Apes and Kitties Roar, Trading AMC, Inflation Expecations, GPT-4o, China Tariffs
Apes Together Strong! Incredible.
While it's true that the shares of GameStop (GME) had started to show some life, both in price and volume as far back as May 2, all it took was one "tweet" or keeping up with the times, one post on "X." Roaring Kitty, which is the "X" or Twitter handle connected to Keith Gill, a one-time marketer for Massachusetts Mutual who ultimately became one of the leaders of the retail trader-infused meme stock craze of late 2020 into 2021, posted on the social media site for the first time since June 2021. That first post was a "meme" of a man sitting up in front of a computer as if suddenly paying more attention.
That's what it took for GameStop to take off, and then for AMC Entertainment (AMC) to follow. Roaring Kitty would post another dozen times or so — all memes... on "X" — before the day was out. GME popped for a one-day gain of 174% and AMC ran 77%. BlackBerry (BB) , Koss (KOSS) , Nokia (NOK) , and Clover Health (CLOV) all also showed some life. All six of these names are trading higher overnight from where they closed on Monday, with both GME and AMC again leading the way, up more 35% apiece as we crawl through the zero-dark hours on Tuesday morning.
Monday's action across these names bore all the hallmarks of a short squeeze. While that may excuse the dislocated results of what we still refer to as price discovery for these stocks, it does little to project to the short to mid-term future. More than 20% of the entire floats of both GME and AMC were held in short positions as recently as less than two weeks ago.
Is there someone out there? Some fund out there, that will turn out to be 2024's Melvin Capital... an extremely unsophisticated trader masquerading as a hedgie who simply thought they could forgo the expense and/or complication of actually hedging? I'm going to guess there's somebody out there sweating bullets that this is not the year of the return to The Planet of The Apes.
That said, even though I waited until well after my piece on TheStreet Pro was published Monday, AMC was easily the top-performing name on my book for the session.
No, I am not necessarily a day trader. What I am is whatever it is that I think will make money, and what made money on Monday was day-trading. Rock on.
Pop Goes the Weasel Cuz the Weasel Goes Pop
The New York Fed released its April Survey of Consumer Expectations on Monday. What it showed was that consumers now expect inflation to rise to 3.3% over the next year, after that expectation had more or less hovered at 3% for four months.
These survey results fit very neatly with what the University of Michigan released on Friday in their survey on Consumer Sentiment. While Michigan painted a very gloomy overall picture, it was the one-year-out inflation expectations that really caught the eyes of economists. Those preliminary inflation expectations for May on Friday moved up to 3.5% from 3.2% in April, the hottest reading for that series since November.
While survey results covering the public's inflation expectations for the next year or so continue to reflect a very negative and concerned perception across the nation, Federal Reserve Vice Chair Philip Jefferson spoke from Cleveland, Ohio. Jefferson said, "In light of the attenuation in progress, in terms of getting inflation back down to our target, it is appropriate that we maintain the policy rate in restrictive territory, which it is right now." While I agree with Jefferson that short-term rates need to be in restrictive territory at the present moment, I am not at all sure that policy is truly restrictive where it is now. I think it entirely possible that the Fed stopped anywhere from 25 to 50 basis points short of where the Terminal target for the Fed Funds Rate probably should have been.
Now, as the economy weakens and as we find out that the economy, and especially labor markets were likely far weaker in 2023 than previously thought, I don't know how one goes about increasing short-term rates, though perhaps that thought has to at least be debated in the court of public opinion. On the scattering of opinion, however, by various Fed heads, Jefferson has other ideas..."The diversity of viewpoints among policymakers lend itself to stimulating debates and, ultimately, better policy. But, in such a situation, more communication could increase rather than reduce uncertainty about our policies."
Manic Monday
Strange day. A little difficult to describe. Weak at the sector level. Simply "meh" at the index level. Trading volume was jacked, while breadth was solid.
