Market Recap: Thursday, May 13
Stocks traded higher on Thursday, with investors digesting the latest stronger-than-expected print on the labor market's recovery, while still eyeing spiking prices that could throttle the recovery. George Ball, Sanders Morris Harris CEO and Sam Stovall, CFRA Chief Investment Strategist joined Yahoo Finance Live to discuss.
Video transcript
[MUSIC PLAYING]
SEANA SMITH: Stocks rebounding after yesterday's pretty dramatic drop. We have the Dow, S&P and NASDAQ all in the green. We had George Ball, CEO of Sanders Maurice Harris with us. We have Sam Stovall, he's CFRA's Chief Investment Strategist. But first, let's get over to Jared Blikre for a closer look at some of the moves to the upside here into the close. Jared.
JARED BLIKRE: That's right. We're coming off session highs right now. Let's take a look at the YFi Interactive. Dow is up 1.4%, 450 points. And we were just making new session highs only minutes ago. S&P 500 up a little bit less. You can see it was making new session highs as well. And the NASDAQ up 3/4 of a percent, the laggard of the day, not quite clawing back some of that dip there. And guess what. The Russell 2000 back in the green after briefly dipping in the red as you can see there.
Now let's take a look inside the market. This is the Dow. Standout there is Chevron. That's at the bottom in red. That's down about half a percent. The energy sector not doing that well today. In fact, it's the only sector in the red. We did have crude oil closing down the most. Worst day in about three or four weeks I believe. So Apple here on your screen up 2%. Microsoft nearly there with it. Walmart up 1.94%. IBM up 2%. So some pretty broad-based gains, but we're seeing them clustering around industrials and financials. Utilities is still the leader though. That's up 2%. There is that energy sector that I was talking about. That's down 1%.
And we'll just take a quick look there before the closing bell. Looks like we got about 30 seconds or so. Exxon down 1%. Some other standouts though. Occidental Petroleum down 5%. Year to date though, most of these guys sitting on some nice gains. You can see they're up 37%. And with just a few seconds to go, I'm going to tell you what the meme stocks are doing. GameStop having a decent day, up 13%, 14%.
[RINGING BELL]
ADAM SHAPIRO: All right, Jared Blikre. We've got the closing bell on Wall Street, and we have turned it around as the gavel pounds. Smoke 'em if you got 'em. Let's see where the markets look like they're going to settle as we have the closing bell. The Dow is going to be up about 433 points. S&P 500 will be up about 49 points. And the NASDAQ will be up about 93 points. Big winners on the Dow today, they were the losers the other day, Home Depot will close up almost 3%. JPMorgan Chase going to be up about 2%, almost 3%. And Travelers, travel company insurance, that's going to be up about 2.6%, almost 2.7%.
Let's go back to our guests and talk about where the markets are headed. We've got George Ball and Sam Stovall. George, let me start with you. What we saw yesterday, a lot of people said this was the CPI numbers, people worried about inflation. But we keep hearing from people who take a deep breath and remain calm that when the Fed says it's transitory, what drove those prices higher in the report for April were really the kinds of things which are not lasting. Airfares were up. You've pointed out that issue. So why did we all panic yesterday?
GEORGE BALL: Well, we panicked because we like to. People are much more risk adverse than they are gain [? desiring. ?] I think the big problem for investors right now is the Fed isn't going to change its course anytime soon. But a lot of people who do have inflation fears longer term are going to look for a shift in the monetary policy that won't take place. And so how people wait and wait and wait, those fears will become greater. And I think that ultimately, they tug prices down, although not yet. We of the investing class like to see prices going higher, and there is momentum still in the market that is more on the bull side, at least temporarily than on the downside I think.
SEANA SMITH: Sam, what do you think about how the Fed has taken its stance? They, of course, have reiterated the fact that inflation that we're seeing, that it will be transitory. Do you think they're correct?
