Episode 210 of the Investopedia Express with Caleb Silver (Oct. 21, 2024)

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From Philly Phinancial Literacy Week, founder Nisiar Smith takes us inside the movement he helped create to extend financial education into the underserved communities of Philadelphia. Plus, Marc Russell, the founder of BetterWallet and one of the original Fin-fluencers, takes us on his journey from being a foster child, to climbing out of $80,000 in debt, to building a personal finance business and platform serving hundreds of thousands of people. And, more record highs for big stocks and big markets usually mean more of the same, even with rising volatility.

Links for Show Notes:

• https://www.investopedia.com/what-to-expect-in-the-markets-this-week-8729934
• https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_101824.pdf
• https://www.bespokepremium.com/interactive/research/think-big-blog/
• https://sentimentrader.com/
• https://www.phillyphinancial.org/
• https://www.investopedia.com/boeing-union-reach-tentative-deal-to-end-5-week-long-strike-8731034
• https://www.instagram.com/betterwallet/
• https://www.thebetterwallet.com/
• https://www.investopedia.com/terms/b/bulltrap.asp

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Key Takeaways

• The 10-Year Treasury yield rose 11 basis points to 4.19% on Wednesday, hitting its highest level in nearly three months as markets reassess their expectations for interest rates.
• There was no obvious catalyst for Monday’s rise, but yields have been trending upward ever since the Federal Reserve cut interest rates for the first time in more than 4 years last month.
• Wall Street has dramatically curbed its expectations for upcoming rate cuts by the Fed.

Treasury yields climbed by the most in weeks on Monday as markets continued to recalibrate their interest rate expectations while assessing the likelihood of a soft landing for the U.S. economy.  

The 10-year Treasury yield was at 4.19% Monday afternoon, its highest level since late July. The 11 basis-point, or 0.11 percentage-point, increase was its biggest intraday rise since Oct. 4 when a stronger-than-expected jobs report assuaged Wall Street’s recession fears. 

There was no obvious catalyst for Monday’s rise, but yields have been trending upward ever since the Federal Reserve cut interest rates for the first time in more than 4 years last month.

Data Has Supported the Idea Fed Can Move Slowly

The Fed went big in September, slashing its benchmark rate by 50 basis points amid a concerning uptick in the unemployment rate.

The decision was a controversial one in some corners. Fed Governor Michelle Bowman favored a smaller cut, becoming the first Fed governor to dissent from a rate decision since 2005.

In the weeks since, economic data—including September’s inflation data—has generally provided positive surprises, supporting Bowman’s view that the Fed can take it slow and steady as it returns the federal funds rate to a neutral level. That data has also supported the stock market, which has risen to record after record in recent weeks.

Market Has Scaled Back Rate Cut Expectations

Wall Street has dramatically curbed its expectations for upcoming rate cuts. On Monday, there was a 64% chance the Fed would cut rates by a total of 50 basis points over its next two meetings, according to federal funds futures trading data.

Markets see no chance of bigger cuts. The inverse was true a month ago; then, Wall Street saw no chance that the Fed would cut its key rate by less than 50 basis points over the last two meetings of 2024. 

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Key Takeaways

• The Walt Disney Co. announced that the replacement for CEO Bob Iger will be named in early 2026.
• The entertainment giant also said former Morgan Stanley CEO James Gorman, who heads the succession committee, will become chair on Jan. 2.
• Iger returned to Disney as CEO in November 2022 after the board removed his successor, Bob Chapek.

Shares of The Walt Disney Co. (DIS) declined Monday as the entertainment giant said that the replacement for Chief Executive Officer (CEO) Bob Iger will be named in early 2026.

The news came in a company release announcing that Morgan Stanley (MS) executive chair and former CEO James Gorman will become Disney chair on Jan. 2, replacing Mark Parker.

Gorman, who heads Disney’s Succession Planning Committee, explained that appointing a new CEO is a “critical priority before us.” He added the early 2026 timing reflects the progress the committee and the board are making, and “will allow ample time for a successful transition before the conclusion of Bob Iger’s contract in December 2026.”

Iger said that the board has “benefited tremendously from James Gorman’s expertise and guidance, and we are lucky to have him as our next chairman—particularly as the board continues to move forward with the succession process.”

