Before the bell: atmospheric nonsense on Wall Street

Not a conspiracy theorist, but a disciplined man as U.S. Treasury Secretary “sinks” long-term yields. MicroStrategy bets on mega-speculation.

Donald Trump seems unable to do any wrong in the eyes of American investors. Oddities are ignored, and constructive developments are consistently greeted with rallies. Over the past weeks, he has proposed one eccentric or conspiracy theorist after another for cabinet positions. Yet Wall Street barely flinched, even when a candidate for Attorney General faced allegations of misconduct. Yesterday, investors enthusiastically welcomed the nomination of Scott Bessent as Treasury Secretary. He advocates, God forbid, for reducing the U.S. budget deficit. Long-term U.S. Treasury yields promptly fell by 14 basis points to 4.26%. Financial orthodoxy indeed offers reassurance to those fearing a wave of inflation and rising interest rates. But what about the tariffs Trump threatened again yesterday? Turning to genuinely good news: there is hope for an end to escalating warfare. According to U.S. media, Israel and Hezbollah are close to agreeing on a ceasefire in Lebanon. Oil prices dropped over 3% to 69 dollars per barrel, while gold prices fell by more than 3%. Overall, Wall Street, like European indices, managed only modest gains of a few tenths of a percent. Among notable movers: HelloFresh (+8.3%), Kering (+5.5%), Remy Cointreau (+4.7%), and TUI (+3.7%). In Brussels, stocks such as Agfa-Gevaert (+9.5%), Jensen (+5.2%), Ontex (+4%), CFE (+3.1%), and real estate group QRF (+2.9%) also rose.

Asian markets began today’s trading session mostly unchanged. After markets closed yesterday, EVS (+3.3%) announced plans to use its net cash position to buy back shares. EVS is holding an investor day today. In the U.S., Dell and CrowdStrike are set to release their quarterly results after market close.

Speculation gone wild

Shares of U.S. software company MicroStrategy fell over 6% yesterday. Despite generating only 400 million euros in annual revenue, the company’s market capitalization had soared to more than 100 billion dollars. Founder Michael Saylor has been buying bitcoin since the COVID-19 pandemic began, with massive gains to show for it. As profits grew, the company aggressively increased its bitcoin purchases, raising funds through convertible bonds and new equity. MicroStrategy’s bitcoin holdings are now worth approximately 40 billion dollars. The stock price multiplied as the company raised funds well above the value of its bitcoin holdings, creating instant leverage gains. The glaring weakness? If bitcoin’s value plummets, this speculation could end disastrously. Saylor, however, believes this is impossible and plans to raise another 34 billion dollars to buy even more bitcoin.

A bargain stock?

Agfa-Gevaert gained 9.5% yesterday, following strong gains on Monday as well. Despite this, the company’s market value remains just 110 million euros—surprisingly low for a firm with 2023 revenue of 1.1 billion euros. The stock price has plummeted from around 4 euros to 60 cents in just a few years. While Agfa-Gevaert has successfully developed new digital products, declines in its analog products and the challenges of its now-divested graphic sector have offset these gains. Everything has its price, however. In recent days, bargain hunters have stepped in. The company’s most promising venture lies in membranes necessary for hydrogen production.

Did you know…

Mega-cap stocks like Tesla and Nvidia fell 4% yesterday, while the Russell 2000 index of smaller U.S. stocks gained more than 2%, reaching an all-time high?

This article was translated from Dutch and was originally published on Spaarvarkens.be.