Dow Jones: 31,730 (-0.33%)
S&P 500: 3,930 (-0.13%)
Nasdaq: 11,370 (+0.06%)
Russell 2000: 1,739 (+1.24%)
Bitcoin: $28,476 (-2.09%)
Ethereum: $1,924 (-8.41%)
Welcome to Extreme Fear… CNN’s Fear & Greed Index showed a reading of ‘6’ today, which is lower than it was in the beginning of the Covid-19 pandemic. Time to get greedy, Mr. Buffett?
Today was another wild session in the stock market, with stocks trying to rebound in the morning but failing yet again. At one point, the Nasdaq was up 1.6% — but we can see how that turned out…
Short squeezes back in play? Some heavily shorted stocks led the brief morning rally, with GameStop and AMC surging as much as 30% before retreating later in the day. On the flip side, Apple fell 2.7% (losing its crown as most valuable company) and Disney shares fell to a 2-year low of $104.
Economy: Also hurting the market was the fresh PPI inflation. Producer prices rose 11% YOY in April.
Crypto: Collapse and pain characterized the crypto market today, with BTC falling as low as $25,400 before recovering some gains throughout the day. At its low point, the entire crypto market lost $200 billion (more on that later).
Hungry Bull: If our newsletter brings you value, help us out by forwarding it to a friend! It’s the least you can do to offer condolences for their portfolio losses 🙂
Now, for the top news stories of the day…
Source: Heat Map & Sector Performance — Finviz.com
Cathie Wood Has a Lot to Say…
Cathie Wood has taking a lot of blows lately, and with ARKK down 76% from its all-time high, she has a lot of explaining to do to her investors…
ARK continues to take on water: ARKK has plunged over 61% year-to-date, but that hasn’t stopped the (former?) Queen of Investing from placing a new big bet. The fund recently added a position in General Motors. While Cathie has been vocally against legacy automakers in the past, she said, “I’m fascinated by how Mary Barra is really turning that ship around and very focused on cruise automation.”
Deep F’ing Value: In a tweet yesterday, Cathie said that ARK’s beaten-down stocks provide a massive value opportunity for prospective investors. She tweeted, “Stocks sold off after the tech/telecom bubble because the ‘dream’ would not become reality for 20-25 years. Genomic sequencing, adaptive robotics, energy storage, AI, and blockchain technology are realities, their stocks seemingly in deep value territory.”
“A bit of a bear market”: That’s what Cathie is dubbing the current investing climate, calling into question the Fed’s plan to increase rates by 50 basis points in June and July.
- “The markets are speaking pretty loudly right now and seem to be calling into question the Fed’s strategy.”
A reckoning for short sellers? Cathie said that “innovative” companies are seeing “incredible” shorting activity, helping drive stock prices lower. “If we are right, then shorts will be forced to cover and we are certainly looking forward to that time,” Wood said.
Crypto Market Loses $200 Billion in One Day…
The Terra UST stablecoin collapse is spreading fears of a broader crypto market contagion, and BTC investors are starting to feel the summer heat.
- Bitcoin fell as low as $25,400 this morning — a level it hasn’t seen since December 2020.
- Ethereum fell below $2,000 today.
Making $200B Disappear: Investors are running away from cryptocurrencies as fast as they can (even the blue-chip ones), as over $200 billion was erased from the crypto market in just one day amid the panic-induced selloff.
The Terra situation might be spreading… Fears of a broader contagion caused by Terra’s stablecoin collapse might be turning into reality. Tether, the first and largest stablecoin, depegged from the dollar today as investor sentiment around stablecoins continues to deteriorate.
- Today, UST traded as low as $0.33 as the Terra team tries to implement its plans to re-peg it to $1.
- LUNA fell as low as $0.01, crushing dreams as it was once worth $119… just last month.
Mark Cuban Weighs In: The Dallas Mavericks owner and outspoken entrepreneur shared his thoughts on Twitter as the crypto market went up in flames this week.
