The Daily Breakdown looks at the recent volatility from the short-lived trade war, as well as the earnings reactions for Palantir and PayPal.
Tuesday’s TLDR
- Tariffs are on the back-burner
- Who panicked yesterday?
- PLTR, SPOT jump on earnings
What’s happening?
Over the weekend, I read tons of negative and worrisome tweets, articles and Reddit posts about the upcoming Monday session, as tariffs were set to send stock prices lower.
Stocks did decline, but it was hardly the catastrophe that many were predicting on Sunday. At yesterday’s low, the S&P 500 and Nasdaq 100 were down about 2%, but they ended the day down just 0.5% and 0.8%, respectively. On any other day, most investors wouldn’t even acknowledge those types of declines.
The trade wars that started this selloff are all but put on the back-burner, but investors should be honest and ask themselves how they handled the recent developments.
It’s one thing to be a little nervous. When our hard-earned money is on the line and volatility springs up unexpectedly, it creates some panic. Panic on Wall Street is nothing new and we’re all humans who have emotions.
But if investors were sweating bullets on Sunday night and felt punched in the gut on Monday morning, it may be time to reconsider their risk levels.
Yesterday’s rebound has the S&P 500 within 2% of its all-time high and Bitcoin is back above $100K. For the deeply worried investor on Monday morning, that bounce gives them a chance to recalibrate, rebalance, raise cash and/or initiate hedges.
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The setup — BMY
For sporting a $120 billion market cap, Bristol-Myers Squibb is quietly holding up quite well near one-year highs.
Shares recently broke out over downtrend resistance and are now holding up above the 21-day and 50-day moving averages. Bulls want to see continued support in the $56 to $57 area and are hoping to see a breakout over recent resistance near $61.
There’s just one problem…Earnings are due up on Thursday morning.
While investors can perform hours worth of technical and fundamental analysis, all of that work could go out the window once a company reports earnings, because management is presenting new and updated information.
It’s what Wall Street often refers to as a “binary situation” — either the event is good and the stock rallies or it’s disappointing and the share price tends to fall.
While BMY has been trading well, know that this binary event looms around the corner. For some, one approach could be options.
Options
Using options around big events — like earnings — tend to be more expensive. However, one advantage is that the total risk of the trade is tied to the premium paid when buying options or option spreads.
For options traders, calls or call spreads are one way for investors to speculate on more upside, while puts or put spreads allow them to speculate on further downside or allow bulls to hedge their long positions.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street is watching
PLTR – Shares of Palantir are exploding higher on Tuesday morning, up more than 20% after handedly beating earnings and revenue estimates. Management’s guidance for 2025 revenue expectations also topped analysts’ expectations.
PYPL – Despite beating on earnings and revenue estimates, PayPal is down about 5% in pre-market trading. The firm’s full-year outlook calls for earnings of $4.95 to $5.10 a share, which was ahead of consensus expectations of $4.90 a share. PayPal also announced a new $15 billion buyback plan.
SPOT – Shares of Spotify are set to open at record highs after the firm delivered a strong quarter and its first full year of profitability. The company’s monthly active users (MUAs) rose by 35 million, hitting a total of 675 million and beating analysts’ estimates. Recent price increases haven’t resulted in the churn that some investors were worried about.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.