Market 06/13: PPI confirms disinflation trend

Favorable $22B 30Y T-Bond auction: demand rebounds

• High Yield: 4.403% (market yield: 4.418% | previous session: 4.635%)

  => Stop-through: 1.5 bps

  • Successful bid rate at High Yield: 8.49% (previous session: 9%)

• Bid-to-Cover: 2.49 (previous session: 2.41)

• Competitive awarded components:

  • Dealers: 13.7% (previous session: 15.36%)

  • Indirect bidders: 68.5% (previous session: 64.86%)

Yellen's statement: High wage growth does not threaten inflation

• Current labor market similar to pre-pandemic conditions

• US creating jobs at very fast pace despite slight rise in unemployment rate

• Labor market slightly less hot

PPI drops sharply: confirms disinflation trend

May PPI growth lower than expected — this ensures inflation will continue to decline sharply in the near term (as PPI is a leading indicator of CPI).

• Aggregate PPI for May increased: +2.2% Y/Y (< estimate: +2.5% | previous month: +2.3%)

• Core PPI: +2.3% Y/Y (< estimate: +2.5% | previous month: +2.5%)

Month-over-month, PPI surprises with largest M/M decline since October 2023

• PPI declines -0.25% M/M, much lower than +0.5% previous month and sharpest decline since October 2023

• Core PPI +0.05% M/M, lower than previous +0.5%

Sharp drop in energy prices drags down PPI - other indicators also negative or low growth.

Initial jobless claims last week highest in 10 months

• Initial jobless claims rose to 242,000 last week - highest since 08/2023, > estimates 225,000 and 229,000 previously

• Continued claims at 1.82 million - highest since January, > estimates 1.795 million & 1.79 million previously

California unemployment claims surge the most since Dec 2023

• Claims so far this year still lower than NSA (non-seasonally adjusted) data in summer 2023

• If summer layoffs become the post-pandemic norm, initial claims will have to rise even higher

Unemployment claims finally show an uptrend - like Challenger layoff cut data

Crypto Market: ETH supply on Coinbase exchange hits 8-year low

• 336,000 ETH worth 1.209 billion withdrawn from Coinbase in the past 48 hours - largest withdrawal in 2024

• ETH supply on exchange hits 8-year low

Q2 FY24 Earnings: Broadcom 10:1 stock split

• Revenue +43% Y/Y to 12.5 billion USD (> expected 480 million USD)

• Non-GAAP EPS: 10.96 USD (> expected 0.12 USD)

• FY24 Earnings Guidance:

  • Revenue ~51 billion USD

  • EBITDA margin ~61%

• Announces 10:1 stock split plan

Broadcom stock surges after better-than-expected earnings and stock split announcement.

Other news

1. Elon Musk posts on X that shareholders voted in favor of 2 key decisions:

   1. Re-approval of his $56 billion compensation package and moving Tesla's state of incorporation to Texas.

   2. Moving Tesla's headquarters to Texas.

• Tesla stock +6% in after-hours yesterday but cooled off this morning:

  

2. Boeing re-inspects quality of undelivered 787 Dreamliners…

   • … after discovering hundreds of bolts improperly installed on the fuselage.

3. GameStop's 2024 annual shareholder meeting hit by server issues due to high traffic

4. European Commission announces provisional tariffs up to over 38% on EVs imported from China.

• China calls on EU to change plan, warns of filing WTO lawsuit over bloc's new tariffs.

5. EU bond yields surge (bond spread vs German bonds)…

   • after MSCI refuses to add EU-issued common bonds to government bond index.

   • FYI: French bond yields also surge due to political issues after the European Parliament election.