SAM STOVALL: Well, Seana, yeah, I think that at least the things that Adam just mentioned where they are are, those items that are going to bounce back really quickly, but it's not really the wage area which is the biggest part of inflation that is also the stickiest part. We've yet to see that. And so I would tend to say that we're actually probably going to see an even worse number for CPI and PPI next month, but then start to see it slide as the year progresses. So right now, the Fed has to remember what is going to happen six to 12 months from now. In a sense, they're aiming at a target that's out of sight, and so they don't want to be reacting too quickly.
ADAM SHAPIRO: All right, everybody hold on, because we have an earnings update. Dan Howley is watching Coinbase for us. Dan, what are they reporting? Dan, are you muted? Let's go back to the panel. We seem to be having a tech issue. Sam, I want to bring up something you said regarding inflation. And that would be the fact that you think that this CPI number will peak around 4.4%.
Are we actually perhaps even wasting the time of investors having this discussion, given the fact that it looks as if those numbers will come down as the supply chain bottlenecks loosen up and the wage gains we're seeing might actually not be as high as people come back into the workforce?
SAM STOVALL: Well, I wouldn't say it's a waste, because nobody knows for sure what exactly is going to happen. You just offer your best guess. And our belief is that because we are not seeing a material deterioration in breadth and momentum, meaning we're looking still at 99% of the subindustries in the S&P 1500 above their 200-day moving average, nine of the 11 sectors in the S&P remained above their 50-day moving average. And so we really, I think it would be too early to claim that something more ominous is ahead.
SEANA SMITH: All right, we are going to try Coinbase earnings with Dan Howley once again. Dan, what do you have for us?
DAN HOWLEY: That's right. Sorry about that. What we have here is a slight miss on revenue and earnings per share. Originally, there was expectations of $1.81 billion for revenue. The company came in at $1.80 billion. And then in earnings per share, we have $3.05. The expectation was $3.09. And obviously, this news comes as we saw that Binance is under investigation by the Justice Department and IRS for potential misdeeds as far as taxes go, and money laundering.
Really, the big deal for Coinbase, obviously it's meant to insulate investors from the ups and downs of cryptocurrencies. We've seen that throughout the week. As far as Bitcoin goes, obviously the big news from Elon Musk that Tesla would not be accepting it for payments on Tesla vehicles because of the environmental impact that mining has. And then his comments over the weekend on "Saturday Night Live" about Dogecoin, calling that basically a hustle. That sending prices of Dogecoin down. So obviously, big news going on in the crypto space. But again, a miss on the top and bottom line for Coinbase.
ADAM SHAPIRO: All right, Melody Hahm has been waiting for the Airbnb earnings. They are out. Melody, what can you tell us?
MELODY HAHM: Yes, revenue up 5% year over year for Airbnb. And just to put that in context, guys, Expedia and Booking reported over the last couple of weeks, revenue was down 50% and 44% respectively at those companies. So any sort of growth in the travel industry, of course, is a win here. Gross booking value was in at $10.3 billion compared to an estimate of $7.47 billion. And of course, revenue at $887 million, that's the total number there. Estimate was $719.8. The net loss is still not profitable for the quarter. Came in at $1.2 billion compared to a loss of expected of $341 million.
We did see free cash flow come in at $486.7 million compared to the negative $586 million expected. So overall, a pretty decent quarter. We do see the stock under pressure right now, down about 6%. This, as we don't really have clear cut forecast expectations for the year ahead. Executives have repeatedly said that they do not feel confident giving any sort of forecast. We do have Airbnb CEO, I'll be speaking with Brian Chesky later on today, and that interview will be airing first thing tomorrow morning.
SEANA SMITH: All right, Melody. Of course, we're all looking forward to that. We also want to continue the earnings today, we have Disney, they are out with their results. Jared Blikre has that for us. Jared.
