My top 10 things to watch Wednesday, May 1

  1. Wall Street begins May under pressure after a terrible April that broke five straight months of gains. ADP’s monthly report on hiring at U.S. companies showed stronger-than-expected job growth in April, showing labor market resilience. The government’s jobs data is out Friday.
  2. The Federal Reserve is expected to hold interest rates steady when it ends its two-day meeting Wednesday afternoon. The market is trying to adjust to “higher for longer” rates. The question the press might ask Fed chief Jerome Powell at his news conference: Would you raise or lower?
  3. Amazon‘s UPOD, under promise and over deliver, is at its best. The e-commerce and cloud giant crushes estimates and its own guidance on first-quarter operating income. Light guidance looks conservative. The benefits of cost control measures were on full display during the first three months of 2024. The Club stock is up roughly 1.5%. We raised our price target to $200 per share from $190. Kept our 2 rating.
  4. Starbucks delivers a horrendous quarter and a guidance cut, sending the Club stock down more than 13%. Why didn’t CEO Laxman Narasimhan preannounce? Management is offering incremental fixes when obviously more is needed. China was a disaster. We cut our price target to $90 per share and downgraded it to our 2 rating.
  5. Starbucks and Amazon were after the bell Tuesday, Club name DuPont is out with earnings Wednesday morning. Top and bottom line beats in the first quarter and guidance raise. The stock is up 5.5%. Recent ramp in orders gives them visibility in guidance. Destock is complete in a few business lines. Semiconductor business up 10% and plenty of runway for growth next year thanks to AI.
  6. Shares of Estee Lauder, also a Club holding, are down 4%. Before the bell, the company issues fiscal 2024 third quarter earnings and revenue that beat. But guidance for the current quarter light but likely conservative given bullish commentary in the press release. Management lowers full-year organic net sales outlook range, citing continued softness in overall prestige beauty in mainland China.
  7. Skyworks CEO Liam Griffin is a straight shooter, and he see “below normal trends” in the mobile phone business, largely Club stock Apple. I reiterate that Bernstein was wrong to upgrade. But the December quarter at Skyworks marked a bottom. Delivered modest sequential growth in March quarter, representing a turning point. The pace of recovery will be measured.
  8. Super Micro Computer is down 11%. Expectations were set too high for quarterly revenue: It’s the first time I can recall that the company missed on revenue. While coming back to Earth a bit in the past six weeks or so, the stock was still up 200% in 2024, as of Tuesday’s close.
  9. Advanced Micro Devices had a good quarter. Disappointing embedded business should bottom. No bottom yet in video gaming. Server crushing Intel. MI300 should be $4 billion next year but the Street was at $6 billion. The stock is down more than 6%.
  10. Johnson & Johnson agrees to pay $6.5 billion to settle nearly all of ovarian cancer talc lawsuits. Claimants must now vote. Will plaintiffs lawyers capitulate? I think they might. Claims that talc products caused mesothelioma are outside this settlement. J&J says it has resolved nearly all of mesothelioma suits to date.

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