Stocks popped higher at the open this morning on strong Disney (NASDAQ: DIS) earnings before retracing slightly through noon. The Dow, S&P, and Nasdaq Composite all sat on modest gains, with Dow stocks leading the way.
“Disney really is what got the animal spirits going,” explained Infrastructure Capital Management CIO Jay Hatfield.
“These large-cap reporters are really what drive the market.”
Disney posted smaller-than-expected subscriber losses in its streaming division while beating on both revenue and earnings. Bob Iger, Disney’s interim CEO, said he doesn’t anticipate remaining in his position for more than two years.
DIS shareholders were also happy to hear that activist investor Nelson Peltz has officially ended his proxy fight with Disney. Peltz previously skewered the company for its reliance on sky-high park prices to buoy losses in other divisions.
But under the guidance of Iger, Peltz says Disney is back on track for success.
“Now Disney plans to do everything we wanted them to do,” he said in a morning interview on CNBC.
“We wish the very best to Bob, this management team, and the board. We will be watching. We will be rooting.”
Jobless claims lifted sentiment, too, as first-time unemployment filings exceeded estimates, rising to 196,000 last week from 183,000 in the week prior. Total US jobless claims are now near a one-year high.
Treasury yields fell in response as rate hike expectations shifted; bulls are hoping a softening labor market will allow the Fed to raise rates less than previously anticipated. This renewed optimism helped drive stocks higher at the open.
However, the major indexes gave up most of their morning gains after Google-parent Alphabet (NASDAQ: GOOGL) spoiled the party yet again.
GOOGL shares plunged yesterday (-7.68%) when the company canceled its much-anticipated AI chatbot test. Then, today, the same AI – named Bard – answered a question incorrectly in a demo that Google posted to its corporate Twitter account.
Twitter users quickly pointed out the error, and the GOOGL rout continued. GOOGL shares fell another 5% through noon today as the stock shed over $100 billion in market cap.
But did investors overreact? According to senior JPMorgan trader Ron Adler, the market is being way too hard on Bard.
“The response from investors around AI has been very emotional and devoid of reality,” Adler said.
“Will anyone change their homepage or no longer visit Google when looking for or thinking about looking for something? Probably not. Will we ever really use the name Bard in conversation? Also, probably not. How many of you use Siri or Alexa to conduct simple searches you do on your phone? A lot less than one would think. Old habits die hard, and Google will be hard to break.”
Adler’s right in that a Bard snafu won’t impact Google’s stranglehold on web searches. On the other hand, selling in response to Bard’s problems was to be expected as the AI’s announcement spiked GOOGL shares sharply higher on Tuesday.
Negative momentum then snowballed over the last 24 hours and now threatens to drag the general market into a bearish reversal, which might just trigger if GOOGL loses any more steam.