JARED BLIKRE: Yeah, not the best results. Disney's down about 4%, and here's why. The subscriber numbers were just a little bit light. So Disney+ subscribers came in at $103.6 million. Estimate was for $110.3 million. So missing the mark by just about $7 million on that number. Adjusted EPS came in at $0.79, much higher than the estimate of $0.32, so a nice beat there. But the revenue, there's a revenue miss. $15.61 billion is what the company reported in the second quarter. The estimate was for higher, slightly higher at $15.85 billion.
And I'll break this down by a segment. So media and entertainment distribution revenue $12.44 billion, missed slightly. Parks, experience and products revenue, $3.17 billion, came in exactly as estimated. And then media and entertainment distribution operating income. That came in at $2.87 billion. Estimate was for a billion lower. So a nice beat there. Then finally, parks, experience and products, they had an operating loss of $406 million, slightly wider than the loss of $369.4 million.
And we'll just take a look at the Wi-Fi interactive here. Those numbers, here's the year to date performance, sending the stock down to probably about these levels. We'll take a longer term look to see the implications here. Kind of been going sideways, I'd say for a few months. But we do have this pennant information. So if we break below, probably looking to get into this potential support area in here. So a miss on those subscriber numbers, and also a miss on revenue for Disney.
ADAM SHAPIRO: All right, Jared, we appreciate that. And again, Disney stock is off about 3% in the after hours. Let's go back to the guests. And I wanted to bring up something, especially with you, George, because a lot of people like to say buy on a dip, whether it be Disney or let's broaden this out obviously, for the averages. And you've pointed out over a decade, that advice might have been good. But then you say that this time is different. Why?
GEORGE BALL: Since the crash and the economic catastrophe of '08, '09 buying on the dip has been a very profitable strategy time after time after time. I think we're now in a position where concerns, A, about inflation, whether there is a sharp increase and then a drop and then perhaps an increase later on about the debasement of the dollar, and really of the tax rates and the fights between pure capitalists and unfettered capitalists is such that this time around, you might be better off erring on the side of caution.
If you don't buy the dip, you can't lose money. But if you do buy it and you're wrong, there could be a substantially greater decline, a drop of not 10 or 15, but a drop of 25% or 35%. So this may be a time where playing it closer to the vest, being more conservative is the smart thing for the thoughtful investor to do. Don't buy the dip, do increase your cash and cash-like holdings if there is a, and when there is a significant decline, I think would be a thoughtful way to approach the markets.
SEANA SMITH: Hey, Sam, what do you think is priced into the market at this point? Do you expect the market to continue to worry about these inflation numbers, say if we do continue to see a rise over the next couple of months?
SAM STOVALL: That was directed at me. I think that the market is actually going to go through a sideways pattern. George mentioned something about how you want to be a little cautious as to how quickly you dive back in. What I have found is that whenever we have had such a strong start to the year, the S&P equal weight 500 was up more than 16% through April, which was the third strongest opening of the year since the index was created in 1990.
History then says, look out, because May tends to be a bad month. And then the June through September tends to trace out the design on Charlie Brown's shirt. So it ends up being sort of a lackluster sideways movement. But then be prepared for a pretty sharp October, November, December. So usually strong starts are then accompanied by favorable finishes.
ADAM SHAPIRO: So Sam, just to follow up on that. I mean, if you're sitting on cash right now and you're following what George's advice is, look, we could have greater than a dip of 8%, 10%, it might be even bigger. Sit on that cash, deploy later. You're not going to get anything sitting on that cash right now. But are you also saying, protect the cash for a greater Fall perhaps?
SAM STOVALL: No, I think what I'm saying is that while there could be the possibility of an additional downward move, today probably was just a knee jerk reaction. I think we have to wait for the jury to come in tomorrow to see how the follow-through is. But I think what George is also saying is, prepare yourselves that the future returns are going to be less than what we have experienced since the financial crisis.
On a rolling 10-year basis, we posted about a 14% rise through February of 2019. And like the peaks of 2000, 1999, 1969, et cetera, you then end up with a longer time period in which we get sub-par performances. So I would caution is probably not a bad thing at this time. I wouldn't move everything to cash, however, more on a rotational basis.
