Dow Jones: 32,160 (-0.26%)
S&P 500: 4,001 (+0.25%)
Nasdaq: 11,737 (+0.98%)
Russell 2000: 1,761 (-0.02%)
Bitcoin: $31,072 (+0.44%)
Ethereum: $2,338 (+2.47%)
Up and down and up and down… Stocks didn’t know what to do with themselves today as the major averages couldn’t convincingly recover from yesterday’s massive sell-off.
The indexes went through some big swings today as investors tried to find their footing, with the Dow ending up in the red while the S&P 500 and Nasdaq were able to close higher. Beaten down tech stocks were some of the biggest winners today, although their gains were modest for this volatile market.
Earnings: Peloton (PTON) took a 8.7% dive today after reporting a wider-than-expected loss for Q1. Coinbase (COIN) fell 12.6% as the company reported a 35% drop in revenue during the first quarter. Ouch.
Economy: Keep an eye out for the April CPI data, which is set to come out tomorrow. Economists expect a reading slightly below March’s 8.5%. The 10-year Treasury yield pulled back from the 3% level today.
Crypto: Things are rough here. BTC briefly fell below $30K for the first time in almost a year, and investors are getting worried about Terra’s recent blunder… but more on that later. On the bright side, COIN earnings showed that while retail trading is falling hard, institutional trading volumes are up 9%.
Now, for the top five stories of the day…
Source: Heat Map & Sector Performance — Finviz.com
Gas Prices Hit a Record That No One Wants to Beat
The gas station and stock market have more in common than you think. Every time you see them you want to cry and they steal your money.
New Record! One that we would rather not have, gas prices hit the highest level on record today as oil prices remain above $100/barrel. The national average reached an all time high of $4.37, according to AAA. (Not adjusted for inflation)
The culprit: Won’t beat a dead bird here — we all know that prices have been on the rise for over a year now and the Russia-Ukraine war has made things far worse. Other factors to blame include labor constraints, refineries running near capacity, and increased demand from Europe amid Russian sanctions.
Its been some time since drivers paid over $4 a gallon. The last time was all the way back in… 2008. We are now paying $1.41 more for a gallon of gas than we did last year. The worst prices in the nation belong to California, where the state average is $5.84, with some counties above $6.
Oh No… Andrew Lipow, president of Lipow Oil Associates, predicts prices will rise another 15 to 20 cents over the next few weeks, and will hit $4.50/gallon.
Who’s Buying This Dip?
Buy the dip! A battle cry once shared by every investor for the past two years that resulted in unreal gains, is no longer. But that could be changing.
Bulls Staging? Bank of America’s equity client flow trends points to an increasing number of investors buying the dip as the S&P hits 14-month lows. BofA’s clients bought $2.4 billion worth of U.S. equities last week for the 4th consecutive week.
Who’s buying? Buying was led by private clients and hedge funds. Private clients were the biggest net buyers followed by institutional clients.
What are they buying? Investors were buying large and mid cap stocks for safety and selling riskier small caps. Energy and real estate saw the greatest inflows, while financials and communications saw the largest outflows. Clients were buyers in 6 of 11 sectors.
Share buybacks were also seen increasing amid cheaper valuations. Buybacks by corporate clients hit their highest weekly level since the end of January.
The Stablecoin Collapse and Great Crypto Humbling
Things are rough in the crypto space, to say the absolute least.
On Monday night, the UST stablecoin powered by Terra fell far below its $1 peg to a low of $0.62 before recovering quickly to $0.90 early this morning. And obviously, this is a scary thing.
- As an ‘algorithmic stablecoin,’ UST isn’t backed 1-to-1 with dollars. Instead, it’s supposed to maintain its peg to $1 using complex code that burns and creates new units of LUNA and UST in accordance with changes in demand.
But here’s the big problem… Terra’s creator Do Kwon recently bought $3.5 billion worth of BTC to create a Bitcoin reserve for the stablecoin. And while that was initially bullish for the entire market, many investors are worried that Terra will (or already has) sold off a portion of its BTC funds to prop up the price of UST amid the collapse.
- Doing so would add tons of selling pressure to Bitcoin — which is the last thing crypto investors need right now.
- Some investors are very pessimistic about the whole thing… “I think the market is expecting some forced selling here on the part of Terra and the reserve,” Nic Carter, co-founder of Coin Metrics, told CNBC. “It is a calamity but very expected. No algorithmic stablecoin has ever succeeded and this is no exception.”
Everyone is Being Humbled: The Terra situation, while significant, is a microcosm of what’s happening in the broader crypto industry as cashflow-less, speculative investments prove to falter under economic pressures. Nearly every crypto company is bleeding big time.
- Goldman’s basket of 11 crypto-sensitive stocks fell 14% yesterday.
- Coinbase crashed 19.5% yesterday (and another 12.6% today on disappointing earnings).
- MicroStrategy dropped an eye-watering 25.6% yesterday.
- Galaxy Digital, a crypto asset management firm, fell 26%.
Year-to-date, Bitcoin is down 35% while the S&P 500 and Nasdaq are down 16.6% and 25.9%, respectively.
Amazon Has a Gains Problem… They’re All Gone
If you had put all of your money into Tesla stock exactly 2 years ago (beginning of May 2020), you’d be up an incredible 392%. If you had done the same with AAPL, your portfolio would have doubled in value with a nice 102% gain.
