Before the Bell: AI Everywhere All at Once; Bed Bath & Beyond Befuddled

Premarket action on Tuesday had the three major U.S. indexes trading mixed. The Dow Jones industrials were down 0.11%, while the S&P 500 was unchanged and the Nasdaq 0.14% higher.

Nine of 11 market sectors closed lower Monday, with communications services (−1.31%) and technology (−1.22%) posting the day’s biggest losses. Utilities (0.87%) and consumer staples (0.02%) closed higher for the day. The Dow closed down 0.1%, the S&P 500 down 0.61% and the Nasdaq down 1%. Two-year Treasuries added 17 basis points to close at 4.46%, and 10-year notes closed up 10 basis points to close at 3.63%.

Monday’s trading volume was lighter than the five-day average. New York Stock Exchange losers led winners by 2,333 to 774, while Nasdaq decliners led advancers by about 2 to 1.

Federal Reserve Chair Jerome Powell speaks during the noon hour Tuesday at the Economic Club of Washington. Whenever Powell speaks publicly these days, markets like to adopt a wait-and-see attitude because traders are not sure what is nestled among the tea leaves.

Later this week, we will get the weekly report on claims for unemployment benefits and the preliminary reading on the University of Michigan consumer sentiment index.

Among S&P 500 stocks, Catalent Inc. (NYSE: CTLT) added 19.5% following a weekend report at Bloomberg that Danaher has “expressed a takeover interest in the contract manufacturer.” Catalent had a market cap of around $10 billion before the report. Apparel maker V.F. Corp. (NYSE: VFC) dropped 6.4% after guiding current-quarter revenue below the consensus estimate. The company reports quarterly results after markets close Tuesday. Monday, Deutsche Bank analysts lowered the price target by a dollar but kept its Buy rating on the stock.

As home goods retailer Bed Bath & Beyond Inc. (NASDAQ: BBBY) inches closer to a bankruptcy filing, the stock nearly doubled on Monday when the company said it had missed a debt payment and could file real soon now. The market reaction could have been driven by meme stock investors and, as always, set off an explosion of short covering.

Then came the big news. Bed Bath & Beyond announced an underwritten offer of Series A convertible preferred stock, warrants to purchase shares of the convertible stock and warrants to purchase the common stock. The company expects to raise $225 million in the deal and an additional $800 million “through the issuance of securities requiring the holder thereof to exercise warrants to purchase shares of Series A Preferred Stock in future installments assuming certain conditions are met.” The company has apparently lined up investors for this deal. The stock traded down about 27% in Tuesday’s premarket.

The artificial intelligence (AI) bandwagon has left the circus tent and either you are on board or you are left behind. Microsoft Corp. (NASDAQ: MSFT) is definitely on board after the public launch of OpenAI’s ChatGPT program late last year. Alphabet Inc. (NASDAQ: GOOGL) joined the train on Monday when CEO Sundar Pichai introduced Bard, Google’s AI technology, a Language Model for Dialogue Applications (aka, LaMDA). Recall that ChatGPT is a generative pre-trained transformer (GPT) LLM (Large Language Model) and uses Google-developed Transformer technology, which takes a text string and predicts what will come next.

Pichai spent a lot of words establishing Bard’s bona fides. The company is releasing what it calls a lightweight model version of LaMDA that requires less computing power and allows the company to add more users in order to gain more feedback. And then comes the kicker:

Soon, you’ll see AI-powered features in Search that distill complex information and multiple perspectives into easy-to-digest formats, so you can quickly understand the big picture and learn more from the web: whether that’s seeking out additional perspectives, like blogs from people who play both piano and guitar, or going deeper on a related topic, like steps to get started as a beginner. These new AI features will begin rolling out on Google Search soon.

Alphabet has to protect the most valuable franchise in all of technology: search. The company owns more than three-quarters of the world’s search traffic.

Microsoft is not sitting still. The company is holding a special press event Tuesday afternoon, and the betting is that the Redmond giant is going to announce that ChatGPT is going to be shoehorned into the company’s Bing search engine. After splashing out $10 billion for its partnership with OpenAI, Microsoft has to keep its publicly perceived place at the head of the AI parade.

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