Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, May 7. The Bottom Line segment of today’s podcast starts at (2:41) for listeners who want to skip ahead.
Disney reported earnings as this briefing was about to go to press. The results are discussed below, though not on the podcast.
State of Play
Stocks rallied again yesterday as investors decided no news was good news. As we look at our board of indicators at 0630, all is quiet with no clear signs of direction quite yet:
Stock index futures are effectively unchanged, with no major US index moving more than 0.2% from the break-even point;
Commodities are down a bit, with copper 1% lower. But WTI crude oil is unchanged at $78.30/barrel;
Bonds aren’t doing anything. The 2-year yields 4.82%, the 10-year 4.47%.
Today’s Known Events
It’s a busy morning for earnings. Disney (DIS 0.00%↑) earnings were mixed but the company maintained guidance. That doesn’t appear to have impressed investors as DIS is moving a bit lower in the pre-market.
Celsius (CELH 0.00%↑), the beverage of choice for millennial anorexics, already reported and that stock is dropping in the pre-market after missing revenue forecasts. In fact, CELH is down 16% at the time of this writing.
Datadog (DDOG 0.00%↑), Crocs (CROX 0.00%↑), and Nikola (NKLA 0.00%↑) are also due out before the open at 0930.
After the close at 1600 we’re due to hear from Rivian Automotive (RIVN 0.00%↑), Arista Networks (ANET 0.00%↑), Wynn Resorts (WYNN 0.00%↑), Upstart Holdings (UPST 0.00%↑ ), Lyft (LYFT 0.00%↑), Twilio (TWLO 0.00%↑), and Reddit (RDDT 0.00%↑) in its first quarterly report as a public company.
Consumer credit for March is out at 1500. Economists expect this figure to come in at $15.5 billion, an increase over the $14.1 million recorded the previous month. This is unlikely to move markets partly because it’s hard to discern exactly what it means about the US consumer. You want US consumers to take on debt to buy stuff they don’t need, but not to the point where they end up defaulting on the debt. The current level is pretty low historically, though this number does fluctuate quite wildly — another reason why it’s hard to read anything definitive from it.
The Bottom Line©️
To repeat what The Contrarian told you yesterday at this time, there are more buyers than sellers for risk assets right now, which is causing asset prices to increase. That simple. Eventually investors will take profits and asset prices will drop. Whether that turns into something more secular is an open question. So too is the concept of where selling pressure could even materialize.
Disney earnings probably won’t do the trick. The company has not produced great results in awhile so it’s unlikely investors will see this as a kind of watershed event for the state of the consumer. But you never know…
As for Celsius, the beverage of choice of millennial anorexics is probably too small still for its earnings to make any kind of definitive statement on the consumer. Plus that appears to be an inventory issue, or so management is saying at least. Margins are still expanding and sales are still growing.
Housekeeping
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Disney Earnings Mixed, Stock Drops