Iger Returned as CEO in 2022, Contract Extended Last Year

Iger returned to Disney as CEO in November 2022 when the board ousted his successor, Bob Chapek, after the company’s profit and stock price suffered during his tenure. The initial plan was for Iger to stay two years, but in 2023 his contract was extended for another two years.

Disney shares, which slipped 1% to $96.18 Monday afternoon, reached a two-year high in March but have faded since. Still, they remain up more than 6% year-to-date.

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Key Takeaways

• Discussions over Cigna’s possible purchase of Humana reportedly have resumed after the two health insurers failed to strike a deal last year.
• Bloomberg said the talks are in their early stages.
• Humana has struggled lately as Medicare changes negatively impact results, while Cigna is selling its Medicare business to HCSC.

Humana (HUM) shares edged higher Monday morning on a report that The Cigna Group (CI) has resumed discussions to buy its smaller health insurance rival after negotiations fell apart last year. Cigna shares declined.

Bloomberg reported after markets closed Friday that the two companies have held informal talks about a deal recently, although they are in the early stages.

The news site noted that Humana has been suffering lately, in part because of government changes in the ratings for its Medicare plans. It pointed out that Cigna is looking to close the $3.3 billion sale of its Medicare Advantage business to Health Care Service Corporation announced last January, explaining that the offloading of its Medicare component would likely make a merger with Humana more likely to pass muster with regulators.

When reached by Investopedia, spokespersons for both Cigna and Humana said their firms don’t comment on market rumors and speculation.

Humana shares have lost more than 40% of their value this year. Cigna shares fell about 4.5% Monday morning but are about 7% higher in 2024.

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Key Takeaways

• GE Vernova reports earnings early Wednesday, with analysts expecting higher revenue from the same time last year.
• The report will be GE Vernova’s third since being spun off from GE Aerospace, completing General Electric’s split into three companies.
• The company said last month that it expects full-year revenue at the high end of its previous projections of $34 billion to $35 billion.

GE Vernova (GEV) is scheduled to release earnings Wednesday morning, its third report since completing the split of General Electric into three standalone companies.

Analysts expect GE Vernova to report $8.92 billion in revenue for the quarter, up from $8.13 billion the same time last year, when it was still part of the GE conglomerate, along with GE Aerospace (GE), from which GE Vernova was spun off.

GE Vernova is also projected to post a profit of $134.5 million after its prior two quarters as an independent company have been split between one net profit and one net loss.

GE Vernova shares closed up 0.7% Friday to more than $272, and have nearly doubled in value since their April debut.

Analysts Believe GE Vernova Well-Positioned To Benefit From AI Demand

Since it was spun off from GE in April, analysts largely have been optimistic about the company’s future, saying it’s well-positioned to benefit from the growing demand for electricity, especially via renewable methods like wind and solar, to run data centers and power-hungry artificial intelligence (AI) technology.

Last month, company leadership said at an investor event that it expects full-year revenue to come in at the higher end of its projected $34 billion to $35 billion range, with analysts expecting revenue of $34.99 billion for the year.

GE Vernova also said it expected the company’s wind segment to post another loss for the third quarter because of the high costs of its offshore wind business, which suffered a setback as an offshore blade broke off the coast of Massachusetts earlier this year. However, the GE Vernova wind business is expected to be “modestly profitable” in the fourth quarter.

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Commodity Has Posted Four Consecutive Higher Closes

Key Takeaways

• Gold will likely remain in focus this week after climbing to a record high above $2,700 on Friday, with the commodity opening above this closely watched level on Sunday evening.
• The yellow metal has received a boost in recent trading sessions from escalating tensions in the Middle East, uncertainties surrounding the upcoming U.S. election, and expectations of further interest rate cuts before the end of the year. 
• The relative strength index confirms bullish price momentum in the commodity, but also cautions of overbought conditions that increases the chances of short-term pullbacks.
• Investors should monitor a bars pattern upside target on the gold chart around $2,890 an ounce, while also watching important support areas at $2,605, $2,530, and $2,430.

Gold (GOLD) will likely remain in focus this week after climbing to a record high above $2,700 on Friday, with the commodity opening above this closely watched level on Sunday evening.

The yellow metal, which has posted four consecutive days in the green through Friday’s close, has received a boost in recent trading sessions from escalating tensions in the Middle East, uncertainties surrounding the upcoming U.S. presidential election, and expectations of further interest rate cuts before the end of the year. 

