Dow hits record-high, gas prices to rise: Catalysts

On today's episode of Catalysts, co-hosts Seana Smith and Madison Mills discuss the state of the consumer and stock market gains following Wednesday's Consumer Price Index (CPI) print.

The Dow Jones Industrial Average (^DJI) surpassed the 40,000 mark for the first time, while the S&P 500 (^GSPC) topped the 5,300 level amid broad-based market gains. Despite the rally, UBS Investment Bank Chief Strategist Bhanu Baweja joins the show to discuss why he believes markets may be due for "a reality check."

Compounding the financial strain on consumers, the Energy Information Administration (EIA) reports that gas prices could increase by $0.10 this summer, prompting an examination of the state of the consumer.

The show covers several trending tickers, including Deere & Company (DE), which lowered its full-year profit guidance, GameStop (GME), which experienced a slump amid the slowing meme trade frenzy, and Canada Goose (GOOS), which beat fourth-quarter profit expectations.

This post was written by Angel Smith

Video Transcript

10 a.m. here in New York City.

I'm Sean alongside of Madison Mills and welcome to catalyst.

It's Thursday May 16th.

Let's dive into the catalyst moving markets today, cooling inflation.

That is the callous that drove record highs in the S and P 500 the NASDAQ markets losing a bit of steam though, after hitting those all time highs, as investors still wait on more clues on the Federal Reserve path forward those clues to come with a slew of fed speak on top today, New York, that President John Williams already speaking this morning saying that he's not ready to seek rates and Walmart holding on the game, the shoppers are going for value.

These results kick off a slew of retail earnings that will indicate how consumers are responding to inflation.

Walmart brings us to the big story that we're watching today, which is the state of the consumer from retail sales to company earnings.

We see mixed reactions to high prices coming from inflation but those Walmart sales there often and the company says consumers are trading in that they're not calling it trade down as consumers across income contributed to the retailers higher sales here.

But that is not the universal story.

Companies like Home Depot, Starbucks mcdonald's, Etsy and ebay all showing signs of consumer weakness.

Yahoo Finance spoke to all of T DC, senior research analyst about the state of the consumer.

Here's what he had to say.

We see the bifurcated consumer, a pressured consumer at the low and middle end and a consumer who's balancing more expensive needs, bottom line.

A consumer is under pressure.

So there continues to be boss optimism, cautious optimism shot.

But with Wal Mart in particular, raises the question is what's good for Walmart actually good for the economy because it can be a sign of consumers trading down.

Now having said that a really interesting stat from Walmart, they say that overall inflation levels for the business were up about 40 basis points for the quarter.

That is half the rate of increase we saw last year, but that's obviously still an increase, even slowing inflation, it's still inflation.

And we have seen signs that consumers are starting to get tired of inflation across the board with other retailers.

We are certainly we're seeing shoppers going for value.

Wal Mart clearly benefiting from that.

You can see it in these results here.

You can see it even if you just take a look at the share price right now.

We are at record highs.

We're seeing this move to the upside.

Today.

We also spoke with the CFO of Wal Mart, John David Marin last hour asking him about his sense of the consumer, what he is seeing at Wal Mart even here in the current.

And he highlighted the fact that wallets are still stretched.

They're looking for value, they're using discretion when they're buying those higher income items.

And he also said that he remains confident that Wal Mart will be able to continue to attract that higher income consumer once inflation.

Es and I think that's one of the big questions out there for analysts right now, whether or not we are going to see that higher consumer continue to shop at Wal Mart once inflation hopefully isn't as big of an issue for millions of as it is today.

But he did really highlight the fact that consumers do remain under a bit of pressure.

Walmart clearly benefiting from that.

And also I want to highlight one of the other points that stuck out to me within this report were the inventory levels that didn't improve here for the most recent quarter.

They are shaping up nicely here for Wal Mart and that's also fueling some of that optimism for the stock as well.

Yeah, it's a great point too that he spoke to you guys about that.

It's not trade down that they're seeing a really is a higher consumer liking.

Wal Mart stuff.

All right.

Well, let's continue to talk about these retail earnings that are picking up stocks potentially waiting for this next big catalyst.

We are right at record highs though.

You got the S and P above 5300 dow 40,000 watch continues.

We want to bring in B as he is a UB Investment bank chief strategist.

But it's great to see you here.

Some curious how are you looking at these current valuation levels and what it means for potential upside from here?

Look, I think the potential upside in equities is, is reasonably limited.

Um because valuations are quite high, which is remarkable given where interest rates are, we just have to bear in mind that interest rates are not the entire discount rate.

The discount rate is the risk free rate plus risk premium.

