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Stock Market Today: Dow Jones, S&P 500 Rebounds After Lowest Closing Since March 2021; Upstart Tumbles After Cutting Outlook

Markets opened higher today after breaking a three-session losing streak.
The post Stock Market Today: Dow Jones, S&P 500 Rebounds After Lowest Closing…

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Stock Market Today Mid-Morning Updates

On Tuesday, the Dow Jones Industrial Average is up by 350 points after retreating for the last 3 sessions. All major indexes were green today despite continued fears of rising inflation. Also, rising interest rates continue to weigh in on investors. Vladimir Putin has reportedly lost his 40th colonel. Earlier, President Joe Biden said he is concerned that Putin no longer has an exit strategy from his war in Ukraine after the Russian president led Victory Day celebrations in Moscow.

Biohaven Pharmaceutical (NYSE: BHVN) is up by over 70% today after the company agreed to be acquired by Pfizer (NYSE: PFE). The deal will be worth approximately $11.6 billion and Biohaven shareholders will receive $148.50 per share in cash. Shares of Novavax (NASDAQ: NVAX) are down by over 12% today after the company missed both top and bottom-line estimates in its latest quarter. The miss comes as Novavax shipped just 31 million coronavirus vaccine doses during the quarter, well off its projected 2 billion shots for 2022.

Among the Dow Jones leaders, shares of Apple are up by 2.81% today while Microsoft (NASDAQ: MSFT) is also up by 3.27%. Meanwhile, Disney (NYSE: DIS) and Nike (NYSE: NKE) are trading higher on Tuesday. Among the Dow financial leaders, Visa (NYSE: V) is up by 0.81% while JPMorgan Chase (NYSE: JPM) is also up by 0.08%.

Shares of EV leader Tesla (NASDAQ: TSLA) are up by 2.95% on Tuesday. Rival EV companies like Rivian (NASDAQ: RIVN) are also up by 2.94%. Lucid Group (NASDAQ: LCID) is also up by 2.48% today. Chinese EV leaders like Nio (NYSE: NIO) and Xpeng Motors (NYSE: XPEV) are trading higher today. 

Dow Jones Today: U.S. Treasury Yields and Oil Prices Drop

Following the stock market opening on Tuesday, the S&P 500, Dow, and Nasdaq are trading higher at 1.41%, 0.96%, and 2.12%. Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (NASDAQ: QQQ) is up by 2.30% while the SPDR S&P 500 ETF (NYSEARCA: SPY) is also up by 1.40%. 

The benchmark 10-year U.S. Treasury yield dropped below 3% today after rising over the last week to new pandemic-era highs as bond traders bet that the Federal Reserve will not be able to get inflation under control. Investors will also be able to look forward to two key inflation reports that will be out on Wednesday and Thursday. Joe Biden will also deliver remarks on inflation today.

Bitcoin Sees Slight Rebound After Sliding Below $30,000; El Salvador Doubles Down On Bitcoin Investments

Bitcoin (BTC) is in the news more today thanks to more bouts of volatility. Notably, this is likely the result of the cryptocurrency diving under the $30,000 per coin mark late on Monday. While moves such as this are common for Bitcoin, it would mark an alarming point for crypto traders. This would be the case seeing as it is the leading crypto component in the digital currency space today. By dipping past the $30,000 point, Bitcoin was at lows last seen in July 2021. For some perspective, this is over 55% since its all-time high back in November 2021. After taking all this into consideration, it would be all that surprising to see Bitcoin making the rounds in today’s news cycle.

Regardless, as with most dips in significant markets, there are some who see a buying opportunity. In the case of Bitcoin, this would be the country of El Salvador. Namely, the country has added an additional 500 bitcoins to its national balance sheet, marking its largest purchase to date. This news comes directly from El Salvador President Nayib Bukele via a post on his Twitter (NYSE: TWTR) account. With this purchase, the country’s total Bitcoin reserve now stands at 2,301. In detail, this translates to total assets worth about $71.7 million. 

[Read More] Top Stock Market News For Today May 10, 2022 

Upstart Stock Nosedives After Company Issues Downbeat Quarterly And Full-Year Revenue Guidance

Upstart (NASDAQ: UPST) seems to be standing out amongst the most active stocks in the stock market today. This would be for negative reasons, however, as the artificial intelligence (AI) powered digital lending firm is seeing massive losses at today’s opening bell. To be precise, UPST stock is now down by over 50% today. By and large, this is likely a result of the company’s latest outlooks for the current quarter and fiscal year. Before getting into that, let’s take a look at Upstart’s latest quarterly financials.

