Growing Quality Morning Market Feed 05.02.24

Yesterday marked an important day as recent economic data points came in less than ideal. FED Chairperson Powell has given his speech and I have to admit, it had me slightly nervous. We have seen Starbucks stock crashing from the sky as they bet big and absolutely missed. Besides these events, we also saw the AI trade slow down, so let’s look back at yesterday and see what happened.

S&P500 -0.32% Dow Jones: +0.20% Nasdaq: -0.72% Russell2000: +0.21%

Numbers as of market close May 1st

• Jerome Powell

Let’s start off with the most important part of the trading day. That was the FED rate decision, or better said the speech following it, and as I said, I was slightly nervous going into it as I was fearing a hawkish Powell due to recent data points.

One of these data points was the JOLTS report that was released yesterday. The job opening numbers came in at 8.48 million for March, down from 8.81 million in February. Expectations were for 8.68 million openings. The trend is starting to point downwards. The Associated Press (AP) however makes the point that this is still a historically high number as before 2021, the number has never been above 8 million. What has to be said is that it is the lowest number since February 2021. 

Quits also dropped, to the lowest level since August of 2020. The number came down to 2.1%.

Let’s take a look at what happened to some stocks before we take it back for some last comments regarding the FED.

• Mastercard earnings

Mastercard reported earnings and posted a rare miss as EPS came in at  $3.31 vs $3.25 expected. Net revenue came in at $6.3 billion, this is an increase of 10%, or 11% on constant currency, and was slightly ahead of expectations.
Advertising & Marketing, and provisions for litigations were cut sharp which contributed to about 1/3 of the increase in operating income

Mastercard slightly adjusted full-year revenue and adjusted earnings guidance downwards to the low end of low double-digit growth, previously expecting the high end of low double-digits.

• AMD & SMCI

Yesterday I already reported on AMD’s amazing earnings, *not*. This resulted in the stocks ending the day down about 9% for AMD, and 14% for SMCI. So why do I want to mention it again? In order to let you know that this has also been the reason why Nvidia and Arm had been somewhat dropping. The AMD, and SMCI drops were to such an extent that they took the big and mighty Nvidia with them.

• Carvana

The best stock in the world is soo back. Carvana reported earnings in which they managed to become net profitable, even if it was due to a 75 million dollar gain on the fair value of their warrants to acquire Root. This did not impact EBITDA, which came in at $235 million on an adjusted basis. The most riggable number in the earnings report.

So how did the company guide? “A sequential increase in our year-over-year growth rate”. Well, that’s great, now investors know what to expect.

What is more likely is that the stock jumped 30% in after-hours trading due to the extreme amount of short sellers in the stock. According to Yahoo Finance, the stock still has a 31% short interest based on the company’s float, making it a very good short squeeze target.

• Starbucks

Shares of Starbucks increased their fall from grace as the CEO came on CNBC to discuss the earnings and let’s just say that it wasn’t a very pretty thing to look at. According to the CEO, the drop in demand was due to the weather, and some other factors they had no control over. When he was asked if it may had something to do with simply outpricing customers, he acted as if it was only customers who didn’t really go there anyways, and that they have action plans in place. These action plans are expanding more in Honduras, not fix the issues.

• Let’s just go back to the fed for a minute

Because what we have seen was a FED which took a surprisingly dovish stand. Although I thought he was going on a more hawkish path towards the end of his prepared remark, he started to respond a lot more dovish than I expected with the latest economic data points. The FED will slow the tapering of the balance sheet from 60 billion dollars, to 35 billion dollars. What else happened? Powell said that the first rate move would more likely be downwards, than upwards.
He did acknowledge the recent problems in the economic data points but expects this to improve towards the second half of the year. Although I am still fearful for a second wave of inflation, or a substantial bounce and short uptrend in inflation data, it makes no sense to fight the FED, which means that I have turned, although still cautious, substantially more bullish and have reduced my cash position by quite a margin.

• So what are we looking at today?

We are expecting job cut data, initial jobless claims, and continuing jobless claims. These will be important and may be a bit counter to what the FED has told us yesterday, but as long as these will not come in dramatically bad, it should not post too many issues at this point.

We are also looking at a bunch of interesting earnings, we will be looking for numbers from:

• Apple (AAPL): $1.51 EPS on $90.366 of revenues expected
  Apple is widely expected to have had a rough quarter, as they have seen market share decline in China, as well as a bunch of other demand problems that analysts have been giving comments on for the quarter. It would surprise me if Apple came in with disappointing numbers but if more uncertainty starts coming into the stock, it can see some downside.

• Booking Holdings (BKNG): $13.98 EPS on $4.254 of revenues expected

• Moody’s Corporation (MCO): $3.01 on $1.698 billion of revenues expected
  Expectations are high for the debt rating segment of the company as S&P Global posted a very nice rebound in this segment with a 29% rebound in this segment. As the two companies operate a duopoly in the segment, this will also be expected from Moody’s.

• Coinbase (COIN): $1.15 EPS on $1.36 of revenues expected
  What I will be looking at is the impact of the ETFs on their commissions. This was still very good during the last earnings release, where they were also hinting at enormous improvements in income.

• Block (SQ): $0.72 EPS on $5.829 billion of revenues expected
  With Block, it will be interesting to see if they make any comments regarding the Federal Prosecutors probe after an employee tipped them of lagging compliance practices which continued for years. What else I will be looking at is if they dilute the entire earnings away with SBC like they did with full-year 2023 numbers.

That was it from me for today, I hope you have a nice day and we’ll be in contact again tomorrow.