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We need to talk about Intel (and Nvidia) (0:30). FedEx earnings, macro worries (3:00). Fed dot plot, more cuts coming (4:30). Tesla churning higher (8:30). Caterpillar soaring (11:10). Darden drops (14:15).
Transcript
Rena Sherbill: Brian Stewart, our director of news at Seeking Alpha, welcome back to another unprecedented week at Wall Street Roundup.
Brian Stewart: Great to be here.
RS: It’s always great to be here talking unprecedented times and new developments in real time.
Of course, we had the Fed meeting. That’s been talked about. Kim Khan, Julie Morgan, Wall Street Breakfast, Wall Street Lunch. We’re also gonna talk a bit about it.
But what’s top of mind for you? Some earnings, a big deal with NVIDIA (NVDA) and Intel (NASDAQ:INTC). What’s top of mind for you?
BS: I think we have talked about Intel first. Company generated a a festival of investor interest this week.
It jumped 23% yesterday, recording this on Friday, after it announced a deal with Nvidia, a co development deal, that also involves Nvidia taking a $5,000,000,000 stake in the company.
Intel had already received some injection of cash from the US government. Obviously, it’s generated a lot of interest lately, up 51% year to date, reached a new fifty two week high after the the NVIDIA news came out.
Basically, Intel is being drawn into the AI fold. This was a company that was largely perceived as having missed the boat.
Companies like Nvidia and Broadcom (AVGO) had kind of stolen a march on them and Nvidia was being left behind, desperate need for a turnaround. And so you see Nvidia itself kind of reaching out and pulling Intel into the way forward.
I think it speaks to just the general need for capacity that, as they, as these companies build out and try and meet the AI demand, they’re going to need as much help in, in that process, as they can get.
Looking at it from just an Intel situation, the question now becomes, whether or not they can execute on, the transition, the turnaround that they’ve, they’ve started now and whether or not the stock has kind of gone too far too fast, based on the the news.
So you’re kind of already baking in whatever upside there might’ve been in Intel kind of moving forward from here. You can just kind of take, you know, the scoreboard as evidence, you know, up 23%. So obviously a lot of interest there.
I think Intel was in such a shabby shape just in terms of its positioning, in the the AI world that getting the leg up from the the government investment about a month ago and then this investment from NVIDIA has turned the ship in the right direction.
Whether or not the specifics of the deal are gonna shake out in the most optimal way, I think that’s probably something that needs to be seen. But just in terms of investor sentiment about the direction Intel’s heading, I don’t think it could be a bigger 180.
RS: And then we have FedEx (FDX). They announced earnings. We talked about them last week as something to look at this week as a type of bellwether. What did you see out of FedEx and what that might portend broadly speaking?
BS: So FedEx is up modestly about 3% after its earnings. It popped initially, and then its gains moderated somewhat as Friday trading moved on.
It beat expectations. This was largely helped by cost savings. It had put in place what it called its drive initiatives, which was basically a cost cutting program looking for efficiencies and things like that.
It saw a 3% revenue increase, and made a 6% profit increase. So that’s just the cost cutting at play. I think investors are very pleased with the execution that FedEx has shown over the past quarter in getting its expenses in line.
However, the company faces a lot of headwinds moving forward. There’s what the effect of tariffs is gonna be on global trade and therefore global shipping.
There are signs that consumer demands might be eroded by higher prices, meaning less volume to be shipped. If everything’s costing more, then dollars aren’t creating as much package volume.
So I think the worry for investors forward is more of a macro one, whether or not FedEx is running right into, just a bad economic time period for it and whether or not even if the company is executing well during that time, it might face some trouble.
RS: Speaking of macro and economics, what would you say about the Fed meeting that we saw this week?
Baked in, not a surprise, but also some focus on the dot plot and the balance sheet as we’ve talked about on various podcast episodes. What else would you add to that conversation?
BS: Just taking a broader view. So the dot plot basically said that the participants as a consensus were looking for two more cuts this year and then a cut probably in early 2026.
