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Dow Jones breaches 40,000, Walmart earnings, Meta investigation: Morning Brief

On today's episode of The Morning Brief, Yahoo Finance Hosts Seana Smith and Brad Smith break down major market news and the trading day ahead.

The three major stock market averages (^DJI, ^IXIC, ^GSPC) opened higher after the S&P 500 closed at a record 5,300 yesterday. The Dow Jones Industrial Average touched 40,000 while the Nasdaq Composite remains relatively flat.

Shares of Walmart (WMT) are rising after the retail giant beat analyst first quarter earnings estimates. The company saw same-store sales grow 3.8% while its e-commerce sales popped 22% year over year. The company also raised its full-year sales and profit guidance. Walmart CFO John David Rainey joins the show to break down earnings, pointing to Walmart's value as a key area of success. TD Cowen Senior Research Analyst Oliver Chen says the retail giant is particularly successful because it appeals to both higher- and lower-end consumers.

Meanwhile, Meta (META) is under pressure after the European Union announced a formal investigation into Facebook and Instagram, citing child safety concerns. The company told Yahoo Finance, "We want young people to have safe, age-appropriate experiences online and have spent a decade developing more than 50 tools and policies designed to protect them. This is a challenge the whole industry is facing, and we look forward to sharing details of our work with the European Commission."

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More than 90% of S&P 500 companies have reported their latest quarterly earnings. Goldman Sachs Chief US Equity Strategist David Kostin breaks down three themes that dominated this quarter: artificial intelligence, the US consumer, and cost controls. Dow Inc. (DOW) CFO Jeff Tate joins to discuss the manufacturing materials company's growth and how it fits into the AI picture.

This post was written by Melanie Riehl

Video transcript

It's not am here in New York City.

I'm John Smith alongside Brad Smith.

This is Yahoo Finance flagship show.

The Morning Brief was that features they are poised to open at a war record highs here this morning.

The Dow set to open above 40,000 that we are seeing this slight move lower for dow features.

Now, the move that we did see yesterday where we ended at record highs that came after softer than expected inflation print helping to reassure the street that is that rate cut is still on the table.

S and P 500 closed above 50,300 for the first time.

I imagine they're getting those hats ready at the NYSC the 40 K for the Dow and a fresh read on the labor market with jobless claims this morning, the number of Americans who applied for unemployment benefits last week that fell by 10,000 payrolls to 222,000 signaling the US is still experiencing a low level of layoff here.

So let's get to over the three things that you need to know this Wednesday morning, your road map for the trading day, the finances Jared Briana and Alexis and have more.

I you stock futures are flat but poised to open at record highs this morning.

Major averages reached all time highs on Wednesday with the S and P 500 closing above 5300 for the first time after CP I data came in softer than the of April.

But now that we have inflation pressures easing last month, the progress isn't likely enough to push the Federal Reserve to cut interest rates just yet.

According to the bond market plus inflation where consumers are stocking up over at Wal Mart, largest us retail reported stronger than expected first quarter revenue and same store sales results driven by a big jump in e commerce sales and more visits to its giant hulking Super Center.

Wal Mart also raised its full year sales and profit forecast as consumers look for value in deals inside of a still uncertain us economy and meta under regulatory scrutiny.

Again this morning, the European Union opened a formal investigation to probe if meta violated you child safety laws.

The European Commission said Facebook and Instagram quote may stimulate behavioral addictions in Children as well as create so called rabbit hole effects.

The commission also looking into the platforms verification system.

Our top story of the day stocks in record territory.

You can see a bit of a pullback here that we're looking at maybe ahead of the open, but we're right around the flat line dow 40,000.

We're gonna be asking strategists about this number all day, whether or not there's still time to buy and room to run here to the upside.

You've got the S and P 500 closing above 5300 for the first time.

NASDAQ also here slightly moved to the upside.

Now, this risk on sentiment that we certainly have seen or this move to the upside to record highs comes on the heels of that better than expected or may be signs of softening here for the inflation print out yesterday morning was essentially in line with expectations.

We did see an improvement here from the previous three readings.

And because of that, that was enough here, Brad for strategist to leave a potential rate cut here on the table.

And as a result, we are pushing to the upside, we did push the upside yesterday.

So we're seeing a bit of movement here just slightly to the downside ahead of the open as I flip this over and back to the major averages.

This move lower, obviously, nothing really to be too concerned about at this point.

Given the fact that we are right around 5300 for the S and P 500.

But again, just some key critical levels to watch in today's trading day.

And we're keeping in mind here, of course, even with this hyper oscillation going into the open where you're seeing the dow the S and P 500 trying to make up their mind as well as the NASDAQ kind of hyper waffling coming into the opening cross, one huge thing to continue to monitor.

Of course, is the tenor that we're hearing over the course.

So this earnings season, how CEO S are talking about the economy, but also how the data is continuing to move.

We had CP I this week, of course, jobless claims, which is really around a level that we had seen kind of be the normalization level of about 200,000 jobless claims pre pandemic.

So getting back to that and kind of maintaining at that level, that's key for the markets that allows that to remain just a little bit more muted here in terms of triggering any type of outsized reaction.

But there you're taking a look at some of the sector activity coming into the start of today's trading activity, staples catching a bit here ahead of the opening bell as well by about 7/10 of a percent.

Yes, certainly we are also seeing some gains here in real estate and consumer discretionary utilities.

Not too far behind.

We talked about this rotation into utilities, some of the names that haven't necessarily participated in the rally since the start of the year.

So we've seen a bit of a rotation into some of those underperformers, relatively speaking compared to the rest of the market.

So it will be interesting to see whether or not that trade continues there, whether or not there's room to the upside and then energy communication services here lagging by just a bit.

