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Iran opens Hormuz, market rejoices, risk back on (0:20) Netflix and bank earnings (3:00) Private credit vs banks (6:30) Snap layoffs, Tesla’s upcoming report (7:40)
Transcript
Rena Sherbill: Brian Stewart, welcome back to another week of Wall Street Roundup. Some good news, man. Some good news and some earnings news.
Brian Stewart: Yeah, I mean, obviously geopolitics takes precedence.
Headlines this morning is Iran is opening up the Strait of Hormuz during the negotiation period. We also saw a headline that the US is going to keep Iran blockaded. I don’t know if that’s going to cause any tension or not, but overall, the market sees this as a huge step forward. It’s been an interesting market, really.
I mean, even as we were in the depths of the conflict and oil was in the 115, 120 range. The market never really dropped in a significant way. It just kept drifting lower, keeping its eye on things, waiting for things to turn. I thought of it as you’re driving down the highway and you see a deer on the side of the road, a little bit in front of you. You take your foot off the gas just in case. But then once you’re past them, back on the gas, you’re back on your way.
So I feel the market did the same thing, took its foot off the gas while the Iran conflict played out and never really slammed on the brakes and is back driving again.
If we just peek under the hood a little bit, I mean, it’s clearly a risk back on kind of environment. You saw over this week, tech stocks were up sharply.
Oracle (ORCL) was one of the big standouts. It was up 26 % over the past five days. You also see (AMD), Palantir (PLTR), Microsoft (MSFT), Micron (MU), they’re all up double digits over the course of the week. These were mostly beaten down. All of those names were down on a year to date basis as of March 30th, March 31st, we saw a big bump in the market. There was that was the beginning of signs that the ceasefire would would go into play. So that March 30th to March 31st, that move is kind of the turning point in the market sentiment on the Iran conflict.
So going into that, those stocks dimension except for my ground were down to date. Now they’re they’re up.
You also see Bitcoin (BTC-USD) seeing a surge lately. So it’s trading at a little over seventy seven thousand five hundred now was close to sixty six thousand at the end of March. So up 17 percent so far in April. It reached its highest level since February.
And then just like a small kind of note in kind of the risk on thing we talked about last week, Avis (CAR) was the rental car company. Avis was up sharply in kind of a meme stock kind of way. A short squeeze driving forward. That momentum carried over into this week. So we saw it up another 53 % over the past five days. It’s now up 250 % year to date over 400 % over the past year.
So just as an one-off kind of data point in the risk on people are obviously willing to take flyers in certain situations.
Rena Sherbill: And earnings news, I guess, Netflix (NFLX) is the big one, but some others as well in the financial space.
Brian Stewart: Yeah, I mean, just to get back to kind of the nitty gritty earnings season starting up, I think, we’re still going to be very headline dependent on the Iran situation, and it’s not wrapped up yet, so there could be a reclosing of the Strait or kind of anything could happen.
But I think optimism is that that things will run their course and will reach some sort of agreement. So over the next couple of weeks, the basic earnings blocking and tackling of the market might come back into the forefront that started this week.
Like you said, Netflix, the big name this week down 9 % on earnings. It beat expectations, but issued soft guidance. Co-founder Reed Hastings is stepping down as chairman. So this is kind of a transitional period for the company. It’s losing its co-founder. Uncertain future.
The deal with Warner Brothers (WBD) fell through. So maybe a bit of a strategic turning point right now. I don’t know how much you can read into the overall market from one company that all that stuff seems very Netflix dependent.
I mean, maybe if you’re looking at things like Disney (DIS) and other areas in the entertainment and streaming space, it might mean more.
But if we’re just looking like the overall economy, I think the bank earnings were bigger kind of sentiment gauge on that front, was mixed and muted in terms of the reaction to the bank earnings.
However, we should note that the banks were up going into the earnings, earning season, a lot of optimism going into it again, starting March 31st, as the view on the Iran situation started to turn, you saw banks rise.
And so going to the earnings, you have kind of a sell on the news, I think, knee jerk reaction for a lot of the stocks. And I think the standout in that category is Goldman Sachs (GS) had strong results, but dipped about 2 % after earnings.
But it’s still up 81 % over the past year. It was up 12 % from March 30th to its earnings. So over that two week period in the beginning of April, it was up about 12%. So you’re seeing it just sort of a little profit taking after its strong results.