Going into the specifics, Upstart is looking at earnings of $0.61 per share on revenue of $310 million. This would top consensus Wall Street estimates of $0.53 and $300 million respectively. Also, the company also facilitated 465,537 loans across its platform totaling $4.5 billion. This would be in comparison to the 495,205 loans adding up to $4.1 billion across its platform in the previous quarter. It seems that Upstart is seeing an increase in loan values albeit with a decrease in total loan count. 

More importantly, investors are likely focusing on Upstart’s latest quarterly and full-year revenue outlooks. For starters, the company is expecting revenue of between $295 million to $305 million. This would fall short of consensus analyst projections of $334.8 million. Additionally, Upstart’s full-year guidance of about $1.25 billion is also short of Wall Street estimates of $1.40 billion. Despite all this, CEO Dave Girouard notes, “While this year is shaping up to be a challenging one for the economy, we know the drill and are confident that we can navigate whatever 2022 and beyond might hold.” Safe to say, there will be no shortage of coverage on UPST stock today.

UPST stock
Source: TradingView

[Read More] Best Stocks To Invest In 2022? 4 Software Stocks For Your List

Peloton Stock Slides Following Wider-Than-Expected Losses And Revenue Miss

Similar to Upstart, Peloton (NASDAQ: PTON) appears to be another casualty during this rocky earnings season. For the most part, a combination of growing warehouse inventory and diminishing consumer demand appears to be weighing on the firm. After all, as we transition towards learning to live with the pandemic, more people are out and about than ever. Accordingly, this would lead to fewer people needing to rely on Peloton’s exercise bikes to get in their daily exercise. In fact, even existing Peloton members would see less reason behind paying for their subscriptions. With all this in mind, it is no wonder that PTON stock is looking at losses of over 14% at today’s opening bell. 

Overall, Peloton is looking at a loss per share of $2.27 on revenue of $964.3 million. For reference, this is versus Wall Street projections of an $0.83 per share loss and $972.9 million in revenue. Upon missing these marks, it is increasingly apparent that Peloton is under pressure. To better navigate its current business conditions, Peloton is borrowing $750 million via a five-year term debt from JPMorgan (NYSE: JPM) and Goldman Sachs (NYSE: GS). According to CEO Barry McCarthy, this capital infusion will serve to help Peloton to free cash flow positive by fiscal 2023. While time will tell if it can pull this off, PTON stock remains in the hot spot today.

PTON stock
Source: TradingView

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The post Stock Market Today: Dow Jones, S&P 500 Rebounds After Lowest Closing Since March 2021; Upstart Tumbles After Cutting Outlook appeared first on Stock Market News, Quotes, Charts and Financial Information | StockMarket.com.

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Zillow Case-Shiller Forecast for May: Slowing House Price Growth

The Case-Shiller house price indexes for April were released this week. The “April” report is a 3-month average including February, March and April closings.  So, this included price increases when mortgage rates were significantly lower than today. Th…

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The Case-Shiller house price indexes for April were released this week. The "April" report is a 3-month average including February, March and April closings.  So, this included price increases when mortgage rates were significantly lower than today. This report includes some homes with contracts signed last December (that closed in February)!

Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow Research: April 2022 Case-Shiller Results & Forecast: Putting on the Brakes
With rates continuing their steep ascent and inventory picking up in months since, April is likely the first month of this deceleration as buyers balked at the cost of purchasing a home and pulled out of the market, leading to slower price growth. While inventory is improving, there is still plenty of room to go before it reaches its pre-pandemic trend. Still, coupled with relatively strong demand, that will continue to be a driver for sustained high prices even as sales volume is dropping in response to affordability constraints. As a result, more buyers will take a step to the sidelines in the coming months, which will help inventory to recover and price growth to slow from its peak, leading the market back to a more balanced stable state in the long run and providing more future opportunities for homeownership for those priced out today.

