Growing Quality Morning Market Feed 01.05.24
It was an eventful day for stocks as the 4 big ETFs fell by a notable amount, we will take a look at what happened there and if this may have any further consequences. Furthermore, we have seen some earnings reports which we will take a look at, in Amazon, PayPal, AMD, and Starbucks. Finally, we will take a look ahead to the day to come as there will once again be a bunch of catalysts for the market to move.
S&P500: -1.58% Dow Jones: -1.48% Nasdaq: -1.89% Russell2000: -2.03%
(End of day 30.04.24)
What Happened To The Markets Today?
Before the markets opened yesterday we had some economic data coming out. Was it important data? Seeing what the market did we can surely assume it is. The Employment Cost Index was the data point that was released and expected to in at a 1% increase QoQ. In reality, the number came in at 1.2% QoQ, fueling the hotter-than-expected economic data points. Higher wages can be a problem as this can spark a wage-price spiral, where wages keep increasing in order to compensate for inflation, but by doing so, it increases inflation due to consumers having more money to spend.
Other data points that came in were the Case-Shiller Home Price YoY (+7.3% vs 6.7% exp), which came in hot with house prices increasing more than expected. Chicago PMI (37.9 vs 45 exp) meaning contraction was more than expected. CB Consumer Confidence (97 vs 104 exp).
Amazon earnings
Amazon reported earnings that made the stock increase 1.2% in after-hours trading. When we look at Amazon earnings we must first run to see AWS numbers, which look very healthy with a 17% increase in sales YoY. Operating income increased about 320%, which leads EPS to come in at $0.98 compared to $0.31 a year ago.
What does stand out on the balance sheet is a 478% increase in inventories at the end of Q1’24, compared to Q1’23.
PayPal Earnings
PayPal earnings came out and this was the first time they reported under the new EPS methodology. But what were the numbers, what was good, or bad, and why did they change this?
PayPal reported adjusted EPS of $1.08 vs expectations of $1.20. As this number was released, the stock slid about 5.5% before rapidly recovering as it was discovered that this number came under the new methodology. When this methodology was compared to Q1’23, EPS increased by 27% YoY. Under the old methodology, EPS came in at $1.40 vs $1.17 in the same quarter a year ago, an increase of 19.5%. What else happened? Revenue beat and guidance was lifted, PayPal beat this quarter on all fronts.
AMD Earnings
Let’s set the stage for AMD earnings before going into the numbers. This will make it clear how I think of them. AMD trades at a 300 PE, 48F/PE, and 0.44% FCF yield (-0.10% when adjusted for SBC). These numbers would suggest we are looking at a company with staggering growth, but unless 2% revenue growth YoY is that staggering you may be disappointed. So then maybe adjusted net income? Again a staggering increase of 4% YoY, while EPS increased 3%.
AMD has done very well over the past years as they improved the business massively, bidding it up to a 48F/PE may however be a bit overdone when we see these results. Let's just hope people will actually go from Nvidia to AMD as an alternative.
Starbucks Earnings
Starbucks is down about 11.5% in after-hours trading as the company reported worse-than-expected earnings, and they were bad. Fiscal Q2’24 presented sales that were down 3% at comparable stores. Change in transactions was down 7%, which was offset by a 4% increased sale in tickets and a 3% increase in store count.
Revenues were down about 600K ($6,380.0 ‘24 vs $ 6,380.6 ‘23), and operating income was down 6% as operating margins decreased to 18.0%, from 19.1%.
The Day Ahead
The day will bring another wash list of economic data points, but all eyes will be on Powell’s speech after the interest rate decision. The interest rate is expected to remain unchanged, as the CME FedWatch tool tells us investors give a rate cut a 1.6% chance. The tonation of Powell is what will be listened to to determine his dovish, or hawkishness.
Before we get there, we will first see the ADP Employment Change (175k exp), S&P Global Final Manufacturing PMI (49.9 exp), ISM Manufacturing PMI (50 exp), JOLTs Job Openings (8.69M exp).
We will also see a bunch of companies reporting earnings. The ones I will be looking at are:
Before Market Open:
Mastercard, $3.25 of EPS on $6.338 billion in revenues
Marriott, $2.16 of EPS on $5.946 billion in revenues
After Market Close:
Qualcomm, $2.33 of EPS on $9.353 billion in revenues
Doordash, $(0.03) of EPS on $2.452 billion in revenues
First Solar, $2.00 of EPS on $718.2 million in revenues
