On today’s episode of Market Domination, Hosts Josh Lipton and Madison Mills break down some of the biggest stories dominating the trading week, from Monday’s global market sell-off to concerns of a recession.
US equities (^GSPC, ^DJI, ^IXIC) were on a roller coaster ride this week, with a large sell-off on Monday and a bit of a recovery on Thursday. Janney Montgomery Scott chief investment strategist Mark Luschini explains, “Collectively, I think we’re ending kind of where we’re beginning, which is to say, the economy continues to look like it’s in pretty good shape. The Atlanta Fed GDP Now tracker is coming in at 2.9% for activity here, so far into the third quarter, which is a continuation of a reasonably good economic climate that should be fertile for stocks.” He expects more volatility over the next couple of months, but notes that the current economic data remains “relatively healthy.”
Bitcoin (BTC-USD) is recouping some of the losses it faced during the global market sell-off earlier in the week. MicroStrategy (MSTR) executive chairman Michael Saylor says, “Bitcoin is the only truly global capital market in the world, and so if you think about the volatility of it, the volatility is the price that you pay in order to create billions of dollars of credit and liquidity at your fingertips, all times, everywhere for everybody. And so on Sunday night, all the other capital markets are closed. Bitcoin is the only capital market that’s functioning. What you saw over the past week is that it’s functioning really, really well. And that is the secret to the success of the asset class.”
Shares of Zillow (Z) are rising after the company posted its latest quarterly results, beating analyst estimates on both the top and bottom line while also naming a new CEO, Jeremy Wacksman, who previously served as the company’s COO. Zillow Group CEO Jeremy Wacksman outlines one strategy that is beginning to pay off for the company: “We are investing pretty healthily in our housing super app strategy. We’ve been doing that for a few years now. You’re starting to see the results of those investments pay off. That’s what’s driving the outperformance across the business. And that’s what’s driving what’s really our mid-term target, which is to grow our share of transactions in the market.”
Recent economic data and the market sell-off has sparked fears and questions about whether the US is in a recession or if a recession is in the near future. Wall Street Journal Chief Economics Commentator Greg Ip explains, “The stock market matters, in so far as it’s got a pretty flawless track record of predicting recessions.” He adds, “I think pretty much every recession was preceded by a big drop in the stock market. The problem, of course, is that not every big drop in the stock market was followed by a recession. It does have false alarms.”
I’m Josh in alongside Madison Mills live from our NYC headquarters.
We’re giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.
And here’s your headline with getting you up to speed one hour before the closing bell rings on Wall Street.
Uh But uh you know, II I doubted the will of the Fed and they, they, I think we’ll deliver 25 not 50 in September.
The gen A I trend is a very transformational one that has been rewarding to some of the enabling technologies in the course of the last 18 to 24 months.
And you’ve seen that crystallized into significantly higher earnings expectations and outcomes.
What we’re seeing now is a little bit of an adaption in hyperscale cap X trajectory.
And so we still see a lot of investment coming from those hypersal into chips and into the A I trend.
Well, I think the themes we’ve seen um have been pretty consistent across the space which is better streaming profits, but that’s come uh with larger linear losses.
And so the trade off that the streets looking at in aggregate across these companies, you know, isn’t, isn’t super bullish.
Um The one thing that I would say that we keep looking at is not so much the net ads or the profits.
What I keep focusing on is what is the consumer paying to spend an hour on any one of these apps?
All right, we’ve got one hour to go here until the market close.
We’re taking a look at the major indices right now.
You know what man, he kind of relatively calm now with one hour to go heading into the weekend, seeming kind of calm, kind of found our our footing and we deserve, we deserve some calm.
It has been a wild week.
You started off on Monday, you know, red everywhere panic hair on fire.
There was different reasons for that and we’ve talked about it’s technical, the yy funded trade, but also a growth scare all of some people worried about is this cooling economy gonna go cold and hot, talk about emergency cuts, but then kind of found our footing and some positive economic data helped throughout the week, initial initial claims.
And and suddenly I think at least right now investors seem to be thinking, you know what maybe that soft landing is, is base case after all.
I was just pulling up the five days so that we could take a look at the beginning of our week.
Let me go over to the NASDAQ here and pull up the five day chart because you can really see what a ride it has been up to the top.
But also right before our show, the Vics did pop below 21.
So it is starting to get closer to where it was before this wild ride all began.
Let me pull the indu you can kind of see how the vics is doing in terms of that downward movement indicating that volatility is starting to normalize after a really tough wild ride of a week.
I’m also looking at the 10 year popping below that forehand.
All that’s gonna be something to watch for our, you know, home buyers out there.
Uh And of course to see how the bond space is gonna inform equities moving forward.
Certainly, something we can talk about with the Zillow Ceo later on.
And then of course, Bitcoin, we got a big interview on that, got a big name coming, big day coming.
Yes and, and big a big move when it comes to the Bitcoin Space too.
But for more on this week’s wild ride here, we wanna welcome in our first guest.
We’ve got Mark Luccini, the Chief Investment Strategist at Jenny Montgomery Scott.
Great to have you on.
