Major energy M&A deals, the market’s momentum: Morning Brief

How are the major market averages (^DJI, ^IXIC, ^GSPC) feeling this morning after the Nasdaq’s big climb above 17,000 on Tuesday? Yahoo Finance’s The Morning Brief is here to help investors start their trading day off right as hosts Seana Smith and Brad Smith walk you through the top stories and market trends.

Hess Corp. (HES) shareholders approved the $53 billion buyout deal with Chevron (CVX). In other energy M&A news, ConocoPhillips (COP) is set to acquire Marathon Oil (MRO) in an all-stock deal valued at $17.1 billion. Tortoise Portfolio Manager Rob Thummel told Yahoo Finance that this deal came as a total “surprise.” Lastly, platinum miner Anglo American (NGLOY, AAL.L) rejected BHP Group’s (BHP) bid to extend their merger deadline.

Russell Investments President and Chief Investment Officer Kate El-Hillow sits down with the team in-studio to discuss the market’s momentum trade and the strength of this earnings season’s fundamentals.

This post was written by Luke Carberry Mogan.

Video Transcript

It’s 9 a.m. here in New York City.

I’m Brad Smith alongside Shana Smith and this is Yahoo Finance’s flagship show the Morning Brief Stock Futures right now.

They are in the red after the tech heavy NASDAQ, it closed above 17,000 for the first time here.

And ultimately, uh well, yeah, 35,000 is what we’re seeing here right now.

And ultimately dow Futures are singing the over 250 points with Wall Street poised to open lower this morning.

Treasury yields, pushing higher traders betting that the fed might actually not cut rates until November sticky inflation.

Will that is to blame the FS preferred inflation gauge PC is due out later this week and that will give investors a little bit more insight into the feds path forward.

Let’s get right to the three things that you need to know this Wednesday morning, your road map for the trading day YJ and for a and pro Superman and have more stock futures are falling after the NASDAQ closed above 17,000 for the first time.

Investors focus is shifting to a key inflation data later this week as expectations for the timing of rate cuts continue to see.

Saw with policymakers wary over sticky inflation.

We have to see if Friday’s PC print can help stops regain some momentum.

Plus investors are watching two major deals playing out in the energy space has shareholders voted to approve the $53 billion buy out by Chevron and Conical Phillips is acquiring marathon oil in an all stock deal valued at $17.1 billion.

Meanwhile oil prices are pushing higher and uh shares.

American Airlines under pressure while dragging down the airline sector this morning, American slashes Q two revenue, all the company navigates increased competition in the domestic market and a more cautious consumer.

The airline also announced it was parting ways with its chief commercial Officer.

Well, good morning, everyone.

Our top story this morning, futures pulling back this morning, the NASDAQ closing yet above another record high in Tuesday’s session, Wall Street tracking a rising treasury yields as investors keep their eyes on inflation concerns.

Dow futures.

They’re off more than 200 points in the S and P 500.

Also sliding here this morning.

We’re keeping a close tab, close eye on some of those futures activity.

As we mentioned the dow right now down by about 7/10 of a percent.

Yeah, the dow uh trading lower here, NASDAQ 100 also on track to to open the day in the red as well as the S and P got the S and P sliding below 5300, a few uh key levels here to watch.

But we also got to talk about some of the big deals that are taking place right now and some of the broader picture that’s going on and starting it off with some of the movement that we’re seeing within the energy space.

When you take a look at Chevron, a little bit of a move lower here and just by a fraction though off, just to the downside here, this coming after has shareholders actually approving Chevron’s deal to buy out the company.

Of course, this is a step forward.

But the question here is what exactly is going to happen to he guy on a stake and we know Exxon has very much been putting on the pressure and could have some plans here that could potentially cause the deal to implode.

So of course, that will be the focus here.

And then beyond that, you also got some news out of Conocophillips this morning, that’s moving lower by about 1% a deal here for marathon petroleum.

So again, some more consolidation within the energy space and that of course, could have uh I guess more ripple effects beyond just some of these bigger names and talk about further consolidation within energy.

Yeah, absolutely.

We’re also keeping a close tab on airlines here this morning as we’re taking a look at some of the, as we were toggling on over to these airlines, one of the huge things.

There we go.

Of course, they’re bound to be there.

Notably here, American Airlines, one of those major companies that we’re keeping tabs on here.

You’re seeing those shares down by about nine, nine and a quarter percent here pre market this after the Chief Commercial Officer is stepping down that person leaving the role.

And then additionally, you’ve got uh, more of a warnings for, uh, forecast for the, um, the forecast warning here that has come out from the company here.

So, uh, a lot of that being factored in at the same time, you’ve got some other movement in the space as well.

United catching a little bit of a bid upgrade there.

So we’ll continue to keep tabs on the airline space.

We’ll dive further out into that on today’s show.

But getting back to those two major deals in the energy space has shareholders officially voting in favor of the $53 billion deal to sell the company to Chevron.

And Koco Phillips has agreed to acquire marathon oil in a $17.1 billion all stock deal.

Yahoo finances and Es Farre has the breakdown on the sector.

Hey Innes.

