False Breakout? – NBC 6 South Florida

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What you need to know today

Increase in work
Wall Street rose after the latest jobless data renewed investors’ confidence in the U.S. economy. The S&P 500 had its best day since November 2022, rising 2.3%, while the Nasdaq Composite rose 2.87%. The Dow Jones Industrial Average rose 683 points. Technology shares, beaten down on Monday, rebounded. Chipmakers Nvidia and Broadcom rose more than 6%. The 10-year Treasury yield hit 4%, a level last seen before Friday’s disappointing jobs data roiled markets. U.S. oil prices rose 1%.

Delta IT has struck
Delta Air Lines has revealed that last month’s CrowdStrike outage and subsequent flight cancellations resulted in a financial loss of $550 million. That includes a $380 million revenue loss from refunds and compensation and $170 million in operational recovery costs. The airline plans to pursue compensation from CrowdStrike and Microsoft, while also admitting to a $50 million reduction in fuel costs due to the cancellation of about 7,000 flights.

Loss of jobs
Paramount Global plans to lay off 15% of its U.S. workforce as it prepares to merge with Skydance Media. Paramount identified $500 million in cost savings, including layoffs, as part of the merger. It also said profits rose as the company’s streaming division turned a surprise profit — the first time Paramount has reported a profitable quarter for its direct-to-consumer business. Paramount also took a $6 billion writedown on its cable networks, as did Warner Bros. Discovery. Its shares rose 5% in after-market trading.

Staggering profits
Eli Lilly beat second-quarter earnings and revenue expectations and raised its full-year revenue forecast by $3 billion. The company now projects revenue of up to $46.6 billion, driven by rising sales of its diabetes drug Mounjaro and its weight-loss injection Zepbound. “We’re just seeing incredible demand, and we’re not even trying to promote the drug that much,” Eli Lilly Chief Executive David Ricks told CNBC. “What you’re seeing is just organic consumer demand because we’ve delivered more product, because we’ve introduced more online delivery in the United States.” The stock closed up more than 9%.

AI Defense Duo
Palantir shares rose 11% after announcing a partnership with Microsoft to offer secure cloud, analytics and AI solutions for the U.S. defense and intelligence sectors. The partnership will leverage Microsoft’s Azure cloud platform to deliver Palantir’s data analytics and AI software to government agencies. The partnership aims to equip defense and intelligence organizations with advanced AI tools for a variety of applications, including logistics and strategic planning. Palantir shares have surged 70% this year, driven by a focus on government contracts and growing demand for AI-based solutions.

(PRO) Weight Loss Race
Eli Lilly shares fell a steep 16% in the month leading up to its second-quarter earnings report. The drugmaker’s results suggest that Eli Lilly is gaining ground against Novo Nordisk in the competitive weight-loss market.

Summary

Recent volatility in the small-cap focused Russell 2000 index has led Wolfe Research to conclude that the recent breakout was illusory.

“False breakout: confirmed,” Wolfe Research managing director Rob Ginsberg wrote in a note to clients Wednesday. He explained that the small-cap index had rallied 10% over the past three weeks, only to nearly erase those gains. Ginsberg warned that further declines could be on the horizon for the index.

“We’ve seen a series of false breaks over the last two years, but this was definitely the most notable,” Ginsberg added. The index, which is up 2.8% this year, closed 2.4% higher on Thursday.

This raises questions about the market’s expansion. Mona Manajan, senior investment strategist at Edward Jones, believes the market is changing, with investors moving away from the “Magnificent Seven” tech stocks.

“We’ve seen a little bit of air let out of the tires,” Manajan told CNBC. “We’re seeing the beginning of what we call a rotation, people maybe taking profits from this market into a broadening theme, cyclical parts of the value market… for this market to really work, we don’t just have to see a rotation, we have to see a real broadening of market leadership.”

CNBC’s David Faber asked how important Nvidia’s upcoming financial results are to the market.

“We think AI is still in the early stages of a multi-year secular growth trend,” Manajan said. Nvidia’s earnings “will be key to the trade, we think they’re consistently beating. Can they consistently beat at the same pace? Maybe not.”

While Wall Street was buoyed by initial jobless claims that fell more than expected, providing some relief for the U.S. economy, not everyone is convinced.

Nancy Lazar, Piper Sandler’s global chief economist, says the recent rise in the unemployment rate to 4.3% may actually underestimate the true weakness of the labor market.

Lazar points to several other labor market indicators, such as an increase in unemployment claims, a downbeat survey of consumers conducted by the Federal Reserve in New York and a falling jobless rate in the JOLTS report, that suggest the labor market is weaker than the official unemployment rate indicates.

“The churn rate… is at 5%+ unemployment — it always falls during recessions,” Lazar said in a note to investors.

— CNBC’s Alex Harring, Jesse Pound, Hakyung Kim, Todd Haselton, Leslie Josephs, Annika Kim Constantino and Spencer Kimball contributed to this report.