Market rotation, auto industry rebalancing: Asking for a Trend

On Thursday's edition of Asking for a Trend, Host Josh Lipton breaks down some of the biggest stories and themes impacting markets.

The auto sector is grabbing investor attention as major companies like Stellantis (STLA) and Ford (F) report underwhelming second-quarter earnings. CarGurus director of industry insights and analytics Kevin Roberts explains that despite disappointing earnings, the auto industry is still "quite healthy." He notes that the earnings suggest the sector is going through "a bit of a rebalancing right now."

The major indexes (^DJI, ^IXIC, ^GSPC) closed mixed on Thursday as they try to recover from a three-day tech sell-off. This downturn was triggered by disappointing earnings reports from Tesla (TSLA) and Alphabet (GOOG, GOOGL) — two of the "Magnificent Seven" tech giants. Yahoo Finance reporter Jared Blikre analyzes the day's top market trends, discussing the rotation into small-cap stocks and Japan's financial markets, which appear to be going through a "capitulation."

The future of regulation for startups and big businesses rests on the 2024 election, as former President Donald Trump and Vice President Kamala Harris have vastly different agendas. Tusk Venture Partners co-founder and managing partner Jordan Nof says that a new administration will likely bring a new leader to the Federal Trade Commission (FTC) "and potentially a different posture that the FTC takes with antitrust specifically." He notes that many investors are worried that Big Tech "just does not want to transact right now," and that fear "really takes a lot of the wind out of the sails in terms of how you can underwrite a deal to an exit." He also explains that investors and early-stage fund managers prefer Trump-era policies compared to Biden's current policies and are most likely to vote with their pocketbooks in this election.

Josh Lipton then breaks down what to watch on Friday, July 26th, before turning to some of the biggest movers in after-hours trading, from Skechers (SKX) to L3Harris Technologies (LHX).

This post was written by Melanie Riehl

Video transcript

Hello and welcome to asking for a trend.

I'm Josh Lipton and for the next half hour, we're going to be breaking down the trends of today that I move stocks tomorrow.

There's a lot to keep track of.

So we're focusing on what you need to know to get ahead of that curve here.

Some of the trends we're going to be diving into back and forth.

The nasdaq and S and P 500 struggled to hold on to gains in today's session.

Rotation appears to be in full effect with the Russell 2000 gaining more than 1% but big tech names extending declines in today's alphabet media had meta all ending of the day lower and tech is not the only sector hurting, autos feeling a pain after a string of weak earnings.

Ford missed expectations.

Salant Ceo called the company's first half disappointing.

We take a deeper dive straight ahead.

Plus the 2024 race has a new look with Harris versus Trump.

Policies are being closely watched from Wall Street to Silicon Valley.

This speak with a venture capitalist later in the hour about what's his take for start ups?

This November now the auto industry is stalling this earnings season.

Top automakers posting disappointing results sparked uncertainty for the sector statis reporting profit fell nearly 50% in the first half of the year compared to a year ago.

Ford shares had their worst day since 2008 after that company missed earnings expectations.

And joining me now to talk about all this is Kevin Roberts car guru is Director of Insights and Analytics.

Kevin, it is good to see you.

So, you know, we had a number of, of companies, you know, give us the latest and greatest earnings reports.

Kevin is Ford.

Uh we heard from GM and stati, it's a lot for investors to kinda digest Kevin.

You know, as you look through these reports, you listen to the conference calls, what were your big takeaways, Kevin?

You know, just how healthy, how strong is that industry right now.

So I think the auto industry as a whole is still quite healthy, but we're seeing consumers who were revenge spending over the past couple of years.

Uh you know, coming out of COVID with the stimulus funds going out and then we had the semiconductor chip shortage, really kind of shook up the overall market uh and pushed prices really, really high.

And I think we're in a bit of a rebalancing right now and that's really what we're feeling and starting to see uh this earnings season, let's dig in a little, a little more into some of the, some of the segments EVs, for example, uh Kevin, I think a lot of folks are wondering, you know, had we hit the trough and better times ahead?

Is that what you heard when you, when you look through these reports?

