Wall Street Warns of Growing
Bearish Signals in US Stock Market

Citigroup strategist Chris Montagu warns that as investors shed a large
number of long futures positions, any further weakness in the US stock market
could exacerbate; the S&P 500 index has $52 billion of long positions, with
88% in a loss state, a risk identified by the strategist. Morgan Stanley
strategist Mislav Matejka suggests that the stock market underestimates the
impact of rising inflation pressures on Fed policy and bond yields; he also
warns against expecting optimistic corporate earnings seasons to drive the US
stock market higher, as much of the optimism has been digested after this year’s
record rally. Morgan Stanley strategist Michael Wilson similarly issues a
warning about the impact of higher interest rates on stock valuations.

Japanese Finance Minister’s Warning
Sends Yen to 34-Year Low

Japanese Finance Minister Suzuki Toshii hinted at possible intervention
in the forex market, causing the yen to plummet to a 34-year low. However, his
remarks lacked the severity of previous statements, leading to the yen hovering
around 154.35. The US retail sales data’s positive performance further
exacerbated the yen’s decline to 154.45, underscoring the challenges faced by
Japanese forex officials amidst international agreements mandating
market-driven exchange rates. Despite Suzuki’s reassurances, market speculation
persists over potential intervention, with the US economic resilience casting
doubt on future Fed rate cuts and exacerbating the yen’s weakening against the
dollar.

Tesla’s Senior Vice President Departs, Marking Second High-Level Exit in Eight Months for Musk

Drew Baglino, one of Tesla’s only four executives, responsible for engineering and technical development of batteries, motors, and energy products, has reportedly left the company after 18 years. Baglino, who has shared the stage with Musk at several events, including Tesla’s Investor Day a year ago, departs following the resignation of CFO Zachary Kirkhorn in August, another senior executive loss for Musk. Concerns about Tesla’s succession plan may intensify with Baglino’s departure, as Musk juggles leadership of six other companies, potentially diverting attention and resources away from Tesla.

Capital Gains Tax Hike Sparks Concerns of Brain Drain and Productivity Loss

Critics warn that the Liberal government’s proposed increase in capital gains tax for corporations and wealthier individuals, outlined in Tuesday’s budget, could have severe repercussions, potentially leading to a brain drain and harming productivity. Finance Minister Chrystia Freeland laid out plans for the inclusion rate on all annual capital gains for corporations and trusts — as well as capital gains above $250,000 for individuals — to rise to two-thirds from one half through amendments to the Income Tax Act, effective June 25, 2024.

“The very folks who drive productivity and innovation will leave the country and head to the U.S. to build their businesses there.”  ——JOHN RUFFOLO

Berkshire Hathaway Issues ¥263.3 Billion Bonds, Fuels Speculation of Buffett’s Return to Japanese Market

Buffett’s Berkshire Hathaway issued ¥263.3 billion in bonds, its largest issuance since 2019. The move, at a lower price than recent trading premiums, signals easing concerns over the Bank of Japan’s interest rate hike. Seen as a test of yen-denominated bond interest, it also fuels speculation of Buffett’s return to the Japanese stock market, where his past investments buoyed indices to record highs. The issuance, comprising various maturities, underscores Berkshire’s continued presence in the yen bond market, supporting its strategic investments in leading Japanese trading companies.

TikTok Defiant: Vows to Fight US Ban Amid National Security Concerns

TikTok vows to fight against ongoing attempts to ban the app in the US after the House of Representatives passed a bill requiring ByteDance to sell the platform within a year to avoid a nationwide ban. TikTok’s head of public policy criticized the legislation as a violation of First Amendment rights and pledged to continue the fight. The bill, expected to be signed into law by President Biden, cites national security concerns over data sharing with China and the potential for misinformation. TikTok argues against the ban, emphasizing its commitment to user privacy and free speech. Democratic Senator Mark Warner warns of TikTok’s potential use as a propaganda tool by China, while some Democrats advocate for stronger data privacy laws instead of a ban. The bill sets a nine-month deadline for ByteDance to divest US assets, extendable by three months if deemed necessary. TikTok faces bans in multiple countries, including India, with partial bans in other major markets like the European Union.

Tesla Cuts Prices in China and Germany

Tesla is back in the spotlight as it reduces prices in major overseas markets like China and Germany to address declining sales and intense price competition. CEO Elon Musk stated that Tesla’s prices must change frequently to meet demand. Reports indicate that Tesla has lowered the price of the Model 3 in China by approximately $2,000, with adjustments in other regions as well. Earlier, some models in the US market were also reduced by $2,000. The company announced its first global decline in car deliveries in nearly four years, resulting in layoffs of over 10%, affecting at least 14,000 jobs. There are reports suggesting that Musk is pushing for layoffs of up to 20%, potentially affecting over 20,000 people. Tesla is set to release its first-quarter financial results on Tuesday, with expected significant declines in operating profit and revenue. Tesla’s stock price has dropped by over 40% since the beginning of this year.