Stocks Slip As Market Memes Along

While investors remain focused on the technology sector, industrials and other cyclical stocks continue to break out. The big question remains whether the economy will perform as the consensus “soft landing” view believes. But the market is certainly positioning itself as if it will. 🤔

Check out the popular long-term treasury ETF $TLT hitting fresh year-to-date lows today. Although the Fed Fund Futures market still isn’t pricing in another hike before the end of the year, the rest of the bond market seems to be getting comfortable with the fact that rates may need to head higher (and stay there longer).

After nine months of consolidating, some traders believe this chart signals the start of U.S. interest rates next leg higher. 📈

Meanwhile, industrial giant Caterpillar ($CAT) soared 9% to all-time highs following earnings. 🐛

The company topped expectations, reporting adjusted earnings per share of $5.55 on revenues of $17.3 billion. Analysts had expected $4.57 per share on $16.5 billion in revenues. Executives saw strength across all three of their construction, mining, and energy-related businesses, with profit margins improving from 13.8% to 21.3% YoY. 🔺

For as much as the headlines say investors are anticipating a recession and a slowing economy, they’re certainly not investing like that. Today’s breakout in Caterpillar is certainly putting the recent strength in cyclical stocks back on everyone’s radars.

And over in technology land, Advanced Micro Devices reported slightly better results. 👍

The semiconductor company reported adjusted earnings per share of $0.58, topping estimates by $0.01. Revenues of $5.36 billion also exceeded the $5.30 billion consensus view.

With client PC business, data-center, and gaming business units revenue all down YoY, the company is looking ahead to artificial intelligence (AI) opportunities. Similar to its peers, the focus on higher-end chips remains as the PC and gaming market supply vs. demand dynamics rebalance. 🤖

$AMD shares rose above 4% after the bell. 

After nine months of rallying, it’s safe to say that animal spirits are back. And with that bullish sentiment comes speculative fervor taking place in several names. 🐂

Most notable is Tupperware Brands, which has rallied nearly 900% from its lows set two weeks ago. The stock is squeezing on seemingly no news, and it’s still unclear when the company plans to file its delayed annual and quarterly reports. And yet, with short interest above 20% of its outstanding float, a short-covering rally is underway. 

Similarly, other names are following suit. Like the 99-year-old trucking company Yellow Corporation, which just filed for bankruptcy protection and shut down its operations. And others, like American Superconductor Corporation and Motorsport Games Inc., recently joined the party. 📈

In addition to this, there have been continuing short squeezes in many beaten-down growth stocks. Some names include Palantir, Affirm, SoFi, and Coinbase, which investors apparently got too negative on late last year. 😮

The classic meme-stock playbook is the same as it has always been: Traders identify a somewhat well-known or iconic brand that’s got a lot of people betting against it ahead of a catalyst. And once prices get going, the trend feeds on itself because traders thrive on volatility. When that stock stops heading in the right direction, they move on to the next. ⏭️

Everyone’s question now is when it will end. Some are pointing to today’s mainstream coverage by Jim Cramer as a sign that the Tupperware rally could be coming to an end. Others suggest it will simply add more fuel to the fire. 🤷

Memesters: tonight it's all you: Tupperware!

— Jim Cramer (@jimcramer) August 1, 2023

I get Tupperware.. but Yellow? give me a break

— Jim Cramer (@jimcramer) August 1, 2023

The craziness will end eventually; it always does. But for now, meme stocks be memeing. 🙃

It remains a mixed bag for travel stocks this earnings season, with several big players reporting today. Let’s recap a few. 👇

JetBlue Airways fell 8% after saying it doesn’t expect to post a profit during the third quarter, cutting its full-year earnings guidance from $0.70-$1.00 to $0.05-$0.40. Its second-quarter earnings and revenue were essentially in line with expectations and at the top of the company’s previous guidance. ✈️

Consumers shifting their leisure travel from domestic to international weighed on its results, as well as company-specific issues like ending its Northeast partnership with American Airlines.

Norwegian Cruise Lines faced a similar issue, delivering strong second-quarter results but whiffing with its third-quarter guidance. The cruise operator now expects $0.70 per share in earnings, missing the $0.80 consensus estimate in what’s typically its strongest period of the year. 🚢

Uber shares initially popped, then dropped after its second-quarter earnings report. Revenues of $9.23 billion missed expectations by $0.10 billion. Notably, the company earned its first GAAP profit of $0.18 vs. the expected $0.01 per share loss. However, when looking under the surface, nearly all of that was due to a $385 million pre-tax benefit from unrealized equity investment gains. 🚗

Mobility gross bookings again topped delivery, and the company’s freight business remains challenging amid weak goods demand.

Marriott International had the best day, with shares rising to new all-time highs after earnings. Its second-quarter results topped expectations due to international strength, causing the hotel operator to raise its full-year outlook. 🏨

Overall, many of these travel stocks have rallied sharply this year, raising the bar for what investors expect from their businesses. Investors’ primary concern remains how much better these businesses can perform, especially given concerns consumer spending will eventually wane. Time will tell. 🤷