저자: EdYardeni · 외국인
요약 보기
9월 PCE 근원 물가 0.2%로 시장 부합, 연 2.8%. 관세로 내구재 물가 일시 상승했으나 내년엔 3%→2% 근접 전망. 연준 12월 인하 가능하나 매파적 인하·반대표 가능성. 연말 S&P500 7,000, 내년 7,700(10%대 상승) 전망. AI 주도주 경쟁 심화, 'impressive 493' 확산 기대. 비트코인은 위험선호 자산이며 스테이블코인으로 결제 기능은 약화, 금이 비트코인보다 강세. 미국 소비 견조, 생활비 문제는 정치적 이슈.
다듬은 글
Welcome to Market Catalyst. I'm Julie Hyman. We got some breaking news now crossing the wire. We've got PCE personal consumption expenditures coming in in line with estimates. This is for September, remember? So rising 3/10en of 1% on a month-over-month basis, 2.8% on a year-over-year basis. If you strip out volatile uh food and energy costs, you get a 2/10en of a percent increase.
Again, right in line with what estimates had been. And also, by the way, in line with what the prior month's increase had looked like. So, pretty steady on the inflation front from a PCE perspective. We also got personal income and spending. And again, reminder, these are September numbers because of the government shutdown.
Personal income ticking higher by 4/10en of 1%. That is a little bit better of an increase than anticipated. personal spending up three ten of 1%. So that's all the September data coming to us from the government from the BLS. Uh we also got University of Michigan sentiment and this is a much newer number.
This is the preliminary reading for December. That came in a little better than estimated the headline number at 53.3. 52 is what economists on average have been estimating. Current conditions in Yumish a little bit weaker than estimated at 50.7. um expectations a little bit better. Um so interesting here.
We're also seeing moderating inflation expectations both a year out and 5 to 10 years out. So put that all together. The Michigan sentiment numbers look relatively positive here. We are seeing the US major averages tick a little bit higher on that. But we want to get a little bit more detail on what we're seeing in the markets today both in reaction to this and more broadly.
So for that we go over to our markets editor Jared Blicker for more. Thank you Julie. Yes, it looks like inflation is looking kind of benign right now. And to be fair, when we got those CPI numbers for September, uh what was it a month ago? We could kind of figure out what these numbers this morning were.
However, the Michigan University of Michigan consumer sentiment numbers, as you said, are new. And any reaction we're getting in price, which looks to be bullish right now, more likely off of that. And the inflation component of that, which is inflation expectations by consumers, that seems to be somewhat under control at least.
uh not out of control. And here we see the Dow industrials here up about 219 points for the day, up 45 basis points or about half of 1%. Let's check out the Nasdaq as well. Uh also at highs look like it's just exceeding that early uh high that it had after the open this morning. And the S&P 500 very similar to the Dow up about 4/10en of 1% there.
I will check in on the Russell 2000. Uh that is in the red today after notching its first record high since October. And also let's check in on the micro caps because they also got a record high yesterday. They were in the green early, slightly in the red now. But uh as I've been saying, this is the time of year when volatility comes down.
Here is the VIX. You can see it was briefly green there, but lower volatility is good. So you want to see that in the red. That means higher stocks usually. And let's check in on the bond market, which so far today hasn't done much. Just a fraction of a basis point higher. So not much change there. 10ear at 4.11.
And then the 30-year that is 4.77% that's up about one basis point not a big amount I also like to check in on the US dollar barely moving there a lot of chop so let's check in on the sector action just before the report guess what we look pretty similar right now communication services was the leader then along with tech in number two and that is the status right now then you got materials up about 7/10en of a percent energy and consumer discretionary all outperforming so a lot of the uh cyclical sector sectors in the green here, although industrials looks like it's just kind of treading water.
The only sector in the red is utilities. That's down about 210 of 1%. And let's take a peek and see what the NASDAQ is doing after a nice day for Nvidia yesterday. I think it was up about 1 or 2% slightly in the red today, but I did say communication services was leading. That is a sector where you have Alphabet, Google up 1% here, and Meta up about 2/3 of 1%.
And I want to show you uh a lot of the dark green on here is what's happening in the semiconductors. So let's switch over and see. There's Nvidia. That's down slightly. But for the rest of them, we got Intel up almost 5%, Micron up over 4%, Western Digital, Lummentum, those are up over 3%. So some nice dark green spaces there.
And pretty similar story in software. Not quite as much dark green, but another strong day for Salesforce. That's up three and a half%. Adobe up 4%. And I'd like to check in on crypto too uh as it can be at times uh inflation sensitive and sometimes reacts to some of these reports. Here's Bitcoin down for the day 1.79%.
Not really seeing much of a reaction here. So a little red to leave you off here, Julie, but uh not a huge movement off of those reports. Jared, thanks a lot. Appreciate it. Well, as we just talked about, the September PCE report came in in line with expectations showing inflation rose 2.8% from a year earlier.
That is, by the way, the fastest pace that we had seen since spring of 2024. It's also the last major piece of economic data to be released before the Federal Reserve's December meeting. Investors still expect the Fed to cut rates on December 10th. My next guest says the US economy could be heading for a code red affordability moment.
I want to bring in Edardenni, our Denny research president. Ed, it's great to see you. I love that. I love that blue there today, Ed. Um, thank you. So, let's talk about the PCE that we just got. Obviously, it is dated, but I'm curious more broadly how you're thinking about the pace of inflation right now.
You know, reading the tea leaves between September and now, well, I think the data clearly suggests that we probably would have been down to 2% on a year-over-year basis by now. Uh, but for the tariffs, the tariffs did have an impact on inflation in durable goods. U durable goods inflation was actually falling on a year-over-year basis at the beginning of the year and then it started increasing a bit reflecting the tariffs.
But that's probably a oneshot deal and um I think that looking into next year inflation will come down from close to 3% to closer to 2%. So that that's that's looking promising. So that implies that you do think the Fed has ample room to cut then next week and beyond. I think that's going to be their perception.
I don't think they really need to. I think the economy is doing fine without rate cuts and rate cuts uh increase the possibility of financial instability, particularly a meltup in the stock market, which are fun on the way up, but you have to remember to get out at the top. Uh but look uh the inflation news uh I think is going to uh uh in in increase the odds that the Fed will go ahead and do at quarter point but it may be a hawkish cut.
We may have more dissenters saying what's the rush? Uh we have more more dissenters saying that maybe they should wait until next year for another rate cut. And Ed, if you do get that hawkish descent, um, you know, the obviously the the market broadly expects the cut to happen, but if you get that if you get that hawkish descent, if you get some of that, what then do stocks do?
Well, I think uh you know we could have a day or two where uh there's there's downward pressure to the extent that the markets are expecting that there'll be another rate cut after December 10th that there might be another rate cut maybe even as early as January at the next meeting. So, um I I don't think it's going to be anything uh particularly uh earthshattering one way or the other.
I think the market's going to kind of continue to deal with some of the issues we have now with uh the the horse race going on in the the entire AI world and trying to figure out who the winner is today. So, I think that kind of complicates that trade. And meanwhile, I think the market uh is going to increasingly focus on the likelihood that next year is going to be a good year for the economy.
Again, we've got a lot of stimulus uh coming into the economy between some tax cuts uh between the uh world soccer um and uh then it's the 250th birthday of the United States. So, there's going to be a lot of spending going on next year and the market may be starting to anticipate that it could be another really good year.
I mean, I think we could have another double digit increase in the S&P next year of maybe 10 10%. I think we'll end the year around 7,000 and this year around 7,000. This year, this year 7,700 by the end of next year. And Ed, what about the affordability question, right? Um I mean, it sounds like you're a little bit more optimistic on inflation coming down and if that stimulus is coming in,
does that become less of a discussion next year? Not necessarily. The the affordability issue is uh is a little bit complex. Uh it's also a little bit psychological. Uh we have clearly had a huge increase in prices since the beginning of the pandemic over 20%. Uh the thing is uh average hourly earnings which is a measure of wages uh has actually increased a bit more than that.
