NEWS
Tech Sinks As Investors Rethink

It was another topsy-turvy day, with big tech continuing to break down while industrials, energy, asset managers, and other cyclical industries saw continued strength. Traders expect additional volatility with U.S. inflation data and consumer sentiment on deck tomorrow. Let’s see what you missed. 👀

Today's issue covers why airlines are getting no $LUV, Dexcom getting demolished on earnings, and regional bank troubles still rumbling. 📰

Here's today's heat map:

4 of 11 sectors closed green. Energy (+1.73%) led, & communications (-1.15%) lagged. 💚

U.S. durable goods orders plummeted by 6.60% MoM and 10% YoY in June, its sharpest drop since the pandemic. While the transportation sector pulled down the numbers, the “less volatile” nondefense orders fell 127%. 📉

U.S. second-quarter GDP estimates came in at 2.80%, topping the initial forecast of 1.90% and doubling the 1.40% logged during the first quarter. Consumer spending rebounded to 2.50%, along with a rise in inventories. 📦

The largest temperature-controlled warehouse real estate investment trust (REIT), Lineage) rose 3% in its Nasdaq debut, marking the largest IPO of 2024. 🤑

Aerospace and defense giant Raytheon soared 8% after earnings and revenue topped forecasts, while Northrop Grumman rose 6% after its beat and raise. 🛡️

Industrial giant Honeywell fell 5% after weak guidance overshadowed its second-quarter earnings beat. Dow Chemical dipped on a top and bottom-line miss. 🔻

Stellantis shares fell 8% after reporting a 48% decline in first-half net profit, citing weak U.S. sales. It says it’s ready to drop brands to fix its U.S. problems. 🚗

Nasdaq stock jumped 7% to 18-month highs after earnings and revenue topped expectations. Software stock ServiceNow also made new highs after raising its full-year outlook and soaring 13%. 💸

Lululemon shares lost another 9% after three Wall Street analysts downgraded the apparel firm, citing a category slowdown and management issues. 🧘

Online course provider Coursera surged 21% after a second-quarter revenue beat outweighed the $0.15 per share loss it posted. 🧑‍🏫

Bally stock rose 25% after hedge fund Standard General agreed to buy the casino company for $18.25 per share, valuing it at $4.60 billion. 🎰

And Deckers Outdoor rose 10% after its first-quarter earnings and revenues topped estimates due to continued strength in its Hoka and UGG brands. 👟

Here are the closing prices: 

EARNINGS
Investors Are Still Giving Airlines No $LUV

Despite record levels of U.S. and international travel, airlines have struggled to capitalize on the surge of customers…causing investors to punish their shares. The negative news continued today, but the stocks saw a brief bid, begging the question of whether a bounce is ahead. ✈️

American Airlines’ results were again weighed down by excess domestic flight capacity, which caused lower-than-expected ticket prices.

The company’s CEO said profits fell 46% YoY to $1.01 per share, with revenue ticking up 2% YoY to $14.33 billion. In addition to lower ticket prices and external factors, the company’s direct-to-consumer sales strategy, which it adopted in 2023, failed to generate the expected results. ⏪

That strategy mishap will cost the airline $1.50 billion in revenue this year, even as it works to reverse its decision quickly. It now expects third-quarter revenue to fall as much as 4.50% and adjusted earnings per share well below its own forecast and Wall Street’s expectations.

Notably, the shares rebounded today after an initial decline, but Stocktwits sentiment remains in “extremely bearish” territory as retail investors bet against the company’s turnaround. 🐻

Meanwhile, Southwest Airlines is abandoning 50 years of tradition by getting rid of its “open seating” policy, which surveys showed 80% of its customers despised. 😮

Beginning next year, it will offer extra legroom seats on its planes and plan overnight flights to better meet customer demand and boost revenues. With customers taking fewer short-haul trips, the importance of an assigned seat goes up…hence the growth in premium product growth across the industry.

With that said, it’s not changing its beloved “two free checked bags” policy, citing it as the number one reason customers choose Southwest over competitors (besides fares and schedule). 🧳

While the airline is fighting for relevance in a competitive market, its management is also trying to stave off activist investor Elliott Investment Management (and others) calling for leadership changes.

Shares fell and quickly reversed into the green to close higher today. And unlike American Airlines, retail investors appear interested in giving this turnaround story a shot as Stocktwits sentiment hit a one-year high. 🤔

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