NEWS
Market Melts Amid “Meh” Earnings

Stocks tried to keep their upward momentum intact, but sellers came in throughout the day and pushed the indexes back into the red. With many of the “big name” earnings out of the way, lackluster results have failed to provide investors the courage to “buy the dip.” Let’s see what you missed. 👀

Today's issue covers Robinhood hopping and Shopify popping, a key risk-on/risk-off ratio flashing caution, and what the Ripple vs. SEC case conclusion means for crypto. 📰

Here’s the S&P 500 heatmap. 4 of 11 sectors closed green, with utilities (+0.56%) leading and consumer discretionary (-1.74%) lagging.

And here are the closing prices: 

P.S. We’re experimenting with different formats to streamline your experience. Like something, don’t like something, hit me up. I want to hear from you. 👍

EARNINGS
$HOOD Hops & $SHOP Pops

As we said in the intro, earnings have not inspired the bulls to step into a volatile market just yet. However, that doesn’t mean there aren’t some bright spots, as Shopify and Robinhood showed us today. 🙂

Canadian e-commerce giant Shopify’s adjusted earnings per share of $0.26 on revenues of $2.05 billion beat estimates of $0.20 and $2.01 billion. Gross merchandise volume (GMV) rose 22% YoY to $67.20 billion, easily topping the $65.80 consensus estimate. 🛒

For the third quarter, it expects revenue to grow at a low-to-mid-twenties percentage rate on a YoY basis, while gross margins are expected to rise by roughly 50 bps QoQ. It forecasted GAAP operating expenses of 41%-42% and a double-digit free cash flow margin for the rest of the year.

Retail investors are gaining confidence in management’s turnaround plan and ability to navigate the consumer slowdown. Stocktwits sentiment pushed to a one-year high in ‘extremely bullish’ territory as shares rose 18%. 👍

The retail brokerage and Neobank reported $0.21 in earnings per share on record revenues of $682 million. Analysts had anticipated $0.16 per share on revenues of $640 million. 💸

Driving the beat was transaction-based revenues rising 69% YoY, helped by options activity. The company said the number of customers trading options was up 25% YoY. Crypto revenue also rose 161% amid increasing activity and a 3 bp improvement in ‘take rate.’ 🔺

CEO Vlad Tenev reiterated the company’s growing subscription service, noting that Robinhood Gold reached 2 million subscribers and saying that’s evidence of “the flywheel accelerating.” The company remains focused on product improvements to drive to provide top value for customers, who Tenev says are “not just novices” (contrary to popular belief).

Shares of Robinhood are up just 2% after hours, but retail is fired up about what they heard. Stocktwits sentiment pushed into ‘extremely bullish’ territory from its ‘neutral’ zone yesterday. 🐂

STOCKTWITS “CHART ART”
A Key Risk-On/Risk-Off Ratio Flashes Caution ⚠️

There are a lot of ratio charts technical analysts reference when trying to assess risk appetite in the market. One of those is the ratio of the consumer discretionary sector relative to the consumer staples ratio. 👀

The reasoning for this is that long-only institutions cannot go to cash when they want to be more cautious in the market (like some are today). Instead, they’ll swap their long holdings in companies tied to cyclical economic activity for companies that can still do well in weaker economies.

That would mean selling restaurant chains or airlines whose products are considered ‘discretionary’ purchases and buying companies that sell consumer staples like household goods, foods/beverages, alcohol/tobacco, etc., that people will buy regardless of the economy’s health.

Stocktwits user @HostileCharts pointed out today that this ratio is hitting fresh lows for the first time in recent history, signaling some cautious positioning among market participants. 😬

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