What next for gas prices, how the S&P 500 can reach 6,000: Market Domination

Table of contents

What next for gas prices, how the S&P 500 can reach 6,000: Market Domination

It was a quiet Friday on Wall Street, with the three major indexes (^DJI,^GSPC, ^IXIC) closing relatively flat.

On the latest episode of Market Domination, Evercore ISI’s Julien Emmanuel explains why he raised his year-end price target for the S&P 500 to 6,000.

RBC Capital Markets US Economist Michael Reid discussed what’s next for the Federal Reserve, including why he thinks the economy is in for a period of “normalization.”

In the latest edition of Good Buy or Goodbye, Washington Crossing Advisors Senior Portfolio Manager Chad Morganlander explains why he is buying Tractor Supply (TSCO) but skipping Macy’s (M).

GasBuddy’s Patrick DeHaan talks about what to expect for gas prices going into the Fourth of July travel period.

Yahoo Finance’s Julie Hyman and Jared Blikre also recap the latest news on Sarepta Therapeutics (SRPT), Palantir (PLTR), Smith & Wesson Brands (SWBI), and McDonald’s (MCD).

For more expert insight and the latest market action, click here.

This post was written by Stephanie Mikulich.

Video Transcript

Hello and welcome to market domination.

I’m Julie J in for Josh Lift in today, live from our New York City headquarters.

We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.

And here is your headline blitz getting you up to speed one hour before the closing bell brings on Wall Street.

If those enterprises and those consumers aren’t paying more for those new A I features, then this whole gravy train comes to a screeching halt like we saw in those the internet bust, picking the top in any particular run is always difficult.

You know, we want to be invested here, the market we think will be higher than where we are right now at the end of 2025.

But we think we’ll probably have a bumpy road that will provide some opportunities and equities between now and then.

I’m a little frustrated that we are not seeing a recovery.

You know, that’s partly due to the delay in the rate cut decision by the Federal Reserve.

But what’s striking is all time high in the median existing home price.

So we are now seeing some acceleration in prices, multiple offers are still happening in the marketplace.

Maybe one welcoming news, potentially a poor leading indicator in the future is we are getting more inventory.

We’ve got one hour to go until the market closed.

So let’s take a look at the major averages.

Jared.

We are not seeing a heck of a lot of movement today.

The dow very little change very slightly to the upside.

It is opposite the NASDAQ today and that, yeah, exactly.

That’s what we’ve been seeing, not just opposite but out performance frequently.

We’ve seen it the other way around with that divergence.

The S and P 500 little change slightly to the downside.

As is the NASDAQ, you and I have been closely watching that S and P, uh, equal weight index, the soldiers, the generals versus the soldiers.

Exactly.

So, should we be looking at a five day chart this week or should we be looking at a four day, four day chart because of the holiday shortened trading week with the S and P?

You were talking about this earlier?

Yes.

So the S and P 500 equal weight is up almost 1%.

Now take a look at the S and P 500 that is up 62 basis points.

But there is a difference here and that’s something we’ve been tracking.

You know, you have the S and P 500 market cap at record highs, the NASDAQ record highs but the dow has been languishing.

The Russell 2000 has been languishing the transport there.

A number of indices that just have to catch up.

So we’ll see, we’ll see how this proceeds next week.

But we’re not done today, are we?

No, we’re not done today if I can get us back over here because I wanted to check on yields also to see what we’re seeing there because we’ve had a lot of economic data this week.

It’s been relatively mixed.

But today we did have, um, the PM is that came in better than estimated.

And, uh, we also had h uh existing home sales pretty much in line with estimates here.

Not a whole lot of movement, nothing happening in the bond market, but on the week we’ve seen, well, I guess not much, not that much movement over the course of the week kind of a reprieve.

Um, in, you know, in a holiday shortened week, maybe it’s a good thing that we don’t see too much movement in the bond market that has been a trouble spot for equities when we do see too much action, but not today.

Yeah.

And Lynn, let’s look at the sectors as well.

Here, we’ve got finance is lagging a little bit, utilities, lagging a little bit, communications and services and, and uh, discretionary check up the NASDAQ 100 because that could be an alphabet story, which is up 2%.

And also guess what?

NVIDIA down 3%.

That’s, that’s tech, but we’ll talk about that as well.

Well, and, and one other thing I just wanted to know, we look at NVIDIA as we talked about earlier today, you helped me a lot in understanding the whole witching situation, which I’ve obviously covered for years.

We dug a little bit deeper and NVIDIA in particular has an enormous number of options that are expiring anything else in the market, right?

Almost as much as the indices, which is crazy.

So, as you noted here, we saw over the past couple of days, it’s sort of like stalled out around 140.

And that’s when the stock really started to fall.

Guess where the strike price where that wall was.

We had that huge opening interest 140.

So that’s not a coincidence on X day.

Yeah.

All right, Wall Street went bullish this week with multiple firms upping their end of year outlooks.

One of the strategists raising their un price target for the S and P 500 is Julian Emmanuel Evercore.

I si senior managing director of equity derivatives and quantity of strategy.

And now he joins us, Julian, you made a lot of waves this week.

