June PCE inflation print, auto earnings: Morning Brief

The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, showed prices rising at its slowest rate in over three years while core PCE data came largely in-line with expectations.

Seana Smith and Jared Blikre help investors start the day off right, highlighting the biggest market stories this morning as the three major averages (^DJI, ^IXIC, ^GSPC) digest the June PCE print.

Bank of America Securities head of US economics Michael Gapen joins the program to shine a light on how the Fed may be looking at the June PCE data, alongside other recent inflation prints, in terms of its interest rate cut strategy.

Bernstein senior analyst Daniel Roeska also sits down with The Morning Brief team to cover the auto industry's earnings performance this week, including Tesla (TSLA) and Stellantis (STLA).

Other top trending tickers on the Yahoo Finance platform include the 3M Company (MMM), Deckers Outdoor (DECK), DexCom (DXCM), Norfolk Southern (NSC), and Coursera (COUR).

This post was written by Luke Carberry Mogan.

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It's 9 a.m. here in New York City.

I'm Sean Smith alongside Jared Bry and this is Yahoo finances flagship show the morning Brief.

Investors are digesting the latest read on inflation futures are higher.

While treasury yields fall after the latest data show that P ce prices, they rose at the slowest pace since March of 2021.

So let's get right to it.

The three things you need to know this Friday morning, Yahoo finances Jennifer Shan be Ma Mi and Josh Lipton have more stocks moving higher.

After a fresh reading on the fed's preferred inflation gauge showed inflation didn't pick up in the month of June but didn't fall either.

The personal consumption expenditures index clocked in at 2.5% and excluding those of volatile food and energy prices at 2.6% on a core basis.

That's 1/10 of a percent higher than estimates and holding the level of 2.6% in May.

This data likely paving the way for the Federal Reserve to open the door at its policy meeting next week for a rate cut this fall.

And crypto is surging the market anticipating future gains.

The former president Donald Trump set to speak at a Bitcoin convention in Nashville on Saturday.

Despite one calling Bitcoin a scam back in 2021.

Trump is expected to deliver a supportive speech on the digital currency.

The price of Bitcoin is still moving to the upside of nearly 5% ahead of that speech.

We have live coverage in Nashville on the event and Apple struggles to sustain its popularity among Chinese consumers.

The company has lost its crown as one of the top five smartphone sellers in China.

According to data from I DC Apple saw sales of its iphone in China fall over 3% in the second quarter from a year ago.

And this is our top story of the day.

The latest inflation data supporting the narrative that inflation is easing P ce the Fed's preferred inflation gauge rising 2.6% on a core basis in June from a year ago.

That's just slightly above expectations and it leaves the door open for a widely anticipated interest rate cut in September, Yahoo Finance's Jennifer Schonberger has the details.

Jen.

Hey, good morning and Happy Friday.

That's right.

This fresh reading on the feds preferred inflation gauge showed that inflation didn't pick up in the month of June but didn't fall either.

And this likely opening the door for the Federal Reserve to set the stage at next week's policy meeting for a rate cut this fall, breaking down those numbers the feds preferred inflation gauge known as the core personal consumption expenditures index, which excludes those volatile energy prices show inflation grew at 2.6% in June.

That's 1/10 of a percent higher than estimates and holding the level of 2.6% in May.

But down from 2.8% in April.

I will note this was also the slowest annual increase in three years.

Still the print shows, as I said, inflation is not picking up.

This goes in line with the narrative that the FED wants to see that that wants to see than a quarter of good inflation data.

So this keeps a cut for September in play while likely open allowing fed officials to look at data for July and August to ensure that inflation is still continuing to come down before they opt to cut rates in September.

And indeed, we were starting to hear encouragement from that officials leading up to this number last week ahead of the blackout period.

Officials, officials encouraged by the latest inflation numbers in the second quarter fed Chair Powell himself said last Monday that inflation readings quote, do you add somewhat to confidence?

Inflation is moving toward the fed's 2% target?

Those comments building on one.

He said before lawmakers in the House and Senate that inflation numbers have quote shown some modest further progress and that more good data would strengthen our confidence that inflation is moving sustainably back towards 2%.

Now, Jared, some investors think that the fed has enough data to cut next week.

That would be very much out of character for the fed.

They are being very cautious about this.

They don't want to make the wrong move.

Investors pricing in this morning odds of a 90% chance that the fed will cut rates in September with a second rate cut likely coming in their minds in December back to you.

All right, Jen, thanks so much for breaking that down.

Let's take a closer look at the market's reaction to that data print that we got out here this morning again.

P ce coming in in line with expectations on that headline number core on a year over year basis, slightly hotter than what the street had been anticipating, but not enough to really re uh to mark a reversal here in futures.

You got futures moving to the upside.

So you got the on track to open just over 200 points to the upside.

You've got the NASDAQ also pushing higher here in pre market trading in the futures and the S and P also moving to the upside in the treasury market.

We are seeing a bit of a pullback, it looks like in yields.

