Bulls, Bitcoin, & Beyond

Market Moves Yesterday

S&P 500 @ 5,235.48 ( ⬇️ 0.60%)

Nasdaq Composite @ 16,737.08 ( ⬇️ 1.1%)

Bitcoin @ $68,492.66 ( ⬆️ 0.36%)

Hey Scoopers,

Happy Friday! Here’s what we’re covering today:

👉 Costco slumps despite earnings beat

👉 All eyes on inflation

👉 Morgan Stanley is bullish on Ford and GM

So, let’s go 🚀

Market Wrap 📉

Stocks closed lower on Thursday as Salesforce logged its worst day in almost two decades while traders look ahead to the release of key U.S. inflation data.

Additionally, U.S. stock futures have moved lower at the time of writing as investors review a flurry of corporate earnings. This suggests Wall Street is heading for a losing week after a stellar month for stocks.

Investors are concerned that the ongoing choppiness could mean the stock rally in May is starting to flag, as the performance is largely driven by a handful of large-cap stocks such as Nvidia.

Mega-cap companies may be masking weakness in the broader market as the S&P 500 index is up 10% in 2024 while the equal-weighted index has risen by “just” 3%.

Trending Stocks 🔥

Zscaler - Shares of the cloud security company are up 16% in pre-market after it reported quarterly revenue of $553 million and earnings of $0.88 per share, above estimates of $536 million and $0.66 per share.

MongoDB - The developer data platform is down 26% after it issued weaker-than-expected guidance in Q2, despite beating estimates in Q1.

Dell Technologies - Shares of the hardware giant are down 17% even though it beat estimates in Q1. It posted revenue of $22.64 billion and earnings of $1.27 per share, below estimates of $21.6 billion and $1.26 per share, respectively.

Costco Reports Stellar Results

Big-box retailer Costco reported another bulk-sized quarter as consumers turn to pocket-friendly prices for essential items.

In fiscal Q3 of 2024 (ended on May 12), Costco reported:

👉 Revenue of $58.52 billion vs. estimates of $57.98 billion

👉 Earnings per share of $3.78 vs. estimates of $3.70

Its same-store sales rose 6.5%, led by international sales that rose 8.5%, followed by Canada at 7.4% and the U.S. at 6%. In terms of foot traffic in Q3, the wholesale retailer beat the likes of Sam’s Club and BJ’s Wholesale Club.

E-commerce sales grew by 20.7%, led by gold and silver bullion, gift cards, and appliances, while new app downloads grew 32% to 35 million. Moreover, Costco expanded its partnership with Uber Grocery in the U.S. and Canada.

Costco’s logistics business increased deliveries by 28%. This business competes with Best Buy and offers items such as TVs, computers, and other appliances.

Its membership fees, a high-margin revenue stream, rose 7.6% to $1.12 billion. Costco ended the quarter with 74.5 million total paid members, which includes 34.5 million executive members.

Will Inflation Cool Down Finally?

Inflation is taking baby steps towards returning to policymakers' levels. The Commerce Department’s measure of personal consumption expenditures (PCE) is expected to show inflation running at 2.7% in April.

If the forecast holds, it will indicate a slight decline in the core measure. Analysts and investors will closely watch the report, which is due before the market opens today, as the Fed’s decision to lower interest rates is tied to inflation.

In the last two years, the Fed has hiked interest rates several times to offset inflation, which has negatively impacted consumer spending patterns and corporate earnings.

Economists initially expected the Fed to lower rates by four times in 2024, But as inflation remains elevated, there might be just a single rate cut this year.

Morgan Stanley is Bullish on Auto Stocks

Morgan Stanley analyst Adam Jonas remains bullish on legacy auto stocks as the transition toward electric vehicles has decelerated in recent months.

Jonas emphasized the valuations of auto manufacturers such as Ford and General Motors are near the bottom 1% of S&P 500 companies, making them attractive right now.

The analyst has an “overweight” rating on the two stocks and named Ford as a top pick.

In an analyst note, Jonas stated, “Our legacy OEMs are ‘short’ the EV theme. Slower EV adoption is good for them, extending the useful lives of highly profitable [internal combustion engine] architectures. Protectionist measures offer extended ‘time value’ to recast more sensible EV strategies longer term.”

Shares of Ford are down 4%, while GM has rallied by 20% in 2024.

Headlines You Can't Miss!

Trump guilty on all 34 counts in hush money trial

Saudi Aramco to raise $11.5 billion via stock sale

China to restrict exports of certain aviation equipment

Mark Mobius is bullish on India

Crypto losses from hacks and frauds declined by 12% in May

Chart of The Day

Around 36% of the people in the U.S. still think real estate is the best long-term investment, followed by stocks at 22% and gold at 18%.

Real estate’s popularity is not too surprising. Almost everyone knows someone who purchased real estate years ago that’s now worth much more. Further, unlike stocks, bonds, or crypto, real estate is a tangible asset and not just an ephemeral number in your bank account.

Since 1990, the S&P CoreLogic Case-Shiller U.S. National Home Price Index, which measures residential real estate values, has risen by 308%. In this period, the S&P 500 index has risen over 1,325%.

Meme of the Day

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DISCLAIMER: None of this is financial advice. The newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.