Welcome to the Weekend Edition!
Grab a cup of coffee ☕️, and relax while we take a quick look at what happened in the markets this week.
Market Recap - 19 Jul 2021 to 23 Jul 2021 📉📈📈📈📈
Monday saw a major sell off in the markets with the Dow declining the most, closing 726 points below the previous close. It was brutal and most doomsayers claimed that this was just the beginning of the end. But, the market showed them! Not only did the market do a complete turnaround, most indices hit all time highs with the Dow closing above 35,000 for the first time ever.
And… on Friday Facebook ($FB) joined the Trillion Dollar Club.
I don’t think anyone can safely say what cause the one-day sell off. Several theories floated about - Inflation, the Covid Delta variant, expected Earnings and a few other conspiracies. While all these factors definitely play a role, I’m not sure that the market has really run out of steam.
Earnings Season Continues… and Facebook crosses 1T 📊
With Banks kicking off the season the previous week, this time around we had an interesting set of reports before Big Tech reports next week.
Both Twitter (+3.05%) and Snap (+23.8%) had phenomenal results causing shares of FB (+5.3%) and PINS (+5.8%) to soar. While Snap’s market cap crossed $120M, Facebook closed the week with a market cap of $1.05T.
The Airlines reported quarterly profits for the time since the pandemic started with strong demand in leisure travel. Business travel will likely see a slower recovery as corporates try to keep spending low, while the Covid Delta-variant still threatens long-haul travel. Southwest, with the stronger balance sheet, missed earnings but clearly their concern is more on bringing people back to work, increasing pay and re-training pilots. American Airlines on the other had beat expectations and is up 36.6% on the year.
The Miners reported earnings this week as well with Nucor Steel ($NUE) just hitting it out the ballpark. Supply chain shortages continue to fuel commodity prices and miners are looking to return some profits to shareholders. Honeywell confirmed inflationary pressures and reiterated supply chain problems
Intel said that chip shortages would likely continue into 2023.
Amex and Crox beat estimates by a wide margin, confirming increased consumer spending because of the re-opening of the economy.
Netflix was the most disappointing of the lot, falling short of estimates. Subscriber numbers are not increasing exponentially as before and NFLX is feeling the pain. But, the company has a plan! They’ve confirmed going into mobile gaming and have said that games will be available to users through the same subscription service.
Unfair Practices 👩💻
Activision Blizzard ($ATVI), the game developers, were served with a lawsuit by the California Department of Fair Employment and Housing, alleging women employees were underpaid, promoted “more slowly,” and terminated “more quickly” than their male coworkers.
Why it Matters: I dumped all my stock immediately not because I was worried about the price but, because I was appalled at the allegations. In fact, the price remains largely unaffected since the news broke and while, the stock market didn’t take notice immediately, if the state-body wins the suit, it will mean a change in labor practices and people will get up and take notice.
Faith in the Markets 😥
Chinese ADR Stocks sold off on Friday, fueled by the $DIDI debacle. Bloomberg reported earlier this week that the Chinese Government was getting ready to levy penalties on the ride-sharing giant, Didi, including a possible de-listing. Didi fell almost 21% on Friday. But, the news doesn’t stop there. Today Tencent Music ($TME) has been asked to give up their exclusive music rights.
Why it Matters: Faith is so very important and Friday’s sell off tells you why it matters. I saw a number of people on Twitter preaching not to “panic sell” and that these are good companies and in the long run things will pan out. While they may be right… who knows how long it takes to work out. My alarm bells went off when the Ant Financial IPO was suspended in Nov 2020. I’d invested in $NIO and $BABA but, gradually liquidated all my positions not because I thought that they were bad companies but, because the lack of information worried me.
The Crypto World
Bitcoin dipped below $30k for the first time in months. The stay was brief and the cryptocurrency rebounded quickly after the “B-word” conference. Brought together by Ark’s Cathie Woods, the conference featured Elon Musk, JackDorsey and Steve Lee. The conversation ranged from Tesla accepting the Cryptocurrency again to Bitcoin bringing about world peace. The Dean of Valuation, Aswath Damodaran on the other hand, called it reckless and “insane” that companies would invest their cash balances in $BTC.
And in Other News…
The Olympics had an eerie opening ceremony without an audience. The authorities are still struggling to keep the spread of covid under control.
COVID cases are mounting around the world and the Delta Variant has now spread to 147 countries as confirmed by the WHO.
Jeff Bezos becomes the second billionaire to go to the “edge of space”
GM recalls EVs after the Bolt catches fire
PF Chang hints at an IPO this year… yummy!
Have good week ahead!
A Personal Note:
This was the first edition of the Weekend Edition and I hope you enjoyed it. I started this newsletter with all sorts of ideas in my head. But, finding a balance between consumption and production has been a challenge. I’ve created this feature in an attempt to bridge the gap because I still want to bring you useful information in some form.
Ayesha Tariq, CFA
Remember, there’s always a story behind the numbers.