The US Treasury Is Running Out Of Cash - Deere (NYSE:DE)

Get ready for a whole lot of Fed talk this week ahead of the new FOMC minutes on Wednesday!

Prices as of 4 pm EST, 5/19/23

G7 members offered harsh criticism of Beijing at their three-day summit in Hiroshima.

They expressed serious concerns over the militarization of the South China Sea and its use of economic coercion.
They also called on Beijing to push Russia to withdraw its troops from Ukraine.
At the end of the meetings, President Biden said he expects China-US relations to “thaw”.
Not so fast though: in response, China immediately ordered its infrastructure companies to halt buying chips from US chipmaker Micron.

New FOMC minutes are scheduled to be released Wednesday afternoon.

We’ll get plenty of Fed talk before then with 6 officials (including 4 today) scheduled to speak over the coming days.
On Friday, Powell admitted that stresses in the banking sector could reduce the need for further interest rate hikes to fight inflation.
Also on Friday, one of the Fed’s biggest hawks—Neel Kashkari—conceded he was open to a pause/skip at June’s meeting.

Janet Yellen said the odds of the US being able to pay its bills by June 15 were “quite low”.

Goldman Sachs economists predict the Treasury’s cash levels will drop below the $30 billion minimum for meeting obligations by June 8 or 9.
As of Thursday, that cash balance sits at just $57.3 billion.
Meanwhile, the game of chicken between Democrats and Republicans continues, with the latter walking out of negotiations on Friday only to resume talks later that night.
After “productive” meetings between negotiators Sunday evening, President Biden and Speaker McCarthy are set for another talk today.

Bloomberg

Meta was just hit with the EU’s largest penalty ever.

Privacy regulators say Facebook unlawfully stored data about European users on US servers.
The company was fined $1.3 billion for sharing that information with the US.
Meta has also been ordered to stop sending such information to the US and delete data already sent within 6 months.
The US, however, is currently working on a trans-Atlantic agreement with the EU to allow data transfers that would nullify the order.

In September 2021, the Justice Department sued American Airlines and JetBlue over a 2020 partnership it argued was anti-competitive.

The alliance allowed the two airlines to operate flights together in the northeastern US.
On Friday, a judge ordered them to halt said alliance.
The companies are likely to appeal the decision as they evaluated their next steps.

The S&P 500 may be close to 52-week highs but traders are cautious ahead of a potential debt ceiling debacle.

Equity funds have seen net outflows for 7 consecutive months, including ~$24 billion in the first 3 weeks of May.
Investors, meanwhile, are seeking safety in long-dated Treasuries.
The options market is also reflecting worries over a debt ceiling impasse: traders are using VIX call options to bet stock volatility will rise at its fastest rate since March 2020.

Wall Street Journal

Money managers are very pessimistic about the prospects of a recession.

Non-commercial positions across all major oil contracts are at their most bearish since 2011 (chart below).
Hedge funds are especially bearish on diesel and gasoline–two essentials for the economy.
On the other hand, positioning among commercial traders is less alarming, with some even reducing hedges against a price drop.

@staunovo

Friday’s highlights:

John Deere DE: $9.65 EPS (vs. 8.58 expected) ✅, $17.39 billion in sales (vs. $14.89B expected) ✅.

Profits jumped 42% YoY on a 30% rise in revenue with increased sales across all 3 segments.
Supply chain constraints remain but are seeing improvement.
Raised its full-year earnings outlook to $9.25-9.5 billion from $8.75-9.25 billion.

Foot Locker FL: $0.70 EPS (vs. $0.81 expected) ❌, $1.93 billion in sales (vs $1.99B expected) ❌.

Missed estimates despite aggressive promotions to get through high inventory levels.
Earnings and sales dropped 49% and 11% YoY, respectively.
Anticipates full-year sales will decline more than previously expected and warned of compressing margins.

What we’re watching today:

False breakout: Noted bear Michael Wilson is warning the recent rally is not the start of a new bull market.
Bank leadership: Morgan Stanley CEO James Gorman will step down within the next year.
Bond deal rush: Issuance of IG bonds this month is double last year’s levels as US companies rush to borrow money ahead of a debt ceiling stand-off.
Targeting Twitter: Meta’s Instagram is preparing to release a text-based app to compete with Twitter.
Chip wars: Chinese chipmakers surged Monday after Beijing told manufacturers to stop using Micron chips.
Severe drought: Olive oil prices have reached a record high due to extreme shortages.
Debt ceiling: President Biden hinted Sunday at the possibility of using the 14th Amendment to bypass Congress and raise the debt ceiling.
Investor day: Analysts will seek more details about JPMorgan’s plans to integrate First Republic into its business at today’s investor day.

Monday: Fed talk - Bullard, Barkin, Bostic, Daly
Tuesday: Redbook, S&P Global flash PMIs, new home sales, Richmond Fed manufacturing, API crude oil stock change
Wednesday: FOMC minutes
Thursday: Initial jobless claims, GDP growth, pending home sales
Friday: Core PCE, personal income & spending, durable goods orders, Michigan consumer sentiment

Prices as of 4 pm EST, 5/19/23

BTC x NDQ: Bitcoin’s BTC/USD correlation with the Nasdaq 100 is near its lowest since November 2021.
Range bound: A lack of dominant bullish or bearish sentiment has Bitcoin trading at its tightest levels in months.
Tornado Cash: A hacker took control of the crypto mixer’s governance over the weekend through a malicious proposal.
Shots fired: President Biden took a shot at crypto traders in comments regarding concessions related to the debt ceiling.
Hotbit shuttered: Crypto exchange Hotbit halted operations and urged users to withdraw funds by June 21.

Space race: Blue Origin won a $7 billion NASA contract to develop an astronaut moon lander.
Billboards: Blackstone is close to acquiring a major stake in private billboard operator New Tradition Media.
Foodie IPO: Mediterranean restaurant chain Cava has filed for an IPO on the New York Stock Exchange.
Legal M&A: A $3.4 billion merger between Allen & Overy and Shearman & Sterling would create one of the largest law firms in the world.
Extension: VMWare has agreed to extend the deadline for its $61 billion acquisition by Broadcom.