Morgan Stanley earnings, Trump VP, retail sales: Morning Brief

It's a new day, but the same old stock market. Seana Smith and Brad Smith help investors through the market open and discuss what's moving markets, like June's retail sales data.

In this installment of The Morning Brief, Morgan Stanley (MS) and Bank of America (BAC) reported second quarter earnings. Argus Research director of financial services research Stephen Biggar joins the show to discuss the latest Big Bank earnings and what lower interest rates would hold in store for the banking sector.

As Apple (AAPL) hopes to inspire a new upgrade cycle in its newest iPhone's AI features — dubbed Apple Intelligence — the tech giant also has its eyes set on the consumer market in India. D.A. Davidson managing director Gil Luria describes the country's consumer prospects as a "long-term promise" for Apple.

Other trending stock tickers on the Yahoo Finance platform include Match Group (MTCH), UnitedHealth Group (UNH), and Shopify (SHOP).

This post was written by Luke Carberry Mogan.

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

I'm Show Smith alongside Brad Smith and this is Yahoo Finance flagship show the morning brief brought to you by invest.

That's right.

Good morning, everyone stock futures trading higher this morning as investors price in and earnings beat from Bank of America was better than expected retail sales for June.

So let's get to it with the three things that you need to know this to day morning, Yahoo finances J Madison Mills and Rick Newman have more.

Thanks for Bank of America.

Morgan Stanley rounding out big bank earnings this morning as the financial sector sector hits an all time high Bank of America topping Wall Street earnings expectations for the second quarter, net interest income.

A key metric for banks.

It fell from the prior quarter and the year but Bank of America says it expects the figure to climb in the fourth quarter.

Morgan Stanley also beating on the top and bottom lines but shares are lower as the company's key wealth management division misses on revenue for the second quarter.

Digging into those retail sales coming in unchanged for the month of June, defining Wall Street's expectations for 3/10 of a percent decline.

That new data showing the consumer continues to spend.

Despite signs that the US economy is slowing retail sales for May by higher to a gain of 3/10 of a percent from a prior reading of the gain of 1/10 of a percent.

June sales excluding auto and gas also coming in higher than estimates.

And former president Donald Trump has selected Ohio Senator JD Vance as his running mate on the Republican ticket.

Trump made the announcement in a true social post Monday afternoon, the first day of the Republican National Convention in Milwaukee in two days after surviving an assassination attempt at a campaign rally in Pennsylvania.

Trump then showed up at the RNC convention.

His first public appearance since the attack.

Trump got an official endorsement from Elon Musk in the wake of the shooting.

And according to the Wall Street Journal Musk plans to commit around $45 million a month to a new super pac backing Trump's campaign.

Our top story today, we are watching shares of two top trending tickers on Yahoo Finance Bank of America and Morgan Stanley both out with second quarter results.

Let's take a look at some of the highlights here and we're taking a look at this market action here beginning the day, the biggest mover that we're seeing right now, Morgan Stanley as of right now.

And then additionally, you've got Bank of America moving to the upside by about 8/10 of a percent.

Let's just briefly hit on Bank of America.

A few of the takeaways that I was able to peruse through this report and ultimately kind of pen down as some of the bullet points that investors may be thinking about this morning.

Number one, looking at some of the year over year comparisons, even though you did get a beat on top and bottom expectations, there was an overall lower performance versus last year revenue they did say was hit by some lower deposit balances.

You also saw the provision for credit losses up annually and sequentially here.

Now that could mean that they're just kind of trying to get ahead of where they could see some weakening in the consumer.

But ultimately thinking about that consumer as well on the digital front for all you Zelle users out there, you're powering some of these new records, digital usage strengthening for the bank, new Zel uh records here.

They, they did note of 22.6 million active users that's up 11% and then ultimately some sent and received 382 million transactions worth 100 and $15 billion.

Both of those markers up 26% here, Sean.

Yeah, I think the big move or the big reason why we're seeing this reaction in Bank of America has everything to do with net interest income and where exactly Bank of America sees that going here for the remainder of the year has net interest income when it comes to that Bank of America, saying that they expected to hit a trough here in the second quarter of the quarter.

The second quarter net interest income will probably hit a trough here for 2024.

And then looking ahead, the company saying that an interest income on a fully taxable equivalent basis is probably going to climb to about 14.5 billion in the fourth quarter.

So some improvement down the line, I think that's giving Wall Street a bit of confidence and why we're seeing Bank of America shares up just over 1% here in early trade or in pre market trading.

Now let's flip over to Morgan Stanley because a different reaction going on there.

You've got that bank under some pressure here following the result that we got out this morning, we're looking at losses of just around 3.5%.

The big reason for that is some of the weakness that we are seeing in the wealth management business revenue there missing expectations coming in at 6.79 billion.

Now, the bank has really been under a tremendous amount of pressure to show that it could keep some of the momentum alive within the uh wealth management business.

It's going to be able to keep expanding, it's already uh market leading share that it does have here under their new CEO Ted pick.