Annual home price growth as reported by Case-Shiller are expected to slow in all three indices. Monthly appreciation in May is expected to decelerate from April in both city indices, and hold in the national index. S&P Dow Jones Indices is expected to release data for the May S&P CoreLogic Case-Shiller Indices on Tuesday, July 26.
emphasis added
The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be 19.5% in May. This is slightly slower than in February, March and April, but still very strong YoY growth.

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Airline stocks have been beset by external problems but could now be a good time to invest in a sector many think is in crisis?

It’s fair to say it has been a tough couple of years for the commercial aviation sector and investors in airline stocks. In 2019 the sector enjoyed record…

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It’s fair to say it has been a tough couple of years for the commercial aviation sector and investors in airline stocks. In 2019 the sector enjoyed record passenger numbers and 2020 was expected to be better yet. Low cost airlines were expanding aggressively, as they had been for years, and national carriers, in response, had made strides in cutting costs and introducing other efficiencies.

Then the Covid-19 pandemic struck, devastating the sector. Over the early part of the pandemic when international travel was severely restricted, airlines operated skeleton schedules. Severely reduced capacity, and schedules regularly interrupted by new lockdowns and shifting government policies bedevilled the sector for the next two years.

Even over the past few months which have seen most pandemic-related travel restrictions drop, a spate of new problems has hampered the sector’s recovery. Staff shortages, the result of a combination of the continuing need for those that become infected with Covid-19 to isolate and a tight labour market, have been a major headache. London-listed easyJet recently cut its capacity forecasts as a result of staffing issues.

And last week over 700 Heathrow airport staff voted to strike over the peak summer period, which promises chaos, and hundreds of cancelled flights, if an agreement can’t be reached over pay in the meanwhile. Staff at three Spanish airports are also calling for industrial action this summer and strikes are a threat elsewhere around Europe’s favourite holiday destinations.

Sky high fuel costs will also put pressure on margins this summer and potentially well into next year and a growing cost of living crisis sparked by inflation levels at 40-year highs will not help demand.

Airline share prices have predictably slumped since the onset of the pandemic. EasyJet’s valuation is down over 50% in the past year and over 75% since summer 2018. Its shares haven’t been worth as little as they currently are since early January 2012.

easyjet plc

Hope on the horizon?

But despite the fact the immediate future still looks tough for airlines, there are a number of reasons why investors might consider dipping into their stocks now or in the months ahead.

The first is that the bulk of the problems that have crushed airline valuations over the past couple of years have been external factors outwith control and unrelated to the underlying quality of companies. They are also all problems that are expected to be temporary and will ease in future. Covid-19 restrictions are, with the notable exception of China, no longer a big issue and hopefully won’t return. And even China recently reduced its mandatory quarantine period for anyone arriving in the country from two weeks to seven days.

That’s still problematic but a sign that an end to the dark cloud of the pandemic may finally be in sight. Most airlines were forced to either take on significant new debt or raise cash through equity issues that diluted existing shareholders, or through mechanisms such as selling and leasing back aircraft.

It will take time for that gearing to be unwound and balance sheets brought back to health. But the sector will eventually recover from the pandemic which should see higher valuations return, providing a buying opportunity at current depressed levels.

Airlines that have come out of the pandemic in the strongest positions will also likely gain market share from weaker rivals, improving their future prospects. British Airways owner IAG, for example, currently has access to more than £10 billion in cash after raising capital to cover losses over the pandemic. EasyJet has access to £4.4 billion. That means both should be well placed to cover any continuing short term losses until passenger numbers return to 2019 levels and push their advantage over less well-capitalised rivals.

Both IAG and easyJet have also seen their passenger capacity improve significantly in recent months. Over the all-important summer quarter to September, the latter expects its passenger capacity to reach 90% of 2019 levels despite the ongoing operational challenges. IAG expects to return to 90% of 2019 capacity over the last quarter of the year.

A full recovery to 2019 levels is possible by next year even if higher costs are likely to mean ticket price increases are inevitable. That does pose a risk for near-term leisure travel demand but there is confidence that remaining pent-up demand from the pandemic period will help soften the impact on discretionary spending on international travel that might have otherwise been more pronounced. Western consumers have also, the pandemic period apart, become so accustomed to taking foreign holidays that some analysts now question if they should still be considered discretionary spending rather than a staple.

