Morning Market Feed May 10th, 2024
As jobless numbers came in, the markets looked with one eye to the last comments Powell made during the speech after his rate hike/less discision. We also had markets tacking wild swings at initial earnings reaction, basically saying “Yeahhhh, we ain’t doing non of that” to ARM Holdings, and Robinhood. Did we see any other interesting articles? Let’s dive straight into it to find out.
S&P500 +0.58% | Dow Jones +0.90% | Nasdaq +0.22% | Russell2000 +1.02% | 10-year 4.46%
(Numbers as of market close May 9th)
- Jobless numbers
Initial Jobless Claims came in higher than expected, this made for a change in the fact that this number has usually been coming in below expectations over the last few times. Why did markets react favorably to higher-than-expected jobless data? Well perhaps you remember my comments on Wall Street getting a little too excited about the possibility of rate cuts even if you shouldn’t want them. Powell commented that the only way to do sudden cuts in the FED Federal Funds Rate is by rapidly rising joblessness, so increasing jobless data gives renewed hope for rate cuts.
I don’t think you should want rate cuts, because that would mean a deteriorating economy, but lower interest rates generally improve profitability so short-sighted street gets to excited about it.
- Putting the Hood back on
After posting incredible earnings, absolutely smashing it out the park, the stock was up about 10% on it’s peak. This however turned out to be slightly to good to be true. In my opinion this sell-off was unjustified, as I thaught it to be all very impressive, but I do see some less positive things surrounding this company. You can find my full article here as I give my fair opinion about the earnings
- Learning the language of analysts
This might be the perfect next course for Duolingo, the stock got swept as it dropped >20% on earnings before the markets opened. What did stand out about the earningscall is that it was held on Zoom, the good old classic. There were many more unusual things about this earnings call however which you can read more about in this article.
- Solar Edge, Green energy deep in the red
Solar Edge posted revenues of $204.4 million, which beats analysts’ expectations of $196 million. This however is down from $943.9 million in the year-ago quarter. The stock is down 42.5%, not from its peak, no that would be way too optimistic, the stock is down that amount YTD. From its peak, the stock is down about 87%. Solar Edge, just like Enphase, has overshipped products as demand fell and is now in a position where it has to clear channel inventory. This caused EPS to come in at -$1.90, where analysts expected -$1.57. Guidance also came in lackluster, as the company expects to have sales of $250, to $280 dollars, analysts expected this number to be $305.99 million.
The disappointing numbers aren’t what is the worst news about this report, however, I was a bit surprised as well when I saw it could become worse. The company has cash of $316.3 million at the end of Q1’24. This is cash, cash equivalents, bank deposits, and restricted bank deposits, this is a very low amount but where the bad news hits is that the company burned cash worth $217 million during the last quarter. They may need to raise capital if the supply, and demand don’t get back into balance quickly.
Source, Benzinga Article
- So what to look for today?
There will not be any interesting earnings that I’m expecting today, so we don’t really have to look there, but we do have some economic data coming in today. Namely, the Michigan Consumer Sentiment number. This will be the preliminary release, but it is expected to come in at a 76 number, slightly down from the previous 77.2 number.
Furthermore, there will be three FED speeches, Bowman will be the first, followed by Goolsbee, and Barr will be last to speak somewhere today.
That was it for today, I hope the week will close out in a positive and I hope to see you again on Monday!