But again, we will see where the market opens.

And then obviously throughout the trading day, clearly, lots of movement will likely see.

Well, we got some big movers here today, Walmart shares higher its first quarter results showing a nearly 4% jump in its US same store sales fueled by a 22% surge in US e commerce sales as well.

Yahoo Finance's executive editor, Brian Sazi joins us now with much more on this.

Brian walk us through some of your takeaways.

Well, Brad, I I started to hyper oscillate my chair after these Walmart results and this is a bang up quarter and I think the city team is right on the mark here.

New note from uh their team out a mi a couple of minutes ago saying this was another positive quarter from Walmart and the winning streak continues.

Walmart shares up almost 7% on the pre market to this quarter is totally 1000% deserved in terms of the stock pop here.

Uh The US business uh as you mentioned, same store sales up 383.8% but these are not the real stories of this of this quarter.

It is double digit ecommerce growth in Walmart US International Sam's Club checked on next.

The international business has finally started to turn around.

It's a story.

Nobody on the street is talking about a lot of our competitors aren't talking about it.

And it's one that I'm gonna start digging into personally because I think that international business is really starting to drive a lot of big results at Walmart.

Nobody cares about it.

And I, they really should.

And then lastly, inventory has really started to come down at Walmart.

This has been a big focus for this company for more than two years, inventory decline in the US that is allowing them to reduce markdowns in their business and push up profit margins overall.

I'm really trying to figure out guys, what is the state of the economy if Walmart is doing so well?

And I think that old thinking economy slowing down Wal Mart does good.

I think that's totally broken.

I don't think that applies anymore.

I think this is a retailer now attracting all sorts of consumers.

Walmart slipped in there.

Really?

For the second straight quarter, higher income households are going to why?

Because they're not selling crap anymore.

They're selling higher end goods, better, a better fish, better meat, better products, better protein shakes, whatever it is, this is not that same clunky, horrible shopping experience as it was 10 years ago.

You know, it's so interesting and it's important to point out and I'm curious because you mentioned the international component here, potentially being a driver.

You're likely a driver here ahead for Walmart.

Is that also consistent with what we're seeing overseas just in terms of more high end shoppers when you take a look at your, when you take a look at other places also trading down to Walmart as well.

Well, some of the luxury good retail earnings over the past few weeks haven't been that great.

I think just Walmart is just operating its business better.

So it's Walmex, that's their business in Mexico.

Uh Walmart, China doing very well.

Some of the big box super centers that they own, I believe Sam's clubs in China is doing pretty well.

And then in addition to that or in part because of this international turnaround, you're seeing Walmart out here come and raise their guidance for sales and profits for the full year.

Despite keep in mind what that full year guidance entails that captures the election.

You know, what is this business look like a month before the election to consumers pull back, unsure, but this is Walmart saying, you know what, we're pretty confident what the consumers are going to do.

This is what our data is saying, we're confident they're going to be spending throughout the election into the holiday season.

And it's how they're classifying the consumer that they're monitoring over the rest of this year too.

And saying in this earnings report, especially pointing to that guidance, you were just mentioning that they're expecting the consumer to be generally stable.

We've seen this move from resilient to healthy to now from Walmart's per view, generally stable and a question of what that stability means.

And in terms of this normalization that we're starting to hear increasingly among retail CEO S right now, what that means for certain aisles that Walmart operates as well, right.

And one finer point than you always talk about is the advertising business inside of Walmart, strong gains really underscores why Walmart is out there buying visio.

This has turned into a pure profit center, this advertising business for Walmart.

And of course, Amazon next up in another topic, we have to dig into membership fee income for Walmart and it's not just Sam's Club anymore.

It looks like they're starting to have some real success with the potential Amazon Prime killer and Walmart Plus.

Uh so that looks to have gained traction too.

Nobody's talking about it.

They should be.

All right, Saz, thanks so much.

And of course, we're going to continue this conversation right here on the morning brief.

We will be joined by Walmart CFO, John David Rainy and Sazi as well.

That's coming up 9:15 a.m. Eastern time.

All right.

Another fact that we are watching this morning is Meta.

You're looking at some pressure on shares off just about 1%.

Now, the company coming under some pressure after the EU announced a formal investigation into meta's Facebook and Instagram platforms.

The regulator concerned about child safety on the platforms, violations of the use of online safety laws coming with hefty fines.

Yahoo, finance senior reporter Alexis Keenan has the story on that for us, Alexis.

Hi guys.

Yeah.

So another investigation into meta's Instagram and Facebook on the other side of the pond here, they're looking into the for the EU if the companies violated online content rules for kids.

And this is specifically the Digital Services Act that went into effect last year.

So kind of testing a bit of this new law on this round.

Now, what the EU is saying is that they're concerned about three different things in particular.

One is that the plan forms and its algorithms may stimulate these behavioral addictions in Children.

They say they're worried they create a rabbit hole effect and that's basically content and algorithms that works to so individually target and whoever is using it that they kind of reinforce and have the ability to reinforce harmful impacts on Children.

They're worried.

They also say that meta's age verification processes for kids which are supposed to not permit Children to have a regular access, full access to the platform outside of age 16 in some countries, it's 18.

They're worried that the company is not compliant in those areas.

Now, one of the commissioners for the EC said they're not convinced that the company has done enough.

The company is required under these European laws to submit what they're doing to mitigate these potential problems.

They did that in September.

And what the is saying here is that they're not sure they're compliant to mitigate these negative effect potential risks.

Now, in response meta told Yahoo finance, we want young people to have safe age appropriate experiences online and have spent a decade developing more than what they say are 50 tools and policies designed to protect them.

They say this is a challenge that the entire industry is facing, not just them and they go on to add that they have parental controls in place.

