Dow drops 411 points, HP Inc. CEO talks AI PCs: Market Domination Overtime

The trading day has come to a close, but that doesn't mean it's closing time for Yahoo Finance's Market Domination Overtime. Hosts Julie Hyman and Josh Lipton get you to the finish line at the closing bell where the Dow Jones Industrial Average (^DJI) fell by 411 points.

In earnings news, Salesforce (CRM) shares are sinking in extended trading hours after the cloud computing giant reported mixed first-quarter results, the stock driven lower on its disappointing second-quarter forecasts. HP Inc. (HPQ) is seeing a boost from its narrow fiscal second-quarter earnings beat.

HP Inc. (HPQ) CEO Enrique Lores sits down with Yahoo Finance Executive Editor Brian Sozzi to talk about the computer company's earnings and its future in the AI-powered PC market.

This post was written by Luke Carberry Mogan.

Video transcript

There is the Bell on Wall Street.

Now it's market domination over time.

We are joined by Jared Bry to get you up to speed on the action from today's session.

So let's see where the major averages ended up.

And I want to look at three different assets here.

Let's start with stocks as we do.

We've got the dow down 1% on the day when all is done just over 400 points falling there.

The S and P 500 finishing also around the lowest the session off about three quarters of 1% and the NASDAQ off a little more than a half of 1%.

Now, we checked on this yesterday and it's important again today.

What's going on with yields?

We see them bumping up once again, 4.62%.

So more substantially above the 4.5% level that we've been watching.

And then the one other thing I want to mention is what's going on with oil where we are seeing a pull back as well as the session went on off 1% at around $79 a barrel that putting pressure on energy stocks yields, putting pressure on kind of everything Jared.

It seemed like again today.

Yes.

It's been really fascinated to watch the divergence between the Dow and the NASDAQ.

And even today, even though everything is in the red, you do have the NASDAQ slightly outperforming.

It's not as bad as the Dow.

And here's the NASDAQ 100 day, you can see lots and lots of red here.

A little bit of dark red but not seeing any disasters.

We do see NVIDIA up.

That should be another record high up 8/10 of a percent.

So go figure there.

But here is the Dow and here we see United Health down almost 4%.

So kind of a similar picture when we take a look at the sectors, everything in the red, all 11 sectors in the red, but the least bad off is communication services and also tech that's XL C and XL K in the upper left there.

And that usually does not happen when you have rates rising as they are.

And I'm going to be discussing this in about 30 minutes and kind of break that down.

But I do want to take a look at some of the leaders here, only solar that would be the tan ETF that little green spot, the upper left.

That was the only green spot that we see on our leaders screen Korean stocks the worst off today.

But regional banks chip stocks which have been bucking the trend recently, not today.

Those are down 2% oil as well.

Cannabis, you take a look at just about anything you're seeing red across the board here.

So let's take a look inside the semiconductors already took care of NVIDIA.

But if I sort by performance, you can see only W DC that's Western digital up 1.7 percent besides those two, everything in the red.

So giving back a lot of those profits that we've seen year to date.

And then we can take a look at unprofitable tech as well where we have coin based down 3% in the arc Innovation holding a lot more red than green.

And let's do this.

Let's take a look at energy which only yesterday was seeing a lot of green today.

We're seeing a lot of red.

One exception here, we got marathon oil up 8%.

We've been talking about that today.

Back to you guys.

Thanks a lot, Jared.

We got to get to sales force earnings.

Those numbers just coming out, the shares falling a quick 9.5%.

That looks like it has to do with the forecast here.

Second quarter revenue seen at 9.2 to 9.25 billion.

Analysts have been looking for $9.35 billion.

Also the second quarter earnings per share forecast, which should be at most $2.30 six cents compares with an analysts estimate of $2.40 here.

Um, at the same time, it looks like the company is raising its full year earnings per share forecast here.

But folks are focusing on what's going on with that second quarter forecast in terms of how the company did last quarter beat estimates when it comes to earnings per share.

244 versus the 238.

That was estimated you pretty much in line with estimates of $9.13 billion there.

But uh that forecast is sending those shares lower jobs.

Yeah, that'll be the focus point.