So some weakness.

There is a bit of a uh caution.

So I guess raising some red flags here for Wall Street.

So why we're seeing that stock under a bit of pressure.

Also the company here provision for credit losses coming in more than expected.

On the flip side, though there are some areas, some bright spots within this report that top line they are trading and net interest income at least beating the street's expectations so able to maybe question some of the fears that we are seeing play out on the street.

But again, a lot of this movement that we are seeing in pre market in direct reaction to this report is related to some of the weakness or uh I guess the momentum that Morgan Stanley is seeing within its wealth management arm.

Yeah, it ultimately seems like and, and kind of continuing trying to get the read on where the executive officers for both of these banks are kind of remarking on what they're seeing in the broader environment right now.

Uh Ted pick as we were talking about Morgan Stanley, the chief executive officer over at Morgan Stanley really remarking on this as a strong quarter, improving capital markets environment, which is actually something that many of the banks we've heard uh as a through line from many of the banks have performed well because of the stronger capital markets environment and and equity markets as well.

Um is something that's been a boon for many of the banks at this juncture, but just to come back to that figure that you were mentioning on the wealth management side here uh because that came in lighter than expectations.

And ultimately here it was the equities and sales trading revenue that outpaced some of the expectations or estimates coming in to this quarter.

And so where they're able to retain some of the wealthier clients, some of those who are looking to kind of rely on the services of the larger banks.

I think that's been one of the other common denominator that we've heard over the course of this earning season, at least for the financial services industry thus far.

Yeah, you're exactly right.

We'll see where these two banks open here at the opening bell in just about 24 minutes from now.

All right, let's take a look at retail sales coming out this morning flat for the month of June and May retail sales revised upward to 3/10 of a percent that was up from the initial report of 1/10 of a percent.

Now signaling that the consumer is at least stronger than what Wall Street had fear.

So here to discuss, we want to bring in Robert Sin.

He's city's senior global economist.

I it's great to have you here, Robert.

So I guess when you take a look at this report, how do you think fed officials are looking at this when they, once they go through the tea leaves here.

Are they at least comforted in the fact that maybe the consumer is holding up stronger than initially feared at this point.

Good morning.

Thanks so much for having me.

I think that is the key question.

And I think for the fed, what this will show is that the consumer is holding up well and is not falling off a cliff as some analysts had feared, you know, the economy was very strong in the second half of last year.

And the big debate in the first half of 2024 was, were we seeing a sharp slowdown in the economy or a moderation into more modest sustainable growth?

And I think what this report shows is that the consumer holding in there.

Well, um and maybe is not spending at the head pace that we saw in the second half of last year, but it's certainly not falling off a cliff.

And I think for the fed, this will take some urgency off of easing rates out of fears that the economy may be slowing down more sharply.

So I think they're gonna still signal at the July meeting that September cut is very likely given progress on inflation, but the economy continues to hold up.

Well, they can afford to be patient and probably move relatively gradually with rate cuts after September.

But it sounds like they don't need to wait for inflation or at least their core kind of tracking of inflation whether that be via CP I or P CE to get down to 2% is that would perhaps mean that they stayed too tight for too long.

Yeah, absolutely.

And I think, um, you've heard that from the Fed as well that they feel that they've seen enough progress on inflation um, to get ready to start easing uh policy.

I think in the first part of this year you had several months of much stronger than expected inflation.

And that really pushed out the idea of rate cuts.

Now you've had several months of pretty good inflation and yes, on an annual basis, um by the Fed's preferred measure we're not back to, to target.

Um But I don't think that's a precondition for them to start easing that they think that they've seen enough progress that inflation is moving sustainably back to target and they're ready to start easing up on that very restrictive policy.

Uh So I think that's probably what we're going to hear from them when they, when they meet this month.

Robert.

So are you confident?

I guess that the US economy is going to be able to avoid a recession and, and, and if so then what does that mean for fed rate cuts in the number of times we could see rate cuts happen here before the end of the year?

Yeah, and absolutely, this is still the key debate, you know, our US team here at city still expects uh the us to go into recession this year.

And so in their base case, that leads to a lot more urgency from the fed.

And after the first rate cut in September, they have them easing at every meeting after that um uh going into next year as well.

Now, uh you know, as I mentioned, it looks like to me from these data, the economy has model um but is, is holding up well and so far, um any of the indicators that are pointing to a heightened risk of recession are still fairly modest at this stage.

You know, consumer spending has slowed somewhat, the labor market has loosened somewhat, but overall, the numbers are still holding up quite well.

So I think there's still recession risk out there.

But to me, the data are feeling more like that soft landing and as noted in that soft landing scenario, the fed still cuts in September in my view, but probably only cuts two times this year and maybe a few times next year.

So I think they're going to ease.

Um But probably at a more gradual pace than if the economy goes into recession.

In which case, um they'll start easing much more rapidly, Robert, if we do see the fed ease at a more gradual pace, I guess my question to you is then what does that signal or does that complicate the easing path or the path forward here for central banks around the world?

