May jobs report, Bidenomics, Lyft’s investor day: Market Domination Overtime

Stocks closed slightly lower on Friday, but all three of the major indexes (^DJI, ^GSPC, ^IXIC) ended the week with gains. The big driver of the market action was the May employment report, which showed the US added 272,000 jobs last month, nearly 90,000 more than economists had been expecting. Rick Newman joins the show to explain how the May jobs report may impact Biden’s campaign, in a reflection of the electorate’s shifting economic priorities. Lyft (LYFT) CEO David Risher also sits down to discuss how the company plans to achieve a 15% annual growth rate in gross bookings.

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Video Transcript

There’s a golden bell on Wall Street and now it’s market domination over time.

We’re getting you up to speed on the action from today’s session.

Let’s see where the major averages ended up or ended down as the case may be because we did see a mixed picture just slightly higher trade for the dow at 3 p.m.

But an hour later, it’s down about a quarter of 1% or about 88 points.

The S and P 500 off 1/10 of 1% and the NASDAQ off about a quarter of 1% as well.

This is after we got that better than estimate uh non farm payrolls number this morning leading a lot of investors, Jared to say, well, maybe we’re not gonna get those cuts as soon as we thought.

Yes.

And really the, the movement was in the bond market today.

If we go to the Wi Fi real interactive, real quickly, I’ll just show you the sector action and it was financials.

Those take the lead today.

XL F up uh 44 basis points followed by tech XL K industrials and healthcare utilities and materials down 1%.

Well, let’s get to what’s going on in the big picture here.

The chances of the Fed announcing a rate cut next week decreasing today after the release of May’s Blockbuster Jobs report, not just decreased for today but decreased for the uh other meetings that are upcoming as well.

Joining us now to help us figure out what comes next is Stephen Whiting, chief Investment strategist at chief economist and chief economist at City Wealth Steven.

great to see you and we obviously could use your help as we try to figure out what these numbers mean as we go forward here and what they’re going to mean for the FED.

It feels like the FED is much more oriented towards strictly inflation data.

Nonetheless, we had a little bit of inflation data in this report today in the form of average hourly earnings, which is not terribly helpful for the FED.

Well, look when the fed tells you that it’s data dependent and unfortunately, the US government releases contradictory economic data in the same report.

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So you have to say, take a step back and that’s very difficult.

It will be difficult for policymakers.

Investors have to make real time decisions on this data.

But let’s just consider the US government told us that 272,000 jobs were added in the month of May and 408,000 jobs were also lost in the month of May.

That’s what was in the uh household survey now again, it’s more volatile, that particular contradiction.

Uh Both uh bureau of labor statistics, data, you know, that can happen, but it’s, it’s quite severe over the last 12 months.

There is a massive gap uh Between these two surveys.

Uh You’ve seen the unemployment rate rise from 34, up to 4%.

You’ve seen uh 4 million job openings disappear.

Uh So a lot of signs do not suggest that the labor market is overheated.

Even if we took the establishment survey over the last 12 months, 2.8 million jobs were added, over 6 million were added in 2021.

So if you really zoom out from this data, think about the fact that we had 100,000 more than consensus, roughly last month, it was 100,000 less than consensus.

You just can’t use this month to month data to really determine uh what the economy is doing and what the economy is capable of.

I think that the fed is going to look at its policy rate of 5.5% and say, you know what, we can wait a little bit longer.

Let’s see if anything changes, sometimes that can be a mistake, but I think it will um it will be ok for us to hold off at least until September.

I wanna fast forward to next Wednesday 8:30 a.m. we get CP I uh Powell is eating his cereal that morning.

What is he thinking as he heads into the room that day because they’re also the FO MC is also deciding what interest rate, what monetary monetary policy is gonna be.

And they’re not expected to make any big moves.

But it should be a big day.

I would think, I think they’re going to say, what does this mean for our preferred inflation gauge P ce deflator, you know, we might call it uh inflation for the things you can still afford for rapidly changing basket.

It’s by design, it’s been less volatile.

It’s been making progress even if you take a look at the first quarter data which bounced back for the CP I report.

Um we’ve come down a lot.

Um It never showed the 9% gain that the headline CP I did uh peaked in the neighborhood of seven.

but now it’s below three and that’s progress.