I mean, I there were folks who were saying Julian given the results we saw from work day, which of course, really disappointed investors and and just generally what the streets use is kind of broad negativity towards software.

Generally.

I I think it's fair to say a lot even people who had, you know, folks at a buy in on the name, we're not expecting a lot of upside, but clearly this is disappointing a about about the forecast.

I'm just looking through the notes, what Mark Benioff had to say.

He's kind of calling off profitable growth trajectory continuing.

He's saying beginning of a massive opportunity for our customers to connect with their, our our customers, connect with their customers uh in this whole new way with A I.

So trying to sound this positive tone, but the initial take here um is obviously disappointing.

Well, and of course Benioff had been sort of going back and forth with activists, then he seems to have sort of moved past that.

Um, but still has something to prove right in terms of slowing growth at the business here.

Uh, the company did see 39% increase in cash flow year over year as you point out that's, you know, something that he is emphasizing.

But, um, you know, if you can't deliver on what's going on with the sales growth that people are looking for, then stock gets smacked into the, the stock was basically flat this year.

Now it's getting shelled here at least initially in the after hours.

So we'll keep watching it moving on stocks closing lower as concerns on the fed's path for rates eclipses the bright spots from A I growth for more on where to focus for investors uh resides.

Let's get to Amy Wu Silverman R BC capital markets, equity derivatives strategy, Amy.

It is, it is good to see you.

So where this interesting point, Amy because you know, earnings basically, you know, mostly over.

Obviously, you know, we're, we're talking sales force, we got, we got HP coming up A as well here.

Um But you know, NVIDIA has come and gone.

I'm just interested in maybe a big picture to start, Amy.

What, what are the big changes you're seeing in the options markets?

You know, that, that you would call out?

Yeah, you know, look, I'd say great question because I think that's what we're noodling on now for a while.

We were just so excited about NVIDIA results.

So the question is, what, what do we look at moving forward?

I tell you seasonally, you know, we're heading into a time period where typically volatility is a little softer in the summer months.

Although August tends to be a surprise and then with kind of the earnings catalyst out of the way, I think the market kind of moves back to the macro catalysts.

And within that, I think us election starts to come more front and center a lot of conventions, presidential debates coming up.

And then obviously, the geopolitics, I think those are the things the market are gonna reach for now and obviously the fed speak that comes along as well.

Amy, I'm really curious though to put those potential upcoming catalysts in the context of what we're seeing now, which is not much.

In other words, if you look at what we're seeing with the vics very low levels, you know, there still seems to be a decent amount of enthusiasm in the market.

What, what are you seeing?

How would you characterize the sort of temperature right now?

You know, so one thing I'd say that I think might not be very obvious unless you kind of traffic in it all day long is, although the vix is relatively complacent, there's kind of stuff bubbling under the surface.

And what I mean by that is the right tail.

So that reach for upside, that reach for calls, you know, FOMO moo, whatever you want to call it, that's really been sucked out of the market since March.

March was the peak.

You know, you saw it in NVIDIA, you saw it in queues, you saw it in the relative different ETF and S and P that's, that's all but kind of evaporated even with NVIDIA having with strong earnings.

That's what I think is super interesting about it.

And to me, it speaks to positioning, it kind of says, you know, last year folks had to dip their toe in the pool because they might have to jump in.

They were worried about that fear of missing out.

That's really evaporated.

And so, yes, the downside protection hasn't picked up.

We're not nervous, but we're also not as bold up from a sentiment perspective and options either.

I'm also, I'm interested.

Uh Amy, you talk about how you're meeting with clients right now and, and one theme that's coming out, I think you mentioned is they're bringing up this kind of um K shaped recovery, maybe Amy, just, just talk more about that and, and what are strategies you might deploy?

Sure.

It's interesting, you know, I kind of call it like sentiment whiplash at this point.

You know, I've had conversations with clients where they're like, let's take two times, let's cut two times.

We still think it's good for the equities market.

You know, that's kind of been the rub in terms of what's been going on.

And then in terms of the consumer, when we say K shape recover, you know, that that's something that investors have pointed out where kind of the high end consumer is just, just kind of humming along and, and frankly, higher rates means higher cash yields for them.