And how so?

Yeah, and II, I think this is the key debate within uh global macro, what it means for the global economy.

We've seen many central banks around the world uh start to ease ahead of the FED.

This is fairly unusual.

We saw the ECB cut in June.

Uh We've seen the Bank of Canada cut a variety of other developed market.

Uh Central banks, of course, several emerging markets that started easing a fair amount before that.

Um you know, so uh in this cycle, clearly, there's a lot of domestic factors that are driving what the central banks are doing.

You know, a lot of this inflation that we're seeing in all these economies is driven by services sectors which are more domestically oriented.

Um That being said, uh we still think that central banks have shown a preference for moving together when they can and if the fed stays higher for longer, there's only so much.

I think that many of these central banks are willing to deviate from FED policy.

So in our base case where the fed starts easing fairly consistently after timber that makes the lives of other central bankers much easier.

They can start easing fairly consistently in tandem with the FED.

If the FED is higher for longer, I still think you'll see rate cuts from these other central banks, but they're going to move more gradually as well out of fear of deviating too much from the FED so what the fed does here very important for the US but also very important for global monetary conditions.

All right, Robert Sin City, senior global economist.

Thanks.

Thank you.

Former President Donald Trump officially announcing his running mate for the 2024 election.

Ohio Senator JD Vance was announced at the Republican National Convention, the RNC on Monday in his first public appearance since the assassination attempt against former president Trump over the weekend, Wall Street weighing in on what this could mean for the market.

TD Cowan calling out likely focuses on trade, fossil fuel and tough stances on China.

Yahoo Finance's Rick Newman joins us with the details.

Hey, Rick, hey guys.

Yeah, JD Vance.

Uh not exactly a friend of big business like Trump, he favors more protectionism.

Uh He is pro union.

He, he favors uh moves that would push up union pay and blue collar worker pay.

Um He actually, he has got some back in among what you might call the uh li w of the industry thiel and people like that.

But he actually thinks um uh some of the tech, big tech companies ought to be broken up.

So he's not exactly a tech pro in the traditional mold.

Um Let, let's keep in mind that a vice president's policies and views usually don't translate into any kind of actual federal action if that guy actually gets elected.

Um People kind of forget about vice presidents and unless something happens to the principal, obviously, in which case he would step in.

Um So I think um one way to think about JD Vance is he is the future of Trumpism.

He's only 39 years old.

Uh He is a millennial.

Um So the millennials finally have um somebody on a national ticket, whether this is the person they envisioned or not, you could kind of say to yourself uh hey Democrats, maybe you should get some fresh blood in there um to counter the millennial who's on the Republican ticket.

But at the moment that doesn't look like it's gonna happen.

All right, let's talk about some of the donor aspects.

And we're hearing from some big billionaires.

One being Elon Musk saying that he is pledging to donate at least $45 million per month to help, to help garner some support and elect Trump in November.

My question to you is what ultimately do you think this could then mean, is this a good thing for Trump?

Could this actually backfire and actually favor Biden?

And, and also, is there a risk here because you had some good t uh tidbits that you pointed out here uh in an email that you sent to everybody.

But what ultimately, this could also mean for maybe Tesla down the line, right?

Um So there's a lot going on there.

Uh If Elon Musk does give $45 million a month for the next four or five months I think that might make him uh the biggest political donor ever to us.

Political causes, money would go to uh what are called super pacs.

These are the organizations that in this case I think would do stuff like um they run ads, they can run a lot of ads in favor of the candidate they're aligned with, which is Trump.

They can also run ads attacking the opponent which is Biden.

Um Some reporting suggests that this group will be focused on trying to get people, more people registered to vote, get more people doing early vote voting.

Which is ironic because Trump himself has said that that's fraudulent, which it is not, but that's been Trump's view.

And um for Elon Musk, he's clearly getting way more deeply involved in politics than he ever has.

Um up till now according to him.

And I think according to all the records we know about, he has never given any meaningful amounts of money to any candidate or any cause, but he has become increasingly vocal and outspoken on political issues.

Musk supported Joe Biden in 2020 if you can believe that um he had kind of a falling out with Biden because every time Biden talked up electric vehicles, he left out Tesla, he would talk about what Ford and GM are doing because those are unionized companies.

Tesla is not a unionized company.

Elon Musk took umbrage at that, got in some spats with um with uh Joe Biden on Twitter now called X and now he's all in on uh on um the, the mega presidential candidacy.

There has been some research showing that consumer interest in buying Tesla automobiles has declined.

As Elon Musk, the CEO has gotten more vocal on political causes.

So I think this is going to be a very uh interesting test case.

I mean, you really, it almost never happens that you have a CEO of a publicly owned company.

Um Certainly you do have some of privately owned companies but publicly owned with shareholders where the CEO is basically picking sides in a very, a very divisive political environment.

So it makes me wonder is uh the brand Tesla gonna become like a subsidiary of the brand Trump and our Tesla automobiles now going to become like uh Republican vehicles.

