Amazon's $2T market cap, consumer spending: Asking for a Trend

On today's episode of Asking for a Trend, Host Josh Lipton breaks down the major market trends of the trading day.

As inflation has put consumers under pressure, Lightspeed CEO Dax Dasilva provides insight into Americans' dining preferences. A recent Lightspeed survey found that 51% of respondents plan to dine out at the same rate or more frequently in the next six months. He argues that Americans love dining out, pointing to the 81% who dine out at least once a month and 39% who eat out at least once a week.

Meanwhile, the results of the Federal Reserve's latest bank stress test results show all 31 of the nation's largest banks could continue to lend in the event of a severe recession. Yahoo Finance's Jennifer Schonberger breaks down the results and what it means for investors.

Yahoo Finance's Josh Schafer joins the show to break down his biggest takeaways from the trading day, from Amazon's (AMZN) $2 trillion market capitalization to the upcoming weekly jobless claims data.

As part of Yahoo Finance's Space Race: Investing in the Final Frontier series, Varda Space Industries Co-Founders Will Bruey and Delian Asparouhouv sit down with Akiko Fujita to give insight into the advantages of pharmaceutical research in microgravity. Bruey outlines how microgravity works and how the company is utilizing it here on Earth, explaining, "It's ubiquitous and it's impossible to create in perpetuity on Earth. And so we essentially are building space manufacturing modules because we can change the outcome of chemical systems like no one else can on Earth."

Finally, S&P 500 (^GSPC) performance and breadth have hit one of the biggest dislocations in 30 years. Fundstrat Global Advisors managing director Mark Newton tells Yahoo Finance's Julie Hyman, "It doesn't have to mean that the market is going to go into a correction or roll over. Those tech stocks can continue to go up and that divergence can get wider and wider, similar to what we saw back in 2021. However, we can also see what I think is going to happen is as a start of the broader market to play catch up. And we've seen a little bit of that in financials over the last week."

This post was written by Melanie Riehl

Video transcript

Hello and welcome to asking for a trend.

I'm Josh Lipton for the next half hour.

We'll be breaking down the trends of today that will move stocks tomorrow.

There's a lot to keep track of.

So we're focusing on what you need to know to get ahead of the curve.

Here are some of the trends.

We're going to be diving into stocks ending the day higher as a lack of catalyst to leave the broader markets, little change in video shares manage to recover the day's losses after breaking their losing streak yesterday.

Plus, can you put a price on value?

Apparently you can mcdonald's debuting its $5 meal deal to win over inflation.

We are consumers after a rougher than expected first quarter and Pharma goes to space.

The pharmaceutical industry is discovering the benefits of zero gravity in drug development.

Going to hear from one of the companies that's helping them reach the stars.

Dining out is here to stay.

It's according to new research from commerce platform, light speed, more than half of survey respondents said they plan to dine out at the same pace or more frequently over the next six months.

But value is now top of mind light speeds.

Ceo Dax.

Da Silva joins me now, Dax, it is always good to see you.

Um So you guys did a, it was an interesting sounding survey.

You're trying to get a read here on dining trends.

So let's start there, Dax, what did you learn how dining trends been evolving?

So, Americans love dining out.

You know, our, our restaurant software is installed in restaurants across Europe, Asia and North America and Americans are, are still dining out as you saw from that stat, 51% plan to increase their dining out in the next six months, but 81% are, are dining out once a month or more right now and 39% once a week or more.

And so, uh you know, you just mentioned something about mcdonald's fast food has gotten more expensive.

Uh And so casual dining is becoming more popular because it's um it's competitive with uh with what fast food has become in terms of, in terms of price.

So, uh there consumers are really looking for that value, uh you know, value for the dollar.

And how is this sort of, I was interested reading through the survey dax how some of the knock on effects, for example, if people they still wanna eat out, but bottom line, they're looking to stretch that dollar, right?

Um How does it affect other things that might go on inside a restaurant for example, does that impact um how people think about tipping?

Oh tipping, you know, I think consumers are reaching the tipping point a little bit on tipping.

There's a lot of pressure, as you see, as you see from these stats here.

Um you know, there's a lot of pressure to tip.

58% are feeling that pressure, 44% say that um that inflation has affected their ability to tip.

But Americans are the most generous uh you know, across our survey compared to Europeans or, or um you know, folks in Asia uh Americans still tip uh close to 20% and a good, good percentage tip above 20%.

