ADP jobs data, Constellation Brands, summer gas prices: Morning Brief

Just one day shy of the July 4th festivities, the market (^DJI, ^IXIC, ^GSPC) will be on vacation tomorrow but not before clocking out one more trading session. Brad Smith and Madison Mills walk investors through the opening bell in today's shortened trading day.

Get your flip-flops ready and grab a beer this holiday because Corona maker Constellation Brands (STZ) reported its first-quarter earnings, topping profit estimates but coming just short on the revenue front. Citi US beverages analyst Filippo Falorni explains how beer sales — particularly through Constellation's Corona and Modelo brands — are still a key driver in the alcohol company's profit growth.

Paramount Global (PARA, PARAA) may be back on the menu for prospective buyer Skydance Media, as reports surface that it is in talks to buy Paramount's holding company National Amusements. Bloomberg Intelligence senior media analyst Geetha Ranganathan comes onto The Morning Brief to talk about the latest development in Paramount's M&A saga.

Other top trending stocks on the Yahoo Finance platform this morning include Southwest Airlines (LUV), Marriott International (MAR), and gasoline prices (RB=F).

This post was written by Luke Carberry Mogan.

Video Transcript

It's 9 a.m. here in New York City.

I'm Brad Smith alongside Madison Mills.

This is Yahoo Finances flagship show the Morning Brief.

It may be a short and trading week and day but stocks are not taking a breather here.

You're taking a look at the S and P after it closed above the 5500 level for the first time ever on Tuesday marking its 32nd record close of the year.

The nada are passing 20,000 the first time ever as well.

Let's get to it with the three things that you need to know for this Wednesday morning.

We've got Yahoo finances, Jared B. Jennifer and Josh left with more futures trading close to the flat line on the short and trading day.

Job creation slowing for a third straight month.

The US added 150,000 new private sector jobs in June.

That's below the 65,000 Wall Street expected.

And even below the prior month, revised levels pay gains for both job stayers and job changers.

They slowed.

Meanwhile, 238,000 people filed for new unemployment benefits last week.

That is more than expected and higher than the prior rating.

So the data showing some weakening in the labor market and all of this comes ahead of Friday's big jobs report.

J JP said to say he's encouraged by the later cool latest cooler readings on inflation but that the central bank will need to see more evidence before cutting interest rates.

He said that the last two inflation readings in April and may quote do suggest that we are getting back on a disinflationary path.

The comments come days after the latest reading of the fed's preferred inflation gauge for P ce rose 2.6% in May, the slowest annual gain in more than three years.

And today Wall Street is watching for minutes from the fed last meeting which could provide clues about how policy leaders are thinking about the timing of rate cuts and shares of Paramount Global rallying on news of a potential merger.

According to reports, production company, Sky Dance has reached a preliminary agreement to buy Sherry Redstone's National Amusements, the controlling shareholder of Paramount.

This comes after merger talks.

Remember fizzled out last month.

If that deal goes through Sky Dance would then plan to merge with Paramount Global which would be subject to approval by Paramount's Special Committee.

Our top story this morning, we're tracking stock futures.

They are a little bit weaker.

The latest jobs data came in weaker than expected for the month of June.

This came in the form of ad P private payrolls 150,000 jobs added last month in the private payrolls versus the 165,000 expected by the street.

Now, another sign of a cooling labor market and investors are hoping this could push the fed to cut rates sooner rather than later.

Well, I regret to inform you that the fed is probably not gonna pay too close attention to the AD P number as much as they do.

Some of the other employment readings.

Notably here, when we're thinking about the more cyclical and weekly jobless claims, but then also the all important monthly jobs report, which is going to come out on Friday here and give us a little bit more of a sense of where the unemployment rate that the FED is tracking is trending right now too.

Yeah, it's gonna be critical because continuing claims here have really surged over the course of the past four weeks to their highest level since November of 2021.

This is also expected to continue given some seasonal factors that are going to weigh on the data.

For example, automakers are set to shut down their plans for some manufacturing and maintenance updates over the summer.

That could lead to a surge in those initial jobless claims moving forward is that group of individuals who might get impacted by that seasonal maintenance over the summer could seek their own initial jobless claims that could lead to some upside surprises in that number and this critical because there's been this question and Stewart Kaiser came on and talked about this from city about whether the labor markets slowness that we are starting to see is indicative of a broader, slow down in this economy.

That could be a really negative factor for the Federal Reserve is they do try to have this goldilocks impact on the economy.

Kaiser saying that the labor market could be our sign into whether or not we are at a tipping point or if it's just casual weakness.

Yeah, looking through some of the other details of this private pay, Ros Prince, uh the chief economist over at AD P Naylor Richardson had actually mentioned within this release, the job growth has been solid but not broad based here.

Had it not been for a rebound and hiring in leisure and hospitality.

Of course, the hardest hit sector on the onset of the pandemic.

Uh if it had not been for that sector, June would have been a downbeat month.

She noted.

So we're actually gonna have much more in that conversation.

Of course, with Nayla Richardson, uh people can stay tuned during the 11 am hour.

We will have her speaking with us and giving a little bit more of her insight into this.

