Wednesday Premarket: Inflation, an Upstart Short Squeeze, Disney Earnings, Scarlett Johansson

Premarket action on Wednesday had the three major U.S. indexes trading lower. The Dow Jones industrials were down 0.18%, the S&P 500 down 0.18% and the Nasdaq 0.19% lower.

Before markets open on Wednesday, the Bureau of Labor Statistics (BLS) will release its consumer price index (CPI) report for April. Economists expect CPI to have risen by 0.4% in the month, a much sharper increase than March’s gain of 0.1%. Core CPI, which excludes food and energy, is forecast to increase by 0.3%, slightly less than the March increase of 0.4%. Trading volume has been subdued recently, as traders and investors have been keeping their powder dry for this report. The BLS will report the producer price index on Thursday.

After U.S. markets closed Tuesday, Upstart Holdings Inc. (NASDAQ: UPST), an AI-driven, cloud-based lending platform, reported what can only be called a mixed bag of financial news in its first-quarter earnings report. Upstart’s business takes the loan officers out of the lending business and uses instead an AI-generated risk model that automates the entire lending process. In the company’s conference call, co-founder and CEO Dave Girouard lauded AI as “the primary source” of Upstart’s competitive advantage and then revealed just what that means:

In the first quarter, we achieved a record level of automation with 84% of Upstart powered loans fully automated across all our bank partners. By this I mean the loans were approved and verified instantly with zero human intervention from rate requests through loan funding. We know of no other lending marketplace with this level of automation.

First-quarter revenue dropped by two-thirds year over year to $103 million, and the company’s adjusted loss per share was $0.47. Not exactly the sort of report that generates a 40% jump in a stock’s price in after-hours trading.

As Ben Ward of Fintel explains, “Upstart will be a short squeeze paradise on Wednesday.”

We already have previewed what to expect from the Walt Disney Co. (NYSE: DIS) earnings report due out after markets close on Wednesday. The company’s feud with Governor Ron DeSantis got more attention Tuesday when DeSantis’s announced rival for the Republican Party’s 2024 presidential nomination, former South Carolina Governor Nikki Haley, said that the feud shows the Florida governor took $50,000 in contributions from Disney, and now that the company is criticizing the state’s “don’t say gay” law, “you’re gonna have thin skin and do a lawsuit that costs taxpayer dollars.”

CEO Robert Iger has bigger problems than DeSantis, though. Iger has done little in his first six months back in charge besides firing 7,000 employees. Can he persuade investors that he has a workable plan to return Disney to its glory days? More important, perhaps, does he have a plan that will keep the activist investors at bay?

As if to ratchet up the pressure a bit on Disney and Iger, Variety ran a long article and interview with actress Scarlett Johansson, who sued Disney in 2021 for violating her contract by releasing “Black Widow” simultaneously in theaters and on Disney’s streaming channel. Johansson claimed that her contract forbade the simultaneous release to streaming. Disney, and former CEO Bob Chapek, settled with a payment of some $40 million, on top of the $20 million salary it had paid Johansson for her role.

However, Johansson admits to being a total Disney groupie. She will star in Disney’s coming “Tower of Terror” movie and told Variety that she still visits Florida’s Disney World “at least 10 times a year and geeks out when talking about the studio’s movies.”

Here is a look at how the markets fared on Tuesday.

Eight of 11 market sectors closed lower Tuesday. Materials (−0.93%) and technology (−0.85%) posted the day’s worst losses. Industrials (0.17%) and energy (0.04%) had the day’s best gains. The Dow closed down 0.17%, the S&P 500 down 0.46% and the Nasdaq 0.63% lower on Tuesday.

Two-year Treasuries added one basis point to end Tuesday at 4.01%, and 10-year notes also added a basis point to close at 3.53%. In Wednesday’s premarket, two-year notes were trading at around 4.04% and 10-year notes at about 3.51%.

Tuesday’s trading volume continued a three-day streak of well below the average volume. New York Stock Exchange losers outpaced winners by 1,753 to 1,202, while Nasdaq decliners led advancers by about 4 to 3.

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