And if the risk free rate is high at this minute, actually, risk premium are extremely tight, you can look at credit spreads and credit spreads are actually approaching the tightest.

And that's one of the reasons valuations are as high as they are.

We find it quite difficult to see further upside in valuations.

What is true is that companies still have very high margins.

You were speaking about consumer companies, although discretionary companies are not giving great results.

As you guys were discussing on the program, some of the staples companies are giving you some really good results.

And even within Walmart, there has been sort of greater supply or or greater revenues coming from staples.

So, so the earnings picture still is reasonably robust and we think it will remain.

So for the coming quarter or so.

But beyond that, we think the US economy will slow down.

I think already when you look at where the retail sales numbers are, when you look at the control group for retail sales compared to where the numbers were in the second half of last year.

So Q three and Q four of last year, you're busy beginning to see sort of a palpable slowdown.

And we think that this will begin to sort of into company earnings also.

Uh And, and we think that by Q three, these numbers would be looking a little bit weaker.

And so there is upside, we, we're looking for the market to go to it 5400 but not much more beyond that.

And if I was to look at bonds relative to equities over the next 12 months, I would firmly favor bonds, manu how much weakness can you drill down a little bit more just in terms of what we should be expecting with that pullback.

So if you, if you're thinking about um where the S and P goes to.

So from 4 5400, you could actually see the market going sub 5000 before it rises again because we do need, I think a reality check in terms of earnings expectations for next year and year after next, the market effectively is pricing in goldilocks.

The market is effectively pricing in very strong um earnings growth, very strong revenue growth with very low inflation.

So inflation expectations have gone up when you look at things like University of Michigan survey.

But when you look at the actual inflation break, even in the fixed income market, those numbers are still quite low.

So the market is pricing in very strong growth with very low inflation.

And that's a combination we've had that through 2023.

I don't think it's likely to persist and I feel quite strongly that while inflation will come lower its growth, that is likely to surprise to the downside.

Well, let's look global here for a second, looking across equities in China and Europe and the US, particularly with the NASDAQ, there is a winner here, right?

And it's driven by tech.

I know you're not long in the mag seven right now.

Do you think it's time to short us equities and go on on the foot?

We, we do prefer global equities relative to us equities.

But again, let me say this as clearly as I possibly can.

That's within the context of being not very ambitious with equity returns over the next 12 months, we think sort of mediocre returns over the next 12 months.

And in most places, China is an exception, Japan is an exception.

But in most places, we prefer bonds to equities.

It's only in China and Japan where we actually prefer equities to bonds where valuations are at a much lower level.

And we spoke about magnificent seven and tech, we've liked tech for a long time.

We're not just not chasing magnificent seven at these levels.

We do think that while tech does make sense globally, there are, there are many other markets where it would be long tech, including in China where we've been long internet for some time and it would be long internet.

That's a tactical trade.

That's not a trade.

I want to hold on to for the next five years.

But I it does make a lot of sense over the next 3 to 6 months.

Similarly in Japan.

So Korea Taiwan, these are places.

So A PAC is where we are buying tech us is where we had bought tech and I'm not chasing it anymore.

Well, let's talk bonds because you mentioned it.

There's this camp of people buying European bonds to diversify against the US.

They are closer to easing, but there's a yield disadvantage there.

So what is better diversification or higher yield I yield because those yields are likely to come lower.

I think the ECB is reasonably well priced by the market.

I don't actually disagree with market pricing for the ECB for 2024 and 2025.

I disagree strongly with the Fed's pricing for 2024 and 2025 more so 25 than 24.

I think two cuts is about right.

But just having two cuts for 2025 is much too low.

I think the market goes back to our earlier discussion.

I think the market is extrapolating the strength of us growth into 2025 as well.

Whereas there's a lot of one offs that help growth including fiscal, including very strong immigration, which we don't think will likely to be in place.

They're not likely to be in place over the next 1224 36 months.

So we are looking for a step down in growth and therefore also a step down in inflation.

And that means we think the fed is likely to cut more than what is being priced in, in 2025.

Much more than what is priced in.

We find greater value in us bonds than European bonds.

Much of that completely concede that ECB is likely to go first, but that's fully priced.

What's not priced in the market is that the fed is going to cut more.

We think in 2025 than the consensus is well, in rate cutting, it's not necessarily good for markets.

What is your thinking on that?

And the impact it could do to us equities.

Yeah, this is where I think many folks get it wrong because we have, we've lived in this world of quantitative easing over the last 10 to 15 years where so if your Palo response is, if the Feds cutting you by, because usually Feds Dobbs has come with a huge amount of money supply also coming through in the form of quantitative easing.