So just give us your thesis here.

Street High Tar Street High Target on the S and P 506,000.

Wow.

Well, so I, I guess we let’s rewind back to 2023.

We have been big proponents uh of generative A I, the enablers, obviously, the stock that was at least for a brief moment or two, the highest uh market cap stock in the world uh this week, perhaps to be again shortly.

Um as well as the companies that have been actually taking uh the A I technology and using it to control costs to get better connected to their customers and to build a competitive mode.

And frankly, when we think about this, this is a theme that has a lot more legs.

Obviously, the excitement has been in and around the enablers as we discussed.

Uh But to us, when you combine that with a fed, that’s also willing seemingly to cut rates if it’s able, not necessarily, I I if it has to ie an economic downturn, if it’s able given inflation continuing to moderate.

Um And the idea that expensive markets have a unique history to themselves is that very often when a market gets it’s expensive.

And this one basically did crossing 20 times trailing earnings back in January.

The history of expensive markets is that they last a year and a half to two years uh in duration and can rally anywhere from 40 to 60%.

Additionally, this one, as I say is six months old and up around 11 12%.

So we think there’s more to run.

Yeah, I just wanna emphasize Julie and it’s Julie here.

It’s great to see you.

I just wanna emphasize that last point.

A little bit because I thought it was such an interesting one and, you know, there are people all over the place who say valuations are too high either in specific stocks or in the market overall.

But just to linger on that point a little bit, just because valuations are high doesn’t, is not in and of itself a reason for them to come down.

No, that, that’s right.

I, I, it basically what we’re looking for is sort of the tail ends of the distribution of things of reasons that stock prices can come down.

On the one hand, uh, you know, there’s what you would call the bubble watch.

We don’t see any of the incipient signs of a bubble forming.

No, uh IP O or M and a mania sentiment by all the reading continues to be reasonably subdued.

There aren’t any egregious policy errors in the fed isn’t, you know, saying we’re gonna cut no matter what they’re being prudent about their approach.

Um And, and so for us, you know, on the one hand, that’s ok. And then on the other hand, the recession watch, which really is ultimately the thing, uh that destroys bull markets for, for the most part.

Uh Yes, the economy is slowing.

It is in recent weeks started to become more noticeable.

But when you look at something like the weekly jobless claims numbers, uh you know, still a averaging 240,000 a week, that’s nowhere near recession, red flag signs.

So we, we, we see, uh you know, just more runway for higher prices.

And that’s basically how we get to 6000.

And let me ask you about the fed.

How does that enter your calculations?

Of course, they’re on pause and they’ve been really talking up the possibility of a rate cut almost to the exclusion of all this data dependency.

Where do you think the fed goes from here?

And is it possible that they lean into end up in a policy mistake?

So, Jared, what, what’s fascinating about the fed is if you think about it, we came in at the beginning of the year, basically looking for six, maybe almost seven cuts at the peak, then uh got down to expecting uh only one cut and now it’s, you know, sort of 1 to 2.

Uh our firm thinks that you’re likely to have two cuts, but the point here is not that they’re going to cut how many cuts that they uh engineer in 2024 it’s much more in the market’s confidence that the fed is going to do the right thing.

OK.

So we’ve been obsessed uh while inflation remained very elevated, uh you know, basically a year ago that the fed was going to cut uh while inflation remain too high.

Well, they’ve been cleared that they’re going to be patient.

And on the other hand, they’ve also said that if the economy starts to slow.

They have the runway again because inflation has, has been coming down.

It’s not a question of how many cuts there will be cuts eventually.

It’s just that the market is more confident that there’s enough runway for there not to be a policy error in either direction.

And I think that’s where the enthusiasm is coming from.

Julian.

I finally, I wanna come back to tech a little bit here because you also upgraded that sector to outperform from in line.

I have to acknowledge here that if you were in line, you missed out maybe on some of the upside, you know, the Infotech index is up what 29% or so year to date.

But it also obviously implies that you think that run is not done here.

You talk a lot in the note about A I and the prospects there is that really the central case for more upside for tech.

It it it certainly it look we go back the last 30 years and there’s no getting around the correlation of tech out performance to stock market out performance.

Most of the best periods of returns have had tech out performance and look, we can be faulted for not going all in on, on the group as a whole.

Uh We tried to and and think it’s still very valid that in an environment where car relations are as low as they are that you pick stocks rather than say, you know, this sector, that sector, obviously we do that because that’s part of our strategists job.

But when you think about it, particularly in comparison to sort of the bubble around Y2K, you’re seeing a greater percentage of the market’s earnings coming from tech.

And a again, the whole uh concept of A I implementation.

We think the critical years are the next two years where you think where we think we’re gonna see more broadly uh tech continue its earnings run.

Uh Julian in addition to your purview, which is broad, you also have an expertise in derivatives.

So finally, I wanna ask you about witching.

You just heard us talking about it and in particular, what we’ve seen in NVIDIA the past couple of days, a little bit of a roll over in the stock is that just sort of a technical options related move?

Do you think it’s the start of a bigger correction in shares of NVIDIA?

What do you think is going on there?

