Rate cuts at all-time highs, Lyft lifts, BCE warns, buzzkill for pot stocks
After a very intense week that featured Halloween, Diwali, my eldest child’s rock-climbing 7th birthday party, the time change and the end of my nearly 15-year career at BNN, I have taken a vow of quietness. I told my husband and kids that for the month of November I will not be yelling. Seven days into that vow, I am still going strong. This weekend will be a real test. I have my birthday, two other kids’ birthday party, a baby shower and Child 1’s hip-hop class. That’s just Saturday. Send me strength.
Fed day: Futures are looking to build on the Trump fueled gains and the bond sell-off has halted. Yesterday’s rally saw the S&P 500, the Dow Jones Industrial Average and the NASDAQ all hit record highs. It is in this environment that the Federal Reserve will make its interest rate decision today. The Fed is widely expected to cut rates but as always it will be about the path forward. And that path could be a little more inflationary given the view that Trump’s policies either through tariffs or tax cuts could reignite inflation. I also wonder about Jerome Powell’s job security. While Powell was selected by Trump in 2018 to be the head of the Federal Reserve he wasn’t afraid to go after him if he made a rate decision he didn’t like in what was a break from tradition. Aside from this, you might be wary about rate cuts while the market is so exuberant. But as the chart below shows, the Fed has cut rates 20 times when the market has been at or near all-time highs. Each of those 20 times, Ryan Detrick of Carson Group points out, stocks were higher a year later.
Thumbs up: Shares of Lyft are getting a lift (sorry). Lyft is up 23% in the pre-market. Sales jumped more than 30%, which was better than expected. The ride-sharing company benefitted from strong demand and its forecast suggest the demand is going to continue. Lyft has massively underperformed UBER (Lyft is flat over the last two years while UBER is up nearly 170%). Most analysts are neutral on it and the commentary this morning suggests that while the stock has an attractive multiple (17x vs UBER’s 40x) they’d like to see consistent execution.
Dial-tone: The hits keep coming for BCE shareholders. Just days after announcing a $5 billion dollar deal for a US company that sent the stock to a 12-year low, BCE is now cutting its sales forecast. BCE says sales will fall 1.5% compared to the previous outlook of 0-4% growth. The company blamed a laundry list of issues including fewer mobile device sales and wireless price pressures. The dividend yield is now nearly 10% which highlights how wary investors are about it. However, they did announce BCE will be pausing dividend growth.
Money of kings: Barrick Gold is a little lower this morning as earnings and free cash flow were worse than expected. Even with gold near record highs, Barrick has slumped to a 3-month low and is still well below where it was during the pandemic. Operational issues have haunted the company, but the CEO Mark Bristow promises that next quarter will be better.
Buzzkill: Marijuana companies took a drubbing yesterday. Proposals to legalize recreational marijuana in Florida, North Dakota and South Dakota failed to get enough votes. Shares of Canopy Growth fell 20% and Tilray fell nearly 13%. Trulieve, which operates in Florida, got hammered down nearly 40%. While the states didn’t progress toward legalization, worth noting that Trump was supportive of legalization on the campaign trail.
