What to know today

  • Inflation is cooling.
  • Roaring Kitty: That’s entertainment.
  • Let’s debate oil demand.
markets

This Is What Moderation Looks Like

We’re still getting back to normal.

That was a nice little Thursday, many interesting storylines, some substantial, others simply dramatic.

Producer Price Index data for May surprised with its softness, providing a little more impetus to the September-rate-cut story.

The PPI was down 0.2 percent month over month and up 2.2 percent year over year, lower than all forecasts from economists surveyed by Bloomberg.

Apple $AAPL, marking its best three-day run since 2020, firmly reestablished itself atop the global market capitalization rankings, overtaking Microsoft $MSFT.

AAPL closed with a market cap of $3.285 trillion versus $3.282 trillion for MSFT. It’s the first time since January AAPL closed bigger than MSFT.

There was a little more meme-stock comedy, GameStop $GME shareholders overwhelming livestream servers and forcing postponement of the company’s annual meeting.

That event will happen today, if all goes according to plan.

And Tesla $TSLA shareholders once again endorsed their mercurial CEO and his $50 billion-ish pay package.

They also approved a plan to move the company’s state of incorporation from Delaware to Texas, as management seeks a friendlier legal venue.

The Producer Price Index was down 0.2 percent month over month and up 2.2 percent year over year in May.

The major equity indexes were mixed again, the Dow Jones Industrial Average showing up red again on a 2.87 percent slide for Salesforce $CRM.

JPMorgan Chase & Co. $JPM was up 1.11 percent, a solid showing after financials had weakened on rising rate-cut sentiment.

The quiet period around this week’s Federal Open Market Committee meeting now expired, Cleveland Fed President Loretta Mester will make a couple of TV appearances today.

Chicago Fed President Austan Goolsbee and Fed Governor Lisa Cook are also delivering speeches, Goolsbee at 2:00 p.m. ET, Cook at 7:00 p.m.

The most significant economic data release of the day is the preliminary University of Michigan consumer sentiment reading for June at 10:00 a.m.

The consensus forecast is a print of 72, up from 69.1 in May. The Michigan survey has shown declining sentiment for the last two months.

Apple will conclude its Worldwide Developers Conference today too, though it’s hard to imagine anything any more catalytic for the share price than has already come from the event.

deep dive

What Does Keith Gill Know?

The meme-stock maven gets marked to market.

Roaring Kitty is no Warren Buffett.

Suzanne McGee of Reuters did the leg work, analyzing his public statements and GME’s financials.

According to McGee, “Many of the predictions underpinning Gill's original thesis and investor exuberance, such as a revival in sales and profitability, have yet to sustainably materialize.”

Roaring Kitty, the nom-de-meme of sub-redditor, YouTuber, and former MassMutual stock broker Keith Gill, resurfaced a month ago with a series of posts on X.

He revealed a $116 million position in GME, which subsequently ballooned to more than $250 million in value, and he hosted a highly anticipated livestream last Friday.

Four years ago, he hypothesized that GameStop would grow its top and bottom lines by embracing a transformative strategy focused on network effects among gamers.

As well as the power of its potential community, Gill said in July 2020 that the competitive threat posed by digital downloads to its retail operation was “overblown.”

GameStop has cut its physical store count by 9 percent since 2021.

GameStop $GME was up 14.18 percent on Thursday, June 13, 2024, and is now up 65.83 percent in 2024.

Management reported a net loss of $215 million on revenue of $5.09 billion for fiscal 2020. The net loss grew to $381 million in fiscal 2021 on revenue of $6.01 billion.

GameStop lost $313 million in fiscal 2022 on revenue of $5.93 billion. Sales declined again in fiscal 2023, to $5.27 billion.

But the company has literally capitalized on the meme frenzy. 

Management announced on Tuesday the completion of an at-the-market equity offering of 75 million shares to raise $2.14 billion “for general corporate purposes.”

GME was up more than 14 percent on Thursday and is now up nearly 66 percent for the year. It’s traded as low as $9.95 this year, on April 16, and high as $64.83, on May 14. 

GameStop had to postpone its annual meeting, scheduled for 11:00 a.m. ET on Thursday, after livestream servers were overwhelmed by the number of people trying to access it.

The meeting was rescheduled for today at 4:00 p.m. ET.

We’ll see what happens with GME heading into the weekend.

deep dive |
June 14, 2024

What Does Keith Gill Know?

ENERGY

It’s OPEC vs. the IEA

There are sticky interests at play.

Brent crude oil futures settled at $82.75 a barrel on Thursday. The European benchmark was up 15 cents, or 0.2 percent.

The US benchmark, West Texas Intermediate crude futures settled at $78.62 a barrel, up 12 cents, or 0.2 percent.

Those are modest moves, but they come amid a stream of data suggesting growth is slowing and other negative demand indicators.

The Energy Information Administration reported on Wednesday that US stockpiles grew more than expected last week on a rise in imports.

Also weighing on price is the prospect of a potential ceasefire in Gaza. That would ease fears of supply disruptions in the Middle East.

This minor bounce is probably a function of the Organization of Petroleum Exporting Countries responding to an International Energy Agency forecast of plateauing demand.

Secretary General Hathaim Al Ghais said on Thursday that OPEC expects demand to reach 116 million barrels a day by 2045, with potential upside well above that.

Al Ghais derided the IEA forecast "dangerous commentary, especially for consumers, and (that) will only lead to energy volatility on a potentially unprecedented scale."

The International Energy Agency forecast that global oil demand will level off by 2029.

The IEA said in its Oil 2024 report that demand will peak in 2029 and plateau in 2030, as more efficient power generation and the proliferation of electric vehicles take effect.

Still, analysts at Citigroup forecast a substantial decline in the per-barrel price of the European benchmark in the fourth quarter.

From the Research Desk, we understand that from recent levels north of $80 Citi sees the per-barrel Brent price at $60 in 2025.

That’s what happens when supply is rising but demand is declining. Brent crude hit a 52-week peak above $96 in September.  

Citi expects global inventories to rise by 1.4 million barrels per day by next year, citing OPEC’s announcement that it would bring 2.5 million barrels per day back to the market as of October.

Even without that additional output, we’d still be looking at a surplus, Citi says, due to production from non-OPEC members including the US, Canada, Brazil, and Guyana.

In a worst-case scenario everyone keeps pumping and crude falls into the $50 range by the end of 2025.

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