New tariffs on Chinese EVs, Apple-OpenAI talks, Roaring Kitty's return: Morning Brief

On today's edition of The Morning Brief, Yahoo Finance's Seana Smith and Myles Udland cover everything from US-China economic relations to the latest moves in the artificial intelligence game.

The market (^DJI, ^IXIC, ^GSPC) opened higher on Monday after all three major indexes closed last week in the green. Stocks are preparing for the Consumer Price Index's (CPI) inflation data expected on Wednesday as core CPI is projected to increase 3.6% year over year.

In the latest move to develop domestic supply chains, President Biden is expected to announce new tariffs on Chinese electric vehicles this week, raising the rate to 102.5% from 27.5%, according to reports.

SoftBank (SFTBY) posted a full-year profit in its Vision Fund for the first time since 2021, boosted by its investment in Arm (ARM) as the AI race heats up. SoftBank now has a 90% stake in Arm, accounting for almost half its entire portfolio.

Apple (AAPL) is reportedly negotiating a deal with OpenAI to include ChatGPT on iPhones. ChatGPT is among the leading AI services, and as iPhone sales slumped last quarter, the partnership with OpenAI could be Apple's latest move to innovate the iPhone and increase sales.

Lastly, GameStop (GME) shares are soaring following the return of "Roaring Kitty" to the social media platform X. Roaring Kitty played a critical role in GameStop's short squeeze back in 2021.

This post was written by Melanie Riehl

Video Transcript

9 a.m. here in New York City.

I'm on that alongside of miles, and this is Yahoo.

Finances like to show the morning brief stop features in the green, 30 minutes ahead of the opening bell on Wall Street and the features a lead games while the Dow looking to extend its eight day winning streak.

And the big story this week is inflation.

All eyes on Wednesday's CP I report.

But for this Monday morning, let's get to the three things you need to know.

Before the opening bell.

You find that Mills and Rick Newman have more futures pointing to a higher open this morning after the Dow saw its best week of the year ending Friday.

Wall Street, now looking forward to fresh inflation data on Wednesday trading Traders remain optimistic that rate hikes are mostly like off off the table for the Fed, despite a hotter than expected inflation print that we've seen in recent months.

Now, markets are currently pricing in less than two interest rate cuts this year, plus we'll get a check on the pulse of the consumer.

Wal Mart, Home Depot and Alibaba are leading a quiet a week of quarterly reports this earnings season does start to slow down here, with the Fed holding interest rates higher for longer.

And investors will continue to watch closely from those earnings reports for any signs that the resilience in consumer spending is starting to dwindle.

That will also become more clear with a rules retail sales report and President Biden is expected to announce on Tuesday new tariffs on some Chinese goods.

The president will hit a range of industries, from electric vehicles to batteries to solar power to critical minerals.

The announcement would also quadruple tariffs on EVs from China, according to a Wall Street Journal report.

That move could raise the tariff rate to roughly 100% from its current level of 25%.

All right, there is top story, crucial inflation data on deck.

The latest CP I print out Wednesday Wall Street, largely expecting those sticky high prices to show some signs of easing core CP I set to rise 3.6% year over year in April.

That'd be down from March's 3.8% increase.

A 3.6% reading would be the slowest annual gain on the core CP I number in three years.

Uh, on the core measure, car insurance, rent, health care set to help ease these pricing pressures.

Um, Sean, we still have inflation.

That's gonna be, you know, roughly two times what the Fed's target is set to be.

So you're looking for 2%.

3.6% is I don't know.

We're gonna consider it a victory of sorts if indeed we get that number.

Um, the components that we called out there, particularly the car insurance, is an interesting one because we've seen the last two inflation trends.

Car insurance come in almost 50 year highs.

Uh, we know there's some structural problems in the insurance market.

Uh, as some people say, more and more people are talking about this.

Um, I'm not sure exactly if Jay Powell wants go out there in, uh, I mean, they're not gonna cut rates in June, but I'm not sure who wants to go out there in July or September and say, Well, you know, we're we're seeing these insurance markets right size, so we're gonna go ahead and cut rates.

But it is a growing subtext within the conversation of what would prompt the Fed to cut rates, particularly as we continue to see.

I mean, Dow is up eight days in a row.

The market's pretty comfortable with the level of rates they've made their piece.

I've said this 1000 times.

They've made their peace with, you know, five, you know, five and three eights, you know, Fed funds rate, Um, for better or for worse?

Yeah, they certainly have.

And we We spoke to Mark Zandi about this over at Moody's on Friday and he was talking about the fact that hey, that 2% level should actually be increased, not something really revolutionary.

Obviously, that talking point has been brought up time and time again.

But I think the case, though for that argument to be made, is getting a bit stronger when you do see the economy remain resilient when we are seeing some softening within the labour market.

But overall, the labour market, obviously holding up much better than almost any forecaster hadn't anticipated up until this point.

So I think if we do see some improvement, even just marginal improvement, I think it's going to be enough here in order for you can then make the argument that the rate cuts are still on the table.

We might even get two before the end of the year.

And then you have some out there saying that, Hey, if we do start to see improvement and and consistent improvement, maybe three could even be on the table.

And I know we'll talk about this later in the in the hour, and we'll probably talk about this all week, maybe for the next couple of months.

But the the the whip saw that we've seen because, you know, now we're we're going back to this.