Who knows, who knows.

We'll see how this all plays out in the coming months.

Rick Newman as always.

Thanks so much.

Bye guys.

We are just getting started here on morning brief match, getting a boost after activist investors.

Starboard disclosed a stake in the company.

They're also pushing for major changes.

We're going to break down some of the today's top trending tickers and more big bank earnings this morning.

We'll speak with an analyst later on this hour about who is best positioned following results from Bank of America and Morgan Stanley.

Plus, stay tuned for our 10 a.m. hour of catalyst.

We will break down the risk of higher volatility ahead of the presidential election.

All that and more.

You're watching Yahoo Finance time for some trending tickers match group shares.

They are rising this morning after activist investor Starbird announcing it has a 6.5% stake in the company.

The Wall Street Journal originally reporting Monday that the hedge fund is pushing for a possible sale should turn around efforts fall flat here shares moving higher here pre market as we mentioned.

And of course, as we're thinking back to what's taking place more broadly with match, you've got some head that subsidiaries and this has a host of subsidiaries.

We should mention matches more than just the match.com that you knew in the early two thousands.

Now, of course, the parent company owning Tinder plus a plethora of other dating apps, OkCupid, plenty of fish within there as well.

Uh But more largely here, some of those consumer discretionary dollars that have really been relied upon for growth of the average revenue per user.

If you see persistent head within that, that's where you could see more of these activist groups actually be successful and not satisfied with some of the turnaround plans that have been attempted to be put in place.

Elliott, one of those other activist groups that's within this name right now.

Yes, the third activist to take a position, take a stake within match this year.

So really showing that there has been a much push here for change at matches as a company like you were saying, has been struggling now for quite some time, we had that one year chart up on the screen just a moment ago, shares are off just about 30 percent.

And this is an issue that's not only with match but some of the weakness that we're seeing more broadly speaking within the dating app sector.

We talk about the fact that they're slowing growth almost across the board.

Stiffer competition.

That's obviously complicating efforts here to increase the market size.

Something that's not just match is struggling with and also just tough times retaining the paying user here and we bring that up because we just had retail sales out before the bell.

Yes, they were flat coming in better than expected but not necessarily pointing to a consumer that is very strong and is out there willing to spend.

So we talked a lot about this key shape recovery, maybe that we are seeing play out within the economy, this big divide between the have and have nots.

So we are seeing consumers maybe pulling back on some of their spending plans here.

And as a result, many of these names match included is suffering a little bit as a result.

Yeah.

J Lo once said love don't cost the thing.

Match said, hold my beer a lot.

All right.

Well, United Health shares the movie I in this morning.

That was good.

Well, I tried let's start up from the top here.

United chairs moving higher this morning reversing course after its mix.

A second quarter report left investors concerned about higher costs in the wake of a cyber attack on one of its affiliates change health care.

Yahoo finances angel.

Come on has the details for us.

Hey guys.

Yeah, United kind of a mixed results morning right now missing just slightly on estimates for revenue but beating on adjusted EPS.

Now, what we know is that investors have been really watching this change health care story very closely.

It has been one of the biggest uncertainties hanging over this company for this year, in particular, in addition to a number of other things.

So when we look at the change health care impact, not only has the impact been greater than expected, 1.1 billion in the quarter alone, and that's a majority of what the company estimated would be 1.6 billion for the entire year.

So already hitting quite a high number there.

Not sure if it's going to continue to be a major expense for them throughout the rest of the year or if it will taper off in the second half.

But we did hear from the CEO on the earnings call this morning all laying a lot of fears about some of the other things weighing on the stock this morning and that includes the payer mix or sorry, the patient mix.

So whether or not they have a majority Medicaid Medicare or commer patients members on their on their role.

And that has changed.

There's been an increase in the commercial side and utilization there.

So that's another thing investors have been looking for whether or not that will decrease throughout the rest of the year.

We heard from Jared Whole saying that the key from here really is how management sounds with respect to the pace of utilization which I just mentioned over the next couple of quarters, investors are looking at whether or not it plateaus goes down, et cetera.

So that's sort of the key here is that, you know, multiple moving parts and just a side note really quickly.

I also heard uh the CEO talk about A I and sort of the use of helping drive down costs but not in the gen uh uh like chat G BT kind of way, right?

Not in generative A I, it's more on how technology is actually help, helping to drive down costs even though they've gotten in trouble in the past over that.

So really interesting to see how they balance that tone with the issue.

United, how so they had, they were using A I to um handle Medicare Advantage claims and that had been uh leading to a lot of denials.

And so they got into trouble over that.

Well, it seems like those days claims payable that actually moved lower, which is a good thing.

It's a good thing about 45 days compared to 47 in the first quarter.

So and thanks so much for tracking all things you and h here on the day will track those share through the rest of today trading session, right?

Shopify share is getting a boost after Bank of America upgraded the stock to buy from neutral, raised its price target to 82 bucks from 78.

The analysts behind the call saying quote revenue growth and discipline spending point to healthy margin expansion going forward.

