Broker Check

Market Insights – Week Ending May 10, 2024

May 13, 2024

Market Summary –

A quiet week in terms of economic and earnings data translated into broad-based strength in equities, as the S&P 500 enjoyed carry-over momentum from the Fed alleviating near-term rate hike worries. Absent these concerns and aided by unchanged treasury yields, we also saw efforts to retest key technical levels – namely, all-time highs. The main takeaway this week is that the market’s hopes for a soft landing remain in-tact, despite higher-for-longer rates clouding the timing of rate cuts. That is, the economy remains resilient and supportive of strong earnings growth with some labor market softening conducive towards eventual rate-cuts.

The consideration that market participants will be reminded of next week is inflation. The Fed will justify higher-for-longer rates as long as inflation continues to remain elevated above the Fed’s 2% target. The monthly University of Michigan consumer sentiment survey, which gauges how consumers feel about general economic conditions, fell to 67 from 77 in May with year-ahead inflation expectations picking up to 3.5% from 3.1% the previous month. Without continued improvement on the inflation front, higher-for-longer rates may renew near-term volatility as the market grapples with seemingly full valuations.

Chart of the Week – University of Michigan Survey: Inflation Expectations Increase

Bloomberg, LP

Light earnings data this week with notable reports from Walt Disney (DIS) and Uber (UBER):

  • Walt Disney (DIS) – The entertainment giant reported both earnings and revenues above expectations, and raised its full year guidance. Despite this, price action was negative as the positive news consisting of strong revenue growth from its theme parks segment continues to be overshadowed by uncertainty around its entertainment DTC (direct-to-consumer) segment. While the DTC segment (primarily led by Disney +) reported streaming profitability for the first time this quarter, expectations were exceedingly high with investors ultimately taking the opportunity to take some profits. The disappointment stemmed from weak FYQ3 guidance as the company expects a slowing in demand for its park segment and a weaker near-term outlook for streaming. Management reiterated that the path towards long-term streaming profitability will not be linear.
  • Uber (UBER) – In a similar case, Uber traded down in response to lowered quarterly guidance which offset still-healthy rideshare demand. The main note was a deceleration in bookings (sales), as consumer spending remains cautious given elevated prices. Bottom-line revenue was further challenged by heightened legal costs and a sizeable unrealized loss in equity investments. Coupled with heightened competition from Lyft (LYFT), near-term headwinds took some momentum out of the stocks 70% run over the last year. 

Week Ahead –

On the economic front, market participants will be focused on Wednesday’s inflation data for April along with Retail Sales. Along with Retail Sales, key earnings reports from both Home Depot (HD) and Walmart (WMT) will provide insight into consumer spending. Other notable earnings releases include Applied Materials (AMAT) and Cisco (CSCO), which will help signal semi-conductor sentiment as investors anxiously await earnings from Nvidia (NVDA) at month-end.

 

As always, if you have any questions or comments please do not hesitate to reach out.

Respectfully,


Michael Neill, CFA




Advisory services provided by NewEdge Advisors, LLC doing business as Marathon Financial Group, as a registered investment adviser.  Securities offered through NewEdge Securities, Inc., Member FINRA/SIPC. NewEdge Advisors, LLC and NewEdge Securities, Inc. are wholly owned subsidiaries of NewEdge Capital Group, LLC.

 

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