HR Block | June 17th, 2024

Today's insights are courtesy of Block Advisors by H&R Block, trusted by millions of small business owners for their year-round small business expertise.

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GOOD MORNING

Here's everything you need to know this week: Despite concerns about interest rates, Big Tech continues to propel the stock market to new highs. The S&P 500 and Nasdaq Composite both posted robust weekly gains, with the S&P 500 having its best week in over a month and the Nasdaq seeing its largest weekly advance since late April.

• Apple (AAPL) saw an 8% weekly gain, briefly surpassing Microsoft (MSFT) as the most valuable U.S. company.

• Nvidia (NVDA) stock increased by over 9% following a 10-for-1 stock split.

• Microsoft also rallied 4.4% last week.

Strategists believe AI-related stocks will maintain their value even in an economic slowdown. This surge suggests Big Tech stocks may be resilient to interest-rate concerns due to the ongoing AI momentum.

Federal Reserve and Inflation

The Federal Reserve's recent actions and economic data continue to influence market sentiment. Last week, lower-than-expected U.S. May CPI data initially led markets to anticipate two interest-rate cuts this year. However, the Fed projected just one rate cut before the end of 2024, down from three cuts anticipated in March.

• Fed's Influence: The market remains optimistic, partly due to the belief in the "Fed put," where the Federal Reserve could intervene to support the economy if necessary.

• Interest Rates: The Fed's stance remains cautious, and significant progress in inflation reduction is needed before further rate cuts.

Retail Sales and Consumer Spending

Consumer spending, a crucial driver of the U.S. economy, is under scrutiny. May retail sales data, to be released this week, will be a key indicator.

• Expected Rise: Retail sales are expected to rise 0.2% in May after being flat in April.

• Consumer Sentiment: Concerns remain about consumer spending due to higher interest rates and persistent inflation.

Global Economic Data and Central Banks

• China: Investors are watching for economic data, including home prices, industrial output, and retail sales, to gauge recovery momentum.

• Bank of England: Expected to hold interest rates steady with inflation data due before the meeting.

• Other Central Banks: Meetings in Switzerland, Norway, and Australia could also impact market dynamics.

Treasury Yields and Economic Outlook

Longer-term Treasury yields fell for a fourth consecutive session, reflecting market assessments of the economic outlook.

• 10-year Treasury Yield: Dropped to 4.212%, indicating a more cautious economic outlook.

• Strategists' Views: Lower yields help sustain the tech rally, and AI stocks are expected to remain strong even in a downturn.

Market Statistics

• S&P 500: Up 1.6% last week, 13.9% year-to-date.

• Nasdaq: Up 3.2% last week, 17.8% year-to-date.

• Dow Jones Industrial Average: Down 0.5% last week, up 2.4% year-to-date.

Key Economic Events

• U.S. Retail Sales: Tuesday's data will be closely watched.

• Fed Speakers: Including John Williams, Neel Kashkari, Mary Daly, and Thomas Barkin.

• China Data: Industrial output, urban unemployment rate, and retail sales due.

• Bank of England Meeting: Thursday, with inflation data released a day before.

• Eurozone PMIs: To be released on Friday, indicating economic recovery momentum.

Oil Prices

Oil prices saw a significant rise last week, driven by strong demand forecasts for 2024.

• Brent and U.S. Benchmark: Gained nearly 4%, the highest weekly rise since April.

• Demand Growth: Supported by forecasts from the U.S. Energy Information Administration and OPEC.
  
  Let’s dive into more detail below.

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CRYPTO

SEC Chair Gary Gensler Flips Bullish on Ethereum, Projects Spot ETF by End of Summer

Spot Ethereum ETFs are anticipated by late summer, signaling growing acceptance of digital assets in mainstream finance

BREAKING NEWS
SEC Chair Gary Gensler, usually bearish on crypto, has projected that approvals for spot Ethereum ETFs could be finalized by the end of this summer.

This development comes as industry leaders anticipate trading to commence by late summer, highlighting the growing institutional interest in Ethereum.

WHAT HAPPENED
In a recent Senate Committee on Appropriations hearing, SEC Chairman Gary Gensler indicated that the approval process for spot Ethereum ETFs is progressing smoothly, with approvals expected by the end of summer. This announcement follows the SEC's May 23 decision to allow spot ether ETFs to be listed. The most significant aspect of this news is the potential influx of institutional investment into Ethereum, the second-largest cryptocurrency by market capitalization. The move responds to growing investor demand for regulated cryptocurrency investment vehicles, aiming to offer safer and more accessible exposure to digital assets.

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POLITICAL TRADING

Texas Rep Roger Williams Violates STOCK Act, Fails to Disclose Stock Trades Since 2019

Williams’ delayed stock disclosures include significant trades in NVIDIA and GE raising questions about financial transparency

BREAKING NEWS
Representative Roger Williams of Texas has violated the STOCK Act by failing to disclose trades within the legally required 45-day period.

