>>> NIKE beats by $0.15, misses on revs, gross margin increased 110 bps, North A

NIKE beats by $0.15, misses on revs, gross margin increased 110 bps, North America revenue decreased 1% (94.19 +0.13)
  • Reports Q4 (May) earnings of $0.99 per share, excluding non-recurring items, $0.15 better than the FactSet Consensus of $0.84; revenues fell 1.6% year/year to $12.6 bln vs the $12.86 bln FactSet Consensus.
  • Revenues for the NIKE Brand were $12.1 billion, down 1 percent on a reported basis and up 1 percent on a currency-neutral basis, with currency-neutral growth in Greater China, APLA and EMEA, partially offset by a decline in North America.
  • North America revenue down 1%.
  • Greater China revenue up 7% in constant currency.
  • Wholesale revenues for the fourth quarter were $7.1 billion, up 5 percent on a reported basis and up 8 percent on a currency-neutral basis.
  • Gross margin for the fourth quarter increased 110 basis points to 44.7 percent.
  • Inventories for NIKE, Inc. were $7.5 billion, down 11 percent compared to the prior year, reflecting a decrease in units.

>>> US Close Dow +0.09% S&P +0.09% Nasdaq +0.30% Russell +1.00%

Closing Stock Market Summary
It was a somewhat lackluster session in the stock market. The S&P 500 (+0.1%), Dow Jones Industrial Average (+0.1%), and Nasdaq Composite (+0.3%) settled slightly higher than yesterday while the Russell 2000 outperformed, settling 1.0% higher.

Market breadth was positive, but there wasn't a lot of conviction on either side of the tape. Advancers had a roughly 3-to-2 lead over decliners at the NYSE and at the Nasdaq.

The lack of conviction today stemmed from a wait-and-see stance in front of the May Personal Income and Spending report tomorrow at 8:30 ET, which features the Fed's preferred inflation gauges in the form PCE and core-PCE price indexes.

Ongoing buying interest in the mega cap space played an integral role in index-level performance. Shares of Amazon.com (AMZN 197.85, +4.24, +2.2%) moved further into record territory after crossing $2 trillion in market cap. The Vanguard Mega Cap Growth ETF (MGK) logged a 0.3% gain.

Meanwhile, semiconductor-related names acted as a drag on the broader market after Micron's (MU 132.26, -10.13, -7.1%) earnings report. NVIDIA (NVDA 123.99, -2.41, -1.9%) was an influential standout from the space.

Some bank stocks traded higher the Fed's stress test showed that the 31 large banks subject to the test this year have sufficient capital. The SPDR S&P Bank ETF (KBE) closed 1.0% higher and the SPDR S&P Regional Banking ETF (KRE) showed a 1.1% gain.

Still, the S&P 500 financial sector fell 0.3% today.

Treasury yields settled lower in response to this morning's data and a stellar $44 billion 7-yr note sale. The slate of economic releases today included an upward revision to Q1 GDP, the highest level of continuing jobless claims since November 2021, and better-than-expected durable orders growth for May.

The 10-yr note yield, at 4.33% shortly before 8:30 ET, settled at 4.29%, which is three basis points lower than yesterday. The 2-yr note yield, at 4.76% before 8:30 ET, settled at 4.72%.
  • Nasdaq Composite: +19.0% YTD
  • S&P 500:+15.0% YTD
  • S&P Midcap 400: +5.1% YTD
  • Dow Jones Industrial Average: +3.9% YTD
  • Russell 2000: +0.6% YTD

Reviewing today's economic data:
  • May Adv. Intl. Trade in Goods -$100.6 bln; Prior was revised to -$98.0 bln from -$99.4 bln
  • May Adv. Retail Inventories 0.7%; Prior 0.7%
  • May Adv. Wholesale Inventories 0.6%; Prior 0.2%
  • Weekly Initial Claims 233K (consensus 238K); Prior was revised to 239K from 238K; Weekly Continuing Claims 1.839 mln; Prior was revised to 1.821 mln from 1.828 mln
    • The key takeaway from the report is the elevated level of continuing jobless claims, which suggests laid-off workers are facing longer wait times before finding a new job, which would be a symptom of a softening labor market.
  • May Durable Orders 0.1% (consensus -1.2%); Prior was revised to 0.2% from 0.7%; May Durable Orders -ex transportation -0.1% (consensus 0.2%); Prior 0.4%
    • The key takeaway from the report is that new orders for nondefense capital goods excluding aircraft -- a proxy for business spending -- declined 0.6% month-over-month.
  • Q1 GDP- Third Estimate 1.4% ( consensus 1.3%); Prior 1.3%; Q1 GDP Deflator - Third Estimate 3.1% (consensus 3.1%); Prior 3.0%
    • The key takeaway from the report is that it is dated (we're just days away from the end of Q2) so its impact should be limited; however, the slowdown in personal spending is noteworthy in light of more anecdotal evidence in the interim that suggests consumers, in aggregate, are reining in their discretionary spending.
  • May Pending Home Sales -2.1% (consensus 2.3%); Prior -7.7%

