The S&P 500 and Nvidia, Chipotle stock split: Morning Brief

It's the middle of the week, but stocks aren't slowing down. The Morning Brief keeps investors informed on the latest market (^DJI, ^IXIC, ^GSPC) movements and top industry stories to start the trading day off right, hosted by Seana Smith and Brad Smith.

In today's episode, Stifel Chief Equity Strategist Barry Bannister weighs in on Nvidia's (NVDA) broader market influence on tech-heavy indices like the S&P 500. CFRA Research Energy Equity Analyst and Deputy Research Director Stewart Glickman also comes on to discuss FedEx (FDX) fourth-quarter earnings.

Other top trending stocks in Yahoo Finance's purview for this morning include Chipotle Mexican Grill (CMG) after its 50-for-1 stock split takes effect and begins trading at an adjusted price; Rivian (RIVN) after Volkswagen (VOW3.DE, VWAGY) announces its willingness to invest up to $5 billion in a joint EV software venture; and Southwest Airlines (LUV) as it slashes its full-year revenue guidance.

This post was written by Luke Carberry Mogan.

Video transcript

It's not AM here in New York City, I'm Brad Smith alongside John Smith, and this is Yahoo Finances flagship show The Morning brief that features are under some pressure here this morning.

Wall Street cooling its rate cut expectations that is playing on the broader market.

Let's get right to the three things that you need to know.

This Wednesday morning, as we prep you for trading day, we've got Yahoo Finance, J, Madison Mills and Superman with more in video strikes.

Back Chip Maker Staging a Comeback After snapping its three day losing streak, the viable to trading sessions they had thrown in video as the world's most valuable company and accumulated a loss over $430 billion in market cap shares are moving higher on the back of its fourth quarter results.

FedEx earnings beating on both the top and bottom line.

But what's moving the stock higher is actually the company's cost cutting efforts.

The firm saying it's on track to achieve its $4 billion cost cutting goal and expect an additional $2 billion to consolidate its air and ground services.

But it's also announcing plans to repurchase up to $2.5 billion worth of shares this year 2025 and Rivian shares surging in pre market trading after the EV maker inked a big joint venture deal with Volkswagen.

The pair will create new EVs using rivian technology that will underpin both companies and next Gen EVs.

In exchange, VW will make a $1 billion investment in the GVJV, with up to 4 billion in additional capital coming as part of the deal.

Now Rivian stock is up more than 30% in pre market but down nearly 50% year to date.

Well, our top story of the day is NVIDIA.

The chip maker is looking to stage a comeback, snapping its three day losing streak, and NVIDIA's slide dented the tech rally that has powered stocks to fresh highs this year.

But the last moves and the latest moves are showing the S and P 500 sensitivity to NVIDIA's stock movements.

At least that's what our next guest says.

Joining us now We Barry Bannister, who is the steel chief equity strategist here.

Barry, great to speak with you here this morning.

Thanks for joining us ahead of the opening bell.

Gonna be another critical trading session, it seems, at least for NVIDIA.

And that could mean for the broader markets as well here.

I mean, just how much weight does this one name continue to have overshadowing kind of the rest of the market machinations?

NVIDIA is like the Cisco of our day.

If you think about it, it takes about one generation to forget about a bubble.

And, uh, the average baby boomer was about 41 years old in 1999.

Uh, they drove stocks up.

Uh, vertically.

They loved Cisco.

It became the most valuable company.

Um, we had extreme optimism, narrow markets, high valuation.

Um, day traders with strange names.

Uh, we even had overzealous prosecutors in Washington.

Back then.

It was Ken Starr going after Bill Clinton.

Now we've got these.

So I'm just astounded, by the way, things are very similar to 25 years ago.

And if you get more quantitative, even more so, NVIDIA is just the, um, poster child for this bull market.

So then, Barry, what does that tell us about where we're headed from here?

Here we are.

And we're not too far from those record highs.

We're under a bit of pressure here this morning, but more so for the broader market.

What does this end signal?

Well, the market's expensive.

I mean, uh, if you look at, uh the way we calculate equity risk, premium the earnings yield above the risk free, uh, yield on offer.

It's at about 2.5.

We think it should be about three.

So the S and P is a good 10% above where it it it it should be.

There are a lot of other ways to value the market and look at equity ownership as a percent of households.

Financial assets, these are at record highs.

These are at enormous levels.

So, uh, we're concerned about future returns being lowered by the high level of today.

There's no better way to get a low long term return than to overpay in the current day.

Um, so right now, we're looking at higher than expected inflation and lower than expected economic growth in the back half.

This is a moderate form of stagflation.

We don't see any Fed rate cuts this year, and as a consequence, the market can pull back.

And that's been our call.

What's the extent of the pullback, Barry.

Well, we, uh you know, I wouldn't, uh I wouldn't, uh, feel disappointed if it fell 10% to about 4900.

We've been saying 4750.

We know that May October not just quantitatively historically, but in this current context, May October is a pretty risky period if you're gonna be getting more bullish, maybe think about doing it in the fourth quarter.

But I would I would be cautious, have some protective puts here going into the summer and early fall.

Barry, when you just said we're expecting lower than expected economic growth in the second half of this year, what do you think that is gonna hold for the earnings guidance that we hear from companies Where, based on some facts, that data earnings growth for the second quarter is expected to be brought across indexes.

