July 1st Pre-Market Brief

Good Morning

People keep debating whether the AI boom is real or just a stock story. South Korea just settled it for me, posting its fastest export growth since 1978, almost all of it chips.

The irony is chip names are getting trimmed this premarket over here, nothing broken imho, just profit-taking. Warsh promised the Fed would "chart a new course" but declined to give any signal on the July rate decision, staying true to his stance against leading folks with forward guidance.

Let’s dig in…

Today's Big Picture

Soft Jobs Data Isn't Cooling Rate Bets
ADP payrolls came in light this morning, 98,000 against the 110,000 expected. A weak print usually pulls hike bets lower, but they barely moved, since this Fed fears inflation more than a soft job market. Across the Atlantic it's the opposite: euro zone inflation cooled and traders trimmed their ECB hike bets. Warsh speaks at 9, and I'm watching how he frames inflation.

Chips Get Sold To Open The Second Half
Micron and Sandisk are lower premarket, with Nvidia and Broadcom getting sold alongside them. It's profit-taking after a record run, but it matters because this one group carried the whole market. Strip tech from the S&P and the index is basically flat this year. Nomura says the top isn't in, while Bespoke's Paul Hickey calls the group extended.

Gold And Silver Are Falling Together
Gold just booked its worst quarter since 2013, and silver is dropping with it, harder this morning. Both are under the same pressure: rising rate bets and a strong dollar make metals that pay you nothing less appealing than Treasuries. It's a clean read on how firmly the market now expects rates to stay high.

Market Overview

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Stock Spotlight (pre-market)

Nike $NKE ( ▼ 1.04% )  

Beat on both lines, but China sales kept sliding and the stock is lower premarket. Holders have to decide if this is the bottom or another leg down, and China is the number that answers it, not the headline beat.

Shutterstock $SSTK ( ▼ 1.27% )  

Down sharply premarket after its merger with Getty Images collapsed over a UK regulator's demand to sell its editorial arm. Getty walked, so Shutterstock holders now face the flood of AI generated images alone and have to reprice that fight.

Salesforce $CRM ( ▼ 0.8% )  and ServiceNow $NOW ( ▼ 0.69% )  

Both higher after Guggenheim upgraded them to buy, arguing AI won't hollow out enterprise software. That puts the bears who spent the quarter betting AI eats the SaaS names on the back foot.

Bloom Energy $BE ( ▲ 10.07% )  

Higher premarket after expanding its Brookfield partnership to finance power for AI data centers. It hands the AI power skeptics one more data point they have to explain away.

Alcoa $AA ( ▼ 2.49% )  

Lower after agreeing to buy South32's bauxite, alumina, and aluminum assets in a deal worth up to $4.1 billion. The buyer rarely gets rewarded on day one, so holders are judging a big bet near the top of a metals run.

Kroger $KR ( ▼ 0.68% )  

Lower after a $1.65 billion deal for regional grocer Giant Eagle. Grocery margins are razor thin, so holders are weighing whether new markets justify the spend.

What to Watch

IPO’s

MarketBeat did an excellent job on this free IPO guide on IPO’s happening this year.

Tesla Q2 Deliveries (Possibly Today)
Tesla $TSLA ( ▲ 2.13% )  could post quarterly deliveries as early as today, with consensus near 397,000. US demand cooled after the EV tax credits expired, but European registrations are running hot. The headline number gets the attention, but the regional split is the real story.

The Yen At A 40-Year Low (Sleeper)
The yen just hit its weakest against the dollar since 1986. If the Bank of Japan steps in to defend it, the 2024 carry trade unwind could echo. Almost everyone is watching Warsh instead.

- John

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