You know, the fed’s inflation target was meant to be uh reached over the long term.

They looked back and said, you know, we were short of uh our, our, our target in the last 10 years, we were above our target in the last 10 years.

Uh You can’t really micro manage these things.

So when uh the pace at which inflation is declining uh is not uh very rapid, certainly the price level, the reason that the public um is still feeling pressure is we never erase price levels.

We never deflate prices down to where we were before a major shock like the pandemic and the feds has already clarified for us.

Chairman Powell said that’s not going to be the new tactic of the Federal Reserve to deflate us down to price levels where we felt better about things a few years ago.

So if we’re still waiting for the fed to cut at some point in the future, Steve and we are seeing those price pressures continue to weigh on consumers.

We’ve also had some signs this earnings season, uh maybe a little bit of softening in demand for enterprise spending in certain areas.

What does that all mean for stocks?

So the gains that we just had 17% over six months, we’re not expecting 34% right?

Uh So we think that the market has come a long way from this view of collapse and inflation at the same time last year.

But um I think we have a much, much broader profit recovery going on across industries.

Um It wouldn’t surprise me if this year 10 out of 11 sectors uh posted eps gains.

That’s the US major regions, Europe, Japan, Latin America, broader Asia.

We think that we’re swinging to earnings gains this year.

Now, of course, that’s what the rally was behind us.

But let’s just look at the year past if we took out mag seven earnings and have your own view on each individual company there.

Some good, some bad maybe.

But across the world, eps fell 7% last year.

We’re not going to stop this profit recovery in 2024.

We think we’re going on to further gains in 25.

Uh, and, uh, you know, all of these signs that the economy was hitting its limit, uh, you know, we wouldn’t see the unemployment rate rising.

So I think that we have the potential to have a much broader market last year.

Uh, the smallest number of shares, the fewest shares B the S and P 500 since 1998.

I think uh it’s already improving across industries.

There’ll be setbacks like today where we don’t know when exactly the Federal Reserve will cut.

But we think that uh policy tightening is out of the way profits are recovering.

And if we zoom out a bit, I think that labor demand, most of the evidence, it’s all conflicting.

But the bulk of it is telling us that there’s some cooling in the labor market, uh not in profits.

That’s still, I think constructive for financial markets, we have time for another one.

Just wanna get your, your quick take on what other central banks around the world are doing.

The ECB just raised rates.

So did Bank of Ca of Canada.

Kind of unusual.

Usually the ECB isn’t raising first or, or the Bank of Canada for that for that matter what and then there’s Japan another outlier.

Uh What do you see the central banks of the world doing?

Going forward for this year.

Well, Japan is the outlier.

Uh and again, the pressure to raise rates in Japan uh is building the case for Europe and the United States are actually not as different as people think we take a look at the harmonized ECB inflation rate for the Euro zone.

And the same measure for the United States takes that one component owner’s equivalent rent.

The US has had more inflation progress than Europe has.

Now.

Our trend underlying growth rate may be higher, the sustainable interest rate may be higher.

Um But we don’t think it’s really telling us a different story that tight monetary policy will interact with labor markets.

Uh And we’ll see a cooling in inflation.

Uh And that’s uh perhaps not maximum employment if we look out 12 months.

Um So I think the Federal Reserve will be doing what the ECB has just done and they’ll take down policy rates a bit now, literally, for investors, it really matters.

The context for this is the fed easing in a an economic collapse.

That certainly wouldn’t be a uh a positive catalyst.

Usually, policy easing is not a positive catalyst uh for credit and for equities markets.

Um But, you know, I think this time around, if it’s just dialing back and sustaining the expansion all on 1995 uh then I think that we’re in a decent place.

I certainly think that’s what’s happening with Europe, which has had a stalled economy now that inflation has come down, even with that economic stall out of the way the European Central Bank is able to ease, got to leave it there.

Really appreciate your thoughts here.

Thank you, Stephen.

Whiting my pleasure.

You’d think today’s job report would be a good thing for President Biden.

But is it too good here with more of Yahoo finance’s own, Rick Newman?

Rick?

I am fascinated to hear the details on this one.

Hey guys, uh look, I mean, more jobs are really not doing President Biden any good at this point.

