Udemy | June 24th, 2024

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GOOD MORNING

As we head into the final week of June, investors have much to consider: This week’s market activities are crucial in understanding the current economic landscape and planning for future investments. Here’s a comprehensive look at the top five things to watch in the markets this week.

1. U.S. Inflation in Focus

The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, is set for release on Friday. This will be a critical indicator of whether the nascent slowdown in inflation is continuing. The latest readings have shown U.S. inflation tracking sideways, contrary to expectations. Another similar reading could undermine hopes for imminent rate cuts, despite market expectations for two rate cuts this year. Alongside this, the economic calendar includes June data on consumer confidence, new and existing home sales for May, the third estimate of Q1 economic growth, and durable goods orders for May.

2. Tech Stocks: Overheating or Opportunity?

Tech stocks have shown strong earnings potential and excitement over artificial intelligence, leading to significant price gains. For instance, Nvidia has seen a 155% increase year-to-date. However, concerns are growing that this rally might be overstretched. Despite the potential for a pullback, history suggests that tech stocks may rebound quickly as investors buy the dip. Market laggards such as small caps and value stocks like financials and industrials might present buying opportunities.

3. Oil Prices and Geopolitical Risks

Oil prices dipped slightly last Friday but remained up for the week, driven by concerns over global demand and a strong U.S. dollar. The Federal Reserve’s patient stance on interest rate cuts contrasts with more dovish policies elsewhere, which could support oil prices by making borrowing cheaper and boosting production. Additionally, geopolitical risks are likely to keep oil prices buoyant in the near term.

4. Eurozone Inflation and ECB Rate Decisions

On Friday, preliminary June inflation data from France, Italy, and Spain will be released, setting the tone for a eurozone-wide print the following week. Traders will be watching closely to gauge the European Central Bank’s (ECB) next moves on interest rates. Despite a recent rate cut, strong domestic inflation and wages raise questions about further cuts. Political uncertainty in France, with elections scheduled for June 30, adds another layer of complexity.

5. Escalating Trade Tensions

Trade tensions are escalating, particularly between China and the European Union over Chinese-made electric vehicles (EVs). The EU’s proposed tariffs on these imports, effective July 4, add to the trade war initiated by the U.S. with its tariff hikes on Chinese cars in May. China is hinting at possible retaliatory measures, which could impact market sentiment and economic activities.

Key Economic Reports to Watch

• Monday (6/24): Fed President Mary Daly speaks at 2:00 pm.

• Tuesday (6/25): S&P CoreLogic Case-Shiller Home Price Index for April, Conference Board's Consumer Confidence Index for May, and Richmond Manufacturing Index for June.

• Wednesday (6/26): New home sales for May.

• Thursday (6/27): Weekly jobless claims, durable goods orders for May, final reading of Q1 GDP, and pending home sales for May.

• Friday (6/28): PCE price index, core PCE, personal income, personal spending for May, Chicago PMI for June, and University of Michigan Consumer Sentiment Index for June.

Consumer Pulse Check

The Federal Reserve is currently on pause, but the effects of previous tightening are still evident. While stock market and housing prices are up, boosting household net worth, low-income consumers face increasing pressure from high costs and debt delinquencies. However, as long as inflation cools and employment remains strong, economic expansion and the bull market should continue.

Weekly Market Stats

• Dow Jones Industrial Average: 39,150 (+1.5%)

• S&P 500 Index: 5,465 (+0.6%)

• NASDAQ: 17,689 (unchanged)

• MSCI EAFE: 2,328 (+0.9%)

• 10-yr Treasury Yield: 4.26% (unchanged)

• Oil: $80.63 per barrel (+3.3%)

• Bonds: $97.76 (-0.2%)

Outlook for the Week

While the S&P 500 and Nasdaq set new records last week, there are signs of exhaustion, especially in technology. The tech sector’s recent reversal might indicate a short-term top, suggesting a potential shift to other market areas like energy and financials. The upcoming earnings reports and economic data, particularly the PCE inflation data, will be critical in shaping market directions. Expect volatility and a slightly bearish trend as markets digest these developments.

Stay tuned to your investment strategies, keeping an eye on diversification to manage risks and enhance returns as we potentially approach a new phase of the Fed’s monetary policy.

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BIOTECH

Sarepta’s Stock Soars 30% Following FDA’s Approval for Expanded Use of Gene Therapy

Sarepta’s Elevidys is expected to dominate Duchenne Muscular Dystrophy market, with projected sales reaching $5 billion by 2027

BREAKING NEWS
Sarepta Therapeutics shares surged by 30% following the FDA’s expanded approval of its Duchenne muscular dystrophy (DMD) gene therapy, Elevidys. DMD affects approximately one in every 3,500 male births worldwide. The U.S. Food and Drug Administration recently granted traditional approval for Elevidys for ambulatory patients aged four years and above, significantly boosting Sarepta’s market reach.

