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Caution isn’t stopping Gordon Reid from finding opportunities. The President & Chief Investment Officer of Goodreid Investment Counsel Corp. is getting more defensive as markets contend with higher interest rates, inflation and geopolitical uncertainty—but he’s not taking his chips off the table.
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FROM AMBER’S DESK
Hakuna matata. Sometimes I think that warthog and lemur are the only sane creatures in this world.
Here are five things to know today
1.
Inflation worries weigh on stocks and bonds
Stocks are falling and bond yields are rising as energy prices raise persistent inflation concerns and the market now prices in a rate hike in October by the Federal Reserve. A week ago odds were just at 50%. Record gas prices and discussions about diesel export controls are making investors nervous. US President Donald Trump and his energy secretary have backed the idea of banning US diesel exports to deal with higher prices. Doing so could backfire. “If it restricts exports, global diesel prices could simply spike. And because US refiners would lose part of their export market, they could simply produce less — eventually tightening the supply of other fuels at home,” wrote Ipek Ozkardeskaya of Swissquote, “The chickens would come home to roost. Terrible idea.”
Investors will watch for the tone coming out of the meeting between US President Donald Trump and China’s President Xi Jinping. US Treasury Secretary Scott Bessent said the trade truce between the two nations will be extended for another two months.
Bonds are weaker this morning with the US 30-year yield hitting the highest level since 2004 and the 10-year yield the highest since 2007. One can’t help but notice how this is not showing up in the stock market. Sure, we’ve seen some selling pressure. But the S&P 500 is just 1% shy of a record high. Bond proxies, however, are feeling the pain. Utilities in the US have hit a 16-month low. “It’s an indirect AI power play, offering a 3.2% dividend yield,” wrote Larry McDonald of the Bear Traps Report, “We recommend investors start taking down S&P 500 index exposure and adding XLU utilities and XLP staples exposure.”
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“It’s extremely rare to see the (utility sector) -16% off all-time highs while the S&P 500 is at record highs” — larry mcdonald, bear traps report |
Source: Bear Traps Report
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2.
Blackberry reports beat and raise quarter
The software security company reported profit more than 60% higher than expected while sales increased 26%, also better than expected driven by its QNX business which hit a record. QNX is an operating system that runs primarily in cars but is also in medical devices and robotics. Blackberry is signaling the good times will continue, increasing its profit and sales forecast. The stock initially surged 5% in the pre-market but now is flat. Keep in mind it’s been on a great run, up 121% so far this year. The secure communications division was a laggard, with sales only growing 2% and the company trimming their forecast for that division.
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3.
MGM Resorts falls 9.5% as Barry Diller withdraws bid
The billionaire revoked his $48.30/share offer saying “We didn’t feel the mix was coming together in the way we had hoped
and have decided not to pursue taking the company private at this time.” Diller says he still believes in the future of MGM resorts and will continue to be a 27% owner of the company. This comes amidst a spate of casino consolidation with Caesar’s Entertainment shareholders agreeing to a takeover just yesterday. Diller attempted to buy MGM through People Inc which trades on the NASDAQ operates as a digital media and publishing company. Bloomberg earlier reported that Diller was unable to secure equity co-investors for the MGM deal.
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4.
Slate Grocery REIT suspends distribution amidst strategic review
The US grocery-anchored REIT, which operates as a landlord to some Krogers and Publix locations as well as other grocery stores, said they were suspending their distribution to enhance “financial and strategic flexibility” as the company reviews its options. The yield was reaching 8% amidst a sell off in the last few months. “We expect the units will be under some pressure as we do not believe a suspension was anticipated,” wrote RBC’s Pammi Bir in a note to clients. “Given the uncertainty surrounding the outcome of the review, distribution suspension, and moderate growth profile, we remain on the sidelines.”
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5.
Kinross falls 4% in pre-market on production warning
The gold miner is cutting its production forecast for this year and next year by 2-3% because of production issues at two mines. Kinross warned that “unprecedented winter weather” in Chile disrupted mining activity there while lower grades were recovered at its US mine. As a result of lower production and greater mine challenges, Kinross is warning that costs will also go up. Offsetting the announcement, Kinross announced it is increasing their return of free cash flow target to 50% from 40% largely through buybacks. “The stock has underperformed the large caps by ~11% ytd, so we believe some of this operational under-performance was priced in, however H2/26 and 2027 are below prior expectations as well, and we expect a negative share price reaction,” wrote Steven Green of TD.
Kinross on NYSE
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