I mean, he, we’re so far into the point of diminishing returns on his political payback for the great job growth we’ve had under his administration, uh you know, 15 million jobs created so far under Biden the most of any president ever when he brags about it.

It’s true.

Um But that, that is uh I mean, it’s now become very clear, this is not what voters care about.

Voters care about prices and inflation.

And uh uh a strong job market has now become kind of a contrary indicator for inflation as it has for all the things we’re talking about with regard to markets.

I mean, markets for the most part care about uh the strength of the economy because of whether and when the Federal Reserve is going to cut rates, Biden cares about strength of the economy for another reason because I think the main thing he needs in a bullish case for re-election is he needs consumers and voters to see prices either moderating or outright declining uh in the home stretch of this election.

And I think we’re getting the point.

We’re just getting 11 hot number after another on jobs on incomes.

I think we’re at the point where Biden is just not going to get the break on inflation that he wants.

Uh We, we all know the economic argument here, the inflation rate, the annual rate of change has dropped from a high of 9% to 3.4%.

But as consumers remind me every single time I write about this.

Um yeah, well, maybe the rate is coming down but the prices went up and they’re staying up and everybody has their own personal uh inflation gauge whether it’s uh the price, price of roast beef or hamburger or milk or your rent.

Uh gasoline is obviously an important one and I, I just think Biden is not going to hit the break he’s hoping for, which is that voters see tangible signs that prices are coming down.

So he’s just gonna have to deal with that doesn’t mean he’s gonna lose.

But I think it does mean we’re just not going to see any meaningful increase in Biden’s approval rating, which is really low around 40%.

Um And he’s just gonna have to deal with that.

Lots of moving parts here.

We will keep track of it.

All.

Thank you, Rick Newman.

Bye guys.

And coming up an interview with the Lyft Ceo David Richer.

That’s next on market dominations overtime.

Lyft revealing 2027 financial targets at at its first investor day this week, the ride hailing company expecting a 15% annual growth rate for gross bookings with more on the road ahead.

Lyft, Ceo David Richer is joining me here in studio David.

Thanks for being here.

Actually, it’s good to be here.

So as we were talking during the break, it seems like the market was relatively happy, the guidance that you guys gave.

So talk to me more about it, the 15% growth in bookings.

How do you get there?

Is it about taking market share?

Is it about um bringing on new customers?

Talk to me about the the path there.

So the first answer is if you get there through customer obsession, right?

I mean, we’re a scale business.

So we do 2 million rides a day every single day, 365 days a year.

And if that goes to 2.12 0.53 you know, over time that produces, you know, frankly an incredibly profitable business.

And the way you do that is you obsess over your drivers and you obsess over your riders and that sort of it.

I mean, we’re looking at $25 billion in bookings over the next three years by 2027 and the only way you get there is just blowing your customers away.

I’m so fascinated by this because when I think about Lyft versus Uber, obviously your biggest competitor, who, how are customers making that choice?

Right?

Are they making it because they think Lyft is a better experience or are they just looking at the apps and saying this is the lower price and it’s gonna get to me sooner?

So people do both right?

There are definitely some people who are price shoppers.

Uh There are people who are time shoppers, right?

Who’s faster right now.

I’m super happy to say that basically our timing is right on.

It’s right on like you’re not going to see a big gap there and they do with price.

In fact, often we’re going to be a little bit cheaper there.

So that’s wonderful.

But I think that’s just the starting point.

I mean, with so much in life.

Yeah, you worry about price.

But then you think is this an interesting or better experience?

So that’s why we launch Women Plus Connect, for example, that if you’re a woman and you want a woman driver, um you can do that right?

That’s kind of it.

And that’s only available on us.

Same if you wanna be picked up on time for the airport, the other guys might say they’ll do it, but we’ll literally give you 100 bucks back if we’re more than 10 minutes late for a scheduled ride.

So I think after you get the basics, right, you start to build innovation on top of it and that’s how you start to really drive a preference.

And are you measuring how many of your riders are single platform riders?

And is there a way of doing that?

I mean, we can get hints, you know, it’s a little hard, we obviously don’t know all the apps that people have on their phone, but you can kind of get a, get a sense and it might be 40%.

It might be 50% frankly.

