Stocks wobbled Wednesday after Federal Reserve Chair Jerome Powell left open the possibility of consecutive interest-rate hikes, while chipmaker stocks sank over long-term impacts on AI chip exports.
Tech gave the Nasdaq Composite (^IXIC) a slight lift, as it finished up 0.27%. The S&P 500 (^GSPC) edged down below the flatline, while the Dow Jones Industrial Average (^DJI) was down about 0.2%.
Nvidia and other AI stocks lost ground after reports that the Commerce Department is considering putting more restrictions on AI chip sales to China.
A clutch of robust economic data helped power a stock rally on Tuesday that marked a comeback from a losing streak and kept the major benchmarks on track to close the first half of 2023 with an unexpectedly strong performance.
Given the signs of a resilient US economy, investors have been watching Powell's comments closely for clues to the Fed's next moves.
Stocks closed mixed Wednesday after Fed Chair Jerome Powell signaled likely more rate hikes this year and reports of an AI chips ban surfaced.
Tech pushed the Nasdaq Composite (^IXIC) up 0.27% in the wake of reports that the US could consider a ban on AI chip exports to China. The S&P 500 (^GSPC) edged down below the flatline, while the Dow Jones Industrial Average (^DJI) fell 0.2%.
Netflix (NFLX) stock climbed more than 3.5% on Wednesday after Oppenheimer analyst Jason Helfstein raised his price target on the streaming giant to $500 a share from $450 — the second-highest price target on Wall Street.
Helfstein cited bullish data surrounding the password sharing crackdown, in addition to the possibility of the company discontinuing its lowest-priced ad-free plan, which it’s currently testing in Canada. The analyst said that would boost average revenue per user, unlocking about $4.4 billion in annual revenue.
Helfstein added the extended writers’ strike serves as possible near-term tailwind given Netflix’s long programming lead-time, deep library and exposure to more international content, which is not impacted by the strike.
He also called out industry-wide layoffs as another catalyst, writing in his note to clients, “NFLX is likely benefiting from media job cuts, as competitors struggle amid ad market weakness and subscription services cash drain.”
Helfstein joins Cowen’s John Blackledge, Guggenheim’s Michael Morris and Wells Fargo’s Steve Cahall with his $500 price target. Pivotal Research’s Jeffrey Wlodarczak has the highest outlook on the Street at $535 a share.
According to data from Bloomberg, Netflix currently has 28 Buy ratings, 24 Holds and just 4 Sells.
The stock is up more than 45% year-to-date.
BlackRock’s CIO for Global Fundamental Equities Tony DeSpirito was animated at the company’s midyear outlook media roundtable on Wednesday as he discussed what he believes is a stock pickers market. He highlighted opportunity in consumer discretionary, artificial intelligence and autos.
He even brought up one of the latest medical advances Wall Street can’t seem to get enough of: Prescription weight loss drugs.
“This is a mega blockbuster opportunity and that’s going to happen regardless of the [economic] outlook,” DeSpirito said.
As Yahoo Finance’s Anjalee Khemlani reports, competition in the space is heating up:
Novo Nordisk (NVO), the market leader, currently has two drugs on the market approved for Type 2 diabetes (Ozempic) and obesity (Wegovy) — both of which are injectables. It also has Rybelsus, its pill for Type 2 diabetes, which the company is also studying for treating obesity.
Novo Nordisk’s greatest competition remains Eli Lilly (LLY). The two are already fierce competitors in the diabetes care and insulin space, and Eli Lilly has a number of competing products on the market and in the pipeline.
At BlackRock’s 2023 Midyear Outlook Media Roundtable on Wednesday BlackRock’s CIO for Global Fundamental Equities Tony DeSpirito made the case for why the 2023 artificial intelligence stock rally shouldn’t be compared to the 2021 run in metaverse stocks.
“The demand is really real,” said. “I think that contrasts what’s going on in AI versus the metaverse of a year ago or virtual reality. The orders are there…The earnings growth is just coming.”
To DeSpirito’s point, Nvidia started the latest AI-led rally in stocks by attributing its revenue guidance boost to “demand related to generative AI.” BlackRock tabbed AI a “mega force” that will drive markets putting the technology in the same category as other mega force drivers like geopolitical fragmentation, aging populations and the low-carbon transition.
Read more here.
AI hype has driven a market rally so far in 2023, and many strategists are betting stocks have room to go higher.
But publicly traded companies aren’t the only game in town when it comes to AI. Yahoo Finance’s Dan Howley reports:
According to Traci Gusher, EY’s Americas data and analytics leader, AI startups are drawing plenty of interest from venture capitalists, despite a slowdown in overall VC spending.