The problem is it's comparing apples to oranges. The reality is it average hourly earnings is exactly that. It's a it's an average and there's plenty of people below the average that haven't kept up with those big price increases. Uh and then on top of all that, you've got uh young people coming out of colleges or uh people 20 to 24.
Their unemployment rate has really almost doubled since last year. And uh so the code red is really the code red for the administration. Uh they clearly have become very concerned that the affordability issue is one that uh could u sink their majority in the house. How much room do they have to to address it?
Not much really. Um, you know, in terms of uh what what they could possibly do. I mean, let's face it, energy prices have come down significantly and that was always kind of viewed as a key uh stim view of uh what overall inflation's been doing. And yet people just uh still aren't happy with what they're seeing.
Well, I mean energy energy in the form of gasoline has come down, but in the form of electricity, that's another story. That that's another story. And of course, the insurance policies for autos, for homes, um life insurance have all gone gone up dramatically. So, uh this this is this is a problem and I'm not sure that it can be solved by the administration uh in time for them to maintain their uh lead in the in the House in the midterm next year.
So Ed, does do you think that affordability is an issue from an economics perspective as well or do you think it is primarily a political problem? I think it's primarily a a political problem because we we have seen that uh the affordability crisis probably has shown up in quite quite depressed consumer uh confidence surveys uh and that in in turn uh is is related to the affordability issue.
Uh so I think it's more a political problem because there the reality is the consumer numbers have been uh pretty strong. Uh the numbers you just reported this morning they were okay. They weren't uh they weren't great up 0.3 for consumption uh is is isn't really an increase when you adjusted for for inflation.
Uh but um you know one month doesn't make the trend. The trend is certainly uh for consumers to continue to spend which is what they've been doing. Um, I want to you mentioned what's going on with AI and I want to um just circle back to that because you talked about the horse race that's going on um with AI given that we sort of instead of everything going up, we now have a little bit more at least in the market recently a little more dispersion among those AI names.
Do you think that's broadly going to be supportive for stocks going higher or do you think it as you said it's more complicated now? Yeah. Well, it's more complicated, but I I I see a a happy outcome, you know, for quite some times. The Magnificent Seven have been uh really the, you know, the concentrated uh focus of the of the bull market.
Uh I mean, if they didn't exist, we'd still have a bull market. It just wouldn't be as impressive as what we've had with the magnificence of it. And for a while, they've been driven by the notion that they're all the winners in AI. Now it's recognized that it's become a lot more competitive and it's uh maybe what this really means is that investors will start to focus on the uh what I call the impressive 493.
You know the the other stocks in the S&P 500 uh that are uh likely to show that these technologies including AI are being used to increase productivity which in turn is very good for uh for corporate profit. So, a broadening of the market to the 493 makes a lot of sense to me. And Ed, I know you and your team watch Bitcoin as well, and Bitcoin has had such an interesting relationship with stocks uh recently also.
Yeah. So, what's your outlook there and not just for the price of Bitcoin itself, but also for the interplay? Well, it uh it's basically proven itself to be a a trading vehicle, a risk on, riskoff kind of kind of instrument. uh it it had a sell off a couple of years ago that uh and then Wall Street came to its rescue and decided that they wanted to create ETFs in that area.
Vanguard just uh kind of folded. They they were saying that they weren't going to do anything with Bitcoin. Now they are going to do ETFs. And of course, we've got a very pro- crypto administration. So, you know, it hasn't really been about fundamentals. It's been a kind of a lot of technical issues here.
And then the Genius Act which was passed in July basically took away the transactions uh function of Bitcoin because now we're going to have stablecoin and stable coin is a cryptocurrency. It is blockchainbased uh and it is and it can be used for transactions very safely I believe. Um, and so that leaves Bitcoin basically as a store of value.
And it's been one heck of a roller coaster if you're looking for a a store of value that keeps going up and up, which is what gold has been doing rather than Bitcoin. So, ironically, Bitcoin's been uh said to be a digital gold. Uh, and you know, gold maybe is physical Bitcoin and gold seems to be doing better than than Bitcoin.
It does, ironically enough, Ed. Thanks so much. It's good to see you. Thank you. Coming up, Rubric shares are surging on strong guidance. We'll talk to the CEO next. Stay tuned. You're watching Market Catalysts. Rubric shares soaring after it raised its revenue forecast for 2026. The cloud data management company also topped third quarter expectations with revenue up 48% year-over-year.
Joining me now, Bipple SA, a Rubric CEO as well as our Yahoo Finance executive editor, Brian Sazzy. Bipple, good to see you. Um, and not only do we see that revenue increase and revenue forecast, but I know there's a lot of attention being paid to your annual recurring revenue cadence. Um, and that's part of the reason why we're seeing uh the stock performance here.
So talk to me about what some of the main drivers are and in this IT spending environment, you know, where so many people are throwing so much at AI and compute capacity, how they're thinking about their budgets that affects you guys. Thanks, Julie. So good to see you. We had a record quarter. In fact, this was our best ever.
We not only exceeded all the guided metrics, but we also raised our outlook for the year. And it is driven by cyber resilience and AI transformation. What is happening in the marketplace is everybody is now rushing to prepare for the AI future. They are modernizing their infrastructure. They are doing cloud transformation.
They are deploying agents and they have to manage cyber risk because cyber attacks are inevitable and they need to prepare for a time when the attack happens and they can keep their services up and running because if your data don't have integrity or availability, AI will not be useful and that's what is driving our demand.
Uh we are seeing secular demand in the marketplace. Cyber resilience is the number one cyber security category and that's why if you look at our subscription ARR that's how we measure our business we grew 34% uh year-over-year uh to 1.35 billion and we also generated 77 million in free cash flow which is 22% margin so we are not only driving hard and growing fast on the top line but running a very disciplined operation
good to see you um AI agents since we last spoke. I mean the development of AI agents only continues to pick up. Are these are these things safe? Obviously uh agents without the guard rails and a a way to govern is not safe. It's kind of like hiring 1,000 employees and letting them lose to write code approved customer purchase order or refund and and you can imagine what could go wrong.
And that's why we launched this new platform called Rubric uh agent cloud. And this new product line is focused on ensuring that you can monitor your agents, you can govern your agents and if they misbehave because of cyber or otherwise hallucination, you can actually push a rewind button and and undo the action of agents.
So we are focused on enabling our customers accelerate their AI future with a comprehensive rubric agent cloud platform. At the same time, of course, the bad guys have the agents too, right? And you said on your conference call that that AI ages in the hands of threat actors could inflict 10 times more damage in one tenth of the time.
So how at rubric do you guys stop that side of the equation from that infiltration? Our basic thesis is you can't prevent the unpreventable. The bad actors will use AI will use agents and will inflict dam damage. So you have to spend money and prepare as much as possible in terms of prevention and detection but you have to fundamentally assume that it will happen to you and how do you ensure that your services are up and running and you need to understand two things the risk of the attack and how are you going to remediate it and that's the comprehensive strategy that Rubric has with our rubric security cloud platform that we are selling and and and we are finding a lot of success around the world and then with rubric Agent cloud.
What we are saying is that companies that are deploying agents, how do you ensure that your agents are behaving in the parameter and guardrails that you establish whether it's a readonly agent or read write agents or this agent can send email but not to this user. All of that is fully automated so that you can deploy agents with confidence and take advantage of the AI opportunity without the risk.
Bipple, since we last spoke, uh there has really been a seminal moment in the the model building industry. Of course, a lot of executives weighing in on the power of Gemini 3. Have you used Gemini 3? What is your take on this? And then uh because of you know how fast Google has developed this model, what does it mean for what you do in the state of the industry?
We use Gemini all the time. In fact, we have been using all the model and it is very encouraging to see Google so fast woke up and really ran the race and stood at the front and that actually shows the speed with which the whole industry this whole AI model and everything else is is evolving and it's very exciting because our customers are looking to accelerate their AI future take advantage of the efficiency gains get uh competitive leverage edge and so they are looking for for us to deliver the right guardrail, right governance structure so that they can adopt AI faster because they see all of these things happening in the consumer space and they want to take advantage of it.
