Headwinds for airlines, pharmaceutical stocks slip: Morning Brief

On today's episode of Morning Brief, Hosts Seana Smith and Madison Mills break down the market open and some of the top stories of the trading day.

US stocks (DJI, IXIC, GSPC) opened Thursday's session mixed, with the Nasdaq Composite ready to recoup its losses from Wednesday's chip stock selloff. Shares of Taiwan Semiconductor Manufacturing Company (TSM) rose in early trading on Thursday after posting better-than-expected second quarter results and raising its full-year revenue growth outlook.

As Wall Street heads into the second half of the year, Annex Wealth Management chief economist and strategist Brian Jacobsen term anticipates market drivers to be "broken into two different parts" for late 2024: the Fed and the election. "Between now and September, it's likely more focused on the Fed. We will get distracted by politics, but really until we get closer to say end of September, beginning of October, when the polls are going to get a little bit more accurate, we think that those are just going to be like pockets of volatility," Jacobsen explains. "The 'Trump trade' came back in vogue with a vengeance over the last week or so. But that could kind of simmer down a little bit."

Peak summer travel is underway, and despite record travel, United Airlines (UAL) revealed mixed second quarter earnings results and disappointing third quarter earnings guidance. Alaska Air Group's (ALK) stock fell Thursday morning following its second quarter earnings, disclosing full-year profit forecasts also below expectations. TD Cowen vice president of equity research Tom Fitzgerald explains, "The game changed a lot... the cost convergence is just the ultra low-cost carriers, they're just at such a disadvantaged point competitive wise, and... think people coming out of the pandemic are much more willing to pay for a more pleasant onboard experience, to pay for a more reliable product, to earn loyalty or to earn miles in an airline where they can redeem to go to Europe or something versus just another low cost, leisure, no-frills carrier."

Pharmaceutical stocks are slipping Thursday as shares of Abbott Laboratories (ABT) dip despite the company raising its full-year profit forecast and revealing its medical-device segment saw sales 12% year-over-year in the second quarter. Similarly, shares of Swiss pharmaceutical giant Novartis (NVS) are falling despite raising its full-year profit guidance after topping second quarter earnings and revenue estimates.

Meanwhile, Morgan Stanley is out with a mix of retail calls. The firm's analyst team is bullish on Gap (GPS), upgrading the retail stock from Equal Weight to Overweight, explaining the stock offers "among the greatest fundamental recapture opportunities." On the other hand, Morgan Stanley downgraded Foot Locker (FL) to Underweight from Equal Weight and slashed its price target to $18 from $24 due to a weakening sales performance from Nike (NKE).

This post was written by Melanie Riehl

Video transcript

It's not am here in New York City.

I'm John Smith alongside in Madison Mills and this is Yahoo Finance is like to show the morning brief futures mixed this morning as text stocks looking to make a small come back from the NASDAQ worst day since 2022.

Better than expected earnings helping investor sentiment.

But the other big driver of markets right now, the great rate cut to debate will be speaking with Chicago Fed President often go be at 10 a.m. Eastern about the Feds path forward.

Let's get to it with things that you need to know for this Thursday morning, Yahoo Finance Jerry Alexander Canal and Rick Newman have more.

Big tech is looking to claw back Wednesday's losses after the NASDAQ composite suffered its biggest single day decline since 2022.

The sell off was sparked after a Bloomberg report claimed the Biden administration is molling plans to impose more sanctions on Chinese tech firms but a stronger than expected quarter from Taiwan Semiconductor looks to have steadied markets 30 minutes ahead of the plus and Netflix is set to kick off big tech earnings after the market closed today and the bar is already set high as shareholders praise the company for a live sports and live events.

The company has also benefited from raising prices on its a free subscription in an attempt to more more users to add supported here.

The stock is up more than 30% since the start of the year.

And Ohio Senator JD Vance formally accepted the vice presidential nomination at the Republican National Convention on Wednesday night.

Former President Donald Trump had tapped Vance as his running mate a few days prior in his address, Vance touted Trump's economic agenda and called out Wall Street for crashing the economy.

Trump is set to take the stage later tonight to accept the Republican nomination for president, providing a glimpse of what the economy could look like under Trump and Vance.

Let's take a look now at futures here, looking at a little bit of downward pressure across the major indices though, I think this might be what we were seeing yesterday in the broader market here.

If you take a look at what we're seeing in the future space earlier, we were seeing at least the dow moving to the downside here, the S and P and the NASDAQ recovering ever so slightly you can see here.

Thanks shot of the S and P up about 3/10 of a percent in your pre market trade here a little bit after the sell off that we saw yesterday, the NASDAQ closing down over 2.7% in one of its worst days in over 350 days.

So, really a tough day given some of the downward pressure that we saw, particularly in those chip stocks, but seeing a little bit of recovery, at least in the free market here.

Yeah, exactly.

And as you can see on your screen, this is actually where we closed the day yesterday.

So lots of red on the screen there.

You got NVIDIA off just around 6.5%.

But flipping over to the extended move and really what we are seeing here today and those are the smaller numbers up here on your screen.

