Wall Street Shows No Fear Amid Debt Default On June 1st

Good morning.?May 15 is National Straw Hat Day, shout out to the greatest protagonist of all time...If only he was here to save America's Banking Crisis...

— Robert Baggetta

Stock data as of market close, cryptocurrency data as of 4:10 ET.?

Banking Situation:?Investors are losing confidence in financial stocks and have withdrawn $2.1 billion from financial stocks in the week through May 10, marking the largest outflow since May 2022, according to Bank of America Corp. strategists. The selloff, sparked by the collapse of Silicon Valley Bank and other lenders, has emboldened short sellers and turned regional banks into the hardest-hit corner of the stock market this year. The drubbing has cheapened the valuations of regional bank stocks, but some investors remain skeptical that they don't have further to fall.

We Show No Fear:?The Government: "Hey so we have to default on 'some' obligations on June 1st." Wall Street: "Ya we don't care...like in the slightest." Markets haven't moved an inch, volatility is going lower amid the approach towards the debt default of the US government.

"Make no mistake, the risk is real. Treasury Secretary Janet Yellen said Friday that the US will “have to default on some obligation” if Congress doesn’t raise the debt limit. It’s just equity investors don’t seem to care ." - Elina Popina, Yahoo FInance

ECONOMICS

Fed's Plan Going Forward

Higher probability surrounding the Fed's rate hike halting has come about as Inflation still remains above the Fed's target of 2%. As the risk for the average person goes up the Fed has finally achieved a decrease in inflation.

Inflation was reported to be around 5% last month with producer prices increasing and demand from consumer purchases decreasing as well. This is the first sign of deflation since the beginning of the rate hike campaign set not too long ago.

So What Are They Thinking?: With all the news on the credit crunch crisis, the regional bank crisis, and debt ceiling talks, the likely plan for the Fed will be a pause in late June this year. This isn't a certainty however as most investors are still holding cash and being cautious which has people thinking.

What Are Experts Saying?

Well, pretty much experts are all saying things along the lines of "It's gonna take a long time to get to the inflation target." There are long-term trends that will keep inflation elevated, but not necessarily at 5%. The Fed is expected to be slow in reacting by cutting rates. The market may be overestimating the possibility of short-term issues leading to significant cuts by the Fed. Four factors that could potentially contribute to inflation are: "demographics, de-globalization, de-carbonization, and growing deficits". It will likely be difficult for the Fed to completely reduce its influence on inflation. Therefore, a strong cutting cycle by the Fed is unlikely to occur.

What The Debt Ceiling Holds For Us Economy

The debt ceiling is pretty much how much they can 'borrow' to pay off their debts. Reaching that limit is a big concern given the fact that the loans they have could default by June 1. If they cannot reach an agreement, it could have disastrous effects on the economy. This debt ceiling has been used as a political weapon in the past, with the last stand-off being in 2011. The Republicans are calling for deep spending cuts as a tradeoff for raising the debt limit, despite significant risks to the economy. The country is dangerously close to a deadline that would trigger a default.

Crypto

Crypto Markets

Bitcoin and Ethereum experienced moderate losses over the past week, despite a small midweek growth spurt. Bitcoin fell 7.9% to $26,817 and has had to compete with a rising dollar, which has affected its value. Ethereum decreased 5.8% to $1,800, but the overall damage across the market was light. Several cryptocurrencies, including Polygon, Avalanche, Toncoin, and Internet Computer, dipped more than 8%.

Bitcoin’s use for Ordinals NFTs appears to be slowing down, with trading volume dropping by 50% on May 11. Bitcoin transaction fees hit a brief two-year high on Tuesday, reaching $31.14. However, this figure has since dropped below $10. In other news, American crypto exchange Bittrex filed for Chapter 11 bankruptcy, and Republican and Democrat lawmakers failed to find common ground over the extent to which new regulation is needed for digital assets. Finally, the U.S. Chamber of Commerce filed an amicus brief in support of Coinbase, criticizing the SEC's regulation-by-enforcement approach.

Binance Leaves Canada

Back in February, the Canadian Securities Administrators (CSA) gave cryptocurrency exchanges 30 days to register under them or leave immediately. Binance decided not to play by their rules and has ended up leaving the country as a whole. Firms that registered are responding to stricter rules which kinda defeats the whole purpose of cryptocurrency. Things like CSA approval before users buy or deposit stablecoins.

The exchange has faced increased inspection in North America due to concerns about money laundering and allowing users to bypass sanctions against Russian financial institutions. The Commodity Futures Trading Commission also charged Binance for providing unregistered crypto derivatives in March. In response to these issues, Binance has decided to withdraw from the Canadian marketplace as it is "no longer defensible" for the company. However, the company expressed assurance that it will return to Canada in the future and hopes to work with Canadian authorities to form a comprehensive regulatory framework.

A Riot

Riot Platforms, a bitcoin mining company, has filed a lawsuit against Rhodium Enterprises for $26 million in hosting fees and is requesting a Texas court to declare that it doesn't owe any credits connected to demand response programs to Rhodium. Riot alleges that Rhodium intentionally miscalculated the sum it was due for hosting services at Riot's Whinstone facilities and underpaid Whinstone for $26 million from 2021 to the first quarter of 2023.