We have prices moving to the upside.

But let's take a look at what the movement has been in the market this week because a bit of a different story than what we are seeing play out in the market here this morning on a futures basis.

When you take a look at the four day chart and the performance that we have seen since the start of the week are still ended at a decline for the NASDAQ 100 of just about 3.5%.

When you flip it over to the S and P 500 look at a loss of nearly 2% over the last four days.

And when you take a look at the dow again in the red for the week off, nearly 1%.

So again, we have seen this reversal, much of that being attributed to this rotation out of the larger cap tech names into some of those under performing areas of the market, which again explains the reason as to why the NASDAQ 100 is also such a significant significant amount when you're talking about those losses of just about 3.5%.

So again, the market's reaction to the P CE print this morning, largely positive, but lots of questions about where exactly the market is going from here.

Let's talk about how the fed factors into all of this.

With that latest inflation data coming in in line with expectations.

Could this pave the way for the fed to cut rates this fall?

Joining us?

Now, we want to bring in Michael Gapen, he's Bank of America Securities, head of us economics and Michael, it's great to talk to you again.

So what do you think of this print and what it might tell us about the timeline for the FED?

Well, I think you characterized it quite well.

I think this is another bit of evidence and we knew most of this data coming into this report because we had the CP I and the PP I print.

So it's no surprise where this number landed, but it is another bit of evidence for the Fed to say yes.

The upside that we saw on inflation in the first quarter was largely an aberration.

It did not break the disinflation trend.

Inflation appears to be decelerating gradually in the direction that the FED wants.

So now it's a question of how much evidence does the fed need?

When does it get that evidence and when does it act?

So I do think it affirms, as you said, the widely held view that the fed will be reducing rates later this year.

And I think next week it can tell us yes, it has gained incrementally more progress.

We're moving in the right direction, we're getting closer, but we're not there yet.

Let's talk about some of that evidence that might roll in.

We just got the latest inflation stats today, but we got two more job reports before the September meeting.

And I believe I've done the calculations if the unemployment rate takes up to 4.2% that triggers the So rule recession warning indicator that we are actually in recession.

Um, do you think that just gives the fed that much more credibility to raise rates in September?

And then what if we don't get that threshold?

What if, uh the labor market is still relatively robust and we don't get that critical?

So, rule trigger before the September meeting?

Right.

Well, cer certainly the FED has changed their tone in, in recent months.

It's now a much more balanced reaction function.

It's not just about inflation.

The fed is, is saying the labor market is back in balance.

Um So further increases in the unemployment rate would, would tell the fed that slack is appearing in markets and reinforce the view that inflation should come down.

Now, I I disagree kind of about using the so rule in this particular cycle and and so does, so does Claudia.

Um I think the the unemployment rate is rising largely because growth in the labor force from immigration is out facing labor demand.

It's not a story about layoffs and rising unemployment because firms are cutting back unemployment and engaging in kind of large scale cost cutting.

So I don't think the s rule applies in terms of recession risk.

But I I do think if the labor market is normalizing employment growth is moderating and strong inflows into the workforce, mean the unemployment rate backs up that can reinforce fed cuts.

I would argue it only reinforces gradual cuts, not kind of the deep and rapid cuts you might get in a recession, Michael, what do you think the pace of those rate cuts are likely to look like we talked so much about when the fed is going to start cutting.

But I think what matters more here to the street and I know you've written about this is more so the pace of that and what that more realistically or accurately could look like right, very quickly here, it's going to shift to pace and end point for the market.

I think at least initially, the view will be it's a quarterly cut cycle.

So a gradual cut, it's a normalizing policy rate following and inflation down, inflation is decelerating gradually.

So cuts are likely to be gradual.

But obviously, the further you look out, I mean, we can write down these, these kind of stylized baseline forecasts that assume a lot of things work out well.

And I still think that's right, the economy just though it rarely evolves in kind of these straight line smooth fashion.

So the further you get out into 2025 and you're past the election and we know kind of what policies we're getting, maybe the view is different.

But I think initially as we look into the rest of this year and perhaps the early part of next year, I think cutting quarterly makes the most sense from from the fed.

Uh we've been talking about inflation, labor market, anything else on your radar in terms of data that we haven't really touched on that you think is important to the calculus at the FED.

Well, I think that part of the calculus in, in markets and at the FED is as you, as you have identified, what is the real risk of a, of a sharper slowdown is a normalizing economy following a pandemic the same as a, as a weak economy.

And I think that the GDP numbers yesterday should assuage some of those concerns that we're in the midst of a of a more rapid slowdown.

I still think the economy is healthy and I still think um a normalizing labor market isn't a weak one.

So the, the key here for me is is to say employment growth should be slowing, but that's not because we have over hired and firms are ready to pare back.

Employment growth should be slowing because we've caught up to where we want to be.

That's a very different dynamic.

So I do think that at least in a risk dynamic story, the GDP data should give the fed less concern about a sharp slowdown in the economy.

Resilience is the key here.