So even though Americans are feeling, you know, the pinch of, of inflation, uh the generosity is still there.

Uh on the tipping side now we, we've spoken another trend.

I wanna get your take on DAX.

You know, we have different restaurant ceo s come on Yahoo Finance and often they'll talk about how enthusiastic they are about integrating technology into their restaurants in your survey.

What did you pick up there?

How do consumers actually feel about tech when they dine out?

Do they react positively to maybe this kind of innovation?

Well, of course, the one of the things that we surveyed uh was the QR code menu uh and that is not popular.

89% prefer a physical menu.

Uh You could probably relate to that.

I I per personally don't love it, but 34% a good third actually hate it.

Um, so, you know, this was a COVID measure that kept us all safe during COVID.

But, uh, but folks prefer the physical menu when they go out.

Uh I think that, you know, restaurant tech is really helping the back end, uh, the back office of the restaurant, you know, be more efficient on food costs.

Uh, helping also to facilitate, facilitate other things like delivery or pick up.

Uh so they consume can have the choice they want and how they get, how, how they receive their food.

Uh So, but the QR Code menu is uh is, is, is not the most popular.

II, I do get that.

I mean, believe me that when I go out, I, I do pre prefer that that kind of physical menu.

I am kind of curious though when sort of the reactions to the tech to the QR Codes, did that, did that differ depending on the demographic?

Yeah, 8, 18 to 34 55% of 18 to 34 were affected.

Oh, sorry.

Yeah.

No, II I think definitely the older folks uh you know, um don't love the QR Code menu.

Um those that are younger that are a little bit more adept to the tech are um OK with it.

Uh So I think it is a generational thing.

Uh I think everybody had to get used to it during the during the pandemic, but now that, that is subsided, you know, everyone is looking, uh, to enjoy the physical menu as a part of their, uh, uh, you know, restaurant, dining out experience.

And you got you all dax, you got, you got a ton of data over there.

I'm just curious, um, besides restaurants, any other big trends you're kind of picking up right now and in other sectors, other industries that you'd highlight.

Yeah, we're seeing in retail.

Um We're definitely seeing some of the outdoor uh verticals and retail start to pick up.

Uh You know, we, in our last quarter, we reported that, you know, home and garden, sporting goods.

Uh we're probably going to trend up uh and uh other, other um other verticals like clothing and so on would probably trend down uh as we approach summer.

So this is uh these are some of the things that we're seeing in retail verticals.

But when we report our export in August, we'll have more data on uh what we actually saw in the summer.

Uh We, and how those verticals sort of fared uh as the weather and, and the the seasons have changed.

All right, Dax, it'll be a great time to get you right back on the show.

Thank you, sir.

Always good seeing you.

Good to see you coming up under pressure.

The results of the Federal Reserve Banks stress test next on asking for a trend, the results from the Federal reserve's annual stress test for banks are out and join me.

Now with the results, Jennifer Schonberger, Jen Josh results from the Federal Reserve stress tests show all 31 of the nation's largest banks could continue lending to households and businesses during the severe global economic recession with plenty of capital on hand to absorb those losses from loans.

And this even as this year's test results in higher loans because banks balance sheets are somewhat riskier and expenses are higher.

The results demonstrate the strength of the nation's largest banks as they push back against proposed capital rules that would see their capital raised as high as 20% under basil three.

Now, the fed stress tests were mandated annually by law after the financial crisis for banks with $100 billion or more in assets, they examine how the banks would perform during a hypothetical severe recession to prevent bank failures in a crisis.

This year, the hypothetical scenario envisions a severe global recession where unemployment spikes 10% home prices plunged 36% and the stock market plummets 55%.

Under that scenario, all 31 banks in aggregate would lose nearly $685 billion.

Yet after covering losses, banks would still have capital left over equal to 9.9% of total assets weighted by risk.

That's well above the 4.5% the fed requires.

Now the hardest hit area under the hypothetical scenario credit cards with losses amounting to 100 and $75 billion or 26% of total loan loans lost a commercial and industrial loans coming in a close second there.

Now, taking a look at how the nation's largest banks shake out.

You can see all but two have capital, that's double or more.

The Fed's minimum capital requirements, the mid sized regional banks including PM see Truest and MNT also above the fed's requirements but not as high as their larger peers.

Now, for the first time, the assessment also included an exploratory analysis for the largest banks which assessed how they would fare during a global recession.

