The Rundown - Chip Stocks Hit by Fears of China Restrictions, Eli Lilly Sinks on News of Rival Weight-loss Pill

Episode Date: July 17, 2024

Stock market update for July 17, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zad Admani, and today is Wednesday, July 17. In today's episode, we tell you why a potential new restriction from the U.S. government is causing semiconductor stocks to drop today. Also, weight loss pills might be coming to market soon, and some investors are really excited. Then stick around to the end of the show to find out how much student athletes got paid to be in the new EA college football video game. All right, let's go.

This might sound a bit repetitive, but stocks had another positive day with the S&P, NASDAQ, and Dow all finishing higher. Stop me if you've heard that before. The S&P and Dow hit new record highs yesterday. In fact, the Dow had its best day in over a year jumping 1.8%. Don't really care about it, but good for them. Now, the Dow wasn't even the best performing index yesterday. That would go to the Russell 2000, which was up 3.5% yesterday. Now remember, the Russell 2000 has made up of smaller companies.

People call them small-cap stocks. I talked a bit about the Russell 2000 on yesterday's episode, so go check that out if you missed it, but it just continues to rip right now. It's been up for five consecutive trading days in a row. Investors are continuing to rotate out of big tech into small cap. By the way, we put up a poll on Spotify on yesterday's episode, asking if you guys wanted to learn more about small cap stocks, and more than 80% of you guys said yes.

So I'll try to mention them more often, especially if the Russell 2000 keeps ripping like it has over the last couple weeks. Now, one of the big drivers of the stock rally yesterday was retail sales data. retail sales minus cars was up 0.4% last month, which is the highest it's been in three months. Now, the reason that we're excluding auto sales in this data is because of a cyber attack last month on auto dealerships that prevented auto sales for a few days for many parts of the country. So we're excluding that from the data. Overall, economic data continues to be positive. Inflation is coming down. Consumer spending is still pretty strong. And investors are loving it,

but we keep seeing record highs in the stock market. Let's run through some headlines. The Biden administration might be taking actions to further stop China's access to advanced chips. So this all started a couple years ago. The U.S. imposed restrictions on the sale of advanced chips and manufacturing gear to China. This was back in October of 2022. The U.S.'s concern is that China could use emerging technologies such as AI to bolster its military or for other malicious purposes. So those restrictions went into effect a couple years ago and it worked.

American companies had to stop shipping their latest advanced chips to China. So American companies like Lamb Research, Applied Materials, NVIDIA, all were affected by this restriction. But those same restrictions didn't stop international companies from selling their latest chips to China. So international companies like Tokyo Electron and ASML, they've seen their business boom over the last couple of years. For example, ASML, which is based in the Netherlands, their sales were up 150% in 2020% in China. Tokyo Electron sales were up 44%. So now the US is looking to potentially enact the foreign direct rule, which would give the U.S. power to halt international companies from selling their products to China if they utilize any

piece of American technology. And most these companies do. Now, this has just been floated out there. It hasn't officially been enacted yet. And the rule might not be so effective because when it comes to global policy, Japan and Netherlands could just decide to ignore the U.S. or even take American technologies out of their supply chains entirely. This is according to Bloomberg. But yeah, this news came as a bit of a shocker to the markets this morning. Chip stocks are down across the board. TSM, applied materials, lamb, stocks are down 4 to 5%. We'll let you know if anything official takes place, but yeah, could be a big deal. Let's shift gears and talk about another breakthrough in technology, weight loss drugs.

The next generation of weight loss drugs just took a big step forward. The pharmaceutical giant Roche has been working on a weight loss pill that showed an average loss of around 6 pounds within four weeks for patients tested in its phase 1 trial. Pharma companies in this weight loss category have seen a huge run-up in their stock price, especially Novo Nordus, which is a company that makes Ozempic and Weigavi, and also Eli Lilly, which makes Monjaro and Zepound. Both of those companies have seen a huge run-up in their stock price because of how popular the weight-loss drugs have been over the last couple years. So other pharma companies are trying to break into this category, but they're trying to do it with pills. Because the weight-loss drugs from Novo Nordisk and Eli-Lilly are all applied through needles.

