⚡️The Week in Review — Market Edition

Good afternoon! OpenAI, the company behind ChatGPT, is depleting its funds faster than it generates clever answers. Reports suggest it may incur losses up to $5 billion this year and could be out of money within a year. OpenAI isn't the only one spending heavily; competitor Anthropic is on track to burn through $2.7 billion this year to stay ahead, while companies like Meta, Google, and Mistral are close behind. To level the playing field, OpenAI is targeting Google's search dominance with its own SearchGPT. However, this might not be the ultimate solution to AI's financial challenges.

MARKETS

• Stocks wrapped up the rollercoaster week with a strong finish. The Dow spearheaded the gains, soaring 700 points at one point today due to an unexpectedly mighty strong earnings report from 3M ($MMM). The Nasdaq and S&P 500 also bounced back from their recent declines.

• Treasury yields dipped slightly, while gold saw a rise following the latest PCE reading. Meanwhile, oil prices fell for the third consecutive week as new economic data from China pointed to lower demand ahead.

• Bitcoin experienced a significant jump today as focus shifts to the Bitcoin Conference in Nashville, where former President Trump is scheduled to speak tomorrow.

STOCKS
Winners & Losers

What’s up 📈

• Coursera ($COUR) soared 44.67% due to a strong earnings report and high enrollment in AI courses.

• Newell Brands ($NWL) rocketed 40.54% as the turnaround plan for the maker of household brands like Yankee Candle comes to fruition. Smells like success!

• 3M ($MMM) surged 23% on a fantastic earnings report that saw the company put some major lawsuits behind it and refocus on profits.

• Bristol Myers Squibb ($BMY) climbed 11.44% on a beat-and-raise earnings report.

• Norfolk Southern ($NSC) jumped 10.95% after handily outperforming expectations, though those estimates were based on a quarter that had a major derailment.

• Deckers Outdoor ($DECK) rose 6.32% due to strong sales growth for its HOKA and UGG brands in its recent quarter.

What’s down 📉

• Dexcom ($DXCM) plunged 40.66% after management cut the diabetes monitoring company’s full-year revenue guidance.

• Weight Watchers ($WW) tumbled 12.50% after Morgan Stanley analysts downgraded the company from overweight to equal weight based on the long-term headwinds it faces from obesity drugs.

• Biogen ($BIIB) dropped 7.15% after European regulators denied marketing authorization for the pharma company’s new Alzheimer’s drug.

MARKETS
The Week in Review — Market Edition

Let’s unpack everything that’s happened in the markets this week:

Ethereum ETFs Get the Green Light: The SEC has finally given the thumbs up to spot ethereum ETFs, allowing investors to buy into funds that track real ethereum, not just futures. These fresh funds pulled in a cool $951 million in trading volume on their second day—pretty impressive for what's typically a sleepy investment vehicle.

Inflation Cools Down: More inflation data came in cooler than expected. June’s PCE showed prices increased just 0.1% month-over-month and 2.5% year-over-year. This slowdown has investors buzzing that the Fed might actually cut rates in September, according to the FedWatch Tool.

Tech’s Rollercoaster Week: Tesla and Alphabet’s disappointing earnings reports set off a market-wide selloff on Wednesday, shaving over a trillion dollars off the market. The bright side? Other sectors are doing pretty well, even if tech's outsized presence in the indexes makes it hard to notice. Tech stocks are already starting to claw back some of their losses.

Bitcoin Conference Goes Big:Russell Brand, Cathie Wood, Edward Snowden, and Donald Trump are all on the speaker list for this week’s Bitcoin Conference. The GOP and digital asset enthusiasts have cozied up, and Trump’s Saturday speech is highly anticipated to see if he’ll reveal any concrete digital asset policies—or just more buzzwords.

Bill Ackman’s Reality Check: Bill Ackman scaled back his lofty goals this week, slashing his closed-end fund’s target by about 90%. But let's be real—who hasn’t aimed too high at some point?

There you have it—your whirlwind week in the markets, all wrapped up!

NEWS
Market Movements

• Apple ($AAPL) is no longer among top 5 smartphone vendors in China as domestic brands dominate market

• Kroger ($KR) and Albertsons ($ACI) have paused their merger in response to antitrust scrutiny.

• American Express ($AXP) has refreshed its Gold Card for the first time since 2018, adding new perks like credits at Dunkin’ and various restaurants.

• Warner Bros. Discovery ($WBD) is reportedly suing the NBA after the league refused its matching bid for TV rights, a move that was widely anticipated.

• The Disney/Hulu/Max bundle will be priced at $17 per month with ads and $30 without ads.

• OpenAI has launched SearchGPT, an AI-powered search engine that can summarize its findings and provide links, positioning it as a competitor to Google.

• Chipotle ($CMG) is reminding employees to serve generous portions following complaints of small servings.

• Spot Ethereum ETFs attracted over $1 billion collectively on their first day of trading earlier this week.

STOCKS
Luxury on Ice — Why LVMH Can’t Pop the Champagne Yet

It seems like even the high-fliers at LVMH ($LVMUY) aren’t immune to a global luxury slump. As we all tighten our belts, even the world’s largest luxury group is feeling the pinch.