So listen, when I look at what’s going on in the markets here with Josh, it’s looking like did this all matter with this much ado about nothing over the past seven days here.
Well, imagine as we sit here on a Friday afternoon after three o’clock and had you not known what had transpired over the course of the week?
You would think that basically nothing had happened.
Uh, you were down a couple of 10th of 1% on a week, over week basis.
At this juncture, we know it was Dramamine inducing activity over the course of the week on a couple of things that I think are certainly worth monitoring as we go forward.
I don’t think we’re necessarily wanting to be overly complacent with regard to certainly the report we got on Friday.
Uh, although Thursday’s weekly claims number gave some assurance that perhaps, uh, companies aren’t shitting workers quite to the same degree as the weakness that was attributed to the jobs report suggests that they might be, uh, in addition to that the, the unwinding, the carry trade seems to be in its later innings.
And the, uh, an official from the bank of Japan came out and seemed to have called a calm fears with regard to any further activity on the part of the bank and that would jar markets any further.
And so, you know, collectively, uh, I think we’re ending kind of where we’re beginning, which is to say the economy continues to look like it’s in pretty good shape.
The Atlanta Fed GDP now trackers coming in at 2.9% for activity here so far into the third quarter, which is a continuation of a reasonably good economic climate that should be fertile for stocks.
So it’s no surprise that we’ve seen, you know, rather impetuous, perhaps rebound and equity prices waived yesterday’s activity, but something at least allowing investors to take their breath.
It was interesting mark.
Uh because, you know, earlier in the week when there was that, you know, Monday, the real sense of panic there red everywhere you heard a lot of criticism of the fed mark.
I mean, people were really out there even pounding the table.
It doesn’t sound mark like you’re in that camp though.
No, not at all.
In fact, I, I think they could have actually exaggerated the crisis of that moment.
Uh had they acted or came out and made some statement.
Uh Even if it was an effort to calm the markets because I think the markets might have interpreted it that it was something that had gotten, gotten their attention.
Certainly, and, and warranted some comment to suggest that perhaps something even more nefarious was taking place behind the scenes that wasn’t obvious to the market observers.
So Um, no, I’m assured by the fact that the Federal Reserve One didn’t act by adjusting rate policy or two have to come out and make some commentary relative to the activity.
Uh, and really allow for the, uh, Marcus to settle down once I think cooler has prevailed with regard to the activity that at least so far hasn’t manifested into something that looks particularly sinister and in fact, is probably, uh, what to be expected.
We’re in a seasonally weak period for stocks, August and September and we haven’t seen the kind of volatility nor a drawdown that was around 10% on a year to day basis, which is highly unusual.
So this is more normal and customary sentiment got a little bit too extreme to the uh enthusiastic side and that had to be reset and we’ve gone through a pretty quick reset of that.
But nonetheless, I, I think it’s a set up for uh calmer markets to prevail.
Well, I think it is largely speaking, I do expect further volatility over the next couple of months.
Uh The presidential cycle analog suggests that we continue to see some weakness here leading up to the election.
Uh In addition to that, there is still, I think some concern that is worthwhile.
Noting that the economy is beginning to moderate the job market is cooling.
So we’ll have to continue to watch the data that suggests that the labor market remains relatively healthy.
So at the end of the day though, while we’re not abandoning uh those sectors that have been leaders on a year to day basis, namely some of those great iconic brands and technology, communication services and consumer discretionary.
We are suggesting to investors that perhaps they continue to bolster their portfolio by adding positions or taking in overweight in sectors like real estate and in health care and utilities.
Uh more classic defensive sectors as a means of balancing out the risk.
In the event.
We do see further moderation of growth that does suggest that uh some of the risks that suddenly have risen around the prospects of a recession uh ultimately become mark.
You know, I gotta ask you about the election, gotta talk about politics for just one second mark.
The election impact on the markets.
When when clients ask you mark, what do you tell them?
Well, at the end of the day, for long term investors, they really don’t have a substantial influence on the market.
So, I mean, certainly we’ve seen a lot of positioning and posturing with regard to sectors that might outperform or underperform relative to who the candidate might be obviously so much, not only depends on who’s occupying the White House, but the composition of Congress and as well, the economic backdrop that persist at the moment that a change over in the administration takes place.
So I want to try to front run that activity.
Uh a focus on the long term and allow your asset allocation to help the weather uh by way of risk management, the inevitable uh moments in time where investors will become, you know, flustered over some comment being made by a candidate or some policy initiatives that uh at face value might look uh potentially disrupting for the markets and focus on the long term where over time we know investors have been rewarded for staying the core through any uh potentially climatic or uh intermediate term influence on markets that have a political orientation in their nature.
All right, mark, we’re going to have to leave it there.
We’re going to take a look at one of our top trending take on the Yahoo Finance home page now and we’re going to start with unity shares are climbing after beating earnings projections, they’re up over 8% right now.
As a reminder, this is the company making software.
It can be used to do things like make video games, graphics, even apps and the company posting a narrower quarterly loss and better revenue forecast.