You know, the high quality companies also benefit from the same phenomenon, right?

And then at the low end, there's the struggle and then there's the real hurt from the inflation.

And so when you're trying to play consumer tactical trades, you have to be very careful of what you deploy.

So I think one thing that I had written about is X RT, which is the ETF is equal weighted, might be a better way to deploy it than say an XL Y which is very heavily skewed towards an Amazon and a Tesla.

So really how that meat is made in the ETF that really matters.

And and what's the strategy you were, you would be looking at specifically when it comes to that X RT.

So for X RT specifically, we talked about put spreads, you know, owning that kind of at the money, put option, but selling that further out the money put option.

Again, you have this situation where implied volatility in general is not that expensive overall, this is a moderately long volatility strategy.

And then the other thing that I think you can do is you can sell calls in different stocks against it.

One thing we've talked about before is stocks that are kind of retail oriented, but maybe trading at 52 week highs as a funding trade because remember, we're again heading to that seasonally lower volatility point, volatility tends to decline in the summer months.

And Amy, you know, we, we were talking about NVIDIA at the top there and within that A I theme I'm interested, you said you want to focus on A I adjacent stocks, uh walk us through that, Amy.

What's some examples there?

Yeah, you know, so we, we have kind of two baskets that we look at one, the A I winners, which to be honest, I think, you know, certainly had their run but also are relatively well known.

And then the A I adjacent are, you know, the things that are maybe not as obvious but our secondary beneficiaries, so your utilities, your data centers, your, you know, your energy companies, I think some of those obviously have had they run, but there's still room relative to that A I winner's basket.

And then from an options perspective, again, some of those volatilities are much cheaper to own than the A I names themselves where you've seen that right tail bid.

So you've seen that bid to the call options, you know, come really strongly because that's where people initially gravitated to just the same way they gravitated towards NVIDIA at the beginning.

Um and, and speaking of NVIDIA, um you know, I, I'm curious how much you can glean from options market patterns about the sustainability of a trend, right?

So when it comes to NVIDIA and what we tend to see after earnings, is it gonna keep going up?

I guess it's just a simple question.

Yeah.

So, so that's been super interesting.

That's something we've tried to look at from a quantitative factor perspective.

So one thing we've said is ok, heading into earnings and then coming out of earnings, how is that call sentiment, that call option sentiment versus that put option sentiment because that can exacerbate momentum when momentum is there.

But if it's not there, it tends the flag.

So right now, we're actually in a period where we see more of that flagging.

But if you go back to March of 2023 where that initial earnings print came out there is really, really strong positive momentum there.

And then that was exacerbated as a tailwind by those heavy call options, you know, but call buying to historic volumes.

And this is the kind of trend that we've seen historically in the meme stocks too where, you know, buying begets buying and then on the option side, it can also beget dealer hedging, which is also more buying Amy.

Good to see you.

Thanks so much for joining us.

Thank you.

We are getting earnings right now from capri holdings of course, this is the parent company of a number of high end consumer brands for Sati Jimmy Choo, uh Michael Kors, uh the company um coming out with numbers that missed estimates here, earnings per share in particular coming out 30 cents below what analysts have been spending at 42 cents versus the 72 cent estimate of revenue.

A little bit light of estimates at $1.22 billion.

I'm looking at at John Idle's comments here.

He is the chairman and CEO and he basically said they're softening demand globally for fashion luxury goods.

He said in particular, things did improve sequentially in America and in Europe, Mideast, in Africa, trends slowed in Asia.

And he said sales remain challenged in the wholesale channel and worth pointing out heading into this report, the stock was already plenty beaten up.

It was down about 30% already this year actually hit a 52 week low this week.

And what interesting is, you know, very few analysts, sometimes you'll see that and analyst kind of think, ok, and you'll see them start moving in, they think the bad news is priced in.

But really if you look at the street free buys 13 holes.

So most folks who are paid to give you an opinion here are still sitting on the sideline, right?

Well, there's a big black cloud that is uh hovering over this company.

Tapestry was supposed to buy them.

The FTC sued to block it.