Do you think there will ultimately be one winner as far as these models go? I don't think so. We'll have different models for different use cases that you are already seeing. If you look at the coding uh Anthropic has emerged to be the the best coding platform and and and their uh proliferation in the enterprise is very high.
If you look at OpenAI they have garnered lot of consumers. So you will have different use case for different model is not no different than what happened in the in the hardware industry. You had HP server and Dell server and and uh IBM server and they serve different purposes for different workloads.
Bibble. Finally, I want you're about what an hour a year and a half out from your IPO now of Rubric. Um, and I'm just curious any big lessons learned, any surprises for you as the CEO of a public company now that you you've got a little time under your belt? I'm glad that we went public. I personally believe that if you want to build a long-term company, you need to have two conflicting ideas in your head.
One is about delivering short-term results quarter after quarter while focus on long-term strategy and vision to continue to evolve the company and and and the industry and just like any intelligence intelligent person who can have two conflicting ideas but still operate coherently businesses have to learn that to be a long-term company.
So I'm very glad that we are a public company and and we hope to continue to execute well as a public company. Bipple that's really interesting and definitely counter to what you hear from some other folks. Thank you so much for joining us. Appreciate it. And thanks Brian Sazzy as well. Coming up, we'll have some of today's top calls on Wall Street, plus the latest outlook for the tech trade.
Stay with us. Welcome back to Yahoo Finance. I'm Ally Canal live at the NASDAQ. Let's turn now to some of today's top analyst calls on Wall Street. We're watching Meta, Ulta, and Humanana. First up, Meta. A fresh call from Bank of America suggests that Meta may be getting more aggressive on cost management.
According to the firm, Meta is weighing up to a 30% cut to its Reality Labs budget. That's the unit behind VR, AR, and the broader metaverse push. VFA saying that those cuts alone could add 6 to 7% upside to 2026 EPS. That the company is also evaluating a 10% expense reduction across other functions that could help offset rising AI investments.
So, the takeaway here is that after months of concern that spending was reacelerating, this reinforces that Meta is still willing to flex on costs. BFA keeps a buy rating and an $810 price target on shares, which implies roughly 30% upside from current levels. Next up, Ulta shares are surging after the beauty retailer delivered a big beat across sales, margins, and earnings.
Company also raised its fullear outlook. The stock jumping over 10% in early trade, its biggest move since May. Analysts called out broad-based strength across categories with fragrance and skincare leading the way in Q3. Ulta added 35 new brands in the quarter, executed promotions more effectively, and continued to benefit from the broader health and wellness trend.
JP Morgan and Barkclays both lifted their share price targets to 647 saying that the quarter strengthens the bullcase as ULA continues to gain share and maintain pricing power. And finally, Humana. The company is trading higher after Jeffre upgraded the stock to buy, calling the setup quote attractive heading into a critical Medicare advantage cycle.
The firm says that Humanana is poised for major share gains in 2026, forecasting 21% Medicare Advantage membership growth and projecting that the company will capture 35% of new applications next year. Analyst David Wley raised his price target to 313 bucks a share, up from the prior 253, implying about 24% upside from the prior close.
The stock has lagged so far this year, but Jeff argues that high volatility churn and big 2026 share gains set up a cleaner, more compelling runway ahead. We'll keep it right here on Yahoo Finance. We'll be tracking all the market moves and top calls throughout the session. Now, time for some of today's trending tickers.
We are watching SoFi, Cloudflare, and Foxcon. First up, soi the fintech firm looking to raise $1 and a half billion dollars through a share sale that is weighing on the stock today as the company looks to add issue additional shares, essentially diluting the value of the existing shares. SoFi looking to expand beyond lending into new products.
A statement shows it intends to use the proceeds to enhance its capital position and for new business opportunities. Next is Cloudflare. The software company says it fixed an outage that hit everything from Zoom to Coinbase. The stock fell as much as 6% in early trading, but has since paired those losses.
It's now up about a fifth 1%. It's also, remember, not the first outage to hit the company in recent memory. Last month, a major outage at Cloudflare hit websites ranging from X to JG GBT for several hours. Cloudflare software is used by hundreds of thousands of companies worldwide. It acts as a buffer between websites and end users to shield them from traffic overload attacks.
And Foxcon, formerly also known as Hanhai, reported a 26% rise in its November revenue year-over-year. Foxcon, primarily known as the main contract manufacturer for Apple, but its largest business is now cloud and networking products, including AI servers. The latest numbers a good sign for Nvidia, who the company partners with.
Foxcon's figures might have helped soothe any concerns resulting from HPE, which reported lower than expected revenue. Well, Nvidia CEO Jensen Wong compared the growing AI economy to a five layer cake recently. He broke it down as energy, chips, infrastructure, models, and applications. So, how can investors play all five layers and make smart picks beyond the traditional magnificent seven stocks?
I want to bring in Tony Wang, Troll Price Science and Technology Equity Strategy portfolio manager. Tony, good to see you. Thanks so much for being here. So, obviously, one of the biggest spokespeople for AI generally is Jensen Wong. So when he sort of breaks down the different components there and also pushes back against the AI idea of an AI bubble, the market does listen to him.
Um where we are right now in this progression. How are you thinking about it through your investing strategy lens? Yeah. Well, I think that uh we're still relatively early in the buildout for AI. I mean, this is a total refactoring of how things have been done historically. So I really think that the AI infrastructure build is like the railroads of today.
And so um to me what matters is that uh you know there's continues to be additional use of AI and this transition to a gentic AI and eventually the physical world. So that's what I'm looking for in terms of like you know the inference capabilities powering a lot of new applications uh the token profitability for the consumption and then in ter on the training side I think what matters is this uh that the move to AGI is actually accelerating and so um I think we've seen a lot of encouraging data points along the way in the last few weeks
and specifically also what about um the data points from the companies themselves in terms of profitability in terms of revenue generation what are you finding sort of most encouraging throughout that universe that that illustrates return on investment. Yeah. Well, so when whenever an industry is going through hyper growth, I think there's going to be a lot of capital chasing and then there's also going to be a lot of competitors and players that enter the market uh both existing and new.
So I don't think the returns are going to be evenly distributed. So I think it's not you know surprising that some companies are making a lot more gross margin than others. And so um to me what matters that you want to invest on the platforms that are able to provide a lot of value and capture a lot of value along the way.
Are you concerned about overbuilding it all? I think that this will be cyclical. Um you know just like anything in the world nothing goes straight up to the right but at the same time I think that over the multi-year um you know there is I think we're just at the beginning of the AI kind of super cycle.
And so um to me I think it's an inevitability that you know AI agents work alongside humans that improves our productivity. But I do think that we have to monitor the cycle and um just like semiconductors you know historically have been very cyclical. Um I think it's something that as investors we need to manage through.
You know, Tony, I think it's interesting. You sent us um a list of stocks that you're excited about. And this is not to say that you don't hold others in this universe, but um it's four stocks, Nvidia, Broadcom, Micron, and Microsoft. What I think is interesting about this list is that Alphabet is not on it because Alphabet has been sort of catching fire a little bit more lately with Gemini 3 and Nano Banana.
Um why isn't it on this list? Yeah. So, I think that um you know the Google is definitely going to be a beneficiary of this and I would I would definitely have them on that list as well. Um and so you know to me it's like you know the multiple companies are well positioned and it's not a win or take all and if anything I think that uh the market can usually be really large and they're all doing a little bit different things uh to some extent and so I think Google you know continues to have a lot of digital properties it can leverage AI across so and the models are performing really well um but I do think it's going to be a kind of rotation of leadership among among a a small group um so I would have had them on the list and and I think them as like a good compounder.
Um I'm also curious to ask about Micron because um it's not just about Micron, it's more about memory pricing more broadly which as we know has spiked here. So um Micron sort of cons concentrating more in the high bandwidth memory i.e. AI serving part of its business. What kind of ripple effect does all this have throughout the tech industry?
Yeah. So, I think whenever you're going from zero to 100, there's going to be bottlenecks along the way. Um, and I think HPM is is one of those. And so, you know, the the industry is kind of consolidated around DRAM. Um, there used to be a lot of players, now there's only a few. And, uh, Micron, I think, is well positioned to capture um, you know, that value as we, as AI continues to proliferate and these GPUs need more HPM.
