve rallied 25 basis points on the tenure.
So Munis have done really well and they’ve done well, not just because of what we’re seeing on the broader fixed income side, but we’re having a lot of spread compression with municipals because I think investors are looking at municipals and saying, uh it is really good from a credit perspective.
All the money that came in from COVID is on the balance sheet of state and local governments.
We’re seeing collections really do well, especially at the local level in sales taxes and all that’s really come together with uh very easily digestible supply, a very favorable envi environment with broader fixed income.
And we’re having a great year compared to just about anything else in fixed income.
So I, I think there is more to come and I think as investors really start to dial in on the T CJ A perhaps going in and not being renewed, we’re gonna see more interest in the tax exemption and what could, what it could do especially for high net worth investors in our final minute here, where specifically is the opportunity within Munis?
Sure.
At Naveen, we see two specific spots by sector.
We’re really focused in on local general obligation bonds.
We’re seeing very good property tax collections, which is what uh basically underlies the repayment of those bonds.
Uh We’re seeing very good fundamentals from any of your essential service, monopolies like water and sewer but specifically to our positioning and different than what you’re seeing in the broader uh treasury curve is, the municipal curve is upwardly sloping.
And so you don’t have this funkiness from 10 to 20 years being kinked from 20 to 30 years.
Actually having a downward slope, you are getting paid more or more for every year you take in the uh municipal bond market.
So we’re really encouraging our investors to go out beyond the 1213 year part of the curve get paid for taking a bit of uh yield curve risk.
And if the fed does indeed cut as is expected after today’s CP I reports, you know, two times in 2024 It’s just gonna add capital appreciation to the story.
Dan Close.
We’ll leave it there.
Neves Head of municipal.
Thanks so much for hopping on.
Thank you so much for coming.
I keep right here on Yahoo Finance because stocks are almost just about what, an hour and a half into the trading day.
We’re looking at gains across the board.
You’ve got the dow up nearly 200 points.
You’ve got the S and P up around 7/10 of a percent.
We’ve got more on the market moves when we come back BMO capital markets, raising its S and P 500 year and target.
Now the highest on the street, the firm is forecasting the index to end the year at 5600.
That is up from 515,100.
Now, in that price target increase their, citing the strength of the market momentum as a reason for raising that often.
And it’s interesting because this was kind of a hold that the mo capital markets typically bullish voice on the street, particularly from the individual raising the price target here to 5600.
It took them a long time to go from 52 to 56.
And it’s interesting that it comes right after this hotter CP I print as well though.
I’m sure it was in the making prior to this print because there is this question mark out there about whether or not today’s print actually does indicate a dis dis inflationary trend, but the biggest on the street 5600.
Yeah.
You know, it’s not a huge surprise.
Msy was sitting here at the desk with us not too long ago.
A couple of weeks ago, he was sitting there with the 5100 price target and sounding very bullish and optimistic.
And I asked him, I knew he wasn’t going to tell me, obviously cannot for um legal reasons here.
But I asked him, I was like, well, it sounds like you might be raising your target pretty soon and it very much ties into the bull case that he laid out with us here in Yahoo finance several weeks ago.
And he was talking about just this right that we are seeing within the market, especially at this time.
And it really defied many of the expectations that we had going into the year.
And also essentially the fact he made the point that consider that investor expectations and fed policy guidance have now essentially come aligned versus the significant disconnect that existed at the beginning of the year.
So the fact that that we are seeing more of the fact that it seems like the market is coming around to realistic expectations here and what we could see from the Fed, giving more of a, uh, reason to be bullish and see more upside here from these current levels.
And we certainly are seeing looking at gains today.
Yeah.
All right.
Well, let’s do a final check of the market and those gains that we were just talking about.
You got the dow just around 200 points and you got the NASDAQ up about 8/10 of a percent.
Now coming up wealth dedicated to all of your personal finance needs.
Our own Brad Smith is gonna have you right here for the next hour.
So, stay tuned.