But guys, the fines here for violations, if they are found at the end of this probe, they are hefty, they can run up to 6% of annual revenues for the company.

So if we're looking at Facebook or Meta rather is 135 approximately billion in revenue for fiscal 2023 talking about $8 billion here.

So in the eu the fines are very, very serious if violations are found.

Yes.

And they've tended to have a more kind of outsized, uh dollar figure or, you know, just figure in general in terms of the compensatory damages there as well uh for us companies as we've seen in the past as well.

Alexis, thanks for breaking this down.

You appreciate it coming up, everyone ac suite a round up.

We'll hear from Walmart's CFO J David Raine after the company saw strong sales growth in its first quarter results, plus the Chief Financial Officer of Dow Inc will join us from the floor of the New York Stock Exchange ahead of the company's Investor Day.

We don't want to miss that Walmart shares gaining just about 6% in pre market training after the company reported very, very strong results, ecommerce sales fueling growth during the first quarter, the retail are now expecting its full year net sales growth to hit the high end or slightly top its previous forecast.

We have John David Raine Walmart, the CFO joining us now alongside Yahoo Finance's executive editor, Brian Sazi John David.

It's great to have you here.

Thanks so much for making the time for us.

So let's talk about what was yet another strong quarter here for Walmart.

You've got shoppers clearly prioritizing value.

I'm curious what your read right now is on is on the consumer and some of the trends that you're seeing here in the current quarter.

Well, it's great to be on the show first.

Thanks for having me.

We are really pleased with the results.

This quarter grew, the top line 6% grew operating income over twice that amount at 13.7%.

And I really think it shows that customers are continuing to come to Walmart for not only just value but also convenience in terms of the consumer, the consumer has been relatively consistent.

We are like everyone else is looking for.

Uh if there's something there, something that we should be more aware of, but they've been pretty consistent quarter to quarter here.

We see that wallets are still stretched.

They're still looking for value.

They're still using discretion with buying those those higher income items.

I think, notably, retail sales came out yesterday, showing April was relatively flat.

We think when we look at our business that that's largely the result of the Easter shift year over year from March to April or April to March, I should say and also weather impacting uh the month as well.

So when we look at the quarter in total, as well as what we see in the first few weeks of May here, it's been relatively consistent.

Uh John David, good to see you again.

Uh I appreciate you coming on.

Is there?

I I really do think that investors are misunderstanding uh what Walmart is today.

You know, I still think they, they think Walmart is a place to get cheap goods and maybe not everybody goes there and then there's that component.

But the other component is here is just how much of a tech company the company has become.

Do you think they understand, you know how much value tech is driving at Walmart right now?

Yeah, there's so many examples uh Brian where we're using technology to help our customers and help our associates that are really leading edge.

And, and one of the examples I like to point to is the scanning Go app that you have when you shop at Sam's fully a third of our customers are using this experience when they shop with us where they're, they're checking out with their mobile phone.

Um I, I don't know the data on this, but I would stand to believe that there's not many other examples of a digital experience in store that has a higher penetration than that.

And so we're really excited about that, but there are many, many examples of where we're leaning into technology to help not only our customers but also our associates in terms of how that translates into our financial results.

We had roughly a billion dollar increase year over year in our operating income.

Fully, a third of that came from these newer businesses like advertising, like membership, like data ventures, data ventures grew 100% year over year.

These are all higher margin businesses that are going to continue to help our margins go up over time.

What do you like to reinvest those margins into the business?

Yeah.

Well, first and foremost in helping the customer have better experiences, we're always looking to uh be an advocate for our customer, whether it be low prices or better experiences, but we have a lot of opportunity in our fulfillment around supply chain.

We've invested a lot and we'll continue to invest a lot in automating our supply chain.

That's not just robotics, it's also software and technology that helps us to better distribute our goods and merchandise to our stores in a more seamless fashion in a less expensive way.

Over time and that translates into lesser less ecommerce losses.

And hopefully, we'll get to a point where we see uh ee commerce profits.

One of the things I talked about on our call this morning that I am really excited about are the incremental margins in our ecommerce business.

And what, what I mean by that is for every additional dollar of revenue we had this year, how much of that fell to the bottom line?

So in a business overall, that is call it roughly a 4% margin business.

The incremental margins for e commerce for us for the quarter were 12.5%.

So roughly three times the overall margin for the enterprise.

And so you look at that and to me that's a very compelling point that our margins are just gonna go up over time as we continue to grow these higher margin parts of our business.

There's there continues to be just this focus in this country uh about inflation where it is where it isn't, you know, consumers, despite the dow breaking through 40,015 million plus jobs created over the past four years, households don't feel wealthy uh in large part because of inflation.

Are you seeing inflation slow down?

And do you see signs of a any signs of disinflation where prices are going to decline at any point this year and, and ease some of the pressures on households?

Sure, Brian.

So overall, if you look at the basket of goods that we sold in the, in the last quarter, inflation for us was about 40 basis points.

And so the takeaway there is that all of the revenue growth was driven by units by foot traffic.

And so we're really pleased about that and it shows that customers are really coming to Walmart within categories.

Not only do we see dis we see deflation in general merchandise.

It's been that way for a couple quarters, food and consumables are call it roughly 0 to 1% up.

And so when you look at uh P CE or the CP I print uh it's really um shelter and energy which is driving 70 to 80% of the of the increase in inflation.

If you focus in on food, I think there's a further disparity between food at home and food away.

That gap between the two has actually grown by 20% over the last five years.

It's 4.3 times more expensive to eat out than it is to eat at home.

Right now, John David going off of that one, I was looking at the quick uh analyst reaction to your print out this morning and I saw, I mentioned a couple of times that one of the challenges here for Walmart once inflation starts, uh what you were just talking about is the ability here to retain some of the new customers that you have won over the last several quarters what is your strategy look like for that?