Well, those shares you’ve had sort of these massive reversal days every time and again, over the last year, yesterday was one of them.

And I think what’s interesting to us is the bigger message, right?

You’re down around, I don’t know, call it maybe 11% from the intraday high uh yesterday.

And the broad market has barely moved before I started talking, you were talking about how the equal weight index is outperforming the S and P 500 here and that’s really positive given the fact that the acknowledged market leader has stumbled here.

Uh Look again, uh uh if you talk to our, our fundamental analyst on the name, he thinks you could get uh to a market waiting of between 10 and 15% between now and 2030.

And that’s obviously based on the promise of A I.

Uh but look the fact that, that, that these kind of short term in a name that’s moved this far, they are to be expected.

And the idea that the market is actually taking it in stride is very, very positive.

And Jared tells me that’s what we call bearish engulfing candles.

He’s, he’s very excited that when you bring up something like this, Julian always a pleasure to talk to you.

Thanks so much.

Thank you, Julie.

We’re just getting started here on market domination coming up.

According to reports, Boeing is getting closer to buying back Spirit Arrow systems.

We’ll discuss the news and check in on some of today’s top 10 trending tickers on the other side.

And at 330 the latest edition of our series.

Goodbye or goodbye.

We’ll take a deeper dive into two stocks to help you make the best moves for your portfolio state t more market domination on the other side.

Time to check in on some of today’s top trending tickers starting with the rep the therapeutics.

That’s after the FDA approved its Muscular Troy Drug Yahoo Finance is Angeli and has been tracking the news.

She joins us now for more, little bit unusual here how this unfolded.

That’s right.

It, it sort of got there step by step and bit by bit.

So up to getting that full approval yesterday from the FDA.

After a long journey with the clinical trial, we still are waiting for further confirmation.

They are on the clock for a confirmatory trial.

So uh just to recap what happened, they got the full approval for anyone four years and older, especially those who are mobile or who can walk, it’s called ambulatory.

Meanwhile, there’s limited approval for those who are four years and older who are bound to a wheelchair or non ambulatory.

And those are the ones that there still is a confirmatory trial needed for benefit.

So this approval was also kind of controversial in the sense that you know, uh the top leaders of the FDA there really went against uh their experts in order to approve this because the the drug hasn’t yet proved that it slows the progression of the disease.

And that’s the thing that experts are kind of worried about.

Meanwhile, we know that the drug has already been on the market with limited approval or accelerated approval.

Since last June, it’s already in a lot of money for the company, about $330 million.

Since last June.

There you see it on your screen and 100 and 34 million in the first quarter alone.

And that’s when, uh, the insurers as well as Medicaid started covering it.

So we know that that really boosted, uh, the, the product and it accounts for 40% of, uh, Q one revenues and is just one of four products that CTA has on the market.

So, really, they have the bulk of the, uh, D MD products there very quick.

Follow here.

It’s an expensive drug as well.

Why so expensive?

So when you think about $8.2 million correct?

And it’s a one time infusion.

So that’s the way that drugs think abo uh drug companies think about the way to price things is how often is it needed.

So what kind of benefit you’re getting out of it?

And there’s this term that they love to use called value add or, or to your life.

So what is the value that you’re adding to your life?

How much um productivity are you getting through your life span from this drug?

And we have to remember that uh D MD tends to affect men.

It also affects younger men and the life span, the life expectancies in the twenties to thirties.

And so it does affect younger individuals.

So that’s where the cost comes from.

Interesting.

Thank you for that Angeli and moving on to reports of Boeing’s deal to buy back Spirit, aerosystems, Spirit Stocks Rose today as Boeing’s negotiations with its whole producer may be coming to a head and this is kind of a roundabout here coming full circle, Boeing used to own spirit about 20 years ago.

And we know that uh Spirit has just had a really rough time since those two crashes which were I believe in 2019 with Boeing.

And you take a look at the charts of either company, they really just kind of fell off a cliff there.

And because Spirit is such a big part of Boeing’s business or excuse me, the right, the reverse because Boeing is such a big customer with respect to Spirit, uh they’re just having a tough time and then you throw in Airbus as well.

Um I don’t know, I’ve, I’ve seen mixed reactions among analysts here, right.

Well, Airbus um is reportedly getting closer to an agreement to buy some of Spirit error systems business, which would then in theory, pave the way for Boeing to complete this acquisition of Spirit Arrow systems to sort of shore up its supply chain.

One other detail of this is it is important is that the CEO of Spirit AO systems, Pat Shanahan is one of the prime contenders to become the next CEO of Boeing.

So presumably all of this getting sewn up would also help with that quest.

If indeed he’s gonna be the guy who will eventually be tapped one more time note on Boeing, they are expected to evade criminal charges now for violating their settlement.

So this is a deferred prosecution agreement.

This could have been a company killer because I’ve seen comparisons to Enron and Arthur Andersen in the past, but that is now passed because they get this deferred prosecution agreement.

So the stock price would be much different if this had gone a different way.

Very important detail.

Um Let’s talk about Smith and Wesson.

That is another stock that we’re watching today.

