What to know today

  • A big part of the economy is still growing.
  • Say hello to the Texas Stock Exchange.
  • At the clinical stage…
markets

Stocks Rally on Good News

The services sector is expanding.

All the major indexes closed well in the green on Wednesday.

The S&P 500 made a record high for the 25th time so far in 2024, and the Nasdaq Composite bounced on Magnificent Seven strength.

The Dow Jones Industrial Average was down early but rallied, while the Russell 2000 and the S&P/TSX Composite were up all day. 

Apple $AAPL was positive for the eighth trading session running – its longest such streak since March 2022.

But Nvidia $NVDA briefly surpassed it to become the No. 2 publicly traded company in the world by market capitalization.

Noteworthy too is the report from the Institute of Supply Management that the US services sector showed its strongest growth in nine months in May.

The ISM’s services index printed at 53.8, up from 49.4 and better than every forecast collected by Bloomberg.

Readings above 50 indicate “expansion.” The 4.4-point monthly increase was the biggest since early 2023. 

And the business activity index increased 10.3 points, its biggest jump since March 2021, to 61.2, its highest print since November 2022.

The Institute for Supply Management’s composite gauge of services increased by 4.4 points to 53.8 in May.

Is that what happened yesterday?

Was it the promise of an ever-expanding AI-driven future and good news about the services sector?

Or were investors, traders, and speculators reacting to the Bank of Canada’s decision to cut its benchmark interest rate from 5.00 percent to 4.75 percent? 

The BoC became the first Group of Seven central bank to cut. It’s the first reduction in its policy rate since March 2020. 

“With further and more sustained evidence underlying inflation is easing,” BoC Governor Tiff Macklem said in a statement, “monetary policy no longer needs to be as restrictive.”

Officials of the European Central Bank have basically said they’ll cut their benchmark when they meet today in Frankfurt. It’ll be the ECB’s first cut since September 2019. 

The yield on the 10-year US Treasury note has been trending lower for more than a week on softer incoming data.

And the futures market now reflects an expectation the Federal Reserve will make its first rate cut in November, forward from and in addition to December and implying two rate cuts this year.

Weekly initial jobless claims data might move markets a little today.

The May jobs report from the Bureau of Labor Statistics is the main event.

We’re starting to narrow the question to whether Jerome Powell and company want to protect the labor market or fight inflation. 

deep dive

The TXSE Will Mess With the NYSE

A lot of eyes will be on this venture.

BlackRock $BLK and Citadel Securities are backing a challenge to the New York Stock Exchange-Nasdaq duopoly, according to an exclusive report by Corrie Driebusch in The Wall Street Journal on Wednesday.

The Texas Stock Exchange would also provide relief from what its backers say is exceedingly and increasingly onerous regulatory burdens imposed by the two incumbents.

The TXSE will be more CEO-friendly, in this conception. The startup exchange has raised approximately $120 million from individuals and large investment firms.

The Texas Stock Exchange, a potential competitor with the New York Stock Exchange and Nasdaq that intends to launch in 2025, has raised $120 million from investors.

CEO James Lee said the TXSE will register with the Securities and Exchange Commission later this year, with an eye on facilitating trades in 2025 and hosting its first listing in 2026.

Lee noted that “Dallas has become one of, if not the most, dominant financial centers in the country, if not the world.”

Goldman Sachs $GS is building a facility in the Metroplex capable of hosting 5,000 employees, and Texas is now home to more Fortune 500 companies than any other state.

deep dive |
June 6, 2024

The TXSE Will Mess With the NYSE

small-caps

The Stuff of High Risk and High Reward

Prepare for ups and downs and ups with these names.

The US Food and Drug Administration’s drug and device approval process is notoriously complex.

Drug-making and device development are high-risk, high-reward ventures, areas where it makes sense to make field bets via industry ETFs.

That doesn’t mean, however, there is no place for well-informed, well-placed bets as part of a larger portfolio strategy underpinned by proper risk management.

From the Research Desk, we have updates on two names perhaps worthy of some specific attention. 

Vigil Neuroscience $VIGL is a clinical-stage biotech founded in 2020 that’s developing treatments for both rare and common neurodegenerative diseases.

Vigil Neuroscience $VIGL was up 34.66 percent on Wednesday, June 5, 2024, but is still trading well below its January 7, 2022, initial public offering price of $14.00 per share.

Its thing is “restoring the vigilance of microglia, the sentinel immune cells of the brain.”

VIGL IPO’d on January 7, 2022, at $14 per share. It was up 34.66 percent on Wednesday and closed at $3.38, making it a $127 million company.

Wedbush Securities sees a lot of upside from here, noting its progress in phase 2 trials for one of its treatments for neurodegenerative diseases and the entry into phase 1 trials for an Alzheimer’s treatment.

Wedbush rates VIGL a “buy” with a 12-month price target of $22. That represents upside of about 550 percent from Wednesday’s closing price.

Six other Wall Street analysts rate VIGL a “buy,” with an average price target implying a 466 percent rally over the next 12 months.

One analyst rates the stock a “sell.”

The clinical-stage medical device maker scPharmaceuticals $SCPH was founded in 2014, IPO’ing at $14 per share on November 17, 2017.

SCPH is developing products for subcutaneous delivery of therapies that were previously delivered by IV. Its proprietary solutions promise to reduce health care costs.  

scPharmaceuticals $SCPH was up 10.45 percent on Wednesday, June 5, 2024, but is still trading well below its November 17, 2017, initial public offering price of $14.00 per share.

Its main device right now is Furoscix, a heart failure treatment that received FDA approval in 2022 and reached the market in 2023.

Heart failure afflicts 6.5 million US adults every year.

SCPH got hit hard by a cyberattack on the entire health care sector but posted 190 percent revenue growth during the first quarter.

Analysts at Craig-Hallum Capital Group recently reiterated its “buy” rating on the stock and its $16 12-month price target. That’s nearly 400 percent from where it closed on Wednesday.

All six Wall Street analysts who cover SCPH rate it a “buy,” with a consensus 12-month price target implying upside of more than 350 percent.

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