Whereas if you look at the larger swathe of history, that relationship doesn't hold over the larger sort of, if you increase your sample size, you will find that usually when the fed is cutting revenues are declining.

So your earnings estimates are coming lower, and more importantly, your risk premium are rising.

So to put this in concrete terms, even if your risk free rate is coming down, let's say by 100 basis points, let's say us yields go from 4.5 to 3.5.

I'm talking about somewhere between sort of the two year and the 10 year.

Let's call it, the five year note is going down by 100 basis points.

But at the same time, high yield credit spreads are widening by two basis points which does not stretch my imagination at all.

Then contrary to popular belief, you will actually see the discount rate go up rather than down the cost of equity go up rather than down.

What most people respond to is the quantitative easing world when the fed used to engage in quantitative easing.

And along with the risk free rate coming down, risk premium also used to come down by design, not by accident.

That's the entire point of QE that you want to kill risk free rate and you want to kill risk premium.

That's why you do QE but in a normal world in the non QE world, what you're usually what you're likely to see is that the risk free rate comes down, but risk premium wide enough.

So the denominator of your N PV or discount rate is actually going up at the same time as the newer of your N PV or cash flows are being revised a little bit lower.

So that's not always positive for equities.

And I think the market, most of our investors actually misunderstand that.

B Thank you so much, really great insights.

Appreciate you joining.

That was B the way from UB.

He's the investment banks chief strategist turning now to gas prices which could go up by more than 10 cents.

As we head into the summer, the busy travel season there.

That is according to the US Energy Information Administration, you break here to break down the driving forces behind possible rising cost is our very own.

And as for as yeah, Madison and the EI A saying that this summer you could see prices at the pump up by about 10 cents per gallon.

And that is if refineries reduce their output, if their capacity for output goes down.

Also, if their costs for these refineries go up.

Remember that a lot of these refineries are older, so the cost to maintain them is higher.

Now we are seeing that at the pump, the average national price is right now at $3.60 prices for gasoline pretty much peaked around in April.

And that was when you saw crude oil go higher.

That was because you saw some refinery interruptions, $3.60 a gallon a week ago, it was at 364 and a month ago it was at 364.

So you can see that they have come down off of their peak.

Of course, during the summer driving season, you are seeing prices that are higher also because of the more expensive blend that is used during the summer.

So the base case scenario now for uh the EI A is for prices to be at around $3.70 per gallon.

As far as oil is concerned, oil has come off of its April peak.

It's down about 8% from that April.

April peak and we can show you the oil charts here.

Brent crude is at $83 per barrel wt I at around $80 per barrel and a lot of analysts are expecting OPEC Plus to extend its output cuts beyond June.

They don't expect brand prices to go up above $90 a barrel.

OPEC wouldn't want that.

There would be recession worldwide if that happens and you would see demand coming down.

So the range has been pretty tight as far as what analysts are expecting for oil prices for the second half of this year guys.

All right, thanks so much for breaking that down for us coming up.

We're going to take a look at under armor that stock on the move to that actually to the upside.

Now, now shares are up just about 1% the move higher coming despite a disappointing report here for the company, we're going to break it down and why we're seeing this move to the upside when we come back.

Let's do a check of the market sponsored by Tasty trade looking green across your screen.

The dow still testing that 40,000 level, the S and P 500 up about 1/10 of a percent.

Same with the NASDAQ taking a look at volume though.

This is kind of a me morning heading into the trade.

We're seeing that volume on the S and P 500 is about 10% below the 20 day.

Moving average is investors still awaiting the next catalyst which perhaps could be that, that fed speak coming out throughout the day here.

All right.

Well, under armor shares are actually moving to the upside here.

We're looking at gains of just about 1%.

Now this move to the upside coming despite the fact that the company reported a weaker than expected fiscal 2025 outlook for more on where the retailer will likely go from here.

And what exactly this report means for the future of the business we wanna bring in Simeon Siegel BMO, capital Markets, managing director and senior analyst, Simeon.

It's great to talk to you.

So explain to us because I think a lot of people initially looked at the report and would expect to see shares under pressure yet we are looking at gains here this morning.

Why?

Hey, great to see you.

So listen, I think Sean, you and I have talked about this before.

Under Armour was a very large business that was over selling and under earning.

They were selling a lot of goods, they just weren't selling them at great profit.

And so today you got them coming.

I mean, you and I have used this term sell less charge more for years.

And in their press release, they said they realize they need to start brand elevating and focus on achieving more by doing less.

And so I think the initial reaction, we all chase revenues.

We all want to look at revenues.

And so the revenue guide was very disappointing.

But if you take a step back and look at this, you can realize that Under Armour is an undervalued, under earning brand.