Yeah.

Well, first and foremost, I'd say convenience.

We've been a company that's been known for low prices for six decades.

We're now being known for convenience and convenience matters to any household, irrespective of your income level.

We continue to see progress in e commerce that grew once again, over 20% for us this quarter, but it's not just customers that are shopping with us online and then go to the store to pick it up the last two months.

We've actually seen delivery outpace, uh store pickup.

And if you look over the last 12 months, we've shipped 4.4 billion items in the same day or the next day.

And over 20% of those have been within three hours just lastly.

And we only have about 30 seconds left here if you're monitoring the data as well as we are on the economic side and whether that be retail sales or CP I, we're looking at some of these department stores that are flailing right now and trying to figure out what their strategy is.

How much share do you think you can take from them as they're trying to figure out what their next iteration of growth is?

And, and how do you retain some of those customers you might be able to pick up?

Well, I think there's a couple of points to, to focus on here and I, I'm not, I, I don't know what other retailers are doing.

We're focused on serving our customers the very best way that we can.

And if we do that well, if we execute, well, I think we'll continue to see share gates.

The other point is I think you're seeing how an omni channel model resonates with customers.

It's one thing to have a, an E commerce site that's really good.

It's another thing to have a brick and mortar site that's really good.

But combining those two is what's resonating with customers.

And we're seeing that in our results, Jon David Raine, who is the Walmart CFO alongside Yahoo Finance's executive editor, Brian Zazi Jon David.

Thanks so much for taking the time here.

My pleasure.

Companies are doubling down on growth strategies in 2024 and Dow Inc is one of them.

The company announcing further plans to deliver on its strategic vision, financial targets and climate projects as well during its investor day to day shares are up over 7% so far in 2024.

For more on this, let's bring in Jeff Tate Dow CFO joining us from the New York Stock Exchange.

Great to see you here this morning, Jeff, you were at Dow many, many moons ago.

You're a boomerang to the company here.

So you've seen this company over many iterations.

What is the core difference between Dow now versus what it was back in the nineties and even early two thousands.

Good morning, Brad it's awesome to be here with you today and you're right, I am a boomerang, but it's been so exciting to be back at Dow for the past six months or so.

And from my vantage point, dow has never been in a stronger position, both financially as well as operationally Brad.

When I look at our ability right now to be able to prepare for growth in this up cycle that we're looking to see here.

We could not be in a better position to do that.

And I think it starts with our culture, it also goes along with our financial position.

Our balance sheet is the strongest, it's been in decades and we've got the innovation pipeline that surely positions us well for that future growth.

Just talking about that future.

I'm curious just what you're seeing from a macro perspective, some of the challenges out there right now, how you're navigating those head ones here I do.

And as we talk about the fact that we could be in this high for longer rate environment.

What specifically does that mean for your business?

Well, for us, we've got a very diverse portfolio and one of the things that serves us well, it's not only being diverse from an application standpoint, but also diverse from a geo geographical perspective.

What we're seeing right now, certain areas are really strong and resilient such as infrastructure, electronics.

So you think of data centers, you think of A I support Pharma continues to be strong for us.

Packaging has been resilient throughout for us over the past two years and continues to have strong export performance as well as local performance.

Now, there are some areas that are still challenged as you mentioned, for us, those things that are more interest rate sensitive such as housing, looking at appliances, furniture, those spaces for us are still relatively soft and relatively slow.

But again, having that diverse portfolio for us has really served us well in working through the cyclicality of our industry.

Jeff, it's been an interesting time to hear about some of the ESG investments that companies are making because investors are trying to, to figure out when that will ultimately pay off.

Investors are also going to hear Dow talk about some of those climate initiatives today and they're going to have to wrap their minds around what it means for a company to either prioritize eradicating emissions from operations that could have a financial impact versus purchasing offsets.

How is Dow approaching that?

We're approaching it as the power of Ann Brad A and D for us.

We're going to do both.

We're going to look to decarbonize.

We're also going to look for profitable value creation.

And as an example, our path to zero project at Fort Saskatchewan, Alberta is a significant example of that where we're going to have the first zero emissions, major ethylene and derivatives complex in the world.

And in fact, in November of last year, we actually got the final investment decision and this will be an opportunity for us to take full advantage of the ethane advantage that we have in Canada.

Today, we're going to build this facility on an existing dow site.

So the infrastructure costs will be much lower.

We also have a great opportunity today in which we're doing this to lock in a lot of the ethane requirements that we'll have.

We're locking in long time lead equipment and we've already been able to hedge 100% of the currency that's associated with this.

So we're mitigating a lot of those potential risks that you can have as we focus on not only decarbonizing but more importantly, creating that value and understanding where some of those operations are taking place us versus other parts of the world.

As you were mentioning in Saskatchewan, we have to think about, of course, the other risk that's out there in a general election year, how you could see a changing of the guards in DC?

And, and what that would mean for a lot of companies who have prioritized some of the goals that you just laid out and where that could have another financial implication for the company.

How are you kind of monitoring that and, and gaming to mitigate that risk?

Well, what we look at is that, you know, regardless of who wins from an administration perspective, Dow feels like we're well positioned.

Brad to be able to operate, effectively operate profitably but also be able to meet our sustainability targets that we've set out there.

Which one of those is to be net zero carbon emission and carbon neutral by 2050.

And so as we look at the investments we're making, not only in the US but around the world, we're well on our way to making progress in that space.

Jeff Tate Dow CFO from the New York Stock Exchange there.

Great backdrop.

Great to see you here this morning.

Jeff, thanks so much for taking the time.

Thank you.

