Traders Market Weekly: Climbing The Wall of Worry

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    Capital One Financial stock slides after Walmart sues to end credit card pact

    Capital One Financial (NYSE:COF) stock dropped 3.3% in Monday premarket trading after Walmart (NYSE:WMT) filed a lawsuit seeking to end the companies’ credit card contract.

    Capital One (COF) won the Walmart card deal in 2018, after the retailer decided to not renew its credit card deal with Synchrony Financial (SYF).

    The suit, filed last week in the Southern District of New York, alleges that Capital One (COF) didn’t live up to certain terms of their pact. Specifically, the giant retailer accused the credit card issuer of falling short on its customer care practices, such as delivering replacement cards to customers within five days and promptly posting transaction and payment information to customers’ accounts, according to media reports.

    As of Dec. 31, 2022, the card program consisted of $8.3B in ending outstanding loan balances and the allowance for credit losses related to the card program portfolio was ~$314M. For 2022, the card program produced ~$214M in net income, Capital One said in a filing.

    If the court allows Walmart (WMT) to end the card program early, Capital One (COF) expects that resulting transfer of its card portfolio to a new issuer to occur no earlier than January 2025.

    The credit card partnership agreement requires that Walmart (WMT) or one or more new card issuers pay to Capital One (COF) a purchase price that is equal to par for the private label accounts and equal to fair market value for the co-branded accounts, Capital One said. COF is entitled to retain any premium above 1.5% of the par value of the co-branded accounts upon sale, it added.


    Pioneer Natural Resources (PXD) shares increased by more than 6% after Exxon Mobil (NYSE:XOM) held preliminary talks about acquiring the company.

    Exxon Mobil in Talks to Buy Shale Giant Pioneer Natural Resources


    Arrival (ARVL) stock jumped more than 22% after the company announced a merger with Kensington Capital Acquisition Corp. V for a pro forma enterprise value of $524 million.

    “This transaction provides a potentially significant capital infusion as well as additional support in bringing our XL Van to market,” said Arrival CEO Igor Torgov. “We are excited to collaborate with Kensington to meet our production targets as we aim to commercialise our XL Van by the end of 2024.”


    Scotts Miracle-Gro (SMG) shares were higher 5% as it expects to achieve a net leverage ratio “comfortably below” the credit facility covenant of 6.5x for 2Q2023.


    Apple (AAPL) shares slipped more than 2% as the company’s sales performed worse than the overall PC market in the first quarter, dropping more than 40% year-over-year.


    Tupperware Brands (TUP) fell more than 45% after revealing the engagement of financial advisors to assess the company’s situation and ability to continue operations.


    Baidu (BIDU) dropped about 5% after suing Apple (AAPL) and other app developers over fake versions of its Ernie bot programme that were available on Apple’s app store.


    Soundhound AI stock jumps amid reports of Alibaba chatbot rollout

    Shares of Soundhound AI (NASDAQ:SOUN) shot up 11% midday Monday amid reports that Chinese e-commerce giant Alibaba (BABA) plans to launch its own AI-powered chatbot later this month.

    The developer of AI-powered communication technology didn’t appear to release any news or make any SEC filings on Monday.

    Based in Santa Clara, Calif., SoundHound went public in April following a merger with SPAC Archimedes Tech. The stock hit a 52-week high of $18.14 on May 3 of last year and a 52-week low of $0.93 on Dec. 22.


    Micron Technology jumps as Samsung memory cut is seen as ‘last piece’ of recovery

    Micron Technology (NASDAQ:MU) shares rose more than 7.5% in early trading on Monday as Samsung’s (OTCPK:SSNLF) announcement that it would cut memory production by a significant amount is seen as the “last piece” of the recovery for the dynamic random access memory market, investment firm Citi said.

    Analyst Christopher Danely, who reiterated his buy rating and per-share price target of $75 on Micron (MU) in light of the announcement, added the announcement should have wide ranging impacts, considering Samsung (OTCPK:SSNLF) is 50% of the DRAM market.