Thank you.

As always, Michael Gapen B of A securities head of us economics and crypto is surging markets are anticipating more gains to come.

This weekend, price of Bitcoin is up, let's see, 5% to 67,273.

This is ahead of former President Donald Trump's speech at a Bitcoin convention in Nashville tomorrow morning.

And Yahoo Finance's financial correspondent, David Holler joins us live from Nashville right now, Dave.

Uh I'm seeing a lot of excitement on X and other social media networks.

People are saying, all right, we got those Bitcoin highs all time highs in sights.

Now, what kind of excitement is there on the floor?

Hey, Jared, it's still early.

Um, the programming today and goes through the day and in the, the big headliner is going to be RFK junior, the independent presidential candidate who's speaking at 4 p.m.

But easily the most anticipated speaker um I've heard from conference goers so far is going to be Donald Trump who will be speaking on Saturday and Trump obviously has, has more recently since the spring, we could say embraced Cryptocurrency and he's made it a part of his platform.

Um We've heard a lot about what the crypto industry um doesn't like about the current administration uh regarding regulation.

We know a little bit less about what, what Trump um is willing to offer um the crypto industry.

And there's a whole question of, of donations from the industry to his campaign.

And then in addition to that, um what uh a crypto vote is worth and, you know, in the meantime, we're waiting to hear from Trump to explain exactly what we can expect um is in store for crypto if he were to be elected um there are rumors and rumblings of um some, some additions to Trump's uh wider economic policy that include crypto.

We really don't know what that is yet.

Um But of course, there's plenty of hype and this comes after.

Um, the ETF S uh Bitcoin and Ether earlier this week have had uh phenomenal inflows for exchange traded products.

And so this is sort of a next step, touch zone, touch, uh stone moment for the industry.

And that's going to be what we're going to be paying attention to the most uh what Trump says about uh Cryptocurrency more than anything.

Um whether or not he sort of gives it that badge of legitimacy that is so wanted for the community after, you know, years of being seen for um the scams that are inherent in the industry and also uh prior uses, David, there's lots of excitement, I think within the crypto community, maybe of what a Trump presidency could mean for the industry.

I'm curious what you're hearing about vice president, uh Kamala Harris right now and, and any sort of insight or rumblings that you've heard so far at the conference of how they're viewing a potential Harris presidency.

Yeah, Shana, she obviously was asked to attend um and declined and that's coming from the conference organizer David Bailey.

Um He tweeted that earlier this week.

Um It's worth pointing out too that um she has a fundraiser in Pennsylvania on Saturday.

So the idea of her coming in and speaking at the crypto conference is not as simple as her not liking the crypto community.

Um Largely everyone I've spoken with um has been open to hearing what uh Harris has to say about crypto.

She obviously um is quite busy uh stepping up her campaign this past week.

Um But I think people are still willing to give her time.

That being said, a lot of the policies that Trump is sort of talking about um lower tax cuts, uh more friendly regulatory environment.

It does seem less to be demo democratic leaning or democrat leaning, excuse me.

And so, you know, we'll definitely want to hear what she says.

Um But there is a minimum she can give that the industry doesn't have that I think would please them.

All right, David, always great stuff.

Thanks so much for your insight and good luck this weekend at the conference.

That's David Holler.

Thanks David.

Well, Apple facing more problems in China seeing shipments of its iphone in the region fall over 3% in the second quarter from a year ago, knocking it out of the top five smartphone makers in the country for the first time in four years.

Now, these numbers are the latest that we're getting this time.

It's data from I DC.

Now, the tech giant also reportedly reducing the price of its iphone Pro models in India by 3 to 4% after the country slashed import taxes.

That's the latest that we're getting out of techcrunch.

Let's start with some of the numbers here.

Uh Jared that we're getting out of China because it, it, it's consistent with some of the estimates that have been published earlier.

We had a drop of about 5.7% that was estimated by counterpoint Canalis Ha Ha had a uh reported 3.9% decline.

So at least what we're getting from I DC, I guess you can view as a bit of an improvement since it was only a 3.1% decline.

But obviously China a critical region here for Apple.

And of course, this begs the question just about the future of Apple in China when we do see this rise of domestic players.

Yes, I mean, if you're in China right now, do you want, do you want to scrap your existing phone, turn it in and get the latest one?

The price premium on Apple phones is still there but is the feature premium still there?

And the the competition has gone uh is up there.

So you take a look at Huawei uh Vivo, there's another company Oppo that I mean, China manages to produce some brands and this is in the EV space as well that just kind of become giants overnight.

But a lot of people in the West haven't heard about.

So it's a very competitive marketplace.

Uh Apple doesn't really have the edge that they used to, but they do have the strength of their brand behind them.

So I want to show something on the wifi Interactive real quickly.

I'm going to show a chart of app.

This is year to date and you can see Apple is in the midst of a three month uptrend here.

But that was after about the first four or 54 months there were negative and now I'm going to show you something else.