In addition, I think the broader markets are probably going to be improved eventually and so um there could be like continued tightness in the industry and you've seen kind of DRAM prices continue to go up. Um and so you know that's I view them as like a key pick and shovel provider to kind of the AI um AI race here.
Um and you talked about bottleneck. Of course energy is another bottleneck that's been highlighted a lot recently including by Jensen Wong in uh the comments he made in DC earlier this week. So is who's going to win from a compute perspective going forward at least partially going to be determined by whether they can get enough energy?
Yeah, it's definitely a key area of focus I would say. Um I think it's more of an engineering problem that with enough capital and and brain power that the industry figures out here. And so um but it's definitely like you know when you're scaling from uh you know this level to what we need in 10 years uh energy is definitely a key bottleneck.
And so um there are several companies in the supply chain that are kind of well positioned I think in that picks and shovels category like Verdive that benefit you know based on the gigawatts that are deployed. Um and then but I do think that semis continue to be a real beneficiary. I think um a lot of them you know help with the power and cooling like monolithic power.
Uh you need to cool the GPUs and then there's also the networking aspect that um you need to have better connections from GPU to GPU uh like Arista. And so um there's definitely I think a lot of companies that can benefit um and that are really strong loaded businesses here. Tony great to see you. Thanks for joining us.
Thanks so much. Coming up, what growth in prediction markets could mean for sports betting companies like DraftKings and FanDuel. That's next on Market Catalysts. Well, the betting market continues to grow with global sports platform Fanatics launching a prediction market platform while prediction market Koshi more than doubles its valuation since October.
Here with more on the action in the competitive landscape, we got Jordan Bender, senior equity research analyst at Citizens. Jordan, great to see you, especially on set. Uh, let's start there. So, as that intro just referenced, you got a lot of news, a lot of headlines for prediction markets. Start big picture, Jordan.
What are you seeing? What are you hearing in that space? Thanks, Josh. Yeah, it the pace that this industry is moving is incredible. It feels like every time I pick up my phone, there's some sort of news event, news story, partnership, agreement with companies within this space. So, you know, the pace that this is going, it's hard to keep up in a way.
You know, I I was with a major um online gambling company yesterday and they said 99% of the questions that they're getting today are around the prediction market. So, you know, this week alone, we've seen pulling market relatics launch and it's just getting going. So, all right. So, so bottom line, you got a lot of news, a lot of action, a lot of headlines.
If I'm an investor, I'm watching this right now. I'm thinking, all right, bottom line, who's going to win this? What do you tell clients? It's a very complicated answer. Um I would say you know from a you have plenty of time Jordan take your time from a market sure and a revenue perspective for sports contracts.
You know our view is the traditional sports betting operators DraftKings and FanDuel they'll launch a prediction market platform in the next couple weeks. Those guys have decades of experience. They know how to build the mousetrap. They have the balance sheet. um they have basically the UIUX that they know true sports betterers want to play on.
Now, I'm not writing off anyone else in the industry. There are other ways to win. Um you know, we've seen Koshi and CNN integrate odds. We've seen uh you guys integrate with Poly Market. So, there are other derivatives and other ways revenue-wise to actually um benefit from what's going on in this industry right now.
So, FanDuel and DraftKings, by the way, and I know you like both names. you tell clients I I think they're both buy, but if I push you, Jordan, and we say, okay, if we if we make the bet, they're going to be winners in this space. Is there one you would say against this environment, this backdrop, that's a strong buy?
You know, it's funny going back to the the 99% of questions go in the prediction market. Like underlying fundamentals within the other parts of this business are still incredibly strong and I think a lot of people are kind of missing that point right now with the whole prediction market cloud overhanging if you want to say that over the industry.
So from a true fundamental standpoint, you know, we like both companies. We think both are actually set up well for traditional sports betting eye gaming as well as prediction markets. But if we had to go with one, we do like Flutter for its global scale. its diversity and its balance sheet. Are there other if we're talking about the prediction markets, are there other winners?
Are there other derivative winners you would call out? Yeah, you know, like I mentioned, there's other ways to generate revenue because the data is key here and that's what's going to be king going forward. You listen to what ICE, they invested $2 billion in the poly market, and the reason was not sports contracts, was the data that they actually um derive off of that.
So if your viewers can now watch or on any uh media platform they can watch in real time and learn in real time people's opinions by real wagering you know that's a benefit and then that's also B2B revenue for companies like Kelshi like poly market. So, um, you know, we think that there's a long runway ahead.
Um, I'd also point to, you know, I was with clients earlier today and one of the conversations was if you're long a stock into a print and you want to hedge yourself very cheaply, you can go to the prediction markets and essentially say, you know, they might miss earnings and hedge yourself to the downside.
So, there's kind of different derivatives off of this industry that we think are ways to basically generate revenue for a lot of different companies. What about I know we mentioned uh Flutter DraftKings. What I remember we've spoken in the past. Genius is another name. Is that still on the buy list for you?
That's still a name that we like a lot. Jordan. So they had an investor day yesterday. They exceeded kind of everyone's expectations in terms of financial targets. You know, just for reference, they have the data rights for the NFL. Um and it's a three billion market cap company. they have Roger Goodell get up on stage commissioner the NFL you know and he's kind of saying how good this company is what it does for the NFL how it grows that game so when you have the key infrastructure the picks and shovels of the industry like a genius sports in place we think that's you know going to be a winner long term here let's end here as we're looking at 2026 broadly and you talking about the sports betting market the industry what are the underlying themes and trends join me how just sort of healthy and resilient Does it look as an industry?
Yeah. So, you know, going back to what I was saying earlier, the underlying fundamentals are still pretty strong. Now, there's been some, you know, bad game outcomes in the last couple years. Sports betterers have been winning at a higher rate than normal, but you know, as we look at sports betting, handle growth, the wagering still extremely strong.
Um, you know, the the pace of um free money that they're giving out is starting to come down. So you're going to start to see that in higher growth rates for a company like FanDuel or parent company Flutter which we like here. So underlying you know sports betting strong I casino slots and uh slots and tables on your phone extremely strong.
So those are going to be the winners long term as long as these strong fundamentals continue in place. Final question we talk a lot about the macro on the show and these concerns Jordan that are brought up about our labor market cooling right the K-shaped economy. How how important is that to your coverage universe and the names we're talking about here?
Yeah, you know, I'd say in the online names, it's a little bit different than if you say Vegas, you have to travel there. You know, you need a big budget. This is you might spend $5 on a given Sunday for an NFL game for 3 hours of entertainment. So, we haven't gone through a recession since legalized gambling has been here in the US.
But I would say um you know if you're spending a very low amount of money for that type of entertainment it's going to be very resilient to what we're seeing in the economy there's global instances of you know during recessions actually online gambling goes up so I would expect that to be the same case here in the US.
Jordan always great to see especially on set. Appreciate it. Thank you my friend. Coming up we'll discuss ways to get your finances ready for 2026 including potentially changing banks. Stay tuned. You're watching Market Catalysts. A lot of us make New Year's resolutions to be more healthy, wealthy, and wise.
So, let's focus on being wiser with your money heading into 2026, including whether it's a wise idea to consider changing banks. Joining me now, Lawrence Sprung, Mittlin, financial founder and author of Financial Planning Made Personal for this week's FA Corner, brought to you by Capital Group. Good to see you.
Thanks for coming in. So changing banks is an interesting thing to sort of think about periodically, right? I I mean I I'm just thinking of myself. I've been with the same bank for 20 something years or probably something like that. Um so why do do is it a good idea to maybe revisit that? So I I think things get complacent, right?
and you look at uh you may have went there for a promotional rate or something else that was taking place and then over time perhaps those promotional rates disappeared and you're not getting all those benefits anymore. But the challenge is that you have all your bill pays, direct deposits and most people the pain of disconnecting all that is more painful than moving it.