If everyone using the other guy also had us on their phone, I’d be pretty happy.

So I’m ok. You guys sometimes you just have it on the phone.

Oh, no.

Fair enough.

As long as they look, flip a coin use this half the time and I’d be very happy.

Um The other half of it as you talked about is the drivers and there you guys have made some progress as well.

So, so talk me through that piece of it.

So here’s the thing in order to have a healthy, you know, we call it a marketplace, a healthy business.

You’ve got to have rider and driver in balance and remember, drivers are actually our primary customers.

There’s two customers in every car.

If you don’t have the driver, you don’t have anything.

Ok.

So what have we done?

We’ve put in place a 70% earnings guarantee.

This literally guarantees 100% 100% that every single week a driver will never make less than 70% of what the riders pay after.

Um fees.

Like, like insurance, usually it’s more like 8283 could be up to 85%.

It’s a guarantee.

And so what that does is that starts to drive preference on the driver side, right, to choose us over the other guys.

And that’s why we have more driver hours than we’ve had in our history as a company.

And so then, then you get the 15% booking to talk about.

Um So something else when it comes to the drivers though is that obviously regulation is something that you um and Uber for that matter, I’ve been talking about around the country most recently, Minneapolis, I believe there was sort of a back and forth about whether a minimum wage was gonna be required for the drivers, I believe in the end.

It was not, although it was in, in the end we actually agreed to a new um minimum pay.

Got you.

So how, how do you view those kinds of, I won’t call them battles but, you know, obstacles perhaps or around the country.

I’ll tell you the small and then the big, the small is I understand, look, different regulators, different cities, different states, they might have a point of view about these things and that’s totally fine.

Like our point of view there is when drivers win, we win.

And the only, and it’s clear, right, the more they make, the more we make, the only problem that we have with that and that’s kind of small stuff is, is sometimes cities and states will sort of try to go so far that they actually force us to raise rates so much that riders then suffer because they just can’t afford it.

So, I don’t like that.

That’s bad.

It’s bad for riders actually bad for drivers.

They make less.

That’s a le let’s call it a small problem.

A bigger problem is there are places, some places that have a view that say, well, drivers who love the gig economy and I’m really serious about that.

These are drivers who say there’s no other job I can have where I can, you know, get on the platform today, get off tomorrow.

I don’t have to quit.

If I don’t like it, I don’t have to go through a hiring process if I like, I don’t have to just, I don’t have to tell my boss when I’m coming to work or when I like that kind of flexibility so important to them.

And I think there’s some people around the world who, who, who still don’t quite understand like this real thing.

As I say, we have more drivers on the platform than we’ve had ever yet.

Unemployment is basically an all time low.

So that shows you people really like it.

And when people start to sort of fight against that, that I sort of object to because I’m like, you know, what actually don’t speak for the drivers, talk to the drivers.

Um There’s a couple of expansion questions I wanna ask you, you guys are in Canada now, your Canada numbers were really good anywhere else.

So, uh not yet, but I think that the fact that we’re doing well in Canada is a really good indicator because what it shows is that our customer obsessed, you know, kind of approach can work outside the United States.

We’ve seen our share in the Toronto area, for example, go up from roughly 12% to roughly 30%.

I mean, it’s really been significant just over six months.

So that shows that when we really put our mind to it and focus on it, the same customer obsessed focus for riders and drivers can work elsewhere, but nothing more to say than that.

And then the other area of potential expansion, there was one analyst earlier this year who said, oh, maybe lift should get together with doordash and do some sort of partnership for food delivery.

Is that anything that you guys would consider or you firmly focused on being a pure play?

You know what I think we can do both.

In other words, I think we can be purely focused on a, on a pure play.

And that’s absolutely right.

We’re all about trying to get people out of the world connected to the world.

Um, you know, more like that, but that doesn’t prevent us from doing partnerships.

Look, we do partnerships with Delta Airlines.

We’re not the airline business, but I tell you what, it’s great to be able to earn sky miles on Lyft and it’s great to be able to get a notification saying this Delta flight is a little bit late, so you probably don’t have to leave for another 10 minutes.

So it’s, you know, if we end up doing those sorts of partnerships, there are ones where they benefit both companies and they benefit our riders and our drivers.