And if the company is finally willing to acknowledge that if they are looking to say we really need to do better rather than do bigger, then the stock is undervalued.

In my Well, Simeon, I'm curious what your thinking is that's different than the rest of the folks on the street here, particularly because we're seeing the volume on this name is nearing its lows of the day even pre this earnings print.

So that indicates to me that there might not be a ton of conviction to the upside.

Where is your conviction coming from?

Sure.

Absolutely.

And listen to be fair.

I'm, I've, this is not a new view, which means as the stock has been coming down, my view has been wrong according to the market.

So for the market, but, but I think that's the beauty of this.

I think the reality is we're supposed to look for market dislocation, right?

If the view continue, if, if we just chase the market, then you're not actually taking a view.

And so I think what's important here is this notion that it's very hard to internalize that revenues are not necessarily the be all end all.

We're trained to think grow or die.

We're trained to think everything is predicated on top line.

And so what that means is when a brand that has been a growth, brand starts hitting saturation points, you start watching the quality of sale erode long before the actual sale, it's easy to force a revenue, it's just hurting your brand.

And so when you're thinking about what do you want to pay for brand equity, what do you want to buy from a stock perspective?

I think it's very important to remember that revenues aren't always good.

And so I think we, we are trained in the market and the group and to your point as, as we think about the, the technicals and the dynamics there revenues drive the conversation.

But I would argue revenues are actually lagging.

They're not the leading indicator.

And so I think this will take time.

I, I, the, the, we put out a report earlier this morning flagging that the shares are down, the gross margin is a huge pivot.

It's a huge positive.

I didn't necessarily think the stock was going to be up today, but I thought this was a huge tone shift that meant the stock will be up.

And so whether or not we like the day trading and where we end up, I don't know, but I think what we do know is that they're committed to improving this brand.

This is a brand that does $6 billion in revenue and has a market cap that's less than half of that or it's around half of that, there's a mismatch.

So I mean, I think the narrative or one of the narratives that we have uh talked about with other analysts most recently when it comes to Under Armour is that maybe they have a product issue just in terms of their products, not necessarily resonating to the extent that they had years ago with consumers.

Are those fears?

Then do you think just overblown?

So here's my problem with that.

And this is a conversation you and I have had about Under Armour about Victoria's secret about, about even Peloton, right about different brands where the story, whether it's the media, whether it's consumers, whether it's us, it doesn't matter.

We say A brand is dead.

We forget that there's $6 billion of revenues arguing otherwise.

And so I think you and I actually talked about this with Nike.

We need to look at the revenue to determine if people are buying the product.

We need to look at the gross margin to determine how much they value it.

So, a brand is as big as its revenues, it's as valuable as its gross margin.

People are willing to buy this product.

And so everyone condemning the product, everyone condemning the brand saying it's missed the plot and it's dead.

It's just not true.

How do I know because of all those billions of dollars of consumer spending?

That's telling me otherwise.

But that doesn't mean it's healthy.

And so if you can take those revenues and actually do more with less, that's that sell less, charge more, then all of a sudden there's actually more value.

You can make more money and it's hard to come to that.

And a lot of times the market doesn't give you that benefit while it's happening, it's a painful process to report down revenues, but you emerge stronger on the other side.

And that's something that people pay for Simeon.

You also cover Peloton and that company as you know, reportedly hired Jp Morgan to raise $850 million through new loan sale that's aimed at helping the company tackle their debt at this point.

Do you think Peloton can tackle their debt on their own.

So it's, it's an interesting segue because it's an interesting dynamic where Peloton still does.

And historically, I've, I've had a fairly um concerned view when, when talking to you about this company, I think right now, we do have to acknowledge that there's 3 million subscribers, which means almost 6 million people, but there's 3 million subscribers paying $44 a month with a very healthy profit flow through.

And so Peloton to me is running two separate businesses, they're running their existing business, which is actually an incredibly profitable cash flowing business that could service debt.

And then there's the chase for the new customers, which seems to take all that money and plow it and and actually essentially flush it down the toilet.

And so I think what my suggestion would be and has been as you bear, hug your brand loyalist, you focus on the fact that there is a very healthy business with incredible cash flow that could deal with the 1.7 billion of debt and then figure out whether to pay it down or to refinance it to your question.

But to do that, you have to acknowledge you're not an uber growth business.

And again, that's why it's an interesting segue from under Armour.

I think some of these companies take a breath and they say, ok, we need to restructure.

But in the same sentence, they say, but we're still going to grow that's dangerous and it rarely works.

There's a time when companies are supposed to grow and there's a time when they're supposed to focus on value and improving their brand and restructuring.