Friday's economic calendar features the Fed's preferred inflation gauge in the form of PCE Price Indexes in the May Personal Income and Spending report. Other data tomorrow include:
  • 9:45 ET: June Chicago PMI (prior 35.4)
  • 10:00 ET: Final June University of Michigan Consumer Sentiment (Bconsensus 65.6; prior 65.6)

>>> NIKE running lower after posting mixed Q4 results as company beat on EPS ag

NIKE running lower after posting mixed Q4 results as company beat on EPS again, but fell short on the top-line, amplifying competitive concerns (94.19 +0.13)
  • For the fourth consecutive quarter, NIKE (NKE) beat EPS expectations, reflecting strong gross margin as the company's inventory returns to healthy levels. Gross margin expanded by 110 bps to 44.7% as inventories fell by 11%, allowing NKE to be less promotional.
  • However, the main concern surrounding NKE right now revolves around the demand picture, and in that regard, its results disappointed. Total revenue fell by 1.6% to $12.6 bln, missing expectations, with softness continuing in its core North America market where revenue dipped by 1%.
  • The revenue decline and miss will only amplify concerns that NKE is losing its competitive edge and giving up market share to up-and-coming brands like Deckers (DECK) owned HOKA and On (ONON).
  • NKE is expected to issue FY25 revenue guidance during the earnings call at 5:00 p.m. ET. Its outlook will be key in terms of where the stock goes from here. Recall that during the Q3 earnings call, NKE warned that it expected FY25 to get off to a slow start.
  • NKE shares are trading 5.6% lower in after-hours action.

The Information : Apple Explores Novel Method for Making iPhone Batteries More R

Apple Explores Novel Method for Making iPhone Batteries More Replaceable

The Takeaway
Under pressure from European regulators, Apple is exploring a new method to make iPhone battery replacement easier, potentially reducing electronic waste.

Under pressure from regulators in Europe and elsewhere, Apple in recent years has taken small steps toward making the iPhone easier for consumers to repair. But self-repair remains a cumbersome step for consumers—particularly when it comes to battery replacement.

Under a law passed by the European Union last year, phone makers have to ensure smartphone batteries can be replaced by their owners with easily accessible tools by 2025. With that in mind, Apple is exploring the use of a new technology to make battery replacement a little easier for consumers, according to five people involved in the iPhone’s manufacturing.

If successful, Apple would use the new method in at least one model of the iPhone 16 this year and possibly all versions of the iPhone 17 slated for global release next year, according to the people. But the new method—which uses electricity to dislodge the battery—will still be too complicated for most people.

An Apple spokesperson declined to comment.

The iPhone currently uses adhesive strips to hold the battery in place. To replace the battery, people must pull on these strips with tweezers to dislodge it and install a new battery using a specialized machine and tray that presses it in place. If a consumer breaks the strips while pulling them, they need to apply heat or a solvent such as rubbing alcohol to dislodge the adhesive.

The new technology—known as electrically induced adhesive debonding—involves encasing the battery in metal, rather than foil as it is currently. That would allow people to dislodge the battery from the chassis by administering a small jolt of electricity to the battery, the people said.

Consumers still have to pry open the iPhone themselves, which is not an easy process because of the adhesives and screws that keep the iPhone’s screen sealed in place.

Apple will still recommend consumers use repair professionals for battery replacement given the need to apply a low voltage to the battery to dislodge it and attach a new one, one person with direct knowledge of the process said.

“I’d love to see Apple innovate toward improved repairability,” said Kyle Wiens, CEO of iFixit, a gadget repair website. “Glue is the bane of modern device repair, and any strategies that help reverse adhesives are welcome.”

