Investors Left Dizzy By Cocktail Of Data

Chipmaker results, Powell's presser, and two healthcare giants' spiral.

Investors Left Dizzy By Cocktail Of Data

The cocktail of U.S. economic data, Jerome Powell’s speech, and lackluster earnings results from chip stocks took investors for a wild ride today. All eyes are turning to Apple earnings tomorrow after the bell as bulls await a stock to save the broader market from its recent volatility. Let’s see what else you missed. 👀

Today's issue covers semiconductor stocks’ mixed reality, Powell pressing the same Fed narrative, and two healthcare giants stuck in a spiral. 📰

Here's today's heat map:

6 of 11 sectors closed green. Utilities (+1.15%) led, & energy (-1.59%) lagged. 💚

The Japanese Yen remains extremely volatile, with the Bank of Japan’s position report revealing that it stepped in to support the currency this week. Additionally, crude oil prices are crumbling in the near term, dragging the rest of the energy complex with it. 🔻

Carvana cruised higher after the bell, rising 30% after its first-quarter revenues topped consensus expectations by double digits. Meanwhile, vehicle wholesaler Openlane tumbled after its earnings and revenue missed expectations. 🚗

Food delivery giant DoorDash fell 15% after posting a wider-than-expected loss and a revenue miss. On the other hand, freight logistics and trucking provider C.H. Robinson surged a similar amount after its earnings and revenue surprised to the upside. 🚚

Starbucks shares sank 16% after the company slashed its 2024 forecast, blaming weak same-store sales and falling traffic. Management’s inability to tell a clear turnaround story eroded investors’ already shaky confidence further. ☕

Electrical infrastructure stock Powell Industries soared 19% after its second-quarter results easily beat on the top and bottom lines. ⚡

Software development company Freshworks fell 24% after its current quarter, and full-year revenue guidance missed expectations. Online marketplace Etsy also tumbled about 14% after earnings missed and revenue met estimates. 📉

And Apple supplier Skyworks Solutions fell 15% on a downgrade from TD Cowen, which pointed to numerous headwinds and said the stock lacks a clear catalyst in the current environment. 🙃

Other active symbols: $CGC (-23.12%), $TLRY (-18.22%), $MULN (-21.94%), $TGTX (+16.25%), $CTMX (+214.72%), & $NIO (+11.65%). 🔥

Here are the closing prices: 

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Mixed Semiconductor Earnings Spark Growth Scare

Chip stocks have been on an absolute tear for well over a year, with hopes of the artificial intelligence (AI) boom fueling investors’ and traders' desire to buy them at any price. 🤑

However, as we typically see in these types of situations, the reality of their underlying businesses does not always live up to these high expectations. And as chip stock investors have experienced recently, that disconnect can cause massive swings in the stock price.

Super Micro Computer was the latest stock to spark a selloff in the sector after it posted revenues of $3.85 billion, below the $3.95 billion anticipated. It did raise its fiscal 2024 revenue forecast to $14.70-$15.10 billion, topping the $14.60 billion consensus view.

But the seeds of doubt had already been planted. 🌱

Meanwhile, Advanced Micro Devices fell sharply after its current-quarter revenue estimate of $5.70 billion “only met” expectations. That represents roughly 6% YoY growth, which may not be as robust as the market anticipated…even as the company says it will sell $4 billion in AI chips.

Despite Wall Street not loving the results, the Stocktwits community’s activity suggests retail investors and traders are still looking to “buy the dip” in these stocks. Sentiment for $SMCI and $AMD remained in “extremely bullish” territory today as message activity surged. 🐂

Overall, earnings season has been a mixed bag for the hottest stocks in the market, with it all coming down to expectations. For example, Qualcomm shares are up after the bell due to the company’s better-than-expected revenue forecast as it pushes toward AI-powered smartphones. 📲

On the other hand, Qorvo shares crumbled after forecasting earnings that were well below the consensus view. So as you see, not all semiconductor businesses (and stocks) are created equal.