Um He makes clear in this statement, uh John idle that is that they're continuing to fight to get the deal done, but that's a huge piece of uncertainty that is hovering over the company and, and that doesn't seem to be that like it's gonna be resolved in the very short term just very quickly here.

When you look at uh overall revenue is down 8.4%.

If you look at the various business lines, versace down 3.6% Jimmy Choo down 9.3% Coors down 9.7%.

So, you know, there has been this conventional wisdom and it's been borne out by some of the luxury goods makers that Amy just referred to the case shape, you know, economy where uh upper and consumers are doing pretty well.

We're starting to see some cracks in that and this seems to be the latest example of that.

All right, coming up, we're gonna have the latest earnings from other companies as well.

Reports from HP American Eagle.

Stay tuned, more market domination on the other side, let's check in on shares of H PE.

We got some second quarter numbers from that company of about 9/10 of 1%.

The numbers look pretty good here, second quarter earnings a penny above what analysts had been anticipating and the company said revenue was at about $12.8 billion.

That to be estimates here, what's more the forecast pretty good from the uh vis a vis the estimate second quarter revenue seen at $12.8 billion 12.6 billion is what analysts had been anticipating and it appears the company has raised its forecast for full year earnings per share to a range of three do.

Uh, it looks like they raised it.

Um Oh, excuse me, they're cutting their forecast for a full year.

My bad, I was looking at the numbers reversed.

330 to 360 is what they now see they had seen 325 to 365.

So they brought up the low end, but they brought down the top end.

So I don't know how they narrowed the forecast.

Let's characterize it that way in the after.

I mean, you know, investors often looked at HB for a few different reasons.

One is like obviously read kind of that broader PC market.

We we've had guests on Julie betting that that market actually does get a lift in part from those new shiny A IP CS.

So be interesting when HP thinks, thinks about that.

We also did hear from Warren Buffett's Berkshire in that regulatory filing this month show Berkshire actually sold off its position.

HP and Q one sort of interesting there.

People often of course, follow the greatest value investor of all time and he makes his stock was basically flat for the year heading into this print.

But at least initially here, look at that pop 7%.

And I'm seeing here, this was the first increase in PC sales in two years driven by commercial sales, not by consumer sales but two years.

That's a long time for a slump to last in your main product.

So yeah, definitely a positive one.

Well, let's talk more about HP now because our executive editor Brian Sazi spoke with the HP CEO Enrique Lores.

All right, HP out with its latest results.

Let's dive right in here with HP CEO Enrique Lores.

Enrique always great to get some time with you.

So my takeaway from this quarter looking at the results is there was finally some stabilization in the PC market.

Is that a fair assessment compared to three months ago?

I I think it's a good assessment not only compared to three months ago, but really compared to several quarters.

This is the first quarter in a where our PC business grew and special driven by the commercial side, both enterprise and SMB.

So we are pleased with the progress that we have seen in P CS and we think that this is going to continue now for the second half of the year.

Yeah, I think the commercial side uh of the business may surprise a few folks on the, on the PC side, Enrique, what's driving that is that return to work?

Uh People, more people were turning to the office and realizing their computers are four or five years old.

And they can't use these pieces of junk anymore.

We think it's a combination of multiple factors.

One of them, as you said is the fact that the install base has aged and now people, both small companies and large companies realize that they need to change that.

We also are approaching a big windows, refresh windows 11 refresh.

Also, this is going to have an impact on, on growth and on the the need to accelerate the refresh of P CS.

And also we think it is because of all the innovation we have bringing being into market, whether it is A I I integrating the P CS better communication.

There has been a lot of innovation that customers are starting to realize can have a very positive impact from a DVD perspective.

Are you surprised to see uh businesses and, and to a lesser extent, I guess consumers out there refreshing these computers ahead of what looks to be the A I PC era.

Why by now, if you can wait a few minutes or, or a few quarters and get something extremely more powerful.

Well, first of all, Luis, there is a significant need to refresh now because of how old the install base is.

And second, we think that A I is going to be very impactful, but the penetration is going to take some time.

Our expectation is that this year, only 10% of A I of P CS will be high on the second half and that it will grow to 46% 3 years after launch.

So it's not gonna be an immediate change.

It's gonna take a change that is gonna take some time.