Williams recently disclosed trades from as far back as 2019, involving notable stocks like NVIDIA, Devon Energy Corporation Common, and GE.

This breach of transparency requirements raises significant concerns about the adherence of lawmakers to financial disclosure laws.

WHAT HAPPENED
For reference, representative Williams has an estimated net worth of $75.34 million and reported a trade volume of $201K from a total of 22 trades, with the last trade recorded on March 4, 2024. What’s strange is he earns an annual salary of $174,000. Putting two and two together, one can gather his stock trades have added handsomely to his net worth. Let’s check out the trades.

Representative Roger Williams disclosed multiple stock trades that date back as far as 2019, violating the STOCK Act’s requirement to report such trades within 45 days. Among these transactions, Williams reported a purchase of NVIDIA Corporation stock on March 1, 2019, which has since appreciated by an astounding 3,090.20%. Additionally, he disclosed trades involving Walt Disney Company (DIS) stocks, with purchases and sales dating from 2019 to 2024, reflecting significant losses on some transactions, such as a 69.43% drop from a 2021 purchase.

The most notable aspect of Williams’ trades is the extraordinary gain in NVIDIA shares, highlighting the potential for substantial financial benefit from timely stock market transactions. This delayed disclosure raises questions about the integrity of his financial dealings and compliance with the STOCK Act, which aims to promote transparency and prevent insider trading among lawmakers.

In addition to NVIDIA, Williams also traded shares in Devon Energy Corporation (DVN), with a notable sale on May 13, 2021, that gained 53.64%, and General Electric (GE), which saw a 91.23% increase since his purchase on February 27, 2019. Furthermore, he traded Stellantis N.V. and several other transactions involving Walt Disney Company stocks, reflecting mixed financial outcomes.

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1. Chipotle's 50-to-1 Stock Split Approaching: Is It Time to Buy?

Chipotle is gearing up for a significant 50-to-1 stock split, an uncommon move for the fast-casual chain. This split could make its shares more accessible to a broader range of investors, potentially driving up demand and stock price. Investors are considering whether now is the ideal time to purchase shares before the split takes effect.

2. Musk Posits $20,000 Tesla Model Y, Says Future Affordable Car ‘Game Changer’

Elon Musk remains committed to releasing an affordable Tesla vehicle. Recently, he speculated about the potential of a $20,000 Tesla Model Y, describing it as a future "game changer." This move aligns with Musk's ongoing efforts to make electric vehicles more accessible to a broader audience.

3. Broadcom Announces a 10-for-1 Stock Split. Time to Buy?

Broadcom has announced a 10-for-1 stock split, coinciding with growing demand for its AI chips. This move is expected to enhance investor interest and potentially drive further growth for the semiconductor giant as it capitalizes on the booming AI market.

4. McDonald's Removing AI Drive-Thru Voice Ordering System After Viral Mishaps

McDonald's is discontinuing its AI drive-thru voice ordering system from over 100 restaurants following several viral mishaps. Initially partnered with IBM in 2021, the technology aimed to streamline order-taking using AI voice recognition, but has faced significant issues.

5. Fed's Kashkari Says 'Reasonable' to Predict December Rate Cut

Federal Reserve official Neel Kashkari indicated that a December interest rate cut is a reasonable expectation. Speaking on CBS' "Face the Nation," he emphasized the need to monitor economic and inflation data before making any decisions, highlighting the Fed's cautious approach.

6. Solana Hits Major Support At $141 Amid Bitcoin Drop, Analyst Says It's Time To Buy

Solana's price has declined over the past 30 days, recently hitting a support level at $141.3. Amid this downturn, analysts suggest it might be an opportune moment to buy, given the cryptocurrency's potential for recovery.

7. Donald Trump Vows to End Joe Biden's 'War on Crypto'

U.S. Presidential candidate Donald Trump has promised to end Joe Biden's "war on crypto" if elected. He also aims to strengthen Florida's position as a hub for cryptocurrency innovation and investment.

8. What's Next for Paramount After Demise of Skydance Merger

Paramount's future is uncertain following the collapse of merger talks with Skydance Media. The termination of these discussions, led by Shari Redstone, leaves the entertainment company at a crossroads as it evaluates its strategic options.

9. Adidas Probes Alleged 'Large-Scale Bribery' by Staff in China: Report

Adidas is investigating allegations of large-scale bribery involving its staff in China. The complaint includes accusations against a senior manager who purportedly received real estate and millions in cash from suppliers, prompting an internal review.

10. Toyota Shareholders Demand Vote Against Chairman Toyoda Amid Testing Scandal

Toyota's chairman Akio Toyoda faces opposition from shareholders amid a testing scandal. Two major proxy groups are demanding a vote against keeping Toyoda, the grandson of the founder, on the board, citing concerns over governance and transparency.

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Today's insights are courtesy of Block Advisors by H&R Block, trusted by millions of small business owners for their year-round small business expertise

Learn More ➔