Daily Rundown: June 2

SARA SILVERSTEIN: Good morning, subscribers. I'm here with Sarge Stephen Guilfoyle to get his take as we begin June with some of the market's biggest questions still on the table. Last night, the Senate narrowly passed the debt ceiling deal with the bill now headed for the president's desk. How big of a hangover is this for the markets as we look to close out the week, Sarge?

STEPHEN GUILFOYLE: Well, it helps push us along, a little bit of a relief rally. I think that's largely algorithmic. I don't think human traders were too surprised by it. But there are keyword reading algorithms that feed on this sort of thing. So that's why we're getting this morning's pop.

I really like that the NASDAQ composite started above 13,000, that the S&P 500 started above 4,200, and that we push beyond those levels this morning. This afternoon there probably will be a little bit of profit taking. It will be key going into next week to see that those two levels are held.

SARA SILVERSTEIN: Right. And this morning's jobs report came in far stronger than expected, with the economy adding 339,000 non-farm payrolls in May. Unemployment rate ticked up to 3.7%. And paired with the other data this week, what does this mean for the Fed? I know you've been among those expecting the central bank to pause its rate hikes in June.

STEPHEN GUILFOYLE: Well, the Fed is going to pause, not pause, skip. They're going to skip on interest rates this month because they've signaled so. Harker has told us that twice in a row. Jefferson, who is probably going to be the Vice Chair, has told us that. And Chair Powell told us that about two weeks ago.

So they're setting us up for a skip. They wouldn't have done this otherwise. They flipped what they saw in the Fed futures market. So that there's a majority chance of no hike on June 14. All right, I'll note this unemployment report we got this morning. I think it kind of supports taking a little bit of a break because it's a lot weaker than you think, all right?

We did get the-- I got all my papers printed out here-- 339,000 non-farm payrolls plus an upward revision of 41,000 to the prior month. But if you go over to the household data, the household survey, you actually saw a job reduction, not a creation, job reduction of 310,000. So there's a difference between the two surveys of 649,000 positions, which implies either one of them is wrong or there's a lot of folks who are feeling pressed enough to take on two jobs.

The unemployment rate rising from 3.4% to 3.7% and the underemployment rate-- let me see what that one went to. That one from 6.6% to 6.7%, suggests that there is a little bit of stress. We also saw higher unemployment rates for men, for women, for Caucasians, for African-Americans, for Asians, and a flat report for Hispanic or Latino ethnicities. So that's not so hot.

Across educational demographics, unemployment's on the way up for those with less than a high school diploma and those with more than a college degree at the same time. That's kind of a terrible sign. You also saw wage growth. Wage growth came in below expectations, as did the average weekly hours. Average weekly hours, demand for actual labor, is down to 34.3 hours a week from 34.6 hours a year ago and 34.4 hours just a month ago.

Just so folks at home who don't follow these things all the time know, 34.5, 34.6 is about normal. So we are pretty well below normal on what employers are asking of their employees right now in terms of weekly hours. I think this report generally reflects a poor demand for labor at this moment and supports the idea of taking a break on monetary policy.

SARA SILVERSTEIN: That's great perspective. Is there any other catalyst on the horizon that we should be paying closer attention to?

STEPHEN GUILFOYLE: We're going into a very light week. That's why it's so important that we hang on to those levels I mentioned on the NASDAQ composite and the S&P 500. Next week we have the whole Apple dog and pony show, their developers conference. And other than that, the macro is rather light. And the earnings are rather light.

So until you get to the second week, to the week after next week, which we had the CPI come out on Tuesday, and the Fed makes their decision on Wednesday, that week we'll be loaded for bear. But next week, you're probably going to have to try to get by on some technical trading more than you would, say, on fundamentals or on macro.

SARA SILVERSTEIN: Great. And you've been heavily focused on AI in your latest columns for Real Money. Nvidia has been the shining star. But what other companies are you looking at in AI?

STEPHEN GUILFOYLE: Well, Nvidia has been my shining star. That's for sure. And so has AMD. I mean, even though AMD is really a distant second place player, Nvidia dominates the space, AMD is coming out with a new chip that should compete with the H100 fairly soon. I would expect them to retain the number one and number two spots in that space as far as providing the hardware, the brains, for artificial intelligence.

I'm not in Marvell Technology. I believe Chris is for this portfolio. And they, in my opinion, are a number three candidate to take a leadership role in that space. As far as the high, let's say, the mega-cap names that have a lot of cash on hand that have to spend now on artificial intelligence, they're kind of rising. As the sea is rising, it's raising all boats connected to AI.

But I'm not so sure about that. I'm into Microsoft. I love Microsoft. But I think as far as a lot of these firms go that have to provide the cloud to corporate customers, they may be able to pass on these costs. They may not be able to pass on these costs. These chips are expensive. And I believe it's going to turn out to be an increased capital expenditure for these kind of firms. It may not be the boon for Amazon, for Meta, for some of these other firms, for Google, that we think it might be.

I think it's more a hardware play right now than a software play.

SARA SILVERSTEIN: And let's end on the name members ask the most about. ChargePoint is lower this morning after issuing disappointing sales guidance for the current quarter. What are your thoughts on ChargePoint and the EV space in total?

STEPHEN GUILFOYLE: Well, I took a good look at ChargePoint because I know Chris has it in the portfolio. And they lost $0.23 a share. But they were growing up enough to report it GAAP style, not adjusted of any kind. So that was in line with expectations. The revenue number was [INAUDIBLE], growth of 59%. They beat by over a million there. The guide was weak. The guide on second quarter revenue was for 148 to 158 million. The street was looking for 167 million. Free cash flow was weak, negative 106.5 million. Cost of revenue increased 59.9%. Gross profit margins, 23.5%. But that was up from 14.8%.

So there is reason to believe here. Total operating expenses were up 8.4% I can see why you would want to invest in this name. The balance sheet, let's see. You got a current ratio of 2.37, a quick ratio of 1.9. So the current situation is rather strong. They have non-current debt of about $295 million. But they have cash on hand with $313 million. So the balance sheet you can say is in good shape.

So this is a firm that's growing revenues. It's growing sales. The balance sheet is fundamentally in good shape. I think it's under $10 right now. I think Chris is on to something here. And I think I wouldn't mind putting it in the under $10 [INAUDIBLE] portfolio. This firm has a nice future ahead of it I believe.

SARA SILVERSTEIN: Thank you, Sarge. That'll do it for today's rundown and for another week. Check by Monday for our preview of Apple's Worldwide Developers Conference and have a great weekend.