We have 23 rate cuts, you know, maybe we're back on the table.

I mean, it was a week and a half ago that it was like Powell was literally asked about stagflation.

You know, not that long ago it was the May 1st was the Fed meeting, Um, and so the speed with which we've moved off of that narrative and back as you're outlining to what really predominated at the beginning of 2024 I think that the challenge maybe it's a good problem for the Fed, although some would say there's no good problems, but things got.

So let's say out of hand relative to what they were hoping the market would be expecting.

They were hoping the market would essentially just follow the dots and remain conservative.

Traders got so aggressive pricing out any rate cuts that as the market comes back to the Fed, which is not a situation they have been in in recent years, maybe the communications ultimately get a little bit easier.

And you know we're gonna talk about the tariffs later on.

And, you know, Ben has done a lot of great work talking about Powell's political predicament.

But perhaps the market narrative coming back to the Fed can take some of these political conversations away from them.

Which is, you know, would be another desired outcome, though of course, a po politics is not factor in, um, they have a creative way of doing that, but, you know, official line.

But I do think that also just highlights how much uncertainty there is out there, right?

Just in terms of the whips saw the fact that the market is quick to jump on almost any sort of tidbit of new information exactly what that could mean in terms of the leadership, the rotation, whether or not, we could see more broader, uh, pressure across the board.

So any of state on that remains to be seen.

But we're gonna get the two readings on inflation this week.

You've got PP I and then obviously CP I will get P CE again.

Uh, in a week or two, when you when you take all of that into account.

Clearly it's coming ahead of that next meeting here for the Fed.

We'll see whether or not how much that language is going to change.

I don't know, though.

Probably not I I think that they made their They made their subtle Well, they made the subtle tweak in May.

Um, And then, you know this meeting that we're gonna have, uh, shoot.

It's only four weeks from Wednesday, I think, Um, you you get the full the gamut.

You're gonna get the dot plot.

You get the SEP, you get the whole kitten caboodle with the fed, and so it makes I don't wanna say it makes it easier, but the statement language becomes but one part of the overall communications where you have the dot plot, you have the economic forecast.

You have the inflation outlook have unemployment, which I think is probably gonna be a growing part of this conversation, which is just how much softening in the labour market does Powell not only want to see, but will they accept, and we'll get a sense of that in the SEP. All right, let's talk a little bit more about this.

We want to bring in Niccola Brooks IC G, head of economic and investment research, Joining us now, Nicholas, it's great to have you.

So I'd love you just to weigh in on what Miles and I have been talking about here this morning.

Clearly, when you take a look at where things stand now, there is this expectation that we will see inflation moderate here later this week on the next reading.

Uh, to what extent, I guess.

Are you expecting to see that moderation, if at all?

Yeah.

I mean, of course, uh, on a monthly basis is pretty hard to forecast the inflation numbers, you know, totally accurately.

Um, I'd say that, um, you know, really what I'm going to be looking at, and I think frankly, most people in the market are gonna be looking at Is that core services number.

Um, so, you know, we know that, um, you know, there'd been a pick up in, uh, gasoline, oil and gasoline prices, so that's probably going to have a slight upward.

Uh, you know, put some upward pressure on the headline number.

Um, core rates may be affected by some of the factors.

You were just talking about car insurance, et cetera.

Um, but I think really the real focus, because this is sort of the area, um, where inflation has been most persistent.

Sort of very worryingly.

Persistent is in the core services number.

So as I'm sure, you know, on a year on year basis that's been trending up since October, uh, running at around 4.8% now.

And, you know, again, as you highlighted earlier, the the the official target is 2%.

So we're well away from that.

So it really puts the the Fed in a bad place, because I think, you know, they keep emphasising that, you know, rates are actually tight.

You know that, Um, you know, based on what they think a neutral rate is, no one knows what it really is, but where they estimate it is that policy is actually tight, so I think they would like to move towards easing.

Uh, but the problem is, when you've got core services running a 4.8% and you know, again, as you highlighted earlier that just, uh the the traditional core rate, uh, X food and energy is running, you know, at around, you know, 3.63 0.7%.

Um, it's very hard for them to start signalling that, you know, they're ready to ease.

And I guess, Nicholas, on that point you're making about the core services number.

Um, we've seen that annualised rate, whether it's a three month, six month annualised rate, really accelerate, um, is the Fed at risk of ignoring an inflation C acceleration?

And what I mean is pell went out in March.

I think it was and said, We don't wanna It was April.

We don't want to ignore data we don't like, but is there a point at which there's a preponderance of data they can't ignore on the inflation side?

And that that core number, you know, by coming down on Wednesday might actually be sending an incorrect signal about the real kind of inflation picture overall.

Well, that's a very good point.

And, you know, again, the the Fed, I'm sure, is looking at three months and six months annualised rates of core services along with everybody else.

Um, they may not talk about it that much, but I'm sure they're watching that pretty carefully.

And I think one of the problems with this cycle in particular having had the pandemic and, you know, energy crisis, you know, with the Russian invasion of Ukraine, you know, a number of other factors is nobody really knows what's going on, including the Fed.

I mean, we've all anyone who's been trying to forecast inflation, including the Fed has been burned multiple times through the cycle, always saying yes.

Now it's time for inflation to start coming down.

We'll be easing soon.

We hope you know, the the the you know, so called Powell pivot back in December.