So what do you need to weigh if you I mean you need to weigh that pain but like what would make it worth it to go to a different bank? So, I think there are some good things that you can do now with maintaining that initial relationship that you have. And if interest rates, for example, are something that you're not seeing in your current bank,
you can open a high yield savings account, link it to the current bank, move money back and forth. We have a uh bank that we use uh for high yield savings for our families that has a technology that says, "Hey, I want to leave $10,000 in my savings account." And the high yield savings account will look and audit that account every two weeks.
And if there's less than 10,000, it will send money from the high yield back. And if there's more than 10,000, it will move it out of there into the high yield. Oh, that's interesting. So there are some really good tools out there that are making it easier to get better interest rates. And in particular, do it sounds like then you think people need to expand their conception maybe if they're especially if they're maybe older or they're at more traditional banks to also think about some of the upstarts in the industry too.
I I think so. I mean, at the end of the day, right, the the safety is of utmost importance. People are at the bank because they want the FDIC insurance. So, as long as that quote unquote upstart has FDIC coverage for those deposits, I think you're fine. And we've seen some of those upstarts that don't have the FDIC coverage and we've seen some issues with those over the last couple of months if not years.
And uh you just want to be careful. But if that FDIC insurance is there, why not? Yeah. Um also at the end of the year, maybe a good idea to look at your spending like how much you spent through the year, what the cadence was like, your budget. Is that is this a good time to kind of do that kind of thing?
It's always a good time. carve out a couple hours, take a look and say, "Okay, let's audit how much money do we have coming in every month? How much money do we have going out?" And it's more important where is that money going out? Is it going out to things that bring me joy and things that I am benefiting from?
If not, cut them out. There might be a lot of things in there that you're not even using. Cut those out. So, it's an easy way to find th that extra cash flow. And then you could talk about maybe redirecting it to retirement accounts, education funding, other areas where it might benefit you much better.
I mean, how many things have we all signed up for that you then kind of forget about and it's the recurring subscription every month all the time? You know, you always I I I think everybody can find at least one of those. Um, we've been talking a lot here too about end of year, thinking about your tax liability, thinking about that positioning as you go into 2026.
So, what should what do people need to do on that front? Yeah. So, you have a couple weeks left to have an impact on your 25 uh 2025 taxes. So, it's something easy to take a look at and look in your portfolio. I mean, we've had a good year, so there aren't a lot of losses, but if you do have that, you know, investment that you thought was going to be a huge winner that turned out to be a huge loser.
It might be a right time to sell that, take the loss and offset some of those capital gains that you might have otherwise in your portfolio and have an impact on your 2025 tax returns. Now is quarterly payments of taxes something that people should think about? Yeah, I think it's most important quarterly taxes for those who are self-employed.
Uh those who have uh variable income where the taxes aren't being withheld such as interest, dividends, capital gains from investments. It's important to make sure you're ahead of that because as your your viewers probably know, if you're not paying enough into the system and you're not doing that on a quarterly basis, you're going to get hit with a penalty.
And why give the IRS any more money than we have to? Yeah, we don't need to do that. All right, thanks so much for coming in, Larry. Good to see you. And that was FA Corner brought to you by Capital Group. Coming up in the next hour, we'll have full market coverage ahead and we'll talk more about the Federal Reserve and those PCE numbers we got today.
Don't go anywhere. 90 minutes into the start of US trading. I'm Julie Hyman. Let's get a check of the markets. Taking a look at the major averages here, we have them now rallying. And this was after we got some economic data here. So, right now, the Dow is up about 178 points. Uh we've got the S&P 500 up about the same in percentage terms, about 4/10en of 1% as is the NASDAQ.
And as we say, this is after we got that economic data. The Fed's preferred inflation gauge coming in in line with estimates that September core PCE up 2.8% year-over-year. That data release was of course delayed due to the government shutdown. We also got at the same time consumer confidence numbers that beat estimates.
And joining me now is John Hillsenwrath Stone, senior adviser and Yahoo Finance contributor. John, I I don't know what your thoughts are on PCE given that it is so delayed. I thought it was interesting. We talked to Edar Denny in the last hour and he said, you know, he thinks that inflation would be at 2% now if not for the tariffs, but he seemed pretty confident that we'll be moving in that direction heading into next year.
What's your current thinking around all of this? Uh, I think I would take a different side of that discussion. You know, my my argument about tariffs for a while has been that the initial impact of tariffs would be muted because companies are spreading the effects throughout their supply chain. Their suppliers are eating some of it.
Wholesalers are eating some of it. Some of it is getting passed on to consumers. Some of it is showing up in profit margins. So, we're not seeing big effects of tariffs in in in consumer prices just yet. But what the United States is going through is a reconsideration of the whole way that we do trade uh with with foreign trade partners.
And during a period of trade opening from the 1990s and 2000s that led to goods price deflation, persistent lasting over two decades. If we're reversing that, I think we're now going to have some persistent upward pressure on prices. So, you know, my concern is that inflation stays a little higher than people are comfortable with for longer than anyone expects.
Um, the Federal Reserve doesn't well, at least the market doesn't perceive that the Fed is going to prioritize those inflation concerns next week, right? Um, they the market thinks that we're going to get a cut. Um, do do you think though that we're going to get some significant dissents again amongst the Fed members that share some of your concerns?
Yes, I do think we're going to get dissent. Uh I think we'll get anywhere from two to as many as five dissents uh at at this meeting and I think that's going to be a sign of what the Fed is up against and what the next Fed chairman is up against in 2026. There's a lot of disagreement at the Fed over a whole range of issues.
So, we talked about inflation. That's one problem. And the hawks at the Fed will point to that. But on the other side of the equation, the job market really has slowed down since this summer. The economy isn't creating a lot of new jobs. And there's different reasons for that. Some of it is immigration, some of it is AI, some of it is uncertainty.
But the result is the unemployment rate is going is rising a little bit and uh job growth is slowing a little bit. And the doves at the Fed want to attack that problem. And then layered on top of all that, we have a lot of political uh change uh let me say going on at the Fed, which create which makes things even more complicated.
Well, and speaking speaking of which of that last point, John, I I talked to one um fixed income strategist yesterday who isn't overly concerned about say a Kevin Hasset um leading up the Fed and about the the Fed as a result being um too doubbish, right? cutting too much because he he pointed out it is a committee, right?
And you do have a lot of other people on the committee. Um, how do you think about that and whether that will be enough of a check on whoever the next Fed chair is? I think that the Fed is already under enormous pressure to run the economy hot and I think it's going to be under even more enormous pressure to run the economy hot in 2026.
And I think Kevin Hassid in particular is going to be under enormous pressure to run the economy hot. And there will be there will be internal resistance. But uh I think the impulse of the Fed is going to be to put more emphasis on the job side of the mandate than the inflation side of the mandate. And for me, bottom line is we're not going to see 2% inflation again for some time.
I I think, you know, you could attach a half percentage point premium to the inflation rate uh for the foreseeable future because there's going to be internal resistance at the Fed. Yes. But, you know, frankly, the White House is already pushing against some of this internal resistance. The Treasury Secretary has been criticizing in particular hawkish regional Fed bank presidents recently who he says aren't even residents of the districts that they represent.
You know, he's pushing back on the regional Fed banks that are that are resistant to lowering interest rates. And then we're going to have turnover on the Fed board. That's going to be more mean more Trump officials. So I think maybe people in the market might be underestimating the change that this institution is going to be going through next year.
Well, and then John, as well, I've been hearing an increasing drum beat that even as the Fed cuts rates, we might not see that much downward pressure on the longer end of the curve. Um, in part because of all of the issuance that's expected to come out next year, and we're running big deficits, etc.
So you might see um that sort of steepening of of the yield curve and I wonder if that then results in even more pressure coming right you know coming if we're not seeing mortgage rates for example coming down in dramatic fashion. Yeah you know we we run the risk of dogs chasing tails in Washington here.
So I think you're absolutely right for a number of reasons. One could argue that longerterm interest rates uh could be rising even if the Fed is cutting short-term interest rates. Let me go through a few points here. The Fed actually cut interest rates pretty aggressively in 2024 by a full percentage point.
