Wall Street’s Usual Suspects
♫ Into the thick of it! Into the thick of it! ♫
I’ve had that Backyardigans song stuck in my head all weekend, Great Ones … and I just had to share. But it’s not just a massive earworm, it’s also rather appropriate for this week on Wall Street.
We’re definitely heading into the thick of earnings season this week. Just wait ‘till you see today’s Chart of the Week. Tesla, AMD, Apple, Microsoft, Alphabet, Facebook, Amazon … man, what a doozy!
Luckily for Wall Street — and your portfolio — earnings excitement was enough to keep stocks from breaking down completely today. Without that excitement, the Dow, S&P 500 and Nasdaq might’ve dropped like rocks.
Here’s a quick rundown of Wall Street’s usual suspects to watch this week:
I definitely do not envy Federal Reserve Chairman Jerome Powel right now. The guy is in a tighter situation than Keyser Söze telling tales in a police station.
The Fed has an increasingly narrow line to walk between rising inflation and slowing economic growth. Can you say “stagflation?”
Of course you can, but none of us really want to use that word out loud. Some of us still remember the late ‘70s — and none too fondly.
The two-day Federal Open Market Committee meeting kicks off tomorrow, with the Fed handing down its decision on monetary policy this Wednesday. Everyone will be paying close attention to any indication on when the Fed will start winding down its bond buying program and begin raising interest rates.
As if COVID-19’s massive resurgence wasn’t bad enough, BioNTech CEO Dr. Ugur Sahin told the Wall Street Journal that the vaccine it developed with Pfizer is decreasing in effectiveness. “The vaccine protection against the new variant is considerably lower,” said Dr. Sahin.
The debate comes as the CDC debates reinstituting a public mask mandate amid a 48% surge in daily average infections and hospitalizations — all driven by the highly infectious delta variant.
Naturally, Wall Street is freaking out because, if things get bad enough again, we could see even tighter restrictions that would further exacerbate the slowing U.S. economic recovery.
The Commerce Department will release its initial estimate for U.S. second-quarter economic growth on Thursday. Economists expect a massive explosion to the tune of 9.2% growth in U.S. GDP for the April-June period. If expectations hold, it will be the fastest year-over-year growth since 1983.
But don’t get too excited. Economists believe that growth will slow considerably in the second half of the year. “Growth has peaked, the economy will slow a bit in the second half of this year, then much more noticeably in the first half of 2022 as fiscal support fades,” said Mark Zandi, chief economist at Moody’s Analytics.
And we’re not just talking “Base Effect” here. The U.S. economy has been on some sort of training wheels ever since 2009 … and that has to end sooner or later (see “The Fed” above).
What economists are really worried about is that most U.S. consumers have seen their household net worth soar in the past two years — largely due to rising asset values, such as soaring home prices. But while household net worth is flying high, household debt payments compared to disposable income is at their lowest point since 1980.
The new question here is, with so much household net worth tied up in assets, what will consumers do when housing prices finally break and return to normal?
It’s not a pretty picture, and it’s already starting to happen. New U.S. single-family home sales dropped 6.6% in June, while foreign investment in U.S. housing dropped 27% to a record low. Hold on to your hats. This won’t be pretty.
China’s everywhere. Everywhere. It’s beating the U.S. in the digital currency market, as the new digital yuan begins to gain traction in the absence of a digital U.S. dollar.
Over the weekend, Chinese regulators blocked Tencent Music from holding exclusive music streaming rights. They also banned education companies from foreign investments and from raising money in the stock market.
What’s more, top-level talks between China and the U.S. broke down over the weekend, with China accusing the U.S. of creating an “imaginary enemy” to divert attention from problems at home. So much for all those “China Joe” memes I keep seeing.
“Reaching agreement or specific outcomes was not the purpose of today’s conversations,” a senior U.S. official said, which seems like a nice way of saying: “Things really went to s%#&, but it’s not like we were really trying.” Or something like that.
Into the thick of it, indeed.
Corporate second-quarter earnings … you’re our only hope! If only Obi-Wan was still around…
Now, if Wall Street’s usual suspects have you ready to leave this rock for a galaxy far, far away … I don’t blame you. But check this out before you join Team Rocket and blast off again (weird crossover, I know.)
Everything is setting up perfectly for space stocks to go on a historic run. And Paul is all over it. He just released a new video outlining his expectations for the entire sector. Click here to watch it now.
Good: Tallyho, Merry Men!
After all the grief I’ve given Robinhood in the past year, I’m honestly not sure how many Great Ones still use it. Feel free to drop me a line and let me know: GreatStuffToday@BanyanHill.com.
But … if you do still use the meme stock wonder, Robinhood is officially going public this Thursday. The company will list with the ticker HOOD, offering 55 million shares priced from $38 to $42 per share.
What’s more, this is not a traditional IPO: Robinhood will sell about 35% of those 55 million shares directly to Robinhood App users. So, like, if you’re down with the HOOD, you need the app for a direct line on Robinhood stock.
The company hopes this direct listing to Robinhood App users will be the first of many as it attempts to diversify away from selling your information as part of its payments for order flow business model.
And by diversify away, I mean Robinhood will still sell your information, but it’ll make more money with direct listing IPOs. What did you expect from a company that blocked GME and AMC stock purchases for users back in February, but then touted “equal access to financial markets” during its IPO roadshow?
Personally, I think HOOD will be a good investment given Robinhood’s growth — assuming regulators don’t kill the company completely, that is.