But of course, you think across some of the different industries that saw the biggest increases, the changes by industry, construction was up by about 27,000 services that was up by about 15,000 for at least trade, transportation and utilities.

Uh, and we'll see exactly what this may carry over into, uh, to, to some extent into that monthly employment situation that we get on Friday as well.

Well, the Federal Reserve meeting minutes are going to be released set to be released this afternoon after fed Chair Powell reiterating the need for more data before the central bank can really loosen monetary policy here to discuss.

We got Yahoo finance is very own.

Jennifer Jennifer, good morning ma that JP said Tuesday he's encouraged by the latest cooler readings on inflation but that the central bank needs to see more evidence that inflation is dropping before cutting interest rates.

Take a listen, I think the last reading and and the one before it to uh and inflation and the one before it to a less lesser extent do suggest that we are getting back on a on a disinflationary path.

We want to be more confident that inflation is moving sustainably down to 2% before we start the process of uh of uh reducing uh how tight uh our our policy is of of loosening policy comments come days after the latest reading on the fed's preferred inflation gauge the personal consumption expenditures index excluding volatile food and energy prices, which showed prices rose 2.6% in May down from 2.8% in April marking the slowest annual gain in more than three years.

Inflation is slowing after showing signs of stalling in the first quarter which had caused Fed officials to look at holding rates higher for longer.

Pell says the fed wants to understand whether the levels the fed is seeing on inflation are a true reading on what's actually happening with underlying inflation and reiterated that the fed can afford to be patient given a strong job market that's gradually cooling.

Still comments cheered investors looking for rate cuts later this year with investors pricing in nearly a 60% chance of the first rate cut in September today, we will get minutes from the central bank's last policy meeting though, those may be a bit dated because we did not have the latest reading of the Fed's preferred inflation gauge core P ce at the time guys.

All right, Jennifer, thank you so much for joining us.

We really appreciate it.

Well, stocks are set to open at all time.

Highs after the S and P 500 closed above 5500 for the first time in history.

But taking a look at the futures right now, we are seeing the market pairing those gains that we saw earlier in the day off of some of the data that is coming out.

We're also seeing moves in the Treasury space.

So we're going to discuss all of that and more with our next guest who does see more upside to come joining us in studio.

We've got Elise Osenbaugh, Elise Thank you so much for joining us.

I should mention you're with JP Morgan Wealth Management and the global Investment strategist there.

So talk to me about the data we got this morning because we are seeing treasury falling a little bit off of it.

How big of an impact do you think that this could have?

I think the bigger picture is the the primary driver of the story, right?

We too are going to be hyper focused on what we see out of the employment data come Friday.

But all in all, we continue to see a labor market that remains rather robust and working in the favor of consumers with positive real wage growth.

And I think we're finding ourselves in kind of this healthy slowdown that ultimately gives one of those key ingredients for the soft landing.

And so how long would that slow down?

Kind of if it does continue for long?

At what point does it become an unhealthy, slow down?

The thing about labor market moves is they can happen really, really quickly, but you're not seeing that dramatic deterioration and things like unemployment yet, I think if you were to see a meaningful rise in the unemployment rate above 4% that would maybe start to stoke some concern and maybe put that fed, put back on the table.

But for now, I think all things considered, we remain confident about this rebalancing of labor supply and demand.

How does that play into your take on the equity market given that we have hit these recent all time highs.

But there is this constant question about valuations and concentration.

We're actually pretty comfortable with valuations where they are right now.

I think in an absolute sense, you of course, can point to something like pe ratios and say, oh my gosh, relative to history, they are elevated and particularly when you're comparing that to where bond yields are right now.

I think it causes some like pause for investors.

But in an environment where inflation concerns and risks are perhaps as great as recession risks, neither of which we think are particularly meaningful.

Our base case is for a soft landing.

I think so long as that remains part of the equation, these valuations are actually fairly justifiable, particularly because the rally is being driven by these really profitable companies that are surprising to the upside, right?

And there was a larger question of for investors out there trying to figure out or wrap their minds around whether or not we could continue to see new all time highs if we did not see the FED signaling that we're ready to cut here.

But for Fed chair Jay Powell, who is coming out in Portugal yesterday, of all places won't even say this on our home soil coming out in Portugal and saying, hey, we need to see more evidence is the more evidence just the amount of data or is it more deterioration.

I think it is a continuation of the trend that's resumed in the second quarter of this year.

What we've seen from the inflation data in recent releases suggests that maybe the Q one sort of hot streak was more of a blip on the radar.

So I think what Powell and the rest of the FOC are really looking for is just this ongoing cool down.

But with P ce at 2.6% when you're looking at that core measure, I think that is a rate of inflation that corporate America is rather comfortable with.

And you're seeing that show up in, you know, resilient profit margins and ongoing rolling recoveries in earnings.

Speaking of those rolling recoveries and earnings, though, I am curious, the degree to which earnings are going to drive the market heading into the next couple of months here or is it going to be politics or the fed?

Which of those three do you think defines the next, let's say six months?

Sure.

So in the near term, I think with all the uncertainty, that's kind of rearing its ugly head related to the elections that very well could stoke more volatility.

I think as investors continue to play this guessing game of not if but when the fed will cut interest, that might cause some fluctuations in markets.

