Stock market today: US stocks rebound from inflation fueled selloff | February 14, 2024

Stock Market

• The stock market attempted to recover after a sell-off triggered by the higher-than-expected January CPI report.
• The broad US equity market is trading slightly above its fair value estimate.
• Small-cap stocks rebounded after a significant decline, while disruptive stocks and cryptocurrencies surged.
• The CBOE Volatility Index (VIX) decreased from 16 to 14.

Share Buybacks and Layoffs

• Fourth-quarter earnings season revealed a trend of share buybacks, layoffs, and concerns about inflation.
• Companies in the communication services sector are leading in share buybacks, including Meta, Disney, and Uber.
• Analysts noted a focus on operational efficiency, leading to layoffs and a renewed focus on AI.

Inflation and Interest Rates

• Chicago Fed President Austin Ghoulsby attempted to calm market fears, stating that one month of higher CPI does not indicate a trend and that the Fed still plans to cut rates multiple times this year.
• Morningstar's US economics team expects inflation to average 1.9% this year and subside further in 2025.
• Higher borrowing costs may lead to increased mentions of layoffs as companies seek to protect their margins.

Undervalued Sectors and Real Estate Stocks

• Undervalued sectors include real estate, basic materials, and utilities.
• Real estate stocks to consider: Realty Income (O) and Healthpeak Properties (PEAK).

New York Community Bank

• The problems at New York Community Bank (NYCB) are seen as idiosyncratic to the bank and not indicative of broader banking system issues.

Cryptocurrency

• Bitcoin's recent resilience and price increase above $552,000 is attributed to supply and demand dynamics, with the introduction of spot Bitcoin ETFs potentially driving further demand.
• Coinbase benefits from increased interest in cryptocurrency, with spot Bitcoin trading volumes surging over 30% in Q1 compared to Q4 of last year.
• Robinhood reported positive Q4 earnings with a surprise profit and 10% growth in cryptocurrency revenue, signaling broader market engagement in crypto.

AI and Cybersecurity

• Microsoft and OpenAI have identified groups using AI, including ChatGPT, for hacking purposes, targeting enemy nations and organizations.
• Countries named in the report include China, Iran, North Korea, and Russia, with groups like Charcoal Typhoon, Salmon Typhoon, and Emerald Sheet.

Wayfair

• Wayfair is seen as a buy due to its market dominance in pure-play online furniture retail, outperforming competitors and gaining market share.
• Margin expansion is expected for Wayfair, with potential for $600 million in EBITDA even in a flat revenue scenario and a long-term target of high teens EBITDA margin.
• Growth potential for Wayfair lies in its continued market share gains, below-average e-commerce penetration in the furniture category, and opportunities in B2B and underpenetrated areas.

Etsy

• Etsy's growth has slowed down in the past year and it is fully exposed to consumer discretionary spending, which is currently facing headwinds.
• Etsy is facing increasing competition from Temu, which is spending heavily on advertising and driving up the cost of performance marketing.

Lyft

• Lyft's fourth-quarter earnings report showed strong progress towards profitability, offsetting concerns about a clerical error in the report.
• Lyft reported record bookings, ridership, and driver earnings, and projects continued free cash flow positivity through 2024.
• Lyft's customer obsession strategy, cost discipline, and increasing volume are driving its financial success.

Cisco and Tesla

• Cisco's earnings report showed beats in adjusted EPS and revenue but disappointed with its guidance, leading to a decline in share price.
• The company plans to cut 5% of its global workforce as part of a cost-streamlining strategy.
• Institutional investors are turning bearish on Tesla, with concerns about Elon Musk's focus on AI, potential negative volume growth, and recent price increases.

Lithium Mining

• Lithium mining, once seen as a lucrative opportunity, has faced challenges post-pandemic, with prices dropping significantly from their 2022 peak.
• Piedmont Lithium CEO Keith Phillips discussed the company's restructuring plan to cut costs and adapt to volatile lithium pricing.
• The restructuring involves a $10 million cost-cutting plan and a 27% workforce reduction to ensure cash flow and cost control in the current market.

Twitter

• Twitter's Q4 results showed beats on both adjusted EPS and revenue compared to consensus estimates, but the company's Q1 revenue forecast missed analysts' expectations.
• HSBC downgraded Twitter's stock due to its low growth profile, and the company has been dealing with decelerating sales growth post-pandemic.
• Recent leadership changes at Twitter, including the departure of CEO Jeff Lawson and the appointment of