The shares falling after the gun maker warned of weakening demand in the current quarter last quarter, which was their fiscal fourth quarter actually was pretty good.

They beat estimates.

We saw sales there rise about 10%.

But the company now says that in its fiscal first quarter, sales are going to fall 10% year over year.

And we recently had the chance to talk to Steven Gats, founder of the Reload, which covers the industry and he talked to Yahoo Finance about why we may be seeing this lack of demand.

2020 was such an unprecedented record year in gun sales that we may still be experiencing a comedown from that four years later.

People may also not be as worried about new gun bans uh because of action by the Supreme Court in 2022 as well.

So that helps explain a little bit about why Smith and Wesson might be coming out with this kind of guidance.

I mean that was kind of the argument back in the day for so many companies that demand was being pulled forward for a bunch of services and products.

But let, let’s go to the Wi Fi Interactive, I have a Smith and Wesson brands chart going back to the last century, the last millennium.

But these peaks are really interesting when they coincide.

What they coincide with this here is the global financial crisis 2008 or so.

Then we have the Trump election, very contested election in there.

Then we have the pandemic here.

That’s 2020 another election.

And you can see that these spikes indeed getting bigger.

So you gotta wonder what’s, what’s gonna be the next catalyst.

I don’t know.

Um And maybe it doesn’t have to happen, but it’s not surprising that after you have one of these peaks that you do have a lull in the action, it looks like these last multiple years, these cycles.

Well, the presidential election maybe would be the next uh catalyst.

Potentially, it tends to be for some of these gun bang trends.

Um Let’s broaden it out and talk about what’s going on in the market today based on some economic data, the purchasing managers index for June coming in better than anticipated.

We’re not seeing a big movement in stocks on the back of that.

We have had treasury yields uh moving a little bit but not terribly much in today’s session, let’s say, sort of look at what we’ve heard this week in terms of economic data we’re bringing in Michael Reed us economist at R BC capital markets.

Um The data seems to be Mike going in a similar direction that it has been, which is most of the inflation data continues to indicate some moderating.

Most of the sort of growth indicators seem to be ok. Maybe retail sales would be the exception.

I mean, what’s sort of the big takeaway from all of these numbers, you know, for us, it’s been a continued sign of normalization and we’re seeing that across a number of metrics.

Uh as you mentioned, we saw retail sales come in and if you look at the headline number, it was a rather modest gain at 1/10 for the month.

But when you look at the control group, which is an important group that feeds into GDP estimates, uh that was uh a bit more robust at 410.

So a sign that consumers are still spending.

Um But when you look at that in the context of the downward revision we saw in the prior month, um it doesn’t look quite as strong.

So again, I think we’re starting to see some normalization and a bit of pull back in spending in the consumer space.

And how does this relate to the labor market?

Um, a lagging indicator depends on which data points you look at, but we’ve seen some cracks in the labor market despite that, the headline numbers continue to come in pretty strong.

Absolutely.

You know, there’s a lot of debate around which labor market uh metrics to look at.

And you know, if you look at things like jolts the job openings number in particular, you look at wages or the unemployment rate.

Um They do suggest um some potential weakness, uh not necessarily something to worry about, but um, signs that the labor market is loosening.

However, when you look at the payroll number, um that is still quite robust, we’re still seeing very strong gains there and wage growth is still quite strong.

So there are signs that growth in the labor market will continue.

So I mean that this is something you recently wrote about, which I think is interesting, this question of is the labor market still tight or not?

So kind of where do you come out writ large on that?

Sure.

And I think important way to think about this is um in the context of normalization, what else is going on kind of uh more broadly uh in terms of the demographic picture?

And we’ve talked about this uh in terms of consumer spending uh in, in respect to retirements.

Uh and what that means for retirement assets showing up in consumer spending.

But another area uh where it’s really important is in the labor market and there, what we are seeing is a rise in the number of retirements and that does create job openings.

So when we’re thinking about where the right number for job opening should land uh, in terms of the new normal, um, we do think it should be higher than what we saw prior to COVID.

Um, because we are now at kind of that peak baby boomer retirement age.

Um, and as those folks retire and leave the labor market, um, that creates job openings that doesn’t necessarily show up as net new job growth.

Um, that would be what we see in the payroll number.

Um, but it should help put downward pressure on the unemployment rate and keep uh upward pressure on wages.

Yeah, it’s an election year.

We’ve been talking a lot about the election.

What kind of pressure?

What do you look for in the economic data in a year like this, that you might not uh look so hard at any other time.

You know, one thing that I think is getting a lot of attention now is uh trade and, and especially around some of the tariffs that have been proposed are enacted.

Uh We saw Biden announce some that will be phased in over the, the coming years.

Uh One in particular I think to watch is uh the, the tariff around semiconductors.

Um We have a lot of activity here in the US that is being supported by the Chips Act.

Um We’re seeing a lot of activity and non residential structures uh continue um because those um Fobs are still being built, uh We’ll see another tail wind in uh investment in terms of equipment as that is installed in those facilities.

Um And then once those come online, uh we should see a boost to employment in terms of the folks who are hired there to uh you know, start the operations.