This is apple seasonality, what the stock tends to do going all the way back to inception 1982.

And this shows that in August, this is one of the historically strongest months and this precedes the iphone cycle.

It precedes everything, it goes back to the eighties.

And for whatever reason reason, August tends to be a strong months.

September, not so much.

That's when you kind of, that's the aftermath of whatever announcements and then October, it's off to the races again.

So this is just a tendency, but I wanted to throw that out there.

That's a great point.

And when it comes to that second story that we're tracking here, the lower prices in India, I bring this up because there's so much talk about tariffs, increased tariffs here in the US.

What that could potentially mean here for prices.

We're seeing what it, what it ultimately means maybe for iphone prices over in India and I bring that up, they are inflationary, but they actually just India just announced that duties on mobile phones and some key components are gonna be reduced from 20% down to 15%.

Now, as a result of that techcrunch is now reporting that they are going to lower the price of the iphone 15 Pro and also the Pro max models.

The first time Apple has ever reduced prices of the current premium models in the country.

So that is significant.

We talk about the fact that Apple is expected to be one of the beneficiaries, one of the main companies to benefit from this move here in the lowering of import duties.

You could see what it means then for consumers in India.

All right, a developing story.

We are tracking France's rail network facing major disruptions today ahead of the Olympics opening ceremony.

Officials announcing fires were set at three locations surrounding the train and network specifically targeting lines that serve Paris from the north, the southeast and the east southwest.

Excuse me, in the east.

Officials say the cables were cut and burned and will take days to repair that it is expected to impact about 800,000 people this weekend.

The opening ceremony is still set to begin at 130 pm Eastern time today.

We'll bring you, bring you updates as the story develops.

We'll be right back time for some trending tickets, shares of three M in the green after adjusting the bottom end of its full year outlook and reporting second quarter sales above expectations.

These are the company's first results under its new CEO Bill Brown who took over for Mike Roman on May 1st.

And so this is kind of a leaner company that we're dealing with.

Now, they recently spun off.

Um They recently spun off another company that was a medical operation and now the maker of post its is just kind of reorganizing a bit.

Uh Vital knowledge says that the, that there's strong upside on the earnings barclays likes the strong margin performance.

They also like the increase buyback activity.

Uh So all in all it looks like they're kind of on the right track here, but it's still in the early going with the new CEO.

And the new CEO is saying in a recent interview that that sales growth obviously remains a priority for him moving forward at his new time here at the helm at three M. He said he's also plans to reduce the organization's complexity.

And he used this as an example that a command strip, I'm a big buyer of those pass through five factories and two distribution centers before it gets to the customer.

So he's looking to streamline exactly who knew he was looking to line some of those businesses there, which does make a heck of a lot of sense if you're looking to cut some of those costs.

And he went on to say in this interview that they're going to continue to take a fresh look at what cost is embedded in that complexity.

He also added that the company's challenge is that it's also looking for a new CFO after announcing earlier this month that their CFO would be departing.

So again, some questions about who is going to take over that role.

But again, this first earnings report with him as the CEO, you're looking at a bump up in the stock with ram shares rising.

They are encouraged by some of the uh initiatives that have already taken place under his um under him as leadership leadership.

There we go, the word I was looking for.

All right, let's take a look at Decker's Outdoor that's surging this morning after lifting its full year profit guidance, the company CEO saying, quote, HOA and Ugg continue to drive a robust full price demand in the global marketplace.

So you're talking about the fact that Chunky Sneakers are back in with OA, they, they're flying off the shelves.

You always talk about that Uggs are back in fashion.

I've been a buyer of both of these products here over the last several months of contributing to that.

But Ugg sales, this really jumped out to me.

So they rose 14% in the most recent quarter.

Less discounting the brands also taking share of the Sandal market.

So again, this rise, we're seeing the popularity of Uggs once again, this continued steady out performance in Hoka clearly, Deckers is benefiting from that.

It would be amazing to me if Uggs is somehow encroaching on the uh Sketchers market or, you know, I, I don't even know, I don't even want to comprehend how that could work, but I do have some analysts commentary here is TD Cowan, the analyst remains impressed by the quote consistent of innovation segmentation and a creative director, consumer growth, which should continue to support a robust growth profile in the future years saying that guidance increased that was bigger than expected.

And he raised the price target to 1055 from 1039 city calling it another big beat.

And then here's another quote, despite market fears of a slowing macro management gave indication of a change in the environment, suggesting earnings upside is still likely this year.

So that a little bit of a statement on the economy as well and you know, just kind of taking all of these, these earnings reports in stride that we've seen this week, the consumer does appear to be strong, the economy appears to be strong and some of the cracks that we've seen in the labor market haven't necessarily been showing up in the earnings reports.

All right, let's take a look at Dexcom because this stock really on the move here ahead of the open shares are plunging.

You're looking at losses of nearly 40%.

This comes after the company missed a second quarter revenue expectations.

They lower their full year guidance.

They said that they are now expecting revenue of between 4 billion and 4.05 billion, essentially $4 billion.