So I think you're still seeing automakers kind of rebalance their expectations and product plans in the face of there's expectations since you're going to see a lot more robust uh ev demand out there than what is actually shown up.

And now we're seeing situation where dealer lots are really starting to over low with evs, you know, the day supply of new evs for the middle of June was around 100 and 37 days compared to a national average of all vehicles.

83.

So there's definitely supply and demand imbalance right now.

And I think you're starting to see the industry start to work through that and also started to come to grips that I think their plan was really to start making more luxury evs and put evs into kind of larger, more profitable pickup trucks and suvs, which also means you have to put the largest batteries in those vehicles and consumers really just aren't seeing the appetite for them.

And so you're also starting to hear automakers start to say we might need to start making more lower priced evs maybe smaller evscuvs uh that might get you more volume to really see EV uh overall adoption take off.

What do you think, Kevin?

Obviously, we got an election here and some folks are trying to game out, let's say Trump Vance take the White House.

What that could mean for the EV market?

How do you think about that?

I think when it comes to the election, probably the most kind of stark lines you're seeing now out there right now is related to EV policy.

Uh overall econ policy is a little too early to say what could be going on.

Um But at this point, I really think the industry really is in on evs and that probably is the long term trend of where it's going.

The question really is what the adoption rate curve is gonna be.

How about hybrids, Kevin still hot, really hot.

Uh You know, if we're talking about the amount of day supply for uh EVs being really high hybrids is actually below the the national average.

And still, I mean, if you're looking for a hybrid, it's gonna be much more difficult to find those out in the marketplace right now.

Really seeing their kind of opportunity in 2024.

All right, we talked a vs, we talked hybrids before we got to let you go.

The the big three is bread and butter uh trucks.

Kevin, how's that looking healthy?

Uh There's still healthy demand for them but the the demand for the kind of those higher price trims maybe is pulling back a little bit uh as consumers are, you know, dealing with higher interest rates.

Um So still, still healthy demand, you're still gonna see a lot of, of those large full size pickup trucks and even mid size pickup trucks being sold.

But consumers might be looking for more affordable trims within there than the higher price trims that they were really indulging in over the past couple of years.

All right, Kevin, always good to see you.

Thanks so much for joining the show.

Appreciate it.

Pleasure.

The NASDAQ and the S and P 500 struggling to hold on to gains in today's trade extending declines for a third straight day and join me now with today's today's takeaway is Yahoo Finance's Jared Blicker.

Jared.

Thank you, Josh.

Well, we got to take a look at the damage that was done before we can assess what's next.

And this is a post mortem here.

So let's just take a picture of what happened over the last two days.

This is a NASDAQ 100 this is fairly ugly.

I've seen worse, but this is fairly ugly.

NVIDIA down eight percent alphabet also down 8% meta down 7%.

And if we take a look at some of the end of season and we can look at the NASDAQ or, or what have you.

Let me just pull up the NASDAQ here, which was down another 9/10 of a percent today.

But if we look at the two day uh, here's what I want to show is that on the open this morning, that's when the low was in for most of these markets.

So you take a look at the NASDAQ low was in at the morning here.

S and P 500.

I'm a little worried because we came right back down, kind of closed at the lows there and then the Dow which closed in the green.

Um, up about two te uh excuse me, up about 2/10 of a percent that is still down over the last one or two days.

But I take a look at this and, you know, I was kind of talking about this with Julia earlier that when you take into consideration all the selling that we saw yesterday.

Well, now we're seeing rotation again and maybe it's not as bad as it seemed.

So I'm a trader and I'm listening though to this.

I wanna know, I wanna know Jared, tell me, is it selling over?

Is this just a pause?

I'll tell you what I'm looking at.

That's a great question because the vix is pointing to the potential for this to be over like as, as though this is already done.

So here we have the VX spikes whenever we get a VX spike and this is a year to date chart, we see stocks fall off a bit.

What you're gonna notice is this spike right here, not quite as big as this one.

And in fact, if I put a three year chat on, you're gonna see the spikes keep getting smaller and smaller and smaller.