So those seem to be on track no matter who wins in November in terms of these big projects, in terms of tariffs and some of the rationing up of tariffs that former President Trump has promised.

Should he rin election?

How are you thinking?

Especially since we got our already a wave of tariffs.

How are you thinking about that?

Uh those tariffs potential inflationary impact?

Yeah, so what Trump proposed was, was pretty wide ranging.

Um And, and we would expect to see that primarily hit the good space and you know, what’s concerning there is that’s where we’ve been getting a lot of the help uh in terms of this inflation battle.

And so, you know, if you lose that disinflation that we’ve seen in, in the good space, uh then I think you’re looking at a slightly different picture uh for the fed heading into kind of 2025 and thinking about what that means uh for inflation, their ability to cut.

Uh and, and more importantly too, um what does it mean for the labor market?

All right, we got to leave it there.

I really appreciate you coming by on a Friday afternoon, Michael Reed, thanks for having me and up next.

It’s the latest edition of our series.

Goodbye or goodbye.

We’re going to take a deeper dive into two stocks to help you make the best moves for your portfolio.

Stay tuned, more mark market domination.

On the other side, it’s a big noise, the universe of stocks out there.

Welcome to, goodbye or goodbye.

Our goal to help cut through that noise to navigate the best moves for your portfolio.

Today, we’re coming through the balancing act that is debt in the retail landscape.

I you Chad Morgan Lander Washington Crossing advisor, senior portfolio manager.

Great to see Chad.

Thanks for coming in.

Thanks for having me.

And first we have up a stock for the gentleman farmer for the cottage for among us, tractor supply the stocks up like 27 28% over the past year.

So it’s done pretty well.

But let’s go through why you still like it here.

The dividends are rising and the company is growing.

Yes.

This company has had a long history of having a wonderful balance sheet, steady eddy cash flow stream.

So it’s growing, it’s profitable, very little debt and it’s a rising dividend company.

Are you a tractor supply customer?

I’m curious.

No, but I’ve been in a bunch of them.

Got, I don’t know if you’re a gardener.

I don’t know.

Um high return on capital business model.

Talk to me about because the company has been putting a lot of capital into its stores.

Absolutely.

They have over 2400 stores.

Uh, just keep in mind that their footprint is in rural America.

So it’s a low type of rental or ownership type of, uh, business model.

And there’s not a lot of capital investment that they need to put forth to get a higher return on that invested capital.

Uh, it’s a very steady Eddie, sturdy business model and they’ve been able to grow in a very efficient manner and we’ve seen also the growth as people have been moving to some extent, right.

Moving to more rural, especially during the pandemic.

Right.

So it’s, it is people who farm for living, but it’s also people who farm or do yard work or whatever for fun.

Right.

So during COVID, they got that shot in the arm as people moved away from the city life to more urban life, you would have thought that that perhaps that would have scaled back.

But in fact, it didn’t, uh they have roughly about 50% of their revenues come from feed of feeding, not only farm animals but pet food.

Uh So it’s a steady, any more predictable revenue stream.

And we believe over the long run that that will continue, they’re not as economically sensitive as the next one.

Got you.

All right.

But let’s talk about a potential risk as we like to do here and goodbye or goodbye.

And that is if we do see that shift, like what if all those people who moved out, moved back to cities.

Oh, absolutely.

And we believe that that will happen to a certain extent.

We have modeled that out.

But we think that over the course of the next 3 to 5 years, the growth rate is gonna be between three and 6% on the top line.

We’re not expecting nor do we need to make this company and this stock uh attractive, a robust growth rate on the go on a go forward basis.

Got you and you do own shares of tractor.

Yes, our family does own shares.

Ok. Let’s get to the stock that you do.

Not like this one also in retail and it’s Macy’s now, this stock is also up over the past year, about 19% or so.

There’s been a lot going on in terms of activism, et cetera, but you say they still have too much debt.

So Washington Crossing Advisor, uh shies away from companies that have a lot of leverage on their, on their balance sheet, they’ve got roughly about 2.7 billion of debt and then 2.5 billion or so of actual leases.

Uh That is a problem.

We think that that’s more of an anchor, which is a real issue over the long run in a very competitive retail environment and that’s at the same time that the company not growing in terms of revenue.

Let’s take a look at the revenue chart here because what you see here are the, you know, these various things are kind of holiday seasons.

Right.

But they’re descending and then the non holiday times are also.

So, so in other words, they’re, they’re just not growing as much.

They’re, they’re trying to rationalize their footprint and it’s like a battleship trying to make a U turn in a closet.

Uh, it’s very difficult, uh, in doing that, it’s gonna contract their top line.

But the issue really has to do with such a competitive environment.

Uh They really have to find their way and that’s part of the problem.

They have online retailers that are price competitive and then they have the higher end retailers.

It’s a tough business.

So being in the middle is a tough, is a tough place to be a tough place.

Yeah.

And so they’re exposed to those sort of consumption trends.

You know, we just saw retail sales this week, for example, that were not fantastic.

Yes.

And in your previous uh uh episode that you just did, they were talking about slowing of the consumer uh as consumption patterns decelerate as COVID relief spend down continues.

It’s going to affect the lower income as well as the middle income consumer.

