The Morning Market Feed, June 14th

We were expecting a PPI and Jobless claims report which were supposed to confirm the CPI report and make stocks run, but we already know one of those things didn’t happen. We saw the Musk pay package approved, and another push in court against him. Adobe posted earnings and is up 14.8% in the gap between market close, and pre-market. PayPal also had some news which resulted in the stock being down 3%. So let’s dive straight into it!

• PPI and Jobless Claims

As the PPI numbers came in, there were some good signs. Stocks popped up initially as the number came in as follows, and in the following order:

Month-Over-Month, Year-Over-Year | MoM Expectation, YoY Expectation

• PPI: -0.2%, 2.2% | 0.1%, 2.5%

• Core PPI: 0%, 2.3% | 0.3%, 2.4%

• PPI Ex Food, Energy, Trade: 0%, 3.2% - -

These numbers support the case for rate cuts, because we see inflation pressures fall quite a bit in this report.

We also saw the initial jobless claims come in a bit hot, as they came in at 242K, where 225K was expected, this was the highest number since the middle of August last year so it’s quite up there. We must also admit the chart of the continuing jobless claims, because we can see the tail pointing upwards towards a level where it has previously bounced back from.

The initial reaction from the markets was favorable, but as we can now see, most candle sticks on the charts are pointing downwards, even Shopify is down after 12 days. Not so great after all. So what is my theory about it?

It’s a bit of a tough one, because the 10Y-Yield is down, and rate cut expectations were up. So the difference here is worrying. With the increased rate cut expectations, stocks should rally, but it was only a small group that did so and pushed the S&P500 up 0.20%, the equal-weight S&P500 was down 0.28%. Seeing this discrepancy is quite worrying as good news is perceived as bad. This is the first time seeing this, so it’s a bit early to raise panic, but it’s a noteworthy development.

• Tesla can hold on to Musk

Tesla was successful in the pursuit of shareholder votes in favor of Elon Musk’s pay package, this was seen as a very important step by Tesla, but only one part of the problem. The issue here can be seen from multiple angles and we have also seen it interpreted that way. In my opinion, all of them make sense.
Because there was a contract, and however excessive it may have been, the targets set also seemed to be… let’s call it optimistic.
But about the excessiveness, the stock hasn’t performed all that well since it peaked in late 2021. Over the past 3.5 years, the stock has been down over 50%, and since money managers aren’t that widely known to be thinking about many other things than their own pockets when it comes to investments, the underlying reasons for the underperformance won’t be as interesting for them.
The ownership of shareholders is also quite diluted with the acceptance of this new package, because Elon will be holding many more shares or voting power.

In my opinion, there was a contract, and it was accepted by shareholders. I agree with the lack of independence of the board at Tesla, and I also still believe that it may be time for Musk to look at xAI, and SpaceX as his main occupancies. He has brought Tesla to a very good position for the future, but may now be in need of a more conventional CEO, that sticks with plans better, in stead of trying to capture everything and drop projects for the next best thing.

However, despite all the discussions on the pay package, now comes the fun part. Persuading a Delaware judge to recognize the pay package, through the same court that canceled his previous deal.

• Adobe Earnings

At market close yesterday, Adobe was 8.85% of the Growing Quality portfolio, but that number seems to be increasing slightly at market open today. How the stock will trade during the day will have to be seen. Remember lululemon being up 10 or so percent and dropping towards being almost flat during the day after. But we can look at the numbers the company posted.

Revenues were up 10% to $5.31 billion, while GAAP EPS was up 24%, and Non-Gaap was up 15%. Operating margin was 35.5%, and Net margin was 29.6%. A very welcomed recovery. Furthermore, the company repurchased 4.6 million shares. Later today I will be releasing a YouTube video in which I will take a way deeper dive into the numbers and the fears before the report.

• So why did PayPal drop 3%?

PayPal yesterday announced that Ebay will offer the option to pay with Venmo. In my opinion, a good development as we have seen the argument made that Venmo was under-monetized. So it’s good to see the options expand with the app. PayPal however can’t seem to get a break after the announcement of Apple allowing its users to hold phones together in order to pay anonymously. This is something that Apple already offers in some way, except for the change in now being able to pay anonymously by holding two phones together, it’s through a normal tap-to-pay. Now excuse my lack of understanding of this “new” competitive threat, but it seems like nothing really new. The drop in share price, combined with the update Alex Chriss gave does offer a buying opportunity for those who want to, as the future seems to get less risky.

That was it again for today. Let’s see how the market will end the week, and although it may still be early, have a good weekend!