If there was a sudden flight of deposits or their hedge fund counterparts failed, the largest banks were able to absorb those shocks, no capital consequences for the exploratory portion though it will be used in the supervisory process for the nation's largest banks.

Now, Josh banks are going to use results from these stress tests to determine how much capital they will give back to shareholders in the form of dividends and share buy backs capital plans for each individual bank are expected to be announced after the market close on Friday back to you.

All right, thanks Jennifer.

Appreciate us stocks closing higher, the NASDAQ leading gains as Amazon hits a market cap milestone.

We have Yahoo Finance is very own.

Josh Schafer joining us now with more on the trading day takeaways, Joshua Amazon star of the day.

Number one, there we go.

$2 trillion market cap for the first time ever.

And let's take a look at our board here of the NASDAQ 100 the other mega caps, I'll pull up the actual cap weight that we see.

So here we go market cap.

There.

You can see Amazon closing above two trillion for the first time ever.

Let me exit on out of that right there.

And then so it's below still these other four, but it's the fifth tech company in the US to rise over two trillion.

And what really stands out to me about this, Josh is when we just take a look at the market action both today and over the last week.

So Amazon up 4% today really kind of carried the market is what rove the NASDAQ higher.

And then we talked a lot about NVIDIA over, I guess really the last year, right?

But specifically over the last month, right?

So if we look over the last month, NVIDIA has had a nice run even with that pullback, it's the best performer of the mega caps.

But you look here, it's been interesting.

The other mag seven stocks that we talk about a lot Microsoft up over 5% Apple up over 12 Amazon itself up over seven.

And then you look over a seven day period when NVIDIA started to fall off a little bit.

You see NVIDIA in the red there, what's been helping us because the S and P 500 hasn't fallen that much.

Well, NVIDIA is lagged.

Well, it's the other big stocks like Amazon.

So it's just sort of a reminder we talk about NVIDIA all day long, but there are other big stocks that also have big ratings in the S and P that can help the index close higher if NVIDIA isn't just going up every day.

It also speaks Josh.

That's also, you know, this and you've about this, this, this theme that investors are so focused on, which is this rally is, you know, narrow, right?

You hear that it's being led, it's kind of big tech outperforming everybody else.

And it's, it's interesting how strats kind of think about that because some have come on the show.

And so that is, you know, a giant yellow flag but there's other and I know you've talked about this, you've written about this in columns saying others say, you know what, relax, enjoy the ride.

Yeah, I mean, if you, I'll, I'll put this on a year to date so you can see how some of the mega caps have been doing pretty decent gains.

I would argue for all of these stocks, right?

And the take is from those strategists is, well, this is being driven by earnings.

When you take a look at some of these stocks, the earnings estimates just keep moving higher.

If earnings are going up, then that's considered sort of a good fundamental trend for the stock, right?

And a reason for it to go higher.

So if that's what drives the rally higher, then people think that can be ok at some point.

Do you need everyone else to participate?

Yes.

But for now, maybe you can survive with Big Tech continuing to outperform.

But we got more.

Take, get me Schafer, take number two, take away number two, this is more something to watch going into tomorrow.

But I'm particularly interested in weekly jobless claims and here's why.

So they come out at 830 every Thursday, they're not always a notable relief.

This is how many people are filing for unemployment.

But if you take a look at the trend we've been seeing here really for the last month, it's been higher.

This number here was above 240,000 filing about two weeks ago.

That was the highest we had seen in 10 months.

And so a lot of folks right now talking about some softening we're seeing in the labor market.

We know the unemployment rate has been ticking up.

It will be interesting to see when we get this release tomorrow morning.

If this sort of trend higher starts to continue because if it continues for several weeks, economists will start to get a little bit worried about what you and that's the question for just remind viewers if you're a viewer right now, you're an investor.

Why do you pay attention to this.

Why should that economic data point?

Just kind of be on your radar.

So, initial jobless claims, as I said comes out every week.

Right.

So it's considered one of the better real time indicators because we get the jobs report that comes out every month, but that's looking back.

So next week we'll get the June jobs report that looking back maybe at a trend that we saw the first week of June, the second week of June.

This is last week, right?

And so it's a little bit more real time of what's happening.

And as people get laid off, they're gonna go and file for unemployment benefits at some point, most likely.

So you start to get a little bit more sense of what's actually happening.

This is one of the key indicators when people talk about recession risk.

If jobless claims tick up, that's where the big concern tomorrow we'll be watching.

Thank you, Josh.