Hey Brad.

Yes.

So first let’s start out with the shareholders which voted to approve the buy out by Chevron that was highly anticipated.

There are still a couple of steps though to this deal, in order for this deal to officially close.

First of all, the FTC regulatory approval has to go through and Chevron is expecting that to go through.

They have put out a statement.

Yes, there spoke spokesperson saying that they’re anticipating that FTC regulatory process to move through in conclusion in the coming weeks.

They also are anticipating that their preemption rights will be affirmed in arbitration.

This has to do with Exxonmobil, which Exxonmobil has taken these companies into arbitration because Exxonmobil is saying that they have the right of first refusal to that stake in Guyana, the very valuable crown jewel that hess has the reason.

The big main reason as to why Chevron wants to acquire Hess because of that stake in Guyana and that would be something that is in the coming months going to be happening with this arbitration.

And Chevron saying that they’re looking forward to completing the transaction and welcoming Hess to their company.

Still, the arbitration is pending here.

As far as the second deal is concerned, this is marathon oil and Conocophillips.

Conocophillips would be acquiring Marathon oil for $17.1 billion in an all stock deal a bit more than that.

If you include debt, this would also broaden Conic’s footprint domestically in the Texas region, in the North Dakota region.

Now, city analysts came out with their take on this.

They’re saying that this has been is not based so much on inventory and growth the way we’ve seen with this other consolidation that has taken on in this space with these bigger players, but this looks more about optimization and also lowering costs.

I spoke to other analyst this morning saying that this deal would be unlikely to face anti trust issues concerns because these companies together would still be smaller than the big major oil companies that we’ve been talking about in recent months.

They’re both considered independent oil companies and without downstream assets without refining distribution and retail guys.

All right, Anne, thanks so much for breaking that down for us.

We want to continue this conversation because oil deals and mergers that are in focus today.

This coming after has shareholders approving an all stock merger with Chevron Conocophillips agreeing to acquire Marathon oil deal making it the sector that rose in 2023 hitting the highest level in over a decade according to the US Energy Information Administration to break this all down.

Talk about some of the acquisitions that are taking place within this space.

We wanna bring in Rob Thumble.

He is the Tortoise Portfolio manager and managing director, Rob.

It’s great to see you here.

So let’s talk.

Let’s start with the Chevron and hes uh shareholder vote there from hes shareholders approving this deal to sold to Chevron.

Of course, this clears what is a major hurdle but other hurdles remain when you talk about Exxon’s involvement here, how exactly that could play out also FTC uh approval whether or not a deal is going to be approved.

So I guess how do you see what happens next?

And how likely is it?

Do you think that that Chevron is going to acquire house?

Yeah, that’s a good question.

So the next step is the FTC approval II I think you just saw ultimately the uh Exxon pioneer deal got, got through the FFTC process.

So you’d probably expect that the, that the Chevron S deal could, could obviously jump back over that hurdle.

But the biggest hurdle is as, and as, and you have been talking about which is, is the, the, what’s it gonna be the, the arbitration and the arbitration and the result of the arbitration drives everything.

If, if the, the arbiter rules uh that ex and CNN are entitled to, to a right of first refusal, then this deal will be, will be off because uh a a as everybody’s highlighted the crown jewel asset of this transaction is the guy on an asset.

And so, um now what’s the probability that’s really difficult to really handicap?

And, and the reason is this is nobody has read the joint operating agreement except for uh lawyers um at, at Exxon, at Co, at Hess and obviously probably a Chevron.

And so everybody, they have their interpretation.

I, I think ultimately though it’s probably good to have Chevron as a partner, I think Exxon would recognize that um as well as co um and, and so, II, I do think that the transaction can happen.

Um But, but it’s really predicated on, you know, probably a handful of words in this kind of super secret joint operating agreement that nobody’s been able to get their hands on.

So, without the Guyana assets, what is the evaluation of this, this price tag for the deal?

Well, well, it goes down a lot.

I mean, I mean, I, you know, I think, you know, he is up probably 20% since the, since the transaction was announced.

Um maybe even a little bit more than that, what I would say is, uh it’s not as if Guyana, Guyana is still worth uh uh a decent amount and, and, and that’s, that’s really the valuation is what’s the valuation?

And that, that’s really part of the arbitration is what is the value that Chevron is placing on Hess and, and does Exxon want to, and, and see want to pursue and pay that, that, that type of value?

But, but that takeover premium would come down.

Uh the he share price would come down if the transaction or if the arbitrator would rule in, in favor of Exxon um in, in this case sometime and, and we expect that sometime probably early next year.

I think the question is if, if Chevron is not able to acquire uh Guyana assets, does this deal then fall apart?

Would Chevron have any interest in Hes outside of the assets in Guyana?

I think the answer that’s no, I, I think Mike, we ceo of Chevron has made it very, very clear that without the Guyana asset, he he if the company is not interested in pursuing a uh uh the the acquisition and the merger with uh on without the guy on asset now, obviously, things can change.

But, but, but ultimately, uh the, the the guy on asset is the, is the critical asset uh for this transaction to occur.