While the "meme stocks" stole the show on Monday, the S&P 500 gave up one point. not one percentage point, but one point, or 0.02%. The Nasdaq Composite gained 0.29% for the session, supported by a Philadelphia Semiconductor Index that "popped" for a gain of 0.31%. The small-cap Russell 2000 gained 0.11% for the day, while the S&P Midcap 400 gave up 0.09%.
In short, nothing really moved too far on Monday from where it had closed on Friday.
Only two of the 11 S&P sector SPDR ETFs closed Monday in the green, led by Tech (XLK) , which was up 0.47%. The Industrials (XLI) led the eight sector SPDRs that closed in the red to the downside but was only down 0.42%. If you noticed that this only makes 10 funds, you would be correct. The Utilities (XLU) closed unchanged.
With the indexes stuck in the mud and the sector SPDRs painting the tape a light shade of red, one would think that maybe overall breadth would shade the same way. Nope. Winners beat losers by a literal smidge at the NYSE and by a roughly 7 to 6 margin at the Nasdaq. Advancing volume, impacted somewhat by meme mania, took a 66.5% share of NYSE-listed trade and a 73.6% share of composite Nasdaq-listed trade.
That's actually impressive, especially when one considers that trading volume in the aggregate increased on a day-over-day basis for listings at both exchanges as well as across the memberships of the S&P 500 and Nasdaq Composite.
So, do we finally have confirmation of an upward change in trend? We do not, as the S&P 500 closed (ever so slightly) in the red.
Interesting
The still privately held, but Microsoft (MSFT) backed OpenAI unveiled its latest updates to its GPT-4 AI model to be known as GPT-4o. The updated version of the model includes the abilities to interpret voice, video, images and code in a single interface. The improvements do not go so far as to be considered the launch of an entirely new model, which some were anticipating.
There were no new partnerships or deals revealed at the event. Last week, Bloomberg News had reported that OpenAI and Apple (AAPL) were in the final stages of putting together a partnership where Chat GPT would be integrated into iOS 18. That has not yet happened.
What will happen today (Tuesday) will be Alphabet's (GOOGL) annual Google developer conference, where any number of artificial intelligence-related announcements are expected to be made. The latest version of Chat GPT now supports more than 50 languages and will be offered for free, while remaining free as more intelligence and advanced tools are rolled out.
No Soup for You...
The Biden administration on Tuesday (this) morning, directed numerous changes in tariffs across a wide range of imports from China into the U.S. in what is being described as an effort to "protect American workers and American companies from China's unfair trade practices." These tariffs will impact steel, aluminum, semiconductor chips, electric vehicles, batteries, battery components, solar cells, medical products, and ship to shore cranes.
Call me crazy, and I am no partisan when it comes to politics, as I truly dislike both major political parties, but did not the left absolutely lose their minds when President Biden's predecessor did exactly this? Now, they adopt his policies. Nothing surprises anymore.
Economics (All Times Eastern)
06:00 - NFIB Small Biz Optimism Index (Apr): Expecting 88.1, Last 88.5.
08:55 - Redbook (Weekly): Last 3.9% y/y.
08:30 - PPI (Apr): Expecting 0.2% m/m, Last 0.2% m/m.
08:30 - Core PPI (Apr): Expecting 0.2% m/m, Last 0.2% m/m.
08:30 - PPI (Apr): Expecting 2.2% y/y, Last 2.1% y/y.
08:30 - Core PPI (Apr): Expecting 2.4% y/y, Last 2.4% y/y.
08:55 - Redbook (Weekly): Last 6.0% y/y.
16:30 - API Oil Inventories (Weekly): Last +509K.
The Fed (All Times Eastern)
09:10 - Speaker: Reserve Board Gov. Lisa Cook.
10:00 - Speaker: Federal Reserve Chair Jerome Powell.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (HD) (3.61), (IGT) (0.40), (ONON) (0.14), (SE) (0.26)
After the Close: (BOOT) (0.92)
At the time of publication, Guilfoyle was long AMC, MSFT, AAPL equity; short AMC calls, long AMC puts.