Now, take Amazon — the final boss of online retail and the competitor of competitors that’s tough to keep up with in almost every market that sells things direct-to-consumer.
- If your entire portfolio was tied up in AMZN stock since May 8, 2020, you’d actually be down 7.5% on your investment. Yep, you heard that right.
The Sleeping Giant: Amid the latest market rout Amazon has given up nearly all of its gains from the Covid pandemic. Now trading right around $2,200, the stock hasn’t been this low since the initial push it got from the great market recovery in 2020. And over the past 2 years, AMZN has been trading in a tight range as other tech leaders continued to push higher.
- AMZN is now over 40% below it’s 52-week high of $3,773 — which it hit on July 13, 2021.
Pressures are Heating Up: After Covid shutdowns sent consumers flocking to online retail, Amazon and other online retailers have struggled to prove to investors that the skyrocketing growth was anything but a short-lived anomaly.
- The company posted its slowest quarterly revenue growth since the dot-com bust back in 2001, and its outlook didn’t impress investors either.
- Investor rotation is adding even more pain… Rising inflation and interest rates caused many investors to start rotating out of tech at the end of last year, and that trend only accelerated with Russia’s invasion of Ukraine.
- Tech has been hit particularly hard… Tech giants lost over $1 trillion in value between Thursday and Monday alone.
What are the analysts saying? Well, many still see big upside for the Bezos brainchild. 36 out of 38 covering analysts over the past 3 months rate AMZN a “Buy” with an average price target of $3,696, representing a 69% upside (data from Tipranks.com).
Cathie Wood Buys This Tesla Rival’s Stock
Cathie and Ark Investment just made a big move with a brand new stock…
While Wood undoubtedly has a perma-bull mindset when it comes to Tesla, she decided to diversify a bit in the EV space with the Detroit automaker that wants to compete with Elon Musk on the big stage.
The Trade: Ark Investment Management scooped up 158,187 shares of General Motors, marking a brand new position for the firm. The buy was valued at just over $6 million and now represents about 0.5% of the ARK Autonomous Tech & Robotics ETF.
- Top holdings in the Autonomous Tech & Robotics ETF (ARKQ) include Tesla, Trimble (TRMB), and Kratos Defense & Security (KTOS).
- Performance: The ETF is down 35% this year and about 44% from its all-time high. Compare that with Ark’s flagship Innovation ETF (ARKK), which is down 58% YTD and nearly 69% from its record levels.
The new position comes just a month after Cathie Wood told Yahoo Finance that she was “fascinated by how Mary Barra,” GM’s CEO, has been able to turn the company around and invest openly in new technologies.
- GM has been one of the most aggressive companies in the market when it comes to investing in EV and autonomous vehicles.
- GM is investing $35 billion in those two fields through 2025 — and has expressed its intentions to take down Tesla as the top EV seller in the U.S. by that year.
Taking a Different Turn: Buying GM also helps Cathie balance out her portfolio as the stocks she likes generally trade with a very high price-to-sales ratio with little to no profits… GM, on the other hand, has 13 quarters of record earnings since 2014 — totaling almost $88 billion through 2021.
What do the analysts think? 12 out of 14 covering analysts over the past 3 months rate GM a “buy” with an average price target of $63, representing a 64% upside from current levels (data from Tipranks.com).
BioHaven (BHVN): +68.39% – Pfizer announced a deal to buy BioHaven, a company that produces a migraine pill called Nurtec.
FuboTV (FUBO): +15.12% – Fubo CFO John Janedis increased his ownership in the company by 233%.
Tripadvisor (TRIP): +6.65% – Tripadvisor led the travel sector higher today as the industry looks to be one of the safer bets going into summer with travel demand surging.
UpStart (UPST): -56.42% – UpStart was absolutely obliterated after beating heftily on earnings, but cut its full-year outlook, saying rising interest rates will hurt loan volume.
GoodRx (GDRX): -28.86% – GoodRx stock tanked after the company said it’s unlikely to achieve 2022 outlook amid issue with grocery chain
Peloton (PTON): -8.70% – Peloton disappointed on earnings and said its piling up excessive inventory and burning a lot of cash.
Sunrun (RUN) – KeyBanc downgraded Sunrun from overweight to sector weight due to uncertainty over California’s decision on not metering which is a billing system that credits solar owners. “We are downgrading the shares of RUN to SW from OW due to significant uncertainty presented by the recent proposed decision related to net-metering reform in CA.”
Palantir (PLTR) – RBC downgraded Palantir from sector perform to underperform noting decreased confidence in the stock after earnings. “Although we expected PLTR near-term upside from U.S. federal budgets being passed in mid-March and ongoing geopolitical tensions overseas, results were disappointing to us given: 1Q topline lacked upside to consensus; 2Q guide missed consensus on both revenue growth & profitability;”
UpStart (UPST) – Piper Sandler downgraded UpStart from overweight to neutral saying there is too much uncertainty for the AI lender. “Overall loan volumes are expected to decline, given elevated loan rates (and the likelihood of them being moved higher). In our view, the range of outcomes for UPST has increased, given macro uncertainties, and we are thereby downgrading UPST to Neutral, lowering our PT to $44.”
Quote of the Day: “The time to buy is when there’s blood in the street.” – Victor Rothschild
Fun Fact: Over the last 10 years, 82% of fund managers failed to beat the stock market.