I think Peloton is very much in that latter phase and that's not a problem given where the stock is today.

I think you could make that conversation, that argument, but they need to want to do it.

Simon.

How long do you think it's going to take for this turnaround story for a Peloton to take place?

I, so it's a great question because I'm not leading the company.

So, so I think that it depends.

I think that it's rare that you have a gift that the answer lies in management's hands.

I think certain things under armor were talking about, there is some externality.

There's the macro when the argument is to shrink your business, it's actually under your control, but you have to want to do it.

And so I believe that if Peloton wanted to just focus on that core, existing user base, I don't even have to grow into a cash flowing business.

I have it again.

They, they convince people in their homes to get on a piece of equipment and pay $44 a month.

That's a beautiful margin.

All they need to do is focus on that and stop trying to believe that there's massive growth.

And I think that turnaround happens really quickly.

The problem is you and I have been talking about this for years where it's not what they wanted to do and we watched the stock and the cash bleed because of it.

I think what they need to protect, they need to make sure they don't bleed their existing users.

If they churn their existing users, if they don't bear hug those loyalists, then everything I just said is out the window.

But if they decide we're going to use our dollars to focus on making sure people don't leave the system because those people are incredibly profitable instead of using our dollars to try and fight others and subsidize new members.

I think the turn happens quickly if they don't, I don't think it happens at all.

And I think that's kind of what we're, what we're grappling with and figuring out what is the new management going to do when they are brought in?

All right, Sime, we gotta leave it there, but thank you so much for joining us, really appreciate it.

That was Simeon Siegel.

He is BMO capital Markets managing director and senior analyst shares of Baidu following this morning down a little over 1% right now.

This comes after the company reported revenue growing at the slowest pace in more than a year.

They did be forecast estimates driven by recovery in a sales, cloud sales as well.

But it's interesting to see by moving to the downside after their positive move to the upside earlier today, Shana, another stock that we're following is the Chinese retailer jd.com, which beat their estimates after price cut and coupons boosted their sales.

And I think it's possible that J Ds move to the upside is weighing a little bit on names like Baidu and also 10 Cent as we head into the next session of the day here when it comes to jd.com just, just to start there because I think this is really a good bellwether of consumer spending right now or the health of the consumer within China.

We talk so much about the recovery that is taking place there and the sluggish recovery that is taking place so we can take a look at at least JD dot com's results.

You 7% rise in revenue that beat the street's expectations.

They were offering more deals, they did slash prices, they're doing everything they can to fend off that increased competition from the other larger players within that space.

So right now, at least that is helping to drive some of the results that we are seeing for jd.com in its most recent quarter.

Then you compare that to what we saw at Baidu.

And yes, there is reason to be a bit optimistic when it comes to that profit beat much higher than what the street was anticipated.

But I think the questions surrounding A I surrounding autonomous driving technology surrounding the investment there that might be what is holding back Baidu.

Just a little bit here when you take a look at Baidu's cores here, adjusted operating margin that was flat, holding flat at 23%.

So that is being called out a little bit here in this instant analyst reaction that we are getting to these results.

But again, two trending figures here at Yahoo Finance, that's giving us a better idea of the state of the economy over in China right now.

All right, let's also take a look at John Deere speaking in the state of the economy, a look here at the US, the company lowering its full year profit forecast, declining food crop prices has seen farmers buying less tractors and other farming equipment.

We're looking at losses here of just nearly 3% when you take a look at some of the other details within this report.

And again, we're closely watching this because of what it signals about the larger US economy right now.

But cutting its annual profit outlook with farmer demand, slowing here, the US farm income is set to slump this year.

So again, a bit of a worrisome sign here for the company.

And as a result, we're seeing shares move to the downside here, Matty.

Well, it's interesting as you mentioned, this is bellwether as well for the overall agricultural footprint here.

One analyst from Bloomberg Intelligence saying that the reduced outlook despite better than expected second quarter earnings, it was largely driven by decline in the small agriculture and turf business and we production and precision profitability.

That could also be an indication given that it was almost 8% below consensus of a deterioration in the global agricultural space amid elevated inventories as well.

We've been talking about the companies that have been able to handle their inventories versus those that have struggled.

This is a concern for a company like John Deere particularly given the volatility that we've seen with their inventories as we've come out of the pandemic here.

Well, even with some around the corner luxury parker maker, Canada goes is up this morning after beating market expectations for quarterly revenue and profit.

The Ontario based company continues to see growth in the Asia Pacific market with revenue jumping almost 30% in their fourth quarter.

Now this is after an over 62% rise last quarter with a name like Canada Goose.

I think about what our last guest and seal was saying, which is that you can actually benefit from having a more expensive product that produce less of and particularly if they're able to get revenue out of a place like China that we know is struggling with consumer sentiment and spending.