Eight of the 11 sectors projected to report year over year growth.

But it's also gonna be about what they're sensing in the macroeconomic environment going into the second half of this year, that investors are really gonna be leaning on to an extent, the things like initial claims picking up the consumers, uh, acting a little tired.

You saw the retail sales number, which is mostly the good side of the economy.

But the services side of economy is red, hot and super core P CE is the part of the is half of the P CE core inflation, and that's the one that worries us.

But beyond that, um, I think what's gonna happen is, uh, Net exports, uh, are going to be a very big detractor in the back half.

I mean, much larger than normal.

Uh, within the, um, uh, GDP figures.

And that's because of the strong dollar and the slow growth overseas.

But, um, as we go through the year, I think we'll scape by a recession.

I think it's just gonna be very sluggish.

And, uh, the big issue really is inflation.

That's the one.

That's the number.

I don't expect a bad number Friday when we get the P CE inflation.

What I think is starting in the June data on July 26th, we'll start to see an uptick all through the rest of the year, and we'll be at 3% by the, uh, late third, early fourth quarter, Barry going back to what you were just saying a minute ago here, when we talk about some of the pressures that we could see on the broader market, you mentioned the fact that NVIDIA could be the next Cisco.

I'm curious.

More so why just given the valuation gaps that we're seeing is not exactly an apples to apples comparison.

So what is it about NVIDIA that you're seeing that makes you a bit worried that this could end up like the next next Cisco?

Well, yeah.

Uh, when I say the next, they're already what?

Cisco was back in 1999.

So they are the largest company.

They are the darling.

Uh, but the valuation difference, you know, consider that semiconductors are capital goods.

They're very small, short cycle early cycle capital goods.

Um, they, uh, don't typically get an enormous multiple like you would give to a very high RO IC low, incremental cost company, like, uh, software.

Uh, where there's enormous return on capital.

Sure, they're getting the build out of a I.

But once you build a bridge, you don't need to build it twice.

So the build out will not be a continuous process that you can discount over 45 times earnings, Um, over 45 years, even with growth.

So that's one thing to consider.

The other is that if on NVIDIA specifically, uh, it's called the second derivative the change in the rate of change of analyst EBD a revisions.

That's the thing that we found that guides the stock.

So if you look at the year to year change of NVIDIA stock, it's the year to year change of the change.

The revisions and analyst Eva DA estimates we published a note on this, and, uh, that has rolled over decisively two quarters ago.

So what we think is the stocks year to year change will diminish.

It'll still be positive, but it looks for a correction.

Uh, I would say, probably in the high eighties, uh, by the, uh, late third quarter and Barry just lastly here, uh, you know, one of the huge things that we saw with Cisco was a major pullback after the.com bubble.

Do you anticipate the same type of stock correlation where investors are gonna say Ok, who else are they possibly gonna sell to?

And then you just see a range bound company for an extended period of time No.

What happened with Cisco is, um and same thing happened to Microsoft and, uh, Amgen and a number of other big cap stocks is their PE multiple was too high and they earned into it over the course of the next 15 years, so the earnings went up dramatically.

Uh, as was expected.

This happened with the nifty 50 stocks in the early seventies.

They earned very well, but their PE multiples were too high.

Their PE ratios, the nifty 50 in the early seventies.

If you look that up on Wikipedia or, uh, Chad GP T, um, that if you look it up, you'll see that those companies had these mid thirties forties time multiples they earned into it over the course of a decade.

But what we have today is extreme optimism on new technology.

And it was the Internet.

Now it's the A I narrow markets, increasingly narrow markets.

Uh, with a high valuation equity ownership was very high, and the day traders and all that I'm just saying that you have to have been there 25 years ago to remember that it was a very similar feeling environment today.

I was just opening up my ETrade account back then.

Barry, I was just getting things started.

I wish I was around for it.

I was a securities analyst.

Uh, and, uh, had been one already for 20 years.

And, uh uh, it was, uh, or nearly 20 years and, uh, I covered industrial stocks.

And so, uh, I was very close to the cyclical world.

Still looking 34.

Barry Looking good, Barry.

It's always great to have you.

Barry Van and source Evil's chief equity strategist.

Thanks so much hopping on and joining us here this morning.

Let's take a look at FedEx.

FedEx is the top turning ticket on Yahoo Finance Shares are surging this morning after its fourth quarter earnings beat, proving its cost cutting efforts are working now the shipping giant saying that capital spending declining 16% in fiscal 2024.

CEO touting quote, unprecedented results in the current environment and you're looking at gains of just about 13%.

We wanna bring in Stuart Glickman.

He's CFR is a research energy equity analyst.

Joining us now, Stuart, it's great to have you.

So I think a lot of this optimism, really, what is driving the stock here this morning has been that some of the commentary surrounding FedEx freight and exactly what that could look like here, going forward.

What do you think about the potential spin off there of that business?

And ultimately, what that means for the stock, right, Shana?

So, yeah, I think that was interesting news that came out last night that a potential spin off of FedEx freight draws a lot of a lot of interest.

Uh, because the margins, uh, in freight are are are are really quite good compared to FedEx overall.

Um, but don't dismiss, I think also, um, some of the other, I think positives from the quarter, um, revenues did not miss, which is a nice change to see.

