Google’s Wiz-ardry 🧙🏼‍♂️— $23B Acquisition Magic in the Air

Good afternoon!Looks like our daily dose of productivity is about to get a little pricier. Coffee prices are brewing up a storm, hitting a 15-year high. Robusta futures, the global coffee benchmark, have skyrocketed 70% over the past year, now costing a whopping $4,800 per tonne.

UK supermarkets are already feeling the heat with a 15% price hike since last year, and Italian coffee giant Lavazza is warning of another 25% increase in the next year. Blame it on those unpredictable weather patterns wreaking havoc on harvests in Brazil, Vietnam, and Colombia, plus a dash of Middle Eastern shipping disruptions.

Might be time to dust off that home espresso machine — it's looking like a better investment every day.

MARKETS

• The Dow rocketed up 700 points today, marking its biggest single-day leap of the year. Meanwhile, the S&P 500 cruised in positive territory all day, closing at another record high, while the Nasdaq stayed mostly flat as tech stocks sat out the rally.

• Bitcoin soared to $65,194, with predictions of a second Trump presidency helping to recover recent losses.

• Gold also hit a new record, fueled by rising hopes of a rate hike, whereas oil dipped due to slower economic growth in China leading to lower crude demand.

• The Russell 2000 notched its fifth consecutive gain of 1% or more, a feat last seen in 1979, signaling a strong comeback for small caps (more on that below).

STOCKS
Winners & Losers

What’s up 📈

• GRAIL ($GRAL) skyrocketed 24.76% after announcing the kickoff of clinical trials for its new cancer detection test.

• Shopify ($SHOP) surged 8.57% following an analyst upgrade from “neutral” to “buy” due to the company’s turnaround efforts. Shares of Etsy ($ETSY) also benefited, rising 6.33%.

• Home builders are on a roll: Builders FirstSource ($BLDR) jumped 8.11%, KB Home ($KBH) climbed 7.17%, D.R. Horton ($DHI) advanced 6.64%, and Lennar ($LEN) increased 6.55%, all driven by hopes of a rate cut.

• Match Group ($MTCH) rose 7.46% after activist investor Starboard Value revealed a 6.6% stake in the company.

• UnitedHealth Group ($UNH) gained 6.49% after beating analyst earnings estimates, despite missing revenue expectations, and avoiding higher costs from a recent cyberattack.

• Bank of America ($BAC) increased 5.35% on strong earnings and management’s optimistic outlook for net interest income growth this year.

What’s down 📉

• Charles Schwab ($SCHW) tumbled 10.19% after its CEO announced the bank would have to downsize to maintain profitability.

• Trump Media & Technology Group ($DJT) dropped 9.09%, retreating after yesterday’s big jump on news of reselling 38 million shares of common stock.

• Reddit ($RDDT) declined 3.43% following a downgrade from “buy” to “hold” by Loop Capital analysts.

ACQUISITION
Google’s Wiz-ardry — $23B Acquisition Magic in the Air

Alphabet ($GOOGL) is about to make waves with what could be its biggest acquisition to date. The tech giant is reportedly in talks to buy Wiz, a cloud cybersecurity startup backed by Andreessen Horowitz, for a staggering $23 billion. If the deal goes through, it would eclipse Alphabet's previous record, the $12.5 billion acquisition of Motorola in 2012, and offer a significant exit for Wiz’s founders.

Wiz is the new sheriff in town when it comes to cloud cybersecurity. This hotshot startup has developed a slick set of tools that help businesses lock down their cloud environments. Think of Wiz as the bouncer at a VIP club, spotting troublemakers before they can cause a ruckus. They create a “normalizing layer” across different cloud platforms, making it a breeze for companies to detect and fix vulnerabilities in record time. With clients like Amazon and Microsoft already on board, Wiz is quickly becoming the go-to guardian for Fortune 500 firms looking to keep their digital assets safe and sound.

Here’s the scoop:

• Massive Deal: At $23 billion, this acquisition would be nearly double what Google paid for Motorola, and a huge leap from the $1.65 billion it spent on YouTube in 2006.

• Big Payouts: Wiz's four founders, ex-Microsoft Azure engineers, would each walk away with around $2 billion.

• Strategic Move: By acquiring Wiz, which boasts clients like Amazon and Microsoft, Google aims to bolster its cloud security features, crucial in its competition with cloud heavyweights Amazon and Microsoft.

But there’s a catch…

• Antitrust Hurdles: With regulators already scrutinizing Google, this deal might face significant challenges. Alphabet is currently battling two DOJ lawsuits, and the strict antitrust environment that thwarted Adobe’s attempt to buy Figma last year could pose a threat to this acquisition as well.

Stay tuned to see if this potential game-changer for Google’s cloud ambitions clears the regulatory gauntlet.

