Market Briefing For Thursday July 11

By Gene Inger

Thursday, July 11, 2024 4:23 AM EDT

Powell affirmed the dovish leanings of the Fed's leadership, actually now acknowledging policy is 'restrictive'. This keeps rate cut hopes clearly alive.

depositphotos

Thursday, we get the CPI and PCE which should allow them to go-forward in modifying policy, and interestingly just the psychological efforts help stocks.

In this regard, of course people feel inflationary pressures and recognize that inflation persists (and will), but at a slower pace, which is all we called-for. Go look at the trends since the massive Oil-war OPEC started inflation way back in the 1970's, and of course you see that prices 'never really' retreated much.

Of course, there were massive dislocations from the mortgage-fiascos early in this Century, and although we warned of that and called for the calamity, there was never a retreat based on the inherent raw costs of commodities or goods.

Market X-ray:

Treasury Auctions continue going well, today as well. I think today shows risks of shorting a dull market, never do it. Technicians calling for massive declines have been wrong all year and will likely continue, barring calamity, to be incorrect about the nature of this market.

This market is overdue for mega-cap retreat, but also overdue for smaller-cap rallies, some now showing signs of life. I don't see the euphoria associated for classic topping formations, although you could eventually correct the Indexes, with money flowing more into the small-cap overlooked plays. Maybe already.

VIX was actually up today, traders remain skeptical. And aside responses to CPI / PCE, there are few signs of euphoria at these record high levels. That's what we anticipated for July (at least so far), with smaller stocks with business models that work or are promising, just starting to catch solid bids...for some.

Conditions are tight 'as' stock Indexes make historic highers, as small stocks, so far, are not participating much. This should change with a flip in focus by a lot of money managers, the nuances of which are detectable in some stocks.

And if there was any development we might applaud (with cynical skepticism as far as how quickly it's embraced), it was a Senate proposal that would bar all stock and commodity trading (or hedging) by all Congressmen and the top folks at the White House. Should this extend to staffers too? And is this just a token gesture or reflect part of what many Americans view as long overdue.

When I did financial television we had rules (they still do) that reporters, and a slew of anchors, cannot cannot trade any stock they mention, or if they hold a stock, they needed to disclose that. And they are not politicians. Some firms it appears already go further and prohibit analysts from investing at all aside in a blind trust for-instance. At least one well-known TV pundit talks incessantly about (mostly overpriced) stocks, but he is prohibited from trading due to long ago rules violations (I believe an SEC trading ban).. ah ha.. 'a trust' appears.

In any case it seems like a no-brainer to ban or restrict Government officials in terms of stock trading, or especially in commodities where they know directly from 'ag' (or farmers) where things are heading, well before the rest of us. We will see how the proposal is modified / truncated before actually implemented.

We have been following AEHR Test Systems (AEHR), it bounced nicely after we detected 'signs of life', and noted they had not modified guidance. Now after a 'surprising' advance look at next weeks results (stating that beat guidance), it had a solid move up and it might be acceptable to hold if you have it, but with next week's 'heart' of the report already known, I wouldn't chase price higher. This applies to any who bought last week as well, when it was near 10. I think it will have trouble surpassing 18-20 for now, but always depends on 'sales'.

Two Things:

I viewed SoundHound's CEO explain something important to me: that is differentiating what 'Generative Chat Ai' (from SOUN/Soundify) versus Apple's (AAPL) CarPlay and/or Siri on your iPhone (if you use an iPhone). Of course he pointed out SOUN's 'lead in timing'. But more important was a very well-phrased remark almost as a footnote, by identifying how SOUN can work 'with' Apple in terms of pressing a button or saying a word to switch between them. His case is that they are more complementary (Apple primarily in their own eco-sphere) than competitive. Well, maybe Apple needs SoundHound?

I doubt it's so (but did suggest it to them long ago), also today, his clarification in noting SOUN will share revenues with carmakers is significant. So was his indirect hint for a further expansion in the drive-through restaurant field. Lastly he talked of revenue moving to a 100 million run-rate 'sooner' than he'd earlier projected (I didn't trust and gained confidence when they changed accounting firms), so if you put a 'multiple' on revenue (hard to estimate margins), well it's a reason some people (not necessarily me) anticipate this stock much higher. It may be such comments by the CEO that triggered today's upside scramble.

The second thing? Ah hah. Remember I suggested our long-held AMD would go back up to 200 plus and ultimately proved a factor in Ai more than some of the analysts thought? Well today's acquisition of a Finnish firm likely will just do that. The firm is the Ai software provider for major European companies, it has about 600 PhD's (hard to believe but that's what I read) and well, we hold.