With Earnings in the Rear View, US Job Report Disappoints

Markets At A Glance

After another week of mixed results from the major stock indexes, the Dow and S&P 500 continue to eclipse recent all-time highs — finishing the week up 3% and 1% respectively — while the tech-heavy NASDAQ composite fell more than 1%, with most of its decline occurring on Tuesday.1 As more investor cash rotates out of technology stocks, value stocks continued to outperform growth and momentum stocks for the third consecutive week with earnings season winding down.2 442 of the 500 S&P companies have now reported first-quarter earnings, and the group as a whole is expected to report a cumulative increase of 49% compared to last year’s Q1 results.

Investors continue to pour money into cryptocurrencies; the global crypto market capitalization grew more than 7% last week and is now closing in on $2.5 trillion dollars. Alt-coins resumed their gain in market share in comparison to Bitcoin, with Ethereum and Dogecoin both notching new all-time highs last week in the ride up to Elon Musk’s debut appearance on Saturday Night Live (here’s how Dogecoin moved during SNL).

The major economic takeaway last week was Friday’s job report; the national unemployment rate remains stagnant near 6% as only 260,000 jobs were added to the US economy in the month of April, far short of the 1 million jobs expected by economists.3 We remain hopeful that the current mismatch between labor supply and labor demand will balance itself as stimulus checks and extended unemployment benefits level out in the months to come. Despite the possibility of a market correction sometime in the near future, analysts remain optimistic for the market’s bull run to continue into 2022. Let’s take a closer look at last week’s stock news:

Article volume of most talked about tickers (+ SNL) last week. The original animation can be found here

What’s Making Headlines

Each week we analyze impactful sentiment metrics expressed in the news to gain insight into each stock and cryptocurrency’s outlook. Despite relatively stationary movement in the markets overall, the news was significantly more speculative and less reactive last week than in previous weeks. The average finance article scored a 0.46 on a scale from 0 to 1 last week in terms of speculative language expressed — compared to last week’s average score of 0.32 — and expressed 0.25 reaction (ie. past-oriented language on a scale from 0 to 1) on average compared to last week’s average score of 0.35 reaction. In terms of mood, both the average optimism (0.04) and pessimism (0.06) expressed across articles were markedly lower last week than in previous weeks. This shift in sentiment signals increased uncertainty in the news, and with earnings season coming to an end and new economic data becoming available, it seems reasonable that analysts and journalists alike are unsure of what to expect from the markets in the weeks ahead, especially given the flat movement from the markets as a whole.

On the bright side, even despite the high degree of uncertainty in the news last week, the broader conversation appears to be leaning bullish. Looking below at the sentiment distribution of the top-25 most mentioned tickers in last week’s news, we can see a clear trend of highly optimistic and speculative tickers (especially in comparison to last week’s plot here). In particular, the majority of the most talked-about tickers last week are large-cap stocks coming off of large price fluctuations post-earnings. If we classify any ticker appearing in the first quadrant of the plot below as being “bullish” in conversation, then this would easily be the most bullish sentiment distribution we’ve seen since we began plotting ticker sentiment in January. Notable tickers in last week’s news include Etsy ($ETSY) after a sharp sell-off in the wake of their earnings report last Wednesday, AMC Entertainment ($AMC) after the meme stock broke an 8-day losing streak with a revised recovery plan, and a new liquidity outlook (though analysts say that it will still take the company years to repay its current debts and work towards renewed growth). In terms of “bearish” sentiment, last week eBay ($EBAY) soured in conversation as the stock dropped more than 10% after light guidance in their earnings report, and outside of the top-25, Peloton ($PTON) rose a few eyebrows after beating earnings estimates amid recalls of their Tread+ product line. Let’s dive a bit deeper to see where Peloton fell off track:

The average sentiment distribution of the top 25 most-talked-about tickers in last week’s news (5/3/21-5/9/21) with respect to each of the sentiment metrics we currently track, and the number of week’s each ticker has been in the top-10 over the past three months.

Peloton ($PTON)

This Week’s Reaction: 0.12, Speculation: 0.75, Optimism: 0.06, Pessimism: 0.06

Peloton seems to be going through a cycle of its own this year (wink wink). The stock found its 52-week high of just over $171 in January, before reversing its momentum and opening today at only $82.59. It's picked up its fair share of bruises along the way. In February, the Consumer Product Safety Commission started an inquiry into the Peloton Tread+ after reports of safety issues with the back of the tread. Reports continued to come in until the company issued a retraction of its initial rebuttal and a recall of their Tread and Tread+. The recall affects about 125,000 Tread+ machines and roughly 1,050 Tread products in the US, and the company predicted recalling and halting sales on two lines of treadmills will cost $165 million in the current quarter (for context, they made $1.2 in revenue last quarter). Investors have mixed reactions to the dip, ranging from waiting for $PTON to find its bottom to breaking out the shopping cart. Full thread:

Twitter avatar for @babbldev

babbl.dev📈 @babbldev

🚨 $PTON recalling Tread & Tread+ after CPSC inquiry early last month. How are investors reacting? And what should we be looking for come earnings AH tomorrow? 👇👇

Kaushik @skaushi

$PTON Peloton recalling all treadmills

May 5th 2021

4 Likes

I’ve Got Good News and Bad News…

Aside from these key tickers, below we take a quick look at which tickers scored the highest (and lowest) in the news last week for each of the sentiment metrics we currently track.