The Numbers Game

LVMH reported a modest 1% bump in sales for Q2, falling short of analysts' rosy 2.89% projections. This is the slowest growth since 2009, not counting that pandemic hiccup. Fashion and leather goods, the company’s bread and butter, saw a mere 1% rise, slicing analysts’ forecasts in half and sending shares tumbling by 6.5%.

Operating margins also took a hit, dropping to 25.6% from 27.4%. This is partially due to LVMH continuing to invest and an unexpected shift: Chinese shoppers are now splurging in Japan, drawn by a weak yen that makes luxury items cheaper there.

The Global Picture

Luxury’s downturn is a tale of two key markets: the US and China. A year ago, China’s post-lockdown spending spree boosted sales, but now a property slowdown has consumers pinching pennies. In the US, middle-class shoppers are grappling with inflation and higher borrowing costs, making them less likely to splash out on luxury items.

Winners and Losers

While some luxury brands are still riding high, others are struggling. Italy's Brunello Cucinelli is predicting a 10% sales rise this year, and Hermès is also holding strong. LVMH, though, is grappling with a champagne demand crisis and a middle-class pullback in the US. Brands like Burberry and Gucci are feeling the heat, with Burberry even warning of potential losses and Gucci seeing an 18% sales drop in Q1.

However, not all is doom and gloom in the luxury space. Richemont’s Cartier and Van Cleef & Arpels are shining bright, and Prada is enjoying a resurgence. LVMH's Loewe is on fire, and Louis Vuitton is still solid, especially in China. There’s concern for Dior, though, after allegations of poor working conditions in Italy.

The Long View

While the road to recovery might be bumpy until at least 2025, LVMH is well-positioned to capitalize when the market rebounds. For now, though, the champagne will have to stay on ice. Cheers to better days ahead!

EARNINGS
New CEO, New Heights: 3M’s Stock Soars

3M ($MMM) just had a day for the history books, folks. The industrial giant's stock skyrocketed 23% to close at $127.16, thanks to some stellar second-quarter earnings and a brand-new CEO with a Midas touch.

The Numbers Don’t Lie

3M’s adjusted earnings per share came in at $1.93 on sales of $6 billion. Wall Street had its money on $1.68 EPS from $5.9 billion in sales, so this was a delightful surprise for investors. The S&P 500 ($SPX) and Dow Jones Industrial Average ($DJIA) also had a good day, but 3M left them in the dust with its best single-day performance ever since 1972.

A notable twist in the tale is 3M's recent healthcare spinoff, Solventum ($SOLV), completed on April 1. Adjusting for this, the company posted first-quarter earnings of $1.70 per share on $5.7 billion in sales. Organic sales growth, which hadn’t seen positive territory in four quarters, ticked up 1.2% in Q2.

New CEO, New Heights

CEO William Brown, who took the reins on May 1, is already making waves. "We delivered another strong quarter with adjusted earnings growth up double-digits and robust cash generation," Brown said. His game plan? Push for sustained organic revenue growth, ramp up operational performance, and smartly deploy capital.

3M’s outlook for 2024 includes a modest 1% sales growth, consistent with their April guidance. However, they’ve tweaked their earnings-per-share forecast to $7-$7.30, up from a prior $6.80-$7.30 range. Wall Street is expecting about $7.20 EPS.

Options markets had predicted a 5% stock movement post-earnings, but reality laughed and tripled that expectation. Over the past year, 3M shares typically moved around 5% post-earnings—rising three times and dipping once.

Looks like 3M’s new captain, William Brown, has started his voyage with a serious bang. Here's to hoping his next moves keep the momentum going!

Calendar
On The Horizon

Busy Week Ahead for Markets

• Next week promises to be a pivotal one for the markets. Not only are we hitting the peak of earnings season, but we'll also hear from the Federal Open Market Committee regarding the central bank's plans for interest rate cuts.

• Following today's PCE announcement, much of Wall Street anticipates a rate cut in September. However, the most optimistic investors are hopeful that the Fed will surprise everyone and initiate cuts this month. Given that the Fed has stated rate cuts will be data-dependent, it's more likely that Jerome Powell and his team will want to gather additional data before making any decisions.

• On the data front, most of next week's economic reports will focus on employment. The JOLTS report comes out on Tuesday, ADP on Wednesday, and the US jobs report on Friday.

Earnings Next Week:

Monday: McDonald's ($MCD), ON Semiconductor ($ON), Chesapeake Energy ($CHK), Tilray Brands ($TLRY), and Sprouts Farmers Market ($SFM).

Tuesday: Procter & Gamble ($PG), Merck ($MRK), Pfizer ($PFE), Microsoft ($MSFT), Advanced Micro Devices ($AMD), BP ($BP), PayPal ($PYPL), Corning ($GLW), Starbucks ($SBUX), and Pinterest ($PINS).

Wednesday: Mastercard ($MA), Meta Platforms ($META), Qualcomm ($QCOM), T-Mobile ($TMUS), Boeing ($BA), Marriott International ($MAR), Wingstop ($WING), and eBay ($EBAY).

Thursday: Apple ($AAPL), Amazon ($AMZN), Intel ($INTC), Toyota ($TM), The Cigna Group ($CI), Shell ($SHEL), Dominion Energy ($D), Coinbase ($COIN), Doordash ($DASH), and Ferrari ($RACE).

Friday: Exxon Mobil ($XOM), Chevron ($CVX), Squarespace ($SQSP), and Church & Dwight Co. ($CHD).