That's down from last quarter's forecast of 4.2 to 4.35 billion.

That was a range that they had initially given when you take a look at the fact that shares are off 40% because they are cutting their outlook.

So substantially.

One of the questions is as to why, what, what is the clear driver of this?

And, and I was taking a look, our executive producer was taking a look um at the earnings call after we were discussing this in the break.

And there was the questions about the impact that maybe G LP ones are having on this company as and what was your first reaction to be fair?

It was, I was just saying, I wonder if there's any correlation to to be quite frank.

We don't know if there's any correlation yet.

The CEO was asked about this and he responded by saying short, a large number of new patients as to where we thought we would be at this point in time.

He also went on to say that sales force reshuffling which led to changes in geographic coverage was more dramatic than expected.

Physicians were now dealing with different reps.

So he didn't say no, he didn't say yes.

But there are questions circling as to the impact that maybe this company is having as a result of G LP ones.

Yeah, we'll just, uh, throw it up in the air right now.

Uh, wanna quote JP Morgan here.

They cited severe and southern near term channels.

They are challenges, excuse me, near term challenges, they lowered their price target to $75 from 145.

So basically cut their price target in half city labeled the guidance cut as quote, clearing the decks.

So this is just a reset of expectations.

That means that uh maybe going forward there is going to be a new plan of action.

But uh I think uh the uh the plan has to be made known to investors especially, is this an idiosyncratic story or is this, you know, a market story about G LP?

And uh yeah, maybe a little both.

Yeah, exactly.

Again, then the maker of the glucose monitoring devices relied heavily upon by diabetic.

So that's the, uh, that's the connection that they would have here to the GOP one medications.

All right, coming up next, we're just a couple of minutes away from the opening bell on Wall Street.

We're gonna break down some of the biggest movements that we're seeing ahead of the open.

Looks like we're seeing a bit of a bounce back here ahead of the open this Friday morning.

We'll be right back and that's the opening bell on Wall Street.

We got confetti at the NASDAQ also some excitement from bet way at the new York Stock Exchange kicking off the final trading day of the week doing a check of the markets.

Now, the movement at the open coming on the heels of that P ce print that we got ahead of the open here this morning.

I believe we are looking at gains at the open.

You've got the dow moving to the upside opening up nearly 300 points here in a rally.

And you're also looking at maybe a bit of a bounce back here, Jared in the tech space.

Yeah.

You know, it's gonna be interesting.

Let's track and see where we are the five day tally for the week and almost back to break even for the dow.

So a little bit of upside more downside.

Here's the NASDAQ composite down two and a quarter percent.

So that is the leader, the loser so far S and P 500 off.

About half of what the NASDAQ was.

Want to check out what the Russell 2000 has now.

Russell 2000 exploded last week and it's been adding to its gains this week.

And finally we got to check out the S and P 500 equal weighted.

So this is actually over.

Well, let's see.

Well, we're getting mixed results or maybe it's not, not getting that first print.

But anyway, we've seen kind of a dichotomy between the S and P 500 market cap and also the equal weight also want to get a check on the sector action.

And here we can see communication services that is the home of alphabet and meta that is up the most, up 1.4% followed by industrials, tech consumer discretionary, all of those outperforming.

And let's leave it with a look at the NASDAQ 100 more green than red Microsoft alphabet a little bit down.

But NVIDIA climbing closer to that record high.

Let's just see how close it is.

Uh It's been almost 30 days and I know people are counting.

Uh this correction here was 29 days.

So people are counting down.

Is it gonna be the same number anyway, we're getting there.

So lots of expectations for NVIDIA as well.

Impressive.

You need 29 days right off the top of your head.

All right, let's talk about this movement that we're seeing here at the opening because we are seeing a bit of a rebound in the tech space now that move higher across all three of the major averages coming on the heels of the latest data that we're getting on inflation, the fed's favorite inflation gauge P ce coming in in line with expectations that core year over year number slightly higher than what the street had been forecast.

Let's talk about that and more we want to bring in Adam Hets.

He is Janice's head, Janice Henderson, excuse me, investor is a global head of multi asset.

Adam, it's great to have you.

So talk to me about how you're looking at the massive sell off that we had this week.

A lot of that being led by the rotation out of those larger cap names and maybe what that signals about the volatility ahead.

Hey, good morning.

Thanks for having me.

And yes, uh Happy Friday.

After a pretty dramatic week, we sort of went from uh goldilocks economy back to growth scare.

And now it seems today we're wrapping the week back in, I think Goldilocks mode.

And so we had PM is we had GDP, we have P CE today.

So it's enough economic acronyms to make any normal person's eyes glaze over, I think.

But the bottom line here is that we've got the economy trucking along.

I think we had a bit of a re acceleration earlier in the year and now we're in this mode of slowly slowing, which is where this Goldilocks optimism is coming from.

So I think all systems go uh green lights on the economy as far as the news this week.