Meanwhile, you had Wells Fargo (WFC), which had a full on disappointment. It beat expectations on the earnings side, but missed on that interest. income. So it dropped 6 % after its earnings and it’s now down 12% year to date. So that was kind of the outlier among the big names on the downside.
And then the outlier on the upside was Citi (C), which rose 3% on its earnings and followed up the next day with some gains, expectations, strength and trading, investment, banking and wealth management. It set a new high after its earnings up 23% since March 30th, more than doubled in the past year. So one of the standouts from the bank earnings.
And if we just take the bank earnings as a whole, volatility led to strong trading performance. Investment banking was strong. However, there are still worries about the general economy.
Wells Fargo being the example of that, that being more of a traditional bank and less of a Wall Street bank. You kind of see that playing out where Goldman Sachs and Citi get more of a boost from the strong Wall Street situation.
Rena Sherbill: I was talking to Samuel Smith this week, he was talking about Blue Owl (OWL) as his big pick, and he was talking about one of the reasons that the private credit sector is getting such a bad rap is because of banks wanting to badmouth that space. Anything to note? I know that that’s not really your purview, but anything to note there?
Brian Stewart: Well, I would say Blue Owl is up this week. So you can see that as either people kind of coming to the same conclusion that things were overblown or just part of the risk on kind of trade. It’s hard to kind of tell the mechanics behind that. I will say just, if you’re to put on your conspiracy hat, Jamie Dimon has been extremely vocal about this.
Rena Sherbill: Don’t call it a conspiracy.
Brian Stewart: There does seem to be at least from him specifically a desire to talk about this a lot. I mean, that could just be like he’s actually worried about it, right? Or it could be what you’re proposing is some sort of kind of talking your book or anti-talk.
Rena Sherbill: I’m simply relaying the proposal, of course. Tech space, what would you say about the tech space these days?
Brian Stewart: Well, so one interesting story coming out of this week is Snap (SNAP), Snap cutting a thousand employees or about 16 % of its workforce. It said explicitly in the letter that got leaked that it’s going to use AI as kind of to pick up the slack for the employees that are leaving.
We’ve seen this in other places like Amazon (AMZN) cut employees and using AI. We saw Block (XYZ) employees and said that it was going to use. I think it used something more general like information technology or something to pick up the slack. So you see that playing out more.
We’ve talked about how is that going to kind of bubble to the surface in terms of jobs, data and the overall economy. So we’re still kind of seeing that play out.
There’s also been cuts at places like Meta (META) and so it just plays into it. But you know, in terms of the stock market, Snap, that news was greeted with very much excitement, so rose 8 % on the news and it had already been up the previous two sessions, so it’s up about 26 % in the last five days.
However, for Snap, Snap is already kind of in the doldrums still down about 24% year to date coming off of 52 week low that it reached in late March. So for that sock specifically, this might just be a bounce off the lows.
But if we’re looking at the overall tech place in the economy, I think traders would like nothing more than to stop having to think about geopolitical situation and just get back to wondering what’s going on with AI.
I think that’s the goal of most investors now is to turn their attention back to the operations of the economy and less on geopolitics. So I think the tech space is going to be the litmus test for that.
Especially as we go into earnings, we’re to get a lot of information about how things are going. So I think the next couple of weeks are going to paint an interesting picture of sort of where we’re at. So if we can get through, say, this earnings season and at the end of this earnings season, the situation with Iran has cooled down and we have all the information we’re going to get from the earnings season, I think we’re going to be kind of set up for the next sort of period of time.
Just looking ahead next week, a lot of earnings coming out at the big headline is going to be Tesla (TSLA) up about 16 % in the past week. So taking advantage of this this kind of rotation back into tech.
However, even with that pop, it’s still down 12 % year to date. It’s down 18 % from its 52 week highs. So there’s a lot of concern about it. The story with Tesla is always the car company is reaching its peak and losing market share to especially the Chinese EV competitors.
However, there’s the promise of things like autonomous driving and robots and whatever else. So I think you’re gonna see that balance this time is how is the car company doing versus where are we on the roadmap to getting these other products.
Rena Sherbill: Appreciate it, Brian. Talk to you in two weeks. We’re off next week.
Brian Stewart: Sounds good.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