They cut the short-term interest rate, but long-term interest rates rose by an almost like amount because bond investors, if you're investing in a 10-year Treasury bond or a more or mortgage debt or long-term corporate debt, you're factoring in not just the Fed, you're factoring in the risk of inflation.
You're factoring in the, you know, the effects of supply from Treasury debt issuance. And I think all of those things could be pushing up long-term interest rates over the course of the next year, especially if the Fed is aggressive in pushing down short-term interest rates because in theory that that should cause some inflation, which if you're an investor should mean an inflation premium on the long end.
So, and then the question becomes, well, what are they going to do about that if that becomes the next problem? Maybe the Treasury tries to issue less long-term debt. Maybe, just maybe, they start getting serious about the fiscal uh challenges that the United States faces in the long run. Then you get another dog chasing tail question.
You got an election year. Uh they're not going to be cutting back on spending aggressively in an election year. So, we have a lot of challenges that we face in the coming year, but I don't want to sound too downbeat about all this. We also have an AI boom going on. We have a lot of investment in technology.
I think that's very this whole environment is very friendly for asset holders, for people who have capital, for people who are invested in the stock market, it's a very good environment. Uh if if you're invested in long risk, if you're a worker and there's inflation pressure and your wages are under some pressure and the unemployment rate is rising, it might not be a great environment.
And that's the K-shaped economy that we keep talking about. Indeed, it is a lot to chew on ahead of next week, John. We will be catching up with you again. Thanks a lot. Thank you. Coming up, President Trump expected to name his pick for Fed chair early next year. We're doing a deep dive into each of the candidates on the short list.
Stay tuned. You're watching Market Catalyst. President Trump is expected to name a new Federal Reserve chair to replace Jerome Pal. We're doing a deep dive into each of the five candidates on the short list. Fed governors Christopher Waller and Michelle Bowman. Former Fed Governor Kevin Worsh, National Economic Council Director Kevin Hasset, and Black Rockck head of fixed income Rick Reer.
Federal Reserve correspondent Jennifer Shamberger here now with a closer look at the final pick on our list. Rick Reer. That's right, the fifth and final pick. Rick Reer is a bond guy. He heads up fixed income for that mega money manager Black Rockck, overseeing 2.4 trillion with a T in assets. He served as vice chairman of the borrowing committee for the US Treasury as well as a member of the Fed's investment advisory committee on financial markets.
Reader spent a large chunk of his career at now defunct Lehman Brothers, where he oversaw the investment bank's global proprietary investment platform and headed its credit business. He holds a degree from Emory in finance and an MBA from Wharton. Reer thinks the Fed can and should cut rates next week.
And in a recent interview with Yahoo Finance's Julie Hyman, he acknowledged that inflation is running higher than the Fed's 2% goal, but had this to say as well. I have a stronger view that I think labor is a tricky thing from here. And I think there is significant displacement on labor that we're going to see over the next couple of years.
excluding jobs created in health care. Reer says he believes that job growth has been negative in the spring and summer months and he believes that is a trend that is going to persist. Though he says he hopes the economy remains resilient. He believes the economy is in good shape now and that companies are in great shape but that labor is a bit weak.
Julie Jen, thanks very much. Appreciate it. We got much more markets action coming up. Stay tuned. and you're watching market catalysts. Welcome back to Yahoo Finance. I'm Ally Canal live at the NASDAQ. Let's get a quick check on the market action about two hours into the trading day and we are seeing stocks rise across the board here as Wall Street digests that cooler read on the Fed's preferred inflation gauge.
Uh a report that's only fueling expectations that the Fed will cut those interest rates by the end of its meeting next week. You're seeing gains across your screen. The Dow up around 130 points. S&P up roughly 3/10en of a percent. The Nasdaq up around 2/10en of a percent. Uh like I said, rate cut bets pretty much held steady after that PCE reading uh came in line with expectations.
So steady moves on the inflation front. If we take a look at Treasury yields, they're pretty much indicating uh that traders are continuing to price in those Fed rate cuts. We're up just slightly here. The 10-year is up around two basis points, trading just uh above 4.1%. The 30-year yield, same thing there.
Two basis points hovering at 4.8%. I also want to get a quick check on Netflix because we've been covering this story all morning long. Really big moves in the media space. Now, Netflix's stock, it was down in early pre-market trading. We saw it come up from those losses, peaked into the green. Now, we're down around 2%.
And this comes after Netflix revealed that it is buying Warner Brothers studio and streaming assets in a deal valued at $72 billion plus debt. It's one of the biggest entertainment takeovers in recent history. And it's it's a dramatic shift for Netflix that has historically been more of a builder than a buyer.
And it was a contentious few weeks leading up to today's announcement. We had Paramount and Comcast also in the mix. Paramount was really fighting for WBD. They had been bidding for the entire company, including those cable assets, but Netflix is just going to have the studio and streaming side. Once the uh planned split of Warner Brothers Discovery happens next summer, uh we will have those cable properties, which includes CNN, split off into a separate publicly traded company.
So, still a lot more to come here. Obviously, antitrust concerns hanging on this deal as well. So, we'll see what the rest of media consolidation brings for the future, but for now, keep it right here on Yahoo Finance. We'll be tracking all the market moves throughout the session. Now, time for some of today's trending tickers.
We are watching Netflix, Ulta, and Victoria Secret. First up is Netflix. The stock has been whipsawed after winning a bid to buy the studio and streaming assets of Warner Brothers for $72 billion. Joining us for more Yahoo Finances, Brooke Top Palma. It's been an interesting journey for the stock today.
What a journey. It started lower, then it briefly spiked higher after a report that there would be regulatory challenges. Maybe there was some relief because people don't want them. This is not actually going to happen and then it went back down again. And now we're starting to get some rhetoric from the street.
analysts really saying uh Laura Martin over at Needm, she has a buy rating on the stock and she pointed out a few things that strategically this would mean that Netflix will be the kingmaker in Hollywood. She said in her note she also went on to say that this sort of positions Netflix to be able to compete with Google's YouTube.
Keep in mind Google does own a YouTube business. I feel like some people some people often forget that. Also Amazon's Prime Video. So really this positions Netflix in her note she says to really go up against big tech and Netflix sort of hasn't really been in that space as of late. They haven't been able to compete with these big mega players.
This would put HBO Max underneath their umbrella and really sort of build out their robust. And she sort of said here that the valuation might be one concern on the street and perhaps that's sending the stock lower today. But she said that she believes that Netflix overpaid only if viewed in a 1 to threeyear time frame.
But when you think about Netflix over the next two decades, the valuation here makes sense. Yeah. So interesting and we'll see how it plays out in the coming days cuz it's not done. Yeah. Truly a this would be a historical transformation in streaming as well. Definitely. Um next up is Ulta. The beauty retailer seeing its biggest jump since May after boosting its forecast.
Um the shares right now are up by 14%. Ulta um you know you you've been following the retailer so closely and it's been so interesting the disconnect between the halves and the have nots in a way and Ulta Ulta's been doing well. Yeah, Ulta's been doing well because as we've talked about I feel like over and over again value continues to do well.
people are ultimately looking for the best deal and executives saying on the call this uh this or this week that they know that they're up against this challenging macro backdrop and so they're doing everything they can especially around this holiday season to continue to push their their focus on value up against consumers as they really are mindful of their budgets heading into the holiday season and Telsey advisory group saying that while macro visibility remains somewhat difficult in the near term they're really confident about the momentum and relevance that Ulta is able to bring year to date.
Of course, we know that the company has made many strategic changes over the past month or rather year, including that change to get out of Target. And so, it's just been really interesting to see the way that this company has repositioned itself and really ultimately gained optimism across the street this year so far.
Yeah. Um, and finally, let's stick with retail and talk about Victoria's Secret because that retailer posted better than expected third quarter results. It boosted guidance. Those shares are up by about 12% right now. Yeah. And if you look year to date, the stock is up about 14%. Over the past year, up 10%.
But keep in mind, over the past 5 years, this stock has severely underperformed. It's down about 14%. This company really trying to figure out how to revitalize itself. And it seems like it's starting to pick up some progress there. And that's what has the street excited. They raised their outlook for 2025 net sales, operating income, earnings guidance.