That means the selling intensity has been getting, getting less, less and less if, and when the pokes above this line and it might be tomorrow, it might be in a few weeks.

That's when I get more concerned about a protracted, uh, sell off, but not right now.

All right.

So we move on to number two here.

Number two, let us go.

Small cap rotation.

Can you know, the small caps kind of saving the day here?

I said, I said the dow was in the, in the green here, but small caps were up 1% and they were just flying a few days ago.

Let me show the Russell 2000 here.

Uh This is a three year chart and I, I'm gonna leave it here.

I like this.

It shows there's just been a lot of choppiness here and you see every time it tends to peak above.

Well, guess what?

Sometimes it's a bit of a disappointment.

So we've seen a lot of fake outs by the Russell 2000 over the last few years.

Now.

I'm gonna shorten this time frame to a year to date.

This really stands out.

That is impressive.

That tells me this thing wants to go.

But, you know, something good.

Have we seen this movie before?

Do Small caps get knee capped?

Yeah.

You know, I think I, I go back to this three year chart and we seen small caps get kneecaps so many times here, fake breakouts to the upside and the downside.

I'm a little bit worried, uh, weary, but I do take the strength, the strength of this move and I'll go back to this year today chart.

I look at the strength of the move.

This thing wants to go up.

Right.

It's so quick and aggressive that move.

Amazing.

All right.

Third one, third one, we gotta take a look at the Yen.

Japan is capitulating, I've been looking at not only the Yen but also the Nikkei Stock Index.

Um Now I think we're talking about the Nikkei when it was, the dollar was at its high.

That was 1 6262 yen per dollar.

Um And then I'm gonna show you where it is now because it's all the way back to 152 or thereabouts.

And here we have the US dollar versus Japanese Yen.

So 162 that was uh the highest, I think in 3540 years.

And now suddenly we are about 6% off.

6%.

Doesn't sound like a lot, but in currency terms, it is a lot.

And then I'm gonna show you what's happened to the Nikkei.

Um This is their benchmark stock index.

It's down 3% today and uh let's just go over the last 10 days because over the last seven of these, it is down 10%.

And so this is something you don't usually see the Nikkei was actually in a greater position of higher returns than the NASDAQ this year.

And so it's under a bit of pressure.

Why does this matter?

This is my point.

So, let's say, uh you're my, you're my dad, you're Andrew Lipton.

He, he's probably watching right now as we speak.

Andrew's wondering.

This is fascinating.

Why does it matter to me, Jared?

All right, bring it home.

I'll tell you what Japan is always the last to uh lower rates.

They're always the first or excuse me, they're the last to raise rates and they are the first to cut rates.

And so what we see happen is we see these wild moves in the, in the Japanese markets when we're at inflection points.

That could mean that we're on the precipice of a bear market or that the, the Federal Reserve is about to change the business cycle here.

I'm not suggesting that we are right at that moment right here, but this is how these things begin.

So we gotta keep an eye on the yen because um you know, one of the things in finance is called the carry trade.

That's where all these traders are by borrowing low in Japan, then they're deploying those assets overseas.

When that unwinds, you see this huge shift back into the yen, it disrupts global risk markets and that's why we're talking about it because we gotta watch those canaries.

Japan has one and it's flashing yellow, not orange, not red but yellow, yellow flag.

Thank you.

Appreciate it up next.

How investors are looking at the 2024 race?

We're speaking with a top venture capital investor next on what the regulatory backdrop could look like.

More.

Ask me for a trend right on the other side, come November, the regulatory landscape for start ups and big business alike could look a lot different depending on who of course wins the White House.

We're taking a closer look at how smaller names are navigating this uncertainty.

And joining me now is Jordan Knoff, Tusk, venture partners, co founder and managing partner, Jordan.

It's good to see you.

Thanks for having me.

So maybe Jordan just to start um just got a big picture here when you look at the overall venture industry, tell me what you're seeing.

How would you describe it?

What are the kind of the big themes and trends?

The big, the big theme right now is definitely the lack of liquidity.

So the lack of exits, whether that's IP OS or M and A transactions um has really kind of locked up the entire, the entire ecosystem.