That is a really big deal for them.

They are just seen as just meeting their yearly sales targets.

So not a huge beat there, but obviously, that's not the metric that the stock is moving on.

Yeah, exactly.

It is important to call out maybe some of the weakness that they are seeing that when it comes to the wholesale revenues that had, that was that declined to 9%.

But it was a, a smaller decline than what we saw the previous quarter.

They actually, it actually declined 28% the previous quarter.

So again, some improvement there.

But when you talk about the fact that there is still demand out there for some of those higher price good, especially from the higher income consumer.

You don't have to look any further than Canada's goose results here just to highlight the fact that there are demand for what their jackets cost.

1213 $1400 here on average.

So again, people are spending and they're spending big those that can still afford to do so within this economic environment.

So again, a huge move to the upside that we're seeing for the stock and the biggest intraday move that we've seen in a couple of years for Canada Goose.

I wanna get one on ebay for less.

That's my, that's my move.

A right.

Exactly.

That's the risk.

That's always the risk with ebay.

Uh Well, finally checking in on a story that we've been covering all week here, meme stocks showing some volatility after that rally earlier in the week and a big sell off today for more.

We're going to bring in our own Jared Blicker Jared.

What's going on with the meme trade?

Well, we're seeing some of the leaders flag a little bit gamestop and A MC in particular are down today.

And you can see this is our meme stock board.

I created this several years ago.

Haven't really added too many names over the years and this is just showing you that it's a very mixed situation right now.

Not seeing any trends.

Now, I'm going to work by performance and here we can see gamestop A MC T were actually the worst leaders over the last day that would be today.

And also over the last two days yesterday, we saw Gamestop and A MC leading things down.

And in fact, we can add cost to this list as well, everything down 25% or more.

But when we put the four day totals on instructive to show that Gamestop still holding on to gains of 91%.

A MC.

Still up 68 nice gains by Tupperware clover up 20%.

And also over the last month, we've seen even more bullish reactions, but I think it's safe to say that the era of meme stocks and what we saw in 21 2021 largely over Wall Street was much more prepared this time.

And I can take the example of AC on a corporate level.

They were very much ahead of the game here.

They were standing by and they were ready and willing to uh sell about 100 and 64 billion or swap about 100 $64 million in debt for newly issued shares.

They had that shelf offering on the table on the shelf and they were able to use it.

So, uh at least A MC was us, was able to improve their capital position after that.

Uh Besides that, I think it's really about some of the individual traders haven't heard much from war and Kitty, but we'll have to see what comes of the rest of the week.

All right, Jared.

Thank you so much for the war and Kitty, shout out, we appreciate it.

We're gonna have all of your markets action ahead right here on catalyst.

So stay tuned for more.

We want to bring in a big milestone here for the market.

The Dow briefly crossing 40,000 here for the first time ever.

This comes as optimism continues to build on Wall Street.

We've seen continued gains here hopes that the FED is going to start cutting rates before the end of the year.

We've also seen some improvement on inflation.

A very, very resilient economy, also strong corporate earnings really helping to drive this momentum here to the upside.

We are starting to see more of a broadening out in terms of those gains, defensive defensive sectors have been getting a bid here recently when you take a look at the action in utilities, when you take a look at the action in consumer staples, but again, this move higher for the Dow briefly crossing 40,000.

It's nearly 40% from the lows that we saw back in September of 2022 since the start of the year.

Matty, we're looking at gains of just about 6%.

Yeah, it's interesting to see those gains continuing today.

Taking a look at the volume that was happening in the dow just as it hit over 40,000.

There, it does look like it was an initial pop and then an immediate drop off.

So that could be an indication that this is one big move that led to those bigger gains.

It looks like it is still teetering right now.

It's above 40,000.

So we'll see if they're able to continue into the gains that we're seeing air into the close.

That would be of course another record for the Dow.

It's looking also like some of the individual names are the ones pushing the index up.

We're talking about Walmart here, obviously a big mover on the day and some of the other names that continue to report aid earnings, they're moving some of the broader indices to the upside.

We're also seeing this come after the S and P and the NADA also hit their all time highs as well.

Well, moving on to Netflix making its first ever sports deal, the streaming giant announced a three season deal with the national football league that will include showing two Christmas Day games.

The company also announced it's cheaper, a supported here, gained 40 million global active users to discuss.

We are going to bring in a Paul and I'm so sorry, I butchered that Paul.

I'm going to have you here, the senior senior media analyst at Comscore.

I really appreciate your patience with me there, but I am really excited to talk with you about this because there's a lot of intrigue about the Christmas Day games.

