Federal Budget Update:
- The White House and GOP nearing a two-year federal budget agreement.
- Proposed deal includes a 3% increase in defense spending next year.
- Renewable energy initiatives and fossil fuel projects would receive more support and expedited permitting.
- A $10 billion reduction from IRS’s recent budget enhancement of $80 billion proposed.
- No resolution yet on spending cap disagreement.
- Treasury’s cash reserve dwindled to December 2021 low of $49.5 billion this Wednesday.
- Q1 GDP figures reveal a 1.3% expansion, exceeding initial forecasts of 1.1%.
- Surge in consumer spending primarily drove the uptick, with a downturn in inventory investment.
- Adjusted GDP price index and core PCE prices read 4.2% and 5.0%, respectively.
Employment Data Revision:
- Recent data modifications show ~171,000 fewer initial jobless claims reported over the last three months than anticipated.
- Upcoming Friday jobs report may reveal stronger labor market, possibly pressuring the Fed to hike interest rates.
Wall Street Outlook:
- Savita Subramanian of BofA raised her S&P 500 index price target from 4,000 to 4,300, suggesting an upper limit of 4,600.
- Andrew Slimmon of Morgan Stanley concedes S&P could surpass his 4,200 aim and reach approximately 4,600 by year’s end.
- JPMorgan to reduce ~15% of the workforce (~1,000 employees) of its recently acquired entity, First Republic.
- Bank developing AI-driven investment advisory product, IndexGPT, using generative pre-trained transformer (GPT) models.
- IndexGPT will select securities “customized to customer needs”.
Mutual Funds & Hedge Funds:
- Mutual funds started Q1 underweight on many stocks that led this year’s surge.
- Cash being channeled into Big Tech as long-only funds approach their cash limits.
- Hedge funds raised allocations to tech stocks from 9.7% to 15.5% of overall single-stock net exposure since the year’s start.
- OPEC+ to discuss oil production quantities next week.
- Saudia Arabia contemplating production cuts, while Russia believes no immediate modifications required.
- Concerns about a potent USD and fears of sluggish demand growth, primarily from China, pose challenges for oil pricing.
- Marvell Technology ($MRVL) exceeded expectations with $0.31 EPS (vs. $0.29 expected) and $1.32 billion in sales (vs. $1.3B expected).
- Marvell’s stock jumped +16% in after-hours trading as it projected AI revenue to at least double this year and again in FY2024.
- Costco ($COST) fell short of expectations with $2.93 EPS (vs. $3.30 expected) and $53.65 billion in sales (vs. $54.66 billion expected).
- Despite a 4.8% global (3.5% in the US) rise in foot traffic, Costco’s average ticket fell 4.2% (3.5% in the US), and e-commerce sales dropped 10% YoY.
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