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Crazy speculative trading is driving some stocks inexplicably higher, a ‘late cycle’ market sign



As the longest ever U.S. bull market continues, investors are looking for stocks that will continue to outperform — but pure speculation is pushing some stocks inexplicably higher in the past few weeks.

But this phenomenon is not new, as it is characteristic of a “late cycle” market, explained Peter Boockvar, chief investment officer at Bleakley Advisory Group.

“In the history of the stock market there are always names that pop up and are the poster boys for speculation — companies that could cure cancer, take us to the Moon or Mars,” Boockvar told CNBC. “For the broader market it’s reflective of risk appetite and people willing to roll the dice.”

Tesla, Virgin Galactic and even hydrogen engine maker Plug Power have all seen astronomical gains since the beginning of the year, with each of the stocks essentially doubling or even tripling. Each of the stocks fall firmly in the speculative category, with investors valuing the companies on what it could earn in the future – not what it does now. Most of the big moves are happening without any major news.

“In a world right now where there is slowing growth, there is a search on for anything growth related … and what’s cooler than electric vehicles and space?” Boockvar said.

Wells Fargo equity strategists said on Thursday that they “are fascinated by the parabolic moves” recently by Virgin Galactic and Tesla.

“One theory we think has some merit is that the seeds for these moves were planted in October when online brokers cut commissions to zero. At the time few people predicted any real macro ripple from this change,” Wells Fargo said.

One group of retail investors that rushed to buy these speculative names are members of the now infamous Reddit forum r/wallstreetbets. Reddit users have mentioned “TSLA,” “SPCE” and “PLUG” thousands of times in the past month, with some members posting screenshots of their trading accounts, showing off mounting profits. Reddit users have dubbed these companies as “meme stocks,” due to the humorously outsized gains that have come after r/wallstreetbets declared the shares were going to surge.

Lumber Liquidators became just latest “meme stock” on Thursday. An r/wallstreetbets user dubbed Lumber Liquidators “a massive turnaround play” and said they bought 25,000 shares. Within hours the post had over 1,500 comments from other users, with many saying they also bought shares. Lumber Liquidators jumped 18.6% on Thursday, with no other public catalyst.

The Securities and Exchange Commission declined CNBC’s request for comment on r/wallstreetbets, while Reddit did not immediately respond.

“It’s definitely a characteristic where investors become infatuated with certain ‘story stocks,'” Boockvar said. “Whether its some chat room or someone’s basement, it happens every bull cycle.”

Boockvar also noted that “late cycle does not necessarily mean end of cycle,” pointing out that cryptocurrency had similar speculative run.

“Bitcoin you could have thrown out there as late cycle,” Boockvar said.

Richard Bernstein, CEO and chief investment officer of Richard Bernstein Advisors, similarly told CNBC’s “Squawk Box” this week that this kind of speculative trading flies in the face of slowing growth, calling these surges warning signs.

“The reality is GDP growth the last three quarters has been below average, the yield curve is inverted, corporate profits growth is 2% and we’re talking about things like Tesla and Virgin Galactic as being the future. That’s very strange,” Bernstein said.

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Trump suspends travel from Brazil as coronavirus pandemic worsens in South America



US President Donald Trump arrives to take part in a joint press conference with Brazil’s President Jair Bolsonaro in the Rose Garden at the White House on March 19, 2019 in Washington, DC.

Jim Watson | AFP | Getty Images

President Donald Trump is suspending travel from Brazil to the U.S. as the coronavirus pandemic worsens in Latin America’s largest nation and economy. 

The president’s order, published Sunday, denies entry to “all aliens” who were in Brazil two weeks prior to their attempted entry into the United States. The order takes effect May 28 at 11:59 pm ET. 

Brazil has rapidly become one of the hardest hit countries in the world as the World Health Organization warns that the epicenter of the pandemic has shifted from Europe and the U.S. to South America. 

“We’ve seen many South American countries with increasing numbers of cases and clearly there’s a concern across many of those countries, but certainly the most affected is Brazil at this point,” Mike Ryan, executive director of the WHO’s emergencies program, said Friday during a news briefing at the organization’s Geneva headquarters. 

Brazil has more than 347,000 confirmed cases of the virus and at least 22,013 people have died, according to data from Johns Hopkins University. At this point only the United States is harder hit in terms of total positive cases. 

Brazil President Jair Bolsonaro has repeatedly downplayed the virus, dismissing it as a “little flu” and attacking stay-at-home orders imposed by governors as a “crime.” He is a close ideological ally of Trump. 

Bolsonaro’s own press secretary tested positive for the virus in March after attending a gathering with the Brazilian president and Trump at Mar-a-Lago. The incident raised concern about the health of Bolsonaro and Trump at the time, though both leaders have tested negative for the virus.  