Uh, markets rally off it, credit spreads tighten, and then that actually has a stimulating effect on underlying economic growth.

And so, I, I think the the the issue we're in, right?

You know, the situation we're in right now is that no one is really sure about which way?

You know how persistent this core services inflation will be.

Um, and therefore, I think the Fed, having been burned a few times, is going to be super careful about hinting at rate cuts.

Um, anytime soon, again and then moving.

You know, the the complement to inflation is what we see in the labour market.

And we continue to get fairly strong, fairly steady labour market readings.

I'm just curious, um, both your read on the labour market right now and also how the fed kind of squares again.

A very clear easing bias with the notion of a labour market that is continuing to add roughly double the, you know, replacement rate of, um, you know, payrolls to keep unemployment flat, et cetera, et cetera.

I'm just curious where you see the labour market at this year and maybe through the balance, Um, or right now, through the balance of 2024 Yeah.

I mean, in a in a way, the Fed and everyone else has been forecasting inflation to, you know, stabilise and come down has been very lucky because we've had pretty strong immigration, much stronger immigration into the US than was expected um, and therefore, we've managed to be able to see pretty strong payroll growth without the kind of significant upward pressure on wages that we might have seen.

So, actually, in a way, we've been lucky because of this high immigration.

Um, now, to the degree that that might slow, um, and the economy continues to move along at the pace that it is, um, you know, there, you know there's a risk that we don't start to see.

Um, you know, the easing in wage growth that everyone is forecasting.

Um, and the Fed has to stay, uh, higher for a lot longer, Um, and and I think, you know, just going back to why do they keep and why do you know?

Most forecasters keep expecting the Fed to get ready to ease.

I think it always goes back to the idea of the concept that the Fed is actually in.

You know, that policy is currently tight because the Fed rate is well above the estimated neutral rate.

But the problem is no one know what that neutral rate is.

It's very theoretical.

Um, and that goes back to, um you know, where should policy, Uh, and you know what is the terminal?

The ultimate terminal rate for for the for policy.

Yeah, and we've seen some Fed Fed policymakers come out and start to talk about the notion of a higher neutral rate.

Uh, we'll table that for next time.

Nicholas Brooks, IC G, head of economic and investment research.

Thanks for the time, Thank you very much.

All right, President Biden expected to announce new tariffs on Chinese electric vehicles this week.

That's according to several reports.

Total tariffs on the sector will rise, reportedly from one or 2 100 and 2.5% from 27.5%.

Yahoo Finance Rick Newman joins us now to discuss So Rick.

Two parts of this first would be on exactly what we're hearing will be in the EV part, but really overall, what the status is of US economic policy as it relates to tariffs on Chinese Good, really, between the Biden and the Trump administration.

Well, let's keep in mind there are almost no Chinese electric vehicles on sale in the United States right now, so this is not going to raise prices on any vehicles that Americans are actually going to go out and buy.

The main point here is to keep those electric vehicles.

Those Chinese made EVs from coming into the United States in the first place.

And they're cheap.

I mean, you can you know, uh, you if they were allowed to come in at a normal tariff rate, even at 27.5% which is the the current rate, you could buy one of those for about $12,000.

Uh, so would people buy those I?

I don't know.

I think some people probably would.

But the point is, uh, keep them out in the first place to protect the domestic auto industry.

So that's point number one.

Point number two is, uh, look, we're we're in a new era of in industrial policy.

I mean, um, this is protectionism.

Uh, So what Biden is doing is different from what Trump did Trump did those across the board tariffs?

Uh, Biden is targeting certain industries that he wants to develop here in the United States.

Uh, and this is this lines up pretty, pretty cleanly with, uh, the incentives that were in the inflation reduction Act from 2022.

Uh, so Biden says we need to, uh, we just need to develop, uh, domestic supply chains for, uh, electric vehicles, uh, green energy technology and a few other things.

And that's what this is all about.

So, Rick, I guess building on that a little bit and just talking about the fact that this is mostly then it sounds like just symbolic here for the Biden administration to impose this.

What's the risk, though?

In terms of that retaliation and what it could look like here from China, if they do have a response?

Uh, I mean, the the history of trade policies like this tells you that the country on the receiving end is going to impose some sort of retaliatory measures that are basically, uh, uh, equal to whatever, uh, whatever we impose.

So, uh, the problem that China has is we, you know, they don't import nearly as much American stuff as we import Chinese stuff, But they do.

Uh, they do buy a lot of, um, uh, American agricultural products, so I mean, you know, the the playbook here is when Trump imposed all of his tariffs.

China retaliated by adding new tariffs on American pork.

Uh, American soybeans and that was a real struggle for farmers.

So that could happen.

I don't I don't know if it will, um, but China will retaliate.

Uh, it the question is, will it be enough to hurt what?

You know, American producers, And, uh, we just have to wait and see what's going to happen.

But there will.

You know.

Look, this is a This is a very tense trade relationship between these two countries.

All right, Rick Newman, thanks so much for taking the time to hop on with us this morning.

Always great to get your in here.

We're just getting started here on the morning brief coming up roaring Katie is back.

Keith Gill, one of the main faces of the meme phenomenon, making his first social media post in three years.

She's shares of the meme darlings.

They are jumping here this morning.

We are going to discuss after the break.

Plus one stop was worse than the rest.

We will bring in the stop that dragged down the S and P 500 earnings growth by the most here this season and later.