It's still encouraging uh when we're talking to our clients though, and we're thinking about the market returns that have accompanied this economic optimism that there is a big disconnect between what the economy is telling us and what the market seems to be expecting and pricing in.

And that's a, a source of risk for us as we're thinking about the next six months in market returns.

Yeah, that I that dichotomy.

Uh, they're always to be a split between the main street and the Wall Street economies.

What are you expecting from the fed next week?

Lots.

The consensus is nothing happens in July at this meeting that we get next week, but it's setting up for September rate cut and there's a lot of speculation about that.

Do this number, do the mornings, do the numbers from this morning, kind of feed into that.

What else would you want to see personally to see that September cut the numbers feed into it.

It helps and look rates and inflation are, are some of the hardest to predict parts of the market and a market that's overall impossible to predict to begin with.

I think in the comments that we'll look for it next week from the fed, the markets at least expecting a 90% chance of a cut in September.

And there was a little bit of a push and some discussion around July cuts, but it seems like the mix of data seems to be consistent with that September cut.

I think you want to see NFP non farm payrolls come in next week again with that slowly slowing, not too hot, not too cold.

But again, it goes back to this is a market that is essentially for better or worse pricing in these goldilocks outcomes.

So it's a very sensitive market.

It's a nervous market and it's a very expensive market.

So if we see any blips in the commentary, we see any blips in non farm payrolls in the next CP I print that's gonna lead into the September meeting and then you can probably expect some pretty violent market reactions.

And we saw that this week, we're seeing 1 2% swings easily within a day when this goldilocks narrative gets disrupted.

So um what, what does that essentially then tell us about this rotation that we have seen out of tech?

Is there more downside ahead for what had been the leading the the leaders within this most recent like hire?

And if so, what do you think the degree of that downside could potentially look like?

Well, the degree and the downside comes from this historic level of concentration we've all been living in and frankly embracing for the last few years and that concentration within the US.

It's the US tech sector making up over 30% of, of the US, the magnificent seven piece of the sector at least.

So there's that and then it's just us making up a historically large part of the rest of the developed world.

So there's a lot of eggs in one basket when it comes to the market right now, when you look at overall headline value sourcing from that concentration of the high multiple names, now, you've got overall multiples on the S and P 500 running at levels that are above 20 you, once you get above 20 think about long term historical multiples closer to 17.

In other words, you can easily see a 10 to 15% D rating if this narrative gets disrupted.

But this gets back to the point of the economic background feels so and stable and we're not seeing those fractures or cracks in the surface of the economic foundation yet.

So when we look at that 10 to 15% D rating, we could potentially witness in the S and P broad line, then you could also see potentially if tech earnings don't go as hoped, you could also see some earnings expectations come down as well, which could compound on that 10 or 15 drop.

And that could very easily spell out a bear market technically at 20%.

So I'm not saying that that's our base case, but we're staying really close to our clients right now, we're focusing on the economic optimism and we're focusing on the fact that the market is relatively expensive and you probably could expect uh correction to that between now and the end of the year.

But going back to your question, luckily that still a lot of opportunity for the market broadening and for investors that have wanted to diversify away from those concentrated expensive names for so long, but paid a price for it.

Now you're getting value for that.

Yeah, I know you like small and mid caps.

So that's what where I wanna get you out of and Europe as Well, so last question is uh where do we put this money here?

Yeah.

And so what you've seen over the last month is you're almost getting this double digit dispersion from the small and mid cap space compared to the large cap names.

And so that's what we like to continue to see.

We love the broadening the catch there is is we're going down in cap, going to the other 493 in the US.

40% of the small cap universe is unprofitable.

And these are also the more cyclical value oriented names and the same goes for Europe.

So as we're diversifying out of these bigger growth oriented names, we have to remember those are more resilient in that rare case of a hard landing type outcome.

So as we are diversifying, going down in cap, going X US, we're looking for growth, we're looking for quality is a bit of a mitigator as we add more cyclicality to a portfolio and what's still a late cycle environment.

All right, appreciate your thoughts here.

Thank you, Adam Hets, Janice Henderson investors, global head of Multi Asset and it has been a tough week for automakers after reporting earnings, we're going to discuss who is best positioned for the second half of the year with an analyst that's up right after the break.

It has been a tough week for automakers Ford and stan reporting disappointing earnings this week, sending their stocks tumbling and despite GM beating expectations, it's ev expansion delay is weighing on its stock to discuss which car company is best position for the rest of the year.

Daniel Rosa Bernstein, senior analyst joins us now and just give us your big picture overview of the results that we got this week.

Any surprises?

Hey, good morning, Jared.

Thanks for having me.

Look.

I think first half and Q two actually was not terrible.

What really spooked investors this week is the outlook into the second half where companies across the board signaled that they expect a weakening us consumer landscape.

Dan, when it comes to what that tells us, maybe once you dig into these reports, there was a lot to like within the GM report, you take a look at investor reaction to Ford.

It looked like something was missing there because we didn't have that beat and raise that.