And you can see we are seeing just a bit of a comeback, better than expected results from TS MC.

Really driving this morning's reaction.

You've got that sock up just around 3.5%.

You've got Broco up nearly 2% NVIDIA, which has been the market darling this year, we talk about it time and time again.

Yes.

Yesterday horrible day for NVIDIA, we have seen it on a bit.

They have roller coaster ride over the last several weeks.

But again, recouping some of yesterday's losses, at least half of yesterday's losses ahead of the Bell on track to at least up just around 3.3%.

So again, some trades to keep in mind when we flip over inside, uh the dow here and some of the Dow components Now we did note that the dow actually closed the day to the upside yesterday.

We are seeing lots of green on your screen.

Actually, it's a bit of a mixed picture here, but you do have Amazon Apple and Microsoft here moving to the upside.

So again, that la that larger cap tech trade back in favor, at least for now.

And I think what investors were really and what we were talking to tragedies about yesterday was whether or not the rally in Big Tech was over.

And that seemed to be more and more of the sentiment here, a growing consensus.

But again, when you look at moves like today and some of that clawback that we are starting to see, I think people are starting to second guess, maybe there is more room to run to the upside by across the board.

I all right, we'll see.

Well, now that feature showing signs of that rebound that we've been talking about, they're sliding over 2.5% now to discuss if it's time to shed some tech or if there's still room to go to the upside.

We wanna bring in Brian Jacobson.

He's an ex wealth management chief economist and strategist, Brian.

It's great to see you.

So let's start with tech.

It's top of mind here for investors this morning ahead of the opening bell.

Where do you stand on whether or not investors should be adding to their tech positions at this point.

Yeah, thanks for having me on and we've been discussing this on our investment committee here at annex actually for a while as far as what type of overweight or underweight to have the tech.

Uh If you look at the distribution of valuations within the tech sector because it covers a wide variety of different types of companies and industries.

We were really most concerned about with the chips stocks, right?

People were looking at it that there's this a trade for now or forever that you kind of just want to hold them and just let the earnings, the fundamentals really kind of push the prices higher.

We were a little concerned as far as the valuations, there could continue to be a little bit of a repricing.

So we wouldn't necessarily view this as a buy on the dip kind of opportunity here with the chip stocks.

We do like tech in general if you think about like the software companies are the ones who manage the data centers, the ones who are providing the electricity, um you know, all the plumbing that goes into them.

And so it's really a broad ecosystem that we think you can kind of think about.

But in terms of the chips themselves, this highlights political risks that are out there.

It wasn't the fundamentals that really disappointed, it was the shock of the politics.

What does that tell you, Brian about the likelihood of this earnings season to be driven by company fundamentals more broadly or by politics.

Do you think that that is a story that's going to continue throughout this cycle?

Well, thankfully, we think that actually in the near term here, it is mostly about the fundamentals.

But then as we get into say, 2025 it is going to likely be a little bit more about the politics.

So it will almost be punctuated by political volatility.

The fundamentals we think are ok.

But keep in mind, it's a matter of how much do you pay for those fundamentals.

If you look at a couple of examples, like we were looking at say Microsoft, for example, it's a stock that we've held for quite a long time fundamentals look good.

But then you have to ask, you know, how long would it take for it to have decent growth to really get back to what you might consider historically normal valuations that could be like 10 years.

So a lot of the gains that we've seen over the last year, year and a half, maybe we're anticipating the good growth of the fundamentals going forward.

So this earnings season that we're going into, we think it's actually going to be ok for say small mid and even for the tech sector in general, because the fundamentals are holding up.

It's more about the price that you're paying for those fundamentals.

And that's where I think there's a lot of questions and some of the vulnerabilities out there.

So, Brian then given that, are, are you buying small caps?

And I guess when we talk about even beyond earnings, you were saying that, hey, maybe we are going to get uh stronger results this earnings season.

What is it going to take to keep some of this momentum that we have seen in the names that had been left out to dry over the last several quarters?

What's it going to take in order for those to stay in favor?

Yeah, I think it is really about the earnings, the reports that come in.

We have increased our allocation to small and mid uh relative to the large cap space more in what you could consider the cyclical areas like say industrials.

But coupling that with some defensive like say health care and consumer staples mainly on a valuation basis as far as where do we want to be for the longer term, taking this opportunity of the past underperformance of those sectors and those market caps in order to position for what is hopefully longer term success.

And so when we go into earning season here, we're really expecting that some of those smaller cap names, they're going to start emerging from this repeat recession that they've been going through.

If you look at the quarter by quarter earnings of small cap and mid cap over the last two years, they have not really had a string of more than two quarters in a row of increases in earnings per share.

And that just shows and it highlights the struggles that some of these smaller companies are having with high financing costs and weak pockets of growth for the markets that they serve, whether it's lower income individuals or if it's exporting to Europe where you've seen lower growth.

Most of the great growth has been in the mega cap space.

Brian.

When you talk about earnings being so important here for the market, you've also got fed decisions and then looking ahead to November, you've got the elections.

I'm curious, what is the biggest driver of the market do you think between now and your end?