So that is the number one thing that people are focused on whether they're limited partners that are investing in venture funds, whether they're start up founders that get money from venture funds or GPS of the funds themselves, why, why aren't we seeing more IP OS by the way, what, what are the reasons for that?

So interest rates plays a major role in addition, uh you know, the perception that there's not much demand in the market uh for, for new listings, uh also just the threshold that you need to hit from a revenue perspective.

And the underlying unit, economics and economics of the business itself are kind of up for debate, what it takes for a successful IP O.

Do you see that kind of shifting 6, 12 months out?

Uh It could be the interest rates obviously play a major role there.

Uh that most likely will be different.

Uh the investor sentiment and the appetite in the market I think has uh there's a few more, few more variables at play there.

Uh It'll also be interesting to see if the M and A market picks up or not, that makes up the bulk of, of exits.

And we, we were talking off camera about that.

Um You know, right now, obviously, I think if you're, if you're big tech, you, you know that the trust busters in Washington are, are looking much more closely.

Could, you know, could that change?

I mean, if, if you see if you do see a change in the White House, if Trump and Vance take the White House is the expectation.

OK?

That, that could, that could change things up here.

I think the expectation, at least from venture capital investors like myself is that uh a new administration will likely bring uh a new head to the F DC and potentially uh a different posture that the F DC takes with antitrust specifically.

Uh If you can ease up the, uh the, the fear that is essentially growing in the, in the ecosystem in general around the fact that big tech just does not want to transact right now.

It, it really takes a lot of the wind out of the sales in terms of how you can underwrite a deal to an exit.

It's interesting though because we, we were talking Jordan about how you kind of try as investors try to gauge.

OK, if it, Trump Vance wins the White House because Vance, as we were talking about, he has nice things to say about Lina Khan.

But your counterpoint which is well taken is Trump obviously is the one who sets the economic policy end of the day.

I think so.

I think so.

And what, what let me ask you this, what if it's, listen, what if it's Harris, then what does that change the calculus?

So it doesn't really change the calculus for types of investments that we're making or really how we underwrite a deal.

I think that, that it's, it's interesting because I, I think that that probably has more implications down to it uh from a state and local level which actually from a regulatory perspective, most state, most regulation and technology happens at the state and local level.

So it's uh it's a little bit, it's hard to, it's hard to say with, with a Democrat or a Republican in um net net at the state and local level.

What would, what would the best outcome be?

Um I do think that professional investors, particularly early stage fund managers definitely see that, think that life was better whenever Trump was in office, last time compared to whenever Biden was in office or is in office.

And therefore they're kind of voting with their pocketbook.

Interesting.

You're a venture investor, you're talking to a lot of smart entrepreneurs and founders.

What are some of the big themes and trends?

J they're interest in you right now.

So uh I'd say that there's obviously A I uh that continues to be on the for A I among ventures investors is the interest as intense right now as it was six months ago, 12 months ago.

It's all relative, I think.

Uh so interest uh probably is about the same now.

Volume is very different.

I think that now we're seeing a lot of deals getting done.

We're seeing a lot of activity not in the A I space, which really was just dominating any deal that was happening.

Uh It's also, it's interesting because you have A I as A F as within part of health care or A I is part of fintech.

Is it an A I company or is it a health care business?

And that's kind of up for debate.

So I think that all companies are implementing some form of A I strategy into their businesses uh at this point.

So it's um it's just AAA kind of a new framework to use Jordan.

I wish we had more time, such a fascinating conversation, but thanks for joining us.

I appreciate it.

Thanks for having me.

Ok, time now for to watch Friday, July 26.

Starting off on the economy.

Big piece of economic data on deck tomorrow, personal consumption expenditures data P ce the fed's preferred inflation gauge out at 8:30 a.m. Eastern Econ is forecasting both overall P ce and core P ce to tick up slightly.

The new June print will give more insight into the fed's path to a rate cut ahead of next week's fed meeting.

Then on the earnings front, we'll be getting reporting from Bristol Myers, Squibb, Colgate Palmolive and three M are the top names to watch Dow component three M posting second quarter results ahead of the open.

