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“Move fast and break things. Unless you are breaking stuff, you are not moving fast enough.” – Mark Zuckerberg
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After three days of gains, a fourth doesn’t look likely today. The largest drag this morning is Meta Platforms (META) which is down over 15% after the company announced that Q2 revenues would be at the low end of prior forecasts and that expenses would rise more than expected. META isn’t in the Dow, so it’s not to blame for the 300+ point decline in those futures, but a 4% decline in shares of Caterpillar (CAT) and a 9% drop in shares of IBM are making their presence felt.
Besides the slew of earnings reports last night and this morning, we also have a lot of economic data to contend with. At 8:30, Q1 GDP, Personal Consumption, Core PCE, Wholesale Inventories, and Jobless Claims were all released. While jobless claims were better than expected, GDP came in weaker than expected (1.6% vs 2.5% estimate) but inflation readings were higher than expected, and that was followed by another leg lower in the futures. At 10 AM, the latest update on Pending Home Sales will be released followed by the 11 AM report on manufacturing from the KC Fed.
When it comes to breaking things, one thing Mark Zuckerberg has broken more than a few times is his company’s stock price. Based on where the stock is trading today, the market cap of META is on pace to decline by more than $100 billion for the third time in 2018 and the second time since the start of 2022. While all but a small number of companies in the world could only dream of reaching a market cap of $100 billion, META loses that much money in market cap about once every other year! That’s not to say that shareholders are upset with these declines- at least they shouldn’t be. Shareholders are feeling a bit bruised this morning, but from the start of 2018 through yesterday’s close, META’s stock is up 180% which is just about double the gain in the S&P 500. That margin of outperformance is narrower this morning, but there’s still a wide gap.
The chart below shows the one-day change in market cap in reaction to META earnings reports since the start of 2018. As mentioned above, today’s decline will be the third time that the company lost $100 billion in market cap in a single day. That includes the largest ever one-day decline for any US stock ($232 billion) in February 2022 (according to Investopedia). Besides the big one-day declines, META also owns the bragging rights to the second-largest ever single-day increase in market cap (according to Bloomberg) when it saw its market cap increase by $197 billion this past February. The only company ever to see a larger one-day increase in market cap was Nvidia (NVDA) when it added $277 billion also in February.
In pre-market trading, shares of META are around $423 per share which is down sharply from its recent highs, and also right in the middle of its gap from February. To fill that gap, META would have to trade down an additional 3%.
Given its enormous market cap, META’s decline is contributing to a decline of nearly 1% in the Nasdaq 100 this morning. That would only take the ETF back to a level it was trading at on Monday, and the next level of support doesn’t come into play until about $412, or about 2.5% below current levels. With stocks like Alphabet (GOOGL) and Microsoft (MSFT) due to report earnings after the close today, we should find out soon if those support levels will come into play.
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