It's all about inflation this week.

But what are the different ways the data is measured.

And what does it all mean for the Fed?

And how does it impact you?

We will explain on wealth in our 11 a.m. eastern time.

Our stick around will be right back.

Soft bank posting a full year profit in its vision fund for the first time since 2021 boosted by its investment in arm.

Now, the company's 90% stake in arm now accounts for almost half of its entire portfolio.

So a lot of this and the resurgence that we've seen around Softbank here, at least in the last quarter, has been surrounding arm holdings.

And the lift that that has been, uh, provided here for earnings.

And they're looking here to leverage arm technology going forward.

The investment.

There are some of the funding that they from there just in terms of what they plan to prioritise for future investments.

And it looks like, at least for now, from this they're looking to use some of that funding to go after new investments.

And you have to think that a lot of that now is gonna be surrounding a I and exactly how that could transform a number of industries.

Yeah, And I think, um, you kind of have two parts to this where, on the one hand, the track record of you know what Masa son has done at Softbank over the last several decades?

Um, obviously says greatly, you know, let let's see what happens.

There's been some massive, massive winners in that portfolio over time.

On the other hand, you look at the way that you know, the vision fund, the reputation that the vision fund got, um, you know, over like it's called the mid 20 tens of kind of moment.

I mean, we work as the canonical example, right, but, uh, momentum chasing, let's say the VC.

I mean, this is the the the thing.

You know, V CS are momentum chasers.

They all kind of go into the same thing.

Everyone's going into a I now and I, I sort of wonder you have the hit like arm has been a huge winner, is probably going to continue to power the gains in that portfolio.

Sure, you take those winnings, you reinvest them into other A. I plays et cetera, et cetera.

Um, but you you look at the success of that where you know arms on a new company.

This is a company that has been in the foundry business for a long time.

And there was a bull case around it, uh, on the cloud 10 years ago.

And, you know, that went fine.

Now you've got the bull case on a I and how much, much more.

You know, how many more bets are there to make on a I and I know like, I'm I'm sitting here a year into the A I thing saying maybe it's over, but, um, you just sort of the the more companies that come out we've got events this week events Next week, you get the apple, all this kind of stuff.

Um, OK, so So thanks for the latest to come in and say we're gonna invest in a I great.

Yeah, exactly.

And And I also think the real question here is is are there going to be any new big players within the A I space or or the leaders that we are seeing it?

They're gonna continue to cap right, because there has been the argument made that we're still in the very early innings.

Some are making the case that you're still in batting practise when you get to the whole, you know, analogy with the baseball games.

But when it comes to what, exactly, that looks like 7, 1015 years from now, whether or not it's still going to be the small handful or more than a small handful, a number of companies that are already within this space and clearly have that lead, or if there is still time to invest in some of these smaller players who could potentially benefit here down the line.

And I think that's a real question when you think of when you're trying to synthesise some of this investor enthusiasm and figure out how much of it is realistic and what exactly that benefit is going to look at.

Yeah, and, you know, And speaking of the soft bank portfolio, let's take a look at Alibaba.

That stock is up this morning.

About 3% results from Alibaba expected tomorrow before the opening bell.

We also saw um, within the Chinese Internet.

10 cent music come out this morning.

They had better user growth figures than analysts were expecting.

That stock is up 3% and this kind of pulls back from a I and really just gets to, you know, the trade du jour.

Speaking of risk sentiment in the market, um, Chinese Internet stocks, K web.

That's that, um, Index that ETF has been up about 30% almost since the bottom in February.

It's about 23% over the last three months.

Uh, you look at these stocks over the last month and you've just got some huge winners in here, your pinduoduo of the world.

10 cent, not 10 cent music, but 10 cent.

That's that stock.

The AD R up 23% over the last month.

Um, K webs up 15% of last month.

Jd.com is up almost 30% over that period of time.

Uh, I don't think there were a lot of people coming out and banging the table for Chinese Internet stocks, But you know that.

Fine.

Tell me the A I fundamental case.

Maybe there's a a notion.

I mean, we've seen some positive regulatory, um, chatter out of China, but ultimately, when you are looking around and saying the market's ripping what's gotten killed, we kind of does the utilities last week, Uh, what?

What can I buy and take my chance on you.

You have seen Chinese Internet stocks really catch a bid over the last three months?

Exactly.

And and so then the question is, how much of a runway is there really left?

Considering that so much of the fundamentals, there still is a heck of a lot of weakness within that picture, right, whether or not they're just betting on some of those being down names.

And maybe you can make a case for if you look into some of these businesses.

Tenet media here specifically, I was going through the analysts reaction, and they were pretty much overall optimistic just about the fact that the moat that this company specifically has within the industry, some of that earnings momentum likely to continue here through 2024.

So whether or not it's going to be some of these individual names that make the most sense at this time or not, it's going to be that rising tide lifts all boats and beating down or investing in buying beaten down names that clearly have not participated in the rally yet.

But you got a question.

Call it a meme stock of sorts meme trade of sorts speaking.

Speaking of Let's move on to the meme trade because it's back today, it's almost like we're back in 2021.

Well, Gamestop shares surging over.

Look at that 50% Here in the pre market, the stock is up 60% and some in the last month.

Roaring Kitty, the account behind Gamestop's Reddit phenomenon just three years ago, is making his first appearance on X since 2021 and Miles.

