The Rundown - Big Bank Earnings Wrap Up, Activist Investor Builds 6.5% Stake in Match Group

Episode Date: July 16, 2024

Stock market update for July 16, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zaid Admani, and today is Tuesday, July 16. In today's episode, we tell you why the Russell 2000 is starting to get a lot of love from investors. Also, we recap more Big Bank earnings and talk about Apple's new iOS release, pushing the stock to all-time highs. Then stick around to the end of the show to learn how many companies filed for bankruptcy in the first six months of 2024. It's the most since 2010, and there's a theme there.

All right, let's go. The markets are off to a great start this week. All three major indices, the S&P, NASDAQ, and Dow all finished higher on Monday, and the Dow hit new all-time highs, which is the 20th record close of the year for the Dow. Still don't care about the Dow, though. Now, there is an index that investors are starting to care more about these days. That's the Russell 2000. The Russell 2000 doesn't get much love compared to the S&P 500, but it's starting to have a moment right now.

The index is made up of 2,000 smaller companies that most people don't know about. They're not household names, like the big-time companies in the S&P 500, but the Russell 2000's on a bit of a hot streak right now. It was up 1.8% on Monday. It's up nearly 8% in the last four trading days, finishing at its highest level since 2022. Now, last week I mentioned that there was this trend where investors were starting to rotate out of big tech stocks and into smaller companies. Some of those smaller companies make up the Russell 2000, which is why we're seeing the Russell 2000 rally over the last few days. So definitely something to keep an eye on. Maybe the big winner for the second half of the year might be small cap stocks and the Russell. 2000. Let's run through some headlines. Bank earnings continued to roll in. This morning, it was Morgan Stanley and Bank of America that reported earnings, and both banks beat estimates for the quarter.

Morgan Stanley's revenues jumped by 11% from the same time last year, while Bank of America on the other end grew by less than 1%. And the biggest driver of these earnings was their investment banking division. With Bank of America seeing 29% growth in their investment banking fees, while Morgan Stanley saw a 51% jump in their investment. investment banking division. This is the same thing we saw with other big banks when they reported their earnings. Now, Bank of America's consumer banking division, not doing so great. It's shrunk by 3% due to lower deposit rates. And Morgan Stanley's wealth management division only grew by 2%. Both of these banks pointed to a weakness in net interest income, which is the money that banks make

from lending out money. So the theme for big bank earnings is that investment banking activity is going up. Not really a surprise here. Stocks are at all time highs. Companies are looking to IPO and merge with other companies. That's good for investment banking. But the consumer banking, not so much. Higher interest rates is forcing these banks to pay more money for their savings account, which is resulting in them making less profit. Morgan Stanley's stock dropped 3% this morning following the earnings, but Bank of America, on the other hand, jumped nearly 2%. So a bit of a mixed reaction from the markets. Switching gears a bit, Apple just released their new beta version of iOS 18. This is the operating system that's expected to launch in the fall with the new iPhone

16. Now iOS 18 has an unusually large amount of hype compared to other iOS releases in the past because it's going to have Apple Intelligence, which is Apple's AI integration into the iPhone with ChatGipT and other AI services. Unfortunately, this beta release won't have any of Apple Intelligence features. So kind of a bummer. Now, I personally haven't installed the beta version of iOS 18. I'm just going to wait until the fall

when the full stable version comes out. But I've seen some reviews, and it looks pretty cool. Like, the calculator app is pretty cool. No joke, go look at some videos. It looks pretty dope. And you can now put your icons anywhere on the home screen and change the colors of them. Android users listening to this are laughing right now.

But yeah, we're going to have to wait until the fall before we get the full release of iOS 18 with Apple Intelligence. So the hype is still building. And speaking of hype, Apple stock just continues to rip. It hit all-time highs again yesterday. In fact, it's up 20% since WWDC back in June when they showed off Apple Intelligence. So the company is just on a roll right now. Let's talk about some stocks making moves today. Starting with the Match Group.

The parent company of Tinder and other dating apps is up this morning following a report from the Wall Street Journal that activist investor starboard value has built a six and a half percent stake in the company. Now, we've talked about activist investors in the past. The way they work is they buy a ton of stock of a company, typically a struggling company, and use that ownership in the company to try to secure a board seat or two to help turn the company around and hopefully increase the price of the stock. So this activist investor's starboard value wants matched to, you know, make some changes at the company to turn it around. And they got some ideas on how they can do that because the match group has been struggling. Your stock is down 12% this year. So we'll see what changes matter.

ends up making to turn the company around over the next few months. Now, typically, whenever activist investors get involved, the initial reaction by the market is generally positive. That's the same in this case. Match group stock is up more than 7% in pre-market trading. This is a separate conversation, but like the economics of dating apps, something feels icky about it, you know? It's like they're incentivized for you to not find your partner so you're back on

the platform. You know what, let's just move on. A stock not doing so good today is Hugo Boss, another luxury company having a bad week. Yesterday it was Burberry. Today, it's the German luxury brand Hugo Boss. Shares are down this morning after they reported disappointing earnings and cut their 2024 sales forecasts. Also, their profits in the second quarter fell by 42%.

Yikes. Now, the company is blaming macro and geopolitical challenges, especially in China and the UK. The company now expects their sales to grow just one to four percent this year compared to the 3 to 6 percent that they had previously expected. So they're expecting lower growth, their profits are down, and the stock, at no surprise, is down 8% this morning on the Frankfurt Stock Exchange in Germany. It's currently trading at its lowest level since 2021. So this is definitely becoming a trend right now.

Luxury companies are seeing a slowdown across the board after seeing a huge boost in the years following the pandemic. I'm really looking forward to seeing what LVMH is going to report. They report earnings next week. It's the biggest luxury company in the world with Louis Vuitton and Christian Dior, Fendi, Celine, a lot of these brands I can't even pronounce. So keep an eye out for LVMH earnings next week. Let's wrap the show with a fun fast.

346 companies filed for bankruptcy in the first six months of 2024. That's the most first half bankruptcies since 2010. That's according to the S&P Global Market Intelligence Report. Now, what's interesting is that most of these companies that filed for bankruptcy were consumer discretionary companies. These are companies that sell things that people want but don't need. You know, so things like restaurants, clothing stores, and car dealerships. Some of the most notable companies that filed for bankruptcy were Red Lobster, Fisker, the EV company,

and the 99 cents store, also Joanne Fabrics. So, tough year for consumer discretionary companies. Now, just to be clear, just because the company files for bankruptcy doesn't mean that it's going to permanently shut down. Like, for example, Joanne Fabrics is already back out of bankruptcy and is operating as normal. So it doesn't mean the company's going to go away forever. Fisker might go away forever, though.

I don't think that's coming back anytime soon. Well, all right, guys, that's the rundown for today. Hope you guys enjoyed today's episode. Turning season is starting to slowly heat up. So next few weeks should be a fun one. I'm already getting pretty excited. If you guys enjoyed today's episode and have like eight seconds of free time, hit us with that five star rating on Apple and Spotify. I think we have over 2,000 five star ratings on Spotify and over 150 on Apple.

So for those of you guys that have already given us a five star rating, thank you guys so much. That engagement really does help to show. Also, don't forget to vote in today's Spotify poll and leave us a comment too. Spotify recently rolled out comments on podcast episodes. So if you like something about today's episode, let us know in the comments section. Thank you guys again for listening. Shout out to Mike and Connor for all the help behind the stuff. scenes. We'll see you guys back here tomorrow.

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