- “Crypto is going through the lull that the internet went through. After the initial surge of exciting apps, NFTs, DeFi, P2E, we saw the imitation phase as chains subsidized the movement of those apps to their chains (aka bandwidth and storage subsidies by startups in the 2000s),” Cuban tweeted.
- But he’s still heavily invested in BTC, ETH, and DOGE — as well as a number of NFT projects. He once told CNBC that 80% of his investments that aren’t on “Shark Tank” are crypto-related.
Zooming Out: The past 24 hours has featured one of crypto’s biggest market drops in recent history. Futures losses in ETH alone totaled over $1.2 billion for traders, and the entire crypto market fell 16% at one point today.
Apple Just Lost its Number 1 Spot in the Market
The World’s Number 1: a prestigious title only one person/thing can claim at a time. Like right now, how we’re claiming world’s number one most destroyed portfolio… Nonetheless, it feels good to be number one!
Just don’t ask Apple about number 1’s right now, though…
How ‘bout them apples… Officially, as of yesterday’s close, Apple is no longer the world’s most valuable company. With oil on the rise and tech on the decline, oil producer Saudi Aramco has now taken the lead with a market cap of $2.4 trillion. Apple stock is down almost 20% this year and now has a total market cap of $2.36 trillion.
This isn’t the first time that Apple has lost its #1 ranking to Saudi Aramco, as Apple was surpassed by it back in April 2020 as well. It’s likely the title will continue to change hands for some time.
Circumstantial: Saudi Aramco has a monopoly on extracting crude oil from Saudi Arabia, the country with the 2nd biggest oil reserves. The company has benefited greatly from the Russian invasion of Ukraine, while most companies have been devastated by it. WTI crude is currently trading above $107/barrel, while the Nasdaq is down 25% so far.
Famous Short-Seller is Going All-In Against Elon + Twitter
Elon’s offer to buy Twitter at $54.20 per share was approved by the company’s board, but it could still take months for the deal to close — and of course, there’s no guarantee that it will.
And investors are taking that “no guarantee” very seriously… TWTR stock has fallen 12% since reaching its high for 2022 back in April. Today, it closed at just $45.08, over 16.8% below the $54.20 promised by Mr. Musk.
- That reflects a market cap difference of around $9 billion.
“The market is having marginally less confidence that the deal will go through due to regulatory challenges,” Mark Mahaney, an analyst at Evercore ISI, told CNBC, adding that this is his “very quick interpretation” of the stock movement.
Hurting the Case: The FTC and SEC started an investigation into the timing of Elon Musk’s disclosure of his 9% Twitter stake. The FTC is also separately reviewing the acquisition itself.
- Before Elon’s deal was accepted by Twitter, he failed to disclose his 9% stake within the SEC’s required window of 10 days. The SEC mandates disclosures for anyone who takes an over-5% stake in a publicly traded company.
A Famous Short-Seller is Going All In: Hindenburg Research (the same team that outed the Nikola fraud) doesn’t think the Elon x Twitter deal will actually go through.
Elon faces a $1 billion break-up fee if he backs out of the deal, but Hindenburg concluded that would only be pocket-change to Musk if he changes his mind based on unfavorable Q1 results and inflated user numbers (not to mention that every tech stock is getting killed in the market).
- “We believe that if Elon Musk’s bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50% from current levels,” Hindenburg wrote, confirming that it holds an active short position against TWTR.
- Elon could get a better deal… If he’s able to negotiate a better deal by threatening a back-out, he could save himself billions. But the stock would react negatively in the short term.
What are the odds? Daniel Ives, an analyst at Wedbush Securities, thinks there’s a 90% chance that the deal with Elon closes. But that’s still far off from a 100% guarantee.
- “This is a soap opera,” he said. “It’s going to have many different chapters.”