Riot asserts that Rhodium's units were amassing power credits on their records for two years that it didn't have rights to. Rhodium asked Whinstone to authenticate that it was owed power credits unrelated to the expired contracts in October 2022, but Whinstone rejected the request and petitioned the court to declare that it doesn't owe any such credits to Rhodium. Riot verified the lawsuit but didn't provide a statement, whereas Rhodium refused to comment.

What This Week Holds...

Anticipated Earnings This Week

The most anticipated earnings releases scheduled for the week are Alibaba #BABA , Home Depot #HD , Walmart #WMT , Monday.com #MNDY , Target #TGT , Sea Limited #SE , Baidu #BIDU , Workhorse #WKHS , Azul #AZUL , and Nu Holdings #NU .

Key Economic Events

Monday, May 15

• NY Empire State Manufacturing Index (May)

Tuesday, May 16

• U.S. Retail Sales (Apr)
• Industrial Production (Apr)
• Business Inventories (Mar)
• Retail Inventories (Mar)
• NAHB Housing Market Index (May)
• Euro Area GDP Growth Rate - Second Estimate (Q1 2023)
• Japan GDP Growth Rate - Preliminary Estimate (Q1 2023)
• Canada Inflation Rate (Apr)

Wednesday, May 17

• Housing Starts (Apr)
• Building Permits (Apr)
• Euro Area Inflation Rate - Second Estimate (Apr)

Thursday, May 18

• Philadelphia Fed Manufacturing Index (May)
• Conference Board Leading Economic Index (Apr)
• Existing Home Sales (Apr)

Friday May 19

• 2023 G7 Summit in Hiroshima, Japan

CHIPS

Alibaba Group Holding Limited (BABA , $85.34):

Alibaba, a leading Chinese technology company, will release its Q4 financial results on Thursday, and its shares have already risen by 6% due to strong earnings results from JD.com and reports of its international shopping business planning an IPO in the United States. EPS estimates have undergone three upward revisions and 12 downward revisions over the past three months, while revenue estimates have only seen one upward revision and 16 downward revisions.

• Consensus EPS Estimates: $1.36
• Consensus Revenue Estimates: $30.19B
• Earnings Insight: The company has beaten EPS estimates in 6 of the past 8 quarters and revenue estimates in 3 of those reports.

Information via Yahoo Finance

Sea Limited (SE , $84.77):

The company's earnings beat consensus estimates in three of the trailing four quarters. The consensus mark for revenues is currently estimated at $3.28 billion, indicating a 26.61% growth from the year-ago quarter. Sea Limited's digital financial services business is expected to benefit from diversification and strong synergies with Shopee. However, the challenging macroeconomic environment, inflation, rising interest rates, and pandemic trends may affect the results.

• Of 32 analysts covering the stock, 22 have a Buy or Strong Buy rating, and nine others have Hold ratings.
• At a share price of around $83.50, the stock’s implied upside based on a median price target of $98.00 is 17.4%.
• At the high price target of $159.00, the upside potential is 90.4%.
• Analysts expect Sea to report first-quarter revenue of $3.03 billion, down 12.2% sequentially but 4.5% higher year over year.
• EPS are pegged at $0.73, down 27.5%, and far better than the year-ago loss per share of $0.80.
• For the full 2023 fiscal year, EPS is forecast at $3.31, well above last year’s loss per share of $1.69, on sales of $13.47 billion, up about 8.2% year over year.
• The stock trades at 25.2 times the expected 2023 EPS, 25.9 times estimated 2024 earnings of $3.23, and 16.5 times estimated 2025 earnings of $5.05 per share.

Information via 247wallst.com

Workhorse Group Inc. (WKHS , $0.9069):

WKHS had a tumultuous journey since its all-time low in late 2018, reaching an all-time high in just two years. However, the company faced a setback when it lost a huge contract to Oshkosh for providing delivery vehicles to the US Postal Service, causing the stock to plunge from $43.00 to $1.00. Recently, Workhorse launched a new electric delivery van, with regular production set to start in Q3, which could potentially boost the company's fortunes. While Workhorse's shares are among the riskiest, they also offer a high potential reward.

• Of seven analysts covering the stock, four have a Hold rating and the other three rate the shares at Buy.
• At a price of around $1.00 a share, the upside potential based on a median price target of $3.00 is 200%. At the high price target of $6.00, the upside potential is 500%.
• First-quarter revenue is forecast at $9.85 million, up 185.8% sequentially and up from $10 million in the year-ago quarter.
• Analysts expect Workhorse to post an adjusted loss per share for the quarter of $0.18, better than the $0.24 per-share loss in the prior quarter but worse than the loss per share of $0.15 a year ago.
• For the full year, the adjusted loss is forecast at $0.58 per share, better than the year-ago loss of $0.74 on sales of $89.24 million, up from just $5.02 million in 2022.
• Workhorse is not expected to post a profit until 2025.

Information via 247wallst.com

*This isn't Financial Advise, please do your own research*

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