Typically, investors flock to the safe-haven asset during periods of geopolitical uncertainty, while lower rates reduce the opportunity cost of holding the metal, making it more attractive as a store of value.

Below, we take a closer look at the technicals on the gold chart and point out important price levels to watch out for.

Bullish Uptrend Continues

The price of gold staged a decisive breakout from an ascending triangle in mid-August before continuing its sharp trend higher in recent months.

The relative strength index (RSI) confirms bullish price momentum in the commodity, with a reading above the 70 threshold, but also cautions of overbought conditions that increases the chances of short-term pullbacks.

Let’s look at a chart-based upside price target and also identify important support levels that investors will likely be eyeing.

Upside Price Target to Monitor

To forecast where gold’s current upward trend may be headed, we can use a bars pattern. This chart technique uses historical trends on the chart to predict future price moves.

In this case, we’ll take the commodity’s trending move higher from February to April as it commenced from the lower trendline of an ascending triangle, similar to how gold’s current uptrend started, and reposition it from the August low. Such a technique projects a price target of around $2,890 an ounce, an area where investors may look to lock in profits.

Key Support Levels to Watch

Upon an initial dip, investors should keep an eye on the $2,605 level, a location on the chart where gold’s price may encounter support near the October pullback low. This region also sits in close proximity to the upward sloping 50-day moving average.

A breakdown below this level opens the door for a retest of support around $2,530, where the commodity may attract buying interest near a period of consolidation within the uptrend between late August and early September.

A correction could see the yellow metal fall to the $2,430 region. Investors may look for entry points in this area around the ascending triangle’s upper trendline, which could flip from providing prior resistance into offering future support.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.

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Coming up: Earnings from Tesla, Amazon, Coca-Cola, housing market data, Fed speak

Key Takeaways

• EV maker Tesla reports earnings, along with Amazon, Coca-Cola, T-Mobile and Boeing.
• Federal Reserve Gov. Michelle Bowman, Dallas Fed Bank President Lorie Logan, and Kansas City Fed President Jeffrey Schmid are among the Fed officials who will deliver remarks this week.
• The Fed’s Beige Book, Purchasing Managers Index updates, and housing market data are also on tap. 

This week, investors will receive key earnings updates from Tesla (TSLA), Amazon (AMZN), Coca-Cola (KO), T-Mobile (TMUS), Verizon (VZ), AT&T (T), and Boeing (BA).

Several Federal Reserve speakers will deliver remarks, including Federal Reserve Gov. Michelle Bowman, Dallas Fed President Lorie Logan, Kansas City Fed President Jeffrey Schmid, Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker.

Market watchers will also get updates on the housing market, Purchasing Managers Index surveys for manufacturing and services, and consumer sentiment for October.

Monday, October 21

• Leading economic indicators (September)
• Dallas Fed President Lorie Logan, Kansas City Fed President Jeffrey Schmid and Minneapolis Fed President Neel Kashkari deliver remarks
• SAP SE (SAP), Nucor (NUE) and Logitech (LOGI) report earnings

Tuesday, October 22

• Philadelphia Fed President Patrick Harker delivers remarks
• GE Aerospace (GE), Philip Morris (PM), Verizon (VZ) and Texas Instruments (TXN) report earnings

Wednesday, October 23

• Existing home sales (September)
• Federal Reserve Beige Book release 
• Federal Reserve Gov. Michelle Bowman delivers remarks
• Tesla (TSLA), Coca-Cola (KO), T-Mobile (TMUS), Thermo Fisher Scientific (TMO), IBM (IBM), ServiceNow (NOW), AT&T (T), Boeing (BA) and GE Vernova (GEV) report earnings

Thursday, October 24

• Initial jobless claims (Week ending Oct. 19)
• S&P flash U.S. PMI (October)
• New home sales (September)
• Cleveland Fed President Beth Hammack delivers results
• Amazon (AMZN), Union Pacific (UNP), Honeywell International (HON), United Parcel Services (UPS) and Capital One Financial (COF) report earnings

Friday, October 25

• Durable-goods orders (September)
• Consumer sentiment – final (October)
• HCA Healthcare (HCA) and Colgate-Palmolive (CL) report earnings

Reports from Tesla, Amazon, Coca-Cola Are Highlights of Earnings Calendar

Investors will get Tesla’s quarterly financial update on Wednesday, following the company’s recent “Cybercab” event. The electric vehicle (EV) maker’s earnings come after its profits fell 45% in its last quarterly report despite an increase in revenue.