Yeah, I think between now and your end, it's going to be broken into really two different parts between now and September, it's likely more focused on the fed.

We will get distracted by politics but really until we get closer to say end of September, beginning of October, when the polls are going to get a little bit more accurate, we think that those are just going to be like pockets of volatility.

You know, the Trump trade k back in vogue with a vengeance over the last week or so, but that could kind of simmer down a little bit now focuses more on the fed about whether or not they're actually going to cut in September.

We think that they likely will probably at in every other meeting pace.

You'll be talking to Austin Goolsbee later.

And so I'm going to be tuning in for that because I think he's a great guy to listen to as far as, uh, sort of how to think about what the Fed is thinking.

Then when we get into October, it is more about the politics.

It's more about policies.

Keep in mind, November and December tends to be a very good time.

You tend to get a relief rally for the market.

So we would be looking at state diversified.

But if you're looking to put that cash to work, we should have a few opportunities between now and the election in order to deploy that capital, Brian.

We love when we have guests promote our own show.

Thank you so much for joining us and for the great insights as well, we appreciate it.

That was Brian Jacobson Annex Wealth Management's Chief economist and strategist moving on to some company news because Netflix is set to report its second quarter earnings after the bell.

The stock is up over 30% this year as investors praise the streaming giants push in the sports and the success of its ad.

Tears.

Can the rally for Netflix continue?

Yahoo Finance says Alexander can now has a breakdown of what investors should be looking out for all.

Hi, Ma.

Yeah.

So Netflix is really the start of big tech earning.

So one of the first things I'm looking out for is a stock reaction following the results, especially given that high that you just mentioned at Wednesday's close, Netflix traded at just over $647 which isn't that far off from its record close of 691 bucks a share on November 17th, 2021.

So the company will be faced with a pretty high bar as those expectations remain elevated.

Now, this has caused some apprehension on Wall Street with analysts saying a lot is already been baked into the stock.

But Morgan Stanley be Swinburne said, quote, we remain bullish given there's still large opportunity for growth ahead and speaking about growth.

That's another thing to watch out for tonight.

Any updates on those growth initiatives like live events, live sports, that's all going to be closely watched, especially when it comes to other potential opportunities.

Management has consistently maintained that the acquisition of those NFL games doesn't change its stance on sports rights, but we have seen this company pivot before.

So something to potentially look out for on that call along with further updates on the advertising to the password sharing crackdown and any future price increases as that all really impacts top line growth.

And then finally, something I've seen circling around is whether or not Netflix will announce a stock split, given the stock is flirting with those record highs.

We've seen it from some other big tech names.

So maybe just maybe that could follow suit.

And guys, I think it's pretty safe to say if that's announced it's going to send shares way up no matter what happens with those earnings.

So, a lot to keep an eye on heading into the second quarter report all coming up after the closing bell.

All right, Ali, we look forward to your coverage on that.

Thanks so much again, Netflix.

The need to keep on your radar here today through the closing bell.

Well, Senator JD Vance accepting the Gops nomination for the vice presidency at the Republican National Convention.

During his speech, Senator Vance looked to win over the working class by blasting Wall Street, Wall Street barons crashed the economy and American builders went out of business as tradesmen scrambled for jobs, houses stopped being built.

The lack of good jobs, of course, led to stagnant wages.

We're done.

Ladies and gentlemen, catering to Wall Street, we'll hear from former president Donald Trump today where he will accept his nomination as a Republican nominee for more on what we want to hear tonight.

What we might hear tonight?

Yahoo Finance is a very own.

Rick Newman is here and Rick, when we talk about what we could hear from Trump, I'm just curious, your reaction to what we heard from bands last night, obviously sticking to many of the talking points that we had anticipated him to do and really doing everything he can.

It seems like to win over that working class.

Uh So those clips you played when I heard him say that last night I had to stop for a minute and ask myself, what exactly is he talking about?

Um, Wall Street has not crashed the economy lately.

Um, the economy is actually doing pretty well.

Uh, I mean, we're hitting, hitting record highs in the stock market.

Uh, until, uh, recently I think he's talking about 2008 when, by the way, George W Bush was president, he's talking about the, the housing bust.

Uh And then he says we are done cat to Wall Street.

Um Is he saying that the Biden administration is catering to Wall Street?

I don't think so.

Biden wants to raise uh the corporate tax rate from 21% to 28%.

So my takeaway here is, uh these are talking points that might sound uh ok to some voters.

In reality, the Trump campaign is kind of doing the opposite.

They are actually sort of catering to Wall Street.

Trump wants to cut the corporate tax rate, not raise it.

Uh He, he reportedly told oil executives earlier this year that they could have any policy they want under a second Trump administration if they could raise a billion dollars for his campaign.

Uh And we've got, um, tech moguls like Elon Musk, uh who seem to be the people who put JD Vance into the vice presidential role for the Trump campaign.

So we're gonna get more obviously, um from Trump tonight and then we've got about four months of campaigning to go.

But those were some of um curiosities, let's say of JD Vance's acceptance speech.

I also want to talk about President Biden testing positive for COVID-19 as we continue to hear reporting about calls for him to step down.

