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- Monday's Scoop: Cruising ☀️
Monday's Scoop: Cruising ☀️
J&J's baby powder cancer & GameStop's meme monetization
Hey friend - hope you had a stellar weekend!
Insiders, catch up with our Weekly Scoop and don’t miss our Explained on making an impact with your investments. If you’re not an Insider, refer, open, vote, or upgrade to unlock your status!
Here’s what you need to know today to inform your work, spending, and investments…
🌎 Big picture
Wages aren’t keeping up with the rising cost of living.
America’s biggest companies are raking in profits.
Corporations are showering shareholders with rewards to boost their stock prices.
How are you feeling about the economy? |
👜 Cost of living trends
Inflation Rate: +3.4% (YoY), +0.3% (MoM)
Policymakers aim for 2% YoY inflation (April CPI)
Wages aren’t keeping up with the cost of living. The Labor Department reported average hourly earnings rose only 0.2% in April, trailing the 0.3% increase in the cost of living. The -0.2% decline in real hourly wages means Americans earned less because our paychecks buy less stuff. Real hourly and weekly earnings have declined or stayed flat for four months straight after gaining some ground on the cost of living last year. When adjusting for inflation, average weekly and hourly earnings have increased only 0.5% over the past year after declining for more than two years.
📈 Investment trends
The Market: ⬆️ +0.1%
S&P 500: 5,308.13
1Mo: +6% | 1Yr: +27% | 5Yr: +88%
The market floated higher on Monday as investors chased optimism that corporate profits would continue climbing, inflation would stay under control, and economic policymakers would soon make it cheaper to borrow money.
Profits are still booming for America’s biggest businesses. Nearly all of the companies in the S&P 500 have provided their first-quarter financial updates, and 78% have reported higher profits than investors projected. According to FactSet, that’s above average for the earnings seasons of the past decade. Corporate profits have climbed by 5.7% over the past year, the fastest growth since early 2022. Much of that success has come from cost efficiency and price increases. Sales have slowed significantly, with revenue up only 4.2% over the past year. Fewer companies than usual exceeded investor revenue expectations, and those that have exceeded did so by a smaller margin than normal.
Corporations have been using their profits to reward their shareholders and boost their stock prices. The number of companies buying back their own shares from the market to inflate their stock price surged this past quarter, up 16% from last year, according to an analysis from the Wall Street Journal. The total amount spent by the S&P 500 companies on share repurchases could reach $1 trillion over the next twelve months.
🤓 Inside Scoop: How do companies reward investors?
Companies with extra cash can reward shareholders for their support in two ways. First, they can distribute money directly to investors, literally giving them a share of the profits by paying them a dividend. Companies will declare that every investor gets $X for each share they own.
Second, companies can buy back their own shares from public investors. Buybacks allow companies to reduce the number of outstanding shares in the market, making each remaining share more valuable. They're slicing their company ownership into fewer pieces, allowing each shareholder to own a more significant percentage of the company. If companies pause or slow either of these activities, it can mean they're preparing for trouble.
🏭 Companies worth watching
👍👎 APPROVAL RATINGS
Act like a boardmember and judge how companies behave. Engaging helps build your financial confidence and hold corporations accountable. (+2pts)
![]() Johnson & Johnson | Damaging Discovery Johnson & Johnson may have more difficulty resolving over 50,000 lawsuits aimed at its baby powder after new research revealed a link between long-term talc powder use and ovarian cancer. The health giant offered $6.5B to settle claims with the cancer victims, but it needs a 75% majority approval.
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![]() Target | Reversing Inflation Target announced plans to reduce prices on more than 5,000 items, from groceries to toiletries, as shoppers resist the rising cost of living. The superstore will cut costs for major brands and its own private brands.
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💭 Broader perspectives… (+2pts)
Should companies cut prices to increase sales or try to maintain profit margins at lower sales? |
![]() Spirit Airlines | Fee Freedom Spirit Airlines will copy competitor Frontier in removing flight change and cancellation fees that used to cost travelers anywhere from $69 to $119. The budget airline is still trying to return to profitability following lockdowns and a failed merger with JetBlue.
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![]() Daimler Mercedes-Benz Group | Union Squashed Mercedes-Benz defeated a unionization campaign at its factory in Alabama. Nearly 90% of the 5,000 plant workers showed up to vote, and the majority chose not to unionize. The automaker fired the factory manager to promise change for workers.
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![]() GameStop | Monetizing Meme Attention GameStop announced plans to sell 45 million more ownership shares to public market investors to raise additional cash as unexpected investor interest sent its share price soaring. The struggling videogame retailer regained internet attention, speculation, and memes about Reddit investors buying back in last week.
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