Better: Hasbro’s Nat 20
Sometimes I think I was born in the wrong generation, Great Ones. The two biggest games I played growing up are now Hasbro’s (Nasdaq: HAS) biggest moneymakers: Dungeons & Dragons and Magic: The Gathering.
Sure, Monopoly is fun and all … but no one will play with me anymore because, according to my wife: “You don’t play fair!”
It’s Monopoly — that’s the point! Like I’m gonna trade you Boardwalk for two railroads when you have Park Place. I know it’s two-for-one, but it still ain’t gonna happen! You’ll get Boardwalk when you pry it from my cold, bankrupt fingers.
Anyway, the days of traditional board games are gone. The era of Dungeons & Dragons and Magic: The Gathering are in. Hasbro beat both top- and bottom-line expectations handily. If you’re curious about the numbers, earnings came in at $1.05 per share on revenue that surged 54% to $1.32 billion.
Results were driven by a fourfold increase in Wizards of the Coast and digital-gaming sales, which hit $406.3 million. Wizards, by the way, makes both Magic and Dungeons & Dragons.
HAS jumped nearly 12% on the news, putting the shares back above $100. I’d expect some consolidation in the $100 area as investors digest this impressive earnings performance. And if you’re interested in buying HAS, this consolidation period is exactly what you’ll want to look for.
Best: Bezos Bucks
I know that, to many of you out there, crypto is hardly any different from Monopoly bucks … but soon, you’ll be able to use all that crypto funny money to buy Monopoly bucks.
The rumors-that-kinda-maybe-aren’t-rumors came from an “anonymously sourced report,” presumably from those infamous people familiar with the matter. What’s more, Amazon’s new job listings for blockchain and crypto specialists kinda makes the company’s new digital direction that much more obvious.
Like they say, what’s good for the bitcoin is good for the gander … I think. Virtually every crypto took off like a shot today on the Amazon/bitcoin news: BTC is up about 10%; Ethereum is up 7%; even Dogecoin was up 11%. And so on.
Where this gets even more interesting is that Amazon supposedly has plans to make its own cryptocurrency — a native coin that’s still unnamed but could net you rewards for using it on the Amazon marketplace.
I, personally, can’t wait to pay for my cheap, off-brand junk with Amazon Basics Coin™. And if Amazon starts paying workers in Amazon Basics Coins … well, we all should know how that will end … coal scrip anyone?
The bottom line is clear for Wall Street and the crypto market: If y’all couldn’t tell by China’s encroaching digital currency supremacy … cryptos are mainstream now. Gone are the days where only oddball coffee shops accepted crypto. Even bitcoin can get Amazon’ed.
But where there’s crypto fanfare … Elon Musk isn’t far behind. The dude hasn’t been directly in the media for a while, and it’s gotta be wearing on his ego by now. Not only did Bezos beat Musk into space, he’s hogging all the crypto limelight these days — the nerve!
It’s only a matter of time before Elon doubles down on manipulating bitcoin or dogecoin with Amazon upstaging him … but more on that nonsense in a sec.
Lemme guess where this is going … it’s a big week in earnings, the market’s soiling itself in terror and somehow, you’re excited for it all?
Ding ding ding! This is peak earnings season, which means yours truly isn’t sleeping a wink — how could you when there’s this much great stuff to catch up on? Half the Dow and most of Big Tech?!
You bet we’re tapping in EarningsWhispers for the new Chart of the Week. Wall Street has its FAANGs out this week — take a look:
By the time you’re reading this, Tesla’s (Nasdaq: TSLA) earnings will be in the books, which means it’s only a matter of time before ol’ Elon trolls Twitter (read: diverts attention back to himself).
Everyone’s looking to see if the Big Red T can pull off its eighth-straight profitable quarter, but I’m personally looking for any worries about Tesla losing ground to its electric vehicle foes — in China and domestically.
Other than that, it’s big tech week — and not just “Big Tech” either. Everybody from Shopify (NYSE: SHOP) to Spotify (NYSE: SPOT) is due to report, though my eye goes right to Advanced Micro Devices (Nasdaq: AMD) as the No. 1 report to watch, especially if you got into our options play around said earnings.
We’ve even got a few cornerstones of the semiconductor market set to report: Both LAM Research (Nasdaq: LRCX) and Amkor Technology (Nasdaq: AMKR) should have updates on the chip kerfuffle. And depending on those updates … your triple-digit gain in AMKR might get that much better.
Teladoc (NYSE: TDOC) is another report should be interesting. How is telemedicine faring amid the Great Reopening hokeypokey? TDOC bulls raved about it taking over in the age of COVID and beyond. Going into a doctor’s office to talk? How barbaric!
Honestly, while I won’t consider Teladoc a has-been just yet — there are some appointments where I’d rather not waste time going to the doc’s office — I think there’s a limit to how much Teladoc can take over the health care game. Hold your phone up to your right lung, I’ve got my stethoscope ready.
The unknown variable here, as it is virtually everywhere else, is where the new resurgence in COVID cases takes us.
But even you oil fiends will get your fix by the week’s end: Valero Energy (NYSE: VLO), Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX). Throw in the handful of airline stocks, and you’ve got yourself a fine mix of old-school value-based plays and potential tech breakouts.
With so many big-name, market-driving names in the earnings limelight, the pressure (and anxiety) is on this week. In the meantime, what reports are you eyeing? Are any of your personal picks entering the earnings confessional — and what do you expect from them?
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Until next time, stay Great!
Editor, Great Stuff