It is Space week here at Yahoo Finance and Akiko Fujita got a chance to sit down with Varda.

Space Industry.

Co founders will Brey and Delen as bruh to find out why and what space manufacturing could actually look like.

Take a listen.

Um There's definitely a couple of different categories of space manufacturing.

We really focus on like space manufacturing for use down here on earth.

So that means you basically take precursor material from here on earth, fabricate it, modify it basically in the unique microgravity environment of space and then bring it back down for use down here on earth, which we believe is basically the largest and nearest term, basically commercial market application.

There's definitely another category of space manufacturing, which is sort of like manufacturing things in space for use up in space.

But there's not a whole lot of buyers or customers up in space.

Most people that buy things are down here on earth.

And so we focus more on that, you know, sort of former, former category.

Well, what what makes micro, micro gravity so conducive to pharmaceutical?

Yes.

So micro gravity will affect the outcome of chemical systems.

So that's the fundamental thing to understand in the same way that temperature can outcome or change the outcome of chemical systems.

So microgravity is free in outer space, it's ubiquitous and it's impossible to create in perpetuity on earth.

And so we essentially are building space manufacturing modules because we can out or change the outcome of chemical systems like no one else can on earth.

And all right.

So which chemical system should we should we change?

First?

Pharmaceuticals is the clear answer from both, you know, an aspirational, what's the best thing for humanity aspect?

And also from a dollars per kilogram perspective, it's a large market and the most expensive chemical systems per unit mass.

And we're not the first to think about this.

People have been talking about pharmaceutical manufacturing in space over the past 50 years, the current National Ministry of Bill Nelson was doing this in the early eighties, tons of large top 20 BioPharma have done, you know, these types of small scale experimentations on the International Space Station, Merck, Eli Lily Janson and Jansen Bristol Myers Squibb.

And in 2019, Merck actually published a particularly interesting where they actually took their blockbuster monoclonal antibody to just $25 billion of revenue for them every year.

Financial analysts estimate that it represents about 125 billion of their market cap.

They were able to show that, you know, as you mentioned, when you turn off gravity, the chemical system changes and it changed in a very unexpected way and the result of that change was they actually found a drug, a version of the drug up in space that rather than having to be delivered the way that it is today, the intravenous drip where you go in once every sort of two weeks for, you know, sort of four or six hour appointment, it's hugely disruptive.

Instead, they could actually just send you home with a syringe that you could take in the safety and comfort of your own home.

And so it's a huge outcome for patients.

It's a huge outcome obviously for Merck because they now have an improved performance drug that extends their patent window.

But ultimately, the International Space Station wasn't a place where they could do this at a sort of commercial scale, you know, sort of low cost high cadence.

The sort of thesis behind VARTA was, well, SpaceX is to the reusable rockets made it that access to space was very cost effective, but we needed to offer them a platform that was also cost effective.

They didn't have humans on board was low cost autonomous and can do all that sort of pharmaceutical work.

And so we work with, you know, top 20 BioPharma mid stage biotech to help them sort of get results.

Like what Merck got in 2019.

In the simplest terms, when you talk about sort of crystallization for those who aren't as familiar, what is it about micro gravity that makes it good for that process totally.

And when we say the word crystal, we just mean essentially like a powder like you would see pressed into a pill.

The reason it's called a crystal is the technical term is just how the molecules are arranged and how the molecules are arranged are fundamental in the macroscopic properties of the drug.

So an example would be like a graphite pencil versus a diamond, they're both just carbon carbon atoms, but they're arranged in a different way.

And so that arrangement defines the difference between the hardness of the diamond, the softness of your pencil.

And for our pharmaceutical companies, they care about things like solubility.

How quickly does this dissolve in the bloodstream?

So that's a macroscopic property that depends on how the atoms are arranged or in technical terms, the crystallization of the product.

So in micro gravity, there's less disturbances from the crystallization process.

It does.

And so you see these crystals nucleate in suspension rather than sinking, causing turbulence sedimentation buoyancy.

All of those effects are removed in microgravity.

And therefore, you can create different atomic structures and therefore different macroscopic properties.

So de gave a great example of going from an IV bag to a shot.

Another one would be like a pill to an inhalable because you can make the particle size distribution more narrow.

So we don't invent drugs per se.

What happens is the pharmaceutical company will come to us with a molecule and we say, hey, we can convert that molecule into a better version of the medicine using micro gravity in the same way that another formulation provider on the ground might say we have some special technique on the ground that can also change the formula like a special ingredient or something like that.

