Apple Intelligence, Musk Reacts, Equal-Weighted S&P Signal? Trading Moderna
The goal on Monday was probably to convince investors that Apple is not falling way behind in the 'generative AI arms race' as has been suspected. Did they pull that off?
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The public waited. Traders waited, as did investors. On Monday, Apple AAPL, from the company's WWDC (Worldwide Developers Conference) finally announced the long-rumored partnership with Microsoft MSFT-backed OpenAI that folks had anticipated for quite some time. The idea is to integrate ChatGPT into Apple devices creating what it is calling "Apple Intelligence."
Upgrades will be made to Apple's software ecosystem, leveraging OpenAI's tools to upgrade the abilities of the Siri voice assistant across the company's services side through its product side. Apple is emphasizing an approach to AI that prioritizes the privacy of user data by running both locally on the physical devices themselves as well as on its cloud, while being powered by the company's own AI-capable chips.
CEO Tim Cook referred to the coming broad upgrade as "AI as only Apple can deliver it." Apple's senior vice president of software engineering commented... "It's aware of your personal data without collecting your personal data." Siri will ask users for permission to communicate with ChatGPT before taking that step. The goal on Monday was probably to convince investors that Apple is not falling way behind in the "generative AI arms race" as has been suspected. Did Apple pull that off on Monday?
Apple stock traded off 1.91% on heavy trading volume on what was more of an "up" day on lighter trading volume for the S&P 500. Then again, Apple stock is not known for especially strong showings on days where the company makes what it considers newsworthy announcements.
Negative Reception
It was not just the trading public that responded negatively to the announced collaboration between Apple and OpenAI. Tesla TSLA CEO Elon Musk, who also owns and or runs well-known private companies such as "X", formerly known as Twitter and SpaceX, spoke some choice words. Musk indicated that he might have to ban Apple mobile devices at his companies' locations if the Cupertino, California firm went ahead and integrated OpenAI at the operating system level.
Musk said, "That is an unacceptable security violation." Elon then added... "Visitors will have to check their Apple devices at the door, where they will be stored in a Faraday cage."
Investors are reminded that Musk is reported to have filed suit against OpenAI and CEO Sam Altman back in March alleging that the smaller firm had put profit ahead of humanity. On that matter, it has also been reported that Musk believed that OpenAI's mission of creating open-source technology had been undermined with Microsoft's huge investment in the operation.
Microsoft stock was up 0.95% on Monday, while Tesla stock gave up 2.08%.
Marketplace
Financial markets acted like they weren't really sure of what they were supposed to do on Monday and despite new record-high closes yet again for the S&P 500 and Nasdaq Composite, it showed. The S&P 500 gained 0.26% for the session. The chart below makes it look as if the market's broadest large-cap index reversed the Friday before last, and then confirmed that upward change in trend yesterday.
Check this out:
Looks good. Everything checks out. Until that is, one looks at the equal-weighted S&P 500. Much less organized. Not so neat and tidy.
Take a look at this:
The equal-weighted version of the S&P 500 has developed a closing wedge or triangle. We typically see these patterns close just ahead of a spike in volatility.
With May CPI due on Wednesday morning and the Jerome Powell family singers set to put on their dog and pony show on Wednesday afternoon, there may be some cause for traders to go into Wednesday set up defensively. Not that I know that there will be some kind of selloff during or after Powell's press conference. I do not, but rather because the chart of the equal-weighted S&P 500 is signaling an almost immediate increase in equity market volatility.
Beyond the S&P 500, the Nasdaq Composite gained 0.35%, while the Russell 2000 gained 0.25%. The Philly Semiconductors led the way north at +1.42% with Lam Research LRCX and KLA Corp. KLAC out in front. The Dow Transports also had a nice day, up 0.91%, while the KBW Bank Index shaded into the red, giving up 0.85%.
Market Breadth
Seven of the 11 sector SPDR ETFs shaded into the green on Monday led by the Utilities XLU that rebounded 1.32%. The Financials XLF, weighed down by regional banks, finished in eleventh place at -0.37%.
The breakdown of winners versus losers really was about as even as I can remember on Monday. Losers beat winners at the NYSE by one name. Not kidding. At the NYSE, there were 1,402 winners, 1,403, losers and 85 names left unchanged. Amazing. Winners beat losers by 23 names at the Nasdaq.
Advancing volume was also split very close to 50/50 for NYSE listings, on slightly lower aggregate trade on a day-by-day basis. For Nasdaq-listed securities, advancing volume took a 62.6% share on increased aggregate trading volume, but nothing to write home about. Mean anything? Probably means that traders are more focused on Wednesday right now than anything else.
Mr. Wrong Speaks Out...
... and makes some sense. Maybe.
On Monday, JPMorgan's JPM Marko Kolanovic noted Friday's disconnect between equities and bonds, while maintaining a model portfolio featuring overweight positions in commodities and cash, but underweight equities. Kolanovic might be the last high-profile bear on Wall Street and has now been notoriously incorrect on equity market performance for a few years now.
That does not mean that Kolanovic will always be wrong. While I think it's clear that he misunderstood the inflation trade despite getting commodities right, he does correctly, in my view, see increased risk on the road ahead. Kolanovic said on Monday... "Equities seem to be ignoring the plethora of risks." He then added, "Despite these abundant risks, equities continue to trade around record highs, and investor sentiment and positioning are elevated"
How come nobody thinks to look at the equal-weighted version of the S&P 500 like I showed you above? Clearly, large-cap stocks have started to struggle, leadership has narrowed, and increased volatility appears imminent. Kolanovic sees increased political risk, risk in still-too-high inflation, risk of an economic slowdown, and risk in both meme sock and cryptocurrency trading.
Another Vaccine?
Long-time readers know what I went through the first time I had Covid in early 2020. I have had Covid twice since, and clearly, what I caught those two times was nothing compared to what I caught the first time. At this point, I am almost as afraid of the vaccine as I am the virus, especially if it continues to evolve in a generally less awful way.
Moderna MRNA, one of the vaccines used widely in 2020 as folks tried not to catch or spread the virus, is in the news again. Apparently, an experimental vaccine that aims to protect against both influenza and Covid has outperformed stand-alone flu and Covid shots in a large trial. More than half of U.S. adults above the age of 65 get themselves a flu shot on an annual basis, so there could be something here, from an investment perspective. The firm says that adverse reactions are similar to reactions to stand-alone flu and stand-alone Covid shots.
The combination shot, known as mRNA-1083 is a mix between an experimental flu vaccine (mRNA-1010) and an experimental Covid vaccine (mRNA-1283). The flu shot may ultimately be released on its, own according to the firm, but that's a tough and competitive market to crack.
MRNA stock has come off of its May highs. Readers can see that the stock has tested the rising 21-day exponential moving average (EMA) several times since running sideways through March and April. In fact, that line was tested yesterday.
Buy it here? Let's see if that line truly holds. There could be algorithmic support at the 38.2% Fibonacci retracement level of the early November through mid-May run, which stands at $130. There could also be support at the 50-day simple moving average (SMA), currently $124 and also rising.
I'm not jumping in just yet. I am, however, putting this name back on my radar.
Economics (All Times Eastern)
06:00 - NFIB Small Biz Optimism Index (May): Last 89.7.
13:00 - Ten Year Note Auction: $39B.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
After the Close: CASY (1.72), ORCL (1.65)
At the time of publication, Guilfoyle was long APPL, MSFT and XLU.