But interestingly when you take a look under the hood, there’s a little bit of a discrepancy here and that’s why we saw we Bush still maintaining their out perform rating Josh.
But a change in the price target to 21 bucks a are down from 3350.
And the reduction guidance from Wedbush is specifically about market share gains that they’re anticipating from a competitor in the space called App Lo and that’s something that they are concerned about having said that it seems like we Bush’s call here is a little bit of an outlier when you take a look at some of the other reaction that we are getting from analysts Oppenheimer, for example, putting them out of perform, saying the updated annual guidance does imply growth moving forward.
Uh They, they applaud the catch up investment in their growth segment city also maintaining a buy but mentioning that the lower 2024 revenue and adjusted EBITA is a more cautious approach than they had anticipated.
Yeah, and you had a change of the C suite too here.
By the way, we should mention the CFO Luis V Soo has chosen to exit the company, senior accounting officer filling his role.
It looks like while they now conduct an intensive search over at We Bush.
The analyst Michael Pachter, of course, long time analyst becoming gaming for a long time saying he likes the CFO very much but understands the desire of CEO that’d be Matthew uh Bromberg to revamp the company and gain a fresh start.
All right, we’re just getting started here on market domination coming up Bitcoin prices rising back above 60,000.
Today, we’re gonna speak to micro strategy’s very own, Michael Slor on the other side to get his thoughts on the crypto sector.
Plus a new head of the household Zillow announcing this week, a long time executive and chief operating officer, Jeremy Waxman has been promoted to Chief executive Officer.
We’re going to speak to Mr Waxman later in the hour and how sweet it is to be Sweet Green.
At least today you’re looking at shares of that restaurant chain of over 28% on the back of their latest earnings print.
We’re going to speak with Jonathan Neman.
Sweet Greens co founder and CEO in the four pm hour.
So all that and more market domination returns.
Bitcoin recouping some of its losses from earlier in the week.
The Cryptocurrency trading above 60,000 as the crypto market tries to find its footing from Monday’s sell off Bitcoin Bull micro strategy, executive chairman Michael Saylor joins us now, Michael, it is great to have you on the show.
Um I wanna start Michael with just the the moves we saw this week, you know, we’re ring here now briefly top uh 62,000.
We we did have that sell off though, early in the week, Mike.
I I’m just curious um what you think explained that what was going on there was that just, you know, investors see Bitcoin as a, you know, a very speculative asset.
Was it margin calls, what, what was going on in your opinion?
I mean, well, I mean, Bitcoin is the only truly global capital market in the world.
Um And, and so if you think about the volatility of it, the volatility is the price that you pay in order to create billions of dollars of credit and liquidity at your fingertips all times everywhere for everybody.
Um And so uh the on Sunday night, all the other capital markets are closed.
Bitcoin is the only capital market that’s functioning.
What you saw over the past week is that it’s functioning really, really well and that, that is the secret to the success of the asset class.
Let me get your thoughts, Michael though, on a uh you know, the critics are out in force, right?
You know, that column from the Washington Post and the title was when Markets Get Scary.
Crypto proves its worthlessness and talking about that sell off early in the week.
Uh Michael, the columnist goes on to say Bitcoin dropped by 15%.
This is not how a hedge against inflation or disaster acts.
Give me your response, Michael to that, you know, volatility is a sign of high energy rivers, waterfalls, fires windstorms, they’re volatile, they have massive amounts of energy.
Niagara Falls is a scary place.
If you’re gonna play in the pool, 5000 people have died and Niagara Falls playing with it over the past 100 years, but it generates five gigawatts of power.
So if you’re going to harness the energy as an engineer, then you want the volatility.
And uh if you’re a tourist and you’re playing in the water, you know, taking selfies, then it’s scary.
Uh, no one that understands Bitcoin is afraid of the volatility.
Ok. Well, Michael, I wanna switch gears a little bit because crypto has sort of become this political football this election cycle.
I’m curious, are you advising either candidate or either campaign on crypto policy?
I’m advising everybody in the world that Bitcoin is digital capital.
There’s a revolution in the global capital markets and traditional finance operates, you know, 19% of the time for 10% of the world that makes it a 2% solution.
Have you spoken with either Vice President Kamala Harris or former President Trump specifically, I speak with both Democrats and Republicans.
Have you spoken to either of them in the past say a month?
Yeah, I I don’t share my conversations that I have in private and confidence with anyone in the world.
Ok, fair enough.
Let’s say that you were on a hypothetical phone call with either of them.
What would you be telling them that your dream is for crypto policy moving forward?
Um The future is digital, right?
There’s a race to own cyberspace that being the case.
Empires are built on productive property and they’re defended by firepower, naval power, air power, nuclear power and digital Power.
Bitcoin’s Digital Power.
You want Bitcoin, you wanna own cyberspace, you want the most digital power just like you want nuclear power, air power and space power.
It’s a good investment.
It’s like buying Alaska or like the Louisiana purchase and it’s also essential to national security.
Which candidate is better for crypto.
I think that again, crypto is I’m not gonna comment uh on anything political at this point.