WHAT HAPPENED
The FDA granted traditional approval for Elevidys to treat ambulatory patients aged four and above and accelerated approval for non-ambulatory patients. According to LSEG data, Elevidys’s sales reached $200.4 million in 2023 and are expected to rise to $991.91 million this year. This expansion is anticipated to significantly impact Sarepta’s financial performance, with potential sales projected to reach $3 billion by 2025 and $5 billion by 2027.

The high prevalence of DMD and the unmet medical need for effective treatments drive this development. Sarepta’s revenue is expected to nearly quintuple in 2024, with Elevidys potentially dominating the market until at least 2027 due to a lack of viable competitors. These developments underscore Sarepta’s strengthened position in the biotech market, though concerns about production capacity remain.

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DEFENSE

U.S. Navy's Budget Projected to Surge by 28-35% Reaching $330 Billion

Shipbuilding and aviation sector growth indicates robust demand for shot peening to enhance structural integrity

BREAKING NEWS
The U.S. military and defense budget recently scored a massive inflow of capital, and sectors like the U.S. Navy and Aviation will continue to grow.

By 2036, both industries aim to contribute 15.5 million direct jobs and $1.5 trillion to the global economy, highlighting robust growth trends.

WHAT HAPPENED
The ship and boat building and repairing market is already exhibiting robust growth, with forecasts indicating an expansion from $284.22 billion in 2023 to $303.65 billion in 2024, representing a compound annual growth rate (CAGR) of 6.8%. Projections suggest the market will reach $390.86 billion by 2028, driven by several key factors.

The industry is pivoting towards eco-friendly practices and green technologies, aligning with global environmental, social, and governance (ESG) initiatives. Substantial capital expenditure in maritime infrastructure bolsters market growth. At the same time, the U.S. Navy's 30-year shipbuilding plan, with its emphasis on procuring Columbia-class ballistic missile submarines and large surface combatants, underscores the sector's growth potential.

In the air, the aviation industry shows demand for air transport, which is projected to increase at a CAGR of 4.3% over the next two decades. By 2036, the air transport industry is forecast to directly contribute 15.5 million jobs and $1.5 trillion to global GDP. These figures could potentially escalate to 97.8 million jobs and a $5.7 trillion economic contribution when considering the impact on international tourism. The sector is prioritizing decarbonization efforts through the adoption of Sustainable Aviation Fuel (SAF), the development of electric vertical take-off and landing (VTOL) aircraft, and the advancement of Urban Air Mobility (UAM) vehicles.

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1. Jeff Bezos Outbid in Bid for Washington Commanders

Reports indicate that Jeff Bezos, the Amazon founder, was not blocked from purchasing the Washington Commanders but was instead outbid. This news comes amidst financial and operational challenges faced by The Washington Post, which Bezos owns.

2. Biden's Crypto Policy Talk Could Spark Market Volatility

As rumors circulate about President Joe Biden potentially discussing cryptocurrency policy during his first debate with Donald Trump, market analysts anticipate significant impacts on Bitcoin, Ethereum, and XRP prices.

3. Apple and Meta Explore AI Partnership

According to reports from the Wall Street Journal, Apple and Meta are in discussions regarding a potential partnership focused on artificial intelligence. This collaboration could significantly influence the tech industry's AI landscape.

4. Elon Musk Reportedly Had Another Child with Neuralink Employee

Reports suggest that Elon Musk, CEO of Tesla and Neuralink, had a third child with Shivon Zilis, head of Neuralink's special projects, earlier this year. This adds to Musk's growing family and intertwines his personal life with his professional endeavors.

5. Boeing and Spirit AeroSystems Deal Nears Amid Union Concerns

An imminent deal between Boeing and Spirit AeroSystems is facing scrutiny from UK union Unite, which seeks clarification on the future of Spirit's UK operations. This union involvement could influence the timing and terms of the deal announcement.

6. Software Company Plans Ransom Payment to Hackers After Major Breach

CDK Global, a software provider for car dealerships, is preparing to pay millions in ransom to hackers following a breach that disrupted operations across North America. The attack has affected around 15,000 car dealerships, causing widespread chaos.

7. AI Companies Continue Web Scraping Despite Blocking Protocols

Reports indicate that multiple AI companies are ignoring "do not crawl" instructions in the robots.txt protocol and continuing to scrape websites for data. This practice raises concerns about data privacy and the ethics of AI training methods.

8. Sen. Casey Presses Major Retailers on Price Gouging Concerns

Senator Bob Casey of Pennsylvania has sent inquiries to the CEOs of Target, Walmart, and Amazon regarding potential price gouging. This action follows similar efforts by other Democratic lawmakers amid rising consumer prices.

9. Under Armour Settles Class Action Lawsuit for $434 Million

Under Armour has agreed to pay $434 million to settle a class action lawsuit related to its accounting and sales disclosures from 2015 and 2016. This settlement aims to resolve claims of misleading investors about the company's financial health.

10. New HIV Drug Provides Complete Protection in Trial

A new drug administered as an injection twice a year has shown to provide total protection from HIV in a trial involving young African women. This breakthrough could significantly reduce infection rates in high-risk populations.

CONTINUE READING ➔

Today's insights are courtesy of Udemy, all the skills you need in one place. From critical skills to technical topics, they support your professional development.

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