So without it, I don’t think the transaction, uh All right, another transaction we’re tracking here this morning, Anglo American officially rejecting bhps request to extend the deadline for talks on its $49 billion takeover offer here.

I mean, just wanna get your reaction on this rejection here and what the signal is next.

Yeah, I’m not as familiar with that transaction but, but I can tell you there’s a lot of transactions going in the mineral space, in the, in the oil and gas space.

Uh and, and, and obviously valuation, I it is always probably the biggest hurdle when it, when it comes to a lot of these transactions.

So, so that’s probably the biggest driver of, of, of what, what’s causing this the uh potential disruption of this transaction.

All right, let’s talk about Conocophillips because that’s the other big deal that we’re talking about within the space.

Conocophillips and uh marathon petroleum, the merger there.

Talk to me just about one, what this is going to do to Conocophillips business here and then two, just what this tells us just about further consolidation, kind of go on what you were just talking about there before, but further consolidation within this space and the likelihood that this might remain a theme here for at least the quarters to come.

Yeah.

So this is a bit of a surprise and uh and I would say the reason and what I mean by that is I don’t think anybody probably had marathon oil being acquired by Conocophillips.

Um And, but, but when you look at it, uh it does make some sense.

So if you look at the marathon oil assets, they’re good, they’re not great.

But the management has really done a great job of the capital discipline and what that’s resulted in a is in a really high free cash flow yield for marathon oil.

So marathon oil actually has one of the highest free cash flow yields in the oil and gas space.

Um So that’s a bit attractive or that is attractive to somebody.

And, and obviously Conco Phillis is, is, has found it the most attractive at this point.

So when you merge these assets together, what, what Conocophillips gets is some good assets in, in uh you know, across the Bakken in North Dakota, across the Permian and the Eagle Ford in, in, in Texas.

But it gets a lot of free cash flow that it, that then uh can redeploy.

And I think what, what kind of go has done at Ryan Lance and the management have done, they’ve been really, really good at allocating capital.

And so now they’re just getting more cash to allocate whether that’s to shareholders or, or to future acquisitions.

Um, they, they’ve done a really, really good job of allocating capital and this just gives them more capital to allocate in the future.

Is this likely to, uh receive much regulatory scrutiny?

Do you think?

I think these all, all, all of these do, right.

But I, but I do think obviously less, it’ll, it’s a less uh less notoriety than a pioneer transaction or even a transaction.

But yes, it will go through the same process and uh and, and I, and I’m sure we’ll, we’ll go through the same uh rigor that all of these transactions have gone through at the FTC.

Really over the last three or four years, Rob Del Torres portfolio manager and managing director.

Thanks so much for taking the time here this morning, Rob.

Appreciate it.

Thank you.

Well, let’s go to the skies here.

American airline shares.

They are sinking this morning after cutting its sales outlook for the second quarter.

The airline also announcing its chief commercial officer will leave his role next month.

Yahoo Finance.

This pro superman has some of the details on this one for us stock sinking this morning.

Almost 10%.

Ross.

Yeah, yeah, you know the getting hit there and that revised outlook also seeing adjusted EPS for Q two in the one to dollar 15 range that was down for a dollar 45.

So big cut there for the current quarter.

Uh, the original points to some trouble here with summer travel when most airlines are sort of doing well.

Uh, now there are some issues that all airlines are dealing with.

Right.

Uh, Middle East tensions.

Consumers looking for more discounts than revenge traveler is sort of going away this, this summer.

But they still want to travel a little bit but they don’t want to spend uh exorbitant fees for it.

Uh And, but the American sort of revision revisions here with, with, with both profit and revenue, they seem worse than expected.

Plus he mentioned the chief commercial officer Vasu Raja leaving seems he made some bets on things like reducing long haul routes L A to New York which are really lucrative.

He started focusing more on the Sun Belt, which I think is good business but it’s not as lucrative as these bigger longer flights.

And the company needs some more general revenue.

They need more revenue.

It’s not, it’s not meeting expectations here for right now.

And it’s concerns why is this happening to American?

Is it just an American problem?

Yeah, and that is the question, is this an American problem or are we starting to see some of this weakness elsewhere?

When you take a look at some of the other larger domestic players we had, we had uh players like Ryanair talk about, uh, uh, consumers a bit more cautious but Delta, uh, United, they’re not warning about revenue.

They’re doing actually pretty, quite well these days.

I mean, I know Brad, you’re pretty close to Delta, you’ve heard the same as well.

So, I think it’s potentially an American issue.

Um, current CEO is known as a good operator, but they might need, uh, more of a sales stick to come in there and really kind of pump up uh sort of getting after that business consumer uh reestablished some of those longer haul flight routes which just take time and, and uh and from what I understand, they, they sort of diminished the New York to L A business, which was, which is a big business, but then also hard to build back up as you have.

Other, obviously Delta United are big there too.

So that’s sort of highlights some of the challenges Americans face right now.

Uh What’s one of the more prem airlines in the world?

Yeah, I mean, look when you think about the broader airline space here too, the, the larger thing for the summer travel is where companies have started to talk about where demand should be holding steady even as we’re kind of going towards this, this cruising altitude of normalization if you will versus what are some of the problems specific as you were laying it out to American Air versus some of the other airlines out there?

