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markets

Apple Goes Full AI

Tim Cook is ready to get in the game.

Not entirely sure it’s a fair juxtaposition, but Nvidia $NVDA was up 0.75 percent the day its 10-for-1 share split became official, while Apple $AAPL was down 1.91 percent the day it unveiled a thorough AI strategy.

On hand for Apple CEO Tim Cook’s big reveal was OpenAI CEO Sam Altman.

At the core of Cook’s announcement is “Apple Intelligence,” a software update for its devices the company hopes will enable a personalized generative artificial intelligence experience for users.

Apple has also partnered with OpenAI and will use ChatGPT for some new AI functions its own system is not yet capable of handling.

“We think Apple Intelligence is going to be indispensable to the products that already play such an integral role in our lives,” Cook said.

“Very happy to be partnering with Apple to integrate ChatGPT into their devices later this year!” Altman wrote on X.

“Think you will really like it,” he added.

OpenAI CEO Sam Altman was in the crowd at Apple’s $AAPL Worldwide Developers Conference on Monday, June 10, 2024.

Longtime AAPL bull Dan Ives of Wedbush Securities wrote in a note to clients that “Apple is taking the right path to implement AI across its ecosystem” while establishing a foundation for a multi-year strategy.

Ives called it a "historical day" that "did not disappoint." We’ll see how the personalization strategy plays out with Apple’s “golden installed base” and whether it catalyzes a critical iPhone upgrade cycle.

As for NVDA, it closed at $121.79. I think all need be said is that it traded near $120 on a pre-split basis as recently as October 2022. It’s up more than 900 percent since then.

Microsoft $MSFT, incidentally, was up 0.95 percent on Monday, and it’s actually a little bit safer for now atop the rankings of the world’s biggest companies by market capitalization.

The major equity indexes were modestly higher the day before the beginning of the Federal Open Market Committee meeting, the Nasdaq Composite leading the way up 0.35 percent and reaching a new record closing high for the 14th time this year.

The S&P 500 also hit a new closing high for the 26th time in 2024.

On a day when Big Tech names have captured all of our attention, utilities were the top-performing S&P sector, rising 1.27 percent.

Of course this is an AI story too.

A lot of the momentum electric utilities are enjoying right now is down to the power demands of new data centers.

deep dive

A Company of Elon

It looks like Tesla is all about its CEO.

Shareholders will have another chance to express their approval of Elon Musk’s now approximately $50 billion pay package at Tesla’s $TSLA’s annual meeting on Thursday.

It’s true that market forces have taken the digits down from 56 to 50. And maybe that sentence doesn’t seem so significant – until you read that “b” for “billion” a second, maybe a third time.

It’s a lot of money, and a lot of big shareholders are questioning whether the CEO’s performance justifies it.

Shareholders already approved Musk’s compensation – including approximately 300 million incentive-based shares – back in 2018.

But Delaware Chancery Court Judge Kathaleen St. Jude McCormick nullified it in January, citing failures to properly disclose details to those same shareholders.

Tesla $TSLA is down 30.06 percent in 2024, while the S&P 500 is up 12.39 percent.

The TSLA board has made some moves to satisfy those objections, and it hopes even more shareholder approval will carry some weight with the Delaware Supreme Court, assuming an eventual appeal.

If a late-evening June 8 post on X by the owner of that platform is legit, it seems “so far, roughly 90% of retail shareholders who have voted have voted in favor of both resolutions.”

“The public sentiment is unequivocally supportive,” Musk added.

That does mean something here, as Bloomberg data show 45 percent of TSLA’s “public float,” or shares available for trading, are held by retail shareholders.

TSLA is down more than 30 percent so far in 2024 versus a greater than 12 percent gain for the S&P 500.

Legal experts say there’s little chance the board’s effort to marshall shareholder support will sway the ultimate decision of Delaware’s highest court.

deep dive |
June 11, 2024

A Company of Elon

WEEKLY MARKET OUTLOOK

Around the World Through Five Commodities

Here’s how to navigate a complex set of circumstances.

The Federal Open Market Committee has gathered for its policy meeting, and we’ll hear from Jerome Powell tomorrow afternoon.

Fed funds futures markets see about a 2 percent chance of a rate cut this week, down from about 70 percent at the end of March.

Still, we’re seeing the US dollar strengthen against its counterparts, notably the euro in the aftermath of the European Central Bank’s decision last week to cut its benchmark interest rate by 25 basis points.

As Mish Schneider notes in her Weekly Market Outlook, “We'll see what kind of damage a stronger dollar does inevitably for our market and whether or not that does anything for the Fed.”

Mish reviews key levels for the dollar versus the euro as well as the implications of its path.

The bottom line is we need to pay attention to stuff right now – literally, things you can touch and handle, like gold and silver and copper and oil and sugar. 

“No matter what,” Mish asserts, “I'm bullish on commodities.”

That’s despite recent volatility, exemplified by gold.

We saw the yellow metal correct last week and it’s now down about 7 percent from its recent peak. Mish identifies 2,280 as a key level of support.

“If we get through 2,350, then you have to say to yourself, ‘OK, gold's still strong,’” according to Mish. “Whether you care about the reasons or not, that would obviously tell you that gold has more upside.”

West Texas Intermediate crude oil was up 2.93 percent on Monday, June 10, 2024, to close at $77.74 per barrel.

Silver is a precious metal that also has industrial uses – its multifaceted nature is one reason it’s outperforming gold. Support is around 28.75. If it starts to get back above 30, 30.50, “that also would be a sign that this high at 32.50 will be very short-lived resistance.”

Then there’s Dr. Copper: “Probably the premier metal that's going to be used in all of the AI technology, the supercomputers and the data centers.”

As Mish notes, copper also had a nice little correction lately, slipping under its 50-day moving average. Support is around 4.20.

“We have support at around 4.20,” she advises. “At this point is really where I would keep an eye on to see if we get any other further weakness.”

Crude oil popped on Monday, reversing last week’s downtrend. “I still think we have to keep our eye on oil,” Mish warns, noting its potential to underpin a stagflationary environment.

Mish closes with a little sweetener this week, a commodity that’s in basically everything. 

Sugar appears to be basing and forming a bottom around 18 cents a pound right now. It’s easy to forget the days in 2020 when it was around 5 cents.

This new “higher low” could be the foundation for higher highs. 

“If it can get through 19.50 and then especially if it gets through 20, you have to say to yourself two things,” according to Mish.

“No. 1 is, is there a good cheap buying opportunity in sugar?” No. 2 is where it gets really interesting; that’s the “why?”

And, as Mish explains it, it’s down to big factors – human and natural alike – including geopolitics and La Nina.

As simple as it seems, that’s really important stuff.

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