What we're covering here today
- Markets: Stocks close higher.
- Snack sales boost Campbell Soup’s earnings.
- Markets are “addicted to cheap central bank money,” analyst says.
- More trouble for GameStop.
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What’s moving markets today: June 5, 2019
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Retail jobs are notoriously low-paid. For some, that may change
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CNN
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What's next for investors on Thursday?
Markets are closed for the day. Here’s what’s next for investors.
- The European Central Bank and the Reserve Bank of India are giving their monetary policy updates.
- In US economic data, weekly jobless claims and trade data for April are due at 8:30 a.m. ET.
- Elsewhere, the eurozone’s first quarter GDP will be reported. It is expected at 1.2% year-over-year.
- Newly-IPO’ed Beyond Meat (BYND) is reporting earnings
Stocks close higher, Dow logs third day of gains
US stocks finished higher on Wednesday as investors continued to be hopeful about the possibility of a Federal Reserve interest rate cut in the near term. The Dow registered its third day of gains in a row.
- The Dow closed 0.8%, or 208 points, higher.
- The S&P 500 ended 0.8% higher.
- The Nasdaq Composite finished up 0.6%.
Cisco (CSCO) and Microsoft (MSFT) were the biggest gainers in the Dow, adding 2.9% and 2.7%, respectively.
Campbell Soup (CPB) was the strongest performer in the S&P after its earnings beat expectations. Its shares closed 10% higher.
Vera Bradley shares jump 9% on strong results
Vera Bradley (VRA) shares spike 9% after posting strong earnings.
Shoppers apparently aren’t tired of the brand’s floral-printed clothing and accessories – its revenue grew 5% to $91 million, which was stronger than analysts’ expectations.
Sales are stores open more than a year grew 5%.
The stock is up more than 40% for the year.
Uber shares finally trade above its IPO price
Uber’s stock rose above its IPO price of $45 a share on Wednesday for the first time since making its rocky Wall Street debut nearly a month ago.
Shares of Uber (UBER) topped the $45 mark in midday trading Wednesday, after a flurry of analysts initiated coverage on the stock, with many recommending buying the stock.
Uber raised more than $8 billion after pricing its IPO at $45 a share last month. But on its first day of trading, Uber opened at $42 a share and ended the day even lower at $41.57.
The company has faced investor concerns about slowing revenue growth and its history of steep losses. Uber reported losing more than $1 billion in the first three months of this year.
Cruise stocks tumble after new Cuba restrictions
The Trump administration’s new restrictions on US citizens traveling to Cuba have sent stocks of major cruise companies lower:
Beginning today, US cruise ships are banned from stopping in the country because the administration blocked the most common way Americans are able to visit the island, which is through organized tour groups.
Read more about how cruise lines are dealing with the ban on CNN Travel.
Here's the worst-case scenario for the market, according to Jeremy Siegel
The yield curve has inverted, which has historically been “very telling and dangerous,” Wharton finance professor Jeremy Siegel told CNN Business anchor Richard Quest on the “Markets Now” live show.
Siegel noted that the economy is mature – in the late stages of growth.
“That’s when it becomes risky. You put something like tariffs down, and you’re going to tip it over into recession,” he predicted.
But Siegel says the stock market will remain relatively resilient. Stocks are trading at just 17 times earnings, which is not unreasonable in a low-interest-rate environment. So the worst that could happen is a bear market – stocks will fall 20%, he believes.
He predicts perhaps a market correction – when stocks are down 10% – is in order. But nothing like the dive of 40% or more during the Great Recession.
What's working for retail: A little something for everyone
American Eagle Outfitters (AEO) is way up today. Why? It’s got the right mix.
Stores still have an advantage over Amazon (AMZN), La Monica says.
“Even if something only takes a day to arrive, you can buy online and pick it up in the store the same day. That’s helping a lot of physical retailers,” he said.
Why is the market way up all of a sudden?
Last week, the market was sinking fast. Today stocks are up again, after it posted its second-best day of the year. What gives?
Cheslock noted investors expected interest rates to be even higher this year, so for the Federal Reserve to be talking about cutting rates is “a massive change” that will benefit the markets.
But what about the ADP report that said employment may be slowing? Ignore it, Cheslock says.
“There’s a lot of conflicting signs today,” Cheslock said. “These estimates have been all over the place, so you can’t really trade on that.”
Fitness startup Peloton files to go public
Peloton, the indoor fitness startup, said Wednesday it submitted confidential paperwork with the US Securities and Exchange Commission to go public.
Peloton is best known for its internet-connected indoor bikes and subscription cycling classes that can be streamed live or on-demand into the home. The company also offers a treadmill with an HD touchscreen for viewing classes.
Stocks rise at the open
US stocks climbed higher at the open, adding to Tuesday’s steep rally that was driven by market hopes for an interest rate cut by the Federal Reserve in the near term.
All three major stock indexes recorded their second best trading day of the year yesterday.
- The Dow opened 150 points, or 0.6%, higher.
- The S&P 500 kicked off 0.6% higher.
- The Nasdaq Composite opened up 0.8%.
One stock in focus this morning is gaming retailer GameStop (GME), which dropped nearly 30% in premarket trading after missing earnings expectations. It’s shares were down 29% at the open.
American Eagle Outfitters soars on strong earnings
American Eagle Outfitters (AEO) is a bright spot in the gloomy retail world.
Shares sprung as much as 7% higher in premarket trading after it posted strong first-quarter earnings, per our Paul R. La Monica:
Revenue for the quarter jumped 8% compared to same time period a year ago, to $886 million.
