TECH-HEAVY: Big Disney data to drop; Why the APPL never falls far from the Buffett

Despite themselves, Wall Street stocks rallied on Friday.

And despite this, both the Dow (down 1.25% for the week) and the S&P 500 (down 0.9% for the week) went home for the weekend to mull over what was their worst Monday to Friday performance since March.

Much to blame for the gregarious end to the week was the much-better-than-expected quarterly earnings report from Apple (AAPL).

Blood pressures remain stubbornly high for believers in the mega-cap tech stocks. Messrs Apple (AAPL), Microsoft (MSFT), Intel (INTC) and IBM (IBM), were all guilty of leading the Friday surge. While blame should also be apportioned in liberal doses to the Federal Reserve and the pall of finality that has followed Wednesday’s 25 basis-point interest rate hike.

That decision was received with the certainty that the central bank has hit the peak of the cycle. In stark contrast to the RBA’s decision which has left many Aussie traders feeling more uncertain than ever.

On Wall Street hopes are (as usual) ridiculously high that we’re done with all this nauseating volatility which has scattered stocks to and fro across a directionless and convictionless market.

From the cheap seats it’s all looks a bit too much like the heroes going home for tea after whacking The Terminator one or twice with a pillow.

The tech-heavy Nasdaq Composite rose 2.25%, adding 275.55 points to close at 12,235.40.

The Dow Jones Industrial Average and The S&P 500 both stormed home, ignoring a good jobs read (which is bad), ending up +1.7% and almost 1.9% a piece.

The headline tech plays with strong earnings reports led trade, with the tech giants aided and abetted by the headline healthcare majors, a staple in any defensive diet – Messrs Amgen (AMGN), UnitedHealth (UNH), and Johnson & Johnson (JNJ) also buoyed trade.

More terrific biff over at the Buffett

Meanwhile in Omaha… Berkshire Hathaway’s Class B stock added another of the very many 1%s it’s accumulated over the lifetime of its oracle and founder, Warren Buffett. The giant heaving conglomerate of the world’s greatest investor and possibly person, reported first-quarter earnings on Sunday morning our time.

Berkshire’s operating earnings were up more than 12% YoY, thanks in no small part to the giant’s mega position in Apple stock.

Its overall earnings, which include short-term investment returns, practically opened the Gates of Heaven and inspected God’s latest dentistry while the Sweet Lord of all Existence slumbered quietly on a nearby cloud.

Berkshire earnings for the same period eclipsed US$35 billion, up nicely from the already market crushing US$5.6 billion a year earlier.

In more genius musings, the Oracle of Uncertainty told shareholders:

“Nothing is sure tomorrow, nothing is sure next year, and nothing is ever sure, either in markets or in business forecasts, or in anything else.” 

Conventional finance upside down?

The T-bill yield has soared in the last week, looking comfy at 5.55%, which is its bestest since January 2001, when the Fed  was slashing interest rates  as the dotcom bubble burst.

The US Treasury Secretary Janet Yellen said earlier last week that cash for the US government could dry up as soon as June 1, with Democrats and Republicans currently at an impasse.

Elon Watch

As the FT enjoyed reporting over the weekend, Elon and his ex-buddy Jack D… The Kings of Silicon Valley, are having a very public hate-in.

The FT pointedly asks: “Can the new social media platforms Dorsey is championing live up to the hype?”

Meanwhile. Lithium…

Increasing lithium refining capacity is critical to a sustainable energy economy — today, we’re breaking ground on our in-house lithium refinery outside of Corpus Christi, TX.

This facility will also prioritize the elimination of a challenging refinery byproduct (sodium sulfate).… pic.twitter.com/mBnDBLNrW7

— Tesla (@Tesla) May 8, 2023

The week ahead

And despite these funky animal sprits clearly at play in New York, US stocks barely moved a muscle in Monday business. Wall Street traders will be treading lightly ahead of some key economic data later in the week, and with more talk of a recession spurred on by wonky banks, the incentive for risk looks a little thinner.

