FedEx earnings, Cybertruck recall: Market Domination Overtime

On today's episode of Market Domination Overtime, hosts Julie Hyman and Josh Lipton analyze the market close and some of the biggest stories of the trading day.

The Dow Jones Industrial Average (^DJI) reversed course from its Monday gains, closing Tuesday's session lower by over 290 points. Meanwhile, the Nasdaq Composite (^IXIC) soared by 220 points.

Federal Reserve leaders spoke on Tuesday, outlining their thoughts on the current state of the economy. Pence Capital Management chief investment officer Dryden Pence signals the potential for one interest rate cut at the end of the year, explaining, "[The Fed] would like to pivot, but I think it continues to move to the right because you have this tremendous robustness of the American economy. I think what people have forgotten is we've added so many workers; we've added 6.1 million new people working in this country since the height of pre-pandemic. When you think about that, that's like adding the entire labor force of Illinois, and that's like adding the entire GDP of France, which is the seventh largest country in the world. And so we've grown France in the last four years."

FedEx (FDX) reported fourth quarter earnings that topped Wall Street expectations. The shipping giant reported adjusted earnings of $5.41 per share compared to the estimated $5.34. Pence points to a reacceleration in e-commerce and improved margins as tailwinds for the company.

On the autos front, shares of Rivian (RIVN) jumped after Volkswagen (VWAGY, VOW.DE) announced it would invest up to $5 billion as part of a joint venture. Meanwhile, Tesla (TSLA) is under pressure after announcing its fourth recall of the Cybertruck.

Finally, Julie Hyman and Josh Lipton break down what to watch on Wednesday, June 26, from Nvidia's (NVDA) shareholder meeting to Chipotle's (CMG) 50-for-1 stock split.

This post was written by Melanie Riehl

Video transcript

That's the closing bell on Wall Street and now it is market domination over time.

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

Let's start with where the major averages ended the day as we've been talking about another divergence between the Dow and the NASA, but they flipped, they switched places.

So the Dow down today about 296 points, about three quarters of 1%.

The S and P still hovering in the middle up about 4, 10 of 1%.

And then the NASA, the big winner of the day up about one and a quarter percent.

Now, another trend that we have been watching in recent days was a broadening of the moves.

Well, today, the S and P equal weight index is dramatically under performing the S and P 500 which leads us once again to believe that it is a number of the small, well, not the small, the very large, a small number of the very large growth mega caps that are helping lead the gains in today's session.

You see that in the NASDAQ 100 which is also outperforming on the day, you still see yields kind of hover around four and a quarter percent or so.

So that's something that is not creating any kind of obstacle for some of the gains that we're seeing, but just basically kind of a rebound move today.

Jared, you know, the tenure is interesting.

It's been consolidating over the last five days or so, hasn't moved much.

So it's just coiling for a move and that itself could be a catalyst.

But I've been told I have a minute here.

So I'd like to show you what the S and P 500 market cap versus equal weight has done here over the last few days.

And so the, the Cyan line up here, this is the equal weight and you can see it was uh soaring yesterday, but it took a dive today.

Meanwhile, the S and P 500 the regular way we calculate it market cap weighted just been trending down, although it is up a little bit today.

And you can also see uh an interesting dynamic in the NASDAQ versus the Dow dow is in the green here, NASDAQ is in the red.

And again, this is over five days.

So we'll have to see if anything comes of this.

But uh I'm gonna be talking in 30 minutes about uh kind of a change in leadership that we're seeing and maybe this will last, maybe it won't.

This is a NASDAQ 100 guess what?

All those doomsayers, those naysayers who thought the uh the market was going to zero nvidia up 6% today, meta, up 2% alphabet up 2%.

And when you look at the sector action, what a break from the days before communication services, that's up 1.14%.

And then XL K that's tech is up 1.8% and really nothing else is outperforming today.

So a real switcheroo in the market, real estate of materials, both down more than 1% utilities also down nearly 1%.

Josh Jared.

Thank you.

See, in about half an hour stocks closing the day next year as NVIDIA regained some of the losses from that three day losing streak.

Despite the brief sell off, our next guest continues to be favorable towards A I but has some concerns the back half of the year.