They called out the fact that under their new CFO that Shopify has made a number of, I guess or taken a number of steps in the right direction, turned a quarter on balanced growth on margin here going forward saying that they do see solid revenue growth, free cash flow conversion all so uh improving there.

So because of all that, I guess they're pretty bullish on what the outlook here, at least or what the road ahead looks like for Spotify, we are looking at year to date, uh losses of just about 17.5%.

So they are making the bet that we're going to see a bit of a turn around there in shares.

This is a huge story for Shopify.

And here's why I mean, if all your social media companies are essentially the new mall where discovery happens digitally for a lot of potential consumers out there or those who are trying to find inspiration and then, and conversions Act on that inspiration and make purchases.

Shopify is very intertwined within that experience and it very well could be the new major purchase uh and point of sale operator here that we're continuing to see grow upon what it's already been able to do.

Now, the key thing that they're calling out within this is free cash flow.

The company talked about this in their most recent earnings call.

They expect that free cash flow margin to be similar to the first quarter of 2024.

But this analyst is actually expecting upside A Q two revenue growth of 23% pointing specifically to better scale and free cash flow conversion here.

So ultimately, that's the number, that's the figure to track.

Once we hear from Shopify this particular earnings period here, once they uh give us those results that not expected for a little bit of time here, we're early innings in this earnings season very early.

Just getting through the banks still going.

All right, we'll keep right here on Yahoo Finance.

Also early on in the show, we've got the opening bell coming up next.

Keep it right here.

We'll be right back just seconds away from the opening bell.

You're taking a live look at the NYSC where Michelob Ultra is ringing the opening bell, Dickerson BBUD, of course, uh but wiser subsidiary there and then taking a look at simply good ringing the opening bell at the NASDAQ here.

All right.

That is the opening bell.

You're watching the morning brief.

It's brought to you by in Beco.

Let's do a check of the markets here.

As we begin this Tuesday trading session.

We're taking a look at Gaines pretty much across the board right now.

The dow, the NASDAQ and the S and P 500 Sea, we are moving higher here.

You got the dow up another half of a percentage point here.

Adding to gains are right at the open.

You can see pushing further, further above the 40,000 level.

You've also got the S and P 500 moving to the upside.

Now, getting closer to 5700 flipping back over to the NASDAQ composite as it calibrates here, we're still looking at gains there at the open on a sector basis.

We are looking at much of the green on your screen.

You can see health care consumer discretionary leading today's action.

On the flip side, you do have energy and materials under a bit of pressure.

But again, this rotation that we have been talking about uh within the market and you could not uh that actually where to go here.

Uh technology, right?

Not too far from the flat line there.

So just below the flat line as that rotation uh seems to be uh taken uh I guess really under under way on Wall Street, we're starting, things are starting up, we're revving up.

Let's get over to Jared Blaker.

He's got to look at some of the movement that we're seeing here at the Jared.

Yes, I am watching the Dow at another record Intraday high.

We've had a few of these recently and let me put the Dow on there.

This is a four year chart.

I'm going to switch it over to year to date and you can see how we just, only yesterday started climbing into record territory.

Once again, it had been a while.

You can see that we did it in May and in March.

But what's interesting about this bull market and in fact, this is how most bull market evolves.

You have different strengths, you have different sectors showing strength at different times and you see sector rotation that is the lifeblood of the bull bull market.

And you take a look at what's happening in small caps.

I'm going to put a four year chart on here.

So you can see how long small caps have been stuck under the 2100 area.

This is the Russell 2000, by the way, and only a couple of days ago have we broken free?

And then you can take a look at the S and P 500 equal weight that has been perking up as well.

And it's just been interesting to track some of the laggard sectors that have really just shown some strength and this goes back, a lot of these streaks have been going on for four or five days, but it was three business days ago, three trading days ago on Thursday that we got that CP I print really changed the game.

So today leading the sectors is consumer discretionary.

That's up 9/10 of a percent followed by health care, energy trading to the downside.

But I want to focus on some leaders here.

First, we got home builders.

Those have been showing a lot of strength recently.

They just broke to a record high and that happened only a day two days ago.

We can also take a look at bio tech that is showing some strength.

This is a four year chart.

So it's just emerging.

That looks a lot like the small cap chart.

And then we can also look at regional banks that those have been perking up recently.

We are just a little bit away from the 1st 52 week high that we've seen in years and this comes after all the damage that had to be repaired from these charts from that failure that we saw last March.

So all in all a lot of other sectors and industries just perking up right now.

All right, Jared.

Thanks so much for breaking that down for us.

Well, so uh stocks are opening year to the upside.

You've got gains across the screen.

You've got the dow up and nearly 200 points on the move to the upside coming after retail sales coming in.

Flat for the month of June is actually exceeding expectations and breaking a streak of disappointing reports.

You've also got uh may revised upwards here.

So maybe pointing to the fact that the consumer is in better shape than maybe initially anticipated.