I’m gonna say it’s just a good idea to support digital assets and digital capital for any nation state, any political party, any politician, it will be a factor in November in the elections.
I have no doubt I’m not.
I I want won’t try to get you to comment anything specifically political uh Michael, but I am to get your take on on this, which is that it does seem like at this moment that it’s, that crypto is breaking hard along ideological lines.
You know, I mean Trump certainly, you know, you see him speaking at the Bitcoin conference, you know, talks about making Bitcoin great again, you know, is that good for crypto or long term?
Do you think, you know, do, do you really need friends on both sides of the political aisle?
There’s a digital transformation and finance taking place everybody on Wall Street understands it.
I can’t imagine that a nation state, a company, um a government or any particular family even is going to be successful without embracing technology.
A kind of investor psychology question for you, Michael too.
It just interests me.
I’m curious how you kind of stay, you know, calm and cool and collected and committed to Bitcoin even when you have these selloffs.
Because that, that’s tough for some people, Michael.
You know, they, they see their investment get banged up and then oftentimes the first instinct is, you know, you get nervous, you wanna slam the sell button.
Well, first of all, Bitcoin’s been appreciating at 55% a year for the past four years, bonds are depreciating 5% a year.
The S and P is appreciating at about 13% a year.
It’s amazing to me that people would, would rather have a 20% A RR with 20 vol than 55 A RR with 55 vol.
But yeah, if you’re, if you think about it, it’s pretty obvious you want the 50% return, not the 20% return.
So if you’re gonna embrace the future, embrace digital transformation, it’s gonna be more volatile.
So I don’t get upset because I know we’re winning and Bitcoin’s winning, it’s pretty obvious to anyone that, you know, can chart the thing that there’s a right answer and there’s a wrong answer.
Michael Safe to assume you bought the dip this week.
We’re buying the, the lows, the mids, the highs, you know, I’ll be buying the top forever because I’m expecting Bitcoin will continue to appreciate as digital capital.
I think, I think physical capital, real estate capital, financial capital, people are gonna sell those things and they’re going to move their money into digital capital and it’s gonna be a trend for a long, long time to come.
A trend that you’ve certainly been at the helm of as the largest corporate holder of Bitcoin, Michael.
We’re gonna do a check in now on some of today’s top trending takers again, I’m gonna kick it off with shares of the trade desk.
You’re looking at gains of over 12% as the company topping estimates on both the top and bottom line.
Well, its outlook also pleasing to Wall Street clearly if you’re looking at that stock reaction as a reminder, this is the ad tech company reporting, these results that beat expectations.
Interesting that uh Morgan Stanley, in particular, highlighting the company’s ability to execute and quote consistently.
Outperform talked about the company’s partnerships with Netflix and Fox demonstrating their ability to kind of lead in the broader space.
Even Jeffries, highlighting not just Netflix but also Roku as a partnership that has been material in terms of contributors to their earnings throughout 2024.
Also mentioning that that could be a catalyst for budget shifting into programmatic C TV in 2025 moving forward.
But I think just in terms of the story behind the stock, it’s just interesting given the pressure that’s been on this broader sector, see the performance that they’ve been able to pull out.
And I guess the street is saying that that’s partially due to these successful partnerships is interesting.
Yeah, Yusuf Scully over Truist, he’s a smart guy.
Uh Youssef telling his clients that copy’s execution remains exceptional amid a volatile digital ad environment.
Talks about what he sees as a large and compelling Tam total addressable market says it remains one of his favorite names for 2024 which is not an unusual opinion.
Most ana on the street, nearly 80% say this one still.
All right, moving on switching gears to Cisco system, that company reportedly planned to cut thousands of jobs in a second round of layoffs this year.
So Cisco plan to eliminate, um let’s see, this is a corner Reuters, by the way, um uh thousands of jobs, all the Cisco’s moves to cut about 4000 jobs remember in February, the company does have about 85,000 jobs, at least that was at, at the end of fiscal 23 just to put some of these numbers in context.
Um This is of course not the only big tech name we’ve heard making these kind of cuts until Mattie saying it is going to be slashed about 15,000 jobs.
Um And apparently the job cuts could be announced as early as Wednesday, which when the company scheduled to report earnings, I think the use of the word thousands is so critical there, Josh, because we saw the stock sell off really reversing in a relief rally driven by just a 7000 myths.
When it came to the number of people applying for unemployment, just 7000 people didn’t do it.
And that is what led to the relief rally that we saw over the course of this week.
Now we’re hearing Cisco potentially laying off thousands of people.
We don’t know the exact number yet, but that is certainly going to potentially be a contributor to the jobless picture that is causing a lot of concern for the street.
And also in the broader tech industry, I have a stat here showing that over 125,000 layoffs have occurred over nearly 400 companies this year just in the tech space.
And of course, we know intel, a huge contributor to that as well.
Yes, Cisco, you know, we know is the networking equipment giant under Chuck Robbins.
They’ve expanded, you know, much harder into software and services.
The stock not great down about 10%.
Now, this year, another story that we are looking at here ST an is planning to cut jobs at a truck plant in Michigan.