Let's welcome in Dryden Pence.

He is the IO for Pence capital management.

Dry.

Good to see you.

So here, you know, obviously one theme we've been talking about a lot Dryden is, is how yes, the the rally has been narrow and that should have been sort of hyper focused on this, trying to make sense of it.

You you say though dry leadership might change in the back half of the year.

So you see, possibly, maybe the baton getting handed off.

Why do you think that driving and, and who does the baton get handed to?

I think the the baton gets handed to a wide array of company.

But the reason why we see this in the back half of the year you've had this long period of time, we had a lot of the S and P inside the earnings recession, but kind of rolling recessions turn into rolling recoveries.

And as we get into this back half of the year, I think you're gonna begin to see earnings pick up, uh, in the 493 the broadening out of the rally.

And I think one of the key reasons for that is you, you now have had a year of 5.5% interest rates.

So corporate CFO S understand their cost of capital, they can plan better.

I mean, they've been preparing, they've been preparing and that's gonna finally show up in additional earnings because you now, you know, your cost of capital, you can predict your margins.

You're gonna see some margin expansion and these companies that, you know, the basic guys out there are gonna begin to get back on track and I think we're gonna see this margin expansion in the second half of the year, the 493 is gonna broaden out.

And I think that's what propels the company we love.

A I, we think we think all the parts of the chip supply chain are good, but when you think of leadership, they can only lead so far.

And, and so at this point, you think the rest of the market broadens out and moves forward.

Uh As we're gonna see, I think a lot of earnings surprises in the rest of the 493.

So it's not that those leaders are necessarily gonna come down.

It's more that everything else is gonna rise, maybe not to meet it because the growth has been pretty spectacular, but at least in that direction, right?

Because when, so when you think about the S and P around, you know, 22% you know, uh uh price per share and then the, but if you take a look at everything else, they're down about, you know, 17 and 18.

So there's some room for the rest of the 493 just to catch up and they don't even have to catch all the way up.

But if you just get, you know, you move from 18 to 21 on pe ratios.

Well, that's a, that's a pretty strong move for the rest of those companies.

So I think the, the, the leadership changes because it broadens out.

You got a lot more horses in the race now and drive.

We did get some fed speak today.

I get your thoughts.

We had Governor Michelle Bowman speaking said she's upside risks the inflation outlook.

We heard from Governor Lisa Cook said it would be appropriate to reduce rates at some point.

Uh thinks inflation improves gradually this year.

Any of that language surprise you dri what, what, what are your expectations for the FED this year?

Our expectation for the fed is, is you may get one at the very end of the year we've been in the camp that, that we're gonna be higher for longer for a while and, uh, you're gonna continue at some point.

They pivot but they'd like, they'd like to pivot.

But I think it continues to move to the right because you have this tremendous robustness of the American economy.

I think what people have forgotten is we've added so many workers, we've added 6.1 million new people working in this country since the height of prepa when you think about that, that's like adding the entire labor force of Illinois.

And that's like adding the, the entire GDP of France, which is the seventh largest country in the world.

And so we've grown France in the last four years.

That's a lot of money in the economy.

And so I think that continues to give a strong base.

And that's one reason why they're having a little hard time with getting inflation there.

You give American money, right?

What do they do?

They spend it, right.

And that kind of drives aggregate demand.

And I think that that's one of the, the key things that are, that are happening here.

So I think we just continue to shift, right, sooner or later they pivot uh a quarter of a point and then they're gonna kind of wait and see.

But I think that, you know, you get the, you can only get the inflation genie back in the bottle so many times, right?

The last thing they want to do is have it reignite.

So I have to take it back.

I have to take it back.

So I think, I think they're gonna prolong this out.

But, you know, since 1971 we've lived over half our lives for the fed funds rate over 4%.

It's not the end of the world.

Uh you know, and so I think that we can, we can kind of survive this for, for, for a while and continue to have a very robust economy.

Yeah, as people get used to it, I guess, um I wanna pause this conversation because we just got some numbers coming out from fedex.