One of the questions I have is whether or not it could be bad for the NFL that this sport is a little bit hard to find that people may not know where to find it on Christmas Day.

Is that a concern?

Well, I think uh just the fact that we're talking about it now people will know where to go on Christmas Day, particularly those who are Netflix subscribers and Christmas Day is typically a huge day for Netflix.

People are home, they're with family, they, they open presents or whatever people are doing on Christmas Day and then they can sit down and watch Netflix, watch a movie, watch a television show together.

So it's very communal in that way on Christmas Day and have live NFL games on that very important and iconic day uh is really huge, I think for the streamer, I mean, they have uh the boxing match between uh Mike Tyson and Jake Paul coming up on July 20 they're gonna have WWWWE raw uh in starting in January of 2025.

So really this foray by Netflix into live sports is, I mean, it, it is a game changer for the company.

And if you think about Netflix, how long they've been around and how we used to get the DVD S and then send them back in the mail.

If you had said to anyone, you know, te, 1020 years from now that they would be uh hosting the NFL on Christmas Day, you would say really, how does that happen?

And think about all the original movies and series, they create reality programming, comedy specials that often go live.

So this live component uh for Netflix in all these different verticals is really in all these categories is really again, a game changer, Paul, is this a sort of a big of a bigger push into live sports?

Absolutely.

I mean, it, it, and it live is very important as we all know, in terms of sports, generally, people don't time shift sports, they don't record it and then watch it a couple of days later when you can look at the internet and already or on social media and know the outcome.

The immediacy of live events is what makes it such a draw for audiences.

And so I think to be on Netflix now, we're just before uh this happened or maybe just a few years ago, uh we would have thought you wouldn't think of Netflix or Amazon Prime who actually prime video who actually has uh Thursday night football there on, on that streaming platform that they would be part of the sports world, particularly when over the air broadcast.

Uh you know, some of those ratings are definitely going down and many people are going over the top and, and cutting the cord and watching all kinds of content on streaming sports is the natural next step in that evolution.

But Paul, how are these streamers, how should they be thinking about these investments into live sports?

Because they cost a heck of a lot of money.

We've seen the content spend be an issue here for so many of these names.

How do they walk that fine line where it makes sense?

But it's not going to upset the shareholder here.

That's going to question maybe the returns that the streamers are going to see on the.

Well, that's a great question because if it doesn't make financial sense, well, then what is the, what is the upside for the streamers and for their investors?

I think what it's about too is prestige.

It's about maintaining subscribers, adding new subscribers through the prestige and high profile nature of something like the NFL and NFL games.

So while there might be a little short term pain, there could be a long term gain, you know, this is a game of yards, not inches when it comes to these streamers and to have NFL football, I think it's a net win all the way around.

But you know, time will tell as this space evolves in that streaming world.

So Paul walk through this situation with me here, Netflix launches the ad tier live content does well with ads.

So they get into sport that makes the ad tier subscriptions more profitable.

Does that mean that Netflix could end up axing the ad free option entirely?

Well, it's really interesting, I think for, for those of us who would prefer not to have the ads, even though some people like them, I think they have to have both.

And for those who choose to pay extra to be ad free, I think that option should always be there.

I think it'd be, it would create a weird perception or a strange perception on the part of the consumer if they go to a platform and it's, it has ads, it's ads supported in order to lower the cost the monthly cost or the yearly cost of that subscription.

So I think let's keep that option available to those who you prefer to pay a little extra not to watch those ads.

Well, uh quickly here, Paul, it's interesting because Nielsen dropped a media distributor gauge that I've been obsessed with all weeks.

It gives us and some intel about, you know, viewership across all platforms including streaming.

Disney is the clear winner, but then you got youtube right behind it.

I'm curious about where youtube stands in the fight to get to become the winner of live sports content.

Where do you think they are at?

Well, I think youtube is always underestimated for some reason, I'm a huge, just full disclosure.

I love youtube.

I watch it all the time actually pay not to have the ads.

And I think that is a major player.

There are a lot of people who watch youtube, I think, look, this is kind of the new frontier for streamers, like youtube and obviously Netflix Amazon, all the very uh apple, all the various streaming platforms can benefit from streaming live sports.

Uh It, but it depends on what you're streaming, right?

Uh There are uh top tier sports and there are those that don't get as big a viewership, but youtube, I think could be, I, in other words, it's very fragmented on youtube, you get all kinds of content.

There could be, I don't know darts or you know, bowling, some of the full sports that those of us like uh that could be shown on youtube.

I think in a way that could draw an audience and make it worth their while to put that type of content on the small screen.

So we'll see.

All right, Paul Garabedian, it's great to speak with you.