Every company is involved in AI in some capacity, but some have hyped its potential business results up well more than others. That’s why we’re seeing the difference in reactions when the short-term numbers and forecasts hit. 🙃

Powell Presses The Same Old Narrative

The highly anticipated Federal Reserve decision came as expected today, with the central bank keeping rates unchanged. ⏸️

That said, it did adjust its “quantitative tightening” program, through which it’s been allowing up to billions of proceeds from maturing securities to roll off each month. With the central bank balance sheet falling about 20% from its 2022 peak, the Fed is reducing the program from $60 to $25 billion. 🔻

However, Chairman Jerome Powell’s commentary is where things usually get interesting. And that held true today. If you’re like me and missed the full press conference, my friend Callie Cox has a great summary down below.

Essentially, Powell shot down the idea of potential rate hikes and dismissed the prospect of stagflation entirely. He reiterated that the Fed’s job is to get inflation down and buoy the labor market if it starts to show signs of material weakness. 🙅‍♂️

He also addressed the political aspect of the November election, reiterating the Fed’s independence and data-dependent strategy regardless of what’s happening elsewhere in the government.

More of the data the fed is monitoring rolled in today, so let’s review. 👇

First, the job openings and labor turnover summary (JOLTS) showed that job openings fell to their lowest level in over three years during March, and the openings to available workers ratio ticked down to 1.30. The quits rate is also firmly below its pre-pandemic peak, showing a continued softening in the labor market.

Meanwhile, ADP’s employment report showed resilience in private hiring. Private hiring rose 192,000 in April, better than the 180,000 expected but lower than March’s 208,000 number. Wage growth was up 5% YoY, marking its smallest gain since August 2021. 🏭

As for manufacturing, the data remains mixed month-to-month but has stabilized and is trying to head higher.

S&P Global U.S. Manufacturing PMI was stable in April, staying in expansion territory despite breaking its 3-month streak of improvements. Meanwhile, ISM Manufacturing PMI fell back into contraction territory during April after just one month of expansion. 🏭

Overall, the softening labor market remains positive news for the Fed, given the role wage growth plays in inflation’s stickiness. Powell made it clear inflation is the primary target right now, but a material deterioration in the labor market could also be a catalyst for a cut in the future.

In other words, he wants the labor market to soften enough for wage growth to continue its decline but not so much it threatens the economy’s slow and steady growth. Time will tell if we can continue to thread that needle as inflation perks back up. 😬

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Pfizer Finds Support While CVS Is Slammed

Two healthcare giants were back in the news today but for differing reasons. Let’s quickly examine what caught retail investors’ attention. 👀

First up is Pfizer, which has been struggling with a post-pandemic growth slump, and its stock price definitely shows that. However, it jumped today after its earnings beat estimates and its raised outlook topped expectations. Cost cutting continues to pay dividends, and a smaller-than-anticipated decline in COVID drug sales helped buoy results.

From a technical perspective, analysts say the stock is finding long-term support in the mid-20s, which has proved to be a transition area for the stock many times over the last two decades. 🤔

Wall Street’s view of Pfizer is not great, but the Stocktwits community looks like it’s buying the long-term dip as sentiment sits in “extremely bullish” territory. 🐂

For some reason, retail investors are also seeing upside potential in CVS Healthcare, which has been slammed along with peers Walgreens, Rite Aid, and others. Today’s decline brought the company’s shares down 50% from their highs and toward their COVID-era lows.

The company slashed its profit outlook due to higher medical costs, which insurers have been warning about for several quarters now. Additionally, its retail storefronts remain challenged by the pullback in consumer spending. ⚠️

These two brand names have been stuck in a downward spiral for several years. But based on today’s action, at least one of them is starting to show signs of life again at a very logical level.

Only time will tell if the dip buyers are rewarded or if these brand names are set to continue their underperformance. But they’re definitely worth a look given the recent developments. 🤷

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