So our business model is not novel like there are tons of formulation platform companies that work with top 20 pharma stage biotechs to provide formulations.

We are just one that has a knob being gravity that no one else has space.

An area of exploration mystery and home of the internet as scientists and astronauts explore the deep unknowns of space.

Space is simultaneously being used to provide internet connections to millions of people on earth.

One of the largest companies using satellite technology to provide internet access to the masses.

Is Elon Musk's Starlink.

The company was founded in January 2015 when SpaceX announced its satellite internet proposal at the time, Starlink remained, the company would take three years to launch its first two Starlink test crafts in February 2018.

By May 2019, the 1st 60 Starlink satellites were launched fast forward to today.

And Starlink has created the first network of interstellar satellites resembling a low orbit satellite constellation capable of delivering broadband internet worldwide.

There were over 6500 starlink satellites in orbit as of June 2024.

According to astrophysicist, Jonathan mcdowell, a satellites distance from earth significantly affects latency.

Latency is the time it takes for a signal to travel to and from the satellite in space.

Satellites have different locations in space.

There are three key types of satellites orbiting right now, low earth orbit satellites which are closest to earth medium earth orbit satellites which are roughly 1200 to 22,000 miles away and are located between low earth orbit and GEO station satellites which are the furthest away out of the three, the further away the satellite is the greater the latency is because Starlink operates low earth orbit satellites which float around in space about 550 kilometers or about 342 miles from the earth.

The company is able to offer high speed, low latency, internet connections.

Conversely, traditional internet service providers use single geostationary satellites that orbit around 36,000 kilometers or about 22,000 370 miles away from earth creating a more high latency internet connection.

While Starlink is the space leader, there are other competitors in the low earth orbit satellite sector.

Amazon bias sta global Star HughesNet util sat one web are just some of the players in the sector.

Amazon's project.

Kuiper is an initiative to provide broadband to unserved and underserved communities by using a constellation of more than 3200 low orbit satellites founded in 1986 via SAT'S primary fleet are geostationary satellites to deliver bandwidth.

EL sat One Web is a satellite communications operator with over 630 satellites in low earth orbit.

The advantages of high speed internet and vast availability provide benefits for both personal and business use including streaming gaming, intelligence and surveillance.

What will the expansion of the low earth orbit satellite market and the growth of competitors mean for starlink future S and P 500 performance and breath hit one of the biggest dislocations in 30 years.

Your finances, Julie Hyman joins me now with a closer look, Julie.

Yeah, Josh, we've been talking so much recently about breath, right.

How many of the stocks in the various industries are participating in the rally?

And the answer is not that many right?

Because they're being carried by big stocks.

So Bloomberg Intelligence has one particular look at this.

So this here is just the 500 of course, we've been seeing it, climb and climb and climb, making new records on a pretty regular basis.

Now, take a look overlaid with that is the percentage of stocks in the S and P 500 that are trading above their 200 day moving averages that have broken out that have participated in that same momentum.

And as you can see here, there is a divergence, the S and P is going up, but the number of stocks that are really participating in that upward momentum is not participating to the same degree.

And then we've highlighted a few areas here because these are areas that Bloomberg Intelligence has highlighted here back in 2001 and then 2003 when we saw similar gaps here.

So it's near the widest that it has been between the S and P and the percentage of companies within it trading above that moving average.

It's the near the widest we've seen in 30 years indeed.

So as you Julie look through these charts for investors watching right now and traders, does it suggest a potential slump could be coming?

Well, it depends on who you ask as is typical with these kinds of situations here.

So the folks over at Bloomberg Intelligence, they looked at these two other times in 2020 and in 2023 And after that, we did start to see some movement downward in the S and P 500.

So they say it could portend a slump.

We also earlier talked to Mark Newton of Fund Strat and he did not seem as concerned about this particular indicator.

It doesn't have to mean that the market is gonna go into our correction or roll over.

Those tech stocks can continue to go up and the divergence can get wider and wider similar to we saw back in 2021.

Um However, we can also see what I think is gonna happen is as a start of the broader market to play catch up.

And we've seen a little bit of that in financials over the last week.

So he thinks 5650 is what we're gonna see on the S and P 500 before the end of the year and then perhaps a little bit of downward pressure.

All right, Julie, thank you for that.

And that is a wrap on today's ask for a trend.

Be sure to come back tomorrow at 4:30 p.m. Eastern.

Have a great night.