Fed’s 2% Inflation Stance Causes Dow Drop as Disney and Las Vegas Sands Report Strong Earnings

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Fed’s 2% Inflation Stance Causes Dow Drop as Disney and Las Vegas Sands Report Strong Earnings
Credit: © Reuters.

Federal Reserve Chair Jerome Powell's reaffirmation of the central bank's 2% inflation mandate on Friday, despite high inflation concerns, led to a significant fall in the Dow Jones Industrial Average by over 250 points. This move also pushed the 10-year U.S. Treasury yield towards a critical 5%, a level not seen since 2007, according to the Chicago Catch-Up newsletter. European stocks mirrored this downturn, with the Stoxx 600 index hitting its lowest in seven months.

In contrast to the broader market downturn, Disney (NYSE: DIS )'s theme parks reported strong financial performance. Disneyland and Disney World experienced a year-over-year revenue increase of 17%, reaching over $24 billion for the nine months ending July 1. Admission revenues alone contributed nearly $8 billion to this total. This strong performance comes despite Disney's recent challenges, such as slowing revenue growth and a high earnings multiple, as noted by InvestingPro Tips. The company's market cap, according to InvestingPro Data, stands at a robust 152.33B USD, indicating its significant presence in the entertainment industry.

Las Vegas Sands (NYSE: LVS ) also showed signs of recovery from the Covid-19 pandemic. The company's third-quarter adjusted property EBITDA neared pre-pandemic levels at $1.12 billion, largely attributed to Asia's role in recovery. This is in line with InvestingPro Tips, which highlights the company's accelerating revenue growth and impressive gross profit margins. In fact, InvestingPro Data shows a staggering 114.3% revenue growth for the company, with a market cap of 35.07B USD.

Meanwhile, Wall Street lenders and large corporations like Tesla (NASDAQ: TSLA ) have been under pressure due to high-interest rates, leading to layoffs and reduced consumer spending. Chris Marinac of Janney Montgomery Scott addressed these cost-cutting measures due to uncertainty.

Netflix (NASDAQ: NFLX ) shares surged by 16% following a positive quarterly earnings report and a significant increase in its new ad-supported subscription tier. Investors are also closely monitoring forthcoming results from Comerica (NYSE: CMA ), Regions Financial (NYSE: RF ), American Express (NYSE: AXP ), and oilfield services company SLB.

In light of these developments, Powell maintained his stance on the Federal Reserve's 2% inflation target and expressed his belief that current rates are not too high. While U.S. inflation is above the target rate, monthly increases have decelerated. For more information and insights like these, consider subscribing to InvestingPro for additional tips and real-time metrics, available at InvestingPro Pricing.

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