Stocks Rally as Amgen, Peloton, Travel Companies Push Markets Higher

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

U.S. equity markets as a whole are decisively higher after wavering 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) are up nearly 15% this morning after the company posted better-than-expected revenue and earnings. Analysts expected a loss of 38 cents per share; instead, Harley-Davidson reported a gain of 14 cents per share, thanks in part to increased demand for one of its more expensive motorcycle models.

Today’s Market Movers

Amgen Inc. (AMGN) is the best-performing stock on both the Dow and S&P 500 on the biotech firm’s $6 billion share buyback plan. Shares of airlines, cruise lines, and other travel-related companies are gaining for a second day with more states ending 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 manufacturers dropped after Pfizer Inc. (PFE) predicted sales of its shot this year would be less than analysts anticipated. General Motors Co. (GM) shares slid on a downgrade and price target cut from Morgan Stanley (MS). Shares of rival Ford Motor Co. (F) are down as well. 

Energy companies’ stocks declined as oil futures sank more than 2% to less than $89 a barrel on a potential easing of tensions between Russia and Ukraine, and renewed U.S.-Iran 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 note jumped to 1.96%, the highest in more than two years. The euro dropped against the dollar.

Cryptocurrency

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

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Chart of the Day: Small Business, Big Costs

A measure of small business optimism fell last month as rising costs for inventory, supplies, and labor weighed on operations.

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

Inflation was cited as the single most important problem by 22% of owners surveyed, the same percentage as December, which was the highest since 1981. In response, 61% of businesses reported raising their average selling prices, a four percentage point increase from the month before and the highest reading since the fourth quarter of 1974. 

 Higher Salaries

NFIB Chief Economist Bill Dunkelberg indicated owners were increasing salaries at record high rates to attract qualified workers to their open positions. A separate NFIB report in January found 50% of businesses boosted compensation, a 48-year high, and today’s survey showed 27% plan to do so in the next three months. In addition, 11% said worker costs were their top business problem, while 23% cited labor quality.

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

Stock of the Day: Peloton Interactive (PTON)

Peloton announced a massive shake-up as the connected exercise company tries to recover from a big drop in demand that had been fueled by the COVID-19 lockdowns. The news sent shares soaring.

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

Peloton added the layoffs are part of its plan to reduce costs by at least $800 million a year through operating expense efficiencies and significant margin improvement in its Connected Fitness category. The company will also cut capital expenditures by $150 million this year, including winding down the development of its new manufacturing facility in Ohio. 

Reduced Revenue Guidance 

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

Shares of Peloton Interactive are up 24%, 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.