Here are five things you need to know this morning:
Elephantine week: I looked up synonyms for “huge” this morning and went with elephantine to describe the importance of this week. We get the first rate decision of the year by the U.S. Federal Reserve on Wednesday and then jobs data out of the U.S. Friday. It is also a mammoth week for earnings, with Microsoft, Alphabet, Meta, Apple and Amazon all set to report. One analyst told me last week that Microsoft’s earnings are the most important in 30 years, not just for the company but the overall direction of the market. Indeed, the move to all-time highs in the U.S. have relied heavily on this group of tech stocks to get there. The equal-weight version of the S&P 500, which neutralizes the effect of the “magnificent seven,” is down slightly for 2024. Oil is in focus this morning, with WTI drifting slightly below US$78 per barrel. Tensions in the Middle East have taken oil prices up 10 per cent so far this year, but our energy stocks are not playing along. Oil producers on the TSX are barely up on the year.
Liquidation watch: I would be remiss if I didn’t mention the liquidation order for China Evergrande Group. That’s quite a tall order when you consider the property developer is the most indebted company in the world with US$300 billion in liabilities. Global investors seem to be taking it in stride considering the size and magnitude. There are a lot more questions than answers at this point. First, the decision was taken by courts in Hong Kong. Will it be confirmed by the courts in mainland China? Is this the first domino to fall in China’s property market? And then there is the impact to the broader economy and how much Chinese policy makers will be able to counteract it with stimulus. Shares of Evergrande plunged 20 per cent in Hong Kong before trading was suspended.
Save the date: Gildan Activewear announced that it will hold a shareholder meeting on May 28 as top investors call for ousted CEO Glenn Chamandy to be reinstated. Top shareholder Browning West has been leading the charge to request a special meeting to vote out the board and bring back Chamandy. They are far from the only ones, however. We already know Turtle Creek and Jarislowsky Fraser have expressed their discontent. Bloomberg is also reporting that Pzena Investment Management, which owns about 6.5 per cent of Gildan, is also in favour of a special meeting. The Gildan release reads like a statement from a board who knows their time may be up while also saying they tried to set up meeting with Browning West and the new CEO Vince Tyra. They say so far, Browning West has refused.
Vertical integration: Many know Leon’s and its brands for the furniture they sell for homes. Now, Leon’s is going to take a stab at building those homes. The furniture company which owns brands like Leon’s, The Bring and Appliance Canada announced plans this morning to turn one of its large plots of land into housing. Leon’s is planning to build 4,000 new homes in the outskirts of Toronto in a move that marks its first foray into real estate development. The backdrop is interesting. While brick and mortar struggle for relevance, retailers are becoming more creative with the land they occupy. Cities have been grappling with housing shortages and solutions like this could provide a blueprint for development going forward. We will have a chance to unpack all of this with Leon’s CEO Michael Walsh who will be on with me at 11:10 a.m. ET. Tune in!
SoFly: Shares of SoFi were surging in the premarket after posting its first profit and growing sales 35 per cent. The lending and online investing company went public with a SPAC during its heyday in 2021 and since then it has lost more than 65 per cent in value as it struggled with student-loan pauses in the U.S. and a short foray in to crypto. Now it is focused on scaling up and eventually becoming a top financial institution.