Turnaround Tuesday is on hold as stocks were red— here’s what you missed. 🔴
Stocks erased yesterday’s gains early, but rallied throughout the day to close off the lows.
Here’s today’s heat map:
5/11 sectors closed green, led by defensive sectors like utilities (+2.00%), consumer staples (+1.64%), and real estate (+1.17%). 🛡️
On the economic front, macro data continues to disappoint, souring sentiment even further. We break down Global PMI, New Home Sales data, and some *scary* comments from the world’s biggest billionaires below. 👻
Here are the closing prices:
Today’s macro data did little to calm investors’ fears of a potential recession. 😱
S&P Global’s flash Composite Purchasing Managers’ Index (PMI), a measure of the services and manufacturing industries, fell to 51.8 in May, its lowest level since February 2021. Investors focused primarily on the weakening U.K. data, which may be a signal that a recession is on the horizon for the country. 🏭
In the U.S., April’s new home sales data fell 16.6% MoM and 26.9% YoY.
April’s annualized sales of 591,00 were well below analyst expectations of 750,000. The report also revised March’s data about 7% lower. 🏘️
The slowest sales pace since April 2020 is primarily driven by a significant pullback in demand, not new supply, as consumers face record-high home prices and the highest mortgage rates in over a decade. Builders are also starting to see cancellation rates tick up. ❌
Amid the weakness in recent housing data, investors also heard from Toll Brothers’ which beat earnings ($1.85 vs $1.60) and revenue expectations ($2.2 billion vs. $2.12 billion).
In its press release, the company noted, “While demand is still solid, over the past month it has moderated from the unprecedented pace of the past two years as buyers adapt to higher mortgage rates and other macro-economic conditions. However, the many fundamental drivers of housing demand remain firmly in place.“
Given the company operates in the luxury market, their view may not be the best read on the entire housing market. Nonetheless, things appear strong in their view. 💪
The economic/earnings news has been bad for a while, and market sentiment is not good. We heard *very bearish* perspectives from two of the world’s most prominent players today. 🐻
At Davos, George Soros said, “Indeed, the Russian invasion may turn out to be the beginning of World War III, and our civilization may not survive it.“
Meanwhile, Bill Ackman took to Twitter with a *hot* take on inflation: “Inflation is out of control. Inflation expectations are getting out of control. Markets are imploding because investors are not confident that the Federal Reserve will stop inflation. If the Fed doesn’t do its job, the market will do the Fed’s job…”
Can y’all believe it’s only Tuesday? 🙃
When a stock trends all morning and afternoon on StockTwits, oftentimes it’s either driven by great news or absolute carnage. 💀 Unfortunately for long-term $SNAP shareholders, on Tuesday it was most certainly an “absolute carnage” kind of day.
In what turned out to be the worst single-day price drop for Snap stock, the 40%-ish haircut seemingly had ripple effects throughout the broader stock market. 🔪 To get the full scoop on SNAP’s slashed guidance, feel free to take a gander at yesterday’s Daily Rip.
The ripple effects spread beyond Snap stock to a wider swath of stocks generally associated with social media, as the Pinterest, Twitter, Match Group, Google/Alphabet, and Meta Platforms share prices all dove in tandem with Snap, albeit to a lesser degree. ⬇️ This leaves traders to ponder whether this panic selling signifies a Snap-specific issue or a deeper, niche-wide trend.
The general consensus, it seems, is that all of the businesses in this category are facing similar headwinds, but with company-specific variations. For example, Alphabet and Google CFO Ruth Porat declined to provide specific guidance, but admitted that since “the largest impact from COVID on our results was in the second quarter of 2020,” Alphabet will face a particularly tough comp in Q2 2022 “as we lap the recovery we had in the second quarter of 2021.” Porat added, “the second quarter results will continue to reflect that we suspended the vast majority of our commercial activities in Russia.”