Uh Right now, a lot of those calls are private.

We're hearing reports that Biden is becoming more receptive to those calls.

Do you think that his COVID diagnosis potentially leads to those calls becoming more public from officials looking for Biden to step down within the democratic campaign?

I mean, Biden obviously is having a terrible summer and it's like catching COVID when everybody else is out going to the beach and going on vacation.

It just sort of symptoms.

What's wrong?

What's wrong with the Biden campaign?

We're the latest reports here.

I mean, it's been a drip, drip drip, but the latest report are that senior Democrats now including Hakeem Jeffries, the minority minority leader in the house and Chuck Schumer, the Senate majority leader are basically telling Biden that if he continues to campaign.

If he's the nominee, he could bring down Democrats in both houses of Congress and we could have a Republican sweep and reportedly Biden is now thinking a little bit more that he needs to take this seriously.

Some analyst, I think the dam is breaking.

Um Biden however, is extremely stubborn and very proud, it's worth saying.

And um we'll, we'll see what happens?

I mean, I think we're probably above 50% likelihood that Biden withdraws.

Uh It's going to have to happen within the next three weeks or so.

I would say so once the Republican convention is over, I think that's going to be the big political story.

All right, Rick, always appreciate your insight.

Thanks so much for having on with us this morning.

Hi, guys.

We're just getting started here on a morning brief results from Taiwan semiconductor showing positive signs for the chip space following yesterday's sell up and looking at gains of just about 3% how the open we're going to break down that and other top trending tick next and Domino shares are sinking after warning of fewer store opening.

Lots of concerns about their guidance to all that we're going to hear from an analyst who still says that you should be encouraged by a number of metrics released within this report and A T for 10 a.m. hour of catalyst.

Jennifer John Burger will be speaking with Chicago fed President Austin will be where she'll be getting his latest thoughts on the feds rate cut timeline.

All this and more.

You're watching Yahoo Finance time for some trending tickers Taiwan semiconductor beating expectations in its latest report and raising its full year revenue outlook feel by confidence in A I demand.

The chip maker CEO saying on an earnings call quote this time A I demand is more real than two or three years ago.

This comes just a day after reports of potentially tighter trade restrictions from the US, send chip stocks lower.

We're seeing a bit of a clawback there of those losses that we had seen in yesterday's session.

Again, you're looking at gains of just about 3% but digging into this report, lots of strength, they recorded 40% sales growth here for the quarter, raising their full year growth outlook, revenue growth outlook to be in the above above the mid 20% range.

We mentioned the commentary from the CEO in regards to A I.

Well, the company actually saw high performance computing including A I contributing to 52% of TSM CS revenue here.

And that is significant because that marks the first time that that has happened, that it's accounted for more than half of the revenue they are going forward.

So that really speaks to the insatiable demand that we have seen for A I this willingness, this Capex willingness here from companies to spend on their A I efforts and a name like Taiwan Semiconductor clearly reaping the benefits of that.

Absolutely.

I think it's interesting to, to take, to look at beyond the stats that you mentioned for TS MC.

And obviously the growth that TS MC has contributing 90% of the world's most advanced chips.

When you get a report like this with such strong earnings, it's going to move the companies that are utilizing and being the customers of TS MC.

So that is why we are seeing a turnaround in some of these chips names in the free market trade here.

You're looking at shares of NVIDIA moving strongly to the upside up over 3% in the pre market here.

I also mentioned to you Sean, I was surprised at the degree of the side that we were seeing in Intel, that is one of the companies that's going to be a beneficiary of the commentary that we saw both from President Biden and former President Trump about brain production States side.

This is a company that already has the Chokehold really on us production.

Meantime, you've got TS MC working on building plants in Arizona that's going to cost them over $65 billion.

But that takes time and that is part of the broader discussion we've been having about bringing production stateside and the expense and time that that's going to take, moving on to airlines here because we're taking a look at the airline sector as shares of United Airlines up a little over 1.5% here.

But the stock did initially fall 1% on the back of its profits coming in below expectations though they did jump more than 20% for the quarter.

We got another story like that with Alaska Air forecasting for your profits below expectations.

That stock is down 2.5% in the pre market trade.

So here to discuss what this means for airline stocks.

We got Tom Fitzgerald TC Vice President covering at the aerospace.

Tom.

Thanks so much for being here this morning.

I want to take a little bit of a step back because we're hearing this word over capacity from a lot of the airlines that they've got too many seats, they're not filling them.

I'm not seeing that when I am on flights right now.

Does not feel like overcapacity.

What is the disconnect?

Yeah, I think it's primarily in the main, the main economy cabin.

There's just too many, too many leisure, too many main economy seats chasing not enough leisure, leisure travel.

And I think what we've seen is with corporate travel plateaued and having a very gradual recovery, the, the full service carriers, the united, the deltas of the world have, have moved more into those traditional leisure markets and they're doing, doing that with a much better product, competitive wise.

You know, they, they've cracked the code on basic economy and they're really, you know, they're taking advantage of their low program to offer consumers aspirational travel and they're leveraging, you know, investments to make, you know, to run a more reliable operation that just give consumers, you know, consumers are voting with their wallets and they're choosing those carriers.

