Wall Street Lunch: Disney’s Iger Survives Proxy Siege

Summary:

• Walt Disney’s proposed slate of directors wins shareholder vote, beating rival slates from Trian Group and Blackwells Group.
• Federal Reserve Chairman Jerome Powell says recent data doesn’t alter the current FOMC view.
• Taiwan Semiconductor Manufacturing pauses chip manufacturing after earthquake hits Taiwan.

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CEO Bob Iger wins shareholder board vote over Trian’s Nelson Peltz. (0:16) Fed’s Powell keeps door open to rate cuts. (1:07) Taiwan earthquake disrupts chip manufacturing. (3:25)

The following is an abridged transcript

Our top story so far

Walt Disney’s (NYSE:DIS) proposed slate of directors was re-elected to the board at its annual meeting Wednesday afternoon — beating a pair of rival slates from Nelson Peltz’s Trian Group and Blackwells Group in what became the most expensive proxy contest ever.

“We are pleased to announce that based on the tabulation of our proxy solicitor, it appears that the full Disney slate has been elected by a substantial margin over the Trian group nominees and the Blackwells group nominees,” legal chief Horacio Gutierrez announced.

Voting closed at 1:22 p.m. ET.

Shareholders voted to elect all 12 nominees recommended by the Disney Board.

Trian said after the vote: “While we are disappointed with the outcome of this proxy contest, Trian greatly appreciates all of the support and dialogue we have had with Disney stakeholders, We are proud of the impact we have had in refocusing this Company on value creation and good governance.”

Looking to the economy

Federal Reserve Chairman Jerome Powell eased some concerns about the policymakers turning hawkish after recent hot economic data.

At Stanford Business School’s first Business, Government, and Society Forum, Powell said the path of monetary policy remains pretty much on track, which would be around three rate cuts in 2024 based as far as traders are concerned.

He said. “The recent data do not … materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2% on a sometimes bumpy path.”

But as usual, the Fed chief tried to provide some balance adding people should not expect rate cuts until there is more confidence on inflation.

Odds of a rate cut in June rose back above 60% as he spoke. They had dipped to around 50% after Atlanta Fed President Raphael Bostic that he now sees just one rate cut starting in Q4 of this year, on the expectation that the current disinflation process will continue to be bumpy.

“If the economy evolves as I expect, and that’s going to be seeing continued robustness in GDP, unemployment and a slow decline of inflation through the course of the year, I think it would be appropriate for us to do start moving down at the end of this year, the fourth quarter,” he said.

On Wall Street, Treasury yields wiped out all of their early gains. The 10-year (US10Y) moved back below 4.40%. and the 2-year (US2Y) fell below 4.70%.

Stocks saw swings throughout Powell’s remarks but settled back to the modest gains on the board right before his speech.

Yung-Yu Ma, chief investment officer at BMO Wealth Management, says while the rate-cut narrative that drove first-quarter gains is wobbling, he expects “more of a market consolidation instead of a correction.”

“The stock market doesn’t need Fed rate cuts or even falling inflation, but it’s also not in a robust position to quickly digest risks that could arise from accelerating inflation, increasing geopolitical shocks to oil prices, or rising long-term interest rates.”

In the morning’s economic data, the much-maligned ADP jobs report said private payrolls rose by 184,000 in March, topping consensus of 150,000. And March ISM Services index dipped to 51.4, trailing the 52.8 consensus. Still, with the index over 50, economic activity in the services sector expanded for the 15^th-straight month.

Among active stocks

Taiwan Semiconductor Manufacturing (TSM) has paused some chip manufacturing and evacuated facilities after a 7.4 magnitude earthquake hit Taiwan on Wednesday morning.

According to Bloomberg, TSM, the main contract chipmaker for Apple (AAPL) and Nvidia (NVDA), has moved employees out of certain areas and noted that it was evaluating the impact of the earthquake.

Paramount (PARA) was under pressure amid a report that the movie studio and Skydance Media have been discussing entering exclusive talks for a possible deal.

David Ellison, the founder of Skydance media, met with Paramount’s board late last month to discuss a deal, according to a New York Times report. A move into exclusive talks would be a big step after a process that has been uncertain for months.

Wells Fargo downgraded silicon carbide semiconductor company Wolftspeed (WOLF) citing its exposure to the electric vehicle market.

Analyst Gary Mobley said amid concerns that Tesla (TSLA) could see a decline in volume this year and a lack of offset from other EV companies, demand for silicon carbide could fall short of expectations. He cut the stock to Equal Weight from Overweight and cut his price target to $30 from $55.

And Spotify (SPOT) jumped on a report it is raising prices in key markets again. Bloomberg says the company is boosting the cost of its audio service by $1-$2 per month in five key markets by the end of April, including the UK, Australia and Pakistan.

A price hike in the U.S. will follow later this year.

In other news of note

Big rig sales take a big tumble.

North America Class 8 truck net orders fell 18.7% year over year to 17,300 units, according to preliminary data from ACT Research. Class 8 trucks are also known as semis or heavy duty trucks.

ACT noted that March marks the first month since May 2023 for seasonally adjusted activity below 20,000 units.

“Nascent improvements in the freight market and select OEMs’ efforts to smooth demand, notwithstanding forced conservatism among a portion of the truck buying populace, capped Class 8 order activity in March,” ACT analyst Steve Tam said. “While we will have to wait for the details of the month’s order volumes, logic suggests waning demand for tractors in the market retrenched in March.”

And in the Wall Street Research Corner

Oppenheimer’s technical analysts published their top buy-sell trade recommendations for each sector.

They also note that Oppenheimer’s OPCO Bullish composite — which is an aggregate of four investor surveys — reached 91% last week. That’s the most optimistic level since 2018.

Analysts said, “it’s difficult to become too downbeat on the market when speculative themes are emerging higher from three-year declines.”

Among the pair trades are

In energy (XLE): Buy Diamondback Energy, Inc. (FANG); Sell Chevron Corp. (CVX)

In consumer discretionary (XLY): Buy Pool Corp. (POOL); Sell McDonald’s Corp. (MCD)

In real estate (XLRE): Buy CoStar Group, Inc. (CSGP); Sell UDR Inc. (UDR)

In industrials (XLI): Buy Quanta Services, Inc. (PWR); Sell United Parcel Service, Inc. (UPS)

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