Also keep in mind something that we went into the year thinking about is how these retailers would position themselves against tariffs. And that turned out that it wasn't as bad or it's better than feared. And so Victoria Secret said that the now estimated tariff impact would be about 90 million for the year.
We went into the year thinking that it would be 100 million. And so this company definitely performing better than expectations. Yeah, definitely. And you can see that obviously in the stock. Thanks a lot, Brooke. We have much more market action coming up. Stay tuned. You're watching market catalysts.
Dollar General, Dollar Tree, and Five Below all reporting strong quarterly results this week as consumers continue to trade down. Yahoo Finance's Josh Lipton spoke to Anthony Chakumba, managing director and consumer sector head at Loop Capital about how to play the sector. Look at these names, these reports.
Dollar General, Dollar Tree, Five Below. There are some viewers, Anthony, who, you know, maybe they throw them all in the same bucket. Can you help us understand what are sort of the the big points of differentiation between these names? Yeah, I think that's a great question, a great place to start.
So, think of Dollar General as almost like a small supermarket, right? These are all three of them are small stores by the way, but Dollar General, it's about 75 80% consumable. So, think food, household uh cleaning items, health and beauty care items. Um whereas Dollar Tree is about 50% discretionary merchandise.
So they have toys, they have party supplies, seasonal items, 50% consumables. And then Five Below is, you know, the vast majority of what they sell is discretionary. And what's different with Five Below is that Five Below is really targeted towards a teen and a pre-teen customer. Now, one thing with Five Below is the vast majority of what they sell is $5 and below.
With Dollar Tree, the vast majority of what they sell is a$125. Um, with Dollar General, they have a a much larger mix of price points. Anthony, when you look through these results, I'm curious, what was your takeaway about the state of the American consumer right now? How healthy, how resilient, you know, here.
So, we keep talking, Anthony, about that K-shaped economy. Is that what you're seeing in these results? Yeah, we're definitely seeing that. There's no question about that. Now, look, the lowincome consumer is holding in there. They're not doing great, but they're holding in there. High income consumers are certainly doing quite well.
Everyone in the middle is definitely trading down. They're definitely looking to stretch their dollar. And I think that we saw that in all three of these companies results. And to some extent that trade down more than offset any weakness that we saw with the low-income consumer. Let's dig into some um specific names here, Anthony.
So, Dollar General, that one surging today. This is an interesting stat you highlight here. Now pricing about 12% above Walmart on average. Widest gap you've ever seen. How how sustainable is that Anthony? Well to be clear I mean that might have been a bit of an aberration. I mean normally what we see is that they're about a mids singledigit percentage higher.
So I don't want to read too much into one pricing study. And I will say given the fact that they're just so much more convenient than Walmart, right? In other words, these stores are in your neighborhood. You don't have to drive 20 30 minutes to get to the store. They're also 8,000 9,000 foot stores.
It's not like navigating that 200,000 square foot um Walmart. So, they don't have to be a price parody with Walmart. They do have to be close enough for government work as the kids say. Um and I'm not necessarily reading too much into one um pricing study. Why is that one a hold, Anthony? Is that a valuation call primarily?
You know, it's just real tough for me to get super excited about Dollar General. I mean largely because I think you know if we were having this conversation a year a year and a half ago when Todd Bezos had just come back and there was clearly a lot that needed to be done in terms of the turnaround I probably would have been more enthusiastic but it looks like we're in the late stage of the turnaround.
Now having said that there is some still some room to go to to go in terms of particularly uh inventory shrink and also damages. But it's just one of those ones where I really kind of feel like the the the turnaround is in the late innings. So, it's tough for me to get super excited about it. Let's switch gears.
Talk about Dollar Tree as well. You note they added three million customers over the past year. Many of them making over $100,000. What is that customer customer mix indicate to you there, Anthony? If anything, it's kind of where we started this conversation, right? I mean, folks are definitely looking to save money and that's why you are seeing that trade down of those higher income consumers to Dollar Tree and that certainly benefits Dollar Tree.
There's no question about it. What do you need to see to come off the sidelines on that one? I mean, this one surged about 50% this year. Yeah. So, look, I mean, Dollar Tree, first off, they did sell Family Dollar, and that was definitely a major albatross for them. Um, and they got a billion dollars, which is about a billion dollars more than a lot of folks thought they were going to get.
Now, having said that, you know, when they reported results last quarter, they were just really, really messy. And the street does it like messy. this was a much cleaner quarter. Um, so that was very encouraging to me. I also have to get more comfortable with with the whole Dollar Tree Plus initiative where they are selling more and more items above their single$125 price point.
I am a little worried that they might take that a little bit too far and start to bump up against, you know, the Dollar Generals and the Family Dollars and the supermarkets, the convenience stores of the world. So, that's definitely something I'm going to be looking for in in addition to just clean results like we saw this quarter.
All right. So, hold on Dollar General. Hold on, Dollar Tree. Let Let's get to one you like. You're a fan of Five Below. I think you said here, Anthony. Correct me if I have this wrong. I believe your favorite Smidcap growth idea. How come? So, a lot of it has to do with the fact that they brought in this new CEO late last year, Winnie Park.
She is a merchant by nature and their merchandising had gotten really, really tired and she has definitely reinvigorated their merchandising. So, they're focusing a lot more on newness. they are focusing a lot more on licensed um products. So, you know, earlier this year they really leaned into the Minecraft movie Lilo and Stitch.
More recently, they're really leaning into Wicked for Good. I think K-pop Demon Hunters is going to be huge for them. Um they did take some price, so they increased prices on 15 to 20% of their items. That helps them to offset the tariffs and they still have a very long square footage growth runway.
For example, last month they opened their first eight stores in the Pacific Northwest and those stores did incredibly well. So, I do think particularly relative to Dollar General and Dollar Tree, they just got a lot longer square footage growth runway. Yeah, I mean we're showing the chart there. What a move.
I mean, the stock has surged about 50% this year. But you must think Anthony valuation still attractive here. Yeah, the valuation is still reasonable. They're trading about called 26 times by fiscal 2026 EPS estimate. I think the best comps are more in the kind of 30 to 31 times range and I think that my fiscal 2026 EPS estimate could ultimately prove to be conservative.
So I do think that there's still some valuation upside in five below. Remember when inflation felt like a five alarm fire just a few years ago? The flames are mostly out, but the Fed is still waiting for a few hot spots to cool down, like your rent, your health care bills, plane tickets, and dinner's out.
The big question now is whether this is just a last mile of a cleanup or a smolder that could flare back up. And on today's stocks and translation, we're going to use the Fed's favorite inflation report, the PCE index, to see how close we really are to declaring victory. Now, let's start by breaking down exactly what we mean by PCE.
The personal consumption expenditures price index tracks what you pay for almost everything. That's groceries, rent, streaming subscriptions, plus what others pay on your behalf, like employer health insurance. You might be familiar with the more common gauge, the consumer price index or CPI. PCI is a little bit broader than that and usually runs a little lower because it gives less weight to housing.
Now, let's take a look at its history and the latest results. This chart here goes back to 2020 and shows a main headline figure for PCE in white and the so-called core number in green that strips out food and energy components. The Fed likes to look at core because it's less noisy and shows the trend better.
But the official the Fed's official 2% inflation target is explicitly tied to the headline number which includes everything. Now, notice in the middle of the chart, those big peaks right here. As both inflation numbers surged above 5% to 40-year highs, the Fed hit the brakes hard in 2022, raising rates to combat this.
And we can see that inflation has leveled off since, going sideways since early 2024. And according to the latest numbers from September that we got Friday, both headline and core came in at 2% 2.8% measured from one year ago or year-over-year. So they finally converge to the same level at the right edge of this chart.
Now let's also take a look at that dotted white line here because that is the Fed's 2% inflation target. Uh if both the headline numbers and cores are stubbly sticking above that line as they are, well this is then the Fed's last mile problem. And it's about the services that you can't easily cut like your dentist, your insurance bill, and that plane to get home for the holidays.