But at the end of the day, we think that the next big catalyst for equities is going to be the earnings season.

And when we pencil in our outlook for the year ahead, it's really that earnings component and not the valuations that's driving our outlook for the S and P 500 to hit more all time highs over the next 12 months.

With earnings season being the catalyst.

What do you think that the theme that prevails this earnings season is?

Look in Q one, we saw a lot of focus and mentions of things like artificial intelligence.

So investors should probably continue to be really focused on.

Not just whether those companies are talking about it and thinking about incorporating it into their business models, but whether they are actually applying it in real time, that adoption will be a process measured in years.

But nonetheless, we do think that it's going to continue to offer tailwinds for the enablers but also start to cause some beneficiaries in terms of productivity increases or cost efficiency agencies to emerge across sectors.

Thank you so much.

It's always great to have your insights, really appreciate you coming in the studio.

Thank you, Elise HBA, who is the JP Morgan uh Wealth Management, Global investment strategist.

Joining us here in studio, everyone.

Let's talk a little bit about paramount as we're tracking that this morning too.

Shares of Paramount Global Rallying on revived merger talks.

According to reports, production company Sky Dance has reached a preliminary agreement to buy Sherry Redstone's National Amusements are controlling shareholder of Paramount.

Now, if that deal goes through Sky Dance would then plan to merge with Paramount Global here with some analysis.

We've got Geeta Ranganathan, who is the Bloomberg Intelligence, senior media analyst, Geeta just take us into what is finally happening here.

It seems like, I mean, I I feels like we've been going back and forth on this since the Obama administration.

Uh So what, what, what exactly does this mean for investors out there?

But also perhaps for consumers?

Yeah, thank you so much, Brad.

Good morning.

So, yeah, this, you're absolutely right.

This has been dragging on for months and months right now, more than six months I would say.

And this is basically what we're seeing is a re engagement with Sky Dance media from the Redstone family.

Remember this had been completely, the talks had completely broken down just about three weeks ago, we were almost at the finish line and in the last minute you had Sheri Redstone kind of swooping in and saying no, no, go to a deal which she had principally agreed.

So again, there's a lot of uncertainty here.

Sheri Redstone will call all the shots.

But what we are seeing in terms of what this means for investors.

Again with Sky Dance, what we've constantly seen is that they are proposing a deal which basically favors Sheri Redstone, who is the controlling shareholder, favors her over everybody else.

So it favors her over class A shareholders as well as class B shareholders.

And that is something that has the potential for attracting a lot of lawsuits.

And that is something that, you know, has made Sheri Redstone extremely wary.

And so it looks like this time around there is much stronger indemnification language in the agreement that should or could potentially protect her from a lot of the upcoming litigation.

But again, none of the deal terms really are very clear at this point, other than Sky Dance offering about 1.75 billion for National Amusements, which is again the parent company of Paramount and that there is this 45 day, you know, kind of go shop period.

Uh I think what it means for consumers again is just a whole lot of uncertainty.

What we've seen Paramount do recently is they've raised the prices on their Paramount Plus streaming service.

So again, what we're seeing is, you know, streaming products all across the board, higher prices, not really a good thing for consumers.

Gita, it's Madison, it's great to speak with you.

Thanks for coming on.

Uh I'm just interested in your take on the degree of the upside move that we're seeing in the stock off of this news.

It's up over 13% obviously surging overnight and into the pre market here.

What does that tell you about sentiment from the shareholders?

Sure, Maddie.

So I think that, you know, shareholders obviously are just excited that, you know, M and A is back again on the table, I think just over the past few days, we've kind of seen a kind of a change, I think in overall sentiment there is obviously now this specter of kind of a Trump possibly a Trump administration and that obviously will ease the regulatory climate and maybe that's part of the thinking for Sky Dance and Sherry Redstone as well.

But the one thing that we have to remember is that the longer and longer this whole process kind kind of drags out the less and the less value that the assets will have.

And I think Sheri Redstone realizes that she's been publicly negotiating for for six months.

But that's something that's highly unusual in the media landscape in, in any M and a deal for, for that, for that matter.

So for her to come that far and then just drop everything again.

That was obviously it created huge overhang on the stock.

And I think she's realized that which is why she's back at the negotiating table.

Wow.

Ok. And so now as we're kind of really trying to wrap our minds around what this means for the larger media landscape, I mean, this was one of the last major deals it seemed like was, was waiting to finally get over the goal line here.

I mean, it's not sign sealed delivered just yet, but is this the end of the big deal making or should we expect more?

I think we can expect a lot more.

And I only say that because, you know, media is really in a bad place right now and that's traditional media.

So we've seen a kind of the linear network business really being in secular decline.

We're seeing more and more people leave the traditional pay TV ecosystem as they kind of migrate to streaming.

And that's really not good for companies such as Paramount, such as Warner Brothers Discovery, such as NBC, which have huge exposure to the linear TV model.

So obviously, again, it's going to depend a little bit broad on the regulatory climate.

But I think if it becomes, you know, much more favorable, I think we're going to see a whole slew of deals which will include a lot of these legacy media players, whether that's, you know, Paramount Warner Brothers Discovery, maybe Sony, maybe Comcast and NBC.

