CNBC Daily Open: Fake breakout?

Pelican Press · August 9, 2024

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CNBC Daily Open: Fake breakout?

Traders work on the New York Stock Exchange (NYSE) floor on August 08, 2024 in New York City.

Spencer Platt | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Labor boost

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after the latest

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renewed investors’ ****** in the U.S. economy. The

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posted its best day since November 2022, climbing 2.3%, while the

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jumped 2.87%. The

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soared 683 points. Technology stocks, beaten on Monday, rebounded. Chipmakers

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and

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both jumped more than 6%. The

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a level last seen before Friday’s disappointing jobs data sent markets reeling.

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1%.

Delta IT hit

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revealed that last month’s

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outage and subsequent flight cancellations resulted in a

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. This includes a $380 million revenue hit due to refunds and compensation, and $170 million in operational recovery costs. The airline plans to seek

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from CrowdStrike and

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while acknowledging a $50 million reduction in fuel expenses due to the cancellation of some 7,000 flights.

Job losses

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as it prepares for a merger with Skydance Media. Paramount has identified $500 million in cost savings, including layoffs, as part of its merger. It also said earnings surged as the company’s streaming division swung to an unexpected profit — the first time Paramount has announced a profitable quarter for its direct-to-consumer business. Paramount also took a $6 billion impairment charge for its cable networks, similar to

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‘s

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. Its shares rose 5% in after-hours trade.

Blowout earnings

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blew past

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and revenue expectations and increased its full-year revenue forecast by $3 billion. The company now anticipates revenue of up to $46.6 billion, driven by booming sales of its diabetes ***** Mounjaro and weight loss injection Zepbound. “We just see unbelievable demand, and we’re not even trying that hard to promote this *****,” Eli Lilly CEO David Ricks told CNBC. “What you’re seeing is just consumer organic demand here as we’ve shipped more product, as we bring more supply online in the ******* States.” Shares closed up more than 9%.

AI defense duo

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‘s shares soared 11% after

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with

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to offer secure cloud, analytics and AI solutions to the U.S. defense and intelligence sectors. The collaboration will leverage

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’s Azure cloud platform to deliver Palantir’s data analysis and AI software to government agencies. The partnership aims to empower defense and intelligence organizations with advanced AI tools for various applications, including logistics and strategic planning. Palantir’s stock has surged by 70% this year, driven by its focus on government contracts and the growing demand for AI-powered solutions.

[PRO] Weight loss race

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shares saw a sharp 16% decline in the month leading up to its

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report. The ***** maker’s results suggesting Eli Lilly is gaining ground in its rivalry with

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in the

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.

The bottom line

The small-cap focused

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Index’s recent volatile performance has led Wolfe Research to conclude that its recent breakout was illusory.

“Fake breakout: confirmed,” Rob Ginsberg, Wolfe Research’s managing director,

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in a note to clients on Wednesday. He explained that the small-cap index saw a 10% gain over the last three weeks, only to erase those gains almost entirely. Ginsberg warned that further declines could be on the horizon for the index.

“We have seen a series of fake breakouts over the past two+ years, but this was by far the most notable,” Ginsberg added. The index, which is up 2.8% so far this year, closed 2.4% higher on Thursday.

This raises questions about the broadening of the market. ***** Manajan, Edward Jones’ senior investment strategist, believes

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, with investors moving away from the “Magnificent Seven” tech stocks.

“We have seen a little air come out of the tires there,” Manajan told CNBC. “We are seeing the start of what we are calling rotation, people perhaps taking profits from that market into the broadening theme, the cyclical value parts of the market… for this market to really work, we not only need to see the rotation, we need to see a true broadening of market leadership.”

CNBC’s David Faber asked how important Nvidia’s upcoming earnings are for the market.

“We do think that AI is still in the early innings of a multi-year secular growth trend,” Manajan said.

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earnings “will be key to the trade, we think they have consistently beat. Can they consistently beat at the same pace? Maybe not.”

While Wall Street rallied on the back of initial jobs claims that fell more than expected, offering some relief about the U.S. economy, not everyone is convinced.

Piper Sandler’s chief global economist, Nancy Lazar, argued that the recent rise in the unemployment rate to 4.3%, might actually be underestimating the true weakness of the labor market.

Lazar points to several other labor market indicators, such as the increase in continuing jobless claims, a pessimistic consumer survey from the New York Fed and the declining quit rate in the JOLTS report, all of which suggest a weaker job market than the official unemployment rate indicates.

“The quit rate … points to 5%+ unemployment — it always goes down in a recession,” 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.