Stocks rally as Amgen, Peloton and travel companies drive markets higher

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Shares of Peloton Interactive Inc. (PTON) are soaring after the connected exercise company announced a major restructuring. The stock is up nearly 30% on Tuesday afternoon. Currently trading around $38, the company is still down over 70% in the past year.

U.S. equity markets as a whole are markedly higher after some faltering this morning, led by tech and small-cap stocks, with the Nasdaq up more than 1% and the Dow Jones not far behind.

Shares of Harley-Davidson (HOG) rose nearly 15% this morning after the company posted revenue and earnings that beat expectations. Analysts had expected a loss of 38 cents per share; instead, Harley-Davidson posted a gain of 14 cents a share, thanks in part to increased demand for one of its most expensive motorcycle models.

Key points to remember

  • The Dow Jones, S&P 500 and Nasdaq are all higher after faltering earlier.
  • Amgen and Peloton are both helping markets move higher, as are small-cap stocks as measured by the Russell 2000 Index.
  • Bond yields were at their highest level in more than two years, while crude’s recent rally came to a halt with a barrel falling below $89 for the first time since Feb. 3.

Today’s market movers

Amgen Inc. (AMGN) is the best performing stock in the Dow Jones and S&P 500 on the biotech company’s $6 billion share buyback plan. Stocks of airlines, cruise lines and other travel-related businesses gain for a second day as more states end mask mandates as COVID-19 cases decline. Delta Airlines (DAL), Spirit Airlines (SAVE) and Carnival Corporation (CCL) are all trading higher.

Shares of COVID-19 vaccine makers fell after Pfizer Inc. (PFE) predicted that sales of its vaccine this year would fall below analysts’ forecasts. Shares of General Motors Co. (GM) slipped following a downgrade and a reduction in Morgan Stanley’s (MS) price target. Shares of rival Ford Motor Co. (F) are also down.

Shares of energy companies fell as oil futures fell more than 2% to below $89 a barrel on a possible easing of tensions between Russia and Ukraine and the recovery US-Iranian nuclear talks.

The Russell 2000 Index of small cap stocks gained 1.4%. It had been declining for most of 2022.

Bond yields jump

The yield on the 10-year Treasury bond jumped to 1.96%, the highest in more than two years. The euro fell against the dollar.

Cryptocurrency

Most major cryptocurrencies including Bitcoin have reversed and are now lower, although the price of XRP continues to climb, up another 3%. The DOJ reported seizing $3.6 billion worth of stolen Bitcoin in a 2016 hack of currency exchange Bitfinex. This is the largest financial seizure to date.

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Chart of the Day: Small Business, Big Costs

A measure Small business optimism dipped last month as rising inventory, supply and labor costs weighed on operations.

The National Federation of Independent Business (NFIB) Small Business Optimism Index fell to 97.1, down 1.8 points from December.

Inflation was cited as the most important problem by 22% of owners surveyed, the same percentage as in December, which was the highest since 1981. In response, 61% of businesses said they had raised their selling prices averages, an increase of four percentage points from the previous month and the highest reading since the fourth quarter of 1974.

Higher wages

NFIB chief economist Bill Dunkelberg said landlords were raising wages at record rates to attract skilled workers to their vacancies. A separate NFIB report in January, 50% of companies increased their compensation, a 48-year high, and today’s survey showed that 27% plan to do so in the next three months. Additionally, 11% said labor costs were their biggest business issue, while 23% cited the quality of the workforce.

The NFIB noted that small business owners remain pessimistic about economic conditions over the next six months.

Action of the day: Peloton Interactive (PTON)

Platoon announcement a massive shake-up as the connected exercise company tries to recover from a sharp drop in demand that had been fueled by COVID-19 lockdowns. The news sent stocks soaring.

Peloton said co-founder John Foley is being replaced as CEO by former Spotify and Netflix CFO Barry McCarthy and two new board members with McCarthy are being added. The company also said 2,800 jobs, or about 20% of the company’s workforce, were to be cut.

Peloton added that the layoffs are part of its plan to reduce costs by at least $800 million a year through operating expense efficiencies and significantly improving margins in its Connected Fitness category. The company will also cut capital spending by $150 million this year, including ending development at its new manufacturing facility in Ohio.

Guidance on reduced income

Peloton projects 2022 revenue in the range of $3.7 billion to $3.8 billion, down from its previous estimate of $4.4 billion to $4.8 billion. Additionally, it expects to end the year with 3 million connected subscribers, down from the 3.35 million to 3.45 million it previously predicted.

Shares of Peloton Interactive rose 24% and are now trading above their initial public offering (IPO) price of $29 each after falling below that level earlier this week. The stock has lost more than 75% of its value since hitting an all-time high in January 2021.

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