Um, and to your earlier point, the cost cuts look like they're finally, like the rubbers finally hitting the road there, so to speak.

Uh, and, you know, 1.8 billion of savings in fiscal 24 that just ended with the May quarter, another 2.2 billion coming in fiscal 25.

And so the fact that FedEx is delivering on the cost cuts, um, able to, you know, expand its its buyback programme.

Uh, and to your point, um, possibility for a spin off, I think makes the stock attractive this morning.

And I think that's why you're getting the pre market bounce.

Transports have been a battered sector over the course of this year thus far.

What is this signal about the economy?

More broadly, at least from the read through in in FedEx's Lens?

Right, Brad?

So you're right.

Um, transports have been, have have struggled.

And I think one of the concerns that's affected this space is, you know, volumes, you know, have really struggled to make any kind of traction.

Um, in the US business, that continues to be a little bit of the case, Um, where and and and even, you know, FedEx's guidance for next year?

Revenue growth is only supposed to be mid the, you know, low to mid single digit growth.

Right?

So we're not talking about, you know, a looming broad macro recovery.

Um, I would also point to FedEx's earlier moves from the quarter where they, uh eliminated, for example, 2000 jobs in Europe, which I think was also indicative of concern that a broader macro recovery, at least in Europe, is not coming around anytime soon, because otherwise why would you let those folks go?

Um, so I do think that the macro picture does look troubled.

Um, and so FedEx is doing.

For the most part, I think what what most companies would do under those circumstances, you cannot count on sort of a broad macro tail wind.

So you really focus your efforts on cost cutting.

And so far, they've been doing quite well on that front.

So when it comes to the valuation, you're potentially a FedEx freight.

How much do you have?

Any idea just how much that business could potentially be worth?

You talk about it.

Maybe, or at least in the lens.

It seems like for investors right now thinking that this could be a catalyst, what do you think that valuation could look like?

Right, So and that's a little bit tricky.

But I, I guess what I would point to is the The operating margins in less than truckload freight, uh, are are generally much better than they are for FedEx as a whole.

So you know you're getting operating margins Probably somewhere in the 20% range.

Uh, for that LTL business and that compares quite favourably with FedEx Ground or FedEx FedEx Express.

So I think it's a bit premature to say, you know, to to to put a sticker price, uh, on the value of the company as a whole.

But certainly I think that if you're going to be selling off the LTL business, um, you know you're going to be generating, um, a fair amount of operating income, Um, from that from from those divested assets.

And so that should fetch, uh, a decent price.

Stuart Kliman, who is the CFR, a research energy equity analyst?

Tracking all things at FedEx, took a simple FDX move, and I are 13.5% here.

Pre market.

Thanks so much, Stuart.

Thank you.

Let's turn now to the auto space shares of Rivian popping on the announcement of a $5 billion investment from Volkswagen Group.

Now here's what this pertains.

The automakers are forming a joint venture that will focus on creating tech for electric vehicles.

The partnership comes amid a broader slowdown in EV sales and is seen as a lifeline for Rivian, which has struggled with cash burn Rivian is down nearly 50% so far in 2020 four.

Here with more is Yahoo finances pro Superman and hey, pros.

Hey, what's going on?

Not much.

We're just trying to figure out what's out with R in here.

Yeah, so?

So basically, you mentioned this deal.

This is a This is a big joint venture.

Uh, situation here.

Right?

So, um, the money is gonna go towards, uh, building next generation software defined vehicles.

But basically, what this means is, ultimately what this means is Volkswagen is paying through AJ V for review and technology, their zonal hardware design, which is sort of the pins or R one vehicles and then also electrical architecture, all the all the different, uh, elect Connectivity motors, things like that.

They're paying for it all.

They're gonna pay that $1 billion initial investment convertible into stock at some point, plus an additional $4 billion into the joint venture for a commitment of 5 billion.

Like you mentioned, it's a big deal for them because of the fact that cash burn is a problem.

There's concerns about how they're gonna bridge over to their R two NextGen vehicles coming in 2026.

Do they have the cash to get to that.

Now they do, and you have the backing of a major one of the largest automakers in the entire world.

Is this a win for V W-2?

And I guess also, just in terms of if this partnership is successful, are there other EV makers that maybe could potentially stand to benefit from this too?

So the VW thing is very interesting because I was on the on a call last night with analysts and VW CEO Oliver Bluma and the analysts were saying, Hey, what's going on here?

You're already spending a lot of money on EVs.

Why are you now buying more tech from company?

Are you double dipping here?

What's gonna say?

No, no, no, we're not doing that.

We're using our other technology and other VW corporate brands, but we're using brine stuff for future vehicles.

People surmise they have a scout brand coming up electric adventure vehicles.

That could be where the Rvi R two pops up in the VW world.

But you mentioned, uh, other companies can benefit from these types of, uh, licencing situations.

I think there is a a city note today talking about how lucid could be the next big sort of, uh um, beneficiary of this because they've already licenced technology to Aston Martin.

They build their own motors, the architecture, all that stuff batteries.

And they have the know how to sort of.

Here's a package for you to build your EV.

And I think that, um, maybe there's some overall bullets in the entire space.

Even Fisker.

Look, they went out of business, but they have valuable IP.

Technology like that could go somewhere.

All right, pros.

