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Summary

US stocks finished Wednesday’s extraordinarily choppy session modestly lower as the market digests new economic data. Today, first-quarter US GDP was revised down to show a 1.6% annualized contraction, as personal consumption came in weaker than previously reported. This follows a report earlier this week that showed consumer confidence in the US fell to the lowest level in nine years. On the other hand, Bitcoin (BTC) continues to fight to stay above the critical $20k level amid extreme volatility in crypto markets. 

 The Conference Board’s latest report showed the consumer confidence index for June fell to 98.7 from 103.2 in May and below expectations of 100. The report’s expectations index, which is based on consumers’ short-term outlook for income growth, the job market, and overall business conditions, fell to 66.4, its lowest reading since March 2013.

Lynn Franco, senior director of economic indicators at The Conference Board, said “Consumer’s grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices. Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year-end.” 

(Note: The working definition of a recession is two consecutive quarters of negative GDP growth, officially declared by the National Bureau of Economic Research (NBER)).

This follows consumer sentiment data from the University of Michigan released last week that showed sentiment fell to a record low of 50.2. The University of Michigan’s report had gained outsized investor attention after Federal Reserve Chair Jerome Powell mentioned the inflation expectations component of that data as “eye-catching” during testimony before Congress last weekGiven these and other recent reports, some Federal Reserve officials have flagged the risk that inflation expectations will become entrenched among consumers, making the case for the central bank to maintain its aggressive, hawkish posture in the near-term. Cleveland Fed President Loretta Mester said in remarks, “The fact that the salient prices of gasoline and food remain elevated suggests that there is some risk that longer-term inflation expectations of households and businesses will continue to rise.” She suggested she would back another 75 basis point interest rate hike in July if economic conditions look similar through the Fed’s meeting next month. Markets are currently pricing in a more than 80% probability that a 75 basis point rate hike will ultimately occur in July, according to CME Group data.

Highlights

  • Pinterest (PINS) announced that Google and PayPal executive Bill Ready will take the place of co-founder Ben Silbermann as CEO of the company. 
  • Short-seller Grizzly Research accused Chinese EV company NIO of fraudulent accounting and “using an unconsolidated related party to exaggerate revenue and profitability.” Here is NIO’s response refuting the report, calling it “ without merit and contains numerous errors, unsupported speculations and misleading conclusions and interpretations.”
  • Shares of Upstart (UPST) opened sharply lower after Morgan Stanley cut their price target to $19 from $88 previously. Morgan Stanley suggested the consumer lending platform would come under pressure due to the cyclical nature of the business.
  • Seems like a lot of negative news today, huh. In another report, analysts at Bank of America allege Bed Bath and Beyond (BBBY) are cutting A/C in order to save money. A representative for BBBY responded saying, “We’ve been contacted about this report, and to be clear, no Bed Bath & Beyond stores were directed to adjust their air conditioning and there have been no corporate policy changes in regard to utilities usage.”
  • Snapchat on Wednesday confirmed it’s debuting a new subscription product called Snapchat+, “a collection of exclusive, experimental, and pre-release features” for $3.99 monthly.
  • First Solar (FSLR) has decided against building a new factory in the US, citing uncertainties regarding trade policy and tax incentives.
  • The Indian government has issued an ultimatum to Twitter Inc to comply with the country’s Information Technology Rules after the social media platform’s repeated failures to act on the content take-down notices sent under the act

“I haven’t failed. I’ve just found 10,000 ways that won’t work.” – Thomas Edison