You're breaking down what exactly this meme means and why everyone is so excited and buying Gamestop here and why we're seeing this massive rally.

So explain to us what exactly?

Let's not make it seem like I'm some kind of meme master.

I think this is pretty self explanatory, but the origin of this meme, uh, as I am to understand it, uh, is from it actually originated on Twitter some years ago, and you know someone's gaming, and it's like now I'm locking in, and I, you know, we were chatting during the break.

This is the equivalent to I'm sitting here.

I'm minding my own business.

I'm checking some slacks.

I'm checking some emails.

It's like, Oh, this guy just messaged me.

All right, let's go.

You know, now, now we're gonna We're gonna take some time to look at this one.

I mean, there's so much to like about this, but really, we just got off the conversation about Chinese Internet names.

We've been talking about crypto over the last month or so.

Um, again, Utility stocks getting memed in the last two weeks, it now we have Keith Gill coming out of the the woodwork to talk about Gamestop.

A name that underneath the surface.

As you noted, you look at that monthly performance.

This has been ripping.

Now the stock is gonna basically be a double over the last couple of months.

There's a lot going on out there.

It it's it's an interesting, like the the speed and consistency with which we have been replaying the hits in this market over the last 18 months.

Since you had that bottom in October 2022 continues to I don't know, impress.

Confound it.

It is the feature.

It is the feature of this market.

It is the future of this market.

I mean, when you just take a look at even this tweet specifically when we talk about.

There's a lot of excitement.

You can, as you were just noting, You put, you can actually look at a number of different pockets here within the market, but this specifically this has been viewed over 10.5 million times.

OK, this is the stock that is now surging.

It's bringing back the whole meme era.

Clearly, if you're betting on this name, you gotta be to lose it all.

That's nothing that's new, because clearly it's not to be.

No, Gamestop is not going out of business.

OK, maybe not literally.

It's going to zero, but you're you're it's not gonna continue to ride this way.

I think what we learned in 2021 is that you got to be prepared for it to come crashing back down.

I think what we've learned what we learned in 2021 and what we've learned since, and what you see this morning is there is now real money behind this.

This is not just people with Robin Hood accounts.

There's, like institutional traders, pod shops who are looking at this and saying this is our does that change the investment narrative around it.

Well, of course, the charts.

I mean, look at the chart.

It's it's a mess.

But the narrative is that the like.

I would just say there is now a self awareness when it comes to the meme trade and when it comes to the factors that are not.

Oh, this analyst had a meeting with management and said, They're great, like you are now literally paying attention to, you know, Wall Street bets.

Of course, that's table stakes.

But all these other kinds of sentiment indicators that are out there for real money investors to grab this is again.

This is not just folks who are sitting at home, and I think that is what's the most interesting part of both today's move and the overall shape that markets have taken over the last several years.

And look at that.

A MC is also up about $20.

Of course, it would be because it's a basket, you know, if you're short the basket Well, now you're on the wrong side of etcetera, etcetera.

So All right, we got to leave it there.

We've got the opening bell coming up in just about two minutes.

We'll be right back and There's the opening bell on Wall Street, this market check sponsored by tasty trade kicking off a brand new trading week.

And we're starting the week in the green.

All three of the major averages here opening to the upside.

We've got the Dow pulled up for you.

That's up just about 3/10 of a percent when you take a look at the move that we're seeing higher in the S and P 500 pushing further above that critical 5200 level.

And then you've got the NASDAQ up just about here, up to up about 1% here in early trading as we start, uh, starting to see that trading action take place.

Let's take a look at the sector action, Miles.

We're taking a look at a lot of green on the screen.

Yeah, we'll see how we open here.

Um, technology up seven tens.

Communication services lagging, so I'll check my watch.

Well, we'll check back in five minutes.

Yeah, Jared Wicker will tell us how we're doing.

I was gonna say, Jared, let's go to you with a closer look here.

Now.

We've got the NASDAQ up just about three times of a percent.

A bit more accurate.

Jared, What do you got?

Well, I was taking a look at the, uh, futures here.

Let me just pull that up on the Wi Fi.

Interactive dollar is not doing too much today, and the futures are kind of quiet, but they've been making some really outsized moves recently.

So let me just go through some of our big tickers here.

So crude oil is one.

Crude oil is up about two thirds of a percent today.

This is the overnight price action.

Not a lot of incremental news.

Here we are.

We are getting some of those production figures from March where we saw Saudi Arabia really stepped up.

Whereas the US figures from February, they dropped and so did Libya.

But the price is holding below $80 a barrel.

If you look at the year to date, it's been pretty choppy.

We have come down to what potentially could be a support area.

But I'm not seeing anything too significant in terms of levels.

And we got to check out gold as well.

Gold is down about 1%.

Still holding above 2300.

That's emerged as a potential level of interest here, and this is a year to day chart.

You can see Gold is simply consolidating the gains that it's made since it broke out.

And just as a reminder, here is a five year chart to show you how it broke.

So looking healthy, there just not a whole lot of action today.

And then I want to touch on cocoa as well.

That's been really on the move.

Let's get the year today chart this move.

Now we're seeing at the lowest levels in what is that?

A month and a half.

But this move here on $15,000 margin, you would have made 45,000 if you shorted.

That's three times your money, a very short period of time, only to say that futures remain very volatile this year.