And a lot of people don't really like needles. So companies like Roche and even Pfizer are working on a weight-lost drug in pill form. I think it's just a matter of time before we get these pills hitting the market. Now, just to level some expectation here, Roche mentioned that it'll probably take a few years before they're able to offer the pill on a large scale. So it's not going to happen this year. Still, it did seem to spook some investors in Nova Nordisk and Eli Lilly. Both of those stocks are down more than 3% in the pre-market.

Let's talk about some stocks making moves today. Shares of VF Corp are up this morning. That's the parent company of Vance and North Face because they announced that they're selling their streetwear brand. and Supreme to French eyeglassmaker Esselor Luxottica for $1.5 billion, all cash. Now, you might not have heard of Esselor Luxottica, but you've definitely seen their sunglasses. They're the parent company of Raybans and Oakley's, and they also make sunglasses for many luxury companies like Versace, Chanel.

I mean, the list is endless. But now Eselor is looking to expand beyond just overpriced glasses and move into clothing to reach new customers. I'll be honest here, guys. I'm way out of my league here. I didn't even know that Supreme was still popular. But apparently, SLO thinks it's still worth $1.5 billion. One thing is for sure, VF Corp investors seem to love this deal.

The stock is up about 8% in the pre-market following this news. Stock not doing so great this morning is 5 below. The discount retailer is having a tough day after they announced that their CEO is stepping down. Joel Anderson had been their CEO for almost a decade, but now he's moving on to pursue other interests. I wonder if the stock price being down 50% this year has anything to do with this decision. Anyways, 5 below is having a tough year. they keep lowering their sales forecast, saying that shoppers are dealing with the impact of high inflation on necessities like food, which is leaving less money to buy items like Squishmallow Toys.

Five Below stock is down 15% this morning in the pre-market. Also, Spirit Airlines is having a tough morning. Their stock is down after they warned investors at their Q2 numbers are going to be worse than they initially estimated. Spirit is dealing with the same issue that other airlines are dealing with, like too many available seats, which is pushing down airfare. Personally, not going to complain about that. Now, what's funny is they also said that their fees that they collected for all

All non-ticket stuff, so like baggage feeds, seat selection fees, came in lower than expected as well. I think that people are finally getting smart about not getting caught with a bag that is like one centimeter too big and being charged like 80 bucks at the gate. Sorry, Spirit. Spirit stock is down 5% in the pre-market following this news. All right, let's wrap the show with a fun fact. EA Sports is set to release the NCAA College Football 2025 video game, almost a decade since its previous college football game was released.

EA had to stop making the game due to disputes over not paying college athletes. But now with NIL in the mix, NCAA players are allowed to get the bag. Apparently 11,000 student athletes will get paid $600 each. Now, players had to provide consent and the top players were offered other promo deals. I'm pretty happy this game is coming back. I remember playing it back in the day when I was in college. It's probably going to bring back some memories. Game comes out July 19th, which is this Friday.

Well, all right, guys, that's the rundown for today. If you guys enjoyed today's episode, don't forget to hit us with that five-star rating on Apple and Spotify. And we're going to put up a Spotify poll in today's episode as well. So go check that out. Earning season keeps rolling on this week. So make sure you guys are tuning in. Thank you guys so much for listening. Shout out to Mike and Connor for all the help behind the scenes. We'll see you guys back here tomorrow. This is the rundown. Your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell or hold that security.

Rundown guests are not financial advisors and are not affiliated with public holdings or subsidiaries. You should make your own financial and investment decisions or consult. Respected professionals. Learn more at public.com disclosures. In partnership with Ayedimani, brokerage services for U.S. listed, registered securities are offered by Open to the Public Investing Incorporated, member FINRA and SIPC.