As many as 2000, 450 hourly positions are set to be eliminated.
You can see the stock down nearly 1.5% at the moment.
Now, we got a statement, our pros to Romanian who covers autos for us here at Yahoo Finance got a statement from ST anti in response.
This is about the end of the production of the Ram 1500 Classic at that Warren assembly plant.
They talked about the Ram 1500 being a great entry point pick up for the Ram and tradesmen models as well that they introduced it and have seen a change in sort of the demand picture moving forward.
But this is leading to, of course, a change in strategy and direction for STIs that of course, led them to this decision about layoffs.
And again, autos is a key contributor to unemployment broadly across the country.
We’ve certainly seen this in the um geographic picture when it comes to Detroit.
So I’m certainly going to be looking at that in the next jobs print.
Yeah, I was reading layoffs could start as soon as October 8th.
I did read also that union members will be given the chance to work at other plants as well.
So that could, that’s very important to know because that could also impact the unemployment numbers we see out of this.
All right.
Moving forward here, the S and P 500 A, a winning week as investors recession, fears looking to ease here.
Still a key piece of the economic puzzle here to discuss.
We’ve got Greg I Wall Street Journal, chief economics commentator Greg.
Um And in it, you compared the Psalm rule to weather forecasts.
And as a reminder to our audience, the Psalm rule is a recession indicator.
We talk about it constantly.
Um, tell us the comparison because I just, I loved it.
So the p so rule basically says that when the unemployment rate has certain a risen a certain amount over a year or so, you’re always in a recession at least according to the historical record.
But the point I just want to make here is that’s a correlation.
It doesn’t actually tell us that the rise in the unemployment rate causes a recession.
It just means that historically, that’s one of the things you see when you’re in recession, just like normally when it’s raining you see a lot of umbrellas open.
But honestly, if you really want to know if it’s raining, go stand outside.
And if you want to know in a recession, look at all the other uh indicators that tell us we’re in a recession.
And the mere point I’m trying to make is that if you look at things like payroll growth, industrial production, real incomes, those things have been growing for the last 3 to 6 months.
So other than the rise in the unemployment rate, we don’t have any strong evidence that tells us we’re in a recession right now or at least in June or July for the month of August clear, we have no data.
How important uh Greg is that data we’re gonna get next week we get, we do get some, you know, CP I retail sales.
Well, the, the, the retail sales numbers will be very important because consumption has been very strong as, you know, consumption is about two thirds of economic activity.
It was very strong through the month of June.
Um You know, some of the preliminary credit card data, uh you know, retail chain data tells us that July was a good month.
But the official number will tell us if, if that continues, if that number weakens a lot, that might be the sort of thing that gives you a bit of a concern that, that negative feedback loop of falling spending falling higher and falling incomes.
And then falling spending again might be getting started.
The CP I inflation number that’s important for a different reason if we see that the inflation number in July was actually very well uh tame and very subdued, that basically removes one of the last barriers to the fed, cutting interest rates as soon as September by a quarter or perhaps half a percentage point.
The reason that matters is that if we’re not in a recession now, keeping us out of recession is really up to the Federal Reserve, moving quickly to lower the cost of borrowing.
Well, I’m curious about the interplay you see between the stock market and the feds moves.
You, you mentioned in your piece as well that there have been some examples in this earnings cycle of weakness like mcdonald’s Intel and Delta, but that the broader picture is looking good and it is on track to be another record breaking quarter for earnings just broadly.
How does the stock market inform your thinking of the economy?
Is the market, the economy?
Well, the stock market matters in so far as it’s got a pretty flawless track record of predicting recessions in so far as I think pretty much every recession was preceded by a big drop in the stock market.
The problem of course is that not every big drop in the stock market was followed by a recession, it does have, you know, false alarms and so trying to understand what we’re going through whether this is really a market event or an economic event.
It depends partly on the reasons that the market is falling.
And as best I see, I can tell there was a little bit of fear over the unemployment numbers driving this market sell off.
But the biggest factor really was what happened in Japan a week ago, the Bank of Japan raised interest rates and said more, uh, rates were in store, that kind of rattled people.
And it basically forced a lot of investors who’ve been betting on low Japanese rates at a low yen to get out of those positions.
And that caused a very abrupt selloff in Japanese stocks were then like rippled across the ocean.
Here we are about a week and, uh, change later, the S and P is only down around, you know, five or 6% from its all time high.
That’s not a steep enough drop to normally tell us that we’re in a lot of trouble.
And again, you’d worry about the stock market if it was responding to bad news from the corporate side, not something we’re seeing yet earnings season, as you were saying, just saying, looks pretty normal.
The final reason you’d worry about the stock market is that of course, stocks are part of household wealth and people when they lose their wealth might be less likely to spend.
And I think it’s also an important, uh, input into the psychology of investors and businesses.
If you own a company and you’re thinking of expanding, maybe hiring some people opening a new store.
Maybe you don’t, uh, take that step if you’re looking at the market saying, hm, that looks like trouble.
So there’s a kind of a self fulfilling prophecy aspect to a weak market.
So, I, it’s very hard to know exactly what we’re in right now.