For more on this, we want to bring in Matt Maley, he's Miller Tabe, the managing director and Equity strategist and Matt.

It's, it's great to see you.

So let's just take a step back because when we take a look at these econ data reports, a lot of times we're looking at the market's reaction and when they are better than expected, we're actually seeing maybe some pressure in the equity market.

That doesn't seem to be the case today.

What do you think is going on and really driving today's action?

Well, I mean, one of the things of course is that people have been starting to worry a little bit about the consumer and, and how uh how strong the consumer is.

So this, this number, I mean, it's, it's funny because when, when interest rates go down, people say that's good.

Uh and, and, and frequently it is um but we don't want it to be a sign that the economy is, it's one thing for interest rates to go down because uh uh because inflation is, is, is coming down.

But it's a whole another thing if it, if it's uh starting to show that we're headed towards a recession or, or, or or even just a uh AAA meaningful slowdown in economic growth.

So I think that's why we're seeing uh a pick up today.

But uh you know, those numbers are, they're OK.

They're not great.

I mean, and you look at, you know what happened with Bank of America this morning, he's talking about the net charge offs uh have been increasing there.

So it's still a somewhat of a mixed uh mixed signals we have here on, on the consumer.

And so if we're thinking about how this consumer could define, not just the rest of this earnings period, but potentially the time period for companies leading up even into the fourth quarter.

As we're thinking about what that holds, which is a general election where more consumers and this is started to shift the consumer sentiment a little bit what their projections are, what their optimism is around, uh that particular event and how that may curtail their spending.

You know, how do you kind of game out what the trend of the consumer might look like going into and even in the latter portions of this year?

Well, I mean, one of the things that, uh you know, needless to say the consumer is so incredibly important, 70% of our economy.

And uh you know, I I hate to say it but things have been kind of trending in the wrong direction even though these numbers were pretty good today.

I mean, we know about all about how, you know, high, uh, uh, the credit card, uh, uh, uh, I'm sorry, the credit card debt is, but now more recently we're seeing the delinquency rates on that starting to pick up.

We're seeing that also in auto, uh, alone, uh, delinquencies.

Same with overall consumer debt delinquencies.

So that's a big concern.

But as you state with the whole thing with the, with, uh, earnings, it's going to be really, really important that not only do we uh does these S and P companies or, or overall companies uh uh beat expectations, let's face it.

They always beat expectations at least, you know, well, over 70% beat expectations every time.

But what's their guidance gonna be?

Is it gonna continue to move up because it really has to because we're in a stock market trading at 23 times earnings.

Uh It's gonna be tough if we don't see uh future earnings forecasts pick up to kind of bring that pe ratio down a little bit.

But I'm curious just what, what, what you've made of the reaction that we've seen uh to the latest developments on, on the political spectrum when it comes to the jump that we did see in yields yields, obviously reading a potential Trump presidency as the fact that maybe we will see an increase in spending.

We're having more and more focus on the fiscal side of things in that debate.

Ha ha.

Has that movement been a bit surprising to you and why?

Well, it has been now, it, it certainly has been the narrative of o over the last couple of weeks that a Trump, uh, if, if Trump were to win, uh, the fiscal spending would pick up more.

But you, let's say, I mean, I think we, if we're honest with ourselves, we see that both parties haven't been particularly good on the fiscal side of things.

I mean, they're spending the money, hand over fist.

And so uh uh this is a concern for me, but I don't know if it's that much more of a concern if uh if, if Donald Trump becomes uh becomes president there rather than, than, than Biden.

And uh and we also have to wonder, II, I must admit, II, I, you know, Sunday, we were, you know, everybody was talking about on the political side of things that, oh, Biden's gonna be the nominee.

We're not this, you know, obviously what happened over the weekend was a tragedy on Saturday.

Um But thankfully, uh uh uh no, you know that, well, somebody did lose their life, which I'm sorry to say.

But, but my point is that, that um boy, the, the pundits last night, I was surfing around the uh political uh uh cable networks last night.

A lot of uh pundits are really starting to worry about Biden very quickly.

So we could see a lot of uh uncertainty still in that marketplace uh coming to uh, on the, on the, on the political side of things.

All right, Matt Maley, who is the Miller Tayback managing director and Equity strategist.

Matt.

Thanks so much for taking some time here just after the bell this morning.

Thank you.

We've got all your markets action ahead.

Stay tuned.

You're watching the morning brief.

You're watching the morning brief brought to you by Invesco Morgan Stanley and Bank of America.

Closing out their earnings for the big banks here.

Stocks moving in opposite directions right now, Bank of America reporting second quarter profit that fell nearly 7% from the year prior.

However, they topped expectations for the second quarter and report a slight beat on net interest income here.

Now, Morgan Stanley, we should focus in on that as well.

That also be on top and bottom line.

But the company's big wealth management division missing on revenue.

Let's bring in Stephen bigger who is the Argus Research Director of Financial Research, uh, financial services Research.

Uh, great to have you here with us.

You, you have Morgan Stanley listed as one of your top picks.