So I think there's a whole lot more to come really great insight.

Geeta, thank you so much for taking the time.

Geeta Ranganathan, who is the Bloomberg Intelligence, senior media analyst.

Great to see you this morning.

Thank you everyone.

We're just getting started here on the morning brief, coming up shares of constellation brands moving higher on the back of its earnings.

We have analyst reaction coming up next and we'll get the latest read on activity in both services and manufacturing sectors.

What this means for the markets and the economy more broadly later on in the show, we've got all this and much more.

You're watching morning breath.

We're taking a look at shares of Constellation brands this morning, the stock up over three and a quarter percentage points after posting better than expected profit for its fiscal first quarter and reiterating guidance for the full year here for deep dive into the latest report.

We are joined by Philip of cities, us, beverages and household products and personal care research analyst.

It's great to speak with you this morning.

Thanks for coming on.

So I I know that you mentioned that the beer scanner data was a little bit of a concern.

What do we know now about the degree to which beer impacted constellation brands off of this print?

Yeah, absolutely.

Good morning, everyone.

And uh thanks for having me.

So look, the quarter was very solid from constellation brands.

There was some concern because the the track channel data which is tracked by Nielsen and circa show a little bit of slow down uh particularly into April and May.

Um but the quarter was better than expected.

They reported 8% year over year sales growth in the beer business.

Um and 6.4% depletion growth, which is a measure of volume and those were very strong results and better than expect expectations that were more in the 5.5% rate.

So again, continue very strong trends for for the beer business driven by the Modelo special brand which was up 11% in the quarter.

Yeah, also craft spirits portfolio, achieving double digit growth in dollar sales.

They mentioned that kind of outperformed what they were expecting on the higher end of the spirit segment there.

What is the trend that you're tracking within that portion of the business?

Yes, Brad.

So that part of the business is part of the wine spirits segment, which overall has been under performing and it's mainly driven by the fact that the the biggest part of the wine spirits business, which by the way is only 20% of the company sales is the wine side.

So it's the Woodbridge brand.

But as you said, the the side which is the premium spirit side of the business has been doing extremely well.

It up double digit, the issue in that part of the segment is that it's small and it doesn't really drive a lot of the segment sales, but they continue to grow.

Well, particularly with the two big brands that they have there, which are High West in whiskey and Mika and Casa Noble in Tequila.

I want to talk about some potential catalysts for the stock moving forward because you say that you are listening in for innovations to come.

Just give me some context because I obviously don't cover uh this area every single day the way that you do.

How much do those innovations drive sales versus just the bread and butter, typical bottle of Corona sales.

Yeah, absolutely.

That's a very good point.

Historically, innovation has been driven about 20% of the company's sales growth in any given year.

Last year, they had a very important innovation with Modelo Oro, which is a low calorie, low carb version of Modelo special.

Uh and that was particularly a success last year until last summer.

This summer, the big innovation is going to be Corona S brew, which is a citrus brewed version of Corona, which, you know, it's very drinkable, very summery and really good timing with the, with the launch ahead of Fourth of July and, and the summer, you know, thi this is gonna be I think a big summer for consumption and, and it's primarily driven by what we're seeing in sport in the Olympics.

How does this company have anything to benefit at least kind of secondary wise from what's taking place within this massive four year event?

Yeah, absolutely.

Look, sport, sporting events tend to be like a driver of social gathering and a driver of uh occasions for, for drinking for, for to be a business.

Uh when you think about the geographic exposure, they are, they are essentially entirely us based.

So for them, they would not have direct implication from the events from the Olympics in Paris.

But there will be some secondary impact as you said from people gathering and watching the Olympics or more recently, the Cup America uh which has been played in the US and it's, it's an event that tends to drive a lot of attention, particularly among Hispanic consumers and constellation tend to skew a little bit more to Hispanic uh consumer with 60% of their consumer base being um in that part of the population.

So to me, you got Cup America, you got the Euro Cup in, in um uh in Europe playing right now.

I know you got the summer Olympics in Paris.

All those could drive more social interaction and and ultimately more beer drinking occasions.

You know, as I'm looking at the fiscal 2025 guidance assumptions here.

One of the major things that we've heard as a theme over the course of this earnings season uh is is about capital expenditures here and they're looking for that to come in at about 1.4 to $1.5 billion.

Um And that includes some, some other factors as well, but I I bring that up because do you think the next innovation from Constellation brands comes homegrown or is it via an acquisition?

Yeah, look when you think about their, their cap expanding is really to expand their Mexican uh brewing operation.

So they right now they have two facilities in Mexico where they produce all their Corona and Modelo brands uh which are one in Obregon and one in Nava.

They are opening a third manufacturing facility in Veracruz, which is in the southeast of Mexico and that should help have give the company enough capacity capacity for them to drive further innovation.

Again, there's been an area where they, they've stepped up innovation more recently in recent years, as I mentioned model or last year, Corona Sambre this summer, if you go back a couple of years, they launched Corona Premiere, which is also another low cal or a low carbs um innovation.

So I would expect their innovation to come more internally.

So uh from their own brands um from an acquisition of Sao Paulo in the past, they've done a few acquisitions in the beer business.

