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Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Tuesday, May 6th, and I'm your host, Kim Kahn. Our top story so far, Robotexy firm Pony AI is partnering with Uber to launch in a key market in the Middle East later this year with
with a goal of scaling deployments to additional international markets in the future. Once the service becomes available, riders requesting eligible trips through the Uber app may be offered the option to be picked up by a Pony AI autonomous vehicle. During the initial pilot phase, these vehicles will include a safety operator on board to monitor operations until the company's fully autonomous commercial launch. Uber also announced a significant expansion of its strategic partnership with WeRide.
The collaboration will roll out to 15 additional cities worldwide over the next five years, including key markets in Europe. Uber has secured more than 15 partnerships with a diverse range of autonomous vehicle technology companies over the past two years. In just the past two months, the ride-hailing giant has revealed new collaborations with May Mobility, Volkswagen, and Chinese autonomous driving company Momenta.
Looking to the economy, the Fed starts its two-day meeting with the rate decision in Chairman Jay Powell's press conference coming Wednesday, although no dot plot this time around. Emily Bowersock-Hill of Bowersock Capital Partners says the FOMC is unlikely to lower rates this week or to act decisively until after July 8th when the 90-day tariff pause ends. The resilient labor market, as evidenced by Friday's job report, gives them further room to delay action.
We still expect one or two cuts before year-end, with the first cut most likely in late summer or fall. This morning, the Census Bureau reported that the March U.S. international trade deficit in goods and services expanded to $140.5 billion versus $136.3 billion consensus and $123.2 billion prior. Exports rose by $500 million, while imports grew by $17.8 billion.
The wider trade gap reflected an increase in the goods deficit and a decrease in the services surplus. Wells Fargo says, "Businesses pull forward needed industrial supplies and retailers stock their shelves with consumer goods in March ahead of tariffs. April may bring a last-ditch effort of firms front-running tariffs, but after that, net exports are set to reverse dramatically. While imports have been the primary discussion topic when it comes to tariffs, exports are also ripe for disruption."
PowerStock says the stock market is currently not pricing in a recession or even a meaningful slowdown. Investors appear to be expecting the 90-day tariff pause to become an off-ramp for the Trump administration, allowing it time to slowly soften its aggressive trade policy without appearing to backtrack. The unappreciated risk is that the vacillations and lack of clarity on tariffs has already damaged the economy enough to cause a slowdown. It's too early to tell if the policy breakdown and messaging disaster from April was enough to cause a slowdown, but it
But we will soon find out for the next few weeks of economic data, she said. Among active stocks, Palantir is tumbling post-earnings, but Wall Street's sell side is coming to the stock's defense. Analysts at Wedbush Securities raised their price target to $140 from $120 as they said the results and raised guidance for fiscal 2025 give them greater confidence in its growth story.
Morgan Stanley said the company is firing on nearly all cylinders. Analyst Sanjit Singh wrote...
Vertex Pharmaceuticals is struggling after it missed on the top and bottom lines for Q1. The drug maker, best known for its cystic fibrosis treatments, now sees 2025 revenue of $11.85 to $12 billion from $11.75 to $12 billion prior. The consensus is $11.98 billion. And Datadog reported first quarter results and revenue outlook that beat estimates.
Datadog, which provides a security platform for cloud applications, expects second quarter revenue to be between $787 million and $791 million, midpoint at $789 million, which was above consensus estimate of $770.47 million. The company forecasts non-GAAP net income per share to be in the range of $0.40 to $0.42, midpoint $0.41, versus $0.41 consensus.
In other news of note, OpenAI has reached a deal in principle to acquire artificial intelligence-assisted coding tool Windsurf for $3 billion.
But Bloomberg reports that OpenAI's largest acquisition to date has not yet closed. Windsurf had been in talk with investors to raise funding that would value it at $3 billion. Windsurf may be able to boost OpenAI's capabilities against Anthropic, GitHub, owned by Microsoft, and other AI coding tools. And in the Wall Street Research Corner, B of A upgraded the energy sector to overweight from market weight as active managers' funds have sold the sector. Strategist Savita Subramanian says that in Trump's first term...
Energy saw the biggest positioning increase, but lagged consecutively during the full four-year term, culminating with the COVID-related sell-off.
Currently, long-only funds have lowered their energy exposure more than any other sector in the past year and are underweight more than any other sector compared to history. Hedge funds are most short energy. APA was the most shorted energy stock as a percentage of float as of March. The company also has the lowest net exposure by hedge funds. But while the S&P 500 energy sector saw its worst monthly drop in years, it is different this time, Subramanian said.
Management compensation is aligned not with production targets, but with cash return. Dividends are sacrosanct. The sector's free cash flow is well above its average at 6%, and its sensitivity to oil prices has dropped by more than a third since 2016-2017. If stagflation is the base case, energy is more likely to outperform than underperform, Subramanian said.
That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com slash WSB. And join the elite community of real investors to unearth great investing ideas. Just head to SeekingAlpha.com slash subscriptions.