Futures get back up again, Micron plunges, Lennar drops, Soho House takeout
I’m late. My three alarm clocks failed me this morning. I guess in Florida they have better things to do than start ordering me around.
Get back up again: Futures are bouncing this morning after a brutal sell-off yesterday. The Federal Reserve cut interest rates as expected but signaled there would be fewer rate cuts in 2025 because the economy is strong and inflation is higher. The S&P 500 put in its worst Fed day sell-off ever according to Bespoke Investment Group, falling nearly 3%. The Dow Jones Industrial Average fell for a 10th straight session. The TSX plunged more than 2%. If monetary policy uncertainty wasn’t enough, there is a chance of a US government shutdown. President-elect Donald Trump was critical of a plan that would fund the government until March 14. Republicans quickly regrouped and scrapped the plan without a new one in place. Earlier this morning we had the Bank of England and Bank of Japan rate decisions, both held rates. However, pressure seems to be growing on the BoE and it is likely they will cut rates next year. This meeting was a 6-3 vote, with three members saying it was time for rate cuts. As for the big sell-off in markets, can you spot it on this chart?
Taking a hit: Shares of Micron are plunging 13% in the pre-market after a softer outlook for second quarter results. The chip-maker topped profit expectations in the first quarter. However, the softer outlook for the next quarter is putting pressure on the stock. Micron is signaling weakness due to a softer PC market which is not enough to offset strength in data centres (read: AI). To be clear, the growth in data centres is there, sales in that business line increased 46%. But, analysts had already priced that in. As the recent weakness in Nvidia has demonstrated, it is not enough to just meet expectations.
Cracks in the foundation: Shares of Lennar are plunging 7.5% and poised to open at a one-year low. A few months ago, the homebuilder was at an all-time high. Profit missed expectations and sales fell from last year as higher mortgage rates continue to dent housing demand. And with today’s mood dominated by the prospect of higher interest rates, it is only adding to anxieties that the housing market won’t pick up any time soon. Shares of other homebuilders like KB Home, Pulte and Toll Brothers are down in sympathy.
Hit the gas: People might not be buying homes, but the used car market is picking up. CarMax reported its first quarterly sales increase in more than two years, the stock is up 7.5% in the premarket. Used-car retailers have had a tough go since the pandemic unwind. Remember when used cars were more expensive than brand new ones because supply-chain disruptions made it hard to get new cars? Well, that unwound over the last couple of years. Today’s results are being greeted well industry wide. Shares of Carvana, AutoNation and Cars.com are all up in the pre-market.
Price of membership: Shares of Soho House are surging 64% after getting a takeout offer. The offer of $9/share is a significant premium to where the stock was trading yesterday (under $5/share) but below where it traded a few years ago. The private-members club grew membership by 17% and total sales by 13.5%. Not too shabby considering a difficult consumer environment and the fact that memberships can run you more than $5,000 per year.