When I look at everything, the market behavior, the data we have so far, it doesn’t look yet like we have a recession in the cards, Greg, you know, earlier uh this week we had on Alliance Chief economic Adviser Mohammed Aian and he, he was highlighting his concern on the Fed’s uh policy decisions.
Greg take a listen on the policy side, you know, I’ve been of the view that the Fed had waited too long.
They should have cut, they didn’t and now they’re perceived to play catch up.
All right, Greg.
So you heard that Mohammed thinks, you know, Jay Powell waited too long.
What, what’s your response to that?
Uh So the point he’s driving at is look, the fed has two mandates, low inflation and full employment and sometimes those two mandates are at odds with each other right now.
Inflation is above its 2% target that says keep interest rates high.
On the other hand, it kind of looks like unemployment is also getting um is also rising that says lower interest rates.
So as you can see their two mandates are pointing in opposite directions that leaves them in a bit of a dilemma.
If they’d never allowed the inflation cat out of the bag, then they wouldn’t be in this dilemma.
And they’d be able to focus purely on the employment side that said there’s nothing simple in life.
And when the fed looks at the economic picture, it has to take a balanced approach, it cannot be purely focused on inflation or purely focused on unemployment.
It has to balance the relative risks of those things.
And the question they’re asking themselves right now is what are we worried about more cutting interest rates and getting stuck with a high inflation problem or not cutting interest rates and getting stuck with a recession.
I, some of this will depend on the number we get next week for the July CP I, but my betting is that they believe that all else taking everything into consideration inflation is slowly but steadily moving back to that 2% level and they don’t have to worry about it so much.
And so they can focus their attention on the unemployment picture and that should give them the freedom, they need to cut interest rates soon.
Greg in our final minute with you.
I I’m curious how you viewed this week as a commentator because it kind of felt like the market news that us nerds are obsessed with broke the fourth wall.
This week.
I was getting texts in the family group chat constantly about whether or not they should be freaking out.
Well, I’m going to reveal a little bit about my age here.
The very first market downturn I covered was in 1987.
I was in college stock market crashed last week that week.
And I still remember the predictions that we’d have a recession as a result.
And of course, we did not have a recession.
And it was an early lesson that you need to pay attention to what’s going on in the markets.
But you need to essentially uh merge that with a big, you know, aggregate like suite of information, including what’s going on with the economic data, what you’re hearing on the policy front and so on and so forth.
You can’t simply look at the data or look at the market to decide what’s happening and that there are no foregone conclusions.
And when I look at that, I sort of look at the market behavior and I say, hey, it’s been a heck of a run.
Don’t think that just because the market sells off a bit, the world is coming to an end, stepping back a little bit.
If the market was telling us the recession was, uh, in the cards, we’d see other signals of it.
We don’t see those signals yet.
We do see some stuff going in a troubling direction.
That’s what the Federal Reserve needs to stay on top of.
And as best as I can tell, they have the time and they have the means to respond quickly and prevent that recession.
But, you know, there’s a certain animal spirits, psychological element to this.
Thanks for having me coming up here, shares of Zillow on the move to the upside today.
Following an executive shake up earlier this week, we’re going to speak with the new CEO Jeremy Waxman on the other side as he stepped into this new role at Zillow, stay tuned, more market domination to come.
Shares of Zillow having a pretty good run this week after boing second quarter earnings, a welcome site as the company is having a tough year in a sluggish housing market.
Zillow also announcing new CEO on the earnings call.
That would be Jeremy Waxman and he’s joining us right now.
Listen, it, it’s the first time we’ve gotten a check in since you did report those earnings.
Uh Q two was really strong ahead of guidance on all measures revenue up 13% year over year and a lot of that flowed through the bottom di for in DA as well.
And that revenue growth was really across the business.
Our residential revenue was up 8% our mortgages revenue was up and our rentals revenue which is now 20% of our business also growing sharply up 29% year over year.
So, you know, despite a still challenged housing market, Zillow is outgrowing that market.
This is now eight consecutive quarters of our performance, uh double digit revenue growth in Q two.
And we’re guiding to do that again in Q three with 10 to 13% revenue growth as our, as our target and and Jeremy in terms of looking under the hood here, it is still another unprofitable quarter for the company.
What do you think is going to be the catalyst to turn that around?
Yeah, so we are investing pretty healthily in our housing super app strategy.
We’ve been doing that for a few years now.
You’re starting to see the results of those investments pay off, right?
That’s what’s driving the out performance across the business.
That’s what’s driving what’s really our midterm target, which is to grow our share of transactions in the market despite having this huge audience, right?
Hundreds of millions of people come to Zillow every month to dream and to shop, we only help a small fraction of them actually buy finance or sell their home.
And that’s really our goal to build the products and services, to help more of those folks move to help those folks tour homes, to help those social finance those homes and to work with our great Asian partners to move.
So those are the investments we’ve been making.
That’s what’s driving our revenue growth, that’s what’s driving our EBITA out performance.
And of course, our mid and long term goal of net income gap, profitability is one of our targets and Jeremy just to broaden out a bit too.