Amazon’s third-quarter report on Thursday comes after its revenue forecast for the quarter was lower than investors expected. The online retailer reported record sales at its recent two-day Prime Big Deals Days event in October. 

Coca-Cola’s Wednesday report will show whether the world’s largest soft drink maker can deliver on the increased outlook it released after reporting a 10% jump in North American sales.

Several telecom providers will report earnings this week. T-Mobile will deliver results on Wednesday after the phone company raised its expected subscriber growth during its most recent quarterly report. AT&T will also report on Wednesday, while Verizon will deliver its quarterly financial update on Tuesday. 

GE Aerospace will report its third-quarter earnings on Tuesday, and analysts expect the aircraft engine maker to grow its quarterly revenue. Boeing’s report on Wednesday follows the aircraft maker’s announcement that it would lay off 17,000 workers as it grapples with a worker strike.

Investors Watching Fed Speak, Beige Book and Housing Data

Investors will hear from the Federal Reserve this week, as several officials will deliver remarks, including Federal Reserve Gov. Michelle Bowman, Dallas Fed President Lorie Logan, Kansas City Fed President Jeffrey Schmid, Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker. On Wednesday, the Fed will issue its latest version of the Beige Book, which provides an update on economic conditions in each of the 12 Federal Reserve districts.

Housing data will capture attention this week, with updates on existing home sales coming on Wednesday and new home sales data following on Thursday. Also on Thursday, investors will be closely watching jobless claims, especially as Fed officials have highlighted the importance of maintaining strength in the labor market. Purchasing Managers’ Index (PMI) data released that day will provide insight into the health of the manufacturing and services sectors.

On Friday, the Michigan Consumer Sentiment Index will provide insight into people’s perceptions of the economy in October, including whether they expect inflation to continue easing. 

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Key Takeaways

• Boeing and the union representing its machinists reached a tentative deal to end a five-week long strike. 
• The union said it plans to hold a vote on the new settlement Wednesday. 
• Boeing faces massive losses from the strike, exacerbating its financial difficulties after burning through cash earlier in the year to address safety issues and investigations.

Boeing (BA) and the union representing its machinists reached a tentative deal that could end the five-week long strike that has hobbled the aircraft maker’s operations. 

The union said it plans to hold a vote on the new settlement Wednesday, according to a statement Saturday.

The deal includes a 35% bump in wages over four years, up from Boeing’s past offers of 30% and 25%, but still below the union’s stated goal of 40%. The agreement also includes a boost to members’ 401(k) plans, among other benefits, though it will not bring back the traditional pension plans workers wanted. 

Boeing’s operations have taken an estimated $1 billion hit a month from the strike, exacerbating the plane maker’s financial difficulties after burning through billions of dollars earlier this year to contend with production pauses to address several safety issues and investigations. 

Last week, Boeing announced a series of measures to curb costs, including cutting around 10% of its workforce or 17,000 people, and postponing the launch of its first 777x jetliner. 

The aircraft maker also said earlier this week it plans to sell as much as $25 billion in debt or stock, and made a deal with banks to receive a $10 billion credit line, among other moves to shore up its finances.

Boeing’s stock price has lost more than 40% of its value in 2024 through Friday’s close, making it one of the worst-performing stocks in the S&P 500 so far this year.

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Key Takeaways

• Coca-Cola will report its third-quarter earnings before the market opens on Wednesday.
• Analysts expect the company to report lower revenue but slightly higher earnings per share than a year ago.
• Last week, rival Pepsi lowered its full-year organic sales outlook due partially to pressure in international markets.

Coca-Cola (KO) will report its third-quarter earnings before the market opens on Wednesday, and investors will be watching to see how the company fares compared with rival PepsiCo (PEP).

The soft-drink titan is expected to report revenue of $11.65 billion, 2.5% lower year-over-year, and earnings per share (EPS) of 74 cents, compared with 71 cents in the prior-year quarter.

Key Metric: Product Mix

Investors will be watching for price/mix shifts across Coca-Cola’s geographic operating segments.

