Bears make trading dangerous; Disney, Rivian on reports
Once again, stock indices melted into the close on Wednesday. Currently, we’re gearing up for a seventh straight week in the red for the Dow Jones, sixth straight for the Nasdaq and the S&P 500. Right now, the tech-heavy Nasdaq is down 30% from its all-time highs set in November. from last year ; the S&P is -18% from its January highs (-4.5% for the week so far) and the Dow is -7% in the past month alone.
Worse still, for the second consecutive trading session, the Dow went on a huge roller coaster ride: +423 points to session highs, only to drop back down and close at -326. Even the last holdouts who hadn’t been hit by this massive bear market – AAPL Apple and Home Depot HD — are down today: -5.2% and -2.8%, respectively. Nothing is certain and there is no bottom. At least that’s the current story.
Based on the interest rate hike induced to rein in the current high inflation (CPI +8.3% year-over-year), forecasts now indicate that future quarterly earnings will decline over the next few months. quarters, even over the next year, depending on who you listen to. So lower earnings are leading to a recalibration of valuations – not just in tech but across all sectors – down as well. Ergo this bear market, whose falling knife has been bleeding your fingers for several weeks.
Walt Disney Co’s DIS saw its late-trading fortunes improve, even after missing both the top and bottom numbers in its second fiscal quarter after the close. Shares were up +3% initially and +6% before pulling back a bit: Earnings of $1.08 per share missed Zacks’ estimate of $1.20, albeit a one-shot of 43 cents per share has caused the company to lose momentum. Revenue of $19.25 billion was lower than the $20.25 billion expected – again on the $1 billion charge related to the termination of a license agreement.
Disney+ subscriptions did better than expected: 137.7 million versus 135 million sought by analysts, while its Parks segment brought in $6.7 billion versus the consensus estimate of $6.3 billion. The company cited both higher volumes and increased customer spending, demonstrating another strongly branded company successfully passing on higher spending to its customer base. To learn more about DIS revenue, click here.
Rivian RIVN shares are doing even better after the close, after its loss per share in the first quarter was weaker than expected – -$1.43 against -$1.50 in the Zacks consensus – while revenues were well in below expectations: 95 million dollars against the 113.6 million dollars expected by analysts. Still, the production outlook for the 25K vehicles generated in 2022 remains unchanged, signaling that its medium-term expectations are still intact. After all, the business of automakers is to sell cars; it’s time for Rivian to deliver electric vehicles. Shares were up +12% late in the session, but are still down more than -60% year-to-date.
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