    “We believe the cuts to both capex and production by the three DRAM providers [Samsung, Micron and Hynix] should help ensure a DRAM recovery beginning in the [second-half of 2023], especially considering PC demand (roughly 10% of DRAM) appears to have stabilized and we expect both data center demand (roughly 40% of DRAM) and handset demand (roughly 30% of DRAM) to both stabilize in [the second-half of 2023],” Danely wrote in an investor note.

    Danley also noted that even though Samsung (OTCPK:SSNLF) did not give specifics on how much DRAM supply it would cut, he still expects demand will grow 8% this year and 21% in 2024.


    Lunchtime Market Snapshot
    Dow 33489.33 +4.13 (0.01%)
    Nasdaq 12006.58 -81.37 (-0.67%)
    SP 500 4089.27 -17.02 (-0.41%)

    10-yr Note -1/32 3.422

    NYSE Adv 1399 Dec 1472 Vol 231 mln
    Nasdaq Adv 1908 Dec 2354 Vol 2.0 bln

    Strong: Energy, Materials, Industrials
    Weak: Information Technology, Communication Services, Utilities, Consumer Discretionary, Consumer Staples

    Moving the Market

    — Reacting to Friday’s March Employment Report, which showed a slight decrease in the unemployment rate
    — Below-average volume as major European markets (and Hong Kong’s Hang Seng) remain closed for the Easter holiday
    — Treasury yields lifting off overnight lows
    — Weakness in mega cap stocks weighing down index performance


    New Bank of Japan Governor Ueda held his inaugural news conference today, pledging to maintain the current policy stance while former Bank of Japan official Nakaso said that the central bank will modify or abolish yield curve control when the right time comes.

    Helmholtz Watson

    Macron sparks outrage, infuriates China hawks over Taiwan comments

    London: French President Emmanuel Macron has sparked outrage after saying Europe should reduce its dependency on the United States and avoid getting involved in any conflict between Washington and Beijing over Taiwan.

    Macron made the comments in an interview with Politico on-board COTAM Unité, France’s Air Force One, while travelling home to Paris after a three-day state visit to Beijing where he struck a range of business deals for French companies.

    On the visit, Macron was given a lavish reception by President Xi Jinping, who is intent on fracturing the trans-Atlantic alliance.

    Macron’s interview was conducted before China’s military conducted three days of drills around Taiwan simulating precision strikes, in retaliation for Taiwan President Tsai Ing-wen’s visit to the United States.

    On the third and final scheduled day of operations, China carried out aerial and naval blockade drills around Taiwan, while a US Navy destroyer passed through waters claimed by Beijing in the South China Sea.

    Xi wants to reunify democratic Taiwan with the mainland and has threatened to use military force to achieve his goal.

    In a disclaimer, Politico said some of the French leader’s comments were redacted by his office under an agreement struck to obtain the interview. In them, Macron spoke “even more frankly” on his views about Taiwan, Politico said.

    Macron said he wanted Europe to adopt “strategic autonomy” from the United States, a concept which is backed by Beijing.

    He warned against Europe becoming “America’s followers”.

    “If the tensions between the two superpowers heat up … we won’t have the time nor the resources to finance our strategic autonomy and we will become vassals,” Macron told the travelling journalists.

    “The paradox would be that, overcome with panic, we believe we are just America’s followers.

    “The question Europeans need to answer … is it in our interest to accelerate [a crisis] on Taiwan? No. The worse thing would be to think that we Europeans must become followers on this topic and take our cue from the US agenda and a Chinese overreaction.

    “Europeans cannot resolve the crisis in Ukraine; how can we credibly say on Taiwan, ‘Watch out, if you do something wrong we will be there’? If you really want to increase tensions that’s the way to do it,” he said.

