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Spike in bets on the women’s games raises tournament handle expectations. (0:16) Apple talking to Google about using Gemini AI in iPhone. (3:45) Target limits self-checkout items to curb theft. (4:26)
This is an abridged transcript of the podcast.
Our top story so far
Grab your brackets; it’s March Madness time! A total of 136 men’s and women’s teams will play 134 games over the period.
For sportsbooks, the NCAA basketball tournament is collectively much bigger than the Super Bowl. The American Gaming Association estimated that $2.72 billion could be wagered legally on this year’s games. The AGA analysis was based on recent trends and monthly sports betting revenue reports released by states. The estimate only includes U.S. sportsbooks. The increase in popularity for parlays and in-game betting is anticipated to boost hold rates for sportsbooks this year on top of the extra volume of raw bets.
Another new development with college basketball in 2024 is the increasing betting handle on women’s regular season games.
Sportsbooks DraftKings (DKNG), FanDuel (FLUT), BetMGM (MGM), and Tipico all reported significant year-over-year growth in betting handles for women’s NCAA games this season. That comes in the wake of high interest in South Carolina’s undefeated season, media exposure on Iowa’s Caitlyn Clark’s streak of smashing scoring records, and the growing story of USC freshman JuJu Watkins.
In today’s trading
Growth stocks are rallying as anticipation of Nvidia CEO Jensen Huang’s keynote address at GTC builds. That happens right after the closing bell.
The Nasdaq (COMP.IND) is up more than +1%. The S&P 500 is up a little less than 1%, but all 11 sectors are in the green. Communication Services (XLC) is the leader.
Rates are slightly higher with the Fed decision on tap for Wednesday. The 10-year Treasury yields (US10Y) is nearing 4.35%.
But it’s not just the Fed that will be impacting rates. Deutsche Bank’s Jim Reid says: “This could be a landmark week in markets as the last global holdout on negative rates looks set to be removed as the BoJ likely hikes rates from -0.1% tomorrow. That could slightly overshadow the FOMC that concludes on Wednesday that will have its own signaling intrigue given recent strong inflation.”
“We’ve had negative base rates now (in Japan) for 8 years, which, if I have my history correct, is the longest run ever seen for any country in the history of mankind,” Reid added. “In fact, I doubt pre-historic man was as generous as to charge negative interest rates on lending money prior to this! It also might be one of the longest global runs without any interest rate hikes, given the 17-year run that could end tomorrow. So, a landmark event.”
Looking to individual stocks
Intel-backed semiconductor connectivity firm Astera Labs (ALAB) boosted the size of its upcoming IPO amid increased demand for all things AI. The company now expects to sell 19.8 million shares between $32 and $34 each, up from a prior expectation of 17.8 million shares between $27 and $30 apiece.
PepsiCo (PEP) gained after Morgan Stanley upgraded the stock to Overweight and called it a top pick. Analyst Dara Mohsenian says that PepsiCo’s relative pricing power will shift from being a negative to a positive. The company is expected to have an advantage over its consumer-packaged peers in both the snack and beverage businesses.
FedEx (FDX) and Amazon (AMZN) reportedly held talks last year to explore doing more business with each other once again after a high-profile split in 2019.
Sources told the Wall Street Journal that the two companies discussed FedEx once again accepting returns of Amazon packages at its retail locations. Currently, Amazon has partnerships with a number of companies to handle its heavy load of package returns each year, including a deal with United Parcel Service.
In other news of note
Apple (AAPL) is in discussions to fit Google’s artificial intelligence model Gemini into the iPhone.
Bloomberg says the two tech giants are in talks to let Apple license the AI model to power some new features that would hit iPhone software this year.
Recently, Apple was also in talks with Microsoft (MSFT)-backed OpenAI and has considered using its AI model.
Apple is preparing new capabilities as part of the iPhone’s upcoming operating system, iOS 18. But these updates will be focused on features that operate on its devices rather than ones provided through cloud. So, Apple is looking for a partner for generative AI, including features such as creating images and writing content based on prompts.
And Target (TGT) is limiting its self-checkout kiosks to 10 items or less at most of its 2,000 stores across the U.S. in the face of increased shoplifting.
Store managers can choose the hours for self-checkout lanes depending on foot traffic.
The company, which piloted the new limits at 200 stores last fall, said the self-checkout option was helpful during the pandemic’s peak, when customers were limiting human contact. But since then, there have been increasing reports of theft through the kiosks.
And in the Wall Street Research Corner
Citi is pointing out stocks that look promising given their capital expenditure plans, which can be important fundamental drivers.
Equity strategist Scott Chronert says: “While overall capex growth has been strong in recent years, more encouraging is that a larger share of this spend is growth rather than replacement capex,” strategist Scott Chronert wrote in a note.
“At the index level, the year-to-year fundamental impact from growth capex may be overshadowed by macro drivers. Yet, longer term, there is certainly a case to be made that incremental growth capex is a fundamental tailwind.”
Citi screened the S&P 1500 for buy-rated names that have strong growth capex measures. The top third bucket realizes higher sales growth and maintains a superior EBITDA margin over the next three years, Chronert says.
Among the names are Alphabet (GOOG) (GOOGL), Amazon (AMZN), Constellation Brands (STZ), Merck (MRK), and Duke Energy (DUK).
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