Apple’s New Headset Drops, Crypto Melts Down, and Another Economic Indicator Bites the Dust

U.S. equities moved lower, as tech erased its early gains after Apple Inc.’s (AAPL) Worldwide Developers Conference (WWDC) debut of its new mixed-reality headset. While mainstream media generally lauded the technology, many armchair analysts took to Twitter, calling it "iterative" of what is already out on the market.

Surprisingly, oil also fell even after Saudi Arabia announced a significant cut of 1 million barrels per day of oil. The Saudi production cut is an attempt to stabilize the market and provide a "floor" for crude prices, but it remains to be seen whether it will be successful. Garrett Baldwin heard from sources inside the recent OPEC+ meeting that things aren't what they seem when it comes to Saudi's market objectives - more on that here.

Bitcoin (BTC) and other cryptocurrencies were also hit hard yesterday after news related to the SEC suing crypto exchange Binance and its CEO Changpeng "CZ" Zhao over alleged securities violations.

We have manufacturing numbers and new bank rules to look at, too - trust me, those will be much more impactful than they sound.

Apple Releases Its VR/AR Headset

Apple has released its first mixed-reality headset, the Apple Vision Pro. The headset is designed for gaming and entertainment and is expected to compete with high-end VR headsets such as the Meta Quest 2.

The release of the Apple VR headset is a significant event in the virtual reality industry, given Apple’s standing as one of the most storied tech companies in history. The tech under the hood is impressive, too. Its resolution is 4K for each eye, it has 12 cameras, and runs on the new speedy M2 processor.

While the mixed-reality market needed to see a product like this, many critics see the product as iterative - not exactly a quantum leap ahead of the competition - and don’t expect this market ever to be nearly as significant as the PC or mobile phone. Skeptics were cool to its near $3500 price tag, as well. Apple's iPhone holds outsized market share when it comes to mobiles, but their handsets are heavily subsidized by carriers - it remains to be seen whether anyone is interested in subsidizing an AR/VR headset. Apple stockholders also reacted poorly, sending the stock down 3% and 2.4% after hours..

Binance Accused of Breaking U.S. Securities Rules

The Securities and Exchange Commission (SEC) has accused Binance, the world's largest cryptocurrency exchange, of breaking US securities rules. The SEC alleges that Binance failed to register its tokens as securities and that it allowed American investors to trade on its platform without first registering with the SEC. While Binance has denied the allegations, quotes related to the situation indicate otherwise. “Binance’s COO bluntly  admitted to another Binance compliance officer in December 2018, ‘We are operating as a [expletive deleted] unlicensed securities exchange in the U.S.A., bro.’”

The SEC's accusations could have a significant impact on Binance. If the SEC is successful in its case, Binance could be forced to pay a large fine and could be barred from operating in the US. This would be a major setback for Binance, as the US is one of its largest markets.

ISM Overall Gauge of Services Unexpectedly Falls to Lowest Level of the Year

The Institute for Supply Management (ISM) has released its monthly report on the services sector. The report showed that the overall gauge of services unexpectedly fell to 55.9 in May, from 63.8 in April. This is the lowest level of the year and well below the forecast of 58.0. The decline in the ISM services index is a sign that the services sector is slowing down and an unexpected turn given previously released indicators showing that consumers are still spending.

This data point has pushed more traders to the assumption that the Federal Reserve will hold rates steady in June, but keep its options open for future hikes.

Potential Tighter Bank Capital Rules May Force Banks to Hold 20% More in Reserves

Yesterday we spoke about the flood of T-bills going on sale, which could pull a significant amount of liquidity out of the market. Now, the Federal Reserve is considering tightening bank capital rules, which were initially tightened after the 2008 crash. The new rules could force banks to hold 20% more in reserves. The higher reserve requirements would make it more difficult for banks to lend money, which would be another knock-on event to drawing out liquidity.

The Federal Reserve believes that tighter bank capital rules could help to reduce systemic risk. However, tighter bank capital rules could also slow down the economy. If banks have less money to lend, businesses may have difficulty getting loans to expand or invest.