Another stock that we're watching today is Chub shares of the insurance company.

They're jumping, jumping as Destiny's Child would say by about 6%.

And this is after Warren Buffett's Berkshire Hathaway revealed that this was the secret stock pick that the Buffett team has been betting on in a new regulatory filing here.

They're seeing shares as we mentioned jumping.

They are also higher over the course of this year.

Last I checked as well for Chubb, but of course, a lot of mystery to know what Warren Buffett is investing in, in the business of mos.

Are you seeing the year to date up by about 12%?

Yeah, this is Ben over now here and we, we want to point out that clearly, this isn't a huge surprise given the focus that Berkshire Hathaway has on the insurance business, given some of the commentary when I was out at the annual shareholder meeting just two weekends ago, just the yuppie commentary that him and his executives had when it comes to the insurance business and the focus that that is going to be here for Berkshire going forward and where those opportunities lie within their portfolio.

So I think the what what's also we're going to point out here is that this is relatively unusual to hold, to not reveal the identity of a stock in one of your holdings here, at least for Berkshire.

And the last time they did they did this was four years ago when you take a look at the holdings that uh that Berkshire had in Chevron and Verizon back in 2020.

So I think the mystery, the suspense surrounding this really gained a lot of attention.

The fact that he was not asked about this at the shareholder meeting a couple of weeks ago was a bit of a surprise.

I was hoping to get a little bit of commentary there from him, but the fact that we are getting this now and the fact that it is Chubb just really shows that Berkshire is remaining committed here to some of their focus that we have seen clearly at Berkshire over the last several decades.

And the fact that they think that Chubb is well positioned within the space given their margin expansion, given their underwriting margins are so strong and they have seen solid growth here over the last several quarters.

Yeah.

And in the insurance business is that they've consistently had exposure to in the past here.

Of course, Geico being one of the largest holdings that has really gained a lot of traction or fanfare after Berkshire Hathaway took a stake in that.

And also thinking about the CP I numbers that even came out showing where inflation still is.

And isn't I actually posted this on my Instagram yesterday and I was surprised at how many friends slid my D MS afterwards.

And we just like auto insurance is crazy right now.

Dude, it's absolutely insane and, and Berkshire has exposures to multiple types of insurance businesses and so everybody is keeping tabs on when insurance premiums are going to start to recede a little bit here.

But for Berkshire right now, there's so much that gets factored in whether it be the parts that go into different parts of the insurance business here when you've got to make sure that a claim that's submitted is able to be serviced upon or even the wages that go into making sure that the servicing is done properly.

All these things considered.

I think that's where Berkshire is made.

It's really concerted play.

And also, of course, it's a business of floats as well.

Yeah, exactly.

And also within the shareholder letter that was just released uh recently Warren Buffett saying that property casualty insurance providing the core of Berkshire's well being and growth.

So again, goes back to the priority for this business here and where they are placing those bets going forward.

All right, it's time for our daily game of who rang that bell.

Of course, the famous line from the Wizard of Oz Farmer Mac rang the opening bell at the nyse and inside partners ringing the opening bell at the NASDAQ.

Hey, it's 930.

Let's do a quick check of the market sponsored by Tasty trade.

Why don't we take a look at the dow, the S and P 500 the NASDAQ.

Oh my gosh.

All right.

Slips just below 40,000.

But we're still in positive territory here for the dow my goodness.

We were so close.

We were right there.

Uh A hair's breadth, some might say away from opening in that 40,000 marker.

We'll see exactly where that opening cross was in a moment.

But the S and P 500 you're seeing that flat just barely to the upside and the NASDAQ composite that's flat just barely to the downside here as well.

Certainly, we will keep an eye close eye on those record setting numbers.

Whether or not we're going to see another day as we close could potentially close at all time.

Highs Walmart, the big driver of the Dow here this morning.

The reason why we're still looking at gains.

All right, let's get over to Jared for a closer look at this movement that we're seeing, Jared.

Yes, I thought we'd start off with some records, but uh we know the S and P 500 the Dow NASDAQ all at or near record highs.

But I want to show you the Wilshire 5000.

This is an index that's supposed to represent all of the liquid stocks in the US.

And we don't have as many stocks as we used to.

So it's actually 3500, but we have just notched a record high in the Wilshire.

So all the arguments about the breadth of this market are just evaporating one by one.

I also want to point out the Vix is near the lows of the year.

So seasonality actually favors a higher Vix over the next two weeks.

That is the only potential headwind I see for this market, especially after clearing CP I yesterday with flying colors.

Here's our sector action.

We got staples and financials in the lead financials, by the way, at a record JP Morgan and Goldman Sachs driving that.

But I do want to get to our meme stocks here while got some time because we have seen game stop under pressure in the upper right.

It's down 12 13% right there and A MC at the bottom there.

That's about 5%.

Uh Let me show you the two day totals here.

So you can see what happened.

I'm gonna sort by performance and you're gonna see the biggest losers were game stop.

A MC and costs all down about 25%.

Uh, these guys have been moving somewhat in lockstep, but now let me show you the four day total where, guess what, reversal of fortunes we have stop still up 100% on the week.

Basically.

A MC up 76% cost of 44%.

And then you can go down the line.

Uh, the point is it's actually been a successful week.

Uh, if you're a buy and hold me stock, if you're just a trader, you got to be nimble because these guys have been flying high and low.

So let me just see if I can pull up a game stop sharp.

Here's the four day price action and you can see they're still up 92%.

Uh but pretty far at least 20% I believe off of those highs.

All right, Jared, a trade that we're gonna continue to watch here today, expected a lot of volatility.

All right, Jared.

Thanks so much for breaking that down for us.

Major indices hitting record highs this week, we're gonna have more on that whether or not they're still upside ahead for the broader market.