And I think we're, we're entering a really interesting fork in the road moment when, where the weaker players, the players who are flying a lot of loss making routes are gonna have to retrench or raise prices.

And that's going to be a great opportunity for the United of the world to take share and continue their upward trajectory.

Tom more specifically, what does that opportunity look like then to take share?

And, and how big of a catalyst do you then see that being for United Stock?

Yeah, I mean, it's got, it will vary market to market but you know, you could see, you could see, you know, UL CCS just, just flat out, just pulling out of markets or significantly cutting back.

And United will be the, you know, the only game in town or you could see, um, you know, Southwest is, you know, launches baggage fees and, you know, maybe they get some incremental revenue, but they could also destroy a lot of demand because there's many customers who, who choose to fly them specifically for the bag fees or not paying bag fees.

So, um you know, we're interested today in the call to kind of get a better sense of management to see how much volume they think they could capture over the next, you know, in the coming quarters and you know, get a better, better sense of what gives them the confidence that they expressed in their prepared remarks that their competitors will pull back.

You know, we're seeing a lot of capacity cuts starting in mid August, but we're hoping to get a better, you know, more granular data on what they're looking, what they're seeing out into the fall.

And, and just, you know, because the industry, there's been other times when the industry has talked about rationalizing capacity, but then hasn't ended up finding religion.

So it's interesting to because the airline sector is one of those that we look at for an indication of how the consumers doing more broadly and as an indication of what we might see for more consumer names throughout the earning cycle.

When you talk about the management challenges, for example, do you see the struggles that some of the airlines are experiencing as idiosyncratic or is it indicative of a struggling consumer?

I don't think it's indicative of a struggling consumer.

Um I just think that this the, the the game changed a lot.

I mean, um you know, United has talked about this a great deal.

We've written about it a lot but the cost convergence is just the, you know, the low cost carriers, the ultra low cost carriers, they're just at such a disadvantage point from uh you know, competitive, competitive wise.

Um And uh you know, they're just not uh you know, I think people coming out of the pandemic are much more willing to pay for a more pleasant on board experience, to pay for a more reliable product.

Um you know, to, to earn loyalty or, you know, to earn miles in an airline where they can redeem to go to Europe or something versus just, you know, another low cost leisure, no frills carrier.

Tom.

Do you think that this is the theme that we're going to hear this earnings season?

When we talk about the fact that the inability of, of some of these lower cost carriers to fill the seats and then obviously having to adjust pricing, it seems to be weighing obviously on the entire sector.

How long do you expect that overhang to exist?

I think, you know, I, I think it can only, you can only continue to post, you know, deep losses quarter by quarter for so long.

People will only underwrite that for so long.

I think we're getting, you know, as, as major debt maturity start to start to come current, I I think that's gonna, you know, that's going to be causing inflection point.

And I think, I think the next, you know, month, 60 days, this quarter is going to be very fascinating for the industry.

I think many carriers might hit an air pocket.

And I think by the time we get to November and United and Delta are having their investor days, I think we'll have a much better sense of, you know what that fork in the road looks like and how the wheat will separate from the chaff.

And I think they're gonna have a great story to tell investors come November and really set up the share as well for a re rating as long as the economy hangs in.

All right, Tom Fitzgerald, great to get your insight here on the heels of these results.

Great to talk to you.

TD Cowan's vice president covering airlines industry.

Thanks so much, Warner Brothers.

Discovery is reportedly drafting a plan to split its business.

The media giants mulling separating its streaming and studios businesses from its television networks.

This is according to a report out from the financial Times.

Now, the company grappling with $39 billion net debt load and it's that debt, that's really been the focus here of the street.

But as you can see from the pre market reaction to this report, it looks like Wall Street is been encouraged by what exactly this would ultimately mean here for Warner Brothers going now within this report in regards to that $39 billion of debt.

Now the Financial Times saying that source is saying that that $39 billion could remain with the pay TV networks business if Warner Brothers discovery were to break up.

Now, Ceo David Zaslav is examining several options for the company according to this report, all in an effort here to boost the stock price here going forward, the stock has struggled for quite some time.

We have the one year chart there up on your screen with shares off just about 32%.

It's Media Week here at Yahoo Finance.

We've been talking a lot about the consolidation that we have seen at least when it comes to Paramount, but then also really more so what we are expecting to see in the coming quarters given that there are by far leaders within the space versus the laggards.

And in order to really excel, it seems to be at least consensus from the street, we will likely see more consolidation as a result.

Yeah, it's smart of you to bring up the debt challenges because this breakup could, as you mentioned lead to scenario where the debt could remain with the pay TV networks, which could be a positive for the business here.

We should mention though we don't have any reporting about Warner Brothers discovery hiring a bank to initiate any of these deals.

If we do get news of that, that would be a sure sign of some ma to come for WBD even though we know they are in the split of the streaming and studio units hiring of a bank would be a key kind of catalyst to indicate that that is a little bit more serious here, but that that potential breakup is indicative of some broader themes that we are seeing in the media space here.