It looked like the street had been anticipating.

What does that then more broadly tell us about the landscape ahead for so many of these traditional automakers and maybe how tough the road could potentially be here in the short term?

I think, look, two things on the short term.

This is all about earnings revisions and what we heard this week will take earnings down.

And so that's, that's the headwind we're seeing in the medium term.

I think you need to realize that Ford wants to keep the cash to preserve strategic optionality.

Whereas the land's MGM are still distributing a significant amount through dividends and buybacks.

And I think if you look out until the end of the year into next year, you probably want to have a stock here that's paying you to wait because it'll take until mid 25 before us consumers wake up again and we get the engine restarted again on autos.

When I get your take on Tesla, they, um they were able to increase their deliveries to 444,000 units.

But there are lots of promises and bottom line, they support a 88 time multiple on Ford.

Pe just wondering are, is Elon behaving, uh is, is Elon's behavior justifying that Ford multiple?

Uh I'm gonna be careful on that multiple because of course, there's a lot of enthusiasm around all the things that are not cars that is built into uh into Tesla.

And I think that's really what you need to look at.

They're trying desperately not to be a car company quite honestly, the way they talked about Optimus and the other opportunities on the earnings call, right shows you, I think on the segment of cars, what you got to realize is there's gonna be a model refresh in 2026 and the new model kind of Tesla two or whatever the name will be likely is 27 and later.

And that means any significant volume growth on the key aspect of cars at Tesla will likely have to wait quite a bit.

And I think that's really what's weighing on the stock right now.

And that's also what our team kind of sees in the future for this company.

Daniel.

You characterized de quarter as quote, it's a missile around and takes you into, it, takes us into quote unchartered waters for this group.

What do you mean by that?

Well, look, we've got one of the best CEO S in Global Autos running this company, Carlos Tavares, right?

He's a master at, you know, the cyclical industry.

He cuts costs like nobody else yet.

Here we are in the situation where Stonis did all the wrong things in one quarter, right?

They pumped the inventory channel last year, inventories went up, they had to put discounts back on, they had to put pricing down, they overspend on M and A, they overspend on Capex and they basically had no free cash flow um in, in the report.

And this is really the first time in the past three years that Stante has messed up, right.

So far, this has been the poster boy of global Autos with a very strong track record.

And so this raises questions whether the performance of Salant or how much of the performance of Salant over the past three years was due to the great M and A and consolidation between PS A and FC A they did and how much was just due to the lack of supply and the supply chain issues we've had driving up prices.

What do you think that then tells us about the price strategy moving forward?

Do you think we'll likely see price cuts as a result of some of that weakness here?

Yes.

Look, if we look at the inventory levels right now, um, we're about 25% higher than where we should be in the US.

And that means everybody across the board, but especially ST L as in some of their, um, their segments will need to cut pricing or find some way to entice um, entice consumers.

What we're seeing as a reaction in addition to pricing is that in uh O Ems will cut production in Q three that relieves inventory pressure into Q four.

And so if you're looking for a car deal, Labor Day is the day to go.

I think up until then we'll see consumers being in a better place uh to buy a car to kind of get a good deal after Labor Day, you'll see some of those production cuts come through into Q four.

So by the end of the year, I think we've, we, we have worked through this and again, this is a typical auto cycle.

This is nothing to be afraid of, but it does weigh on earnings in the second half.

I'll give you the floor here for the last one.

Anything.

Uh You wanna leave investors with here.

Uh Look, I think Autos is autos and the past three years haven't changed that.

And so it's cyclical industry, you need to think about the near term earnings.

We think GM here is best positioned to tide people over with a good buy back and dividend strategy in the medium term though, we flag that everybody still London's for GM.

They're all working on the future platforms on the um electric vehicle platforms and they will be around, they will be a part of this market.

And so in the very, you know, long term for investors on autos, which is three years, argue these companies are going to be around, they're going to have better earnings than they had 56 years ago.

And so ultimately, valuations will have to come up on this sector.

But that, that is not something for today for the next couple of weeks.

This is all about second half and I, you know, I take a deep breath, step back, look at your portfolio and if you want to be active, I would look for a stock that's compensating you for to wait.

And that's basically GM at this point in time.

All right, Daniel Rosa, great to have you here.

Bernstein is a senior analyst.

We appreciate the time.

Thanks guys.

Let's take a look at shares of Novo Nordisk.

They're on the move to the downside actually down by about 7/10 of a percent.

Despite the fact that EU regulators back the use of a GOVI to lower the risk of major heart issues and strokes in overweight and obese adults to discuss.

We have our very own yahoo finances.

Angeli Kamlani.

Yeah, that's right.

Uh, this is good news, of course for Novo because more, uh, of a market for them, but at the same time, more pressure on production for these very same drugs.

So, uh, the E eu joining the UK and the U and approving will go for use for cardiovascular risk.

We saw in the phase three trial for Novo nor that it reduced uh if uh cardiovascular risk for death, non fatal heart attack and non fatal stroke by 20% may for other major adverse events as well.

