US Market Rebound & Mirror BBAI's Surge?
I thought the worse of US market on Fri, 13 Dec 2024 & Mon, 16 Dec 2024 would be over, come Tuesday.
My optimism was largely unfulfilled.
On Tue, 17 Dec 2024, Dow Jones notched its longest losing streak in nearly 47 years.
US 3 Composite Indexes - Tue, 17 Dec 2024: (see above)
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The blue-chip index fell -0.61% (-267.58 points to 43,449.90), leading major US indexes lower. Last time the Dow declined 9 days in a row was in February 1978.
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Meanwhile, the S&P 500 shed -0.39% (-23.47 to 6,050.61).
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Tech-heavy Nasdaq Composite dropped -0.32%. (-64.83 to 20,109.06). Advancers outnumbered decliners by a 1.05-to-1 ratio.
According to Federated Hermes, VP and Hd of multi-asset, Damian McIntyre:
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He attributed past 2 days’ declines were most likely tied to traders reconsidering the path of borrowing costs ahead of the Fed’s interest-rate decision on Wednesday.
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Investors expect another quarter-point interest-rate cut.
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The bigger question is whether the resilience of the economy will lead the Fed to be more cautious about future easing in 2025.
Here are two US economic reports that were mentioned in my Friday post. (click here ! to read, Repost and share ok).
(1) S&P Flash Manufacture PMI Report.
On 16 Dec 2024, the S&P Global Flash US Manufacturing PMI slid to 48.3 (December) from 49.7 (November), coming in below economist’s 49.8 polled by Reuters.
This is a 3-month low, signaling a deterioration in business conditions within the goods-producing sector for a 6th successive month.
And the rate of deterioration accelerating to the fastest since September.
In addition, a gauge of factory production hit its lowest level since May 2020, ahead of the prospect of higher tariffs increasing the cost of imported raw materials next year.
**Note: A PMI Flash value above 50 signals expansion in the manufacturing sector compared to the previous month, while a reading below 50 indicates contraction.
(2) US Retail Sales.
On 17 Dec 2024, US retail sales report for November 2024 was released, while the FOMC met on the first of a 2-day meeting. (see above)
Data showed retail sales rising faster at 0.7% vs analysts’ expectations of 0.6% vs upwards revised October numbers of 0.5%.
This reflect continued resilience in American consumers and that US holiday shopping season is off to a strong start.
$Wells Fargo(WFC)$, Senior economist, Tim Quinlan has cautioned :
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Though November 2024 data points to a "decent" holiday season for retailers.
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There are early warnings that consumer spending could slow heading into 2025.
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In view of "potential fallout from new tariffs at some point next year “due to new price pressure.
[After thots] I didn't pay much attention to these two reports until today.
If I had, I might have understood why US stock market fell on Monday and Tuesday. Lesson learnt !
Instead, I focused on $BigBear.ai Holdings(BBAI)$ which I had first mention in my Sat, 14 Dec 2024 post. (click here ! to read, Repost to share ok)
When I shared the post, BBAI’s Fri, 13 Dec 2024 closing price was $2.52. (see above)
On Tue, 17 Dec 2024, it closed at $3.40.
In a short span of 2 days, the stock has gained +34.92%, not too shabby.
Having said that, I also want to share some bad news so that those who are interested in BBAI can be prepared for potential problems.
Below is the scathing Iceberg Reseach (IR) report. It is a concise post.
After reading it is reminiscent of a Hindenburg Research report but short on details.
BBAI has been a poster child of the ChatGPT-driven AI hype that swept the markets at the start of 2023.
Any company automatically turned into an AI-champion as long as it had AI in its ticker.
In reality, BBAI was a roll up of legacy IT consulting firms with little AI expertise.
The company’s financial performance reflects low growth and escalating losses.
As of Q3 2024:
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BBAI’s accumulated deficit was $462 million.
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Operating cash flow has been negative, over the last few years. (see below)
IR expects dominant stakeholder AE Industrial Partners (AEIP) would exit once AI-related excitement wanes.
In fact, this is exactly what is happening, of late.
So far, the private equity firm has sold over 85 million BBAI shares, with 61 million shares sold in the past 2 months.
AEIP’s aggressive sales have effectively reduced its ownership from 75% (Q1 2024) to 32.4% as of December 13. (see below)
IR expects selling pressure to persist.
This is because AEIP still owns about 67% of BBAI's shares (held via Pangiam Ultimate Holdings LLC.), and they are locked up until March 2025.
The remaining 30% of shares can be sold whenever AEIP wants.
If AEIP sells more shares, it will be harder for BBAI's stock price to rise quickly due to short squeezes.
My viewpoints : (mine only)
If you have read my BBAI post, you would already know the AI projects BBAI have implemented and are working on at the moment.
The work-in-progress projects are mainly US government’s, in particular US Defense department.
If BBAI is really short on talents, would they be able to secure US government open tender projects that are at the forefront of AI technology ?
Lastly, why would $Palantir Technologies Inc.(PLTR)$ jeopardizes the relationship it has foster & build with US Defense department (over time) by collaborating with BBAI that is not up to scratch ?
At times like these, when a stock in your holdings is subjected to fake news, how would you react ?.
Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks.
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Do you think US market will turn the corner today - before or after Mr Powell’s conference ?
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Do you think market will ignore IR’s report and continue to pump up BBAI price ?
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