We still don’t know what the ultra low cost carriers are gonna have to navigate during this interim period of time as well.

But at least for this period, it seems like united, even as they had presented or at least given some of the updates going into the busy spring break and then summer travel season, they were seeing demand hold steady right now too.

So we’ll continue to track all of these.

But right now the American airline taking it on the Chin and a lot of the other major airlines down here as well.

In extended hours.

We’ll see where things open up process.

Thanks so much.

Well, we are just getting started here on the morning.

Retail round up Dick Sporting Goods are Ring after boosting his full year guidance and a Crombie shares, but they’re also in the green this morning after posting its strongest first quarter ever, we will speak with an analyst from U BS later on plus two shares are surging up just about a five for actually 12% for two in the back of its earnings report.

State t for a conversation with the company CEO that’s coming up on catalyst.

Next hour, all this and more.

You’re watching.

Yah Anglo American officially rejecting BHPS request to extend the deadline for talks on its $49 billion takeover offer.

The deal deadline will remain at 5 p.m. London time today.

You’re taking a look at the stock reaction here.

Uh pre market we’re seeing BHP group here flat just barely to the downside, Anglo American down by about 1.9% amid a wave of consolidation that we’ve seen in the broader energy sector and specifically oil and gas landscape right now, looking at Anglo American under just a bit of pressure off nearly 2% in pre market.

Now, this comes after like you were just saying they rejected the bhp’s request here for more time.

So what happens next?

So BHP has until 5 p.m. London time today to commit to an offer offer or walk away for six months.

And R BC analyst, uh Marina Collera was out with a quick reaction here noting the Anglo was already below the implied value of BH BS latest offer.

So she sees further pressure as the probability of an acquisition is repriced in terms of what could happen next.

Talk about a possible hostile takeover.

She’s saying that BHP is unlikely to go hostile given the complexity of this deal.

So again, you’re looking at BHP here in pre market up just over 1% on the flip side, you’ve got Anglo American those shares off nearly 2%.

But again BHP has until 5 p.m. London time today to commit to an offer or walk away for six months, right?

And just to further clarify, I should have said commodities landscape consolidation that we’ve seen because this is really more on the multinational mining elements of uh some of the commodities that of, of course are as Anglo American would say in their tag line, improving people’s lives.

So, uh ultimately, at the end of the day, this would kind of consolidate things like diamonds, platinum, copper, iron ore and so forth in some of the mining efforts there.

All right, let’s move on to the retail space.

A couple of big movers out today.

Let’s first start with Dick’s sporting goods jumping after raising its full year earnings guidance, the retailer seeing comp sales climbing over 5% in the first quarter up from a year ago, driven by heightened transactions.

So an increase in transactions, meaning more people are spending buying goods at the store to put it in plain English for everyone.

And again, you’re looking at the pre market trade up nearly 10%.

So why are they seeing this?

Right?

And we talked about some of the changes that have taken place under Ceo Lauren Hobart.

She has been expanding this new retail concept.

She’s renovating current stores.

She’s re relocating some stores as called the House of Sport location.

So it’s more of an experience.

These include batting cages, golf club repairs, management plans to boost spending on both e commerce and a physical location.

So those turnaround efforts, it looks like at least uh helping the stock, at least helping the business for now.

The retailer now expects the com sales are going to be up between two and 3% for the full year with EPS uh within a range of 3 30 1335 to 1375.

And again, you’re looking at a pop here ahead of the open.

Yeah, it’s really interesting here.

I mean, especially looking at the raise in the outlook, you just mentioned some of the specifics on there, but the demand profile that they’re seeing among consumers right now and that’s really pointing back to the products that they’re being able to bring into store here, product pipeline from some of their key brand partners in the vertical brand portfolio, they say has never been better.

So that points back to both the equipment and potentially on the apparel side uh where they’re seeing, for example, as they provide Nike’s recent Paris Innovation Summit highlighting breakthrough products across apparel and footwear that they look forward to bringing to their athletes.

Dick saying that in this release here and talking about some significant momentum that they’re forecasting about a differentiated product and compelling experience that they’re providing.

I just remember running around the track when I used to go into Dick’s sporting goods growing up, testing out out the shoes.

I mean, you gotta put it to the test and you just go for a quick sprint.

That’s the way to do it.

Let’s switch gears here and talk about Robin Hood that so is also turning check on Yahoo Finance this morning, announced a plan to repurchase as much as a billion dollars of its own shares over 2 to 3 year period.

Now, this buyback program is expected to begin in the third quarter.

This is significant because it’s the first uh stock buyback program announced by Robin Hood.

They’ve been rolling out a series of new features trying to cater to that new demand here for products.

So they’re looking to grow really beyond that start up phase, uh which is still pretty much referenced as, but this buyback really under how Robin Hood, I think is adopting a similar approach to kind of win over investors of those as other companies who are, who are a bit more mature, who have been around for a lot more time, obviously.