Macy’s hat may be more exposed to that than you one would like.

Uh hence the reason why if you have a lot of debt and you have a contracting top line, uh any type of economic impulse on downside could have deleterious effects on this kind of thing.

So what could have good effects, let as always, you know, we look at the other side of this, maybe they de deliver the balance sheet.

What would that even look like?

Well, they would have to dele it uh quite a bit.

Uh they do have some very interesting properties that a private equity firm may be more attracted to.

They may have to take a company like this, private, clean it up over a decade to then bring it back uh out there in into the market.

But this is a very tough business to be in.

And when you have a lot of leverage, a lot of debt and you don’t have pricing, that’s very uh that, that’s very, that’s very sensitive to outside competition.

Then you’re really setting yourself up for a tough go, got you.

Ok. And you do not have a position in Macy’s.

So again, you’re recommending folks take a look at tractor supply, avoid Macy’s in this environment.

Thanks, Chad, appreciate it.

Have a great weekend and thank you for watching.

Goodbye or goodbye.

We’ll be bringing you new episodes next week at 3:30 p.m. Eastern Jared.

And let’s get to some of our calls of the day, Moness Crespi Hart downgrading palent here to a sell the note saying the company’s rally gives rise to a gluttonous valuation.

And I got some more choice quotes here from analyst Brian White saying the downgrade comes after a quote dismal earnings season for enterprise software also failed to live up to the 18 month gen A I propaganda cycle propaganda cycle.

So I think you uh some biases might be revealed right there.

Um Yeah, but well, but he also one of the things he says is that we have not seen um the gen A I Nirvana pro uh in his words, propagated by the enterprise software industry, he said that’s proven to be a revenue illusion this year that the the boost that we have seen for some of these enterprise software companies has not necessarily been from gen I in terms of the actual revenue growth.

A couple of other things to note about palant.

Here here, the stock is up about 39% this year.

But for Wall Street, unusual negative sentiment from sell side analysts, there are five buys, eight holds seven cells including this new one from white.

And you know, we tend to talk about how bullish the street tends to be in general.

It’s rare for them to have cell ratings.

So to have seven cells on a stock, it’s pretty rare.

It’s also a very highly charged stock.

It’s a Peter Thiel enterprise.

So politics get involved.

Um I’m not entirely surprised, but you’re right.

It’s very good to point out that Wall Street typically is much more bullish on the software enterprise plays.

Let’s go to the Wi Fi interactive real quick where I’ll chart it uh $30 per share is a critical level here.

And what I’m seeing.

So this is the IP O this is that initial spike and we might be tracing out a head and shoulders bottom here.

If that’s the case, then you take a measured move from the bottom of that to the top and probably puts us around 45 $50 if we can break above.

But it looks to me like the pattern is incomplete and it’s going to take a little bit more backing and filling to complete that interesting.

Shall we talk about a golden arches pattern?

Next, please?

Let’s do it.

Let’s let’s talk about mcdonald’s U BS coming out with a new note today on the fast food chain as the value meals were value meal were ray on U BS breaking it down if it will translate to the traffic mcdonald’s is looking for.

And Dennis gear over U Bs says, yes, he thinks that the company will see a boost.

He says for the next few quarters, there should be some pressure on same store sales trends, but then he says, sequentially, things will start to improve throughout 2024.

I also thought it was interesting.

He, he did say that the $5 meal deal which mcdonald’s is about to kick off could drive a 200 basis point same store sale.

He also says he expects it to become permanent right now.

Mcdonald’s is just rolling out the value um menu, the new value offerings on a sort of provisional basis, temporary basis.

But he says there should be a permanent value platform launching later in 2024.

I would say temporary until you get to the next level.

That used to be a dollar menu.

I guess the next step is what, $25 100 $5.

It just takes a few more QE cycles, right?

In 2035 maybe we’ll get there.

I, I do have, um, I did want to go to the Wi Fi Interactive real quickly here.

I have our QSR that’s fast casual and fast food heat map.

This is a year to date.

Look.

And you’re gonna see a lot of red here and let me sort by equal rate.

So you can see we got some clear winner, Chipotle Domino’s Pizza Shake Shack.

That’s 40% down to 20%.

But for the most part, oh, and Young brands also in the green there.

But for the most part we’re seeing a lot more red than green and some of these names are pretty big, not just mcdonald’s but Starbucks and as well.

Yeah, it’s been, yeah, it’s been a rough here for some of these names.

Let’s also talk about gasoline prices since it’s officially summer temperatures might be rising across much of the country, but gas prices are not, at least, not yet joining us.

Now, Patrick De Gas, buddy, head of petroleum analysis.

Patrick.

Always great to see you.

We have seen, not today, but we have seen oil prices start to creep back up over the past couple of weeks.

What’s the sort of lag time where we’re maybe gonna see it make its way into gasoline prices?

Yeah.

And, and great to be back with you.

Um, you know, we’ve seen gasoline prices stabilize that is, they probably would have fallen under 10 or 15 cents.

But as you mentioned, the price of oil has heated back up here up about $8 a barrel in the last few weeks.

