Retail sales, stealth record highs, and hope for homebuyers. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
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What we're watching | 🛍️ February retail sales: January saw the steepest decline in retail sales since March 2023 (-0.8%) and a drop in consumer confidence. Economists aren't expecting the trend to continue and predict sales grew 0.8% month-over-month.
📈 Stealth record highs: Despite a down-ish day (-0.19%) Wednesday for the S&P 500, especially from some big names like Nvidia and Tesla, the Materials (XLB) and Financials (XLF) sectors just hit record highs. It's another sign of a broadening rally despite the outsized role of the "Magnificent Seven" tech stocks.
🎄 Dollar Tree raises concerns: Dollar Tree's eyebrow-raising plans to shutter 1,000 stores is largely a story of post-acquisition woes as it failed to integrate 970 Family Dollar stores it acquired. But its quarterly report showed a weakness in the low-end retail market as the company missed sales expectations.
🏠 Hope for homebuyers: Morgan Stanley strategists now expect that the trend of rising housing prices will finally break after 11 straight months of gains, thanks to more stock and for-sale inventory. After the close on Wednesday, homebuilder Lennar reported the average price of a home delivered in its latest quarter fell to $413,000 from $448,000 a year ago.
👩💻 More economic data and quarterly results: Investors will also be watching the Producer Price Index, which measures wholesale inflation, after Tuesday's CPI report, which showed hotter-than-expected inflation in the price of consumer goods. Results from Dick's Sporting Goods and Dollar General will also feature, as well as Adobe, which will take the focus away from the consumer and, most likely, towards AI. |
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Note: Data is as of the time of opening this email. To view real-time markets data click here. |
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| It's time to retire the 'Magnificent Seven' | Today's Takeaway is by Jared Blikre, Markets Reporter.
Less than a year after its birth, the Magnificent Seven moniker is wearing out its welcome among stock market aficionados. The problem grows daily, as does the disparity in returns among this much-vaunted group of megacap stocks.
One wonders if the magic of this motley crew — Nvidia (NVDA), Meta Platforms (META), Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOGL, GOOG), Tesla (TSLA), and Apple (AAPL) — is simply gone.
Nvidia is up 85% this year alone and is seemingly in its own asset class. It continues to defy bears on a near-daily basis with 29 record closing highs this year and it sports a market cap that has rocketed higher by over $1 trillion this year alone.
Meta Platforms doesn't get quite as much press as the AI poster child, but it's up nearly $400 billion in market cap this year, returning 175% over the trailing year.
Amazon and Microsoft are each adding about $250 billion to the market cap of the S&P 500 and Nasdaq 100 this year.
Enter the three laggards.
Tesla peaked in November 2021 — a height from which it cratered 75% over the next 24 months.
Apple doesn't suffer from the volatility that fuels Tesla, but its sheer size means that its price losses — though smaller — still result in outsized drops in value. Apple is only down 10% this year, but that equals a $385 billion drop in market cap.
Then, there's Alphabet. The stock price has gone nowhere this year and sentiment is bearish. Despite being a key innovator and leader in the field of artificial intelligence, it has faced a few high-profile embarrassments over its Gemini rollout, losing nearly $100 billion in one day in February.
Taking out the three clear laggards — Tesla, Apple, and Alphabet — improves the returns of the Magnificent Seven over the longer term.
And as a purely intellectual exercise, Yahoo Finance's Head of News, Myles Udland, reshuffled the Magnificent deck. He's keeping the Mag Four outperformers, losing the three laggards, and adding a couple "diversified" stocks — Costco and Eli Lilly — to the list. |
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Eli Lilly recently gained fame (and fortune) with its weight-loss drug Zepbound. At the beginning of 2023, its market cap sat at about $350 billion and it has since surged past $700 billion, placing it firmly in the realm of megacaps. Its 30% price return this year also makes it an attractive entrant.
Costco is a well-known, consumer-facing large-cap stock. But as a "boring" staple, it is decidedly not known for artificial intelligence. That might make it an appropriate counterweight to the other stocks so reliant on tech. Its market cap is just over $300 billion, and its return is just over 10% this year.
All in all, the re-jiggered index competes nicely with the original. According to Yahoo Finance calculations, the Mag Four plus Costco and Eli returned over 135% since the beginning of 2023 — besting the Mag Seven's 90% return.
But neither beat the Mag Four return of 145% over the same period. As of this week, the Mag Four and Myles's constructed Mag Six are each up about 25% this year, while the Mag Seven is up 9%. |
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| On the move | Dollar Tree (DLTR) led the Yahoo Finance trending tickers page as shares tumbled 14%. The dollar store chain's announcement that it would close nearly 1,000 stores was part of a quarterly release that also included lower quarterly revenue and earnings per share than Wall Street analysts had projected.
Block (SQ) stock jumped nearly 5% in morning trade. The move came after Afterpay, which is owned by Block, revealed it has added more merchants to its buy now, pay later services.
US Steel (X) stock fell more than 12% in afternoon trade following a report from the Financial Times that President Biden plans to express serious concern over Nippon Steel's proposed $14.9 billion purchase of US Steel. Biden will issue the statement about the planned deal before Japanese Prime Minister Fumio Kishida attends a state visit in Washington on April 18, per the FT.
Bitcoin (BTC-USD) was trading hands above $73,000 Wednesday, continuing a furious, record-setting rally of its own.
— Josh Schafer, Markets Reporter |
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There's one area of inflation that economists believe will keep falling.
The February Consumer Price Index showed inflation remains stickier than initially hoped and that the shelter index played a key factor, notching an overall price increase of 5.7% compared to a year ago.
Within that index is owners' equivalent rent, which saw a 0.4% monthly gain in February. Notably, this was a move down from the surprising 0.6% monthly increase seen in January.
Economists suspect these price increases are set to slow further moving forward, though, as indicators in the private market — which aren't lagging like the CPI rent index — have decreased significantly over the past year.
"Through the recent monthly volatility, the trend in housing inflation remains downward," Wells Fargo senior economist Sarah House wrote in a note to clients on Tuesday. "Both the year-over-year rate of OER and rent of primary residences registered the smallest increases since the summer of 2022, and a further slide appears in store with private-sector measures of rent growth having largely returned to their pre-pandemic rates."
— Josh Schafer, Markets Reporter |
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Watch on Yahoo Finance Live |
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Earnings and economic calendar | Thursday
- Economic data: Initial jobless claims, week ending March 9 (217,000 previously); Retail sales, month-over-month, February (+0.8% expected, -0.8% previously); Retail sales ex auto and gas, February (+0.2% expected, -0.5% previously); Producer Price Index, month-over-month, February (+0.3% expected, +0.3% previously); PPI, year-over-year, February (+0.9% previously)
- Earnings: Adobe (ADBE), Blink (BLNK), Build-A-Bear (BBW), Dollar General (DG), Dick's Sporting Goods (DKS), Ulta Beauty (ULTA)
Friday
- Economic data: University of Michigan consumer sentiment, March preliminary (77.0 expected, 76.9 previously); Import prices, month-over-month, February (+0.2% expected, +0.8% previously); Export prices, month-over-month, February (+0.1% expected, +0.8 previously); Industrial production, month-over-month, February (+0.0% expected, -0.1% previously)
- Earnings: No notable earnings set for release.
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