All right, we got the opening bell here in just a few seconds.

Again, a bit of a reversal looks like it is going to be underway on Wall Street as we do.

Ring that opening bell at the NASDAQ and the New York Stock Exchange.

A shift in sentiment when it comes to the chip makers, we're seeing our performance here at the open among many of those tech stocks.

Now, this on the heels of TSNC Taiwan semiconductors, raising the revenue outlook.

A lot of that reflecting the demand that we have seen for A I.

We also got some econ data out before the bell this morning.

Jobless claims spiking more than we have seen really pointing to some weakness maybe within the labor markets of reinforcing, maybe what the street wants to see when it comes to expectations for a fed rate cut soon again.

So we're seeing that play out here, the S and P and the NASDAQ opening here to the upside.

You've got the dow though reversing some of those gains off just around 110 here at the open.

Yeah, those jobless claims also putting some pressure on the yield space falling off of those jobless claims.

As to your point, the market looks ahead to those fed rate cuts, but we're going to get to more with Yahoo finance is very own.

Jerry for a look at what is moving.

Hey, Jared there, Matty, you know, the Dow and the NASDAQ just can't agree lately.

And today we have the dow down about a third of a percent while the NASDAQ is up 7/10 of a percent.

And let me just show you what is been this week so far.

Four day chart.

Here's the dow up 2.67%.

Here is the NASDAQ going in the opposite direction down 1.5%.

So what's going on?

This is sector rotation, the lifeblood of the market, we are getting away from that concentration that we had.

So the mag seven not doing that well recently, but the S and P 493 really stepping up here and we can see some of these new sectors that have really just shown a lot of strength recently, even wearing staples.

Let me just show you what happened to consumer staples recently.

This is a three year chart and it is just now breaking out of this high.

We had a record high, uh I believe only yesterday.

And then you take a look at what's happening industrials, another break to the upside there.

You can take a look at health care, which is down today, but that also broke out.

So we have a lot of exciting things to think about here.

But uh definitely over the last few days, what is not work?

Well, it's working today.

These are the chip stocks, but let me just show you the five day total here and you can see a vastly different picture.

So even though we're seeing this zigzag action, that effect on the market is it reduces volatility.

And we also have a trending dollar that's going to the downside.

That is a tailwind for equities.

There's really not a lot standing in the way right now outside of a surprise.

And so I think, you know, we're looking at earnings and then also the fed next week.

So we'll see what happens, we'll see what happens, Jared.

Great stuff.

Thanks.

Well, coming up more results from the health care sector, we're going to break down why both Abbot Labs and Nova are moving to the downside here at the open.

You're looking at losses of about 4% here for both of those stocks.

More on that.

When we come back, Abbot Labs, raising its full year profit forecast, boosted by sales in its medical device unit that grew about 12% from a year ago in the second quarter shares.

Though, moving to the downside here this morning, it's off just about 4% shortly after the Open Angela Kamlani has been digging into the into this report and it looks like at least on the surface, it was actually pretty strong here from the company.

It was yeah on the surface.

And I'd also like to point out in particular, uh in addition to the upgrade, we also saw really strong numbers for their freestyle libre, that's their continues glucose monitoring device.

And that's one of the specific products that I've been keeping an eye on, especially in light of the G LP one boom.

We know that that those types of devices had been sort of under pressure and there's a sort of doomsday prediction for them.

But you see growth 20% year over year for the for that um the only downside we saw was the reduction of COVID-19 tests, which of course, is impacting all stocks related to COVID and the waning of the pandemic era even though we are in the middle of, you know, another way right now.

Uh But really, the story for Abbot is pretty solid in terms of, you know, the growth in all across all of business divisions or nutrition was also up driven more by the adult side rather than what we've known in the past is their baby formula side.

We know that that has taken a hit in the past, barely missing uh beating, sorry, but just by a hair on the estimates for revenue and then really good on the adjusted DPS as you can see on your screen.

So uh the numbers there uh tell a pretty strong story but still it's falling right now, closer of percent almost.

Well, Angeli, another stock that I know you're taking a look at is shares of Nova.

Uh there was an outlook boost but it was kind of expected from the street.

Was it just not enough?

Yeah.

So their story is also based on on one specific product that everyone is looking at and trust of.

That's a heart failure, drug sales of those have been very strong 1.8 billion.

But in addition to the fact that they are losing x uh the patent next year that's been sort of dragged out for some time.

A judge ruled against them initially for extending that patent, but they have managed to bring, to bring it out to the middle of next year.

So that's when that top Blockbuster for them goes off and they do have stuff in the pipeline to replace that.

So that's really the focus of the company is how it's going to take a very robust pipeline and actually translate that into market moving and Blockbuster type drugs to replace the lost of one of their biggest products, which is that heart failure drug.

All right.

And thank you so much for joining us.

We really appreciate it as always here.

We're going to take a look at shares of Dr Horton because they are moving higher.

They're actually up over 8% despite quarterly orders missing expectations as consumers still grapple with the weight of those higher mortgage rates.

At the end of June, the home builder had 42,600 homes in inventory with just over 26,000 left unsold here.

