This Rally Is Real

MARKETS

Good Times

It almost always pays to look on the bright side.

“Let the good times roll” is such great phrasing – immortalized in their own way by people like B.B. King and Jimi Hendrix, The Cars and Buckwheat Zydeco – that it doesn’t even matter that it’s a cliche.
Investors, traders, and speculators are driving a rally well-supported by economic and business fundamentals.
So why not let the good times roll, at least until the mid-month, when as “Stock Trader’s Almanac” editor Jeffrey Hirsch reminds us, the major indexes get weak.
And then there’s that strong finish.

According to the Stock Trader’s Almanac, the major indexes are strong early, weak in the middle, and strong late in May.

The major indexes were all higher on Thursday following Wednesday’s mixed action.
The Dow Jones Industrial Average has been up for seven straight sessions, its longest such streak of the year. And both the S&P 500 and the Nasdaq Composite are flirting with new all-time highs.
All three indexes are up at least 3.5 percent this month after all three were down in April.
As Charley Grant of The Wall Street Journal notes, US companies are also feeling good “and spending like they mean it.”

Analysts at Goldman Sachs $GS project that total S&P 500 share repurchases will grow by 13 percent to $925 billion in 2024 and 16 percent to $1.075 trillion in 2025.

“The first-quarter earnings season is turning out better than many Wall Street forecasters had expected,” Grant writes. “At the same time, companies are stepping up repurchases of their own shares, which is giving a resurgent stock market an extra boost.”
Willie Delwiche of Hi-Mount Research notes that “after bending but not breaking from a sentiment perspective, bulls have regained the initiative this week and the cyclical rally off of last year’s lows remains intact.”
April showers, he adds, have generated May flowers.

DEEP DIVE

The Party Is Just About Over

And it’s been a really good one.

Airbnb $ABNB was down 6.87 percent on Thursday after it beat Wall Street estimates for revenue and adjusted earnings per share but fell short of expectations for second-quarter guidance at the top line.
The short- and long-term homestays and experiences outfit wasn’t the only earnings-reporter to suffer.
Online game platform Roblox $RBLX fell 22.06 percent, even though management reported a narrower-than-expected loss and exceeded revenue forecasts.
Signs point to slowing revenue growth, though, and management’s second-quarter guidance for $870 million to $900 million is well short of the $934 million Wall Street consensus.
This, apparently, is how RBLX rolls.

Roblox $RBLX fell more than 20 percent on May 9, 2024, after management guidance for second-quarter revenue fell short of analysts’ expectations.

Chip designer Arm Holdings $ARM was off 2.34 percent, as it beat analyst estimates for its fiscal fourth-quarter and for fiscal first-quarter guidance but fell short of expectations with its full-year sales forecast.
Brokerage firm Robinhood Markets $HOOD was down 3.08 percent in regular trading after the shares surged more than 5 percent in pre-market action.
HOOD reported first-quarter earnings per share of $0.18 on company record revenue of $618 million to beat estimates of $0.06 and $553 million. HOOD reported a loss of $0.57 per share on revenue of $441 million a year ago.
Warner Bros. Discovery $WBD bucked the price-action trend, rising 3.08 percent.
It also bucked the beat-estimates trend, missing analyst expectations on both the top and bottom lines. WBD reported a loss of $0.40 per share versus a consensus forecast of $0.24 on revenue of $9.96 billion versus $10.231 billion.
People are excited about the strength in its streaming unit, which added 2 million subscribers during the quarter to reach 99.6 million. Ad revenue for the segment surged by 70 percent.
WBD also announced this week a deal with The Walt Disney Company $DIS to bundle their respective streaming services into a package that will include the former’s MAX and the latter’s Disney+ and Hulu.
Pricing is yet to be determined.
But this is starting to feel a lot like “cable TV.”

APPLE

Apple Hurts Some Feelings

Artists and acolytes alike are angry.

Artists and acolytes alike are angry.I’m a big “announce your presence with authority” guy, but that’s only because of a really funny scene in Ron Shelton’s cinema classic “Bull Durham.”
There’s a time and a place for everything. Sometimes you don’t need to bring the heat with your initial delivery in a fresh at-bat, as Crash Davis teaches Nuke LaLoosh.
Perhaps you haven’t yet seen it, this Apple $AAPL ad highlighted by a bunch of crushed musical instruments, but it looks right now like Tim Cook is in the Nuke LaLoosh role.
And a man in Tim Cook’s position can’t afford to be made to look like he’s in the Nuke LaLoosh “announce my presence with authority” phase, not at this stage of his particular game.
As a guy who appreciates an alliterative subhead, I feel like he needs to be in the “a good friend of mine used to say, ‘it’s a simple game’” phase right now.
This is a cultural thing with Apple and this ad. It’s not showing up in AAPL – the share price has been trending higher since Cook’s late-morning Tuesday tweet, including a tidy 1 percent gain today – and it might not ever be a top-and-bottom-line factor.
Maybe there’s a long tail here, maybe there isn’t.
It’s all anecdotal right now, but many people are tweeting about it. And, if Apple’s “Let Loose” event was sorta ho-hum, this new ad is pretty zorch, as my grandma would have said.

Apple $AAPL CEO Tim Cook introduced the iPad Pro on May 7, 2024, the thinnest product the company has ever created.

There are some people who are sharing deeper thoughts about that cultural thing, though, and Kyla Scanlon nails it with her open:

Apple released an ad to highlight their new iPad Pro with the M4 chip. That’s fine. Great, even. New technology is phenomenal! But what Apple also did in this ad was use a hydraulic press to crush musical instruments. It was meant to show how skinny-coded their new iPad is, but if anything, it just felt sad. Like oh gosh, they just crushed creativity? Culture? Of course, if their goal was to get people talking, they achieved that.

Explaining how message-makers are exploiting a broad opportunity, Kyla also hits her close:

Apple did destroy tradition too, seemingly on accident. But people certainly aren’t fools. To rebuild agency, we need to be transparent about the problems. We are divided, economically and politically. We are surrounded by a force that wants us to wither into skeletal memories of ourselves. There are incentives to crush things to bits with a hydraulic press in the name of consumerism.

A lot of rallying cries, but the basic idea is that in order to re-establish societal trust we must re-establish motivation and care on the individual level. Work on media literacy. Work on financial literacy. Education is a toolkit, and we have forgotten that I think. The institutions are a nightmare (Derek Thompson, of course, wrote on it recently) and the world will never be perfect.

If it feels like a little bit of Steve Jobs’s Apple has fallen from the tree, maybe that’s the point.
Cullen Roche shared one of the more perceptive X posts on the issue:

Marketing in the modern age isn’t about making you feel good about the product you’re buying. It’s about stirring maximum emotion to get the most eyeballs so the ad reaches the maximum number of people.

The objective is to elevate awareness. This ad is certainly doing that, if only within a certain self-selecting subculture so far.
We’ll see how wide it goes and what its proliferation or lack thereof means for the brand.
You win some, you lose some, sometimes it rains.
With AAPL still down more than 4 percent for the year, underperforming all but Tesla $TSLA among “The Magnificent Seven” and subject to rumors of demise, the company needs a win.
For Tim Cook, that means leading the conversation again. He certainly introduced the new iPad Pro – “the thinnest product we’ve ever created, the most advanced display we’ve ever produced, with the incredible power of the M4 chip” – with authority.
In that sense, this ad in its audacity… it’s kinda Jobsian. And new hardware, it’s sleek.
And perhaps investors, traders, and speculators are already imagining “all the things it’ll be used to create."