I am curious to get your take on on just the overall health of the housing market.
And what that means is really tough affordability for buyers, especially first time home buyers, you put those two things with the high interest rates we have and it just makes it tough for a home buyer.
So that’s why you’re seeing such low volume, right?
Despite all that, we’re able to grow our share and we’re able to help more folks start that process when it works for them.
But for sure, the last few years, you’ve seen really low transaction volumes while prices have increased Jeremy.
I’m curious about what you saw in terms of activity over the course of this week when we saw mortgages dipping to a 15 month low.
Do you see that driving more activity on your platform?
You know, it’s interesting, usually rate shocks and rate movements is what drives a pullback in activity common either direction.
But I would say we’ve had so many of those in the last couple of years that buyers and sellers have kind of found this as the new normal and the demand we have in the marketplace.
Generally, we have a lot of pent up demand from sellers who are stuck in their home and stuck in, you know, locked in on a rate that they don’t want to move out from.
And then we have that high rate really squeezing buyers and squeezing their affordability.
So the demand coil has really been loaded on both sides.
And so any movement you see in rates will help over time.
But right now, we have a lot of folks waiting, I think for that relief and Jeremy, I wanna just look back on rentals for, for a minute because I think you said there, it’s about, you represent about 20% of total revenue at this point.
Yeah, so many folks may not know, but we’re actually the largest rentals marketplace in the country.
Uh We have the most listings.
So there is no national database of all listings out there.
It’s really tough for renter, you have to shop around and we’ve been trying to amass and build as much of the listing inventory as possible.
We now have the most inventory which is yielded the largest site for renters to come.
So renters come to Zillow and they look for listings and in many cases, they can actually book that listing uh on Zillow, they can apply for, they can sign a lease and they can even make payments to their landlord on the platform.
And that’s driven the growth we’ve seen in our marketplace.
So our rentals revenue is up 29% year over year.
Uh As I said, it’s now about 1/5 of our revenue and continues to grow really nicely.
And what’s really driving that growth is the multifamily segment, our multifamily advertisers, the big buildings we all see uh downtown.
They are really excited and leaning into the demand, the renters coming onto our platform to try and find more renters to fill their buildings.
Uh Jeremy, let’s talk about the fact that you’ve got a new job.
The uh co-founder Rich Martin, stepping down as chief executive, you are coming into the top executive position.
Yeah, I mean, the answer to why now is really how well the business is going, right.
I spent a lot of time in product and marketing, as well as leading a bunch of our business and operations and obviously Rich and Lloyd Frank, our co founders have been here the whole time and they aren’t going anywhere.
Uh They’re still gonna stay as executive co chairman and help with strategy and help really support me in the leadership team.
But why now is the business is doing so well?
The quarter that we just reported the guidance for the growth we have ahead shows that our strategy is working this idea that we want to move from an advertising business to a transaction business that we wanna take this huge amount of potential energy in our audience and help more of them actually turn into transaction and build the software and services to help them do that.
That’s what we’ve been investing in for the last few years and you’re starting to see the results of that pay off.
We have a lot of confidence in the road ahead and the ability for us to grow that share over time.
So that’s why we feel so comfortable making this transition now.
That was Jeremy Waxman, the latest Ceo of Zillow, thanks for having me.
Let’s get to our calls of the day, Tik Tok and Pinterest will reportedly enable buying from Amazon in their apps, Bank of America Security is publishing a new note on the news maintaining its buy rating on Amazon and Josh, what fascinated me about this note is that I I was on the Amazon call this quarter in the last quarter.
And both times executives were receiving a slew of questions about competition from Sheehan and Timo specifically and trying to figure out when Amazon was going to release more information about partnerships with those retailers that are certainly fast fashion but also very affordable for consumers.
And so that’s very much so a headwind for Amazon.
And then on top of it, you lay on Tik Tok shop which has not only the competitive factor of products, but also the sellers who are flocking from Amazon to tiktok shop because they’re making a heck of a lot more revenue by selling products on tiktok.
And so it’s interesting to see what this could look like moving forward and if it is going to be the next big uh upside move for Amazon in terms of its e commerce business because there is such a strong demand from the consumer for these more affordable brands.
They said if the deal improves rois by 20% estimate an opportunity for an additional 1 billion out of GMV.
Uh They said it could aid sentiment on concerns around tiktok shop competition.
I mean, you have to date, the stock is up about 10% but it’s down about 15% from its record close.
And the company of course did recently report earnings results and projected that weaker than expected revenue growth and investors were obviously disappointed.
Yeah, and that certainly weighed on the stock following that earnings print, as you mentioned, Josh, another stock that we are looking at Morgan Stanley naming Eli Lilly a top pick in a note today.
The note saying that the drug maker has the quote strongest growth pile with growth profile within its coverage universe.
And this was really interesting this topic because they’re talking about a couple of things here when it comes to Eli Lilly’s performance, right?
One of them is this idea that Eli Lilly has been talking about and spoke about on the call, the idea that their shortages of the drugs, the weight loss drugs that they’re offering are gonna start alleviating soon.