And so instead of causing gas price to immediately go up, some of this is simply gas price aren’t going to go down as much and then go right back up.

So I think we’ll probably level out here somewhere right around the 3 43 45.

There are still a majority of states that are falling, but I do expect that would probably wrap up here in the next few days and then we’ll start to see prices stabilize.

So for now, I know it kind of funky that oil prices go up.

Don’t expect gasoline prices to make much of a jump yet.

We’ll have to see oil prices climb a little bit more to see the national average start to have more of a reaction.

And Patrick also in election year, gas price is a huge election issue.

Anything, any levers we might get, might expect to get pulled to affect gas prices to the downside most likely.

But you know, sometimes we see these things in election year, maybe the S pr the strategic petroleum Reserve is tapped, unlikely.

I understand to do that this year.

But all in all does Biden have any leverage here.

Not a whole lot, I think talk is cheap and that may be something that the administration utilizes.

That is they may hint at the potential S pr reserve just because the psychology of potentially offering the S pr may be enough to keep oil prices under somewhat of a pressure, somewhat under balance.

But as you mentioned, I don’t think that’s a tool that the government will necessarily utilize.

It also sets a dangerous precedent to use a strategic reserve as a strategy price reduction tool instead of the strategic petroleum reserve.

The good news is though the S pr has continued to now see increases, the Department of Energy had accelerated the plan to buy back oil.

Of course, that’s now fizzled with oil prices north of $80 a barrel.

But again, the president really doesn’t have a whole lot of mechanisms here, especially considering Mother Nature.

We are starting to see some areas out in the Atlantic, in the Gulf of Mexico off Florida that just kind of uh make us remember that hurricanes supposed uh hurricane season is rather going to be very active and that could be a wild card.

Yeah, definitely could Patrick.

I, I’m also curious for your take on demand right now.

You know, we’re kind of past the height of the revenge travel phenomenon, but it feels like demand for travel is still relatively strong here.

What are you seeing?

What kind of patterns are you seeing?

And especially, I’m curious about regional patterns.

Well, uh, regionality is certainly very interesting out in the west where, uh, gasoline prices, arguably California, Oregon, Washington to be more expensive.

We tend to see a little bit more of demand destruction there.

Now, I would certainly classify demand so far this summer as being a bit soft.

That is while the Department of Energy, the EI A is uh metric that is implied demand measures how gasoline moves towards the pump.

It doesn’t measure how gasoline is dispensed at the retail level.

That’s where gas data comes in and shines.

Now, according to our gas buddy demand data, we’ve seen real demand at the pump essentially be under 9 million barrels a day.

And compared to back in 2019 and 2018, that’s very soft.

Traditionally, we’d see numbers somewhere more in the mid to upper 9 million barrels a day range.

So I think demand is still soft and I think to your point COVID is still playing a role.

We saw a lot of revenge travel in 2022.

That’s when international travel really wasn’t possible.

Last year, we saw gasoline prices lower.

I think we still saw Revenge travel domestically last year.

I think this year we’re still seeing some of that revenge travel.

But I think now with airfares down compared to last year, a lot of that is not on the roads but in the skies overseas, uh, obligatory question about OPEC Plus here.

Uh we don’t expect any big changes on a month to month basis, but sometimes they happen, anything you see that could move the needle with OPEC plus.

Well, you know, again, going back to talk is cheap.

We’ve seen OPEC, you know, come out with some salacious statements about potentially, you know, hinting at further cuts.

But uh I think OPEC is pretty happy with the way oil prices have bounced back up.

Now, global oil inventories do remain on the tighter side of things.

OPEC is probably hoping that summer driving season really comes in stronger than affected, but, you know, OPEC certainly could drop comments to keep oil prices range bound.

We’ve kind of been in this now 85 excuse me, 75 to $85 a barrel without much of a breakout.

Um I think the interesting thing, by the way about those OPEC meetings here a couple of weeks ago was highlighting when oil production would start coming back online.

So kind of interesting development there.

All right, we got to leave it there, but thank you for stopping by here, Patrick and up next Penn Entertainment could be getting a big time.

Buy out offer.

What a possible deal could mean for the gambling company and its investors up next, the gambling world may be getting a bit smaller Reuters reporting that casino operator Boyd Gaming is looking to acquire pen entertainment.

And if a deal goes through, it would be the biggest merger for that space in nearly five years.

We’re looking at how to navigate the gaming landscape with the Yahoo finance playbook with us.

Now to discuss Jordan Bender Citizens, J MP, senior equity research analyst, Jordan, thanks for being here.

I guess I should start with whether you think the deal is going to happen at all because it seems like there is a fair bit of skepticism out there that this is realistic.

Yeah, you know, this is a super interesting time for the company.

Um really, it started last summer when Penn um sold Barstool back to Dave Portnoy and create an alliance with ESPN to form an online gaming company.

You know, there’s really two parts of this story ever since there, the brick and mortar side of the business, which is one of the largest regional gaming companies in the United States that’s actually been performing pretty well.

Um On the other side of it is this alliance with ESPN and the ability for them to kind of build this business and create a sports betting and I gaming platform.

