20th Century Fox Licensing/Merchandising / Everett Collection
The stock market’s main gauges will rack up weekly gains of 2% or more, if they can just make it through today’s session unscathed.
They’ve got their swagger back, feeling good thanks to a tech rally. Facebook is fully recovered from that Cambridge Analytica brouhaha, and Apple’s up 15% this month.
But should stocks slow their roll?
Hedge-fund manager Dan Loeb doesn’t sound all that bullish, and he delivers our call of the day.
“We aren’t in a time right now where you’re going to be rewarded for taking a lot of long-market-exposure risk,” the Third Point founder and CEO said yesterday during an earnings conference call.
The billionaire activist investor said he wouldn’t necessarily characterize his shop’s view as bearish, but he is highlighting a sea change.
“An important shift in markets happened in the first quarter. Over the past two years, markets were boosted by positive surprises in growth and benign inflation, but during the first quarter, uncertainty returned in each of these areas,” he said, according to FactSet’s transcript and recording for the conference call.
“Investors have become increasingly concerned about multiples — particularly since, after many years of low rates, there’s finally an alternative to equities in the form of relatively risk-less two-year money.”
The two-year Treasury yield this week has climbed to levels last seen more than nine years ago. It was recently at 2.535%. “Concerned about multiples” is a reference to price-to-earnings ratios or other valuation measures.
And so Third Point is ramping up its bets against individual stocks, according to Loeb.
“This is a time where I think we can make money on the longs and on the shorts,” he said.
“We’re just seeing more opportunities to find companies that we think are going to go down — or at least materially underperform the rest of the portfolio.”
Asked on the call about what looks great in particular for shorting, he demurred: “We can’t give all our secrets.”
But his skittishness is clear, as forecasters say a U.S. recession could hit in 2020.
“We’re watching closely to see if a recession, which we don’t think is close, might be getting closer,” said the boss at Third Point, which reportedly may launch a “blank-check” company as stock-market returns flatten.
Key market gauges
Futures for the Dow , S&P 500 edging higher, while Nasdaq-100 futures dip. As of yesterday’s close, the Dow is up 2% for the week and +0.1% for the year, while the S&P and Nasdaq Composite are on track for weekly gains of 2.2% and 2.7%, respectively.
Europe is mixed, after Asia largely closed higher. It has been small moves up so far for oil and gold , as the dollar index slips. Bitcoin is trading back under $9,000.
See the Market Snapshot column for the latest action.
The chart
Nvidia’s high-flying stock looks on track for a down day, even after the chip giant’s earnings and outlook topped expectations late yesterday.
Shares are down about 2% in premarket action, as shown in the chart above.
It may not be helping that Nvidia CEO Jensen Huang predicted a drop in crypto-mining revenue, as he also said the company is still waiting to make big bucks from self-driving cars.
The buzz
CNBC
Prominent venture capitalist Tim Draper has defended Theranos founder Elizabeth Holmes — who has been charged with fraud — as an “icon” who did a great job, also saying that she was bullied.
Beyond Nvidia’s premarket retreat after earnings, Symantec’s stock is plunging more than 20% premarket after the maker of security software disclosed an accounting probe while posting results yesterday.
Other accounting woes: Paint producer PPG Industries has fired its controller and reassigned employees after it found additional errors.
Dropbox looks set for a fall following its results late yesterday, and Yelp and MarketWatch parent News Corp will also be moving after their after-hours reports.
The U.S. has taken a step toward cutting Iran off from the global economy, levying sanctions on a financing network and accusing the country’s central bank of helping funnel dollars to a blacklisted elite military unit.
In his memoir, John McCain describes Vladimir Putin as “an evil man.”
Figures for import prices hit ahead of the opening bell, showing a 0.3% rise in April. Consumer sentiment hits once trading is underway.
Check out: MarketWatch’s Economic Calendar
After being dislocated over the past decade, households are now on the same footing as employers, said the St. Louis Federal Reserve’s James Bullard in a speech before the open.
The quote
Kenishirotie - Fotolia
“Until we get closer to policy solutions that address the ability of drug manufacturers to set whatever price they want and increase prices year after year, we may only be scratching the surface of this problem.” — Juliette Cubanski, a health-care expert with the Kaiser Family Foundation.
She’s among the folks bracing for President Donald Trump’s speech on drug prices that’s expected to happen today, after some delays.
Trump is turning to the topic following a campaign-style event last night in Indiana.
Random reads
“Alexa, take on health care,” says Amazon.
Adios Airbnb: Madrid is making 95% of tourist apartments in its city center illegal.
More Airbnb news: NYC artist fined a record $185K over illegally renting apartment.
Cleveland’s pitchers have been pondering the existence of multiple Earths.
Meet the “deodorant challenge,” the latest harmful viral stunt.
Scots angry after a Trump golf resort bans Irn Bru, a popular soft drink.
A central bank is using cartoons to explain inflation, monetary policy.
Cool video, but maybe it’s just more subterfuge from the robots themselves:
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