Peloton is falling behind the pack

Stocks took another fall yesterday as emotions swirled through the market, pushing and pulling in all directions. Treasury bonds, known for low volatility defied their historic roll and provided a roller coaster ride in yesterday’s session.

All in an instant. When I was growing up there were really only three things that could be guaranteed: death, taxes, and…dial tone. I am sure that most of my readers know what dial tone is, but those of us that are of a certain age understand the significance of it. When telephones were still attached to walls and handsets were attached to them with long almost-always tangled spiraled chords, one could lift the handset, place it to one’s ear, and BAMM, as if by magic there was always a dial tone, guaranteed by Mother Bell. You could press “0” and get an answer to almost any question. What’s more, you could dial “411” and get information about almost anyone. An address, a phone number, and you might even ask the operator to connect you…though there was a charge for that. That was state of the art as before all that innovation, we had to actually pull the dusty, 5-pound phonebook off the top of the refrigerator and look up a phone number…never a fun affair, but necessary if you wanted to dial someone up. At that point, dialing “411” was the closest thing we had to instant gratification. If you had investments in the stocks market, you would have to wait until the Wall Street Journal was dropped at your local news stand…or your stoop, if you were really posh. If you owned bonds, you would have to call your bond broker, assuming he wasn’t out to lunch. If you wanted to get news about the market, you would have to wait for the 6 or 11 o’clock news, and if you wanted real depth, you would have to wait until Friday’s airing of Wall Street Week with Louis Rukeyser. Well, clearly lots has changed since those days.

There is no such thing as dial tone anymore. Today, we have one touch checkout and same day delivery of just about anything. News comes 24 hours a day and 7 days a week, and you don’t even have to seek it out - it simply shows up on the front screen of your phone. On that same phone you can track the value of your portfolio by the second. You can place trades, read the news, order lunch, place some more trades, get some options quotes, check your portfolio value again (and again), make a dinner reservation, pay some bills, text message your friend, monitor your dog through your home security system, place a video call to your children, and order up an Uber to drive you home. Now that is instant gratification, wouldn’t you say? We have become accustomed to it. We expect it, and if something goes wrong, we become flummoxed.

In my more than 30 years in this business, I have witnessed many innovations and changes that have tracked (albeit loosely) the evolution of technology. Sure, you can trade like a pro from your phone while sitting on a porch or on a public bus, but there is still one thing that you can’t do. You cannot rush the market or the economy. On the economy, the Fed, which you can watch live from your phone, enacts monetary policy in order to steer the economy clear of the rocks. However, steering the economy is not the same thing as steering one of those electric scooters which you can hire through your phone on almost every street corner. No, the economy is more like a heavily laden cargo ship. Piloting those ships, the captain has to begin turns or maneuvers miles in advance. Many may argue that the Fed was a bit late with its current braking maneuver, bringing the economy frightfully close to rocks. Adding to the fright, the global economy is in rough seas with a war in Ukraine causing commodity prices to spike and a possible economic slowdown in China, the world’s second biggest economy. Indeed, the Fed is acting with purpose, and though we may not see it yet, it is having an effect. Expectations for slower growth are beginning to creep into the economy as well as the minds of consumers, who are likely already pulling back on their spending. On the markets, who wouldn’t want instant success. It would be nice if the values of our portfolios would only rise, but we know better. Wealth creation takes time and patience, and it cannot occur without challenging periods. During those periods we must be extra diligent in selecting investments to maintain a high-quality portfolio. Most importantly, we have to be patient. There is no instant gratification with this one, sorry.

WHAT’S SHAKIN’

Dentsply Sirona Inc (XRAY) shares are down by -13.38% in the pre-market after it was unable to file its quarterly report due to an internal audit investigation into misuse of funds. The dental supply company further missed on Q1 EPS and Revenue estimates and lowered its full year EPS guidance. Dividend yield: 1.27%. Potential average analyst target upside: +38.8%.

Microchip Technology Inc (MCHP) shares are higher by +3.09% in the pre-market after it announced that it beat EPS and Revenue targets by +7.31% and +1.36% respectively. The company acknowledged that supply chain challenges would persist through the year but delivered strong results. Dividend yield: 1.72%. Potential average analyst target upside: +32.1%.

Peloton Interactive Inc (PTON) shares are lower by -25% in the premarket after it announced that it missed on its Q1 results. The company stated that its costs are rising prompting it lower forward guidance. Cash is also dwindling for the pandemic darling, prompting it to seek out debt financing from some of Wall Street’s largest banks. Potential average analyst target upside: +173.2%.

YESTERDAY’S MARKETS

Stocks fell yesterday as investor fear took hold. The S&P500 fell by -3.20%, the Dow Jones Industrial Average sank by -1.99%, the Nasdaq dropped by -4.29%, and the Russell 2000 declined by -4.21%. Bonds rose and 10-year Treasury Note yields slipped by -9 basis points to 3.03%. Cryptos sold off by -16.87% and Bitcoin dropped by -9.54%.

NXT UP

• NFIB Small Business Optimism (April) came in above expectations at 93.2 for a second month.
• Today’s Fed speakers include Williams, Barkin, Waller, Kashkari, Mester, and Bostic. That’s a lot of them and they will, no doubt, have a lot to say.
• After the closing bell announcements: ROBLOX, Occidental Petroleum, Witch, Allaway Golf, Rocket Cos, Allbirds, Coinbase Global, Wynn Resorts, and Electronic Arts.