That is a potential upside catalyst for the stock moving forward.
Uh They also said that they believe that Lily offers the most attractive opportunity in coverage for upside to consensus estimates despite the stocks performance.
So they continue to see that upside movement moving forward here.
And also just that the drug maker has kind of come from behind here, Nova Nordic was the first to get to market with a weight loss drug back in 2021.
And then Eli Lilly came onto the scene with their own competing drug.
And to me, it’s kind of an interesting story about how you don’t necessarily have to be first to win.
That becoming even more clear with this Morgan Stanley test.
Yeah, Morgan and Eli Lilly has the most robust new product cycle and hence wrote that look in Pharma says the company could launch five new drugs over the next two years.
Reiterate the overweight, they take their target up to 1106.
Now, this the stock has enjoyed, uh, obviously a very strong one, some more than 50% already this year.
But clearly Morgan Salley says, you know what better times ahead.
All right, coming up, Walmart will look to shrug off that slowing consumer trend when it announces Q two earnings next week for the preview.
What to expect from the retail giant, right on the other side, while other companies have pointed to the consumer not spending as much in recent earnings calls.
Walmart will look to shrug off that trend when it announces Q two earnings next week and our next guest thinks the retailer will be a standout joining us.
Now is Michael Lasser, U BS us Hardline and Broad Line and food retail analyst, Michael, it’s good to see you.
So Walmart earnings on deck next week, you know, heading into this print, Michael, uh nice run for the stocks I about 30% already this year.
Is a the consumer overall has been consistent which keep in mind that Walmart sells mostly groceries and other household products.
So, and it’s taking market here.
So what is it has been experiencing is gonna be uh a bit different than what other retailers have been experiencing?
We also expect to hear that all of the alternative profits remain uh growing very rapidly areas like advertising, third party marketplace fees, membership fees, logistics services and uh data monetization.
That is a key element of the story.
It’s one reason why Walmart stock has appreciated so handsomely as of late, we also expect that the company is gonna raise its guidance uh last quarter.
It said that it, it expects to be at the high end or higher uh of its full year EPS guidance.
And we think it will take this as an opportunity to raise its full year eps guidance.
So all of this means that the bull case on Walmart is well intact and is likely to support the stock from here.
Hey Michael, when I take a look at the performance of different sectors within the S AND P over the last month, I’m looking at retail specifically down nearly 17%.
It’s one of the biggest laggards in the S AND P. Uh That to me indicates a little bit of the struggling consumer story that you had uh addressed in your first answer here.
But I’m just curious what exactly makes Walmart different when we’ve heard from the likes of others in the space, even like a mcdonald’s saying that their consumer struggling, why would Walmart’s consumer not be struggling?
So Walmart, uh the consumer is experiencing some challenges without a doubt, but Walmart is a benefiting from those challenges because it has the perception that it offers amongst the best value in retail.
The other thing that’s happened is it’s become very expensive to eat out.
So there’s a there’s a shift away from food, away from home to food at home.
And given that Walmart sells one out of every five grocery dollars in the United States and is the largest single player in the grocery market.
It’s been benefiting from that trend.
So those are a couple of the reasons that make uh Walmart a bit different with you.
Your point is very fair that it has been challenging to say the least for the retail sector so far this year, we expect that that’s gonna continue through at least the end of this year, not only because of uh consumer trends that are very episodic, but also in response to that consumers are becoming more promotional and aggressive, which uh poses the risk that that’s gonna pressure their margins.
So all of this is resulting in stocks that you need to be very selective uh amongst when approaching investing in the retail sector at this point.
What about Home Depot, Michael?
Another another name of watching closely reports next week.
Next Tuesday, your expectations there.
My expectation is that Home Depot’s sales trends were gonna be a little bit softer than what was embedded in the consensus forecast uh for the second quarter.
And as a result, the company is most likely gonna take a more conservative stance on the outlook for the back half of the year.
Keep in mind what’s happening on the uh within the home improvement sector is a people are just simply not moving normal existing home sales in the United States or somewhere in the range of 5.5 million.
The most recent indication uh it has been that only 3.8 to 3.9 in existing home sales took place in the United States.
Those lack of move events meant that there’s just fewer flooring projects uh projects that are involve cabinet, those things that are uh typically done when someone’s moving into or out of a home.
Uh uh In addition, we’ve all heard about this noise that interest rates are gonna come down.
So if you’re a consumer and you’re thinking about financing a big ticket remodel, you’re inclined to wait at this point until the financing of that project is gonna become a little bit less expensive.
All of that means the conditions are set for an upturn that’s probably gonna occur in 2025 and we’ll hear that from home de when it reports next week.
Certainly Michael and it’s a big week for earnings both for the uh retail sector, but also for the retail sector.
In terms of those sales numbers we’re gonna be getting next week.
So we’ll definitely be uh giving you a call to chat with us.
While we’re wrapping up today’s market domination.
Don’t go anywhere.
We’ve got you covered with all the action following the closing bell, including a conversation with Sweet Green co founder and Ceo Jonathan Ne.
And on the back of their earnings print they t more market domination over time next.