Match Group CEO Shar Dubey acknowledged, “Our business is not immune to the macroeconomic headwinds such as the war in Ukraine, the strengthening U.S. dollar against foreign currencies at levels we haven’t seen in a while, and lingering variants of COVID-19.” At the same time, the company anticipates $800 to $810 million in total Q2 revenue, representing 13% to 14% year-over-year growth, reflecting the “impact of the challenging current macroeconomic environment.” 🤷
Meta Platforms CEO Mark Zuckerberg had his own early 2022 complaint list, including “softness in e-commerce after the acceleration we saw during the pandemic,” as well as Russia’s invasion of Ukraine and Facebook/Meta being blocked in Russia. Apparently, though, these headwinds didn’t prevent the company from generating $27 billion in Q1 ad revenue, up 6% year-over-year.
Meanwhile, Twitter CFO Ned Segal remains confident, expecting the platform’s revenue to “grow in the low to mid-20s range versus 2021, excluding MoPub and MoPub Acquire, with performance revenue growing faster than brand,” while also anticipating $7.5 billion or more in total revenue for 2023. Turning to Pinterest, the company sees its non-GAAP operating expenses increasing by around 10% quarter over quarter in Q2. Still, the platform has guided for Q2 revenue growth of roughly 11% year over year – not too shabby at all.
In other words, Snap’s peers face challenges, but they are managing said challenges and even thriving. Perhaps Snap’s shareholders are right to bristle at Snap’s sudden guidance revision – but then, there’s a fine line between a reaction and an overreaction. Whether a 40% single-day price drop falls into the former or the latter category is the billion-dollar question which, unfortunately, will only be answered with the benefit of hindsight. ⏳
A lot of niche retailers reported earnings today — here’s how they fared:
Best Buy reported Q1 earnings today and the company’s stock closed up 1.21%. 💚 Best Buy’s sales declined by 8% compared to Q1 2021, though Wall Street expected a more dramatic fall in sales due to economic conditions. $BBY CEO Corie Barry shared his thoughts on the company’s lower sales figs: “That trend has continued into the beginning of Q2 and it does not appear that it will abate in the near term.” Despite lower sales, Best Buy says that it does not anticipate a full-scale recession.
Petco shares closed the day up 3.7% and continued to rise higher after hours. 🐶 The company posted a +4.3% YoY gain in revenue and +5.1% YoY growth in comparable store sales.
Autozone shares rose 5.82%. The company posted a +5.9% YoY gain in revenue and +2.6% YoY growth in comparable store sales.
Nordstrom shares rallied 10.45% after hours after the company beat expectations and raised its financial outlook for the full year.
CEO Erik Nordstrom said the company has been able to capitalize on demand from people who are shopping for “long-awaited occasions” that were delayed by the pandemic. Also, CFO Anne Bramman noted that the company hasn’t seen inflationary cost pressures result in lower consumer spending just yet.
These comments contrast what we’ve heard from Target and Walmart, whose customers tend to have a lower income profile and thus may be less resilient to the macroeconomic factors hitting the economy right now. 💡
After hours, the stock rallied 4.28%, erasing nearly two-thirds of its regular session loss.
Finally, some Tech names worth noting: 🤖
Shares were only up about 2.75% after hours despite the company raising full-year revenue and operating income guidance.
Want more EPS?? Check out Stocktwits’ earnings calendar! 📅
Bullets from the Day
🍋 WeWork founder Adam Newumann’s crypto startup gets a16z stamp of approval. The controversial founder recently launched Flowcarbon, a startup focused on selling tokenized carbon credits on the blockchain. Today, the company announced it raised $70 million in funding through traditional VC equity ($32 million) and a token sale ($38 million). Andreesen Horowitz’s crypto division, a16z crypto, led the round, which comes just two days before the private sale of Flowcarrbon’s GNT token ends. TechCrunch has more.
☕ A new battery plant is coming to Indiana. Stellantis NV and Samsung DSI announced that they would invest over $2.5 billion to build a joint venture battery plant in Kokomo, Indiana. The venture will create 1,400 new jobs, and the investment could gradually rise to $3.1 billion as both companies look to keep up in a fast-changing electric vehicle market. Full press release.
🗳️ FTX founder Sam Bankman-Fried says he expects to spend massively in the 2024 election. The democratic billionaire says he expects to give “north of $100 million” in the next presidential election and has a “soft ceiling” of $1 billion. While it’s hard to pinpoint precisely how much money individuals spend to influence politics, the size of this “hard money” donation would be record-breaking and put the FTX founder among a small group of mega-donors. NBC News has more.