Wall Street Brunch: Meta Connect 2024

Summary:

• Meta Platforms’ Meta Connect event will reveal future hardware/software, focusing on Reality Labs and AI integration.
• Southwest Airlines’ Investor Day will detail strategic pivots like assigned seating and financial benefits, aiming to attract new customers and improve cash flow.
• Fed’s recent rate cut sparks speculation on future moves; August personal income/spending figures and core PCE price index will provide more clarity.
• Key earnings reports from Micron, Costco, and others will offer insights into AI trends and consumer resilience.

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Meta CEO Zuckerberg’s speech and Southwest’s Investor Day highlight events of the week. (0:18) Fed’s favorite inflation gauge seen rising. (1:46) Micron earnings will grab AI attention. (3:04)

The following is an abridged transcript:

Investor events highlight the coming week as the third quarter wraps up.

Meta Platforms (NASDAQ:META) will hold its annual Meta Connect event on Wednesday.

The event will focus on the company’s Reality Labs division and is expected to include reveals of future hardware and software. That could include augmented reality glasses.

CEO Mark Zuckerberg will give a keynote address, Expectations are for him to talk about Meta’s broader artificial intelligence plans, and the integration of Meta AI (even possibly with the glasses).

Seeking Alpha analyst Zvi Bar says Meta stock “continues to outperform expectations and just broke out of a six-month trading range.”

“I believe that shares are likely to continue to appreciate along with the market, as well as due to what is likely to be a positive earnings report next month.”

On Thursday, Southwest Airlines (LUV) hosts its Investor Day and key topics will include 2025 guidance expectations and updates on the order book and fleet modernization.

Crucially, the event will also showcase how Southwest is making major strategy pivots for the first time in 50 years with the introduction of assigned seating, red-eye flights, and extra legroom seats. The changes are being made to attract new customers to the carrier in the wake of activist moves from Elliott Management.

Bank of America expects Southwest management to provide more details on the financial benefits of the strategy reset and the near-term impact on cash burn and debt during the transition period. Shares of Southwest Airlines are up 8.5% over the last six weeks.

Looking at the economy, the markets finally got the first rate cut from the Fed but the speculation about its next move is only just starting. Last week’s dot plot showed the FOMC penciling in two more quarter-point cuts by the end of the year, but traders are betting on at least three, with a 25% chance of four.

More clarity could come on Friday when the August personal income and spending figures arrive. They include the core PCE price index. The August core PCE is forecast to have risen 0.2% on the month.

Wells Fargo economists say that “the pickup in shelter inflation revealed in CPI” will be the driver for the gain, but “shelter’s relatively weaker influence on the Fed’s preferred inflation gauge will make for a smaller bump.”

A 0.2% rise would be “a small step above the unrounded 0.16% increase in July” and unfavorable “base effects set up the year-over-year gain for a firmer 2.7%. Through the monthly volatility, however, core price pressures remain on a downtrend.”

Fed speakers are also emerging from the blackout period, so there will be plenty of chances for them to refine their message post-decision. Around 15 speeches are scheduled, including Fed Chairman Jay Powell on Thursday. But his remarks ahead of the 2024 Treasury Market Conference hosted by the New York Fed will be prerecorded, so don’t expect any nuance.

On the earnings front, Micron (MU) will be considered an AI bellwether, while Costco (COST) will provide more on consumer resilience as the jobs market softens.

Micron reports fiscal fourth-quarter results Wednesday, with analysts forecasting a profit of $1.11 per share on $7.64 billion in revenue.

Stifel cut its estimates on the stock last week, while keeping an Outperform rating, saying “consumer electronics sell-through (and more importantly, mix) has underwhelmed. In our view this may create a lull in the market over the next few quarters, with memory suppliers reluctant to accept the trade-off of higher bit shipments in exchange for lower prices.”

Seeking Alpha analyst Khaveen Investments says they “will be looking out for management guidance for revenue growth expectations for FY2025 to further support the case for its continued growth momentum.”

They raised their view on MU to Strong Buy mainly due to an increase in their “projected growth for FY2025 of 21% compared to 13% previously.”

Also on the calendar, AutoZone (AZO), KB Home (KBH), Thor Industries (THO) and Stitch Fix (SFIX) report Tuesday.

Jefferies (JEF) joins Micron in issuing results on Wednesday.

And Costco (COST), Accenture (ACN), Jabil (JBL) and CarMax (KMX) weigh in on Thursday.

In the news this weekend, General Motors (GM) will lay off nearly 1,700 employees at its Fairfax Assembly and Stamping plant in Kansas. The automaker made this announcement in a WARN filing with the Kansas Department of Commerce.

The plant in Kansas City, Kansas, opened in 1987 and produces the Chevrolet Malibu sedan and Cadillac XT4 SUV. It employs about 2,300 workers.

A GM spokesperson was quoted by the Detroit Free Press as saying that the layoffs are “temporary” while the company spends $390 million to retool the plant to produce the Chevrolet Bolt electric vehicle. Production at the plant is expected to restart in the middle of 2025.

And X has backed down in its fight with Brazil’s Supreme Court after it banned the social-media platform in the country for not complying with a justice’s order to block accounts for spreading misinformation and hate. That’s according to the New York Times.

In a court filing late Friday, attorneys for X said the accounts that Justice Alexandre de Moraes had ordered to be removed were taken down. The Times said X also paid fines that were imposed and named a new formal representative in Brazil, as ordered.

The court on Saturday confirmed the move but said X had not submitted the proper paperwork, adding that the platform has five days to do so.

For income investors, Logitech (LOGI) goes ex-dividend on Tuesday, with a payout date on Wednesday.

Getty (GTY) and Philip Morris (PM) go ex-dividend on Wednesday. They both pay out on October 10. Nucor (NUE) goes ex-dividend on Thursday, paying out on November 8.

Companies forecast to increase their quarterly dividend payouts include Accenture (ACN) to $1.47 from $1.29, Honeywell International (HON) to $1.19 from $1.08, and Concentrix (CNXC) to $0.333 from $0.3025.

And in the Wall Street Research Corner,, with just six trading days left in the third quarter, the Goldman Sachs trading desk says the short-term technicals for stocks are unfavorable.

Scott Rubner, managing director for global markets and tactical specialist, says he is tactically negative into the end of the quarter, and that after Friday’s options expiration, “the market is free to move in either direction.”

In the medium-term, “I am cautious on risk pre-election and see investors reducing 1 delta (in favored long positions) and adding to directional hedges (buying the S&P 500 put spreads) given the reset in implied volatility,” he said.

Long term, he said he is targeting a year-end rally to S&P 6,000.

“I think investors will chase risk in November and December and re-allocate their portfolios out of cash and into stocks,” he said, adding that the market will trade “like a bunch of (recession in name only)” 2025 portfolios, with breadth to increase and reflation, value (IVE), (SPYV), energy (XLE), (VDE), and emerging markets (EEM) outperforming as “out of favor” themes lead the market.

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