Take us into your analysis from the earnings that came out this morning and perhaps what that spells out about the broader banking sector right now in the earnings season.

Yeah, good morning.

So, uh right, a little bit light on the wealth management side for Morgan Stanley today.

Um, certainly offset by a, a terrific uh performance by investment banking revenues up 51% there.

Uh So that's been a kind of the story uh broadly with, with banks and what we expect to going into the quarter that we'd have a much better uh backdrop and environment for uh investment banking.

We've seen gains uh from as low as 20% from uh Goldman Sachs to uh over 70% for Citigroup uh and everything in between.

So, so I think that's the narrative uh that, that, that we expected um you know, the lending business uh and, and, and deposits uh have certainly uh uh gotten more costly uh for uh for the banks at, at large.

I mean, you, you think of them a little bit more in terms of the regional uh bank side, but certainly the large global banks have uh uh some deposit pressures as well.

Uh Fortunately more of the pure players like Goldman and Morgan Stanley, uh the investment banking side, the fee revenues are much more dominate uh than, than the uh net interest income side.

So, so I think the narrative going forward is, is gonna be something similar, you know, if you like these banks as I do uh for it's for the improvement in the uh capital market side and, and not so much the uh the lending business or uh uh you know, specifically wealth management, Stephen, if we do see the fed uh wait to cut rates, I guess in terms of that turnaround.

Or some of the strength that maybe you are expecting to see here in the coming quarters.

Is that going to delay that?

And I guess by how much?

Well, I, I think this, uh, the higher interest rates, uh, the higher for longer that we've had, have, uh, you know, been, uh, been not good for banks.

Uh, they, they've kind of worn out their welcome at, at this point.

So I, I think uh lower rates would, would be uh a benefit for banks both on uh the loan growth side, uh loan growth has been very anemic as high, high interest rates have have curbed uh loan demand uh and also taking some depo uh some pressure off those deposit costs.

So I, I think that's why banks are uh while they're very well hedged uh to whether rates go up or down.

Um I think at this point, uh rates are would still be high enough.

We're not expecting rates to fall off a cliff.

So in the back half of the year, if we do get two interest rate cuts, as we continue to see, uh I think the um the lending business will actually uh pick up uh relative to where it was in the first half, which, which bank is worst positioned right now, from your perspective to really navigate this macro environment.

Well, we have uh a preponderance of buyers across the board.

Uh and that would include Wells Fargo who I would admit as uh had the, the weakest results of, of any of the banks we've talked about so far.

JP Morgan City, Goldman, Bank of America, and Morgan Stanley and Wells.

Uh you know, in, in addition to the regulatory uh continued issues there with the terms of the asset cap, um they, they are still kind of working their way out of that.

They guided down on, on that interest income.

Uh Certainly among the large large players.

Wells has more of a dominance and uh from the lending business, less so on the fee based business.

So, so that's a just a little bit more difficult environment to be in.

So while we like the the group broadly, uh I think it's really the the global banks that are going to have the better time here.

The what bank?

Sorry, I'm sorry, what did, can you just repeat the last time that you said there?

Who's going to have the better time?

Well, no, I think the the global banks.

Uh so the JP Morgan City, Goldman, Morgan Stanley Bank of America have uh have a better opportunity for uh for revenue growth in this environment than, than a Wells Fargo Stephen, more specifically on Morgan Stanley because that's where we are seeing the big reaction here this morning.

Yes, there was a lot of uh key data points within this report or metrics that investors are encouraged about, but there really has been this focus on some of the weakness that we are seeing within wealth management just in terms of not living up to expectations.

Is that something that you're confident CEO T is going to be able to expand in terms of having to gain even more market share within wealth management?

Or is this an area which could prove, which could prove to be a bit challenging here for the bank in the coming quarters?

Well, I feel they have a very strong wealth management franchise.

Uh and um, but, you know, having said that they have faced some pressure and there's a lot of competition particularly for the high and ultra high net worth uh segment within wealth management.

So I, I think that's where some of this is coming from.

Uh as well as this, uh again, higher interest rates have, have pushed up deposit costs.

So to the extent that they are not offering the, you know, the best rates uh on deposits, uh there's some migration to, to other firms.

So I think they, uh you know, the, the the conference call will, will shed some light uh on, on those.

Uh But again, I, I think a terrific wealth management franchise, they tend to have relatively good uh retention.

Um but, but something was amiss this quarter and, and uh we're gonna have to dig into what that is, Steven Bear, who is the Argus Research Director of Financial Services Research.

Thanks so much for taking the time.

Here this morning.

Thank you.

Coming up, Apple hitting another record high.

What this means for its next iphone cycle that's on the other side of the break.

Welcome back to Morning brief brought to you by Invesco Apple hitting another all time high, bringing its market cap above $3.6 trillion.

Well ahead of the next closest company which is Microsoft which sits at just over 3.3 trillion.

Now, the tech giant also seeing its India sales jumped 33% in the 12 months through March.