And that’s how the market has also come to interpret it.
There’s alignment there. So right now, markets are pricing in a 92% chance of a rate cut in October, it’s just leaving a little bit of room for if something devastating were to happen with inflation.
But generally speaking, you kind of bake that one in. And then 80% chance, 50 basis points lower by the end of the December meeting, which basically points to two cuts, one in October, one in December.
If you look further out, if you look at the March meeting in early 2026, there’s a 20% chance that interest rates will be a full percentage point lower by that point than they are now.
And this is after the cut that just happened. And there’s a 65% chance that the rates will be 75 basis points or 100 basis points lower from now at the end of that March meeting.
So that’s basically, like I said, a cut in October, a cut in December, and then a cut sometime either the first or second meeting next year. So it feels like the market has a pretty clear idea of how they think the Fed is going to proceed.
I think as long as the economic data supports that and as long as the commentary from Fed officials supports that, I think the market will be relatively happy with the way policy is shaking out.
RS: And what are you seeing out of some economic data? We’ve been talking about how the data has been sadder for longer, let’s say, as a way to sum it up. What would you say about any data that you’re looking at now?
BS: I think that’s a good way to to put it. I mean, all the inflation data so far has basically been inflation’s stickier than we had hoped. It’s kind of hovering around the 3% mark. For reference, the Fed targets 2% as healthy inflation levels.
So, on the high side, meanwhile, there’s been a deterioration of labor market, not just the monthly numbers that come out, but the revisions that have been coming out have all suggested that the labor market has actually been worse than we realized for the past several months.
Next week, we have some housing data coming out. Also that’ll give us our economic indicator, our underlying economic indicator for the week. So we’ll see how that market is doing.
And then we also have the PCE inflation data coming out late next week. So that’ll be our next inflation marker. Given that the Fed just acted and as long as that inflation number isn’t too far off of the 3% mark that we’ve all kind of come to expect, I don’t think it’ll have a huge impact.
And similarly with the housing market, if it shows weakness in the housing market, as long as it’s not dramatically worse than expected, I think it’s probably already understood that there’s a weaker economy, sticky inflation, but the market currently as evidenced by reaching new highs is betting that the rate cuts will come in time to skirt a recession, and get growth back on the way without a significant acceleration of any inflation.
RS: Not to mention the definition of dramatically worse, maybe somebody else’s not too bad. These days, it seems like it’s all a bit relative when we’re parsing data and and categorizing it afterwards.
What else would you point to that you’re thinking about this week?
BS: There were a couple stocks I thought would just be interesting. Like, we haven’t done a Tesla (TSLA) check-in in a while in terms of news flow.
RS: We’ve missed you, Tesla.
BS: Right. We’ve missed you. In terms of news flow, it’s kinda gone dark, which has been a positive for the stock. It’s up 26% over the past month, so just quietly kind of turning higher.
Wedbush said about its recent upswing that Musk has gone into wartime CEO mode. Basically that was what analysts in Wall Street in general had said, that Musk had drifted away from his focus.
He got involved with DOGE and just whatever that entailed sort of the political aspect of things. And now he’s kind of hunkered down just doing his day job basically.
And, also recently bought more than a billion dollars of Tesla stock. So that was also a catalyst for the stock to move higher, just the confidence that he was showing there.
So our analysts on Seeking Alpha are still pretty split at my last check, 11 sell or strong sell ratings and eight buy or strong buy ratings. So a slight bearish tinge to that, but there might be a delay factor in there sort of not taking into account the sort of return to the return of the king there, at Tesla.
RS: Anything to say about Musk’s buying Tesla stock? Any any other context that you would be, willing to throw out there?
BS: Yeah. I mean, it’s hard to test the psychology. I mean, I would say that somebody like Musk, a billion dollars is is not the same sort of figure that it would be. So it’s much easier for him to do a performative act for a billion dollars than it would be for… pick a billionaire, even for, a rich CEO, like if Tim Cook bought a billion dollars of Apple (AAPL) stock, they would have a lot more meaning than Elon Musk buying a billion dollars of Tesla stock.
