Futures rise after Fed disappointment 📈

Markets are shaking off yesterday's Fed news and futures are up in early trading.

Good Morning! 

It's Chris from Elite Trade Club, here to give you this morning's premarket trading news.

Correction: I accidentally sent out the earnings list for May 2nd in yesterday’s report. Apologies for any inconvenience. 

Let’s get ready to trade!

Markets 📈

Stocks ended Wednesday with mixed results, after the Fed admitted rate cuts are farther off than initially hoped. However, the movements were minor and didn’t exceed 0.3% in either direction.

  • Dow [+0.2%]

  • S&P 500 [-0.3%]

  • Nasdaq [-0.3%]

  • Russell 2K [+0.3%]

Futures are ticking higher in early trading. S&P 500 contracts are showing a 0.6% ahead of the opening bell.

What to Watch Today:
The fallout from yesterday’s Fed announcement will still affect the market today. Investors are understandably put off about the news, especially after the Fed set expectations for a rate cut around this time of year earlier in 2024. However, judging by this morning’s futures action, the market has been quick to shake off the news. We’ll see if this trend continues through the entirety of today’s trading session.

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Premarket Highlights 🔎

💸 Consumer Cutbacks Hit Fastfood Giants

Recent reports reveal that major fast-food chains like Starbucks, KFC, and McDonald's are feeling the crunch as consumers tighten their belts. Starbucks announced an unexpected drop in same-store sales, leading to a 17% plummet in share prices. Similarly, KFC and Pizza Hut saw declines, while McDonald’s is ramping up efforts to attract budget-conscious diners.

Causes and Concerns 🌧️
Starbucks attributes part of its downturn to unfavorable weather, while Yum Brands—parent company of KFC, Pizza Hut, and Taco Bell—cited January snowstorms and tough year-over-year comparisons. However, these factors don’t fully account for the disappointing earnings. A broader issue seems to be the fierce competition for a shrinking consumer base, who are becoming increasingly selective due to higher dining costs.

Pricing Pressures 📊 
The cost of dining out has risen approximately 5% over the past year, outpacing grocery price increases. McDonald’s CFO highlighted the necessity of a "street-fighting mentality" to attract diners under these challenging conditions. Meanwhile, some chains like Wingstop and Chipotle continue to see growth, suggesting that consumers are still willing to pay for favored treats despite overall spending cutbacks.

Value Focus 💵 
Chains are shifting strategies to offer more value. Starbucks is enhancing its app to extend discounts to more customers, and McDonald’s is contemplating a new national value menu. Yum Brands sees an opportunity for Taco Bell to capitalize on its reputation for value in a market where budget-friendly options are increasingly crucial.

Outlook & Adaptation 🔄 
The sector faces ongoing challenges as consumer spending habits evolve. Companies are adjusting their strategies to navigate these changes, hoping to attract price-sensitive customers without compromising profitability. The landscape suggests a mixed outlook, with some brands poised for recovery and others needing to reassess their approach to value and customer engagement.

Featured Earnings 💰️ 

  • Linde [LIN] ... AM

  • ConocoPhillips [COP] ... AM

  • The Cigna Group [CI] ... AM

  • Regeneron Pharmaceuticals [REGN] ... AM

  • Southern Company [SO] ... AM

  • Intercontinental Exchange [ICE] ... AM

  • Apple [AAPL] ... PM

  • Amgen [AMGN] ... PM

  • Booking Holdings Inc. Common Stock [BKNG] ... PM

  • EOG Resources [EOG] ... PM

Economy 🏗

  • Initial jobless claims [Apr] ... 8:30a

  • U.S. trade deficit [Mar] ... 8:30a

  • U.S. productivity [Q1] ... 8:30a

  • U.S. unit-labor costs [Q1] ... 8:30a

  • Factory orders [Mar] ... 10:00a

Running Hot 🔥

  • Context Therapeutic [CNTX] >> +36.0%

  • Aptevo Therapeuitc [APVO] >> +28.1%

  • Enovix [ENVX] >> +31.1%

  • Fastly [FSLY] >> (35.7%)

  • Freshworks [FRSH] >> (28.4%)

  • Everspin Tech [MRAM] >> (18.0%)

Loews Corp [L] - Last Close: $76.28

Loews is powering to the top of the S&P 500 despite no obvious company-specific news to explain the sudden breakout.

Late yesterday, CFRA published a report that reemphasized its positive view on stock and highlighted positive notes from its recent performance.

The note must have gotten the market’s attention because share of L are exploding in today’s premarket.

L is up 22.3% but volume is very low at the moment. This gain translates to a $3.77 billion increase in the company’s market cap.

My Take: I had to mention this today because it’s very odd to see a stock as big as L make such a sharp & sudden move with no obvious news to explain it. I’m not sure what’s going on here but I would advise caution.

Carvana [CVNA] - Last Close: $87.09

Online car retailer Carvana is getting a boost after a strong earnings report in Wednesday’s aftermarket.

Carvana reported a surprise profit of $0.23 per share after reporting a loss of $(1.51) per share a year ago. The consensus estimate was for a $(0.79) loss.

Net sales grew 17% YoY to $3.06 billion for the quarter, which also outpaced the Street’s $2.69 billion forecast.

CVNA is a top mover with a 36.7% gain on roughly a half-million shares traded.

My Take: CVNA has made a dramatic comeback over the past year. It’s pretty impressive to see, but I worry it’s a little late in the game to start buying. It could be wise to wait for a pullback here.

Allarity Therapeutics [ALLR] - Last Close: $1.37

This tiny biotech just announced the early discontinuation of a Phase 2 trial of stenoparib due to the success of the stud.

The drug showed clear clinical benefit and achieved significant milestones in the trial, so the company halted early to “enable and accelerate” the development of a follow-up trial with the FDA.

ALLR is up 121.1% on over 10 million shares traded.

My Take: This could be a big catalyst for ALLR. The stock has had a rough run of it in 2024, but this news could help it get back on an upward trend.

Emergent Bioscience [EBS] - Last Close: $1.93

After yesterday’s close, Emergent Bio posted a double-line beat on its Q1 earnings report and announced a cost-cutting effort.

Emergent reported a surprise profit of $0.59 per share against the consensus of an $(0.83) per share loss.

Revenues of $300.4 million also topped the $224.5 million consensus. Emergent also said it would lay off 300 employees to slash costs.

EBS is up 54.3% on roughly 8 million shares traded in today’s premarket.

My Take: This was a good report for EBS. Shares have been downtrending since a spike in March, but maybe news of the strong quarter will help it pivot.

That's it for today! Thanks for reading, and good luck out there!

Best Regards,

— Chris D.
Elite Trade Club

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