A quarter ago, unit case volume rose 2% year-over-year, driven by 2% volume growth in trademark Coca-Cola, and 6% growth in Coca-Cola Zero Sugar. Sparkling soft drinks improved 3% overall, and sports drinks rose 3%. Conversely, the company’s water sales fell by 1% and coffee slid by 4%. 

Business Spotlight: Performance vs. Pepsi

Last week, Pepsi lowered its full-year organic sales outlook when it reported earnings, with management noting that “the cumulative effects of inflationary pressures continue to impact budgets and spending patterns.”

Similar concerns, particularly in international markets such as China, Mexico, and the Middle East, could affect Coca-Cola’s results, too, said UBS analysts in a note Wednesday.

“Given what we saw from Pepsi last week, we think these concerns are somewhat justified as certain international markets remain and/or are becoming more challenging,” UBS said. 

Wall Street is projecting organic growth of 6.7% organic growth for Coca-Cola, according to UBS, including 4% growth in North America and 8.3% internationally.

Coca-Cola shares rose 0.8% on Friday to over $70. They’ve gained roughly 20% this year.

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Key Takeaways

• The S&P 500 added 0.4% on Friday, Oct. 18, wrapping up a week of trading that included an initial wave of quarterly earnings releases from major companies.
• Netflix shares surged after the streaming giant reported better-than-expected third-quarter sales, profits, and subscriber numbers.
• Shares of grain processors Bunge and Archer-Daniels-Midland lost ground after an analyst said low crop prices and weak farmer sentiment weighed on the agriculture industry.

Major U.S. equities indexes moved higher on the final day of a trading week that included a series of earnings reports from key companies.

After major financial firms disclosed mostly upbeat results earlier in the week, Netflix (NFLX) took the spotlight with a strong report that could be a positive signal for the tech and communications giants set to report in the coming weeks.

On Friday, the S&P 500 added 0.4% to notch an all-time closing high. The Dow reversed morning losses to end the session nearly 0.1% higher, extending its streak of record closes to three. The Nasdaq was up 0.6%. 

Netflix shares scored the S&P 500’s top daily performance, soaring 11.1% to an all-time high following the video-streaming giant’s better-than-expected third-quarter financial results. Although the pace of subscriber additions slowed from the preceding quarters, 14% growth in total active subscribers was enough to edge out estimates. Analysts have indicated that the company’s crackdown on password-sharing has helped boost subscriber numbers, but Netflix plans to discontinue the public release of subscriber data starting in 2025.

Shares of Lamb Weston Holdings (LW) surged 10.2% after a securities filing confirmed reports that activist investor Jana Partners has acquired a stake of around 5% in the food processing company. Jana reportedly intends to encourage the maker of frozen french fries to consider the possibility of a sale as well as push for changes to its operations and capital allocation strategy.  

An upbeat earnings report also helped lift shares of Intuitive Surgical (ISRG), which jumped 10% after the provider of robotic-assisted systems for minimally invasive medical procedures topped quarterly sales and profit estimates. The company disclosed an 18% uptick in the number of procedures performed using its da Vinci surgical system. In the wake of the strong results, analysts at Piper Sandler lifted their price target on Intuitive Surgical stock to $538 from $495.

Agricultural stocks moved lower after Raymond James downgraded Canada-based grain processor Ag Growth International (AGGZF) to “market perform.” Analysts said soft crop prices and weak sentiment among farmers amounted to significant headwinds for the global agricultural industry. Shares of fellow grain handler Bunge Global (BG) dropped 6.3%, the steepest decline in the S&P 500 Friday, while peer Archer-Daniels-Midland’s (ADM) shares slide 3.8%. Ag Growth International’s American depositary receipts (ADRs) were down 10.7%.

CVS Health (CVS) shares tumbled 5.2% following the announcement that the pharmacy giant is replacing its chief executive officer (CEO). Company veteran David Joyner, most recently in charge of the firm’s pharmacy benefit manager (PBM), Caremark, is stepping into the top role, effective immediately. CVS also issued a lower-than-expected outlook for its third-quarter profit. The company is set to release its next quarterly results before the opening bell on Nov. 6.

SLB (SLB), the world’s largest oilfield services company, reported mixed third-quarter results, topping profit expectations but falling short of revenue forecasts. The company, formerly known as Schlumberger, cautioned that depressed spending by oil producers in the context of a weak oil price environment could restrain its fourth-quarter revenue growth. SLB shares lost 4.7% on Friday.

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