That's according to the latest results that we have out from Bloomberg as Apple looks to, to diversify beyond China.

So what does this all signal ahead for the company's next iphone release cycle?

We want to bring in Gloria, he's D A Davidson's managing director Gil.

It's great to have you.

So it seems like we have this unrelenting move to the upside here in Apple shares and the narrative surrounding Apple.

Certainly shifting here.

Lots of excitement surrounding that new A I enabled the iphone that we're expecting to be coming, I guess.

Do you think that a lot of this excitement is it warranted?

It is uh we, we haven't had a major iphone upgrade cycle since iphone 12.

And now that there is a sense that there's enough new functionality and uses for the phone that we will have an upgrade cycle which could last for a year or two that, that warrants this excitement around the stock.

Um Let's not forget iphone is half of Apple's revenue and it really pulls with it.

A lot of other revenue including services revenue, which has been the, the uh ongoing best grower within the business lines.

And so for Apple, what is the signal about some of their other product lines?

What what could continue to or what could do?

Well as the company looks to further penetrate the India market.

So India has a a long term promise for Apple.

It's, it's the country that's creating the most middle class and upper middle class population anywhere around the world.

By far.

It is in that sense, the kind of driver that China was for the last 20 or 30 years.

And so that's why it's a critically important market now to Apple's benefit.

It doesn't have domestic competitors there, unlike China, where now Apple is going head to head with the domestic competitors that are making better and better phones in India, that's not the case they really have as dominant a position in the high end of the market as they do in other countries outside of China.

And that means that India will continue to be a long term growth driver across businesses for Apple.

What do you think this upside really looks like here for the, for the A.

So in terms of the the growth rates, uh the the consensus expectations, at least going into the worldwide developer conference was that iphone would grow 5% which was actually not bad considering it hasn't grown in a couple of years.

We actually think that iphone sales uh this upcoming year could grow 10% because the functionality is gonna be compelling as folks use some of this new functionality during the holidays on their iphone 15 pro and some new users use it on the iphone 16 versions.

It's gonna be compelling to other people and and other around them and other people have iphone twelves, thirteens phones that are due for an upgrade.

And once they see that this functionality is only available in newer phones, it will compel them to go out and buy a new iphone.

You also cover uh a host of other tech companies and one of them being Microsoft are there other strides that you're seeing other consumer tech companies make within the same region where where Apple is starting to see its efforts really ramp up.

So on Microsoft side, the impact is so broad right now in the implementation of more A I and generative A I including in the PC category.

So the A IP CS will be another place where we start using A I capabilities, more generative A I capabilities, more A IP CS have been for sale and they'll probably be part of a cycle as well.

It may not be as pronounced as the iphone cycle.

But considering PC C have have been in a, in a hangover the last couple of years, they've started showing signs of growth and that's a category adjacent to the Apple, right?

The Mac is gonna have A I capabilities as well and that could drive more sales there.

So let's not forget that that's another category that Apple could benefit from, but Microsoft will as well.

But for Microsoft, the benefits of A I are really across the business starting with Azure into the office products, et cetera.

G, most of the mag seven companies are, are within your coverage.

When investors hear about a broadening out or people perhaps reducing or trimming some of their positions, taking profits where necessary in some of these names and then either sitting on cash waiting to deploy or reallocating to other sectors.

What does that hold for these companies that had been part of the famed mag seven?

And, and should they be weary when they hear about that broadening?

We'll see the, the biggest cap uh technology companies have outperformed because their fundamentals have outperformed, they've grown earnings when others have not.

That's why there's, that's most of the reason their stocks have done better.

It's also the fact that they present less risk because their business are so entrenched and diversified that would have to change.

We would have to see the uh the 4 92 4, 94 whatever other companies you want to consider actually have earnings growth.

They haven't had earnings growth for a while.

If they actually have accelerating earnings growth outside of these mega caps.

We may see a convergence of uh of uh stock performance that just hasn't been the case so far.

It, it is these biggest companies that have had the highest growth rates in revenue and profitability.

They've contributed most of the growth to the S and P 500 earnings.

And until that changes, there's we, we may not see a convergence and gil real quick before we let you go.

I if you had to pick one of the big tech names, that's best positioned tier ahead of this earnings season, who do you have Amazon Microsoft and Apple are now getting a lot of credit for what we just talked about.

They're seen as A I winners and their stocks are reflecting that by trading at the high end of historical multiple ranges.

We actually think Amazon at the end of the day may have more A I business than any of these other companies.

Aws is the biggest hyper scalar and it's done a lot to catch up to Azure in terms of A I capabilities.

And yet, Amazon is getting very little credit in terms of multiple.

It's trading at, at average multiple compared to its historical rates.

And so we think that's where when they get more credit, that stock will outperform.

All right, Gloria D A Davidson is the managing director.

Thanks as always for hopping on with us.

Thank you coming up is the market rally finally starting to broaden out.

It is I think the question is whether or not some of the movement that we have seen over the last couple of days, if that is going to continue, we will dive into that next on catalyst.