US markets put in a positive performance over the past week despite building worries over the US debt ceiling after headline consumer price inflation and factory gate prices slowed as expected.
The S&P 500 gained more than 1% while the technology-focused Nasdaq 100 jumped 1.7%, as growth stocks benefited from falling bond yields.
The US Bureau of Labor Statistics said consumer prices fell to 4.9% year-on-year in April, from 5% reported in May. The Federal Reserve’s preferred core inflation measure, which excludes volatile food and energy, edged lower by a tenth to 5.5%.
The equity market reaction suggests investors believe the odds of the central bank pausing its interest rate hikes have increased. Bond yields fell back while the US dollar weakened.
Meanwhile, weekly jobless claims jumped to their highest level since 2021 supporting the rate pause narrative.
WALT DISNEY
The Bob Iger-driven rebound at Walt Disney (DIS:NYSE) has run out of steam with the shares, which have stalled in recent months, taking a bath on its latest quarterly numbers (10 May).
Returning CEO Iger has made progress in reducing losses in the streaming division, a key strategic priority, but this appears to have come at a cost in terms of subscriber numbers.
Disney revealed it had lost four million subscribers in the second quarter to 157.8 million, undershooting analyst expectations of 163.2 million. This reflected the impact of price increases in North America and the loss of streaming rights to the Indian Premier League cricket tournament.
Price rises did though help to reduce losses at the unit to $659 million, which was better than the $841 million projected by analysts.
The parks, experiences and products division, where revenues increased 17% to $7.7 billion driven by guests spending more time and money in the quarter both domestically and internationally.
AIRBNB
Was the markets’ response to Airbnb (ABNB:NASDAQ) earnings over the past week an overreaction? Having now had a few days to process commentary and guidance from the homes and rooms rentals platform, the market has decided, not a bit.
Plunging 11% immediately after first quarter figures (9 May), the stock has fallen further since (to $111), close to three-month lows.
Airbnb may have chalked-up its first ever first quarter net profit ($117 million) but the market looks forward, and didn’t like what it saw, with second quarter guidance in the $2.35 billion to $2.45 billion range seen as weak versus the $2.42 billion consensus.
The real worry is that the impressively resilient spending on travel in the wake of the pandemic is coming under greater pressure just when competition, from rivals like Booking.com and Expedia’s Vrbo, is getting tougher. There’s also concern that a tightening regulatory net could crimp growth opportunities even more – there’s talk in the UK, for example, to make homeowners listing entire properties on short let platforms to have to seek planning permission first.
TYSON FOODS
Sentiment towards Tyson Foods (TSN:NYSE) continues to sour, the shares’ 17.9% week performance the S&P 500’s second worst and sending the stock plunging to five-year lows.
A surprise second quarter loss from the meat processor (8 May) suggests that even meat eaters are cutting back, never mind pressure from the emerging meat-free brigade. This is a classic case of low pricing power, with inflation hiking input costs that Tyson is struggling to pass on customers.
Tyson suffered a year-on-year swing from $2.28 earnings per share to a $0.28 loss on flat sales, and it lowered its full-year revenue guidance, trimming its range from $55 billion to $57 billion to $53 billion to $54 billion.
‘While the current protein market is challenging, we have a strong growth strategy in place and are bullish on our long-term outlook,’ insisted CEO Donnie King. ‘We saw strong performance in our branded foods business and continue to be laser-focused on meeting customer needs and planning the future with them.’
That’s optimism that investors, for now, simply do not share.