The last one was um the acquisition of Bala Point in 2016, they haven't really been successful.

So I would think they would probably continue to push forward an innovation on their core Mexican uh beer portfolio.

Good note there.

Flipo, thanks so much for taking the time here this morning.

Great to see you, Felipe Fone us beverages and HPC research analyst at city.

Appreciate it.

Another ticker we're watching this morning is Eli Lilly.

Shares are up right now.

Fractionally after the food and drug administration, the FDA approved the Pharma company's Alzheimer's drug after facing multiple challenges in its path to market health reporter Angeli Kamlani has the details.

Hey and hey guys.

Yeah, the good news for Lily, of course, another drug for them that gets the FDA stamp of approval and this time the Alzheimer's drug which has been struggling to get to market, it's been delayed.

A couple of times, but we've also seen that with competitor le can be, that's from Biogen and a sign that is what this new drug Kiss and Law is going to be competing against.

That is a market that is pretty tough.

Right now.

We've seen the can be struggle to really gain more following, sorry, more prescriptions for that.

And what we know is that that's Eli Lilly is put, is priced a little bit higher, in fact, so that's gonna be an interesting market for them.

And just to recap what we know about this drug, it helps reduce cognitive decline by about 35% in 18 months.

It's a monthly infusion just like it's uh its competitor le me, but that's a twice monthly infusion.

So you do have that burden of getting to a clinic for that.

Um It's for the senior population, 16 older and does treat mild dementia.

So this is another drug that has to be used earlier on in the diagnosis for Alzheimer's.

So that's something to keep in mind for who gets access to it.

We also know of course that there are scans and the like that have been obstacles and hurdles for patients to get on this.

But this is good news for the market because uh obviously more competition out there.

Just a quick note to look at those prices $32,000 a year for uh the new drug.

Meanwhile, it can be at 26 5.

So a little bit of a discount there for the drug that's been on the market longer.

Good news for Lily on two counts.

One, it is now in this new space, Alzheimer, we know of course, is an area that has been begging for some innovation for some time, but also for Lily, which we know is on a tear because of G LP ones.

And now adding this to the bucket for its revenue, Angeli, thank you so much for joining us on that.

We really appreciate a huge obviously update for one of the names you're covering all the time.

Thanks so much an we are going to get to the opening bell here on Wall Street happening right now.

So let's do a quick check of the markets.

You're looking at a mixed picture across the major indices, the S and P just hovering above that flat line, the NASDAQ just covering below the flat line here.

I want to take a quick look at what we're seeing in the Treasury space because we know that yields were falling after the jobs numbers coming in and continuing claims in particular hitting the highest high since November of 2021.

You're still seeing that downward pressure, particularly in the 10 year yield and also the 30 years.

So looking at the longer end of the curve in terms of the pressure on Treasury following this morning's data, but let's get to Yahoo Finance's Jared blicker for a broader look at what's moving.

Markets, Jared, thank you, Mattie.

Not surprisingly, markets are a bit quiet.

Now, looking at the dow behind me, this is over three days, up about three quarters of 1%.

Just want to show you the NASDAQ 100 real quick, passing 20,000 close above that level yesterday.

And finally, the S and P 500 over these last three days, you can see it's been from the lower left to the upper right and yesterday was the 32nd record close of the year.

So really stacking up there and I want to focus on the sector action today.

The number one sector consumer discretionary, that's XL Y that was up uh pretty big yesterday as well.

That was a leader yesterday.

And I've been tracking on this five year chart.

Well, that's materials right there.

I want to pull up XL Y and on this five year chart, we can see a lot of these sectors have formed cups, but you know, you'll notice that this high right here is lower than this record high over here.

So a little bit of a different pattern but could be setting up for a longer term breakout.

But uh just looking at the three month chart here, you can see finally breaking into the upside.

We got a lot of records with respect to uh some of the mega caps here.

But I do want to get to our meme stocks because cost is definitely parking up.

If I sort on an equal weight basis, you can see it is our number one stock here up 33%.

And I was looking at, uh, the episode of gamestop surging recently from here, this is cost.

So from this low to this high was 200%.

Gamestop in the same period went from, uh, all the way up to 400%.

Uh, But this as we know, be stocks kind of go up in concert.

And so is this the next play?

Well, at least today it is guys.

All right, Jerry Blier.

Thanks so much.

All things around the opening bell.

Hey, for anyone wondering who rang the opening bell today, it was the United States Coast Guard at the Nysc Macy's, who's uh authoring the fireworks this year in New York gonna be ringing the closing bell over there.

All right, everyone.

We're also watching Airlines this morning.

Shares of Southwest.

They are on the move fractionally higher right now by about nine cents of a percent after the airline said it's going to implement what they're calling a shareholder rights plan.

And this is an effort to fend off activist investor firm Elliott management.

Shareholders will be entitled to purchase one new share for every share they own at a 50% discount.

But that's only if Elliot or another investor acquires at least 12.5% of the company.

All right.

So they're calling it a shareholder rights plan.

What you should note this as more colloquially is a poison pill.

Nice brad.

Yeah.

I mean, that's what it boils down to.