So they’re saying this as they’re very confident within the business, they’re looking to grow, they’re looking to reinvest, they’re looking to come up with new products.

And again, you’re looking at extended gains of nearly 1% here ahead of the open wave of buyback programs that we’ve seen first of their kind over the course of this earnings season here.

I think back to even as we were speaking with uh Kaufman from Fiver and their CEO yesterday, you’ve got fresh buybacks there.

You got a fresh buyback here on Robin Hood.

And so a lot of focus on, at least for the mindset of the investor that CEO S are trying to send and signal about the confidence of their business.

That’s typically where you see more of these announcements coming forward, especially if you see uh over an extended period of time, a lot of chop or volatility in shares and, and Robin Hood had seen that for a while coming into the start of this year.

But over the past year, take a look at that share price reaction here.

It’s up by about 100 32% fast past 52 weeks.

Uh But notably, I would be interested to see current quarter, uh, what they say after this quarter about what they’re seeing or saw within the broader kind of meme stock frenzy that once again reinitiated, I think that’s gonna be interesting to hear once they finally do report earnings again, but we’re gonna have to wait for that.

All right.

Well, you don’t have to wait for the opening bell on Wall Street.

That’s just around 3.5 minutes away.

So, keep right here on Yahoo financing.

You got much more of the early action ahead.

We’ll be right back.

All right, we’re taking a live look at the opening bells happening at the NASDAQ and the NYSC.

Hey, it looks like, uh, you’ve got the great folks at perspective ringing the opening bell at the NYSC.

Oh, and the winner of the Indie 500?

Joseph New Garden there, front and center ringing the opening bell at the NASDAQ.

You know, I went to Indianapolis for the first time this year and a lot of people are very happy about the Indy 500 there.

No surprise at all brings a lot of, yeah, it brings a lot of uh, a lot of cheddar to the um, local economy.

A lot of De Niro.

Yeah, money anyway.

No, I can’t say I am but I like cars.

So leave it there, checking out where things are opening here this morning.

We got the dow under a bit of pressure.

You got the S and P uh pulling back just a bit.

You can see falling there below 5300 on track to pull back there.

And the NASDAQ Composite closing at a record high closing about 17,000 this morning.

Uh giving back some of those late day gains and checking out some of the sector action, what we are seeing here this morning as we pull that up here, a bit of a mixed picture.

We talked a lot about, we have energy up on our screen because of some of the deals that are taking place here this morning ahead of the Open.

But again, you are seeing a lot of red, you have energy among the out performers.

I guess the best of the worst of the group here when it comes to the fact that we’re still looking at losses of about a half of a percent that along with communication services on the flip side though, if you got utilities under a pretty decent amount of pressure off just about 1% and real estate, a bit of a reversal here today from what we saw early in yesterday’s trading action that’s opening up just off, about 1%.

Jared By with a closer look at some of that movement that we’re seeing.

Jared.

Yes, it is off to the races for the NASDAQ.

So a very fitting opening bell there.

And by the way, I like cars too.

So I just wanted to show what the difference between the NASDAQ and the Dow mainly and also the S and P 500.

This is year to date.

And you can see we have accelerated to the upside right here.

But if we take a look at the dow, well, we just kind of exceeded these highs that we had in April.

Let’s see if I can draw on this.

There we go.

We got a little bit of a punch above, but then we dropped off pretty steeply and we’ve had some bigger losses.

We’ll take a look at that in a second.

Here is the S and P 500.

It is maintaining the highs and it is not broken through that big red candle that you can see there.

That was a bad day in the indices last week.

Uh We can also take a look at the transports pretty weak there and also the small caps.

Here’s the Russell 2000.

But I want to show you what’s happened with the bond market because I think this is really instructive and it’s counter intuitive what’s happening with the sector action.

So this is a year to date chart with the 10 year T note yield.

And over the last 10 sessions or so, we have screamed to the upside.

Now, we’re at the highest level since early May.

And in that time, I’m going to show you what has happened over the last seven days in the sectors.

Now we have tech and communication services.

Those are the only out performers.

Usually when you see going higher, you don’t see uh tech outperforming.

But that’s nevertheless, what is going on here.

And then you can see a lot of dark red real estate down 5% financials down four health care and energy down more than 3% and just peering inside the NASDAQ over the last seven days, you can see NVIDIA now up over 20% since its earnings release last week.

Um But I think uh we what we have here when the rest of the market is kind of fallen off a little bit.

You have this Invidia safety trade going on and maybe that’s what’s been holding up the market because if we take a look at the semi conductors over the last seven days, that is one of the few bright spots and there you have it again, NVIDIA leading the way.

So I’m going to take a brief look at what’s happening today and yes, all 11 sectors in the red here led to the downside by real estate and health care, but I’m going to be watching the Tenure Tino Yield and basically the US bond market for clues as to what might happen next in equities.

All right, Jared, thanks so much.

Let’s talk about the NASDAQ right now because it’s hitting its 12th or hit its 12th record close of the year.

A I really fueling the rally.

One of the biggest names in the story has been NVIDIA.

It’s contributed over 46% of the major averages returns a year to date according to Yahoo finance calculations.