That’s where we’ve been seeing the struggling from the company and it’s really been reflected in the share prices um of, of Penn, they’ve lost nearly over $4 billion trying to create an online gaming again.

Now, with ESPN, um and investors are starting to, you know, become worrisome about this and uh activists are getting involved in the story and that’s what’s really driving the noise.

And, you know, we have had a shareholder letter about two weeks ago saying, you know, Penn needs to put itself up for sale.

We’re kind of over the losses here.

There’s more value embedded in this business.

Um But on the surface it sounds good within a sale.

But, you know, we think it gets a lot more complicated on who are the actual take out candidates here.

Again, there’s two parts of this story.

Um Does someone come in and take out the whole business or do you separate the brick and mortar casinos from the online business?

Um That’s when it gets pretty complicated.

Um, you know, we’re still a little uncertain how that would kind of play out moving forward.

Well, I just want to read you a sentence from your report dated June 4th on Penn.

Uh for a buyer of online gaming history suggests it takes at least several years to build a successful online business, a large amount of capital in a perfect strategy to run the sports betting and I gaming business together.

Uh Perfection is difficult to achieve here.

So just is that what we’re talking about?

Some of the parts, maybe not there.

Like what is the, what is the real value in the business tech?

Anything?

Yeah, you know, we don’t know exactly what the value of the business is because we just haven’t had enough time.

So the way that management has positioned this story is before football season.

So this upcoming September, we’re going to have a fully functioning product, you know, from being able to cross sell from ESPN, being able to promote to these people and retain them.

And we just don’t know about that retention part.

So we know that, you know, they’re able to cross sell people.

We saw that when the app went live, um you know, last year, but the real question is, can they retain the people and actually generate a profit?

You know, we look at consensus estimates for the company, they’ll lose about 500 million this year and that’ll be about 100 million next year.

And, you know, we just don’t know, you know, in a potential out scenario, what is the actual value that a suitor um or someone that’s looking to buy this business?

Actually, you know, trying to get out of this business because, you know, we just don’t know quite yet.

Well, on the flip side, you have a market perform rating on pen, but you do have an outperform rating, I believe on Boyd.

So what makes it attractive?

And would it even need to buy a pen to continue to be attractive.

You know, the, the reason we’re skeptical, at least on Boyd by Penn is Boyd has been overly conservative, especially through COVID and kind of post COVID.

They haven’t made any large investments, they haven’t done.

Uh really M and A and they really haven’t jumped into the online gaming space and for Boyd to go, uh look to buy pen, this would be a complete 180 of strategy.

We think, you know, in this scenario, if you know, we don’t really know how it’s going to play eye up.

But if they do buy uh the brick and mortar business, they’ll become the or just regional gaming operator in the United States.

If they keep the online business, they’ll have a fully, you know, function or fully capable business of running the online platform.

But, you know, again, that is just a complete change in strategy.

You would need the board, you need management, you need shareholders behind that.

And it’s, it would be an extremely complicated transaction just given some of the res involved.

And again, you know, the question marks with the online business, uh still floating around and just speaking of the online business, I’m wondering, we saw a huge push and this was just this dates back to the pandemic and pre pandemic.

We saw a huge push at the state level uh to approve uh gambling.

And I’m just wondering on a regulatory uh basis, how does Penn fit into the picture where you have these two BM Moss that really dominate uh draft Kings and Fan Fanduel.

Yeah.

And that’s, you know, that’s the core of all this is, you’ve had two companies vandal and drafting, that essentially dominated uh the online gaming space since it was legalized back in 2018.

You know, so that’s part of if you want to call it.

The problem here is Penn is trying to build something that they’re 567 years behind the leaders in the space who have all the data, all the people, um all the technology and they’re trying to do this in such a short period of time.

And you mentioned earlier in this that, you know, it it takes four or five years really to build up a good business and that’s what draft kings did they spent, but they actually built the product where Penn is trying to shorten that time frame, do this in about a year, time timeline um and try and prove it solve.

So it’s incredibly competitive and that’s why, you know, we haven’t seen success from them.

Their market share as it stands today is about, you know, below 3% of the US where the top two players are around 75% of the US.

And to go back to that comment of they spent over $4 billion it’s gotten under 2% market share.

You know, investors just aren’t happy with that and that’s why we’re getting calls for the company to put itself up for sale.

Right.

And, and Jordan just quickly here in your coverage universe, what would be your top pick in gaming?

Yeah, we, uh, you know, we like flutter.

Um, they actually just listed their primary listing here in the US.

That’s bands, uh, parent company.

That would be, you know, one of the dominant players in the online gaming industry.

You know, we like scale, we like diversification.

This is one of the global leaders in online gaming.

And, you know, I think there’s a lot of advantages uh when you have scale in this industry, it’s a very mature business outside of the US.

So the ability to kind of, you know, acquire and, and acquire customers and businesses and grow in that aspect, we think it’s, it’s an extremely attractive part of the online ecosystem to own.

All right, thanks a lot, Jordan.

Have a great weekend.

Thank you.

Well, we’re wrapping up today’s market domination.

Don’t go anywhere.

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Stay tuned for market domination over time.

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