They're trying to make sure that they can fend off any major type of activist play that would impact the airline operator, the seats on the board.

And especially if Elliott were to assume a certain position 12.5% in this particular case of the outstanding shares of the company.

That's exactly right.

And it's interesting because I mean, our succession fans out there like myself are going to be familiar with the hostile takeover, but the poison pill would protect against that.

However, obviously, you can tell by the name not always giving them the best over outlook, but it does enable the shareholders to potentially get the best deal possible.

Here.

I do want to pull out a quote here because we heard executive chairman Gary Kelly saying in light of the potential for Elliot to significantly increase its position in Southwest, the board did determine that adopting the right plan is prudent to fill its fiduciary duties to all shareholders.

And the board does continue to believe it has the right strategy, the right team in place of the plan would be triggered if a person or group does acquire a stake of over 12.5% of the firm moving forward.

And like you mentioned, Brad Elliot disclosing roughly $1.9 billion ST back in June in that letter to the board and said they feel that their suggestions could boost the stock by over 75% over the course of the next year.

But the details of those plans, they included them.

But you know, obviously Southwest board saying that they've, they've got things under lock and key here.

All right.

Well, we are taking a look at major indices here flipping over to the green following the opening bell.

You can see the S and P and the NASDAQ though just above the flat line as well as the Dow.

We're going to take a look at strategist predictions for the rest of the year.

That's right after the break, markets hovering just above the flat line after record highs this week to discuss strategists outlook on the rest of the year.

Yahoo Finance's very own miles.

Edland is here.

You've been tracking the strategist takes pretty much across the board here.

Who, who is filling in for Josh Schafer, who is in his job for the day, who has the most resounding perspective right now on what could prevail in the second half.

Well, I, I think if you, you know, look at the lay of the land, it obviously has to be the folks um with the 6000 price target.

But, you know, the most recent move was from Laurie Cabana and her team over at R BC in a note yesterday to clients raising their price target to 50,700 from 50,300.

So we're only 200 points away.

All these price targets.

And of course, Julian Emanuel at ever with that um most bullish outlook, all these price targets, which really came higher in the last couple of weeks seemed, you know, exciting at the time.

But now, of course, with the S and P at what, 55 09, yesterday, 55 and some change this morning, we're basically right back at these levels.

And I think, you know, Laurie's note yesterday captured the sentiment from a lot of folks you ask, who's the most resounding?

There's a, a sense of resignation and maybe that's too negative, but there's like this, look, we were bullish, you know, a lot of Wall Street analysts to say, look, we were bullish.

We thought stocks would be higher, then stocks went even higher than that.

And so now we sort of have to, you know, accede to the fact that maybe the market is even more enthusiastic than we imagined.

And it's, you know, the Wall Street analysts job is to basically say, you know, is this going to get better or worse right now, the agreement is slightly better.

But I don't think there are too many folks who are really pounding the table looking for another 15% rally in the next 12 months because it'd be hard to do that after each of the last three rolling 12 month periods or, you know, looking at returns roughly in that range.

Yeah, it was interesting in um Calvi's note where just the wording was so interesting to me about like we're OK. Ish, we're kind of anxious about this bowl rally.

It was not an excited rah, rah, we're getting the record highs feeling.

I'm curious, what does that tell you about the conviction under this rally and the degree to which maybe the folks whose notes we all soak up every day are maybe thinking, I don't love that.

This is all driven by one stock.

Well, yeah, one stock, one theme.

And I think everyone has a similar outlook where earnings this year are gonna be up a little bit, you know, not a huge move in earnings in 2024.

The consensus view is about 10% another 10% increase ish, you know, give or take a couple percentage points in earnings next year.

And so I think some of that ambivalence, if we want to call it that is, are, you know, we're basically seeing stock move higher on expected earnings growth, but it's happening now.

So kind of the idea maybe is the best we can do next year is meet that, you know, call it, I think, you know, Laura is looking for 268 in earnings from the S and P in 2025.

Consensus is right in that ballpark.

So unless you see 15% earnings growth next year.

And we know that most of the earnings growth has been from nvidia Meta, uh, you know, Microsoft to an extent, um, are the main drivers there of year, over year earnings growth.

So if we're already seeing that pulled forward into this year, the balance of the S and P is kind of flat, uh how excited are you gonna be on a market that's gone up 30 some odd percent over 18 months, looking for 10% earners growth next year.

And you've kind of realized those gains.

Now, it's not exactly the way that markets work, but I think that logic loop is essentially what you're gonna be walking clients through.

As, as you, you talk through this process, I want to get your take on another note from earlier this week, Mike Wilson talking about the risks to inflation pressures if Trump were to enter office again, come November talking about inflation from tariffs and potential immigration policies.

This brought me to a question that I came up with during your reading your morning brief about whether A I or politics would drive markets more in the second half of the year.

What's your take on that?

Well, you know, when you asked me, I said politics, but then as we talk through it, I think the answer has to be A I probably for all the things I just said, right?

Like the markets rally this year.

If we are to accept, it's driven by earnest growth and almost all the earnings growth is driven by the A I theme.