NEWS
Market Movements

• Burberry ($BURBY) is shaking things up by replacing its CEO and suspending its dividend. The iconic British luxury brand, famous for its signature plaid, has forecasted an operating loss for the first half of the year

• BlackRock ($BLK), the world's largest asset manager, has reached a record $10.6 trillion in assets, driven largely by ETFs, according to CEO Larry Fink

• Apple ($AAPL) and Samsung saw a rise in smartphone shipments last quarter, but they continue to lose market share to Chinese competitors like Xiaomi. Apple is shifting its focus to India, where it has reportedly achieved record annual sales

• Stripe's valuation has soared to $70 billion following a deal with Sequoia

• Gold prices have surged to a record high above $2,460 an ounce on optimism that the Federal Reserve will soon cut interest rates

• Microsoft ($MSFT) has disbanded its diversity, equity, and inclusion (DEI) department

• Skechers ($SKX) is suing L.L. Bean, alleging that the company copied one of its shoe designs

• Elon Musk has announced plans to relocate the headquarters of both X and SpaceX from California to Texas

• The Biden administration is pushing for a nationwide cap on rent increases, proposing a limit of 5%

• Gemini's AI platform ($GOOGL) has come under fire for potentially scanning Google Drive files without user consent

NEWS
Small-Cap Surge: The Little Stocks That Could

While the mega-cap stocks have been hogging the spotlight, small-cap stocks are quietly staging a strong comeback. The Russell 2000, which tracks 2,000 of the smallest publicly traded companies in the US, has been on a roll. It jumped over 3% on Tuesday and is up about 11% over the past week. Over the past month, the index has surged 12%, far outpacing the S&P 500’s 3%, reaching its highest levels since January 2022.

What’s fueling this rally?

• Rate Cut Hopes: With inflation cooling, investors are betting on a Federal Reserve rate cut in September. Lower interest rates would provide a significant boost to small-cap stocks, which are highly sensitive to economic changes.

• Election Influence: The “Trump trade” is in play, with investors speculating that tariffs and regulations under a Trump presidency could benefit smaller domestic companies.

• Bargain Hunting: As Big Tech stocks hit sky-high valuations, investors are hunting for bargains. Despite the recent surge, small-cap stocks have lagged behind this year, suggesting there's still plenty of value to be found.

Analysts are bullish, predicting that the rally in small caps could last for several months. With the market rally spreading beyond tech, it’s an exciting time for these smaller players.

EARNINGS
UnitedHealth's Cyber Comeback, Revenue Still Reigns Supreme

UnitedHealth Group beat revenue expectations despite dealing with a cyberattack that would give anyone a headache. Here’s the quick rundown:

Numbers Game:

• Revenue: $99.8 billion vs. $99.26 billion expected.

• Adjusted Earnings: $7.16 per share vs. $6.61 expected.

The Cyberattack Saga:

• Total impact: 74 cents per share for Q1.

• Full-year impact: Expected between $1.15 and $1.35 per share.

• Efforts to restore Change Healthcare systems are ongoing, with over $6 billion advanced to healthcare providers.

Bright Spots:

• Optum: Revenue jumped to $61.1 billion from $54.1 billion last year.

• UnitedHealthcare: Added 2 million new members, with Q1 revenue at $75.4 billion, up from $70.5 billion.

CEO Andrew Witty: "Immensely grateful for our colleagues working tirelessly to restore services and protect the broader health system."

Outlook:

• Updated full-year net earnings forecast: $17.60 to $18.20 per share.

Despite the cyber drama, UnitedHealth’s solid revenue and proactive measures to support healthcare providers have kept investors optimistic, with shares rising over 5%.

Calendar
On The Horizon

Tomorrow

Earnings season is in full swing, with a few economic reports sprinkled in for fun. We’ve got US industrial production (measuring output from manufacturers, utility companies, and miners) and building permits & housing starts, giving us a peek into the housing market's health.

Before Market open

• ASML Holding N.V. ($ASML) kicks off the semiconductor earnings parade. Shares have soared this year on pure hype, but with expected flat revenue, investors might be in for a scare. This could be the first domino in a semi-sell-off. Consensus: $4.05 EPS, $6.57 billion in revenue.

• Johnson & Johnson ($JNJ), the consumer goods titan, has had a rough year with lower customer spending. Shares are down 6% year to date, but its strong dividend history could make this a buying opportunity for bullish investors. Consensus: $2.70 EPS, $22.29 billion in revenue.

After Market close

• Discover Financial Services ($DFS) , in the spotlight for its $35.3 billion acquisition by Capital One, faces regulatory hurdles. Investors are keen to see how rising credit card delinquencies are impacting Discover’s bottom line. Consensus: $3.07 EPS, $4.18 billion in revenue.

• United Airlines ($UAL) has been on a turbulent descent since questions arose about the airline industry this summer. However, a strong balance sheet and high optimism among Wall Street analysts could mean a surprise upside. Consensus: $3.99 EPS, $15.14 billion in revenue.