“What we’ve seen is that just in this year alone, VC funding is up nearly 7x in this space, and that’s against a market where venture capital is actually down 34% in the same time period,” Gusher explained. “The amount of money being just pumped into this is just unprecedented.”
The AI movement kicked off in earnest in Nov. 2022 when OpenAI debuted its ChatGPT generative AI-powered chatbot.
Wall Street’s biggest prediction for this year of an imminent US economic recession is looking like a bust.
As Yahoo Finance’s Josh Schafer reports, incoming economic data continues to recession fears into a waiting game.
Fresh data out this week showed consumer confidence in June hit the highest level in 18 months. At the same time, both April home prices and May new home sales came in on the upside, while durable goods orders expanded last month amid calls for a decline.
If we rewind to a few weeks ago, May’s retail sales beat estimates and the jobs report crushed expectations, too. And when we fly beyond the economic figures, travelers are picking up the pace through those TSA checkpoints.
Now, economists are becoming increasingly less worried about a recession this year and consumers agree as well, with 69.3% of consumers saying a recession in the next 12 months is “somewhat” or “very likely,” down from 72.2% in May, according to Tuesday’s consumer confidence report from the Conference Board.
“Consumer attitudes remain resilient,” Jefferies US economist Thomas Simons wrote in a note on Tuesday. He added: “There are storm clouds on the horizon, but the consumer is growing tired of the expectation that a recession is imminent.”
Stocks wavered during Wednesday’s midday trading session after Fed Chair Jerome Powell signaled more rate hikes this year and didn’t rule out the possibility of increases at consecutive meetings.
Tech stocks gave the Nasdaq Composite (^IXIC) a lift, up 0.6% amid reports that the US could consider a ban on AI chip exports to China. The S&P 500 (^GSPC) edged higher by 0.2%, while the Dow Jones Industrial Average (^DJI) fell 0.1%.
Bud Light (BUD) launched a new ad campaign Wednesday highlighting the people behind the brand in the wake of the transgender influencer Dylan Mulvaney controversy.
The beer giant is headed toward its third monthly sales decline following its partnership with Mulvaney, a transgender influencer and TikTok personality, which prompted a boycott among some beer lovers. Since the boycott began, shares of Anheuser-Busch are down more than 15%.
Yahoo Finance’s Brooke DiPalma reports that the new campaign is called “That’s Who We Are” featuring more than 140 Anheuser-Busch employees, growers, wholesalers, and partners.
This comes after Bud Light’s parent company Anheuser-Busch InBev lost its top spot in the beer market to Constellation Brands’ (STZ) Modelo.
Analysts at Evercore ISI wrote in a note to clients this week if sales remained impacted, more action may need to be taken.
“Continued weakness begs the question of whether Anheuser-Busch and/or its distributors will have to make structural changes to reduce their cost basis if trends don’t improve over the next few months,” the firm wrote.
Pinterest (PINS) stock was up more than 5% in mid-morning trading after another Wall Street analyst bet on the company’s turnaround.
As my colleague Brian Sozzi reported:
Wells Fargo analyst Ken Gawrelski upgraded his rating to Overweight (buy equivalent) and hiked his price target to $34 from $23.
“Amazon partnership [that is] live ahead of 2023 holidays, improving engagement trends and higher ad load will allow PINS to deliver accelerating and above-consensus revenue growth,” Gawrelski wrote in a client note on Wednesday, adding that he sees a “strong catalyst path over next 6-12 months.”
This follows Pinterest CEO Bill Ready’s comments to Yahoo Finance late last week.
“I think it’s hard to predict the macroeconomic environment,” Ready told Yahoo Finance Live at Cannes Lions International Festival. “There are bright spots in the ad market. I think there are other parts of the ad market that are challenged. So there’s still puts and takes across those. But it’s good to see that there are bright spots that are emerging there, and so I think that’s encouraging across the industry.”
Wholesale inventories in the US fell in May, according to preliminary government figures released Wednesday.
The Commerce Department said wholesale inventories were down 0.1% month-over-month, following a 0.3% drop in April (revised lower from a decline of 0.1%)
Economists polled by Bloomberg had expected a fall of 0.1% on a monthly basis.
Wholesale inventories for May were up 3.6% year-on-year.
Inventories, a key part of gross domestic product, reflect the pace of spending by consumers and businesses.
In the same report, retail inventories rose 0.8% from April’s figure, compared with the 0.2% gain forecasted. They advanced 7.0% year-on-year.
The US trade deficit shrank to $91.1 billion in May, undershooting the $93.7 billion estimated and a decrease of $6 billion from April’s reading of $97.1 billion. The slowdown could be attributed to changes in both exports and imports of goods.
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