RS: I told you it’s all relative. Look at look at what we’re comparing here.
BS: 100%. Which billionaire is better at buying stock?
If I were betting, I’d say it was probably, meant to show his confidence in the stock, meant to sort of signal a bottom even though the stock had already been kind of on the upswing when he bought it.
And, also, he could believe that Tesla is moving higher. I mean, he has more information than either of us do. So don’t discount that.
RS: There’s always truth at face value.
BS: Exactly right.
RS: What else, Brian? What else are you looking at? What else should we share with our lovely listeners?
BS: Just an off the radar stock in terms of news flow, Caterpillar (CAT).
It’s been up seven sessions in a row, reaching a new high, up 8% for the week, up 12% for the month, up 20% year to date, and then an eye popping 77% since it hit its April lows.
Caterpillar was one of the stocks that got hit hard during the initial tariff concerns. Crashed in the April timeframe. And since then, it’s just been sort of churning higher unexpectedly or at least not something that that’s been on the radar, I think of a lot of investors.
And this is pointed out by our analyst, Leo Nelissen. The company is benefiting from AI in the sense that there’s a lot of data center build out.
There’s a lot of power infrastructure build out just to to create the physical infrastructure required to drive AI and Caterpillar selling the machinery for those kinds of buildings is taking those kinds of construction projects is taking advantage of that.
So I think this plays into the theme that you and I have talked about a few times of just the way the AI theme kind of radiates through the market. You have the chip builders where the point of the spear where the first revenues were coming in as people bought these chips, but then you would see the AI products being being pushed out.
So you have companies like Oracle (ORCL) benefiting from the the consumer facing AI developments.
And now you have a stock that is taking advantage of the long term build out the actual physical, like digging into the earth and putting in buildings that are gonna house these data centers, are gonna house the power infrastructure that’s going to power them.
So I just think it’s an interesting way to look at the way in which these kind of investing themes can kind of run through different types of stocks, stocks that you might not expect at first first sight.
RS: On Investing Experts this week, we’ve been talking about MLPs, dividend paying energy companies, health care, which is basically, at this point, AI. A lot of opportunities that aren’t necessarily the headlines that you’re getting every second of every day.
So stuff to look out for, not just the top tech stocks. Brian, I’m happy for you to just keep talking about what you’re thinking about this week and what folks can look forward to next week.
BS: Just looking ahead. Like I said, economic, data, it’s a pretty light schedule, what we do with the housing data and the PCE coming out.
And then earnings again, a pretty light schedule, but there are some interesting ones. You have KB Home (KBH) that plays into the housing situation.
So that could be just sort of like an add on data point for that. Costco (COST), big retailer. We’ve been talking about how it’s been sort of a mixed bag for retailers and how tariffs have hit them.
It kind of depends on where you are and how your your business plan is structured. So it’ll be interesting to get a glimpse into Costco, which is one of the larger retailers retailers and see how it’s affecting.
One note from this past week that I think plays into this is Darden Restaurants (DRI) dropped sharply after reporting its results, dropped 8%.
The company operates brands like Olive Garden, Longhorn Steakhouse. It missed expectations. It beat on revenue and raised the sales guidance, but threw up some red flags based on costs.
It was hurt by beef and shrimp tariffs and it says it’s now testing smaller, cheaper portions so you can get sort of a light pasta meal at Olive Garden. I think that’s a good example of both the pinch that some of these companies are going to feel from tariffs and also a good example of the innovation that I think companies are gonna have to put in play to handle this.
You don’t want to just sort of jack up price prices. You don’t want to get into a price war with competitors trying to get consumers back in the door if they’re reluctant, but you need to find a way to provide products at an affordable price to bring companies in.
So I think Darden’s a good example of companies trying to do that.
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