Thanks so much.

Tracking all things rivian plus Volkswagen and the entire automotive landscape.

Appreciate it, everyone.

We're just getting started.

On the morning brief coming up, Southwest shares are sinking after slashing its unit.

Revenue estimates for the second quarter will break down some of the top trending tickers next.

Plus, it's been a big week for health care stocks.

We speak with the strategist on how you can play the farmer space later on in this hour and then stay tuned for our 10 a.m. hour catalysts where Shana and Mattie are gonna speak with an analyst calling uber quote sleeping giant.

All this and more.

You're watching Yahoo Finance time for some trending tickers here.

Let's kick it off with Southwest.

You're looking at declines of nearly 5% the stock falling after the company slashed its revenue guidance for the second quarter.

Now Southwest is now projecting a drop of as much as 4.5% in revenue per available seat mile.

That's an adjustment from the previous expectations of 1.5 to 3.5% decline.

So now they're expecting a larger decline here, the company saying that this is primarily driven from by complexities and adapting its revenue management to current booking patterns in this dynamic environment.

They also went on to say that the company continuing to expect an all time quarterly record for operating revenue in the second quarter of 2024.

But again a lot of this coming down to demand ability to meet demand.

We know when it comes to what is available in terms of planes and supplies there.

That has been a critical issue here for many of these airlines over the last couple of quarters and really ultimately what needs for meeting some of those initial projections in the second half of next year and of course, looking ahead to 2025.

But again, a lower guidance here is clearly taking a hit with the stock.

So a lot of people asking just ultimately, whether or not this is a Southwest specific issue or if this is something that is also signals issues elsewhere within the airline space, one of the low cost carriers here.

Perhaps this should have been anticipated to a certain extent from some investors out there, especially if you continue to see economic data prints like we did in CP I, where airfares were actually continuing to decrease, continuing to decline.

So that is one point that I would actually continue to remind people about is that some of the economic data had already showed this, um, in the in the tape, if you will.

For Southwest Airlines and some of the other low cost carriers here, what's also worth noting here is that it's not gonna affect the ninth consecutive quarter that they were projecting of record revenue.

They noted that within this filing here, um, the company expects second quarter, uh, revenue per available seat mile to decline in the 4% to 4.5% range as we were mentioning here, but they're also noting that this is not going to impact the expectation of an all time quarter for or all time record quarterly record for operating revenue in the second quarter of 2024.

This is something that they had talked about in their most recent, uh, earnings call as well.

And so that's not gonna be impacted.

However, shares, uh, certainly taking it on the chin, at least here this morning.

Um, and then the other thing to really continue to keep in mind here is some of the fluctuations that they could see in routes that consumers are expressing more propensity to travel to.

And weather plays a huge factor in that, too.

And so, even as we're kind of looking across the airline industry right now and many of the airlines in a few weeks and closing the books on their quarters, the the heat waves that we're seeing across the country, that could have another impact on where you do see travel cancellations, booking cancellations, or even pushing those out even further here, too.

So, uh, that's one thing to consider, especially as we get the outlooks when they do report earnings for this, uh, current quarter as well.

All right, let's take a look at Whirlpool.

It's another stock that is trending here on Yahoo Finance shares our surge and look that up just around 18%.

The company, uh, that, uh, this comes after German engineering group Bosch is reportedly eyeing a bid for a whirlpool.

Now, this is according to a report here from Reuters, in a statement to Yahoo Finance Whirlpool saying Quote as a matter of policy, we do not comment on market rumours or speculation.

So lots of questions about the odds of this happening and why this could potentially, uh, make sense here for Bosch.

And this would significantly, uh, help boost Bosch's home appliance business.

Obviously, at a time when there is much competition within the space increasing competition within the space when it comes to what Whirlpool could potentially add to Bosch's business, it could be viewed as a catalyst here for shares going forward for their business going forward.

But again, we're looking at gains of just about 18% bred.

Yeah, Whirlpool had been offloading certain parts of its business as well.

Anybody who listened to the last earnings call heard them talk about executing on the announced sale of their 24% stake in Whirlpool of India.

They still about 51% ownership.

But it does beg the question of what parts of the business they're open to evaluating a potential sale, if not the entire business.

So that is one of the areas especially considering what they've been talking about within the demand that they're seeing, especially here in North America.

They continue to see that industry volume being soft, at least during this past first quarter promotions, remaining elevated, persistently high interest rates and then that continuing to put pressure on housing affordability and overall consumer discretionary spending.

What's that mean?

Less fridges, less washer dryers, that people are perhaps, uh, replenishing as they're getting into some of or historically would have been getting into some of those new homes And, uh, and and pads or or cribs?

Yeah, and I mean and take a look at the stock right?

We just have some of the longer term, uh, charts up on the screen there.

Year to date.

This is a stock that's tremendously underperformed the broader market.

You're taking a look at the last 12 months.

Not much of a different story.

They're looking at decline of nearly 40%.

So they need to turn around the business.

They need to figure out something that would look attractive.

So maybe you never know, but maybe Whirlpools board would entertain it.

Is entertaining this offer if there's one.

Yeah, that true?

All right, let's also talk a little General Mills.

Where, uh, some people might Well, anyway, I was gonna try and make a correlation to Whirlpool.

There is none.