We'll be right back.

Well, stocks hitting record highs this week after the inflation data print out yesterday morning, came in line with expectations reigniting some of that optimism that we have seen on the street that we could see a rate cut before the end of the year and take a look at where things stand today.

You've got the S and P holding on to positive territory pushing further above the 5300 level.

You've got the NAS or the dow excuse me, just below 40,000.

We of course, are gonna monitor that and see whether or not we can reach that level here to us more on where the markets are headed.

We want to bring in Kevin Gordon, he's Charles Schwab director and senior investment strategist here to break it all down.

So Kevin, I'm curious, how are you looking at the levels that we're currently trading at and whether or not you do still see some room here to the upside.

I I think there is there's room to the upside, but I think more important to keep in mind is what's gonna get us there.

Number one and then number two kind of what to expect and maybe paring back the expectation of really strong gains akin to what we've seen if you go back to last October, you know, when we really got this, this leg higher after that correction.

And I say that because you know, so much focus this earnings season has been on companies for the most part, at least for the S and P 500 different story down the cap spectrum doing relatively well.

But in, in our mind, when you look at the data and you look at the out performance for companies relative to the S and P or whatever benchmark, even when they're beating earnings.

Um, there hasn't been out performance, you've actually seen an average decline of 0.2%.

So when you factor in sales and there's a beat on sales and earnings, that's when you get, when you've gotten strength.

But when you start to look at where we are now in the earnings cycle, now, you're moving back into double digit territory in terms of earnings growth, that's actually a weaker zone.

You're still seeing gains, but historically, a weaker zone for the stock market, the strongest zone is when you're between down 20% and up 5% for earnings.

So we've already exited that zone.

Now, we're just moving into something that's a little bit more, you know, consistent with maybe relatively, you know, less strong gains I would say, but you're not in negative territory.

So that's the one thing.

The second thing being what you mentioned about rate cuts, I'm not sure that we should put so much emphasis or so much focus on the fed cutting being necessarily a bullish or bearish thing for the market.

It really matters more as to why they're cutting what the, what the economic environment looks like because, you know, if they're cutting for the wrong reason with unemployment surging and the labor market deteriorating, that wouldn't be a risk on scenario for, for the market.

And so you mentioned that even if companies are being, they're still not being rewarded as much as we've seen in the past.

So that would almost kind of spell out this, this hyper goldilocks scenario that we could be navigating through for the rest of this year, even, even leading up to the election at, uh, in November as well here.

How would you evaluate them?

What we, what have we typically seen in those types of?

Well, I think it speaks to, you know, what the focus has been on the part of the market where if you're beating on earnings and if you're achieving really strong earnings growth and in a profit scenario, just based on aggressive cost cutting, um that's just not good enough anymore for the market.

So you're at the point in the cycle now where you need to start seeing actual sales growth and revenue growth improve because we've been in an environment of decelerating revenue growth still positive, but the change has been sort of moving lower.

So as long as you start to see that improve in the back half of this year, which, you know, we would expect to be the case, um then you can get another leg higher in the market, but you need to see both of those come into play in addition to strong guidance.

That's another key area where we haven't seen as much strength on the part of the market's reaction is if companies, you know, revising guidance to the downside, that's been to the detriment of the stock price Kevin.

What about the fact that we've seen some of these defensive sectors coming into favor when you take a look at the fact that consumer staples utilities, both trading above their 52 week highs.

Is that a bullish sign for the market or is it something that maybe investors would be looking at a bit bearish?

Yeah, I think the, you know, the natural, maybe human reaction is to, is to look at something like utilities and staples, the strength you've seen there.

Um especially leading this next leg higher mo mostly for utilities, not as much staples, but the breadth has still been strong for both.

But the natural reaction would be to say that that's a bearish indicator.

Um It's hard when you look back in history and look at these prior episodes of markets reaching new highs are doing well with the defensive also doing well and, and say that that's a bad thing you have one instance uh being the lead up to the global financial crisis, but that's a sample size of one.

And I also think that when you look at something especially like utilities, you know, a sector that got deeply oversold back in October, we have to keep in mind that relative to the S and P uh for the utilities low in October of 2023 relative to the S and P, you hit an all time low.

And then in absolute terms, the sector fell to a three year low.

Um Very unusual to see in the first year of a bull market.

Um So I, I think that part of the strength that you've seen can be attributed to the fact that that sector just got deeply oversold and people are now buying into the momentum.

And so with that, how much momentum is there left?

I mean, we're looking at, I'm sitting looking over your shoulder 39,918 for the dow right now, all of us are just waiting to whip out the 40 K hats at this point.

But how much more room to run from there?

Are you anticipating?

Well, it depends, I mean, if you talk about momentum as a factor, you know, we went through a pretty swift contraction.

Uh because when you look at that late March to mid April period, the, the mini pull back if you want to call it that not a full blown correction for the S and P. But what was leading that were some of the mo the momentum names that had been in that spot and dominating the momentum factor since, you know, late October, early November.

Um So if they get put back in and, and you continue to see momentum outperform, um it's, it's understandable as to why that could, that could lead you higher, especially if now what would be interesting is given the run you've seen in utilities of some of those names and some of those industries now start to move into momentum because momentum as a factor is not just tech or communication services, it's just whatever has been doing well.

So you can easily swap in another sector uh and see momentum as a factor continue to do.

Well, Kevin Gordon Charles Schwab, director and senior investment strategist.

Thanks so much for taking the time here.

Good to see you.

Good to see you.

Thanks.

Well, Cisco shares, they are higher in pre market trading and now that trading is commenced, it's down by about 1.5% after the tech company, they had topped fiscal Q three earnings expectations plus raised the full year revenue forecast.