Our next guest thinking that there might be some more room to run in the tech trade here to break it all down.

We wanna bring in Kate Hill Russell Investments, president and Chief investment Officer is here, Kate.

It’s great to have you.

So let’s talk about the ru the massive run up that we’ve seen in some of these tech names.

You talk about a lot of the fact that it’s been driven by only a handful of these larger cap tech plays.

What does that then tell us?

Do you think just about that momentum that we could see in the second half of the year, we still going to see some of this buying activity of these larger cap names?

Yeah.

Well, it’s always hard to call the end of a momentum trade, particularly when it’s supported by some good fundamentals.

And so you know, you’re hitting kind of a new high yesterday.

Yeah, I’d say, like, you know, continuing to add to that right now at these levels, you know, probably if you’re already a holder, you know, wouldn’t do, you know, as much.

But, you know, if you are, you know, you know, in it and, you know, trimming a little bit might make sense, particularly if you think that the A I, uh, trend or theme is a durable one.

And we do, and so you start to see some broadening out into other sectors.

And we’re seeing some of that, whether it’s in utilities, maybe that what we are seeing is the market opens, you know, today or some of the sectors that might be able to benefit from some of the A I productivity gains consumer and health care will probably be some of the first, you know, sectors to be able to see the benefit of it.

So we do see this, you know, still being a well supported trend that could continue.

Um you know, in the second half of the year, if we continue to see in future earnings periods, earnings growth as uh as we’re continuing to track up against whether or not we really do see a recession and a concerted consumer pull back here and no rate cuts then does no rate cuts matter to the markets.

Yeah.

Um I think a slow cut kind of scenario that might start at the back half of the year should be really good for risk assets, you know, cuts that are driven by obviously a recession, you know, have a very different impact.

But if you’re still seeing some, some strong growth and inflation starts to taper a bit and we’ll see what happens with core PC.

You know, at the end of the week is a signal, you’re having some cuts at the end of the year will be helpful but not necessary if you’re continuing to see some of the growth in earnings, even if it slows down a bit helpful.

To what extent, I mean, if, if we do see cuts, what does that then mean for future gains versus if we don’t see cuts?

Yeah, I mean, if you don’t see cuts but you don’t start to have some of this, you know, hawkish tone in terms of hikes.

I think you’re still focused more on the fundamentals and earnings and how companies are doing.

I think certainly more of an edge case if you start to see a concern about inflation coming up and the discussion on hikes coming back in that has a very impact on the market but no cuts at all with growth.

I don’t think it will have a big impact as people focus on the earnings and where we’re seeing the growth coming from, even if we did see some profit taking at these levels.

We were just talking about at the start of this segment some new record highs for the NASDAQ composite, if we did see rotation, where would that kind of flow into from your perspective?

Yeah, so, so I think it ends up being in, you know, consumers in health care, maybe absent some of the political considerations that will happen towards the back half of the year European financials, you know, is another area if you kind of shift out kind of globally where there might be some shifts.

But I think European financial is attractive right now.

Yeah, I mean, I think it’s just like the, the set up and you obviously have some challenges in in Europe from, you know, you know, maybe not as healthy as, as the US is and some cuts that could end up coming through.

But just from evaluation perspective, they could be in a, in a better position.

And I think there’s some, you know, cyclical kind of rotation that you could see there when you talk about the uh gap between the out performers and the underperformers is that set to widen.

If we don’t see the, if we don’t see the fed cut rates this year, I think if you have like higher for longer, it’s gonna start to hurt companies that handle this period.

Well, thinking that there was gonna be some relief coming and if you don’t see that both some of the higher leverage companies, small cap companies, but then even some of the consumers particularly low and middle income, it’s gonna start to pinch and I think that could, you know, start to hurt some of and widen the gap further when we talk about, uh, the performance that we will likely see here going forward.

And I guess what is going to be that massive driving factor we have earning season pretty much behind us now, is it, is it mostly going to be the fed that’s driving this intraday action and some of this volatility that we’ll see, at least in the short term, the shift to macro, you know, post earning season is definitely there.

Now, buybacks and other things now that that window is open may help support the market a bit, but it’s shifted back to to macro particularly as you start to have some of the, you know, the fed speakers, you know, coming in with a bit more of that hawkish to like people are, you know, focused on what’s going to happen.

Are we going to see these rate cuts?

Are we going to see this slowing kind of in the labor market that doesn’t, you know, it’s still a healthy labor market and healthy consumer.

But the back half of this year, if you start to see some slowing, I think that’s going to become a big part of the focus over the near term.

You mentioned the general election.

At what point do markets really start to pay attention to what’s being campaigned on?

What economic policies candidates are discussing.

Yeah, not until the, um, not until kind of the back half of the summer when you start to get the conventions and, and closer to the election, you know, at the end of the day and this won’t be a new thing like elections, you know, generally don’t move, you know, the, the market, you know, much in investors, you need to be focused on the policy shift, as you said and kind of which the administration and you know, whether the House and the Senate you stay aligned you or not.

But you know, right now we’ve got a lot more time.

It’s before it starts driving markets, Kate L Hillo, who is the Russell Investments, president and chief investment officer.

