What to know today

  • The song remains the same.
  • $SPOT is in tune.
  • Iger Defeats Peltz.
markets

More Data To Depend On

Powell says there’s time to figure it out.

So it’s clearly an exaggeration to call the Institute for Supply Management’s Services Purchasing Managers Index for March “bad.”

It did decline to its lowest level in four years, but at 51.4 it’s still above the dividing line between “expansion” and “contraction” right there at 50.

But the major indexes did surge at about the same time that data hit the tape on Wednesday, hopes raised by the release’s dovish inflation indications.

Of course, this is click-bait in service of parallelism following Tuesday’s “Stocks Sink on Good News” subject line.

And we’re still rising and falling on incoming economic data and the words Federal Reserve Chair Jerome Powell uses to describe it.

[The ISM PMI Services Index declined to its lowest level in four years in March but is still in “expansion” territory.

During Wednesday’s lunch hour on the US East Coast, Powell reiterated his position that the world’s most important central bank will wait and see what’s happening before it makes any move on interest rates.

At the same time, the Fed Chair did say that recent data haven’t “materially changed” the overall inflation picture.

After opening April with two consecutive mixed-to-negative days Wednesday was mixed-to-positive.

It wasn’t exactly a “rebound” for stocks, but the S&P 500 and the Nasdaq Composite managed to hold green numbers on Wednesday despite a last-hour bear attack that took the Dow Jones Industrial Average into the red.

The US dollar softened some and the yield on the 10-year US Treasury note backed up a little, reflecting a sense of softening inflation.

At the same time, however, gold was up another 1.70 percent, the biggest mover in our data box.

OK, then, we shall continue to wait and see…

deep dive

I’ll Pay Up for Spotify

Management is making a pretty sound bet.

I’m a Spotify $SPOT guy. I’m pretty sure it’s part of my Disney-ESPN bundle, but who can be sure anymore.

There is no question that, as I type, I have the Sixties Jazz playlist compiled by Spotify user somelikehot on in the background.

It’s just an anecdote, and we must discount its probative value even further because I’m a GenXer, but it feels to me like SPOT has something going on.

I know audiophiles have little respect for its tech. And there is the not-insignificant fact of its exploitation of artists.

But it’s convenient. And the content is there.

One-year price history for shares of Spotify $SPOT.

SPOT was up more than 8 percent at the close after announcing a plan to raise subscription prices for the second time in less than a year, as management gets serious about achieving profitability.

The price hike will help SPOT cover costs related to maintaining its content library, including the addition of audio books last year. Management’s new plan includes multiple price tiers.

One of those tiers will be a premium level featuring high-fidelity audio. That’s a solid move.

SPOT pays royalties to the music industry that amount to about 70 percent of sales. Efforts to mitigate that flow by expanding the variety of content on offer on more efficient terms should help the bottom line.

The market sure seems to like the sound of what it heard on Wednesday.

deep dive |
April 4, 2024

I’ll Pay Up for Spotify

Consumer Discretionary

Is It Still a Wonderful World?

Bob Iger is cleared to lead an icon’s recovery.

While SPOT surged early and stayed up all day, The Walt Disney Company $DIS was steady until selling off after 2:00 p.m. ET.

For DIS it was very much sell-the-news price action following a whole lot of drama around a proxy challenge by Nelson Peltz and his Trian Partners alternative investment management fund.

Shareholders ultimately voted in favor of current management and CEO Bob Iger.

On Monday, The Wall Street Journal reported that BlackRock $BLK, DIS’s second-largest shareholder, was backing Iger. T. Rowe Price $TROW also threw its support to Iger.

“Star Wars” creator George Lucas, Laurene Powell Jobs, and Walt and Roy Disney’s grandchildren also supported the current setup.

Challengers to Iger’s authority, along with Trian and  included Neuberger Berman and the California Public Employees’ Retirement System, the nation’s largest pension fund.

Iger dismissed the Trian challenge, noting that Peltz has offered no concrete solutions to address problems he perceives with the company and its current strategy. 

One-year price history for shares of The Walt Disney Company $DIS.

The thing to note about Disney is that this is probably the very first “network effects” company. It’s got an enormous, loyal, and passionate base of fans, many of whom happen to be shareholders.

Indeed, individual investors comprise a much larger than average cohort among DIS shareholders. Hard to say exactly how that played out, but Iger did come out on top on Wednesday.

We took a look at DIS From the Research Desk on Monday, highlighting a report from Bank of America Securities analyst Jessica Reif Ehrlich.

Ehrlich boosted her price target for DIS to $145 from $130 ahead of the proxy vote, citing an expectation that fiscal second-quarter numbers will likely reflect the strong underlying momentum that supported first-quarter results.

She also cited recent moves to update Disney’s content profile, including a collaboration with Fortnite creator Epic Games. Ehrlich is also impressed by management’s aggressive cost-cutting efforts.

The analyst community is generally bullish on DIS. A significant vote of confidence from shareholders is another positive, for Iger, at least.

The CEO has moved to settle a dispute with the Gov. Ron DeSantis and the state of Florida, has added directors to manage a succession plan, and is promising the company’s streaming service will soon reach profitability.

DIS gave back some of its 30-percent-plus year-to-date gain on Wednesday.

But, if nothing else, its immediate future is a little more clear.

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