Thanks so much for making the time to talk with us.

Come course, a senior media analyst.

We appreciate it.

Thank you.

What's the most wonderful time of the year for some hedge funds?

13 F, they are the, they are the quarterly reports that are filed by institutional investment managers with at least $100 million in assets under management giving the broader market a signal of what institutional money is into.

To no surprise, tech is getting lots of love.

The value of investments in technology increased the most while real estate rose by the least for any industry.

That's according to the regulatory filings.

The other big reveal was Warren Buffett's Mystery Stock.

And to no surprise, it was a bet on insurance.

They revealed a steak and chub that remained, had been a mystery here for so many people on the street trying to figure out what exactly that holding was.

It wasn't revealed at the annual shareholder meeting.

That was that two weeks ago, he wasn't asked about it.

So here we're getting some insight there.

But to focus on this focus that we have seen from these hedge funds when it comes to tech, boosting their to some of these A I darling specifically Invidia really shows just where that allocation has been, where it's going and why we're seeing so many of these companies still mention A I in these earnings calls because they're trying to get a piece of that excitement that we clearly are seeing on the street.

They absolutely are.

And I wanted to just for fun, take a look at any that were actually selling NVIDIA.

And this is not super surprising, Stanley Druck and Miller, his investment firm cash out their gains on some magnificent seven stocks.

They sold 400,000 shares of NVIDIA.

They also did this last year too.

So some profit taking there.

This isn't like a bear signal for and video.

I just think it's interesting David T investing firm doing the same.

We also have the likes of Michael Burry selling some names, selling out of Amazon and alphabet, but looking into some of those other big tech plays there.

So we saw Amazon actually down on the day yesterday.

Despite the market rally, we saw, I think that might have been related to some of the moves following that.

And then lastly, you've got Bill Ackman who continues to just be obsessed with Chipotle.

So that's always fun to take a look.

And it was also interesting.

Did you mention Microsoft there?

No Microsoft was cut or reduced by 252 investors.

The biggest such number that we have seen Amazon on the other side was increased or initiated by 232 investors, which is the biggest tally there.

So we're seeing some divergence within the mag seven names which have been market darlings where we are still seeing some out performance there, at least a handful of them.

So again, interesting to keep an eye on there where this large institutional money is making those bets and exactly what that means for the broader market here.

I wonder if they're over open A I some of the drama there.

We'll see.

Yeah, I think it's priced in.

Right.

Right.

Very true.

Well, we are gonna have all of your markets action ahead right here on Yahoo Finance.

So stay tuned for more.

You're watching Catalysts Stock still climbing.

I today the dow passing 40,000 for the first time ever.

The rally sparked by Wednesday, softer inflation print, spurring optimism around a possible rate cut this year.

Investors are watching the slew of Fed speak that we are expecting to get today for any sign that cuts are coming.

We already heard from Richmond Fed, President Tom Bark and saying that CP I is still not where the Fed is trying to get it down to.

But on the flip side, we have the most commentary and from New York Fed President John Williams, he said he does see inflation in the low twos and possibly as low as 2.5% at the end of this year.

That is a lot lower than what the market has been pricing in.

So that could be an indication that cuts could be coming this year.

That's what he's thinking.

But he also runs this model that shows that the Fed has been more restrictive than a lot of people think they are.

So he could have potentially Bi Yeah, exactly.

And, and also he co it a little bit saying that the f still needs a little bit more evidence before do have the confidence to cup but you're exactly right when you talk about his expectations to where inflation is going to be between now and the end of the year, he does see significantly more improvement than what is being priced in right now to the market.

So that could suggest maybe some further upside that we could see here.

But again, the dow pushing above 40,000 the first time ever.

And I think that just really highlights some of the commentary that we're getting, not only from fed officials here this morning, but also this optimism that has remained on the street that we are going to get cuts before the end of the year that corporate earnings have been holding.

That has really been the driver here for the market.

So many strategists that we have talked to over the last several weeks have actually been brushing aside some of that rate cut talk, the timing of the rate cut talk and really focused on that stronger than expected earnings and the prints that we have gotten out so far this earnings season.

And what exactly that could signal here for future growth at least in the intermediate term here.

So again, that being inflation, the resilient economy that coupled with very, very strong earnings results enough to push the dow here above 40,000.

We'll see though where we close the day.

All right.

Well, let's do a quick check of the markets.

We were talking a heck of a lot about the dow pushing above 40,000.

You've also got the S and P still above 5300 and you got the NASA trading up just about 2/10 of a percent and coming up, well, to dedicated all of your personal finance needs is here, Brad Smith is gonna have you for the next hour.

Stay for more.