😨 Trader Places Largest-Ever Bet On Fed Rate Cuts

Good morning Investor. "It is easy to get bogged down trying to find the optimal plan for change: the fastest way to lose weight, the best program to build muscle, the perfect idea for a side hustle. We are so focused on figuring out the best approach that we never get around to taking action. As Voltaire once wrote, ‘The best is the enemy of the good.'"

— James Clear, Atomic Habits

MARKET UPDATE

TODAY’S BIG HEADLINES

• Trader Places Largest-Ever Bet On Fed Cuts

• Costco’s new cash cow outperforming the market

• Inflation comes in hotter than expected

• Meta, OpenAI to release AI with reasoning

FINANCIAL EVENTS

Trader Places Largest-Ever Bet On Fed Rate Cuts😨

The Big Long: On a fateful Tuesday evening, the trading world was abuzz with news of a bond trader placing a bet that could make even the most seasoned gamblers blush. The trader effectively went long on December 2024 short-term interest rate futures, a bet hinging on the Fed slashing interest rates at least three times this year. This audacious move isn’t currently factored into the market and seems less probable given today’s CPI inflation data. It’s a plot twist that could give any Netflix drama a run for its money!

The Fine Print: This daring trader orchestrated a transaction involving a staggering 75,000 SOFR (Secured Overnight Financing Rate) futures contracts, all through a single block trade. The CME Group (CME) confirmed that this is indeed the largest transaction for this product ever recorded. The price executed on these December 2024 SOFR futures was 95.320.

Hold Your Horses: The futures’ price was set to skyrocket if the CPI inflation figures had come in lower than expected. However, the reality was a bitter pill to swallow as the figures didn’t play along, and the price of these futures is currently lounging at 95.12, a 0.22% decline on the news. The million-dollar question now is, will this trader’s bold move pay off by the end of the year? Only time will tell!

sources: (BusinessInsider), (Bloomberg)

COMMODITIES

Costco’s new cash cow outperforming the market🤑

The New Gold Rush: Back in September 2023, Costco (COST) embarked on a lucrative journey, selling 1oz (28g) bars of 24-karat gold exclusively online, with members allowed to buy two bars at a time. It was like opening a treasure chest online! Recently, a Wells Fargo analyst dropped a bombshell, revealing that Costco is now selling a whopping $200 million worth of gold to their customers every month. It’s like they’ve struck gold, literally!

The Midas Touch: This revelation shouldn’t raise eyebrows, given the global demand for gold is skyrocketing, with the BRICS nations among others, proposing a gold-backed currency. Moreover, gold as an asset class has been the star performer this year, with its value increasing by 14% year-to-date, reaching an all-time high of $2,354 per ounce. It’s like gold is running a marathon, leaving both the S&P 500 and the Nasdaq huffing and puffing in its dust.

Proof is in the Pudding: The demand for Costco’s gold bars is so high that they often “sell out in hours” online. It’s like a virtual gold rush! What’s more, the $200 million in monthly sales of gold bars contributes roughly 3% to the company’s total profits for an entire quarter! Considering that for the quarter ended February 2024, the company generated $57.33 billion in revenue, it’s safe to say that Costco’s golden venture is indeed a golden goose!

sources: (Invezz), (USAToday)

MACROECONOMICS

Inflation comes in hotter than expected🔥

Red Hot Numbers: On On a not-so-ordinary Wednesday morning, the US CPI Inflation data for March was unveiled. The numbers were spicier than a jalapeño, hinting at a future where interest rates might just take a long vacation in the “higher” territory. This revelation effectively played party pooper for bullish investors.

The Figures: Year-over-year, the CPI saw a 3.5% increase, beating the 3.4% forecast and the 3.2% figure from February. This indicates a slight but noticeable inflation uptick. On a month-over-month basis, March’s inflation came in at 0.4%, outperforming the 0.3% expectation. Meanwhile, the Core CPI, which includes the ever-fluctuating food and energy costs, was up 3.8% YoY, surpassing the 3.7% prediction.