Now, let's break down the so-called super core inflation. When the Fed was aggressively hiking rates in 2022, Pal kept pointing to core services excluding housing. That's what we shorthand as supercore. Think of it as a wage heavy part of the economy. Healthcare, financial services, travel, dining out, recreation.
If wages are running hot, this is where you see it in prices. And now, let's take a look at how Super Core has run since 2020. And here's the backstory. Supercore surged to around 5% in the pandemic boom in the middle of that chart again and has come down a lot, but we just learned it's still sitting around 3.3%.
It's been going sideways since last year and has stubbornly remained higher than the headline and core PCE numbers and much higher than the Fed's 2% general inflation target. And if you look inside the latest report from the BEA, almost all of the spending growth came in September from services, housing and utilities, health care, financial service, dining out, the stuff that you can touch, what we call goods, those were actually flat.
So to put it all together, you've got paychecks creeping higher, people still paying for services that they can't ditch, and prices in those categories just refusing to cooperate with the Fed. So, what should you be watching on the inflation front into year end? First, we got a big Fed decision out Wednesday, December 10th, and a Wall Street Wall Street has baked in a rate cut.
So, the drama itself is not going to be about the move. It's going to be about the split inside the room and what POW says at the presser and how he describes the inflation threat. We've got a block of officials who are worried that cutting too fast could light up services inflation again. and another block saying, "Look, growth is cooling down, so we need to ease off the brakes." And then we get a number for uh November CPI on Thursday, December 18th.
If it comes within expectations and doesn't change too much, the markets will lean into a bigger rate cutting cycle next year, 2026, especially with the prospect of a more dovish Fed share after Powell's leadership ends in May. Finally, keep an eye on bond yields and rate cut odds. They are the real-time vote on how quickly the Fed can tiptoe from today's services stickiness to that new 2026 Fed that the administration would just love to lean doubbish.
And tune in to the Stocks and Translation podcast for more jargon busting deep dives. New episodes can be found Tuesdays and Thursdays on Yahoo Finance's website or wherever you find your podcast. Stay tuned for more market catalyst up next. Venture capital money has been pouring into artificial intelligence startups amid red-hot competition.
But fintech firms are also pulling in capital, even going public. So, let's get a read on the state of the industry. Joining us now is Nigel Morris, QED investors, co-founder and managing partner. Nigel's also the co-founder of Capital One, and he is invested and has invested in many fintech uh that we know within this landscape.
Thank you so much for being here. Happy to be here. Really appreciate it. Um so let's talk about the investment landscape first of all from the VC side. Um because certainly this year we have seen one of the most popular places for IPOs has been within FinTech. Do you think that's going to be the case next year as well?
And are those the kinds of companies that continue to attract a lot of capital? Yeah, you're quite right. Um in uh in 2021 there were over 60 fintech IPOs and then the last three years very few. This year we've had about a dozen uh some household names um uh Cler uh Circle uh Chime uh Figure and uh they've all gone out uh in the uh in the last couple of quarters.
I think the fourth quarter is going to be more muted. I think you know the backdrop of uh what's happening with rates and uh immigration and uh and the shutdown in Washington has not helped but I think that all of them have done somewhat well and it speaks to the fact that uh the there's a lot of investor appetite both retail and institutional for fintexs that have got to scale and are profitable and are growing very fast.
So I think we'll see some fintexs going public in 2026. I think we'll see more in 27 as these as fintexs are moving through the maturation cycle. But fintech is back in that um 69% now of public fintexs are profitable. That certainly wasn't the case in 21. Uh the revenue multiple gone from about three to four and a half five and a half sorry over the last uh uh two or three years.
So there's a sense that these companies are real, are at scale, and companies like uh Robin Hood of course now are becoming household names. Um it's been a really fascinating trajectory to watch some of these fintexs um expand their offerings, their services over the past few years and as somebody who's a veteran of not just the traditional financial industry, although Capital One was an upstart as well when it began once upon a time.
um but also somebody who's invested in a lot of these companies you know I look at the sofas and firms and clarnas of the world or Robin Hood which is also expanding its offerings and I wonder if you look 5 10 years from now what share of financial services you think those types of companies will have
oh my I think it's going to be very large but you're quite right uh fintech start with a single product and they make that product work they get the unit economics to work they get the wonderful net promoter scores they're solving a real customer problem be it a consumer or a small business and then from there they expand.
They go into uh uh analogous spaces of either on the asset or on the liability side or both. And new banks are perfect example of that that started with a lending product in Brazil uh went to deposits and CDs and went to wealth management and built out uh full range of lending products and Capital One did the same thing 30 years ago.
uh Capital One also uh um went to Canada and the UK and France and Italy and Spain. So FinTechs by their very nature are incredibly expansive and we're going to see a lot more of that. Um if we look at the data fintexs which only represent 3% of all revenue in financial services is actually 400 billion of revenue on 14 trillion.
So 3% if you look at the growth rates of fintech they're growing at 21% last year. incumbents grew at 6%. If you extrapolate that forward, and I think fintexs are going to continue to grow a lot faster than the incumbents, then fintech represents 10% of market share in 10 years. So I think we're going to see a lot more of that.
And then if I might add on, we we also have a generation of fintexs that have been developed overseas who now have critical mass who are very much eyeing the United States. New bank that has nearly 60% penetration of all Brazilian households. Uh um uh Re You're an investor in New Bank. We should mention
very early investor in in Revolute uh uh u very strong in in other geographies. Monzo, a uh neo bank startup in uh the US in uh in the UK and the the the US but in terms of market opportunity the TAM the total addressable market is so much bigger. So it beholds them to really look at uh theiite the the United States.
So we're going to see more of that. Plus the regulatory climate in the last 12 months has dramatically changed. So new bank is applying for a banking license. We're going to see so many fintexs both inside the United States and those that covered the United States getting access to banking licenses that under the previous administration would have been implausible.
What is the appeal to a consumer either a retail or a business client of this new crop of FinTech? What are they offering to customers that traditional finance is not? It's a great question. Um, they are offering uh a seamless uh approach to solving a real problem that they have. often much more transparent, often better pricing and uh the ease of a user experience that's far superior measured by net promoter scores.
The fintexs that we've just been talking about will have net promoter scores that are 70, 80, and 90. Bank and insurance company fintex are often 30, 40, 50 points lower than that. And it's very hard for an incumbent with uh incumbent management structures, incumbent technology to be able to keep up with Planner and Robin Hood and Revolute where they're so tech forward and move at a much greater speed with incredible agility.
That agility now showing up by the way in terms of adoption of artificial intelligence, both reducing cost and improving customer experience where the incumbents are struggling with now how do I start to use these kinds of tools to make my business better? Um, how will I know as an investor who the winners are going to be within FinTech or do you just is it better to sort of buy them as a group?
I wish I knew how to do that. If I could do that very well, I think you probably done pretty well at it. Well, you know, a lot of being in the right place at the right time. I would look for traction, you know, um, and an ambition. And I think they're the two things to to look at. If uh, if you can make the lending side of the business work, chances are you can make the other side work.
lending is much harder to do uh than it is uh the uh the debit side of the portfolio. Do you have a real raise on detra? Are you targeting a particular demography with a real problem? Uh you know part of the challenge of coming to the United States particularly in the credit card business is who needs another you know upscale uh credit card you know where there's uh uh JP Morgan and Capital 1 and AMX who are really focused there.
Um I think we see still a tremendous amount of opportunity down in the near-prime and subprime space where the banks have basically de facto said we don't want to to play in that population. So there we've seen the massive expansion of earned wage access uh and of course buy now pay later uh which have are really focusing on that population that population is hurting today.
They are suffering in the economy and are nervous. So I think there's a real role for FinTech to play to have a a massive social purpose in reaching out to those populations where the incumbents are really not terribly interested. Nigel, thank you so much for coming in. Really fascinating conversation.
I appreciate it. It's a pleasure. Thank you very much. And that is it for Market Catalyst. I'm Julie Hyman. Thanks for watching. More Yahoo Finance is coming up.
Comments 0