In spite of the beat sales dropped 13% during this quarter compared to last year, Cisco saying Splunk it's recently acquired software subsidiary will be a catalyst for further growth here.

And so one of the huge things as I was looking through this earnings call transcript, I didn't have a chance to listen into this one yesterday, but it's all gonna continue to come back to and I mean, stop me if you've heard this before, but the amount of A I mentioned seemingly a company is able to weave into their demand narrative going forward at this juncture and Cisco attempted to do just that as well here, even with the speed on the top and bottom, I think there's still a lingering question of how accretive that will be to the business in a near term period of time for a lot of investors out there.

Yeah, and take a look at the analysts reaction here.

A lot of focus here is, is coming on their analyst day which is going to take place next month in June 4th.

That could be the next catalyst here for the stock going forward.

But you're right, Brad to call out A I I think that's one of the bullish thesis here when we talk about this stock and why so many people are seeing reason to buy at least at this point.

It's also important though to point out that Cisco has been an underperformer since the start of the year.

When you take a look at that year to date chart here, we have it up on your screen.

It's actually declining about 2.8% nearly a 3% drop here since the start of the year.

And that's compared to the S and P 510 11% climb that we've seen since January 1st.

So I think a lot of people are looking at this name and seeing that we could potentially look at some upside here for Cisco.

When you talk about the spend that companies are, are allocating towards A I when you talk about the spend that they're allocating towards cloud and that was enough to give that upbeat fourth quarter forecast.

But when you take a look at the underlying factors right now, there still is some weakness surrounding Cisco Stock and that's a big reason why you're looking at shares off just about one and a half percent today.

Yeah, absolutely.

And, and investing a lot right now in terms of where they're seeing the demand, whether that be on customers who are investing in private data centers, collaboration, they're saying that's being positive, but also even in the security realm here.

So I think this an era and this has kind of been one of the underlying themes of this earnings season where companies are spending because of the demand that they're seeing in order to scale up to continue to deliver at scale, I should say for a lot of the customer that are asking them for many of the services in this case for Cisco, the Cyber security element, the of course cloud element, but then the data center and and A I weave in as well.

They're spending that happens on the front end for Cisco in order to realize more of the long term contracts from their portfolio.

Clients also coming up, everyone.

We saw strong results from Walmart's first quarter release and target results are still untapped next week.

We'll speak with an analyst who still says Walmart is still a better position.

Next Walmart seeing strong ecommerce sales during the first quarter with its delivery business volume surpassing in store pickup.

We spoke with Walmart CFO John David Raine about the state of the consumer and here's what he had to say, the consumer has been relatively consistent.

We are like everyone else is looking for.

Uh, if there's something there, something that we should be more aware of, but they've been pretty consistent quarter to quarter here.

We see that wallets are still stretched.

They're still looking for value.

They're still using discretion with buying those, those higher income items we wanna bring in Oliver Chen.

He's TV Cowens, a senior research analyst, Oliver, it's great to see you.

I'm curious just to get your rea reaction to what we just heard from Jon David.

And if we are seeing the consumers still willing to spend, although we are seeing some pressure, what in turn does that ultimately mean for Walmart here in the coming quarters?

Yeah, Shana Walmart's our top pick.

It's great to be here with you.

What Walmart offers is both needs and wants.

So on the needs side, grocery remains critical.

Also offering the consumer extremely great value.

What we see is a bifurcated consumer, a pressured consumer at the low and middle end and a consumer who's balancing more expensive needs.

It still wants other items.

General merchandise.

Non-food has been a little bit bumpier, but keep in mind, Walmart is the country's leading grocer and over 50% of the revenue is related to food.

So it's a bit mixed bottom line.

A consumer is under pressure.

So there continues to be boss optimism in terms of the rewards programs that are out there, Oliver, I mean, Walmart offering its rewards program for members.

You've got Amazon that they're going up against as well with their very noted prime membership.

And then of course other entrance into the space, whether that be the behemoths that are kind of the legacy um buy in bulk of bjs and Costco.

But then you know, the there's also target, of course out there.

So all of these things considered, where is the best bang for a consumer's buck when it does come to some of these membership programs?

Yeah, what customers love about Walmart plus is Gas and Walmart Plus is this entire ecosystem of delivery specials as well as paramount and media.

And Walmart is a big part of Americans lives just given the sheer footprint of 4000 stores, 90% of the US is within 10 miles of a Walmart.

So it's a very trusted brand and Walmart Plus is a great momentum as we think about artificial intelligence technology, Walmart being a tech company, this membership model, the marketplace model and digital advertising.

All of these really work together rather the other marketplace in terms of membership model that we really like is Costco and Costco in many ways is a not even a retailer.

It's a membership club where most of the profits are due to that fee.

So we see this evolving but it will increase in competition and it's very hard these programs need to have multifaceted value.

Oliver, what about the ability here to retain some of the new customers that Walmart has won over over the last couple of quarters?

Are you confident they will be able to do that and why?

Why not?

Yeah, Shaw.

And we're excited about that higher household income customers have been coming to Walmart in part because of the convenience, the speed and the customer satisfaction.

So enabling marketplace having products like apple fragrances like burberry goddess uh that really elevates Walmart as a whole.

And then having curbside pick up, you don't have to go in the store.

Adding convenience has been a big factor uh as well as being clean, fast and friendly.

So executing on both and all consumers appreciate low prices.

So this whole ecosystem is working and when you do experience curbside, pick up your net promoter scores are high, you recommend it to others and you do come back Oliver.

I I mean, you're a very fashionable person.

We talk about this all the time, we see it all the time as well.

Here, you've seen more of these collaborations between companies like like Target and Diane Von Furstenberg and uh making sure that they're kind of showing that higher end consumer as well that hey, those same brands, the same manufacturers or, or fashion houses, we have the ability to partner with them too.