All right, Jared, thanks so much for bringing that down for us here.

We'll see how the trading day shakes out.

Let's talk about what is on top here this week because we've got the CP I and PP.

I prints in focus the latest readings that we will get on inflation, potentially giving us a bit more clarity on what the feds next move could potentially be and what that timeline looks like for rate cuts.

Now this coming after the S and P 500 still continues to hold above that 5200 level.

Not too far now from the all time high.

The Dow having the best week of the year last week, and we're now moving to the upside at the open, up nearly 3/10 of a percent.

Let's talk about what to expect.

We wanna bring in Ben Emon.

He is a new wealth.

A senior portfolio manager had a fixed income income and macro here, Ben, talk to us just about how much is really relying on the inflation prints, if at all, and how you think the market will likely react if we do get any sort of hotter than expected prints.

So I was looking at the actual estimates of the of the inflation number, which is really narrow this time, like to base points between the high and low of that estimate from economists.

And then I looked at the bond market and they priced it exactly to perfection of what the headlines we expected to come out, as have now casting of which is sort of like a real time measure that is also exactly in line.

So if a price for perfection on then any type of surprise on that number, whether softer or harder, could lead to significant movement in interest rates, particularly because the previous segment I think it was talked about, we keep buzzing every day about this rate cut and inflation numbers matter a great deal to that, because if this is a softer print than the previous three numbers, the calculus again changes.

But if it's harder, the trend continues.

And so I do think we are going to see some volatility around this number.

If whether it's soft or or hot, I don't know if it's gonna be soft or hot.

That's a bit of a gash.

The market is sort of trepidation, so there's not much signal that we're getting currently.

So we're just waiting here.

So you know, at a certain point we can deal with Wednesday when we get to Wednesday.

I'm curious.

Speaking of of what's happening in the bond market and sort of the action we've seen you know along the treasury curve over the last month and and really the way that price has perhaps led some folks to think of about how they're allocating across asset classes.

What's the state of play as we sit here?

Mid 24?

You still have 5% on the two year.

Still have plenty of opportunities to get something for nothing, Right?

If you wanna talk about Treasuries and cash, what moves have you been making?

Seen Been discussing most often as it comes to those allocations which you know are are Now we're a year into a state of play that people didn't think was last too long.

Yeah, the yield curve has actually been very flat and stable.

You know, the the the difference between the two and the thing is something oscillating around negative 40 basis points.

So you're not getting much reward from being really far out the yield curve.

And as an investor, I take note of that because at the end of the day, it's about risk taking.

In this case of like if I don't get enough yield for the duration risk, so to speak, I may have to do different things now.

I was talking to some of our clients and our advisors our firm about thinking of duration itself, which is basically measuring the sensitivity of the portfolio with interest rate changes.

You should not think of diversifying duration because we are in an environment, as I just described.

If these data points keep throwing us off with volatility going one way or the other for interest rates, then you want to play it more safer.

So let's say you want a duration of six years.

You can do that, but you have to use different pieces of fixed income in that duration to get to six years by Have a low volatility portfolio.

So what it comes down to is that you probably have to do more shorter maturity securities.

At this point, you not only get a better yield there, but it gives you low volatility.

But then there's emerging markets.

There's prefers from that.

Banks issuing this structure credits there.

Those are all like securities, I think are attractive in this environment.

They have been positively returning and gives you a low volatility for the same duration, and you mentioned emerging markets and made me think of something else that you brought up in your notes about Milken last week and it seemed like, you know, Rick Newman made this point in a column.

Several other outlets made the point that everyone was cheering the US economy.

Everyone was super excited about investing in America.

What do you make of that kind of consensus?

Overweight to the US in the context of global investments?

There is a big story in the FT over the weekend about will Europe ever catch up to the US economy?

And everyone is kind of contrarian.

I think signals are going off the productivity miracle that we're dealing currently with.

Or at least we're anticipating it with all this a I hype and the money is spent on it.

You know, Look, we have a stronger economy because I think, really that in the early days of the pandemic, part of the country just reopened without having any kind of acceptance of the pandemic being there, so to speak.

And I think that was really that matter today even and we all say the Sun Belt states and then we got the stimulus not just the spending stimulus, but the Infrastructure Act and Inflation Reduction Act.

That sounds political, but it does have a real impact on the economy.

Currently, that's actually driving the productivity to an extent.

I think this is why people are looking at the US of this difference of growth versus Europe.

That does not have as much productivity growth currently.

And lawmakers in Europe are concerned that productivity growth is too slow.

And I think this is why people like the US but to sustain it.

This was the other big team at the Milken Conference, like everybody wants a rate cut because if we don't cut rates at some point, then we cool off the economy too much, and that productivity miracle may disappear.

So I think the enthusiasm for the US will remain and it will remain well into the election.

After that, we'll we'll see.

But I, I do think it's Yeah, it's the outperforming economy.

And speaking of enthusiasm, let's talk about the meme stock move that we're seeing here this morning because Miles and I were talking about and this massive run up that we've seen in Gamestop a lot of it on the heels of this tweet that we got out from Maureen Kitty over the weekend.

But I'm curious from your perspective, this hype, this mania that we're starting to see resurface here with some of these meme trades.

Is it gonna play out differently this time?

Is some of this do you think of maybe a bit more staying power than what we saw a few years ago?

Well, on the one hand, the meme stocks are always interesting about the reopening of the economy like that.

