Incoming Data (Growth Version)

MARKETS

What’s Going On

Investors, traders, and speculators are adjusting their reactions, over and under.

Jobless claims is the new Consumer Price Index.

So be prepared for some noise today.

That’s what happens when investors, traders, and speculators get scared about growth… or Buffett sours on Apple $AAPL… or the tide turns for the carry trade… and we’re dealing with low summer volume.

Word from multiple sources is that a weak Treasury auction set off a drift lower for equity indexes Wednesday afternoon after they all moved up more than 1 percent in the morning.

We’ll have a good idea of how things are going to go before the opening bell rings at the New York Stock Exchange.

And, then, of course, attention will turn to the actual CPI, with data for July scheduled for release by the Bureau of Labor Statistics next Wednesday, August 14.

This is just how it’s going to be for the next several weeks, months even, with the confluence of August-October seasonal weakness and a historically volatile US presidential election.

All the incoming data will be filtered through a “growth” lens now.

Let’s try to pay attention to the signal amid all of that.

Markets are pricing in heightened volatility an multiple spikes over the next six weeks.

The US Department of Labor will report initial and continuing claims for unemployment insurance for the period ended August 3 today at 8:30 a.m. ET.

A consensus forecast based on a Bloomberg survey of economists sees initial claims falling by 9,000 to 240,000.

Initial claims surged to 249,000, a one-year high, during the period ended July 27 on scheduled yearly shutdowns for auto plants and the impact of Hurricane Beryl in Texas. The four-week moving average was up by 2,500 to 238,000.

Continuing claims rose to 1.88 million during the week ended July 20, the highest print since November 2021.

There is an upward trend here. But there are also seasonal factors at play.

Initial claims for unemployment insurance reached a near-term high of 249,000 during the period ended July 27, 2024.

Data remains consistent with the long-hoped-for soft landing: under-control inflation and a stable economy.

Another upside surprise in today’s numbers will, however, trigger those who think the Federal Reserve needs to cut rates yesterday, and by 75 basis points at that.

All this is happening while the Federal Reserve Bank of Atlanta’s GDPNow model is showing a seasonally adjusted annual growth rate of 2.9 percent for the third quarter.

That’s as of Tuesday, August 6, and up from 2.5 percent on Thursday, August 8.

The most recent update to the Federal Reserve Bank of Atlanta’s GDPNow model indicated 2.9 percent annualized growth for the third quarter.

The model is based on methodology used by the US Bureau of Economic Analysis for its official estimate.

The most recent update includes recent releases from the US Bureau of Labor Statistics, the US Census Bureau, the US Bureau of Economic Analysis, and the Institute for Supply Management.

The GDPNow model will be updated today.

DEEP DIVE

A Little of the Old Magic

Disney delivers in a time-tested way.

It’s been a tough stretch for The Walt Disney Company $DIS since March 2021.

Following a big post-pandemic attendance boost, inflation ate into consumer budgets and put a drag on results for the theme parks at the core of its experience business.

And its entertainment unit struggled to create the kind of content that’s carried the company since animator Walt Disney and his brother Roy founded it in 1923.

Though there’s good news from the entertainment unit, fiscal third quarter results and management commentary on the experiences unit are still weighing on DIS.

The shares were down 4.46 percent on Wednesday even though earnings per share of $1.39 on revenue of $23.2 billion for the three months ended June 30 exceeded a consensus forecast of $1.20 on $23.1 billion.

That’s despite the fact that Disney recorded its first-ever profit for its streaming business and that total operating income was up 19 percent to $4.23 billion.

Operating income for the experiences unit, which accounts for a little more than half of total profit, was down 3 percent to $2.2 billion, even as revenue rose 2 percent to $8.39 billion.

The Walt Disney Company’s $DIS ‘Inside Out 2’ is now the highest-grossing animated film of all time.

And management said it expected to see a “moderation in demand” over the coming quarters, with operating income for the unit to decline by “mid single digits” during three months ending September 30.

At the same time, “Inside Out 2” is now the highest-grossing animated film of all time, and Disney’s television unit earned 183 Emmy nominations.