Then while it is going to be a, you know, a more interesting conversation around what would any presidential elections policies mean for, you know, X right, for tariffs, inflation, I think tax policy, I mean, look at what happened in 17, I think tax policy is the most important part of this, whether it is a Trump or Biden win in November.

But ultimately, if the market has very clearly declared itself, I mean, I kind of started the piece with this, right, the market declared itself as an A I market.

There's really nothing else to talk about when it comes to quote unquote the market because that is where a bunch of the action is coming from.

We look at, look at the index every day, then it follows that it has to be that over the second half of this year and maybe that gets us all the way back to the ambivalence that a lot of strategists have around the outlook.

People do think profit margins are gonna be higher.

People are fairly constructive on the economic growth path, you know, and GDP of course, feeds in to profits.

But these are Wall Street strategists, not necessarily A I evangelists and it becomes a very precarious position to be in when you're a strategist who thinks the market's gonna go higher.

But it all kind of depends on, you know, what, 2027 orders for Nvidia's next chipper.

Like that's a, that's a, the scary spot to be if you think S and P 6500, but it just matters what NVIDIA says that it's called True Miles.

Thanks for taking some time joining us.

Miles of newsroom fame, Miles Edland.

Appreciate it coming up everyone a check up on gas prices where they're heading this fourth of July weekend and what it means for your travel plans, wherever you were headed, that's next auto sales giving big ev energy for it is the latest to report its second quarter results seeing a 1% year to year rise in total sales and ev sales jumping 61%.

This of course follows solid reports from Tesla and GM earlier in the week, Tesla ticking higher today.

After friend of the show, we budget analyst, Dan Ives raised his price target on the stock to $300 a share there.

You're seeing shares of Tesla move higher by about three, 3.4% here in the early innings of today's activity here.

But we should also note that it really comes in a period where there was so much concern coming into these prints that it was almost just this massive weight and perhaps pushing down some expectations, limiting expectations and companies essentially coming out and saying no, there's there's still a fair bit of uh of fodder out there in terms of the consumers that are willing to get into the EV landscape for Tesla's sake.

And then for Ford, this is a big deal, especially as they've kind of moderated their own plans within their own development.

Thinking about the Ford blue business versus the Ford Ice business as well.

Historically.

Yeah, it's interesting too, given what we've seen from some of the other analysts ahead of the deliveries, numbers that we got out of Tesla.

In particular, this note stood out to me from Citi saying they recommended buying Tesla, August 24th $195 calls ahead of three upcoming catalyst.

They list of the vehicle deliveries that we just got quarterly earnings for Tesla expected.

Coming up on July 19th, we've got the upcoming Robo Taxi Day on August 8th, that's obviously going to be closely watched event for investors and then in general, that could all lead to some catalyst for the stock while we await Robo taxi news from the company.

And of course, as we get some more information from them in the upcoming earnings print, but also to your point, Brad and taking a look here at what we saw, not just from We Bush, but also from Bank of America.

John Murphy saying that deliveries were better than consensus expectations and notably better than investors had expected.

So also seeing just some additional positive sentiment over the idea that those deliveries did come in better than expected.

Interesting to me though, given that we still saw those headwinds particularly coming out of China and the degree to which ev makers on Chinese soil are still having the majority of market share in Beijing.

But still that didn't impact that headline number.

And I guess that's what the street is focused on byd, particularly to put a name on it.

They, they absolutely are continuing to not just take market share but potentially be a market share leader for an extended period of time too.

That's compared to what Tesla and the inroads that they've tried to develop within that region, bringing a good factory to that region in Shanghai and then also ensuring that they could try and put even more of that mass market model three in the region as well.

Now Ford has also been trying to do the same with, of course, making sure that they've got a lightning that is available essentially internationally and specific models region by region here.

It was interesting to see within this filing that the vans actually lead in Q two.

However, hybrids grew 56%.

Evs were up 61% for.

Absolutely.

Well, we're going to continue to talk about cars as drivers are hitting the road this Fourth of July weekend and they might find to celebrate at the pump.

The national average price of gasoline on July 4th is expected to reach $3.49 a gallon that is the lowest holiday price since 2021 according to gas buddy on prices, we are joined by Patrick Dahan.

He's head of petroleum analysis at gas buddy.

Thank you so much for being here with us, Patrick.

So I'm one of those drivers hitting the road over the next couple of days here.

Who do I need to thank for these gas prices.

What is driving this news?

A lot of this is simply a normalization of the economy still uh post COVID Russia's warn Ukraine.

But all in all us oil production remains at record levels.

13.2 million barrels a day.

Gasoline demand has been somewhat soft this summer.

So you can almost thank consumers for that.

As we go into July 4, we're seeing gas prices that are basically on par with what they were last year, at least naturally.

But here's the big news, 10 states where you can find average gas prices 25 cents a gallon or more below last year.

If you're on the west coast, you're a big winner.

Washington state seeing prices 66 cents lower this July for the last year.

Oregon, Alaska Wyoming, all seeing prices about 35 cents lower this July for the last year.

So some big savings out there with gas prices basically on par with what we saw last July for, you know, Patrick, we were just taking a look at WT I and Brent, both of them hovering right now.

Mid eighties, low to mid eighties level.

What is your kind of top end projection for where we could see this move to in the near term?

