Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, Nov. 8. The Bottom Line segment of today’s podcast starts at (4:40) followed by Stocks On The Contrarian Radar©️ at (6:25) feat PINS 0.00%↑ for listeners who want to skip ahead.
State of Play
Trump +2 saw another rally for stocks, this one even more broad-based. Major US indexes closed at fresh record highs again. The Fed’s interest rate decision (25 basis point cut, as expected) was overshadowed by the Trump trade hysteria, as anticipated.
As we eye our board of indicators for signs of direction at 0625, the picture is a bit cloudier:
Stock index futures are mixed for a change, with tech leading a bit of a drop. The Nasdaq is down 0.4%. Probably earnings are weighing on this. Arista Networks (ANET 0.00%↑), Rivian (RIVN 0.00%↑), and Airbnb (ABNB 0.00%↑) reported disappointing numbers. Other indexes are hogging the break-even point;
Commodities are dropping again, with WTI crude oil down 1.5% to trade close to $71/barrel. Copper is down 2%, giving back yesterday’s gains. China did announce a stimulus package but that once again appears to have disappointed the market judging by these moves;
Cryptos continue their ascent however, with Bitcoin up 2% to move north of $76,000 and within range of its all-time high of $76,837;
Bonds are also seeing some bids. The 2-year yields is down 5bps to 4.17% with the 10-year yield down 4bps to 4.30% (yields move inversely to prices).
(Today’s cover image created by author via OpenArt.ai)
Today’s Known Events
Sony Group (SONY 0.00%↑) reported earnings that appear to have impressed as the stock is moving higher in the pre-market.
The University of Michigan’s consumer sentiment survey is out at 1000. This is a pretty big survey that often moves markets. However this week it may be a non-event because the actual survey-taking likely predated Trump’s victory that appears to have inspired so much risk-taking. But just for fun, the number that is anticipated by a survey of economists is 71.0, an improvement over the 70.5 seen last month.
We also get our first Fed speaker now that the meeting has passed and the blackout period is over: Fed Governor Michelle Bowman speaks at the University of Mississippi School of Business Banking and Finance Symposium at 1100.
The Bottom Line
So would not expect the known events to factor into things here. Investors appear to still be bullish on this Trump stuff. To repeat what we said in the immediate aftermath of the election results, the only question is how long this lasts and whether any of the winners and losers switch columns…
Earnings are weighing on things in tech land. It remains to be seen whether that will carry the day or whether this Trump euphoria will ride in and turn things around. The losses in tech — individual companies aside — are not very big at all and you do have cryptos continuing their ascent, so…
Stocks On The Contrarian Radar©️
One company that is getting absolutely bludgeoned after reporting disappointing results last night is Pinterest (PINS 0.00%↑). The stock dropped 15% immediately after reporting. It has since rebounded overnight but still finds itself in a precarious position, especially if you hold it up to the S&P 500:
Earnings themselves were fine but guidance is what led to the sell-off. The revised revenue expectations weren’t even that bad, in the midpoint of the previously-announced range. But a rise in anticipated operating expenses to the tune of 11-14% was enough for investors to dump the stock in the after hours.
One has to ask if that is an overreaction? Monthly-active users are still increasing, as are revenues per user. So the company is still growing, it’s just that expenses are rising as well. But well-managed companies can handle that and eventually produce more growth from the increased expenses. The fact that these are operating expenses versus capital expenses (for investment) is a significant detail however…
Still, the case can be made (and management has tried to make it. So far, apparently unconvincingly) that AI and partnerships (including with Amazon) will drive growth more. Apparently the site is also popular with younger users.
Pinterest has suffered earnings-related sell-offs before. The Contrarian took advantage of one of these during the pandemic and eventually sold for healthy long-term gains. If you zoom out a bit on the chart, you can see there were clear opportunities:
You can also see there has been a clear uptrend since around mid-2022 and also that PINS is a long way from recapturing its post-pandemic highs. A rising tide lifts all boats? If this Trump trade euphoria really gathers steam, you figure PINS will, in time, benefit…
Disclosure: The Contrarian does not have a position in Pinterest but is dangerously close to putting in a limit order to buy some.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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