But one thing that I'm seeing in some of the analysts reaction here is that there was a 1% increase in net new orders that did fall far short of analyst expectations.

Uh that recent pullback in mortgage mortgage rates falling below that 7% handle that we saw through April and May could uh see make analysts see that result as sort of backward looking because we are getting that drop off in mortgage rates.

So that could be why we're seeing a little bit of a lift here.

Also, the commentary around demand is going to be really important for the stock given that some of that mortgage rate change, Jane is potentially making the earnings print a little bit backward looking uh gross margins though coming in much stronger than anticipated.

They also had an outlook for the fourth quarter of the year that came in above expectations.

And I bet that focus on the call coming up is going to be another critical catalyst for the stock.

Yeah, I think a lot of this just centers around what exactly the fed is going to do, how that's going to impact mortgage rates here down the line.

We know so many buyers have been sidelined given the fact that higher home prices coupled with higher rates right around 7% has kept them from buying homes, they no longer can afford them.

And then also adding to that has been the existing home market where so many people have been locked into their homes because of the fact that they have much lower rates than what is currently being offered right now just in terms of uh the 30 year rate.

So obviously that's adding some hiccups here and some challenges here to the broader housing market because of that, that has been giving just a bit of a lift here to the new home sale market because they're almost the only game in town when it comes to those homes that are available to be purchased at this time.

But again, when you take into account, the fact that we are up against higher prices, the fact that mortgage rates, yes, they have improved a bit.

So we will be more interesting to see what some of that current commentary.

Uh The current or the commentary is about the current quarter here and whether or not they're starting to see any pick up in demand when it comes to their outlook.

What they are expecting for the remainder of the year they had their sales volume is now expected to deliver between 180,500 homes slightly higher than what they had the prior forecast here.

They narrow their forecast just a bit.

But again, lots of questions about what ultimately the timing of the catalyst for the housing market and what it's going to take to really unlock the supply of homes going forward and therefore demands.

We see absolutely big fed watch day for a lot of stocks here.

But coming up, we're taking a look at another stock because shares of dominoes down around 12% after falling short of analysts expectations on their earnings.

We're gonna have analysts reacting to that on the other side this week, shares of dominos sliding down now over 8% they were down over 12% which was the most, they've been down since 2012.

Now this comes after they missed second quarter revenue estimates and indicated fewer store openings to come.

So for more on the company's results, we are joined by Danilo Gargi A B Bernstein senior analyst and no, thanks so much for being here.

So talk to me about what stood out to you from the Domino's earnings print given that we are in an environment where some consumers are struggling.

And you would think that that would potentially be a catalyst for a name like Dominos.

Yeah, I would say um uh it was a tale of two cities.

Uh on the one hand, um the demand in the United States as well as in international was very encouraging.

I mean, you look at all the same store sales were looking in the United States.

Clearly, they were boosted by a combination of the value that you were discussing.

But also uh the underlying strength of the loyalty program that was launched in the fourth quarter of last year, coupled with increased access to consumers through the partnership with Uber Eats and eventually with new aggregation coming in.

So um the the the top line, so the the same store sales were quite positively impacted this quarter.

On the other hand, international markets where uh uh the uni growth in international markets as you pointed are slowing down.

Um There are some challenges with one of their master franchisees operating in Japan operating in France, operating in, in, in Australia.

So D pe uh which resulted into management reducing their guidance on the unit growth in 2024 Danelle.

When you take a look at the fact that they did suspend their long term guidance.

I'm curious what you think this suggests going forward and, and how long some of this weakness, I guess, how big of an overhang you expect this to be on the stock?

Yeah, I think it might be an overhang on the stock until there is more clarity on.

Um you know, the the future potential for Dominos.

I mean, Dominos historically has had in their international market, their growth engine so clearly fixing the United States was very relevant um for Dominos in 2023 but all eyes and e are going to be increasingly more into the international markets and so not having clarity on what future potential might look like in terms of unit expansion might spook some investors.

Um You know, I think that the fact that they are they have not provided the suspended guidance in international markets is indicative of management wanting to have the maximum amount of transparency with the market and making sure that before they put out another guidance, they feel more safe about um you know, the the real opportunity that is outstanding.

I want to talk a little bit about Dan.

So switching gears just a little bit because we have news about Dan and I know this is one of the names that you cover, uh Dan agreeing to buy Chewy the Text Mex chain for those that aren't familiar.

Uh Dan, moving to the downside on that news, she shares absolutely skyrocketing up more than 49% here.

What is this deal?

Make sense for Dan?

Yeah, I think this deal makes sense because, um, you know, growing in a, in the, in the full service restaurant category um especially in the casual dining category, which is a variety of seeking category, you know, despite the scale, you might be structurally constrained in your ability to grow with your existing brands.

And clearly Darman has a pathway towards its growth.

But I think something onto their portfolio brands, which is a little bit faster growing versus their uh Longhorn and versus their, their uh Olive Garden will be boosting the long term algorithm for uh for, for garden.

And so enable them to actually reach higher skills going forward, which will result into uh potentially better synergies and better access to their consumers.