That company that you mentioned, I mean, in fact, that malls went open, Everybody could go back into the game stop store, and it allowed Gamestop actually to have access to capital markets and have capital and then invest in his business and recover.

That was part of that initial meme stock.

And then it became speculative and everybody jumping on us.

I think this latest move, I guess, is again enthusiasm of taking risk and some level of speculation as we are sitting here sort of in a low volatility environment, waiting for any kind of signal from the Fed, the election, or the economy.

And it drives people to potentially trading again.

So I'm not surprised right away.

This is one company you get a bunch of other of those are they investable stocks.

I think you need to do your homework on the companies in and in and by itself.

I would I would advise we not analysts on it.

But I think, broadly speaking, that it will always be part of our markets.

Now, you know, people have learned to trade this enthusiasm about taking option trading on.

And you know, all these retail brokerage firms offer that right in order to to trade options, that people look at it as an income generating, too.

So I think that's part of what's playing out here.

Uh, you know, as we enter the fifth year since the pandemic started to sit here with 5% rates and talk about a low volatility environment, Um, it's really amazing how far we've come.

It feels like we're back in 1920 you know, pre pandemic.

To some extent, Um, Benny's always a great conversation.

New Edge Wealth senior portfolio manager.

Thanks for stopping by.

All right.

Coming up Apple's big push into a I expected more information on that next month.

Tech giant reportedly inching closer to a deal with Open A I.

We'll talk about what it means for Google coming up next, All right.

Apple is reportedly closing in on a deal with Open A I to include its technology on iPhones.

That's according to Bloomberg.

Companies are looking to finalise terms to include chat GP T on Apple's next O SI S 18.

According to that report, a couple of things here stand out.

We see Apple stock up about 1% so outperforming the broader market early.

Here we have WW DC early next month.

Apple has been, I mean, what?

It's been a year and a half since everyone's getting on the A. I train.

But if there's a laggard, if you're if there's, we're able to talk about there being laggards.

Apple has been the laggard on that front, Um, but my what stood out to me from this report is two things.

There's the obvious, which is, well, Apple and Google are search partners so tough that Google is not part of this agreement.

But you know, Apple is a tech company, but it's all about the brand, like the the like.

Their branding is the thing, which is, of course, the ad last week, et cetera, et cetera.

Chat.

GP T is the main a I brand.

So I know that people are gonna come out of the woodwork and debate.

What?

The best technical a I chat, you know, large language model, um, language learning model.

Um, large language learning model.

Whatever, uh, you're gonna we're gonna we're gonna debate what the actual technical best one of these is.

But when people on the street you say a i anyone who gives you an answer other than I don't know what that is is probably gonna talk about chat GP T. And that's a very strong brand to have at this stage of the cycle.

And that was my kind of big picture takeaway here for Apple thinking about an approach to a heck of a lot of sense.

Well, it makes sense it like it's, I think, again really tough for Google, who's been their search partner who is trying really hard, and they're gonna try hard this week at their event to talk about all their a i things.

But if Apple is like, we're sort of agnostic on whether a I actually works like I don't I don't know how much they care about your prompts and iMessage being good or you even using them.

But if they want to come out and make a splash, it makes sense at this stage in the game to be like we partner with chat G BT They're the ones.

Yeah, it it does.

And I think that's also the argument that a lot of analysts are making this morning and have made ever since.

Reports of this, uh, started to surface late last week, and they were talking about the fact that maybe this is what is necessary in order for Apple to have a blowout coming up here later on this year when it comes to the next iPhone cycle, if that is going to be what it takes for people to eventually upgrade their iPhone.

And I think the case is out on that because I think the use cases, the personal use cases need to be developed just a bit like I still think I. I wonder honestly how many people use chat GP T not only on daily basis, but more so even on a weekly basis, and whether or not that some of that excitement is going to be enough in order for them to go out and spend $1200 1300 dollars on a new phone.

But I do think it does make sense one, because Apple has largely been criticised for the fact that it hasn't jumped in more, I guess more aggressively into the A. I push up until late, so I think they can put up to about some of those fears out there.

But two, I think even beyond that the fact that they are teaming up with open A I like you are saying with chat GP T that is the house owning when you are talking about a I that does make sense.

If they are looking for any sort of push, which I think they could get here, I mean, I think sometimes about like, family group texts, I wouldn't be opposed to having an A I write responses to that.

Yeah, like do I have to?

Oh, you know, like the a IA I equivalent is if someone sends a picture, you give it the heart reaction.

It's basically I'm not acknowledging this.

I don't care.

That looks nice.

So would a I like in that setting.

Fine, because I I'm notorious nonresponder to like all kinds of texts, but in particular, like, you know, family type, group chat things.

You fire off an A I you know, cook.

Yeah, but what if it's a text that you So the picture.

I don't really If I If I care, I'm gonna respond.

Most texts I get I don't care about So then, you know, having chat GP T would.

I mean, I'm not gonna go buy an iPhone because of this.

I'd buy an iPhone because it stops charging, which it does every two years.

So that's why I need to buy an iPhone.

But, like, I think there's plenty of uses.

Yeah, I don't know.

I upgrade my iPhones.

Probably like once every four.

I mean, are you gonna Are you gonna use chat GP T to reply, Mark?

Probably.

I mean, honestly, it it's not convenient.