EV Stocks Just Exploded (Up) — Here’s Why
After getting crushed all year long, EV startup stocks just popped in a wild, unexpected move as the rest of the market continued on its downward slide.
Here are the biggest stock moves in the industry today:
- Rivian (RIVN): +17.96%
- Lordstown Motors (RIDE): +47.02%
- Lucid (LCID): 13.20%
- Fisker (FSR): +12.61%
- Solid Power (SLDP): +10.17%
- Hyzon (HYZN): +13.80%
- Evgo (EVGO): +19.67%
What’s going on? A number of the companies above released quarterly reports in recent days that were better than Wall Street expected. But contributing most to the industry move today was Rivian and Lordstown Motors.
RIVN: Rivian released Q1 earnings after the closing bell on Wednesday, reporting a narrower-than-expected loss and confirming that both demand and production targets are still on track.
- Rivian now has over 90,000 pre-orders, with 10,000 new orders coming in even after March’s price hike.
- The company confirmed that it still plans to make 25,000 vehicles this year.
RIDE: Lordstown Motors announced yesterday that its $230 million deal to sell its Ohio plant to Foxconn finally went through, just days before the deal’s deadline.
- The sale is a much-needed cash lifeline for Lordstown and gives the company some breathing room as it develops the Endurance EV pickup truck and a low-cost EV for Fisker.
Keep in mind… These stocks, despite today’s move, are still down huge in 2022, and way off their 2021 highs. With that said, the Nasdaq is down 30% from its 2021 high, so the EV stocks are certainly not alone in their decline.
Missing from the List: Industry leader Tesla unfortunately didn’t share the same gains today, as it fell 0.82%. Ford Motor and General Motors fared even worse, falling 3% and 4.59%, respectively.
Squarespace (SQSP): +48.48% – Squarespace stock exploded today after the company beat on revenue and raised its forward guidance.
Carvana (CVNA): +24.63% – Carvana sparked a meme stock rally today after heavily shorted stocks poped, nearly 29% of CVNA shares available for trade were short sold.
Affirm (AFRM): +23.38% – Speculative fintech stocks like Affirm and UpStart surged today after digital financial service company MoneyLion beat on earnings and surged over 31%.
Dutch Bros (BROS): -26.97% – Dutch Bros stock crashed after the company slashed profit guidance due to rising commodity prices while announcing it would open 130 new stores.
General Motors (GM): -4.64% – Wells Fargo downgraded both GM and Ford today warnings that high EV production costs would hurt profits. Cathie Wood also bought the stock yesterday (ha ha ha).
United Airlines (UAL): -3.91% – U.S. airline bookings dropped 17% in April as flights got even more expensive.
Ford (F) – Wells Fargo downgraded shares of Ford from overweight to underweight on profitability concerns. “Therefore, we are concerned 2022 could be the peak profits, as Ford will be increasingly forced to absorb BEV (battery electric vehicle) losses to meet high 2026 U.S. regulatory hurdles. … We are downgrading Ford from OW to UW & lower our price target from $24 to $12.”
Beyond Meat (BYND) – Barclays downgraded shares of BYND from overweight to equal weight as margins remain below historical levels. “Given limited short-term visibility, mounting cost pressure and high cash burn, we downgrade BYND to EW and lower our price target to $25. 1Q results were disappointing and 2Q guidance was less upbeat than our previous estimates.”
Zoom (ZM) – Piper Sandler downgraded Zoom from overweight to neutral seeing limited upside. “With GARP names historically trading 15-20x FCF, we see limited risk-reward at these levels, and even if growth names return to market favor, we see stronger upside in other names.”
Quote of the Day: “Life can only be understood backwards; but it must be lived forwards.” – Søren Kierkegaard
Fun Fact: The total value of the world’s stock markets at the start of 2022 is $116.78 trillion. The world’s stock markets have grown 464% in 11 years, up from $25 trillion in 2009.