Daniella.

I'm curious your take on the consumer right now because we're starting to see mixed reports.

The n uh uh uh and Dominoes included is pointing to some weakness.

Maybe that we are seeing in terms of consumers pulling back.

Is that how, how much of that do you think is going to be a theme this quarter?

And given that who is then do you think best positioned for the quarters to come?

Yeah, I think it, I think it's going to be the hottest team of um the, the second quarter.

I think the deceleration that we are starting to see in June um is puzzling investors, right?

People are, are trying to, to understand whether um you know, the guidance that many of many of the companies have provided, which is a kind of a hockey stick recovery in the second half of the year, whether that one is going to be still on the table, given that the demand is slowing down in June and so extrapolating only in one month is obviously extremely hard, but uh all eyes and years are going to be on whether the consumer uh ability to spend is decreasing uh more recently.

Uh I think, you know, from what we've been hearing from various companies, the uh the challenge remains on the low end of the consumer spectrum.

So the media and high income consumers are not as affected by this slowdown in, in, in demand.

But um you know, obviously the the companies that are more operating in the, into the uh quick service restaurant space.

So the likes of, you know, mcdonalds Burger King, Wendy's are going to be a little bit more under the radar under scrutiny in the second quarter.

You know, I want to end with one other consumer name that is under your coverage here and that's Starbucks Starbucks in particular, struggling last quarter with their earnings and the high prices frankly, on a lot of their products, you've got a market perform on this stock.

Have they done what you wanted to see them do to change your market rating potentially as if they are able to deliver this cycle.

I think management is working to a set of um, um, demand driving initiatives that could be helping in the short term.

I think, you know, to really realign the value positioning of Starbucks to what consumers might be looking for.

Um It might need, you know, it might take some time.

Um You know, we're talking about um some realignment of price versus uh the expectations and, and the willing of consumer potentially to pay.

Uh We are talking about maybe uh the store experience improving.

Uh given that the Starbucks of today is a much more complex a store um compared to, you know, the Starbucks that we used to see in PRE COVID levels, right?

In PREVID Starbucks, there was more um kind of single channel versus now you have many more ways of accessing to your company.

So the complexity of the store operations might be impacting also the um uh the willingness of consumers to go to Starbucks and it might take a little bit of time for Starbucks to access again to some of the laps in consumers, especially the kind of less frequent consumers within their uh uh within their base.

All right, Danilo, we're gonna have to leave it there.

Thank you so much for joining us.

That was Danilo Gargiulo A B Bernstein senior analyst coming up here, Morgan Stanley feeling bullish on some retail names will discuss why the firm is calling gap a top pick on the other side of this break, Morgan Stanley feeling bullish on gap shares getting a boost after the firm upgraded the retailer to overweight from equal weight.

The argument here, they're saying that the stock offers quote among the greatest fundamental recapture opportunities.

That's pretty strong words, looking at a price target here of 29 bucks, that was actually unchanged when you dig into this report here and why they are uh why they see upside here for the stocks are saying incremental confidence in the new management strategy here going forward.

This comes after the Q one results.

Also they had some internal meetings there uh most recently in June, that's G that's making them a little bit more optimistic about what the road ahead looks like for gap.

They see potential for positive eps revisions, earnings per share, revisions in fiscal year 2024 and beyond.

And matty gap is one of these names where Wall Street remains split on what exactly that turnaround looks like how long it's going to take to really get underway.

There are seeing some signs of improvement, but even you can tell just by the the stock reaction or, or I guess the pattern that we've seen over the last several months, a lot of highs and a lot of low that we, we can see.

There's many that are not convinced that some of the peaks in some of the strength, some of the positives that we have seen in past reports, whether or not that's going to stick here going forward.

Given the fact that it's an increasingly more competitive environment.

Yeah, it's interesting to taking a look at the broader names within this note and how that might apply to the outlook for gaps.

Specifically, this analyst noting that the score card that they developed for a lot of these names might be kind of more moving to the bias side for upside on some of the department store style retailers versus the off price retailers like a TJ Maxx, for example, which is mentioned in this note.

However, I do want to focus in on Foot Locker and it's interesting to me to take a look at why exactly Morgan Stanley talks specifically about some of the downside pressures on Foot Locker, uh moving to the bear on this stock because of weaker performance from Nike.

Specifically noting that Foot Walker Foot Locker rather previously talked about a return to growth at Nike specifically as a driver for potential improvement moving forward.

What we know about Nike so far is that it's not necessarily a stock to bank potential upsides on for other companies that are interacting with it, Nike continuously having quarter after quarter of downside pressure.

That is why Morgan Stanley their price target for Foot Locker from $24 a share down to $18 a share.

So I think that's not only putting some pressure on Foot Locker today, but it's also an indicator of some of the movement that we might continue to see from Nike as well.

Certainly, that's smart to point out there.

All right, we'll keep right here on Yahoo Finance.

We've got much more coming up.

Our fed correspondent sitting down with Chicago fed President Austin Goolsby to, to discuss the path forward for Ray Cut.

That's next on catalyst.

We'll be right back.