The Rundown - S&P 500 Tries to Recover from Worst Day Since 2022, Ford Shares Skid on Profit Miss

Episode Date: July 25, 2024

Stock market update for July 25, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zad Admani, and today is Thursday, July 25th. In today's episode, we'll recap the brutal day in the markets yesterday and tell you about a streak that unfortunately came to an end. Also, we recap earnings from Ford, American Airlines, Southwest Airlines, and more. Southwest actually announced a big change that might impact their business in the future. Then stick around to the end of the show to find out all the box off. records that Inside Out 2 is breaking. It might be Disney's most successful movie this decade.

All right, let's go. Oh boy. Well, Wednesday was a blood bath in the markets, especially with the magnificent seven stocks. The S&P 500 dropped 2.3%, and the tech heavy NASDAG dropped 3.6%. The worst trading day for both of these indices since 2022. In fact, it's been 356 trading days since the last time the S&P 500 fell more than 2% in a single day. That's the longest streak since 2007. But it came to an end yesterday. And the Magnificent Seven stocks continued to get crushed. They lost a collective $750 billion in market cap on Wednesday,

which is the most the group has lost in a single day ever. Tesla led the way dropping more than 11% because of their poor earnings. We covered Tesla's earnings on yesterday's episode, so go check that out if you missed it. We also covered Google's earnings, and their stock was. down 5%. So it's been brutal for tech stocks right now. We're going to get more big tech earnings next week from Apple, Microsoft, Amazon, meta, and if they continue to disappoint, this might get worse. You know what's crazy is that stocks were at all-time highs like two, two and a half weeks ago, and now all we're getting is a sea of red. But honestly, though, it's been a pretty wild two weeks,

and I'm not just talking about the markets. Let's run through some headlines. And we're going to recap some earnings starting with Ford. Ford shares are plummeting this. morning after the carmaker missed profit estimates due to high warranty costs. Basically, consumers are finding issues with their Ford cars and using their warranties to get that fixed. And that's costing Ford money. Ford said the cost related to warranty expenses was roughly $2 billion in the second quarter. That's $800 million more than it was in the first quarter. Now, Ford's management said that cars in question are from 2021 or before. On top of the warranty issue, Ford's EV unit continues to lose money, with losses north of one.

billion dollars in Q2. So the warranty expenses and the EV unit were a drag on Ford's profits, which dropped 26% compared to the second quarter of 2023. Now on the bright side, while Ford did miss their profit estimates, it actually beat on top line. Ford's revenues grew by 6% more than what Wall Street was expecting. So I guess that's the one optimistic takeaway from this earnings report. Still wasn't good enough for investors. Ford shares are down more than 13% in the pre-market on this news. Let's talk about Southwest Airlines. They reported earnings. and shares are down after the airline experienced a 45% drop in profits. Southwest has also forecasted a 2% decline in unit revenue.

I mean, Southwest is dealing with a lot of issues right now in their current business model. The airline has struggled to get new planes due to delays with Boeing because they only utilize Boeing planes. And traditionally, Southwest has always marketed itself as a discount airline, but that's kind of hard to do these days with other cheap alternatives flooding the market. You know, we got Spirit, we got Frontier. A lot of these traditional airlines are also offering. basic economy tickets. So Southwest is having a hard time competing.

And anecdotally speaking, I don't think that Southwest has ever been the cheapest option when I've looked in the last couple years. So the airline is going to make some changes moving forward. They're going to start flying overnight flights, which I'm surprised they didn't do before. And the big one, they're getting rid of their open seating policy starting next year. And offer seats with extra leg room so they can charge more money for those seats. So we'll see how that works out for Southwest. I mean, they didn't need to try anything right now to help turn their business around. Investors still weren't optimistic. The stock dropped around 6% in reaction to these earnings. And American Airlines reported earnings this morning. They're also

having profit issues. Their profits fell by 46% in the second quarter. It's the same story. Airlines have too many open seats, which is pushing down airfare, hurting profitability for these airlines. American Airlines expects unit revenues to decline by more than 4% in the third quarter. So even though it looks like travel demand is on fire and we're seeing record numbers of people go through TSA checkpoints, it's still not as much as these airlines had expected, which is why they have too many seats. If you're planning to fly somewhere, this might be a good time because you could probably score some great deals. American Airlines shares are down more than 4% in reaction to these earnings. Let's talk about some more stocks making moves today, and again, it's all earnings related.

Let's start with Kuregg Dr. Pepper. Their stock is up this morning after the drink provider reported earnings that came in line with estimates. Kuregg Dr. Pepper's volumes grew by nearly 2% while prices were up more than 1.5% from 2023. So they're selling more stuff and they're able to raise their prices a bit too. Investors like those numbers and their stock is up more than 3% in the pre-market. And a quick fun fact about this company, Dr. Pepper now holds the number two spot for the most popular soda by consumption in America. Number one is Coca-Cola, obviously. Number two, Dr. Pepper. It overtook Pepsi, which honestly is shocking to me. I know that people like Dr. Pepper. The Dr. Pepper stands are very vocal.

but I didn't think it'd be number two. I'm actually curious to know where you guys fall on this. We're going to make that the poll today. What is your favorite soda? The poll is going to be on Spotify, tap today's episode, vote in today's poll, and let your voice be heard. Now, let's talk about a stock that is getting crushed today. Universal Music Group,

shares of the world's largest record label is tanking after they reported earnings and really disappointed investors. Universal Music Group is huge. They have artists like Taylor Swift, Billy Ilish, just to name a few, and their revenues only grew by saying, 6.9% in the second quarter, which was much lower than the 11% that Wall Street was anticipating. In fact, UMG's streaming revenue was down 4%.

UMG lost revenues last quarter because of their dispute with TikTok, which removed their music for a couple months, and Meta also recently stopped licensing premium music videos for Facebook. Investors seemed to be worried about the future outlook of the company and the stock tanked more than 20% on the Amsterdam stock market where it trades. There was a bright side, though. Merch sales were up 44% in the second quarter, which I'm sure. sure Taylor Swift's Aeros Tour is responsible for a majority of that.

All right, let's wrap the show with a fun fact. Disney Pixar's Inside Out 2 is officially the highest grossing animated movie in history, overtaking Frozen 2 this week. The movie was released six weeks ago and it's made over $1.46 billion at the box office worldwide. Frozen 2 had made $1.45 billion at the box office when it came out in 2019. Inside Out 2 also has the record for the fastest animated movie to reach $1 billion at the box office. which it did in just 19 days. And it's currently the only movie in 2024 to being the billion dollar club.

Disney and Pixar have to feel good about this dub because they've been in a box office slump for years. It really hasn't translated to Disney stock performance though because Disney stock is down 1% for the year. So it's not all great at Disney. All right guys, that's the rundown for today. Another action-packed episode, so many earnings to cover. Things are getting pretty crazy in the markets, but we're locked in.

We're tracking it all. And we'll see how the markets cap off the week. Thank you guys again for listening. Shout out to Connor and Mike for all the help behind the scenes. And 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 this 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 its subsidiaries. You should make your own financial and investment decisions or consult. Respected professionals. Learn more at public.com disclosures. In partnership with Aided Mani, brokerage services for U.S. listed. registered securities are offered by Open to the Public Investing Incorporated, member FINRA and SIPC.