All right, David, thanks for being here.

I appreciate it.

Of course, you’re coming in for sure.

Jared all of our major averages lock in a winning week as investors digest a stronger than expected jobs report and joining us now with our top takeaways from the trading day, let’s bring in Yahoo, finance reporter, senior reporter, Alexandra Canal.

And, uh, you were there at 8:30 a.m.

So was I it was a, it was an eon ago.

Oh, yes, I know, I felt like a lot has happened since then, but you said it Right Jobs Day in America.

And that really dominated the story for markets.

We saw jobs come in much stronger than expected, the unemployment rate ticking higher at four.

And if we pull up an intraday chart, it seems like the markets really struggled to figure out how exactly to play this throughout the day, we saw a lot of volatility.

Exactly.

And a lot of this comes from the fact that rate cut expectations are changing.

Now after this print came, we still have most traders expecting a rate cut to come in September.

But the odds are less than what we got before this hot print.

So, so that’s something that investors, it’s top of mind for traders moving forward.

At the same time, some economists have come out said, look at the end of the day, this shows underlying strength when you think about the economy at large as well as the labor market.

But I want to take a look at some other areas of the market that we saw move on the heels of this jobs report.

One is the small cap ending in the red for the week to I.

Right.

Right.

And if you take a look at, let’s look at the three month, the longer term.

So we’ve seen the small cap index remain really under pressure as we’ve gotten this higher for longer mantra from the fed.

And then if we take a look at a shorter term, you’ll see after that jobs report a lot, a lot of struggling there with small caps.

And then I also want to talk about the 10 year treasury yield big move today, crazy 15 basis points higher just around 4.43% under that critical 4.5% level.

So, various moves here based on that report.

All right.

What is your next take away?

We’ve been watching a lot of things here today.

I don’t think it’s time for me stocks yet.

Either the next one.

Ok.

Here we go.

All records jar.

You know, they’re hovering at records.

I that, exactly.

And he was so close to, to not another record there fell a bit short.

Obviously, the S and P it’s been increased by those large cut names and video hitting the $3 trillion mark.

But it sort of speaks to this narrative that perhaps we don’t need the fed to cut rates in order to see this resiliency and stocks.

And I love this chart from fact that earnings growth, robust earnings growth, that’s when this market elevated and the estimates as we had deeper into the year there to remain elevated.

So that has been very encouraging for strategists as well.

Yeah, it’s been uh it’s been nice to see us kind of climbing out of this earnings recession, much different from a regular recession.

All right now, I think it’s time for me.

All right.

Deep teaser gamestop.

All right.

The return of roaring kitty, he returned to the live stream format.

The first time we all watched it, he was a little late to the party, but when he did finally show up, he was in front of a live chart from Yahoo Finance, which is really fun Right.

Exactly.

Right there.

Now he spoke, it wasn’t, I don’t know what your thoughts were.

Well, you know, I think he was very conservative.

He was giving more risk disclosures than I was used to.

But I mean, I think the whole thing boiled down to trust Ryan Cohen except, except we don’t know what Ryan Cohen is thinking yet.

So, I don’t know.

I don’t know if the best buy and, or excuse me, bed bath and beyond shareholders.

Like what Ryan Cohen did with that company, you know, who, who knows what’s gonna, what we’re going to say a year or two from now.

But he did make his Exactly.

But look at the stock move, right, we closed down 40%.

Let’s see what we are.

17 volatility halts.

That was only today, by the way and look at, look at these wild swings that we saw just throughout the past five days.

We do know that game file to sell another stuff.

You put a five year chart down there and then we’ll see, we’ll see the initial ones.

What’s interesting to me is we have this kind of lower highs here and diminishing returns for all these new meme stock revivals.

And then this one here, that’s a trend break.

So, you know, you have a higher high, that’s indicative of a trend chain.

Are we going to see a higher, higher than that?

I think that’s going to be the big call here.

And will he keep coming back for those live streams?

I hope so.

Try to be on time, please.

Exactly.

All right, Ale Canal.

Thank you and Julie back to you.

Thanks, Jared.

And that’ll do it for today’s market domination over time.

Be sure to come back Monday 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.

But don’t go anywhere on the other side of the break.

It’s asking for a trend.

Stay tuned.