Useful indictaors will drop in the form of quarterly earnings reports from a near perfect cross section of what makes the US economy tick.

PayPal is up (PYPL). So is Airbnb (ABNB). Fox (FOX) is too.

So is a Ron de Santis reinvigorated Walt Disney-on-a-war-footing all of which will offer some fab diagnostic data on the rude health of the wider US economy.

Being big fans of inflation, traders will be looking for cues when the US Bureau of Labor Statistics drops a consumer price index for April.

Wall Street is also monitoring the umpteenth blue over the US debt ceiling, which remains handily unresolved. It’s a mugs game knowing what these American politicians will do, but it’s worth remembering that if the US government defaults on its debt, it would send trample Treasury bond prices and squeeze yields skyward.

At the Fed’s rate decision last Wednesday, Chair J. Powell warned his people were unlikely to be able to do anything but watch if  the federal debt ceiling wasn’t raised in time.

The US dollar would cop a kicking, it threatens the US credit rating and puts a giant question mark over US financial assets from corporate bonds to garden variety equities. Just worth pointing out.

Key US Economic data
Monday May 8 – Friday May 12

TUESDAY

China trade data (April): exports to rise by 11% compared to 14.8% in March.

WEDNESDAY

US CPI (April): prices expected to have risen 4.9% YoY from 5%, and fall 0.2% from a 0.4% rise MoM.

Core CPI to be 5.6% YoY and 0.5% MoM, from 5.6% and 0.4% respectively.

EIA crude oil inventories (w/e 5 May): stockpiles fell by 1.3 million barrels in the preceding week.

THURSDAY
China CPI (April): prices to rise 0.9% YoY and 0.1% MoM, from 0.7% and -0.3%.

BoE rate decision: rates expected to rise to 4.5%, though signs of dissent could indicate a resistance to further rate increases.

US initial jobless claims (w/e 6 May)

US PPI (April): prices expected to have fallen 0.1% MoM, claims to rise to 248K.

FRIDAY

US GDP (Q1, preliminary): growth expected to have been 0.1% QoQ and -0.5% YoY.

US Michigan consumer sentiment (May): expected to fall to 63.

US earnings highlights

Monday May 8 – Friday May 12

Here’s some of the Wall Street plays we think are worth watching.

TUESDAY
Airbnb (ABNB), Fox (FOX), Coupang (CPNG), Nikola (NKLA).

WEDNESDAY
Disney (DIS), Trade Desk (TTD), Roblox (RBLX), Unity Software (U).

THURSDAY
JD.com (JD), US Foods (USFD), News Corporation (NWS).

FRIDAY
Spectrum Brands (SPB), Soho House (SHCO).

A Q2 2023 earnings eye on …The Walt Disney Co (DIS)

So with returning CEO Bob Iger back at the helm, the entertainment megalith reports Q2 fiscal results on Wednesday, finally giving Wall Street the answer on what’s happened to the stock magic at the magic factory. While the share price of the movie mouse has found about 15% year to date, there’s a long way to go to come good on the 45% it lost last year.

That was Disney’s worst performance since the release of Herbie Rides Again in 1974. Which explains some.

The company’s silly stoush with Trump wannabe, the Florida Gov. Ron DeSantis, continues happily sucking up oxygen, with a lawsuit and counter-one already filed.

Also, in further madness, Disney didn’t renew its IPL India cricket broadcasting rights.

While the streaming platform Disney+, has done good, the upbeat subscriber results over at Netflix (NFLX) put a question on if Disney can achieve its targeted Disney+ global subscriber gains to be between US$230 million and US$260 million by the end of 2024.

Netflix’s surprise Q1 and some decent upcoming releases has inspired hopes Disney+ could remain a reliable growth opportunity for shareholders in the near to mid-term.

DIS consensus estimates for Q2:

• Revenue of US$21.8bn for the quarter

• Revenue to have increased 7.54% (from the prior year’s comparative period)

• Earnings per share (EPS) US$0.99 (vs earnings per share of US$1.08 in the prior year’ comparative period)

• Theme Park revenue is up almost 30% in 2023

Via Refinitiv