Anyway, General Mills shares falling this morning after reporting mixed fourth quarter results and issuing softer than expected guidance.

The Cheerios maker also seeing sales fall 6% from a year ago.

Shares are down 6% right now.

And the cereal business, I mean, I always do a command that for cereal, just to see what they're saying about that, uh, they did mention that within the North America retail segment, net sales were down about 1% to $12.5 billion.

Organic net sales 1% below a year ago results, uh, that actually grew double digits.

And so, um, it's interesting.

I mean, pet seems like one of the stronger elements of the business right now, especially as you're kind of evaluating what North America retail for them is looking like in that pullback of about 3% for the full year.

As we're tracking at this point.

Yeah, I think when you take a look at General Mills business the fact that they did come in below expectations on the guidance, lots of questions about what is going to happen to this business, at least in the short term they're under a tremendous amount of pressure to lower prices at the same time that they do do that, then they need to significantly boost volumes.

And you're doing this at a time when millions of Americans are still under a tremendous amount of pressure from a very sticky and persistent inflation.

So again, it is a tough set up for a name like General Mills.

And there is some caution.

I was looking at the quick, uh, analyst commentary here, or reaction.

I should say to these, um, to these results.

And and there was some speculation that we could actually see a softer, uh, second half coming up when it comes to the pet business and Maybe it's not gonna be enough to offset some of the weakness elsewhere.

So again, they're under a tremendous amount of pressure to lower prices.

They also need to boost volumes and to offset some of that pressure on margin.

So we'll see whether or not that can be done.

Seems like they need some new ideas and they know it.

They said they plan to drive even more of the reinvestment and exciting growth ideas that meet evolving consumer needs.

So I don't know what that looks like.

You've already got honey nut Cheerios out there.

What more investment and innovation is there?

And there you go.

All right, we're just minutes away from the opening bell on Wall Street.

Two minutes, uh, away here.

You've got all three of the major averages under a bit of pressure.

We'll be right back.

Oh, yeah.

That's the opening bell on Wall Street and in Midtown Manhattan at the NASDAQ.

You've got a great group of bell ringers there, Uh, both on your right and left side of the screen.

AeroVironment ringing the opening bell at the NASDAQ a V and sound point.

Meridian Capital.

SP MC is the ticker symbol there.

Lots of collapse, lots of cheering, lots of fun.

Fetti.

All right, that is the opening bell.

Let's do a quick check of the markets as we're taking a look at the Dow, the S and P 500 the NASDAQ.

The Dow right now begins the day lower by about 300 points, equates to about three quarters of a percent the S and P 500.

You're seeing that hold on to gains out of the gate here this morning.

It's up by about 4/10 of a percent.

The NASDAQ composite ripping to the upside.

Right now it's up by about one and a quarter percent.

We'll see if we can hold on to that.

All right, let's get over to Jared.

Lucky, he's just over on the other side of the studio at the interactive.

Jared, what are you looking at Right here?

I am looking at Bitcoin this morning.

We've had some volatile action recently, but not this morning.

You can see it's up about half a percent over the trailing 24 hours.

I want to look at a year to date chart so we can see the consolidation that's been happening across at these highs.

So we have basically from the high 50 thousands all the way up to the highest about 73,000, and we are at the lower end of this range right now.

So if everything continues the way it's been going for the last few months, you would expect it to retrace to the top.

Now, if it breaks down, you're going to see some people saying, Well, this is an M top, but it's too early to call that right now.

You need to get a decisive break below about 58.

57,000.

That happens.

That sets up 45,000 as the next target.

And what could be the catalyst here?

Well, over in Japan, Mount Gox that that firm, that crypto firm that went south about 10 years ago uh, they had a bunch of Bitcoin stolen about 700,000, 100 40,000 are going to going to be distributed by the trustee that could come to the market.

That could result in a lot of selling.

Um, and that could happen in the month of June.

It could happen in the month of July.

Uh, but sometime this year.

We are expecting that.

So that is a catalyst, a potential catalyst and a risk that we keep in mind.

But, uh, let me just show you the longer term technicals.

Here is a five year chart of Bitcoin.

I'm going to compare Bitcoin to some of the other cryptocurrencies that we have.

What you see here is we are just consolidating that the consolidation area is really small that we are just looking at on this longer term chart.

But it is higher than these highs we had in 2021.

Compare that to Ethereum.

Here we have a low, a higher excuse me a lower high here.

And this is another consolidation area, but just at a lower level.

And then you take another token, like Solana, very similar to ether, but just a little bit lower itself.

And this continues down the line.

And when you get to Cardano, you can see it's still in the bottom end of its range here.

So not all crypto has come back and we have a lot of laggards.

It kind of reminds me of stocks, how you have stocks like peloton that just haven't been able to bounce back the way Microsoft and Netflix have.

So there is that dynamic going on.

But also, I want to point out that another potential bar impulse or headwind against these, uh, cryptocurrencies is the US Dollar Index and that is heading higher right now.

This is a year to date chart.

This is the highest level for the dollar in about a year.

Uh, excuse me in about four weeks, and if it were to breach these highs here, that would probably put some downward pressure on cryptocurrencies commodities International stocks.

We're not there just yet, but we want to keep an eye on it, Guys, indeed do.

And we know you will.

Jared Blier.

Thanks so much.

Appreciate it.