What does that look like for some of the Walmart's?

The Targets of the world.

And in order to make sure that they are to Shawna's point, retaining that higher end consumer, even after we see a much rosier macroeconomic scenario and Walmart's making big strides in apparel.

The problem is, uh, Walmart does a great job with basics such as underwear and basic apparel.

The opportunity is for Walmart to be more like a lifestyle brand and apparel and expanded the dresses amplify their presence and depth and trade the customer up.

We we see a lot of innovation in the new store remodels as well as brands that are adding to their portfolio as well as private label.

So looking ahead, that should be really exciting.

We also see what we say is customized moderation, meaning customers are both scrumping and splurging trading up and trading down.

So today's customer goes high goes low in a, in a really unique way and everybody wants to look good and fashionable and you can do that at a very good price.

And the other category we've always loved is beauty.

Uh Our favorite ideas are Ulta and Elf and and beauty is about investing in your face and body and wellness and essentials.

Uh Walmart and Target have big opportunities there as well.

So overall, we're excited about the journey ahead and Walmart, as you think about it more broadly social media short form video um using some having their own movie during Christmas time.

Well, this will continue to build Walmart as a lifestyle brand as well for younger customers as well.

I mean, is that, is that movie during Christmas time?

More Hallmark Channel or is it more, you know, uh, uh, box office type of picture?

Uh, they're all of it.

I think that's the question that a lot of potential viewers wanna know.

Yeah, I think they've struck a really good balance and it's exciting.

Um, Lindsay Lohan mean girls, some great commercials, some great um rethinking about, you know, how they position the brand.

Uh That's fun, fast, friendly, convenient tech enabled.

Um All these factors, you know, are something Walmart's considering as it continues to modernize, it still offer just great prices, great grocery, great execution and balancing this, you know, as the customers evolve at large, Oliver Chen TD cow and senior research analyst, Oliver, always a pleasure to see you and get some of your insights.

Thanks for taking the time.

My pleasure.

Thank you.

We've got all your markets action ahead.

Stay tuned.

You're watching the morning brief April CP I print showing that inflation eased last month but prices are still holding at elevated levels.

Shelter and gas were two areas where prices remain sticky.

Join us as we impact the details of April CP I print hunting President Biden recently announcing expanded tariffs on Chinese imports.

These include a 100% tariff on EVs a 50% tariff on solar products and a 25% tariff on Chinese steel and aluminum.

Here's the latest on these tariffs and how China is expected to respond.

Do they want that in there?

Because China could respond at any moment and then that's gonna be dated.

Let's can I I just record that again and not, it shouldn't have how tr is expected to respond?

Sorry.

Ok. You guys ready?

One second.

President Biden recently announcing expanded tariffs on Chinese imports.

These include a 100% tariff on EVs a 50 per percent tariff.

Now I can't talk.

Ok. President Biden recently announcing expanded tariffs on Chinese imports.

These include a 100% tariff on EVs a 50% tariff on solar products and a 25% tariff on Chinese steel and aluminum.

Here's the latest on these tariffs.

How many times did I just say tariffs and tariffs?

All right, it's gonna be dramatic here guys, here we go.

Meme stocks made their presence known once again in May triggering comparison to the frenzy in 2021 Gamestop shares.

GME surging by 50% in just one day.

We examine the social media post that sparked the surge and explore the role of the retail trader in the investment landscape.

I messed up the last the second to last word, but I think it should be ok. Would I say investing, invest?

We're wrapping up Q one earnings season in the next couple of weeks.

So we still got some time here.

But according to fact that more than 90% of S and P 500 companies have reported the uh quartered re reported quarterly results, 78% posting profit beats here.

And Goldman Sachs Equity strategist, David Costin says he's noticed three themes that have dominated earnings calls A I, the US, consumer and cost controls.

Now, starting with A I. Costin's team says 1% of S and P 500 companies discussed A I artificial intelligence on calls versus 23% a year earlier.

And of course, we know consumers and cost controls.

Cost control is interesting because that can go one way or the other.

That can mean that you hear from companies saying that they're going to be pulling back on spending in certain areas of the business maybe operationally in order to reinvest in other large areas where they see demand boon uh being a boon to their business.

And I, I think about meta platforms and how that company sure they, they had a solid quarter.

But at the same time, they announced a major kind of wave of investing that they're anticipating coming forward from here on their generative A I ambitions as well here.

Yeah.

And exactly what Goldman is saying within this note, they're saying that firms this quarter have emphasized the actions that they've taken to manage those expenses and to keep costs under control.

And that is a theme that they expect to continue here for as long as this uncertainty remains over the timing and the magnitude of policy easing.

So that is a theme that maybe they are expecting here to hold in the current quarter.

I also want to go back to what you led with there and that was what we're hearing about A I and what stuck out to me was where the A I where A I is being mentioned in terms of that sector breakdown in energy, seeing the largest increase in the proportion of companies that are discussing A I.

And to put that even more specific here for the audience, nearly 70% of the S and P 500 energy companies have mentioned A I on their earnings calls and that's versus just 19% last quarter.

So as the discussion starts to shift to the energy transition to the role that the energy companies are going to play and to support those A I demands, we are starting to see that become more of a focus here for investment.

And as a result, we are also seeing it uh become more of a focus for executives as they are trying to win over.

The fact with, with uh with analysts, with investors that they are at the forefront of this transition and that they are well positioned to capitalize on this going forward.

We didn't even talk about the consumer uh relatively consistent is what the CFO of Walmart says.

Sums it all up.

There we go.

All right, Madison Mill.

Is joining me for the next hour.

I'm catalyst.

We will be right back.