That’s good content to support subscriber growth. And the streaming unit, which includes Disney+, Hulu, and ESPN+, beat by a quarter the consensus expectation for turning its first profit.

From a loss of $512 million a year ago the business was in the black by $47 million.

And CEO Bob Iger said during the company’s conference call that Disney is raising subscription prices based on the attractiveness of its content, despite a light gain for Disney+ during the quarter.

CFO Hugh Johnson noted prominence of the entertainment business but said of the moderation in demand for experiences that he “certainly wouldn’t call it a significant change.”

“I would just call this a bit of a slowdown that’s being more than offset by the entertainment business,” Johnson added.

FROM THE RESEARCH DESK

It’s a Travel Sector Thing

Airbnb sees slowing demand.

Let’s just get this out of the way right here at the top: I love Airbnb. We booked multiple stays for our dogs and us, including five days in Portland, during our recent road trip.

That it enables efficient access to people willing to welcome our traveling circus for any length of time earns my esteem.

But I can acknowledge legitimate questions about its business and the prospective return on $ABNB, particularly in the aftermath of a disappointing earnings report.

Airbnb beat the consensus forecast at the top line but missed on earnings. And management’s guidance for third quarter revenue came in well below where Wall Street wanted to see it.

"We are seeing shorter booking lead times globally and some signs of slowing demand from US guests," the short-term rental company said in a statement announcing its results.

ABNB was down 13.38 percent on Wednesday to its lowest closing price since May 2023.

Given my bias, I can also see the opportunity here. So do some Wall Street analysts.

The key number is the 125 million users who booked “nights and experiences” during the second quarter, Airbnb’s best-ever result for the April-to-June period.

If nothing else, you’ve got to admire CEO Brian Chesky’s chutzpah.

CEO Brian Chesky is ‘confident it’s a good time to buy’ Airbnb $ABNB.

Wedbush Securities analyst Scott Devitt, noting that near-term weakness warrants a price-target reduction, said there’s a bright future for Airbnb.

Devitt said Airbnb will benefit from an ongoing shift to international markets, the addition of new hosts, expansion of guest services, and the relaunch of its experiences category.

The analyst still rates ABNB a “buy” but trimmed his 12-month price target to $135 from $165. That’s upside of 19.46 percent from Wednesday’s closing price of $113.01.

Morningstar analyst Dan Wasiolek said Airbnb’s results reflect the health of the broader travel sector.

"Airbnb is not immune to a travel demand slowdown,” Wasiolek wrote in a note to clients, “but it remains a well-positioned brand for the long term."

Of the 40 analysts who cover the stock, 12 rate it a “buy,” while 24 rate it a “hold” and six rate it a “sell.”

Based on the consensus 12-month target price, there’s more than 25 percent upside for ABNB.

What We're Reading: Market Thoughts From A Broad Are we there? by Frances Horodelski

Variety ’Inside Out 2’ Lifts Disney Quarterly Earnings, Overall Streaming Biz Swings to Profit Amid Light Disney+ Subscriber Gain by Todd Spangler

TechCrunch Airbnb details plans to expand beyond short-term rentals, including co-hosting and relaunching ‘experiences’ by Sarah Perez

What’s Going On

Investors, traders, and speculators are adjusting their reactions, over and under.

A Little of the Old Magic

Disney delivers in a time-tested way.

It’s a Travel Sector Thing

Airbnb sees slowing demand.

past issues

read more from our daily investor newsletter

Bottom Lines Are Just Fine

It’s Easy Being Green

What We’re Seeing Is Good

It’s Just a Correction

Concerned About Jobs

Incoming Data (Growth Version)

What’s Going On

Investors, traders, and speculators are adjusting their reactions, over and under.

A Little of the Old Magic

Disney delivers in a time-tested way.

Stay ahead of the markets with our daily investing newsletter

It’s a Travel Sector Thing

Airbnb sees slowing demand.

past issues

read more from our daily investor newsletter

Bottom Lines Are Just Fine

It’s Easy Being Green