Stock Market Whispers: The market reacted to this news like a toddler denied candy, with Bitcoin, the Nasdaq, and the S&P 500 all sulking with over a 1% decline at the time of writing. On the flip side, treasuries seemed to be on a sugar rush, with the 10-year treasury bill up by 0.19% for the day. As the Oracle of Omaha, Warren Buffett, once quipped, interest rates are to stocks what gravity is to an apple falling from a tree - they bring valuations down to earth! So, brace yourselves, folks. It’s going to be a bumpy ride!

sources: (coindesk), (CCN)

ARTIFICIAL INTELLIGENCE

Meta, OpenAI to release AI with reasoning capabilities🤖

Houston, We Have Progress: In a world where artificial intelligence is no longer just a buzzword, Meta (META) and OpenAI, two trailblazers in the AI landscape, have taken a significant stride towards the holy grail of AGI (Artificial General Intelligence). They’ve announced that their upcoming language model releases will be more than just parrots, they’ll be thinkers! “One Small Step For Man, One Giant Leap For Silicon-kind?”

The Ones And Zeros: The forthcoming models are not just going to regurgitate words based on patterns. No, sir! They’re designed to mull over problems, make logical deductions, and chalk out multi-step solutions. It’s like they’ve graduated from being mindless word prediction machines to thoughtful problem solvers.

OpenAI, for instance, believes that their existing models, especially the GPT-4, are quite adept at handling one-off tasks but still have a narrow scope. It’s like having a brilliant sprinter who’s yet to prove himself in a marathon.

The Grand Vision: The tech pioneers envision a future where “AI agents” will plan your entire vacation, from booking flights and hotels to arranging transportation. Travel agents, you might want to start looking for a plan B! The latest models from OpenAI and Meta are expected to hit the market in the coming weeks and months, likely bearing the monikers GPT-5 and Llama 3 respectively.

sources: (IndianExpress), (digit)

MORE NEWS

Additional market-moving events🌎

• The Eclipse-Effect: Internet traffic plunged by 40%–60% from the previous week in states like Arkansas and Ohio that were in the path of totality said Cloudflare, while Spotify said searches for the 1983 song “Total Eclipse of the Heart” rocketed up nearly 50% before Monday’s celestial event. (Yahoo)

• Data Centre Warfare: Intel, in a bid to reclaim market share from Nvidia in the data centre department, have announced their new chip named “Gaudi 3“. Impressively, Intel stated Gaudi 3 is over twice as power-efficient as and can run AI models one-and-a-half times faster than Nvidia’s H100 GPU. (CNBC)

• Factory Robots: Meat-packer companies including Tyson Foods have announced that they’ll be spending a combined $1 billion on automation to boost efficiency, given the labour issues they’ve faced. (WSJ)

• Copycat Payback: In an attempt to get back at Meta who copied TikTok by launching their “Reels” product on Instagram, TikTok have just informed their users of their new photo-sharing app that could rival Instagram dubbed “TikTok Notes“. (Forbes)

EARNINGS

This Week’s Earnings Calendar📅

• Constellation Brands (STZ) will report Thursday.

  • Analysts estimate $2.10B in revenue (+5.11% YoY)

  • $2.09 in earnings per share (+5.56% YoY).

• Fastenal Company (FAST) will report Thursday.

  • Analysts estimate $1.91B in revenue (+2.74% YoY)

  • $0.53 in earnings per share (+1.92% YoY).

• JPMorgan Chase (JPM) will report Friday.

  • Analysts estimate $42.05B in revenue (+6.90% YoY)

  • $4.21 in earnings per share (+2.68% YoY).

• Wells Fargo & Company (WFC) will report Friday.

  • Analysts estimate $20.19B in revenue (-2.60% YoY)

  • $1.09 in earnings per share (-11.38% YoY).

• The Progressive Corporation (PGR) will report Friday.

  • Analysts estimate $17.65B in revenue (+30.42% YoY)

  • $3.11 in earnings per share (+378.46% YoY).

• BlackRock (BLK) will report Friday.

  • Analysts estimate $4.66B in revenue (+9.83% YoY)

  • $9.25 in earnings per share (+16.65% YoY).

• Citigroup (C) will report Friday.

  • Analysts estimate $20.41B in revenue (-4.84% YoY)

  • $1.22 in earnings per share (-44.29% YoY).

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,295.00 SEK (📉-1.33%)

• Hims & Hers Health: $14.48 (📉-0.21%)

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