Wiens said applying a voltage to release the iPhone battery is a promising approach, as direct current power supplies—typically used for electronics testing and charging—are widely available for purchase.

Many people choose to upgrade their phone when they see the battery dying, even though Apple for many years has offered a battery replacement service, now costing $99.

Expensive and Complex

Although early mobile phones had batteries that could be swapped in and out by hand, the rise in popularity of the iPhone and other smartphones—coupled with the invention of longer lasting mobile batteries—ushered in a new era where removable batteries took back seat to a desire for better water resistance and thinner designs. This required the devices to be tightly encased using adhesives and seals, making them difficult to open for consumers.

In 2022, Apple introduced self-repair options, as part of its efforts to comply with a wave of new right-to-repair laws across the world. Consumers can buy replacement parts from Apple and rent equipment that allows them to fix their iPhones without a professional, although the tools and rentals were still prohibitively priced and bulky.

For instance, consumers can buy a battery they can install themselves for $51.48—and rent the specialized tools needed to replace it for $49. That means there is no financial advantage for consumers who want to do it themselves. It’s unclear how those prices could change if it adopted the new technology.

On Wednesday, Apple announced that its repair software for helping users diagnose problems with their devices would be available to 32 European countries after it was made available to the U.S. only last year. It also released a whitepaper spotlighting its repairability efforts, saying that it was “committed to designing all products with serviceable batteries.”

The fact that Apple is testing a new battery replacement technology suggests it feels the pressure of the new European law. That law was the latest in a series the EU has enacted requiring Apple and other tech firms to redesign their software and hardware to be more open and consumer friendly.

The EU already has mandated that Apple must offer alternative app stores and give outside payment services access to its hardware.

Possible Exemption

Apple could be exempt from the EU’s battery replacement law if the iPhone can fulfill three requirements. Those require that batteries retain at least 83% of their capacity after 500 full charges and 80% of their capacity after 1,000 full charges.

The device also needs a water and dust resistance rating of at least IP67. The iPhone has had that rating, or higher, since 2016 but only recently met the battery health criteria for 1,000 full charges with the iPhone 15. Apple didn’t reveal the battery health of the iPhone 15 after 500 full charges but the iPhone 14 and earlier models wouldn’t have met the 500-charge requirement, according to its disclosures earlier this year.

There have been some signs that Apple is working on electrically induced adhesive debonding. In November, a user on X posted photos of what they claimed was the battery for the iPhone 16 Pro. The component had a metal shell for the first time, which is a prerequisite for the bonding process to work.

Last year, Apple’s senior vice president of hardware engineering, John Ternus, said in an interview with a German YouTube channel that there were trade-offs to complying with the new European battery replacement law. If users can easily take apart their phones, that could make the iPhone less water resistant.

“We absolutely believe that if people need a battery replacement, there should be a safe and an effective way to do that, and we’ve been enabling that through various Apple Stores and also our service partners,” he said. “We always need to make sure we’re balancing the durability with that repairability.”

FT : Cocoa prices tumble as African crop fears ease

Cocoa prices tumble as African crop fears ease
Hedge funds cut bullish bets as seasonal rains improve production outlook in Ghana

Cocoa futures fell for the sixth day in a row on Thursday, the longest run of losses since 2022, as improved weather in the main growing region in west Africa takes the heat out of a record price surge.

The most active futures contracts in New York tumbled 5.6 per cent to $7,361 a tonne, and its London equivalent lost 10.3 per cent to £7,010 a tonne, as rising hopes that crops in Ghana and Ivory Coast may recover in the coming season trigger a sell-off. 

“The years long bull market in cocoa may have finally ended as prices fell by enough to trigger our risk-management liquidation rules,” said Eric Crittenden, chief investment office of Standpoint Asset Management, in his latest monthly update.

Cocoa futures in New York and London doubled in value to record highs this year, with New York prices surpassing $12,000 a ton in April as poor weather and disease devastated crops in Ghana and Ivory Coast, where two-thirds of the world’s cocoa beans are grown, and hedge funds piled into the market.  

The two west African countries, which set prices for farmers and sell forward contracts to traders to deliver the beans, also failed to meet orders for hundreds of thousands of tonnes of beans.

Carlos Mera, head of agricultural commodities at Rabobank, said that this year’s price peaks had been driven not only by “shockingly low” crops in west Africa but also the fact that “more cocoa had been sold than there was in existence”.