Thanks so much for joining us in studio.

Thanks so much.

Coming up everyone.

We’ve got a fresh pulse on the consumer and we’ve got a deep dive into Abercrombie and Fitch’s quarterly results.

On the other side of the break update, the stores don’t smell anymore.

They say at least that’s what our executive producers do.

Good vibes this morning for Apple Bank of America reiterated the company as the top pick, maintaining a buy rating and a price target of $230 on the stock B of A analysts are optimistic about the adoption of A I enabled phones.

They’re coming.

Dan Dan Yahoo Finance’s Dan Halley here to tell me whether or not these A I enabled phones are coming.

Are they, I think they call them in telephones.

Uh, that is, uh, yeah, in telephones you need to workshop that quotes.

Yeah.

Um, but I mean, look, this is something that Apple clearly has had to work on.

Uh, they don’t have any really generative A I capabilities right now that are doing anything.

Uh, they’ve been teasing this for some time.

Tim Cook has been teasing it, uh, on various, uh, earnings calls just because they’ve been left in the dust.

Microsoft has generative A I Google has generative A I meta uh Amazon, all of these companies are doing it.

Um uh some success, some floods here and there.

Uh but Apple has been the, the one kept out and so this is seen uh by a lot of analysts as potentially a kind of new driver for smartphone sales.

Now, do I feel that way?

Uh Not, not, well, I don’t, I, I, unless they show something at WW DC that’s like software driven that I think is gonna get people excited, then it’s not gonna do anything right?

People care about the camera, the screen and the battery.

Now beyond that, there’s gotta be some amazing software feature.

No one’s ever like, man.

Did you get that Siri update?

Have you ever heard anyone say that?

No, even when Siri came out, people were like, cool.

I’m sorry, I’m sorry.

Yeah, I just activated everybody’s phone.

Um But II I think if, if they can do something with the software that gets people actually excited, then it will be a driver.

Now, what does that look like?

I don’t know.

Right.

Because Samsung and Google already have generative A I capabilities on their own phones and it’s not really a reason for people to wanna buy them.

Right.

It’s more about the capabilities of the phones physically offer.

So I don’t necessarily know that this is going to be the driver that everybody hopes it’s going to be.

Uh unless it truly is something that Apple can say, look at how amazing this is compared to the rest of of what’s out there, this is going to get people to want to buy.

So Dan then how much is riding on the worldwide developers conference here next month?

Just in terms of if there’s any disappointment, what do you think the impact is or I guess what are analysts saying that the impact could potentially be here on Apple and the demand there for their phones at least in the near term?

Well, I think this is really uh a kind of setting up table stakes for like the future of of Apple and their software just because look, they’re already c is behind on this technology that’s changing things, right?

Microsoft showed with their uh their laptops that these are interesting technologies that can do a lot, right?

They have new features called things like recall uh that can kind of pull up anything you’ve been doing on your phone in the past, uh, you know, couple of years, uh, if you have the settings tweaked, right.

Uh, they’re, they’re doing cool, interesting things.

Um, Apple needs to offer that across everything, not just the iphone.

So if they don’t, if they disappoint, um, I don’t think it’s gonna get people to not buy an iphone.

Um, but I, I think it’s going to leave Wall Street and, and, and analysts saying, well, what gives is Apple, has Apple lost its edge?

And I think that’s more along the lines of what would happen is that the right way and going back to what you just said a minute ago, that Apple is very much viewed as maybe lagging when the comes to A I adoption in the A I race right now.

Is that the right way to view Apple at this point?

And I, I guess, is it a bit surprising just given the fact that you’ve covered the company for so long and it’s normally on the cutting edge when it comes to technological advances and adoption?

Yeah, I think, I think it’s a, I think when it comes to where they should be as far as at least having something uh to preview, right?

They’re, they’re behind, right?

But if you look at something like uh uh meta, they’re releasing these technologies as open source.

So it’s not really finding its way into too many products.

It’s more on the advertising side.

Um You know, Amazon, obviously, this is more about they have their uh Rufus uh A I assistant which is helpful but has its issues.

Um Google has launched Ja I it’s telling you to eat rocks, right?

So apple doesn’t want to do that, right.

That I think would be a bigger problem for apple and the perception of apple than it would be for, for something like Google.

Now, it’s a huge problem for Google because they’re supposed to be the source of trust online.

You don’t say let me Google this real quick because you don’t trust them, you do it because you do trust them.

So it’s a huge problem for Google.

Apple is all about fit and finish.

It’s all about delivering a product that people love and if they flo that, I think that would be a bigger problem than not having anything at all.

Nobody should be surprised that artificial intelligence is telling humans to eat rocks.

Yeah, I mean, look, eat rocks, eat paste.

It’s totally fine.

Uh And uh yeah, I mean, look, it’s not uh like you ever go to Google for anything important, you know.

So, well, we’re just going to leave it there.

Great with us here this morning for about 20 minutes into about 17 minutes into the trade.

You take a look at where things stand.

You’ve got the dow of nearly 400 points, a bit of a pullback here.