Uh and in particular, the forecast is getting some attention here, the fiscal 2025 adjusted earnings per share, it is predicting will be at 20 to $22 a share.

21 right in the mid point there is above the 2085 that analysts had been anticipating.

You can see uh revenue coming in in line with estimates and adjusted earnings per share at 541.

A little bit ahead of what analysts had been anticipating.

The company also says for fiscal 2025 it is expecting buy back of up to $2.5 billion.

Worth of its shares.

So that also supportive of the shares and they are seeing a 9% gain here in uh just as we see the the first blush reaction to those numbers.

Um, also we, we got the statement here from, from the company as well.

Josh, what stands out to you?

Well, yeah, I mean, is it why, why you gotta look at fedex even more broadly?

You know, obviously we we are looking at as a kind of economic bellwether.

You know, people look at this as sort of a read on the consumer where they're at and kind of where, where they're headed.

I think guidance is a big focus.

I think also that the cost cutting efforts during obviously fedex has been working to get, you know, leaner and meaner.

Um the stock had not done a whole lot heading into the print.

I mean, it was basically flatten up single digits over the past 12 months, but at least initially nice, nice pop in the after hours.

Yeah, and I wanted to um I was wanted to focus on some comments also that Raj Suber mani and uh made he is the CEO of fedex.

He talked about making significant progress in fiscal 2024.

This is their last quarter of their fiscal year um and four consecutive quarters of expanding operating income and margin that he is uh highlighting in a challenging revenue environment.

Um And he also talked about the uh efforts to try to transform the company here and he says momentum is gonna continue in fiscal 2025.

Remember, um fedex has experienced some setback including losing the U SPS uh contract to UPS.

That was something that happened in the past year.

So, um this looks like a bit of a relief for investors up almost 10% here in the after hours drive.

Any, any um views takes on Fedex here or transports more broadly.

Well, we, we, we like fedex and it exists in, in some of our, our investment trusts and I think what you're seeing is two or three things going on here first.

This is again, that broadening out thing we just talked about because you're beginning to see that earnings or in real time, it's playing out in real time, which is a good thing.

And, but I, but I also think you're seeing AAA re acceleration of e commerce and I think that that's gonna help fedex all the way through as we, you know, ecommerce kind of peaked and COVID and then kind of came back down and now we're seeing a re aeration in, in the growth of that.

That's gonna be, uh, I think a creative to, to fedex, I, I like stock buybacks when A CFO thinks his company is worth a lot more than everybody else does.

He knows more about the company, anybody else.

So I think that all of those things are are positive, uh, you know, trends that we can see.

And I think that you're again, cost cutting, getting, you know, that whole margin expansion thing we're talking about.

So I think that this falls into, into that and, and that's, that's a, that's a favorable thing for us.

How long, you know fedex, talking about continuing to try to get costs in order, get new discipline here, not just for fedex, but more broadly for companies.

Where do you think we are in that cycle or do you think that that cost discipline is here to stay for a while?

I think cost is, you know, back when we had peaking inflation, whether you needed to raise your prices or not, you did, you had a wonderful excuse, right.

So, so everybody was able to raise their prices, but then they needed to come in behind that and actually get, impose some discipline.

And so I think cost cutting is now gonna get very important to people.

They can, they raise their prices almost as much as they can.

You're seeing some or push back on that.

So now if you wanna expand your margins, you've got to have some discipline, you now know what your cost of capital is.

The next move there is down.

Now let's get our operations straight and let's try to fix.

So I think Fedex is, is recognizing that and playing right into, into that.

So, you know, going through this quarter next quarter and next quarter, I think they're, they're, you know, headed in the right direction.

But I think you're gonna see more and more companies coming out and say we're gonna impose some discipline here.

And I mentioned, right.

I mean, people, you know, folks do, like, still do look to fedex as a kind of bellwether kind of the macro the consumer.

Do you use it for, for that as well?

Does it, do you think it gives you a read a broader read?

It?

It does, it, it does and fedex is almost a verb.

I mean that, you know, you, you, you, you, you, you say I'm gonna fedex it to you even though you may use a different, a different carrier.

And so I think, you know what, you, you wanna be a verb as a business, right?

