May 18th Pre-Market

Good Morning

Figured we'd open ugly after Friday's selloff and a weekend full of bad headlines out of the Gulf. Instead futures are green and oil is pulling back.

NextEra buying Dominion energy for $67 billion is the big story this AM. Nvidia earnings Wednesday.

Let's dig in...

Today's Big Picture

1. Berkshire Overhauled The Portfolio And It Is Not Subtle 

Greg Abel's first quarter running the book and he rewrote it. Berkshire bought $2.6 billion in Delta, tripled its Alphabet stake, completely exited Amazon and UnitedHealth, and cut $8 billion from Chevron. The signal is clear: Abel is rotating out of the Buffett playbook and into a different kind of value. Half a dozen names are moving on this filing alone.

2. NextEra Officially Buys Dominion For $67 Billion 

All-stock deal, NextEra ends up owning 74.5 percent. Dominion controls the grid in northern Virginia where every East Coast data center sits. This is AI demand finally forcing utility consolidation and I think more deals are coming. The hard part is not the merger. It is getting three state regulators to sign off.

3. Day 80 Of The War, Hormuz Still Closed 

A drone strike sparked a fire near a UAE nuclear plant this weekend. Not the headline you want on day 80 of a war. Trump posted AI-generated images of explosions on Truth Social and told Tehran the clock is ticking. Oil pulled back today but December crude futures hit a contract high. The curve is telling you this lasts the year. G7 finance ministers are in Paris today with this at the top of the agenda.

Market Overview

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Stock Spotlight (pre-market)

Dominion Energy $D ( ▲ 9.32% )  
popping in premarket on the officially announced all-stock deal at roughly $76 per share. Merger arb desks are loading the spread today and it stays wide until three state regulators bless the deal.

NextEra Energy $NEE ( ▼ 5.88% )  
down as the acquirer paying $67 billion in stock for a 74.5/25.5 ownership split. Day-one selling is reflexive, but anyone underweight regulated utilities into the AI power buildout has to revisit the book today.

Regeneron $REGN ( ▼ 9.89% )  
getting hit hard after the late-stage melanoma trial missed its primary endpoint. Long-only pharma PMs are trimming this morning and the entire immuno-oncology basket gets repriced in sympathy.

UnitedHealth $UNH ( ▼ 0.96% )  
down after Berkshire's 13F showed a full Q1 exit. When Buffett walks, retail capitulates and long-only quality managers have to defend holding the name.

Delta Air Lines $DAL ( ▲ 0.04% )  
up on Berkshire's new $2.6 billion stake, Greg Abel signaling cycle bottom on a sector Buffett swore off in 2020. Anyone short the group is covering and AAL and UAL get bought on sympathy.

What to Watch

IPO’s

MarketBeat did an excellent job on this free IPO guide.

Putin Lands In Beijing (Tomorrow) 
Days after Trump's visit, Putin shows up. Any joint Russia-China energy statement moves crude before Wednesday's open.

SpaceX Prospectus (This Week) 
Filing could drop any day targeting June 12 and up to $80 billion.

Refiner Squeeze (Ongoing) 
US is exporting record diesel while domestic gas stocks deplete. Marathon and Valero running flat-out at peak margins. Gas tax suspension or export curb chatter out of the White House is the only thing that breaks this, and that risk is rising into Memorial Day.

- John

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