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U.S. likely impose sanctions against China over Hong Kong law



Hong Kong Chief Executive Carrie Lam attends the opening session of the National People’s Congress (NPC) at the Great Hall of the People in Beijing on May 22, 2020.

Leo Ramirez | AFP | Getty Images

The U.S. government will likely impose sanctions on China if Beijing implements national security laws that would give it greater control over autonomous Hong Kong, White House National Security Advisor Robert O’Brien said Sunday. 

The draft legislation represents a takeover of Hong Kong, O’Brien said, and as a consequence U.S. Secretary of State Mike Pompeo would likely be unable to certify that the city maintains a “high degree” of autonomy. This would result in the imposition of sanctions against China under the Hong Kong Human Rights and Democracy Act of 2019, O’Brien said.  

Pompeo has already called the proposal a “death knell” for Hong Kong’s autonomy. O’Brien warned that Hong Kong could lose its status as a major hub for global finance. 

“It’s hard to see how Hong Kong could remain the Asian financial center that it’s become if China takes over,” O’Brien told NBC’s Chuck Todd on “Meet the Press.” He said financial services initially came to Hong Kong because of the rule of law that protected free enterprise and a capitalist system.

“If all those things go away, I’m not sure how the financial community can stay there. …They’re not going to stay in Hong Kong to be dominated by the People’s Republic of China, the communist party.” 

The legislation was announced during the annual session of China’s parliament, the National People’s Congress. The session had been delayed for months during the coronavirus pandemic. Hong Kong faced months of at times violent anti-government protests before the pandemic effectively shut China down.  

Hong Kong has been governed under the “one country, two systems” principle since the former British colony was returned to Chinese rule in 1997. The system gives Hong Kong a high degree of autonomy and a greater degree of freedom for the special administrative region than the rest of China. 

A draft decision on “establishing and improving the legal system and enforcement mechanisms” for Hong Kong was submitted to China’s parliament Friday, according to state news agency Xinhua. A document explaining the decision said the one-country two systems principle “has achieved unprecedented success in Hong Kong,” but the “increasingly notable national security risks” in the city “have become a prominent problem,” according to Xinhua.  

The document says activities “have seriously challenged the bottom line of the ‘one country, two systems’ principle, harmed the rule of law, and threatened national sovereignty, security and development interests,” according to Xinhua.

The move from China has incited strong opposition from pro-democracy activists and politicians. Thousands of protesters demonstrated for the first time since the introduction of the national security laws on Sunday. Hong Kong police fired tear gas and pepper spray to disperse the crowd.

Nearly 200 political figures from the U.K., Europe, Australia, North America and Asia condemned the laws in a joint statement. 

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Airlines change summer air travel procedures



Ahead of the Memorial Day holiday weekend, all states in the U.S. began to lift some restrictions implemented to halt the spread of the coronavirus. Government officials are still urging people to practice social distancing and to wear masks in public. 

Changing opinions from scientists and health officials have contributed to some people refusing to wear masks because public health authorities initially advised against wearing masks, saying there was little evidence that it would help prevent people from getting sick.

China’s top diplomat criticized U.S. efforts to hold China accountable for its alleged role in the spread of the coronavirus, calling any aims to force Beijing to pay compensation for the coronavirus a “daydream.”

The number of coronavirus fatalities in New York state fell below 100, Gov. Andrew Cuomo said on Saturday, marking the lowest daily death toll since March 24.

This is CNBC’s live blog covering all the latest news on the coronavirus outbreak. This blog will be updated throughout the day as the news breaks. 

  • Global cases: More than 5.33 million
  • Global deaths: At least 341,513
  • U.S. cases: More than 1.62 million
  • U.S. deaths: At least 96,046

The data above was compiled by Johns Hopkins University.

Air travel is going to look different this summer because of the coronavirus

9:03 a.m. ET — Memorial Day weekend is the traditional kickoff to the peak travel season and while demand is showing some signs of life, it is still down about 90% from a year ago. The virus and concerns about it spreading have prompted new procedures at airlines and federal agencies.

The Department of Homeland Security, which includes TSA and customs, is exploring temperature checks at airports. The Transportation Security Administration is also changing some polices to limit physical contact, such as asking travelers to scan their own boarding passes and that they remove food and other items from their bags so officers don’t have to touch bins.

Starting this month, U.S. airlines require that travelers wear masks on board. They are tweaking boarding to fill seats from back to front to limit contact with other travelers. Some airlines are limiting the number of travelers on board, or letting travelers know when their flights are full. Experts warn its nearly impossible to socially distance on an aircraft, however. —Leslie Josephs

AngloGold Ashanti closes mine in South Africa after 53 employees tested positive

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