Years of low prices have meant cash-strapped farmers have been unable to invest in improving ageing plantations.

Mera said that Ghana had produced only 500,000 tonnes of the 800,000 tonnes it had contracted to sell to the world’s big food processors, and the remainder had to be rolled over for delivery to the next season. As the price rose, “many physical buyers had to buy back their short hedges”, he added.

But he said the market was expecting to see “some recovery” in Ghana and Ivory Coast’s crops after the arrival of the seasonal rains. New plantations in countries such as Ecuador would also help meet global demand, he said.

As the price drops from April’s record high, hedge funds have reduced their bets on the bull market continuing. Net long positions fell to 25,675 contracts in New York in the week ending June 18, compared with 70,661 in late January, according to data from the US Commodity Futures Trading Commission.

However ADM Investor Services, a UK brokerage, said that “the crop is not out of the woods yet”.

“The trade is awaiting the results of the pod counting surveys, which will come later this summer,” said Mark Bowman, an analyst at ADM.

He added that Ivory Coast’s weekly tally of fresh crop arrivals was still falling. It totalled 15,000 metric tonnes for the week ending June 23, down from 25,000 the previous week and 30,000 a year ago.

FT : North Sea tax regime as complex as a ‘war zone’, warns oil group

North Sea tax regime as complex as a ‘war zone’, warns oil group
Serica ‘actively’ looking overseas ahead of potential increase in UK government’s windfall levy on producers

The boss of one of the UK’s top independent oil and gas producers has said the company is “very actively” seeking opportunities overseas, as he compared navigating the country’s fiscal regime to working in a “war zone”.

The comments by David Latin, chair and interim chief executive of London-listed Serica, come just days ahead of the general election, with Labour’s pledge to increase windfall taxes on producers set to dominate campaigning in Scotland.

“Other than when I was responsible for a company which had significant assets in a war zone, I have never encountered a situation which was so challenging when it comes to making investment decisions,” Latin said at the company’s annual general meeting on Thursday.

He noted that neither Labour nor the Conservatives had committed in their manifestos to cutting windfall taxes to recognise a decline in prices. He added that Labour’s plan to raise them and reduce tax relief for capital investments would make most North Sea projects unprofitable.

Latin was previously an executive at energy company OMV, where he dealt with disruption to the company’s operations in Libya following the fall of the late leader Muammer Gaddafi.

The Serica boss said the company, whose UK operations are in the North Sea, would not abandon the UK but that an increasingly difficult trading environment would force it to look elsewhere for growth.

“While we remain watchful for opportunities in the UK that might be attractive despite this increasingly challenging context, we are also looking very actively overseas,” he said.

Serica has contributed about £500mn in UK taxes since 2020 and is responsible for about 5 per cent of the country’s gas production.

Smaller companies that increasingly dominate the ageing North Sea basin after the majors retreated argue they are subject to punitive taxation that has seriously dented profits and made investments uneconomical.

Separately, Labour’s biggest union funder Unite together with Scottish businesses on Thursday demanded the party drop its opposition to new oil and gas exploration in the North Sea until it can provide a plan to replace jobs that would be lost.

Labour has a polling lead of more than 20 points ahead of the election on July 4. The party’s plans to raise the windfall tax on oil producers from 75 per cent to 78 per cent have prompted warnings from businesses and unions that as many as 100,000 jobs, mostly in Scotland, are at risk.

Labour has also pledged to remove “unjustifiably generous investment allowances”, which companies can use to reduce their tax bill, and to stop issuing licences for new fields in the North Sea, which they say would worsen the climate crisis without ensuring energy security.

The Conservative government, which introduced the windfall tax after the breakout of the Russia-Ukraine conflict in 2022, has pledged to keep the levy until 2028-29 unless prices fall “back to normal” sooner. It also plans to legislate to mandate annual licensing rounds for oil and gas production.

The Scottish National party, which has been losing support to Labour, has said decisions on oil and gas exploration, which are reserved to Westminster, should be taken on a case-by-case basis and be subject to a “robust climate compatibility assessment”.

A group of over 60 climate activists and lobby groups, including Greenpeace and Oxfam, on Thursday called on the next UK government to commit to phasing out oil and gas production while ensuring a “clear and funded” transition for workers.

Labour has previously defended its windfall tax policy. One party official told the Financial Times this month that it was usual for companies to threaten to pull out when faced with higher taxes.