OP Wire 4/9 (OP – Lite)

Fed’s Influence Amid Economic Signals: This week, the financial markets are closely tuned into the Federal Reserve’s commentary, especially following a surprisingly strong jobs report last Friday and in anticipation of the upcoming U.S. consumer price index data on Wednesday. These developments come amidst evidence of a resilient U.S. economy, despite the Fed’s extended period of rate increases.

Shifting Rate Cut Expectations: Traders have significantly adjusted their expectations for Federal Reserve rate cuts this year, with Fed funds futures contracts for December now forecasting around 60 basis points in reductions, a sharp decrease from the 150 basis points anticipated at the outset of 2024. This adjustment occurs despite the Fed’s own projections of a 75 basis point cut this year.

Fed Officials on Rate Adjustments: Minneapolis Federal Reserve Bank President Neel Kashkari recently highlighted the risks of premature rate cuts, suggesting the possibility of no rate reductions in 2024. Contrastingly, a more dovish stance has emerged this week, with former St. Louis Fed President James Bullard predicting three rate cuts this year as inflation approaches the central bank’s target. Chicago Fed President Austan Goolsbee emphasized the delicate balance the Fed must maintain to avoid economic damage from prolonged high rates.

Wall Street Awaits Inflation Data: With the critical inflation data release on Wednesday, Wall Street indices closed nearly unchanged on Monday, reflecting traders’ cautious approach ahead of information that could shape the future interest rate landscape. The focus also turns to the minutes from the Fed’s March meeting, revealing officials’ wavering confidence in the projected three rate cuts for the year.

Earnings Season and Taiwan Semiconductor’s Leap: As the new quarterly earnings season commences, major banks are poised to report on Friday. Meanwhile, Taiwan Semiconductor Manufacturing Company (TSMC) saw its shares reach a record high Tuesday, buoyed by a $6.6 billion subsidy from the U.S. Commerce Department for an advanced semiconductor plant in Phoenix, Arizona. This move underscores TSMC’s critical role in powering the next generation of technology and artificial intelligence, alongside its importance to global technology leaders like Nvidia and Apple.

Oil Prices React to Geopolitical Uncertainty: After a dip on Monday due to progress in Israel-Hamas ceasefire talks, oil prices have edged higher on Tuesday amid ongoing uncertainty. Despite the faltering cease-fire negotiations, the market remains on edge, with oil prices near five-month highs due to potential supply constraints from the Middle East. However, the market’s attention is also divided, awaiting key inflation data and industry reports on U.S. crude stockpiles.

$BABA- Morgan Stanley named Alibaba as a “Catalyst Driven Idea” ahead of the company’s fiscal Q4 report due in early May. The firm thinks key catalysts would be the company’s Customer Management Revenue, or CMR, growth in fiscal Q4 and an update on the progress of capital management, adding that it expects the company to declare an annual dividend for FY24 in May on top of the announced buyback update. Morgan Stanley has an Equal Weight rating and $85 price target on Alibaba shares.$TSLA- Morgan Stanley analyst Adam Jonas notes Elon Musk has said that Tesla will unveil its robotaxi on August 8, pointing out that the announcement coincides with reports that the company is delaying the launch of its “highly anticipated” affordable Model 2 EV. While the firm believes Tesla “has many attributes that can make it a formidable player (if not an outright winner) in the race to autonomy,” it also believes the more material commercial scaling of the business would be “well beyond 2030” and cautions that the path to commercialization of “true robotaxis” with no steering wheels at scale will be “both long-dated and volatile.” The firm, which expects over time that investors will witness a shift in the company’s business model, at the margin, to a more asset light, software-based, recurring revenue model and wonders if a robotaxi could be the first step in shifting the core business, has an Overweight rating and $310 price target on Tesla shares.

$AAPL- BofA reports Apple’s App Store revenues in fiscal Q2 increased to $7.4B, which would be up 10% year-over-year, citing data on developer revenues from SensorTower. For the month of March, App store rev increased 13% year-over-year globally and increased 7% year-over-year in China, noted the analyst, who maintains a Buy rating and $225 price target on Apple shares.

$AMD- BlackBerry (BB) announced a collaboration with AMD (AMD) designed to revolutionize next-generation robotic systems by enabling new levels of low latency and jitter, and repeatable determinism. Together, the companies will address the critical need for ‘hard’ real-time capabilities in robotics-focused hardware with a platform that delivers enhanced performance, reliability, and scalability for robotic systems in industrial and healthcare. The platform combines BlackBerry QNX expertise in real-time foundational software solutions and the QNX Software Development Platform with heterogeneous hardware solutions powered by the AMD Kria K26 SOM that features both Arm and FPGA programmable logic-based architecture. With Kria, an Arm sub-system can power the advanced capabilities of the QNX microkernel real-time operating system while allowing users to run low latency, deterministic functions on the programable logic of the AMD Kria KR260 robotics starter kit. This combination aims to enable sensor fusion, high-performance data processing, real-time control, industrial networking, and reduced latency in robotic applications. The integrated solution is now available to customers.

$NFLX- Barclays raised the firm’s price target on Netflix to $550 from $475 and keeps an Equal Weight rating on the shares ahead of the Q1 report. Netflix is on track “for another strong quarter” but the “growth algorithm is getting more complicated” versus the past, which is not reflected in the stock’s valuation, the analyst tells investors in a research note. The firm says broader streaming trends highlight the growing engagement share of YouTube versus subscription streaming.

Hey OP…. Still riding the AAPL play as I believe it’s going to run into this earnings. See you in chat. 

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