Ticker Optimism😀 and Pessimism😒

In terms of mood, here are the most optimistic and most pessimistic tickers discussed in last week’s news. US Steel production company Nucor ($NUE) was spoken of with far-and-away the most absolute optimism last week after finishing the week up 20.75% and rising to the top of the basic materials sector on Tuesday. Other highly optimistic tickers in last week’s news include Shopify ($SHOP) after a post-earnings surge as it continues to outpace its computer technology peers (the stock is on the road towards a $1500 price milestone), and the India Tobacco Company ($ITC) after finishing yet another week with disproportionate optimism relative to pessimism in conversation despite underperformance in the markets.

In terms of absolute pessimism, Cathie Wood’s ARK family of ETFs ($ARKK, $ARKW, $ARKG) rounded out nearly half of the list with negative sentiment in last week’s conversation after a dismal start in the month of May across the board. Cathie remains hopeful despite the recent battering of growth and tech stocks, saying “I love this setup” on Friday during an appearance on CNBC, in reference to big return opportunities ahead. Other pessimistic tickers in last week’s discussion included Dutch multinational banking company ING Group ($ING) despite approaching a 52-week high price point after a week of downwards trading, and McDonald’s ($MCD) after posting impressive earnings and comments from CEO Chris Kempczinski saying “you can argue that stimulus checks are wearing off” in reference to an uncertain consumer spending outlook in the months ahead. Here’s the complete breakdown of optimistic and pessimistic tickers in last week’s news:

The complete visualization of the top-10 most optimistic and pessimistic tickers in last week’s news articles (5/3/21-5/9/21) broken down by their relative mood (normalized optimism vs. pessimism expressed) and absolute mood (% of optimism or pessimism expressed outright with respect to each ticker).

Ticker Reaction😮 and Speculation🤔

As mentioned above, in terms of time-sense expressed, last week was highly speculative in conversation. The three most speculative tickers in the news last week were in a class of their own: AMC Entertainment ($AMC) scored average speculation of nearly 0.98 after recent earnings, the S$P 500 ($SPY) reached 0.97 after hitting yet another new all-time high, and Etsy ($ETSY) notched a 0.95 post sell-off as analysts expect a stock price rebound in the week ahead. Other notable speculative tickers last week include NextEra Energy ($NEE), Canadian Worksport ($WKSP) on plans to join the NASDAQ, and EV infrastructure company Chargepoint ($CHPT).

In terms of reaction, the most reactive tickers in last week’s conversation include Nucore ($NUE) mentioned above after coming off of the top-ropes up 20.75% last week, Dell Technologies ($DELL) after announcing a spinoff their 80% stake in VMWare ($VMW) to shareholders, and Texas-based EV charging company TPG Pace ($TPGY) after falling more than 4% last week as analysts say that the SPAC sell-off has now created a buying opportunity. Here’s the complete breakdown of this week’s most speculative and reactive tickers:

The complete visualization of the top-10 most reactive and speculative tickers in last week’s news articles broken down into relative time-sense (normalized speculation vs. reaction expressed) and absolute mood (% of speculation or reaction expressed outright with respect to each ticker).

Looking Ahead

Going forward, we anticipate continued churn from growth to value stocks in the aftermath of earnings, and expect money to continue rotating out of the stock market and into cryptocurrencies. Though employment numbers did not impress, analysts look to upcoming economic data and recent decreases in vaccine hesitancy to paint a rosy picture for the remainder of 2021. Reports expected this week include the Consumer Price Index on Wednesday (US Bureau of Labor Statistics), a federal budget update from the Department of the Treasury, and retail sales data from the US Census Bureau). As for ourselves, we will be buying some dips and running more sentiment analysis (stay tuned this week for a breakdown of $EBAY vs. $PYPL in the news); as always, thanks for reading, and if you found this insightful whatsoever, let us know by giving this article a like or comment. 🙏

Twitter avatar for @MorningBrew

Morning Brew ☕️ @MorningBrew

Peloton 1 day: -7.5%5 days: -13.5%1 month: -20.2%3 months: -43.6%

Image

May 5th 2021

522 Retweets5,365 Likes

The meme of the week this week is brought to you by Morning Brew (and $PTON):

About

Our goal at Babbl is to bring better sentiment analysis to retail investors to help automate some of the legwork around investment research. We analyze finance media to detect "mood" signals such as optimism, speculation, confidence, and credibility about individual stocks, markets, and publishers over time. Every week and month, we summarize these findings into a newsletter for our subscribers. Our goal is to make it easier for retail investors to make confident, well-rounded decisions by quantifying finance news.

This roundup was written by Ramsey Shaffer and Sam Cartford, with help from the Babbl Discord and the MoneyMen group. We randomly scraped 1000+ articles from across a variety of financial news platforms this past week, and to determine this sentiment, the language used in each article was automatically analyzed across the four metrics mentioned above; scores were determined based on the percent of sentences in each article containing words considered to be reactive, speculative, optimistic, or pessimistic for each of the tickers mentioned, respectively. Please note: all information reported here is for informational and educational purposes. We are amateur investors, not financial advisors. To help us make this better down the road, please consider leaving a comment below or sharing this post with a friend.

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