    France has long held out an ambivalence for US power and influence over Europe. France, for example, forced the withdrawal of NATO headquarters from Paris in 1967 over fears of US political sway over the continent. Macron has also supported the creation of a European army that could function in place of NATO.

    Politico said that Macron conducted the interview in the stateroom of his A330 aircraft wearing a hoodie with the words “French Tech” written across the front.

    A short time later, he released on his social media channels a video of his visit to China that showed him being swarmed by Chinese citizens who would have been carefully selected by the CCP.

    That carefully engineered interaction is in stark contrast to scenes at home following weeks of strikes and fires in Paris, following major protests over his plan to raise the pension age.

    Macron’s comments on Taiwan are more conciliatory to Beijing than those made by EU Commission boss Ursula von der Leyen, who has taken a tougher stance on China, and whom Macron invited to accompany him on parts of his visit to Beijing.

    The trio held a meeting in which Xi gave talking points on all topics except for two. He went off script when Ukraine and Taiwan were raised, according to a source in the room.

    After the meeting, von der Leyen told reporters that security in the Taiwan Strait was of “paramount importance” and that the threat of force to change the status quo was “unacceptable”.

    Macron’s comments sparked widespread dismay and anger across Europe and in the United States, where Republican senator Marco Rubio urged European countries to clarify “pretty quickly” if Macron spoke for Europe or France alone.

    “We need to ask Europe does he speak for them, because we’re pretty heavily involved in Ukraine right now, we’re spending a lot of our taxpayer money on a European war,” he said in a video statement.

    “And I’ve supported that because I think that’s in the national interest to the United States to be allies to our allies.

    “But if our allies’ position, if in fact Macron speaks for all of Europe, and their position now is they’re not going to pick sides between the US and China over Taiwan, maybe we shouldn’t be picking sides either?

    “Maybe we should say we’re going to be focusing on Taiwan and the threats that China poses and you guys handle Ukraine on your own?”

    German foreign policy scholar and China-watcher Ulrich Speck said Macron’s comments vindicated Australia’s decision to tear up its contract for French-made submarines in favour of the AUKUS pact.

    Malcolm Davis from the Australian Strategic Policy Institute described Macron’s comments as “ill-conceived at best, and poorly timed” given the situation in Ukraine, and the need for Europe and the US to work together to support Kyiv.

    “He’s dramatically weakened trans-Atlantic unity in the face of a determined challenge from Moscow and Beijing, by promoting his concept strategic autonomy for Europe (with France leading of course – I wonder what the Germans must think?) and in doing so weakened NATO.”

    Davis said Macron has “given Xi Jinping and the CCP a huge boost to their perception that western liberal democracies are weak and divided. This has occurred in a period of intensifying competition between autocracies and liberal democracies over which form of governance – authoritarianism vs democracy – will ultimately become dominant in the 21st century.”

    Bruno Tertrais, deputy director at France’s leading defence think tank Foundation for Strategic Research, said Macron was wrong on Taiwan.

    “The best way to avoid a war over Taiwan is deterrence,” he said.

    Helmholtz Watson

    Weakness in mega cap stocks pulling down SPX NDX:

    Vanguard Mega Cap Growth ETF $MGK -0.8%
    Apple $AAPL 161.44, -3.21, -2.0%
    Alphabet $GOOG 106.18, -2.72, -2.5%)
    Tesla $TSLA 182.37, -2.70, -1.5%

    TSLA’s decline is related to reports that the company cut prices for its vehicles in the U.S. for the fifth time since January.

    NVIDIA (NVDA 275.10, +4.74, +1.8%), benefitting from renewed buying interest in semiconductor-related names.


    Wholesale inventories rose 0.1% in February (consensus +0.2%) following a revised 0.6% decline in January (from -0.4%).

    Employment trends for March 1 16.24 versus 116.75 (revised) last month
    prior month was revised lower from 118.29 to 116.75
    The level is the lowest since October 2021

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