Analysts expect the company's organic sales to take a hit with deepness in the consumer business.

And finally the summer box office is heating up.

We've already seen movies like inside out Two and Twisters bring in big numbers.

Now, Deadpool and Wolverine is out tomorrow nationwide.

The new Marvel movie is expected to bring in between 100 and 60 to 100 and $70 million domestically stick around.

More.

Ask for a trend on the other side.

Factor reconstruction is booming in the US, spurred by federal programs.

That's a subject of our chart of the day.

And Yahoo Finance says Julie Hyman joins me now with a closer look, Julie Josh, as you know, we just got GDP numbers for the second quarter today that came in better than estimated with growth of 2.8%.

And as part of that, we also got a more insight into factory construction.

Now this chart coming to us courtesy of George Perks from Bespoken Vest.

He's the one who pointed it out that we are seeing this huge surge in factory construction as a share of GDP.

In fact, that figure is now at a record as a percentage of GDP.

Some of this has to do with the Chips Act, some of it has to do with the IRA and basically a lot of the fiscal stimulus that has been put into the economy to try to get this stuff built.

Now, as George pointed out in an email to me, he said, basically this looks at investment as it takes place.

So in other words, you have initial site prep in some cases, sometimes that's the most expensive part of the process.

He says it's unclear how long that this trajectory will last.

He says we're not seeing equipment investment pick up next, which presumably would be kind of the next phase of this.

But we did talk to Sa Subramani and earlier from Bank of America about this sort of infrastructure boom that we are seeing and she talked about whether she thinks that it continuing will hinge on the election.

But I think the idea is if cities want to court all of these new businesses and new jobs and economic activity, they need to make sure they have the infrastructure in place to support that.

And I think that is necessitating and maybe hastening a a an infrastructure spending cycle that is, you know, kind of as you put it uh agnostic of, of, you know, who wins the election, government spending fiscal spending.

So in other words, she doesn't think that who wins in the presidential election will matter much for infrastructure spending.

And as you know, we just had a conversation with Bob Clark of the construction giant Cleo and it sounds like whether he's building data centers or helping build some of these factories as well.

Things are going gangbusters.

Yeah, he sounded very bullish Julie.

Um So you mapped out the big trend there any ways to play it for?

Yeah.

Well, Sabina talks sort of in the very big picture of buying into infrastructure, building type names from George Perks again over at Bespoke.

He gave us some specific examples of companies where this might work.

These are various companies are in construction.

We're looking at the year to date chart.

So you can see in most cases these stocks have already gone up quite a bit.

We're looking at M Corp up 61%.

Some of these are Canadian based by the way, but they've seen big increases as well.

Stanch is this one that's up 11%.

Uh We've got Atkins Reales up about 33%.

So already a lot of these names have been going up but he says companies like these like Mastec like a com should continue to benefit as we see this boom.

Most of these guys pro pro um provide either services, construction project management type services or in some cases some of the materials as well around these construction projects.

All right.

Thank you, Julie.

Now let's take a look at what's trending here after our shares of Sketchers, they are rising higher following a mixed earnings report.

Footwear company beating estimates on the bottom line while net sales of 2.16 billion came in below street expectations.

This company also raising though its full year guidance and announcing a new $1 billion share repurchase program.

Sticking with shoes deckers, outdoor shares getting a boost after the company's fiscal first quarter results beat estimates and raised its profit outlook.

The company's incoming CEO giving a shout out to brands HOA and Ugg for their fantastic performance during the quarter in the release and Norfolk Southern share, they're jumping after hours after the company reported sales rising for the first time in five quarters, the rail giant topping second quarter earnings estimates while revenue came in line with Wall Street's expectations, rising revenues.

Aside, the company's turn around plan is to take hold and L three Harris edging lower.

After raising revenue margin or eps guidance for the full year, the aerospace and defense company topped expectations for adjusted earnings per share in second quarter with revenue of 5.3 billion that came in line with estimates for the period.

That is a wrap on today's ask for a trend and be sure to come back tomorrow at 4:30 p.m. Eastern for all of the latest market.

Moving stories affecting your wallet.

Have a great night.