Confusion abounds on where investors should take their cues.
Somewhat hotter-than-feared inflation readings this week have caused a rethink on interest rates. Expectations are now showing a 50/50 chance of a rate cut at the Fed’s September meeting.
The repricing has caused a mild pullback in the S&P 500 (^GSPC) from its highs.
This concern appears to be overshadowing another strong profit showing from the big banks, which was fueled in part by record-setting markets.
Here is everything we touched on during Yahoo Finance’s Opening Bid on Wednesday. Tune in live daily to Opening Bid at 9:30 a.m. ET.
The banks deliver, for the most part
Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) all handily beat earnings estimates for the second quarter. But the quarters for the three couldn’t be more different.
Goldman Sachs had the best quarter in terms of investment banking and trading.
Morgan Stanley struggled in investment banking but showed strength in its lucrative wealth management business.
Bank of America’s results show a resilient consumer as seen through the prism of solid spending on credit and debit cards.
On Tuesday, reports from JPMorgan Chase (JPM) and Citigroup (C) were well received. Wells Fargo (WFC) got penalized for a weak quarter and a downgrade in its profit outlook.
Argus Research Director of Financial Services Research Stephen Biggar said the best play on the financials is the large banks rather than smaller regionals.
“All [regional banks] have is kind of that loan growth environment,” Biggar explained on Opening Bid. “And they have to be in a decent service territory to extract decent lending growth in their operations. That’s why we continue to be favorable on the large banks and those with capital markets operations that can see that better growth.”
Tuning into Netflix’s stock
We continue to keep an eye on Netflix (NFLX) ahead of its earnings release after the close on Thursday. Shares are down nearly 2% in the past five trading days as investors get antsy about one of the best performers in tech this year.
Shares have surged 30% since the company’s last earnings release, compared to an 18% gain for the S&P 500. Expectations are high!
Despite concerns about Netflix sustaining its rapid growth into year-end, Guggenheim analyst Michael Morris has raised his price target on Netflix to $1,400 from $1,150. He sees Netflix as an industry leader in content sourcing and distribution, which lends itself to strong revenue growth potential.
“Does Netflix have something to prove?” Morris asked. “Management’s outlook for the robust second half content slate, expanded live content partnerships (led by a recently announced partnership with TF1 in France), and advertiser demand will be keys to supporting investor confidence in the incremental long-term global growth potential of the business.”
Watch the Opening Bid team set up Netflix’s earnings release below.
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Yahoo Finance Executive Editor Brian Sozzi, Yahoo Finance Senior Reporter Ines Ferré, Blue Chip Daily Trend Report chief technical strategist Larry Tentarelli, and Interactive Brokers chief strategist Steve Sosnick take a closer look at Netflix’s recent price action.
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Meta’s stock has been hot, but…
Meta’s (META) stock has been one of the hottest tech plays of late, rising 36% in the past three months. Attention is now turning to Meta’s earnings in just a few weeks.
But CEO Mark Zuckerberg’s aggressiveness on the AI talent front is again bringing to light a key question: Is Meta spending too much money and risking its near-term profits?
BofA analyst Justin Post said, “We expect AI investment to be a top focus area on the upcoming earnings call, and Meta likely needs to make a case for strong AI returns to drive multiple expansion.”
Yes, it does!
You can see on the Yahoo Finance platform that Meta’s forward price-to-earnings (PE) ratio is 29 times. That’s above the five-year average of 25 times.
“It’s [AI spending] definitely going to hurt their bottom line. They’re betting big because the opportunity is that big,” Citizens JMP Securities CEO Mark Lehmann said.
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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