Despite the transient and external nature of the problems that have hit easyJet’s valuation, not all analysts are convinced the current share price offers good value even despite its depressed level. They still look relatively expensive given the risks still facing the sector at a forward price-to-earnings ratio of close to x160.

iag

IAG could offer better value, currently trading at a price-to-earnings ratio of just x5.8 for next year. It is also expected to reverse return to a healthy profit by 2023. The company also has exposure to the budget airline market through Vueling and Aer Lingus and while it abandoned its move to take over Air Europa late last year it shows it has ambitions to further expand in this area. And it has plenty of capital available to it to make major acquisitions that could fuel growth when the sector recovers.

IAG’s cheap valuation does reflect the risks it faces over the next couple of years but for investors willing to take on a little more risk the potential upside looks attractive.

A dollar-denominated airline stock play

On the other side of the Atlantic, American airlines also suffered during the pandemic but are now recovering strongly. For British investors, dollar-denominated U.S. stocks also offer the attraction of potential gains in pound sterling terms as a result of a strengthening U.S. dollar. The Fed’s more aggressive raising of interest rates compared to the ECB or Bank of England is boosting the dollar against the pound and euro and it is also benefitting from its safe haven status during a period of economic stress.

One U.S. airline that looks particularly interesting right new is Southwest Airlines, the world’s largest low cost carrier. The USA’s domestic travel market has recovered so strongly this year that Southwest expects its Q2 revenues to be 10% higher than those over the same three months in 2019. It’s already profitable again and earnings per share are forecast to come in at $2.67 for 2022 and then leap to $3.84 in 2023. It’s a much more profitable operator than easyHet.

It also, unusually for an American airline, hedges a lot of its oil. That’s expected to see it achieve much better operating margins this year, predicted to reach 15.5% in Q2,  than other airlines being hit by much higher fuel costs. The company isn’t immune to the risk of the impact the inflationary squeeze could have on leisure travel but is seen as one of the most resilient airlines in the sector. It could be a better bet than either of its two London-listed peers.

The post Airline stocks have been beset by external problems but could now be a good time to invest in a sector many think is in crisis? first appeared on Trading and Investment News.

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Falling VIX Spells BIG Trouble For The Bears

If there’s one thing that a bear market – secular or cyclical – feeds on, it’s fear. The further the drop, the bigger the spike we see in the Volatility…

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If there's one thing that a bear market - secular or cyclical - feeds on, it's fear. The further the drop, the bigger the spike we see in the Volatility Index ($VIX). From the CBOE.com website, the VIX "measures the level of expected volatility of the S&P 500 Index over the next 30 days that is implied in the bid/ask quotations of S&P options. Thus, the VIX is a forward-looking measure..." So let's be clear about this. The VIX does NOT measure what's happening now or what just happened last week. Instead, it looks forward to determine expected volatility. High volatility is generally associated with falling equity prices and low volatility typically accompanies rising equity prices.

As fear dissipates, expected volatility drops, and bear markets end. That's the historical formula. Let's start off by looking back to the financial crisis in 2008 and how the spiking VIX unfolded:

The VIX topped in October 2008 and though the S&P 500 hit two lower price points, the bear market ran out of sellers as fear came tumbling down in late 2008 and into the first quarter of 2009.

During the market turbulence in 2014-2016, we saw a somewhat similar pattern:

Q4 2018 was a very short cyclical bear market (less than 3 months), as was the pandemic-led selling in March 2020 (4 weeks), so there really wasn't much time to evaluate the VIX at various low points, but currently we're seeing a similar pattern in the cyclical bear market of 2022:

But the action on the VIX was really strange this week. The S&P 500 saw selling pressure once again, yet the VIX finished very close to a 3-week low. Check out this 1-month 30-minute chart:

From mid-day on Thursday through the early morning Friday, the S&P 500 fell from 3820 to 3750 and the VIX was dropping right along with it. That's extremely unusual behavior. The VIX is looking ahead and it's pricing in less volatility. That suggests that we're being given a signal of a rally ahead. That's the reason the VIX goes down. Less volatility means higher equity prices.

We're heading into a fresh quarterly earnings season and I'll be featuring one company that I believe is poised to make a big run into its quarterly earnings report later this month. To read about it in our next newsletter article, simply CLICK HERE and sign up for our FREE EB Digest newsletter. It only takes a name and email address. There is no credit card required and you may unsubscribe at any time.

Happy trading!

Tom



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