Sometimes if you don't need to read every single text, you know what I'm saying?

But it's not gonna make it.

It's not gonna be enough, at least for right now for me to get off this highlight and upgrade my phone.

I've literally heard enough from you.

Let's do the thing, But we'll see how it plans to monetize A. I are coming up S and P on pace for its highest year over year earnings growth since the second quarter of 2022.

But it would be even higher if it weren't for one company in one second.

We have the details coming up next, All right now that 92% of companies in the S and P 500 have reported earnings, let's talk about the performance of the index.

Overall, it's on pace for its highest year over year earnings growth since the second quarter of 2022.

But it would be even higher if it was not for one company.

And Josh Schafer is here to tell us.

Well, the banner told us.

But you'll tell us more Bristol Myers Squibb, right?

Of course, the earnings call that we all followed very closely over the last couple of weeks that we really our eyes on is what dragged down the index.

Um, I think you guys were probably with me and being a little bit surprised in seeing this stat overall.

So Brister Miles Squibb is in the health care sector and really the big thing that stuck stuck out for them here was they had a one time loss that they reported.

They don't think this is gonna be a continuing issue that had to do an acquisition, but they reported earnings per share and earns per share loss of $4.40.

That was compared to, uh, $2 earnings per share in the positive going back a year ago.

So a massive loss, Then when you take that and sort of extrapolate it to the S and P 500 growth, their big loss leads you to a massive decline in S and P 500 earnings growth.

So you go from what would have been 8.3% earnings growth for the S and P 500 down to 5.4 just by taking out Bristol Myers Squibb.

Now, if you also took out a couple more companies in the health care sector, you would actually have even further earnings grow.

So if you took out the lead sciences and you took out Pfizer, you would actually have 9.7% growth for the S and P 500.

So really, the health care sectors, 25% negative earnings growth kind of weighing on.

When I saw this chart in your week ahead post, I literally didn't believe it.

And I was like, this guy, I was like, this guy screwed something up.

Now we're gonna have to do a big fix this one out as an email, this one out all kinds of ways, um, and and to put some numbers and we do the earnings per share here, you know, the $4 um $4.

40 on an adjusted basis, the unadjusted number is $5.89.

That's an $11.9 billion loss to put, you know, dollar figures around it on an adjusted basis, $8.9 billion loss for BMY in the last quarter.

The stocks only down 10% in the last month.

So it was somewhat priced in.

It was some of the price, but with the three stocks we're talking about, too, in the sector as a whole, that was sort of interesting as I started looking in this more as you see this and you see the big health care decline and you think, Oh, probably one of the worst performing sectors, at least in the last month, right?

No health care is actually outperforming the S and P 500 in the last month, marginally 1.4% compared to 1.2% for the S and P. But I think a lot of that has to do with when you look at what happened this quarter.

It's not really expected to happen next quarter for the second.

Well, and also, if you look at XL V, I mean, Eli Lilly is 12% of the thing.

Plus, you know, Eli Lilly United and J and J.

That's over 20%.

Almost almost 30% of the ETF right there.

What are the expectations then for Q?

Yeah, for Q 2 17% earnings growth year over year for health care would actually be the second best performing sector in the S and P 500 in the coming quarter.

And I do think it gets to with health care.

I don't think the most interesting part of the sector to me is just There's only a couple of companies there that are really, really interesting, right, and they all have to do probably with G LP ones and then the companies that are dragging this down actually have a lot less to do with the hot trade in the sector.

And so you kind of look at it and you're like, Oh, well, and I think you know, the other health care and utilities is in this bucket as well.

I know I've brought utilities like, five times.

These are I mean, these are defensive all else sequel.

These are defensive type sectors, and in this market they've turned into growth sectors.

Basically, right.

Utilities are now in a I play with the new data centres and power and all this kind of stuff.

And you know, if there's a non a I meme trade out there or, you know, like it's G LP one well, in that sense, within health to to to take it a step further, too.

On the utilities, it was interesting talking about earnings and OK, we can explain health care, maybe knock trading off because Q two is supposed to be good Utilities is the third worst performing sector in earnings this quarter.

It's also supposed to be in the bottom three next quarter.

And so I think over the last week, we've been trying to reason, You know?

Why is the why is the sector moving so much?

And we got to this while they're undervalued.

People are seeing opportunity there.

There's a big There's a big part of the A. I trade in that, too.

Absolutely.

Absolutely.

I mean, I you know, we sat here at the beginning of the year.

Why are industrials ripping?

And it's like, I don't know, Is Trump gonna win all the walls like No, this is probably an A. I related everything's a I health health care could be a I unless it Well, unless it's a it's either a I or G healthcare has both working for it.

You can get to the A. I trade in health care, too you can use?

Uh, yeah, sure.

We'll leave that to me on it.

You can use a I to prescribe more GOP ones.

You know, it's probably gonna happen sooner than you think happening right now.

I just got a prescription.

We got to leave it there.

The on set here with us coming up in the next hour.

New show.

Catalyst, we are gonna be breaking down what the upcoming inflation prints mean for the Fed and for the markets.

Plus, retail is in focus this week.

We've got earnings results on deck here from Walmart and Home Depot.

What that's going to tell us about consumer and spending about all that and more miles.

You're out of time.

Come on.

I got I got another job to do.

Unfortunately, I would love to do this.

All right, guys, we'll be right back.