The Wall Street Breakfast Podcast: The Bits, The Techs, The Stock Leaders (NYSEARCA:SPY)

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Galianu Mihai

The stock market lead continues to narrow, the framework for a debt ceiling deal may be in place and the war of words between Carl Icahn and Bill Ackman heats up.

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Leading today’s news: Tech bulls undoubtedly cheered the market’s rally on Thursday. But the move put into stark relief the concern of Wall strategists — a lack of scope.

Thanks to NVDA (NVDA), the Nasdaq (COMP.IND) (NASDAQ:QQQ) jumped 1.7%, the S&P (SP500NYSEARCA: Spy) gained about 1%. But the Dow (DGI) (NYSEARCA: Slide) is slightly closed.

“The price action is a reminder that this year’s favorable equity market performance is still a handful of tech stocks,” Allianz Advisor Mohamed El-Erian tweeted.

DataTrek notes that the 7 US Big Tech names are now responsible for all of the S&P’s positive performance and then some — 10.5 percentage points versus the index’s 8.1 percent gain — year-to-date. Nevia alone is one-third of the S&P’s 2023 returns, adding 2.7 points.

Even with Big Tech’s strength, the S&P failed to top 4,200 after several attempts.

According to JPMorgan, the stock’s lead is the narrowest in the market since the 1990s, by some measures of underlying market breadth, the weakest ever. Equity was led higher by a narrower growth lead and a shift to safety. The AI ​​theme seems to be expanding, he adds.

Meanwhile, Due is performing poorly with very little exposure to AI.

DataTrek’s Nick Collas said this is a problem “because the Dow is the primary way Americans track the US stock market.”

“US Google has 7 times more searches for the ‘Dow Jones’ than the ‘S&P 500’ and twice the ‘stock market’ over the last 5 years.” Thus, the Dow is a direct conduit for the influence of wealth and economic confidence between Wall Street and Main Street.

Now the question is whether this narrow technological lead should be corrected in those names if it is too stretched.

“More than 6x sales, the S&P 500 Information Technology Index (NYSEARCA: XLK) continues to trade at multiples rarely seen before the current cycle,” Roth MKM added. “Even if we’re more generous and use forward earnings estimates, the 25x forward multiple is not far off the 28x peak seen of late. 2021 – More than a 30% slide for the sector ahead.

If they are chasing the sectors and stocks that have led the market this year, investors say they are taking on more risk than they realize.

In other market news:

There are reports that debt ceiling negotiators are deadlocked on an agreement framework.

Although there is nothing concrete, Bloomberg reported that there is an agreement to limit federal spending for two years in order to raise the debt limit.

Defense spending will be allowed to grow 3 percent next year, in line with President Joe Biden’s budget. There will also be a measure to upgrade the electric grid to accommodate renewable energy in return for speeding up pipeline permits. It would cut $10 billion from the $80 billion increase allocated to the IRS.

Reuters says the two sides are only $70 billion apart in discretionary spending.

Icahn Enterprises (Nasdaq: IEPIt fell another 14%, managed by activist investor Carl Icahn, who said there could be more downside for the stock amid Hindenburg’s short call and issues related to margin lending.

The Icahn holding company is down 36% this week and has fallen for the past five days. IEP shares fell 60% after the Hindenburg brief was released on May 2, wiping billions from Icahn’s net worth.

Ackman had a popular show with Icahn a decade ago on CNBC’s Ackman Herbalife Briefing. The billionaire now waded into the IEP fight on Twitter on Wednesday, writing that IEP still trades at a 50% premium to net asset value — even after falling this month.

“Its performance history and management structure do not justify a premium, rather, they suggest a significant discount to NAV is appropriate.” Ackman tweeted.

Icahn responded to Ackman in a statement to CNBC.

“Taking advice from Ackman on short selling is like taking advice from Napoleon or the German General Staff on how to invade Russia.”

After reports that Icahn plans a counterattack against the Hindenburg, Icahn Enterprises has drawn some comparisons to yesterday’s failures, including legal action or a buyback of IEP shares.

Ackman also suggested that Icahn’s margin lenders are “very concerned” about the current situation. Hindenburg, which is short stocks and IEP bonds, first raised concerns about margin lending in its report earlier this month, saying IEP’s NAV is “overvalued.”

Jonathan Weber – Cash Flow Club Invest Group Leader at Alpha Search – says IEP offers an incredibly high dividend yield. But if it’s preserved, that’s going to go with a giant dye.

Ulta Beauty ( ULTA ) has become the latest retailer to point the finger at organized shoplifting that has hampered its financial results.

While “downsizing,” as it’s known in the business, has always been a problem, Target ( TGT ) said it could hit $500 million in profitability this year. Dollar Tree ( DLTR ), Foot Locker ( FL ) and Home Depot ( HD ) have called out the problem.

Ulta shares fell in extended hours on sales concerns and as it adjusted operating margin guidance.

“We continue to see pressure as production volumes decline this quarter and we have updated our full-year guidance to reflect the persistence of this trend,” CEO Dave Kimbell said on the earnings call.

“While the decline is due to a number of factors, theft, particularly organized retail crime or ORC, is an increasingly serious challenge, especially as we have seen an increase in violence and abuse in these cases.

Kimbell said that while investing in safety is a problem that cannot be solved by retailers alone, it requires the efforts of manufacturing, law enforcement and legislators.

Earlier this week, I discussed this issue in detail with Consumer Editor Kevin Curran. You can watch the Wall Street Breakfast podcast wherever you find it.

Other market topics related to Seeking Alpha:

Ford is partnering with Tesla for electric charging

Costco fell after US sales were weaker than expected

The dollar index reached its highest level since mid-March

Oil slips as Russia cuts further OPEC+ cuts.

Tilre has collapsed following a switchable note offering

After an unexpected profit is recorded, the gap increases

JPMorgan Chase announces that 1,000 First Republic employees will not receive job offers

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