And this is specifically for overweight adults.

Remember we go is the weight loss drug, not the diabetes one that Novo Nordisk produces.

So just another market for Novo to now cater to, you know, I would call Eli Lilly a mega cap and we saw some big drops in mega cap stocks this week $760 billion by the magnificent seven in one day.

But we're talking about Eli Lilly 100 $20 billion in one day.

Competition is heating up.

So who's, who's in that competition space?

Yeah.

So Noble also getting a little bit of a hit from that.

But Eli Lilly specifically because to your point, it is a major mega cap.

It has been on the path if you will for becoming potentially the first trillion dollar health care company, right?

Like that's the thing that people have been watching for the stock in particular.

And so what it has and that's why this loss is a little bit more disappointing $120 billion in value lost on the news that Viking Therapeutic, a biotech is getting closer to the finish line with its obesity drug.

Meanwhile, it has lost 14% in the last eight trading days alone, but on the upside, 38% of year to date and 80% up in the past year.

So on balance, not doing so badly and still managing numbers in the first place, right?

And, and it still is holding on to a fairly decent uh valuation.

The the market cap is still well above that half million, uh a half billion point right now.

So uh sorry, half trillion point.

So that's, you know, it's still, it's still holding pretty well.

Um But it is one of those stocks that is being impacted.

Novo is also being impacted.

But because Lily has had so much more going on for it, you're seeing that, that uh trajectory.

All right.

And let's take a look at Weight Watchers because that stocks under a bit of pressure here this morning actually got a downgrade from Morgan Stanley.

The reasoning behind that they talked about some of the headwinds from obesity medications, maybe G LP ones that has been one of the overhangs on the stock most recently here.

Yeah.

And this is similar to the story for Lily.

You're seeing increasing, uh, competition, you're also seeing increasing focus on what else is out there.

Right.

We've seen other companies sort of pick up the Weight Watchers strategy.

You've got him and her, for example, that are both offering the GOP ones as well as the counseling and the Guidance and Weight Watchers try to get into that.

They've had a number of major losses in terms of executives.

We know Oprah Winfrey left the board.

They've also lost another executive as well, the chief medical officer just left.

So they've had these concerns about pivoting away from the idea that you don't need to follow the pills, don't need to follow the fads and can, can, you know, consistently lose the weight.

And that has been one of the things that has weighed on the stock.

How do they exist and co exist in this world of increasing GOP one frenzy.

Could it be uh you know, an over reaction from Wall Street?

We've started to see a little of that when it comes to other medical device is other machines as well in the recent past.

Um all focused on this G LP one era.

And so whether or not that that actually comes to fruition, whether or not that really is a headwind for the company we will definitely be seeing.

But it, it strikes me as interesting considering the fact that we do see other companies, you know, following that similar strategy and they're actually up on these news.

So we'll be interesting to watch.

It will be interesting to watch.

All right.

And thanks so much coming up, Coursera is big gains, the stock up pretty significantly here this morning on the back of an earnings beat a lot of this having to do with excitement surrounding A I courses.

We've got more for you when we come back.

Let's get to three other big earnings reports that we were watching here this morning.

We've got three stocks for you in 30 seconds.

Let's kick it off with course, Sarah, we're looking at that stock moving to the upside.

A massive rally on our hands here.

You're looking at shares gaining about 53%.

This coming after the company beat on earnings expectations for the second quarter.

Why?

Well, it's actually all about demand for A I.

This is an online education company.

They're saying that demand for the A I courses is surging and just give you a better idea of what that demand looks like.

So perhaps more than 2 million enrollments in its gen A I courses here.

So again, we're seeing that directly reflected in these results.

And again, trading volume, really pushing to the upside today much higher than typically is as the average time for the day.

I am looking at Norfolk Southern and this stock is also moving higher about 10% off of a solid earnings report.

The company getting a boost from insurance payments to help pay for some of the costs of last year's derailment in East Palestine, Ohio.

So this is a company kind of clawing back from that disaster.

Morgan Stanley is saying of the results they were the surprise second quarter beat driven by productivity traction noting that the company's opportunities and risk lie more on the revenue side than on the cost.

Jeffrey is calling the costs a beat across the board, expressing confidence in long term margin improvement opportunities, Shana.

All right, let's take a look at the Chinese EV battery maker Catl and seeing its profit rise over 13% in its latest quarter.

Bucking some of the trend that we've seen from its rivals at least to some degree, maybe it is shares are up just about 1%.

But we do have to put this in perspective because revenue did slide during the quarter.

Weaker demand out of EV is an issue here for Catl and its rivals.

It's been hit by the sluggish economy in China.

That revenue drop actually deepened from that 10.4% drop that we saw in Q one.

Yes.

If we want to look at a positive side to this report, it was that profit jump net profit jumping 13.4% from a year ago.

All right, coming up, we have a breaking consumer sentiment data out at the top of the hour, we are going to dive into that and much more next on catalyst.