Well, Chipotle's 50 for one stock split is officially in effect.

This is the Burrito Giants first stock split and one of the largest ever in the history of the New York Stock Exchange.

Yahoo Finance's Brooke De Palma is here with everything you need to know.

Hey, Brook.

Yeah.

Good morning.

Chipotle shares are falling this morning down roughly 3% of the stock split this morning.

Shares of Chipotle were over $3200 as of Tuesday's market close.

Now, shares are trading around $64 per share after the company issued 49 additional shares per share owned as of market close on June 18.

Now three factors worth noting here, a stock that makes shares more accessible to investors and to the company's employees.

On the other hand, one expert warned to finance that the stock could be exposed to a little bit more to some level of volatility at the share price.

And lastly, stock splits are purely cosmetic, with no impact to fundamentals.

But they are largely a sign of confidence from the company.

Shares also do tend to see higher returns following stock splits.

Year to date, shares of Chipotle before Market Open were up around 40%.

If you take a look at another company that also conducted a stock.

But earlier this year, WalMart will shares the retail giant are up around 11% year to date in that or rather in the last three months after it conducted its stock.

But back in February, and that's compared to the S and P 500 which is up only about 5%.

All right, Brooke, thanks so much for breaking that down for us again.

Chipotle a stock to watch here in today's trading day.

Let's take a look at the broader market.

We're seeing some pressure across the board as we're just about five minutes into the trading day.

A lot of focus has been on Tech.

You've got invidia shares, at least here at the open, under a bit of pressure off just about 3/10 of a percent.

Giving back some of the gains that we saw yesterday, our next guest saying that it might be time to rotate out of some of those larger cap names we wanna bring in.

Matt Stuckey.

He's Northwestern Mutual Wealth management's chief portfolio manager.

It's great to talk to you, So let's take a step back.

Talk to me about what you're seeing here.

Some of the caution Maybe, uh, that you're warning about when it comes to large caps and what investors should be doing today.

Well, really, our our caution towards US large caps is a function of a little bit of caution towards the economy here, Um, you know, we still are in the camp that the end destination for what's been the fastest hiking cycle from the Federal Reserve in more than 40 years is ultimately some form of a mild recession.

And when we're looking at different asset classes on the equity side of our portfolios, US large cap expectations are what's built into the price.

Don't give us a lot of compensation for that thesis on the macro side of things.

And what I mean by that is, if you're looking at 2024 2025 earnings, they're expected to grow double digits.

And against those double digit growth rates, we're expected to pay 22 times 24 estimates and and about 20 times 2025 estimates.

That's a full valuation, not a lot of compensation for if something does go bad with the economy.

Yeah, and and that's you know what?

We were talking about a little bit earlier on trying to figure out if we did see some volatility or at least, uh, a worsening economy in the second half of this year.

How that would translate through to valuations.

What?

What are your anticipations?

Well, usually something has to give if the economy starts to falter and earnings are under pressure.

Um, price tends to follow that as well.

Um, you know, looking at, you know, the various macroeconomic indicators that we follow.

I just can't stop looking at leading economic indicators, and I know they haven't really played out as they have in historical cycles, but just looking at the actual index today, it's down almost 15% from its highs, you know, typically, we've seen recessions.

Historically, if it's off just 10% there's only been three other times in the last 80 years where it's been down more than 15%.

And that was the recessions of 1973 19, 82,007.

Um, so certainly there's some warning signals here that, you know, we can probably rotate out of asset classes that are expecting continued growth, soft landing and acceleration of the economy, and into things that give us a little bit more defensiveness in our portfolios or don't have as egregious expectations built into the price on the equity side.

And what would some of those investment opportunities be?

Well, I think US small caps can make some sense here, and and typically it's a little bit funny to recommend that, um you know, given that they're a little bit more economically sensitive, but, you know, US small caps trade at eight times three the cash flow.

Um, that is AAA recession level valuation that you just don't see anywhere else.

Uh, across the equity investing side of things today, Um, you know, and given our view that what we're likely to see on the on the recession side of things is more mild in nature that the Fed is going to likely be able to cut quite a bit.

Um, you know, typically, we see US small caps respond positively to those effects.

Um, so there's a little bit of catalyst on on on the other side of all of this that we think is attractive and it's overweight in our portfolios because of that I, I guess, boiled down as well, though, Is that the case for small caps?

Just that it really hasn't participated in the rally thus far.

And and that's the area where we could potentially see the the next, uh, you know, upward trajectory or or or trend higher.

I think that's part of it.

But I also think that, um, thinking through the next kind of leadership cycle as the economy moves past this economic expansion and and starts another one.

Usually, leadership also changes in the market and US small caps tend to be earlier in in an economic cycle in terms of demonstrating our performance.

And we want that well represented in our portfolios.

Now, when it comes to some of the valuation, uh, comparisons that have been made here between a lot of those a i stocks when it comes to maybe the excitement surrounding NVIDIA and comparing that to what we saw, uh, 20 plus years ago, uh, with Cisco, you're talking Barry Bannister over at Steel about this, uh, at the top of the hour.

I'm curious what you make of those comparisons and whether or not there is some sort of warning sign or signal that you are seeing from the massive run up in some of these a I names.

Well, since you mentioned NVIDIA specifically, I think it's a little bit different than we saw in the late 19 nineties.