This morning, the S and P following further below 5300.

But the NASA take a look at that now off just around 7/10 of a first hand pulling back after, at another record high yesterday, above 17,000, we’re seeing a pull back just over 100 base points here this morning.

So again, some downward pressure across the board, we take a look at the sector action that’s reflected in the sector action to this morning.

All 11 of the S and P sectors here under a bit of pressure, real estate.

The worst performer of the group followed by financials and health care.

We’ll be right back.

Consumers still flocking to Abercrombie and Fitch name them shares.

Rallying on Wednesday after beating profit expectations and posting strong sales in the first quarter.

The company raising its full year sales outlook as demand across apparel and accessories continues to grow for a deeper dive into the results.

Yahoo Finance executive editor Brian Sozzi here with the breakdown.

Look, I I said name them but like I am one of them.

I made my my way in one of the stores like last week.

Yeah, this quarter, I just want to put this in context.

Um This is not going to be the norm from these retail earnings that are coming up.

We saw it when Walmart Report, we saw it from t reported a couple week ago, apparel is just soft and we saw it within Macy’s results.

So for Abercrombie again, to put up a, I would say mind blowing quarter is, uh, a very much an Abercrombie driven story.

So, what is this company doing?

Right.

It’s just getting its styles, right?

Uh, it’s keeping in its inventory under wraps.

This is a company that grew sales over 20% in the most recent quarter and its inventory was flat.

What is that telling you?

It’s that it’s just planning its business very well and it’s not overstocking items.

It’s putting new merchandise on the floor and the stuff is selling out.

Well, one area of the business that really caught me by surprise guys on the conference call moments ago was the wedding business is the business.

They recently launched Abercrombie and Fitch and it’s, uh, the Fran Hoitz CEO will talk to a little bit later on, uh, this afternoon saying it’s one of the hottest businesses they have right now can’t keep the stuff in stock and it’s not only that they’re coming in and buying wedding dresses, uh, from Abercrombie and Fitch or various wedding styles.

These are new customers in many cases to the Abercrombie brand and that is having that is sending customers to other areas of the store.

You know what?

That’s so interesting because it makes sense when you take a step back and think about it because it was really the millennial shopper who knew Abercrombie so well, decades ago, right?

And so now many of those people are in the age of, they’re getting married, they’re having weddings.

So why not buy at Abercrombie?

I didn’t even know I just pulled it up.

I pulled it up on my, on my computer right now.

I had no idea that they even had this business until you just said it.

But it makes sense because it also re the remaining committed to their loyal customers and they’re playing into that base that has worked well for them.

You see the film, you see the fitness.

Look, I saw, I saw the fit and I was upset because you were teasing this to us before.

And yeah, I didn’t see this coming at all.

They don’t have tuxes there though.

I was just there.

No tuxedos.

They’re not going to compete with the men’s warehouse.

But also interesting to uh Abercrombie noting on the conference call that they are now going to, I think now that their US business is solid.

Abercrombie’s working Hollister businesses finally start to turn they’re shifting their or shifting their sites to uh Europe, notably, uh Germany and the UK.

In fact, Fran Horowitz, uh saying she was just in the UK for and had their first annual board meeting there uh in, in quite some time.

So look for the company now to expand overseas a little more aggressively and thoughtfully and then also open up a good number of stores here in the US in the back half of the year we should clarify.

This is like wedding.

I’m still hung up on this wedding guest attire is what?

But they have stuff that you could wear for your wedding.

Walking down the aisle, rehearsal dinner, there’s a lot of stuff you could wear.

They get, yeah, get you geared up for your back.

I’m here to bring you this like a hashtag breaking news.

This one you can wear down the aisle, not me But yeah, if you wear head to toe, Abercrombie and Fitch, why not just live that wedding lifestyle and go out and buy one of these dresses you would, you, would you buy, would you get something from there?

Of course, why not?

I mean, it’s not bad.

Yeah, it’s not bad and it’s also a very affordable price point, especially when you compare it to some of the other.

I’m gonna put this to uh Ceo Fran Horace because I walk, walk by my latest, uh my recent my Abercrombie Fitch store, uh Roosevelt Mall and I didn’t see any of this stuff.

So I gotta ask her, what, where is this?

And why is not my store one?

Yes.

Yeah.

Maybe we should be buying more of these dresses.

I have no weddings to go to.

Nor am I getting married.

Not yet.

Nor do you need a dress any time any of that stuff on the wedding site.

But we’re gonna be asking Brian all of these tough questions.

We’re gonna have a deeper dive into the company’s latest earnings results.

Also the wedding business.

So has a heck of a lot of questions on that.

People come to my wedding.

That’s about it.

I mean, I know maybe one of my pets.

How about you?

Do you really want to come?

Good, uh Good gifts.

I give you for your another segment.

Great.

Thanks so much.

Coming up.

We are going to be taking a deep dive into the big deals in the energy space and what it means for the industry.

Plus the CEO of Chewy joining us here on set to talk consumer spending on pet some of the trends that he’s seeing within his business.

What it tells us about the health of the consumer that’s all coming up next on catalyst.

We’ll be right back.

Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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