The, uh, the outlook you, uh, the, the quarterly outlook that uh HP provided.

Uh, uh, my surprise may surprise a few folks up to the upside.

How much have you built in, uh, with respect to those early shipments of your what?

Two new A IP CS.

Well, there is some of it integrated, but the key drivers really are coming more from the refresh cycle that we were talking before by the shift to Windows 11.

And also in the case of the US by a stronger federal business during the first half of the year because of all the budget limitations, our federal business was impacted and we expect that this business will accelerate.

Now in the second half, sell me on an A I PC enrique.

So there has two big three big things.

One is significant productivity improvement.

Second, it will personalize based on how you use it and for example, will optimize battery life and third, a much more secure solution than anything you have ever had before.

There's a lot that is going to be running on these computers um with these various A I bots and applications.

How do these computers handle this processing power?

Why won't some of these computers melt down?

I'm not saying your computers are going to melt, but there's gonna be so much going on in these computers.

How can they handle all this stuff?

Well, there is a lot of technological innovation in the new products.

And also from a performance perspective, for example, they come with two processors, they will come with a same similar processor than what we have had before.

And then a special TPU or GP U that will handle all the A I work.

So basically you have two processors in your PC, each of them specialized for each type of activity.

Additionally, of course, we have redesigned the full board has faster memory, more memory than anything we have had before.

So there has been a lot of work to make sure that not only we cope with the demand of our customers, but we really can excel the expectations that our customers are going to have HP is not the only one looking to build out A IP CS.

Uh Can you get the chips that you need to build these out?

Yeah, we, we don't see any limitations in terms of availability of nor the P CS we have introduced nor the ones we plan to introduce in the coming months.

On the printer side, you and I have talked about this business.

Um a lot through the years.

Enrique uh this is a challenging quarter for the printer business uh with the top line, not so much margins but on the top line.

Do you see any inflection point in sales for printers over the next 12 months?

Yes, I think that it was a, a difficult quarter but it performed as we were expecting.

And now we, when we project the business for the second half, we start seeing stabilization and recovery.

So we think that the business is going to start perform better in the second half than what we have seen in the first half are some of the, the the reasons for the top line pressure and printers enrique is that that these Japanese competitors are undercutting us based companies on price.

Well, clearly the gend is now very favorable for all Japanese competitors and this is why we have been very aggressively reducing our cost.

So we can be more aggressive in the second half and still meet our goal of driving profitable growth.

We are not interested in selling units with low or negative profit.

We want to sell profitable units and we have been adjusting our cost to be able to compete in this new environment.

I want to man a deal on a printer enrique.

I'm just saying I want to man a great deal.

Well, if you got a great deal, you should subscribe to our subscription programs both with instant ink, instant paper.

Now with uh all in offering, you can get a full printer for a very, very small amount of money and meet all your needs.

All right.

Well, you saw me on A I PC and A and a good price on a, on a printer.

Enrique Lares.

Uh HPC O always good to see you.

I'll talk to you soon.

Great to see you, Brian.

Thank you.

Time now for to watch Thursday.

May 30th earning season rolling on before the bell.

Investors going to hear from companies like foot locker coal style General and Best Buy tomorrow afternoon, Dale and Costco will be among those delivering results, Costco now in third quarter, earnings analysts expecting the big box retailers to report growing revenue and that income from the same period a year ago, as well as an uptick in memberships.

Turning to the Federal Reserve.

We'll hear from both the New York and Dallas fed presidents with John Williams and Laurie Logan.

Each set to deliver remarks this coming after comments earlier this week from Minneapolis fed President Kashkari expressing that he wants to see many more months of positive inflation data before a rate cut and taking a look at the economy.

You also get the first revision of GDP numbers from the first quarter which could provide more clues as to whether the economy is headed for a soft landing or a recession.

And we'll have several executives joining us here on Yahoo Finance tomorrow including C three A I CEO to Cable Red Robin, Ceo GJ Hart to see Todd mckinnon and Gap, Ceo Richard Dixon.

He'll be busy but that'll do it for today's market domination over time.

Be sure to come back tomorrow at 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.

But don't go anywhere on the other side of the break.

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