Well, I think there remains some upward pressure on oil markets, as you mentioned.

Uh wt I about $83 a barrel, it seems like we may be bouncing off an upper limit although we could go a little bit higher.

Uh There's certainly been a lot more anxiety in the market here over the last couple of weeks, wt I up about $10 a barrel from where we were in early June, it's hard to pinpoint exactly the sentiment shift here.

Although I think we're in a little bit more bullish sentiment that could be helped by Middle East violence between Israel and Hezbollah.

Obviously, some central banks globally starting to lower interest rates that could boost demand slightly.

Also, we're in the midst of now, what's the earliest category five hurricane in the Atlantic that we've ever seen?

So it's a stark reminder that as global inventories are starting to decline, we could be on the hook for some additional risk here in the second half of the summer.

I think wt I could go a little bit higher here, especially if we do see a major organized storm.

I think maybe $90 could be tested briefly before we start to get to those cooler months.

I think the coast starts to clear in September and October and that could usher in a national average that falls below $3 a gallon later this year.

So talk to us about that hurricane season, you mentioned, it's obviously top of mind for investors, but oil markets could be moving not just on weather but also on those geopolitical tensions over the next couple of quarters here.

Which do you anticipate being the bigger catalyst for oil?

Well, you know, I think uh the Middle East is certainly worrisome, especially uh when you talk about Israel and uh uh Hezbollah going at it and how Iran now has a presidential election, there's a lot to watch geopolitically.

But for now, I think kind of the story is still with us consumer, we saw some really bullish travel numbers, but I think it's important to mention that us gasoline demand is still far below record levels.

This July 4 now us economy could start to improve.

Uh but we're really the trendsetter when it comes to global gasoline consumption.

Us gasoline demand really struggling this summer to hit 9 million barrels where prior to COVID, it was routine that we'd see demand well over 9 million barrels and potentially even approaching 10 million barrels.

So I think that's part of the conversation here is still uh a US consumer that may not be hitting the road but more traveling.

You look at ts a passenger screening numbers, they're at record levels, but I think that's still work in the post COVID world where consumers may not be road tripping as much this summer, but they may be gravitating towards jumping on a plane.

Airlines seeing more capacity and lower airfares than we saw last summer.

I'll be jumping on my bike, Patrick.

Appreciate it, Patrick Dahan, who is the gas buddy, head of petroleum analysis.

Appreciate it.

Thanks for having me.

We've got all your market's action straight ahead.

Stay tuned.

You're watching morning breath.

Let's get to our five check today.

New York City's congestion problem is leading to a life of luxury for some people.

Six hotels in the city are providing free helicopter travel from JFK and Newark.

The flights are operated under the Urban Air Mobility Company blade and customers must stay at the hotel for a two night minimum here.

Now, these are not any cheap hotels on this list.

We should note, but of course, this is a premium that perhaps you're willing to pay a little bit for.

If you just wanna make sure that you can get to your suite, kick off your shoes and you know, get one of those plus bathrobes, why not?

Yeah, we've got a breakdown of these prices here on your screen.

So definitely not getting a helicopter ride for free at the Ritz Carlton.

The average price for their liberty suite that you'd have to stay in to get access to this.

Helicopter transportation is hitting around 3395 bucks for the Saint Regis that's just above $3000.

And at New York's edition hotel, that's going to be around $2500 for the Iron Suit.

So really getting a deal there at the addition for only 2500 bucks.

I also know that for some of these hotels, there is a catch in terms of the number of nights that you have to stay, to have access to this.

And we should mention this would be operated by Blade helicopter.

This is an urban air mobility company that did go public a couple of years back.

And it's interesting to see that the stock is actually down off of this news and not seen some upward movement on the stock off of this potentially because I mean, it's interesting to figure out the financials behind this.

I would be curious to see how much the uh hotels are paying Blade for this service and also how the financing works.

If I was someone who was already paying for these suites and the cost of the suite didn't go up, I'd be like, well, then what was I paying for in the first place?

Yeah.

Uh Well, I mean, for Blade, it's a very expensive business to operate.

Uh and a company that originally I believe had been trying to or at least put together a pitch to go public, had some timing, I think about 2018 and then eventually won public via Spack.

And so that's why perhaps you're seeing it kind of sputter, uh, at least in its life as a publicly traded company right now, just above $3 a share.

And most of the specs, the kind of earmark figure that you see many of them going out the door at is about 10 bucks.

So, at the end of the day here it's been a tough ride of it.

Uh, choppy if you will or turbulent for blade, Uh, you know, just the air travel puns.

They, they run abound.

No, you're right, Brad.

Yeah, they went public in 2019 a little bit of a free money environment and via spec which we know led to a wide variety of companies going public that maybe wouldn't have in our current interest rate environment.

But nonetheless, you and I can look forward to never having access to type of hotel rooms.

No, no, we're not saying never.

We are speaking these things as though they were.

Well, he's going to be fine.

He's got it.

Well, I hope so one day.

All right.

Well, coming up, we are going to have breaking data on the services sector right at the top of the 10 a.m. hour.

Myself and Bradley are gonna dive into those numbers at the top of our show catalysts after the break.