You know, NVIDIA certainly has the margins, the cash flow of the earnings, Um, and you know, from my perspective, the question is not so much really the valuation today, but you know more.

So is the return on investment of all of this A I infrastructure going to keep demand levels into the future to support the stock.

Uh, we just don't know the answer to that because we're in kind of more of a test and learn phase across corporate America as it relates to artificial intelligence.

Diligence really on the product deployment side and return on that.

All of this investment.

That's when we're going to know whether or not this valuation is sustainable.

Um, you know, and and and you can probably apply the same kind of logic to a lot of the other A I winners out there, you know, we're the belief that artificial intelligence is for real, that productivity gains are likely to be, uh, quite strong from this technology.

We just think it's further out than what we're likely to see in 2024 even the front half of 2025.

And so evaluations are getting ahead of their skis a little bit on that, then and then about how long could you expect for the actual benefits of the technology to be realised and then, uh, the companies actually grow into those Those, uh, those valuations, I guess, um, over realised, kind of appreciation of that technology.

IRL I. I think it's more of a a two plus year out kind of framework that we're thinking about with that, um, and that's well beyond the window of where we see some macro pressure, enter into investor mindsets and and keep in mind, these aren't exactly low beta names.

And so, despite you know, a a strong story to tell as it relates to the deployment of this technology, they are volatile stocks.

And so, um, you know, just be careful in terms of how much exposure you have in your portfolio to some of these positions, because despite a good story that's behind it, it wouldn't be surprising to see the move around quite a bit if if the macro gets a little bit rocky from here.

Great insights.

Matt Stuckey, Northwestern Mutual Wealth Management chief portfolio manager of equities Matt.

Thanks so much for taking the time here today, just after the market opened.

Coming up.

It's been a big week for health care stocks.

We'll speak with a strategist on how you can play the farmer space next wave of developments in the pharma industry this week.

Capturing Wall Street's attention.

We've got Eli Lilly's diabetes and obesity drug showed positive results when used to treat sleep apnea in obese patients, sending shares of companies that make machines for sleep related complications like ResMed and also inspire medical.

Those shares were under pressure to uh this week and Nova Nordisk also getting some positive news for its weight loss drug after getting approval in China.

So here, what the top ways to play the sector we wanna bring in.

Jared Holt.

He is a Mizuho's health care equity strategist.

Joining us now, Jared I.

It's great to see you.

So we just take a look at, obviously the excitement surrounding, uh, these drugs within the pharma space and exactly what that is going to do to stock prices.

Clearly, we've seen a run up in Eli Lilly.

We've also seen a lot of the excitement play out in Novo Nordis.

I'm curious from your perspective.

How much of this how much of this hype and excitement has already been priced in to shares at this point, or whether or not maybe these two stocks still have room to grow great to be here.

Thanks for having me.

I mean, that's the real question here.

I mean, these have been monster stocks for the past few years.

Another banner year for Eli Lilly, up over 50% Novo Nordisk up over 40%.

Still think there's room here, though?

I mean, the one thing that I keep on coming back to when looking at both of the stocks is kind of what the supply demand metrics look like for the G LP one market and we're still in, I think the infancy stages.

Considering that it's only been about a year since both drugs had been on the market for obesity specifically and then we talk about all the demand in the market that seems, at this point unlimited.

Plus, you've got all these different catalysts for, you know, not curing, but at least addressing all these un other underlying medical conditions which make the drugs even better.

So I think it's very hard to kind of predict either name from a a valuation standpoint alone.

But I do think the news flow over the next 6 to 12 months and even into next year, um, are gonna be potentially prolific because we're gonna be talking about more and more indications that the drugs satisfy.

With that in mind, I mean, investors are always looking at the health care space for the the next major breakthrough or scientific advancement.

What is that beyond G LP ones at this juncture?

And is it is it clear which company is pioneering that?

It's not really clear at all.

I mean, I think in some respect, the next you know, innovation wave could still come as a result of the G LP one class because both companies are looking at their technology for use in neurological diseases, including Alzheimer's disease.

And we're gonna have data on that, um, roughly a year from now, maybe a little bit later than a year from now.

So as I kind of like look across the complex in BioPharma, the G LP, one still might be, you know, the centre of innovation in terms of like what you're talking about the next leg, or, you know, the next exciting area.

Because outside of this, I just don't see market opportunities when we talk about dollar or revenue opportunities being anywhere near as significant as what these are gonna do so J When it comes to I guess the potential here as to be the catalyst, then for other names within the industry.

We spend so much time and rightfully so over the last 6, 12 months, I'm sure for you a lot longer talking about We're pleasing a lot of the emphasis on Eli Lilly and Anna Novo Nordis.

Are those the two top plays within the sector?

Or are there other names that maybe investors should be taking a look at here that could kind of ride the the coat tail, so to speak and also, uh, get a boost from some of this D LP.

One excitement?

Well, yeah, I mean, I think for me, Novo and Lily are still gonna be the top two.

You know, as long as they're dominating in in this kind of section of the market.

Um, it's really tough to, you know, not ride these a little bit longer.

Um, as far as other players in the G LP, one market that might emerge that are of interest or intrigue to investors, I think we're still trying to understand from Amgen what their monthly G LP one data is going to look like that's gonna be available sometime this year.

