The Rundown - Google Loses Historic Antitrust Case, Uber Cruises Higher After Earnings Beat

Episode Date: August 6, 2024

Stock market update for August 6, 2024.

Public.com presents the rundown your daily market update in five minutes. My name is Zadadmani, and today is Tuesday, August 6th. In today's episode, we recap the wild start to the week in the stock market and what's causing this huge spike in volatility. Also, Google just lost their antitrust case against the government that could have huge impacts on the tech industry, including Apple. Then stick around to the end of the show to learn what the data says about big market sell-ops. If you're a long-term investor, it usually means an opportunity.

All right, let's go. Yesterday was absolutely wild. Markets all over the world experienced a huge sell-off. Near the United States, the S&P and NASDAG dropped by more than 3% on Monday. And it wasn't just the S&P and NASDAG getting crushed. The Russell 2000, which is made up of small cap stocks, also dropped by more than 3% on Monday, and crypto was down big too. So there was nowhere for investors to hide.

You know, the volatility has really jumped over the last. last few days. The S&P 500 has moved lower by more than 1% for the last three trading days in a row, starting on Thursday of last week. We just haven't seen volatility like this in a long time, especially this year. So seeing movements like this over the last couple of weeks really catches your attention. Now, we've talked about how a weakening U.S. economy could be a driver of the recent market sell-off, but there's another thing. The Japanese yen carry trade. It's starting to unwind. See, over the past couple years, traders have been taking advantage of the big gap between interest rates in the U.S. and Japan, and they're using that big gap to make money.

Interest rates are high in the U.S. They're super low in Japan. So traders have been borrowing money in Japan paying nearly 0% interest rate and then exchanging that yen to U.S. dollars to buy U.S. assets and bonds to earn like 4 to 5% on that money. So you get to borrow money for nearly 0% interest and earn like 4% to 5%. Pretty sweet trade, right? Well, it was until recently. The Bank of Japan is now starting to raise interest rates and the Fed in the U.S. is starting to starting to cut rates. So the gap and interest rates between the two countries is starting to close and this trade isn't as profitable anymore. So now you have traders rushing to close out their carry trade position and all of this is causing a bit of mayhem in the markets. It's just crazy

how something that nobody was talking about until this week can rattle markets like that. Now according to JP Morgan, the full unwind of this carry trade is only half complete, but stock markets are starting to bounce back a bit. The Japanese Niki index jumped a record 10% today after dropping 12% on Monday. And stock market feels like that. in the U.S. are flashing green right now. Crypto is also bouncing back to. Bitcoin and Ethereum are up 5% from their lows yesterday. So we're seeing a nice little bounce back from all the madness on Monday.

I mean, we might still see some volatility over the next few days. There's still real fears of economic slowdown in the U.S. But it's just great to finally see some green after so many days of red. Let's run through some headlines. Google just lost their antitrust case against the Department of Justice. This might have been the biggest story of Monday. I'm not even joking. On Monday, a federal judge ruled that,

that Google engaged in illegal practices to preserve its search engine monopoly. This was in regards to a case of the Justice Department and 38 states filed against Google. The Justice Department argued that Google suppressed competition by paying billions of dollars to web browsers and phone manufacturers like Apple and Samsung to be the default search engine. In fact, in just 2021 alone, Google paid over $26 billion to be the default search engine. And no other search providers like Bing or others had even received an option to bid. Now, Google plans to appeal this case. So it might take another couple years before we see the full fallout from this antitrust

ruling, potentially even into 2026, according to Reuters. But Google might have to change the way it does business if these appeals don't hold up. But you know who might get hurt by this the most? It's probably Apple because Google paid Apple $20 billion in 2022 to be the default search engine on iPhones. And if Google isn't allowed to do that anymore, Apple's not going to get the $20 billion from Google anymore. And I bet you $75. to 80% of people are going to make Google the default search engine on their iPhones if it's not done so

already. So it will have some impact on Google's business, but not that much. But that's just my take. I could be wrong here. But nonetheless, I think other big tech companies should be nervous, because the fact that a federal judge ruled in favor of the DOJ should make Apple, Amazon, meta, and other big tech companies nervous that have a case against them. So we'll have to see what happens over the next few months. Let's shift gears and talk about Uber. They just reported their Q2 earnings and they crushed it. Their earnings beat on revenues and profits. Revenue was up 16% to $10.7 billion, driven by growth in the mobility and delivery business. Mobility is their ride sharing segment saw growth bookings up by 23%, while their delivery unit, which includes Uber eats, increased by 16%. Uber now has a 156 million

monthly platform consumers. That's of 14% from a year ago. And then Uber's CEO made a point to highlight on the earnings call that Uber's consumers have never been stronger. I'm sure that's going to give investors some confidence after the market's getting crushed over the last few days, as people were starting to feel nervous about the strength of the U.S. economy. In total, there was 2.8 billion trips booked on the Uber platform in Q2. That's up 21% from a year ago. That's about 30 million trips a day. Uber also gave an update on their autonomous rides on the earnings call. Their autonomous rides grew by 6x through partnerships. Now, Uber doesn't have their own autonomous vehicles, but they have teamed up with 10 companies, including Google's Waymo, and last week, Google announced a

partnership with BYD to bring 100,000 new BID electric vehicles onto the Uber platform. So, Atomus Vehicles is another part of the business that can open up new revenue streams for Google down the road. Investors were loving that. Uber stock is up more than 7% in the pre-market. All right, let's talk about some stocks making moves today. Lucid motor shares are rising after the Saudi Public Investment Fund provided another $1.5 billion in funds to the EV company. Now, the Saudi public fund already owns around 60% of Lucid, so they're pretty motivated to see lucid succeed. Shares of Lucid are up 11% on this news. On the flip side, Zoom Info shares are plummeting after the data search company missed earnings. They also lowered their outlook for the year.

And then on top of that, they announced that their CFO will be replaced. So a triple whammy right there. It's looking pretty messy over at Zoom Info. Now, if you're not familiar with Zoom info, it's pretty big for people in sales. Essentially, it's a search engine that you can look up anybody's phone number or email address. It's kind of creepy, but very useful for people in sales. But yeah, Zoom Info shares are down more than 14% in the pre-market in reaction to these missed earnings. All right, let's wrap the show with the fun fact. Markets have been down for a few days in a row, but drawdowns are pretty normal for financial markets. Since 1928, the S&P 500 has dropped 5% or more in 94% of years and 10% or more in 60% of years. This is according to data-sided by

by Ritholtz Management chief investment strategist, Callie Cox. So seeing the markets drop by more than 10% in a single year happens more than half the time. It's not great when it's happening in the moment, but it happens quite often. But the good news is in the long run, markets tend to go up. Over the past 96 years through the end of 2023,

94% of a 10-year period have been positive for the S&P 500, according to the capital group. So if you're a long-term investor, seeing the markets drop can be a bit scary, but it's actually an opportunity. Put that on a quote card. Well, all right, guys, that's the rundown for today. If you guys enjoyed today's show,

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