You're, you're so ubiquitous out there.

But I think that, uh that I do think it is a bellwether because particularly on the ecommerce side.

Now you have to look at Amazon, you have to look at, at Fedex, you look at UPS and all of these things, but e commerce continues to grow dramatically as a part of, of, of our national pastime, which is Retail therapy.

Uh And so I think that we, that, that fedex is gonna be a great benefactor of that, but it's also a great read when you just look at at volume of package.

Yeah, I just want to mention a couple more details from the statement kind of to the themes that we're talking about.

Um in terms of cost cutting, the company is permanently retiring 22 of its Boeing 7 57 200 aircraft and seven related engines.

It says it's continuing to modernize the fleet, but obviously that also, you know, can help cut some costs.

The other thing that stood out to me is international yields did not perform well, but um, that us domestic package yields did perform better.

Which kind of speaks to what you're saying here, Dryden about maybe a little bit of pick up here in, in US demand.

I mean, the US economy is moving at a little bit different speed than the rest of the world.

And it's, and, and so we're kind of picking up a little faster, a little stronger and more robust.

I talked about all of the people working.

We've grown, we've grown France, right?

So I think that in, in, in that sense, all of this feeds through to a continued greater aggregate demand.

And that means the consumer is gonna shop more and if they're shopping more, they're shopping online.

And if you shop it online, it's gotta get to your door.

And I think all of those things feed right into this and, you know, fuel prices are a big deal.

So if you can retire your inefficient fleet for a more efficient fleet, that's probably gonna help that cost cutting thing we talked about right.

Yeah, definitely.

All right, Dryden.

Thanks so much.

Appreciate it.

Nice to see you in person coming up less than a year since its first delivery.

Tesla's cyber truck gets recalled for 1/4 time and investors focusing on one key stat from the announcement, we've got more market domination overtime coming up.

Rivian shares are surging after hours as it look gets a hefty investment from Volkswagen.

Here are the details of Yahoo finances, senior reporter, Pro Superman.

This happening just as you are basically just as you are walking to set.

Um this may this announcement made in a tweet or an or a post on X?

Right, right, with the CEO RJ scarring talking about how uh him and Oliver Bluman, the Ceo of Volkswagen sort of made a deal here to to create a joint venture, uh 1 billion in funding coming in uh to make this.

It's for electrics and electronics and software kind of platform stuff.

It's like kind of the backbone of some of the electric vehicles.

Uh it's gonna be sort of that's the joint venture.

Is this the this technology are gonna use across a number of of evs and it could be as much as $5 billion given uh the the progress of their, of their JJ V. So for Rian, you see the stock up, I mean, this is a huge move right there.

It's after hours right then during trading.

But um basically this is kind of kind of allay some concerns about.

Do, do they have enough money to kind of keep going to reach 2026 when they balling vehicles come out?

That was my question is whether you thought prize is sort of like changed, it helped to change the story, the narrative because there was a lot of questions about this company and we don't know, we don't know, it's the, the $1 billion a convertible offerings.

We don't know how much that's gonna be in terms of stock.

But, but right now you gotta say to yourself, they have the ability to have the backing of VW, one of the biggest auto companies in the world to kind of ex execute their vision, bring out those mass uh mass market vehicles in 2026 so that it's a big step in the right direction for RBE.

And I think that's why we're seeing the enthusiasm right now in the, in the stock uh big move for them and just for people who have not covered, followed this close.

They make this sort of premium electric uh pickup truck, which I personally think looks really cool when you see it out and about.

But the company came public in 2021 it's $78 a share.

And as we just saw they're trading e even with this big increase, they're trading around 15.

So they, the, the sort of lo I mean, listen almost everything that went public in 2021 has come down a lot but still the prospects for this company that were so lofty it has.

It's been a, had a harder time.

Yeah.

You know, um, at, at the depressed price levels as I was below, I believe, $10 at some point.

Um, you know, we're talking about the end of cash on hand and IP technology where it was sort of like even money there.

It was, you're paying, you're paying obviously the, the debts there.

That's the big problem.

But, um, you're absolutely right, Julie, I mean, the, the enthusiasm was, was insane at that point and it kind of came back to earth.