The company’s flagship brand and Aerie, its lingerie unit, both recorded higher sales:
- American Eagle sales increased 4%.
- Aerie leapt 14% higher, which marked its 18th consecutive quarter of double-digit increases.
Private payrolls fall off a cliff in May
The ADP employment report showed that only 27,000 private-sector jobs were added in May, compared with the consensus forecast of 180,000.
That’s right, that is an underperformance of 153,000 jobs.
The market is already fired up about a possible interest-rate cut to boost the economy, and today’s data point probably did little to convince it otherwise.
Friday’s jobs report is sure to be interesting.
Jack Daniel's maker posts strong sales despite tariffs
If you think that tariffs on American bourbon and whiskey are going to stop drinkers from buying more bottles of the brown stuff, then you don’t know Jack. Daniel’s, that is.
Brown-Forman (BFB), the maker of Jack Daniel’s and Woodford Reserve, reported earnings for its latest quarter Wednesday that topped Wall Street’s forecasts. The company issued a solid outlook for fiscal 2020 as well – despite a continued drag from retaliatory European tariffs on bourbon.
CEO Lawson Whiting conceded that tariffs would probably hurt profit margins this year, but strong demand for the company’s high-end spirits will help ease the pain. Brown-Forman said that sales of its premium bourbon, which includes Woodford Reserve, rose 23% last year. The company’s also a big player in tequila. Sales of Herradura and el Jimador were up 13%. Bottoms up!
Campbell Soup pops on snack sales
Shares of Campbell Soup (CPB) jumped about 4% before the market opened Wednesday after the company reported strong snack sales in the third quarter.
Sales of its snack brands, including Snyder’s-Lance and Pepperidge Farm, rose 37% during that period. The company said those sales helped drive 16% sales growth in the quarter overall.
The results “were ahead of our expectations,” CEO Mark Clouse said in a statement.
Though the company’s snack business is performing well, its meals and beverages products are struggling. Sales fell 1% in the quarter, driven by a decrease in V8 and Prego in the United States. “There is more to do,” in that segment, said Clouse, adding that the company is nevertheless making improvements on profit and margin, and that the “business is showing signs of stabilization.”
Campbell revised its outlook for the rest of the year because it is anticipating a negative impact from currency translation.
Markets are "addicted to cheap central bank money," analyst says
Tuesday’s market rally, which led to the Dow, the S&P 500 and the Nasdaq Composite to record their second-best day of the year, was boosted by hopes of a Federal Reserve interest rate cut in the near future.
Fed Chairman Jerome Powell said yesterday that the central bank would act as appropriate to sustain the economic expansion in the United States. On Monday, St. Louis Fed President James Bullard, who is a voting member on the Fed’s rate-setting committee, said risks to economic growth posed by the trade war and weak inflation could warrant lower interest rates soon.
“But with the US-China trade uncertainty still lurking in the background, are investors being unreasonably too optimistic?” said Razaqzada.
A further escalation of the trade conflict between the United States and China could prove painful for both markets.
US futures point to another strong day on Wall Street
US stock futures are continuing their climb after recording their second-best day of the year on Tuesday.
As of 7:30 am ET, Dow (INDU) futures are up 0.6%, or 159 points. Nasdaq (COMP) futures are up 0.75% and S&P 500 (SPX) futures are up up 0.6%.
The markets rallied Tuesday as hopes for a Federal Reserve rate cut took hold and worries about an escalating trade war took a backseat.
GameStop plummets 27% after terrible earnings
GameStop (GME) stock plunged 27% in premarket trading after dismal earnings.
The retailer’s first quarter revenue came in below analysts’ expectations and its sales fell 13%.
The company also said it no longer pay investors a quarterly dividend to save nearly $160 million. It would use the money it saves from halting its dividend to pay down debt.
Its year ahead doesn’t look much better, either: GameStop said it expect sales at stores open at least a year to fall between 5% and 10%.
GameStop said customers are holding off video game console purchases, because they’re waiting for Sony and Microsoft to release new versions of the PlayStation and Xbox.
The stock is now down 40% for the year.
Apple CEO doesn't think China will attack company
Apple CEO Tim Cook said he doesn’t believe China will target the company despite ongoing trade issues between the United States and the country.
Cook told CBS News that he doesn’t anticipate the Chinese government to take retaliatory actions. The Trump administration has been cracking down on Chinese tech companies, such as Huawei.
He conceded that a potential 25% tariff on the iPhone would hurt sales:
Apple’s (AAPL) shares rose 2% in early trading.
Your move, Renault
Renault’s board will meet again today to consider a merger pitch from Fiat Chrysler.
If completed, the merger would create the world’s third largest carmaker and lower the cost of developing new technologies. Investors want to know how the deal would affect Renault’s existing alliance with Nissan (NSANF) and Mitsubishi Motors.
Renault’s board said yesterday that it had met to review the proposal “in detail” and will “continue to study with interest the opportunity of such a combination.”
Shares of Fiat Chrysler (FCAU) in Milan fell 0.6% in early trading. Renault (RNLSY) stock rose 0.3%.
Oil supply check
Data on US crude inventories will be released Wednesday at 10:30 a.m. ET.
Prices for US oil have been hammered recently by reports of excess supply. They’ve dropped more than 14% in the past month.
That’s boosting anxiety amid fears that global economic growth is slowing, which could eat into demand for energy.
The World Bank on Tuesday cut its global economic growth forecast for 2019 to 2.6%.
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