Not precisely sure when, but they're looking at, you know, the use of the weight loss drug on a monthly basis.

That's versus Lilian Novo, um, Weekly.

So that's one to kind of watch out for I mean, I've been pretty bullish on Merck all year given valuation, given the fact that they seem to be doing a lot of smart things from a business development standpoint to kind of dilute the effect of keytruda losing patent exclusivity closer to 2030 That's been the big concern that you know the lion's share of their revenue is going away.

But they've done a lot of smart things in terms of, um, acquisitions and otherwise, to kind of make sure that that erosion is not as extreme.

Um, and I think AstraZeneca is probably fourth.

So I think Astra and Merck as kind of like still very solid quality names in pharma that you can play.

Um, they don't have huge GOP one exposure, but I think Amgen is gonna be interesting.

I, I don't have a strong view on it.

We really haven't seen a lot of data companies seem super bullish on it.

Um, you know, that could be one clearly worth watching into the second half, you know?

And that's interesting because it strikes.

Uh, a key thought that investors should be remembering as well is when companies see a windfall of profits or success in one drug or one part of the business, they typically take some of that or at least earmark or allocate a certain part of that capital to go back towards.

OK, what are the patent roll offs that, uh, we're going to be experiencing where we need to go out and buy new companies who have patents that we could secure for, You know, a.

A decade plus are are there clear companies from from your analysis that are going to have to do some of that heavy acquisition that could impact margins in the near term?

Yeah, it's a great question.

I mean, I. I think about M and a almost every day kind of doing this job and and how significant of a piece of the of the puzzle it is for pharma.

And I'd probably argue that you know, most companies in large cap biotech and pharma are kind of perennial buyers.

Um, I think Lilly and Novo, of course, you know their backs are up against the wall less than all of the other peers.

Pfizer has done about $60 billion worth of deals over the past couple of years.

I still think there's potential for a little bit more, um, out of Pfizer into kind of like the second half of the decade here.

Um, I think Merck is still a buyer.

I think you could see additional activity out of sanity out of Amgen.

It's really anyone outside of the the top two that's going to have to continue to, you know, put dollars to work with respect to M and A.

And I would include Johnson and Johnson there, too.

They've been very active in medical devices but have not done a tonne in biotech.

So maybe, um, you know, once their T situation is more resolved or looking like it's going to be resolved and they kind of know the pathway a little bit better, I I would be shocked if they didn't do something in the next year or two Massive case.

That's continued to be a multiyear effort to try and get passed for Johnson and Johnson with regard to the T, the Tau lawsuits and investigations there.

Jared.

Thanks so much for taking the time here with us today.

Jared Holtz, who is the Mizuho Health care equity strategist.

Appreciate the time.

Thanks so much, guys coming up some ride reservation changes coming to Disney World.

We're breaking down what you need to know if you wanna skip them lines.

That's right after this break.

Oh, don't experience the magic.

Walt Disney World in Florida is revamping its ride reservation system starting July 24th.

Disney Hotel guests will be able to book ride reservations up to a week ahead, and other park attendees can book up to three days in advance Now, currently, visitors can really only book spots on the day of their visit.

I haven't been to Disney World since high school.

I wanna say so, yeah, because it's been barred from the magic for a little bit.

I've driven by Disney World when I was in Orlando last year, but it seems like people are still having a fun time there at, uh what they deem the most magical place on earth.

Um, but it's gotten a little bit more expensive.

Yeah, I was gonna say they better be having a heck of a time there, just considering how much it costs.

I'm actually shell shocked right now, and I have two young kids.

So I guess maybe I'm going to be going to Disney World sooner than I would like to admit.

And the fact that people are paying this much just we're not even getting into the news of the day that people are paying this much to enter the parks is just something I'm still wrapping my head around.

Now, if you wanna pay even more here in order to reserve your place in line, maybe if you are, I guess you can rationalise it.

You're already paying so much.

So you might as well capitalise on the time that you have there.

But But I think this makes sense.

And this also goes back to what we have seen Disney do over the last several years.

They're trying to make their parks more efficient.

They're doing this because they see it ultimately driving revenue here in the longer term.

So they're trying to cut down on crowding.

They see that potentially helping revenue here over the next several quarters next several years.

How much people are willing to pay for these multi passes and to and to cut lines.

I think that is what is up for debate right now.

Exactly what, like demand is going to look like.

But again, when you take a look at the crowds of people month after month at Disney World and the fact that people are continuing to spend and take their trips to Disney World, even in this macroeconomic environment, it does say something right.

Even in this economy.

Uh, you know, I was looking at some data from the points guy, actually who and this is the 2023 data we'll see if we get at the end of 2024 some aggregate costs, Uh, but ultimately, they said, excluding taxes, the total came out to and and of course, this includes the two day tickets granted entry into Disney's Hollywood studios on one day Magic Kingdom and another day total came out to $282.55 a person for everyone 10 and up and then so ultimately collectively spent 1100 just south of $1200 for two days of Disney World tickets for four people.

That that's a that's that's actually on the low end of what I've heard.

Really?

Well, it sounds like a lot of money to me.

All right, You right here at Yahoo Finance.

We have much more coming up at the top of the hour.

We've got some breaking housing data out for you.

We're gonna cover that and more on catalyst next.