We kind of saw the fact that they were losing money on every vehicle that they sold.

Uh RJ Scarin said yesterday or, or in a Reuters report yesterday, they went to visit the factory and talked about how they had improved.

A lot of their cost cut, they simplified processes, cut them like 50 components from some of the vehicles.

They're making the vehicles cheaper.

That was a big positive.

They, we saw yesterday and then couple that with today's news.

Here we go.

We get this big pop.

All right, let's talk about something else going on in the auto space as well.

Tesla hitting another speed bump with the Cyber truck, uh, the EV Giant announcing its fourth recall on the vehicle.

We also got a little bit of numbers info.

Right.

Yeah.

So in a re recall, there's two recall notices today.

One for, uh, the large wiper blade that everyone knew would kind of be a bit problematic because it's the biggest wiper in any commercial vehicle.

It's huge.

Uh, some, there's an error, there's an issue with power surge issues with that could malfunction.

Also, a piece of trim could come off the back of the butt of the bed.

They need to reapply that.

But in the announcement, they talk about how 11,688 vehicles were affected.

Now, what this means is basically these are the amount of, of cyber trucks that are out in the wild that they, they've been sold or in transit to customers right now.

So what we know is that they've, they've created this many vehicles um since you know, December of last year, right.

So looking at back in the hand math, we're talking about around 1700 vehicles a month Tesla made on average.

Now, Musk said at the shareholder meeting this this past two weeks ago that Tesla reached a 1700 uh weekly production record on the cyber truck and on their way to 2500 a week, which it equates around 100 and 25,000 vehicles a year, which is where they kind of wanna be.

Big question is, are there enough people to buy these things right now?

I think that they're kind of like some fulfilling orders of people that have pre orders in.

Right.

So, yes, each one's getting sold.

That that's not a problem when they get to 1 25 200 vehicles a year, 200,000 vehicles a year.

Do they have that demand for that?

It's a good question.

Especially if they keep having to take them back to the dealer to get things fixed.

No, over air updates for a broken windshield wiper.

Yes.

No, can't do that.

All right, frost.

Thank you.

Appreciate it.

Well, after days of dangerously high temperatures across the Midwest and northeast millions are finally getting relief.

But those record high temps come in a big cost to the economy.

The Atlantic Council estimates that extreme heat costs the US GDP $100 billion annually.

That's a figure that could double by 2030 as climate change takes its toll.

I'm joined now by Nathaniel Cohan, a president at the Center for Climate and Energy Solutions.

That thanks a lot for being here.

So obviously it, it's on our minds when it's hot out in particular, but this is something that flares up increasingly here.

Um How are, what are the most acute sort of pain points when it comes to heat specifically and its economic effects?

Yeah.

Well, thanks very much for having me on.

And as you say, in much of the country, we're feeling a little bit cooler than we were a few days ago, but it was only a couple of days that we were a couple of days ago, we were setting heat records.

I uh my organization is based in Washington DC, hit 99 degrees a record high for late June.

Um And I think many of the parts of the country felt similar amounts of heat.

And as you say, it really does have an impact on the economy and that comes through a range of channels.

Think about uh first like agricultural production and crops, right?

When the heat gets too hot, that really can threaten agricultural productivity, it can undermine um farming and, and and farming productivity.

You think about um the cost of cooling that um that businesses have to spend on whether it's data centers uh increasingly or whether it's big box stores like Walmart, cooling their facilities or their warehouses, perhaps more surprising and more hidden really, the big impacts are around labor productivity.

You mentioned that site that study by Atlantic Council $100 billion a year.

Currently, they estimate just from the hotter days due to climate change.

With that doubling by the end of the decade, maybe reaching $500 billion or half a trillion within a few decades.

And that's just the labor productivity piece.

It is harder to be productive, it's harder to do good work when the, when the heat really climbs and then there is also heat related mortality in the US.

That's less of an issue.

It does happen in real bad heat waves, but globally that's a, a big impact, both in terms of human impacts, but also in terms of economic impacts, you add this all together and we're looking at, you know, maybe a percentage point or two of GDP within the coming decades.

That's a pretty big amount for just one aspect of the changing climate.

Yeah, and, and if, depending on the country, I'm sure that that is even more.

Um that's just for the US.

Right.

Exactly.

Um I have to uh to, to be pers on a personal note.

Nat um I commute via New Jersey Transit and I don't know if you've seen the headlines but both New Jersey an Amtrak have been affected by the heat because apparently old wires do not like hot weather and they sag and then the power goes out to all the trains.

So um do you feel that there is enough acknowledgment?

Let let's just focus on the infrastructure side for a moment, you know, what are we doing and how are we addressing in the US?

Um How are we heat proofing for lack of a better term sort of our logistics and infrastructure systems?

Well, you're, you're absolutely right to raise infrastructure.

That's another category and particularly when you think about transportation infrastructure, you mentioned New Jersey Transit, Amtrak, but also the grid infrastructure, which of course is related to that as well providing electricity to those trains.

We work at CTS we work with a lot of companies and I will tell you electric utilities, this is one of the top issues on their minds, especially if you get out west where the heat issues are high are more intense and there's also a bigger threat of wildfire.

So thinking about how we build resilient electric grids that can both be uh that can continue to perform and operate at higher temperatures.

The wires don't sag etcetera that, that don't present a risk of wildfire to surrounding areas.

You think about this is another area where really has struggled with maintaining the performance of its grid with really record record high temperatures.

So the short answer is we have to do much more to heat proof our infrastructure to build a more resilient grid and a more resilient economy.

And this is just one aspect of the way that climate change is really shaping our economy and requiring us to make real investments in adapting to it.

Well, now, I guess the question is, are we doing that right.

Are there examples that we see where the threat is being taken seriously?

And we are seeing those investments being made because it's already too late in a lot of situations.

But you know, I guess it's never too late because it's just still gonna continue to be hot.

Well, that's right.

So if you look first at the resilience, uh investments that we're making, so what are we doing to adapt to the changes we're already seeing.

You do see a lot happening at the corporate level.

I mentioned electric utilities.

You also have uh companies like Walmart thinking about how to do a better job cooling, their um their warehouses, their their stores, you have data centers, you know, utilities that are providing electricity, data centers and the companies that are running those data centers worrying a lot about cooling.

So companies are starting to take this seriously.

And what's interesting is when they make investments in their own resilience to climate, they often look to also invest in the resilience of their communities.

I think there's more that the federal government and the state governments can do.

We're starting to see that fema the Federal Emergency Management Administration is starting to look at the investments that need to be made to adapt to a climate, a changing climate across the board, including on heat.

But the last thing I do want to say is we also need to get at the issue at its source, right.

So we can we need to invest more in a more resilient grid, a more resilient economy, more options to keep people cool.

But we also need to cut the emissions of climate pollution that are really driving up temperatures in the first place.

And that's an area where we've made a lot of progress.

There's much more to be done.

So on both fronts, we need to both make the investments to make our economy more resilient, but also make the investments in a cleaner grid and a cleaner economy overall, that will cut the emissions that are causing the problem in the first place.

Well, here's the thing.

Nat, thank you so much, Nat Cohan.

Appreciate it.

Thanks very much for having me now.

Moving on to what to watch Wednesday, June 26 starting off with Nvidia's shareholder meeting that kicks off at 12 p.m. Eastern time stock breaking three straight sessions of losses today.

While analysts do not expect many new updates, NVIDIA could use the meeting of course to reiterate the strength in its A I advancements and moving over to the company initiating a 50 to 1 stock split that will take effect when the markets open on Wednesday.

The stock has since seen consistent growth skyrocketing more than 40% year to date and investors can also expect some earnings.

Miron General Mills, Levi Strauss and Blackberry all reporting micro announcing third quarter results at the close and I was expecting revenue and margins will increase throughout 2024.

And finally that on new home sales for the month of May coming out in the morning, economists forecast that number to increase to 640,000 giving us more into a tough housing market for home buyers.

Well, 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, it's asking for a trend.

Got you covered for the next half hour with the latest and greatest market moving stories.

So you can get ahead of the themes affecting your money.

Stay tuned.