📉 Stocks go down

Tuesday, July 20, 2021 by Robinhood Snacks | Disclosures
_Investors cranking out the umbrellas like [praetorianphoto/E+ via GettyImages]_

Investors cranking out the umbrellas like [praetorianphoto/E+ via GettyImages]

S&P 500
4,258 (-1.59%)
Dow Jones
33,962 (-2.09%)
Nasdaq
14,275 (-1.06%)
Bitcoin
$30,766 (-2.93%)

Hey Snackers,

Facebook Messenger just released Soundmojis, "next-level" emojis that let you send sounds like clapping 👏... and "audio clips from your favorite artists like Rebecca Black." 🤔 #ThonkingFace

Stocks dropped so much yesterday that we're doing a full story on the market.

Red
1. Delta rises, confidence falls: a cold shower just rained on the stock market's parade

"In the red"... Not a phrase we've heard recently re: the stock market. The market closed lower last week, after rallying to records for three weeks in a row. Yesterday, things got worse for the major stock indexes.

  • The Dow was the worst performer, plunging more than 2% in its biggest one-day drop of the year. The elite index tracks the stocks of 30 large US companies, and it's heavy on cyclicals —  aka: stocks that tend to move in tandem with the health of the economy.
  • The S&P 500, which tracks the stocks of the 500 most valuable US companies, dropped 1.6%. Travel, energy, and financial companies (all cyclicals) were the worst-performers. Airlines and cruise companies plunged.
  • The Nasdaq, the tech-heavy index which tracks 3K+ stocks, fell 1%.

Cloudy with a chance of N-95 masks... A surge in Covid cases driven by the highly-contagious Delta variant is pouring cold water on recovery optimism. Ballooning Covid cases — mostly among the unvaccinated — in highly-vaxed countries like the US and the UK have dampened investors' expectations of economic growth. The CDC is calling the US surge "a pandemic of the unvaccinated." A few big counties, including LA, brought back indoor mask mandates last week. Meanwhile in developing countries, the situation is more dire.

THE TAKEAWAY

The market mood has shifted... again. Stock market prices aren't just a product of fundamentals like profits, but also of human psychology. Stocks have been basking in Caribbean-level sunshine, but investors are starting to fear clouds ahead. The VIX, which measures the stock market's expectation of volatility, has soared 36% in the past five days. As Delta rises, confidence is waning: US consumer sentiment plunged in early July to its lowest level in five months. Sharp price increases in everyday items could also be knocking confidence in spending. It's TBD how long this shift will last.

Rollin

Bringing the tractor factor... minus the tractor. Hardware chain Tractor Supply Co. sells tractor-adjacent products like animal feed, tractor apparel, and anything that caters to the “tractor lifestyle.” Turns out, the tractor lifestyle has been booming: TSC reported record profits last quarter after a pandemic-fueled boom in DIY projects.

Like the Peloton of farmland... TSC has created a lifestyle brand focused on community — in its own words: "a rural lifestyle brand." TSC differentiates itself from competitors like Home Depot and Lowe's by prioritizing farm-specific needs. A few features of its lifestyle strategy:

  • Experts: Just like Peloton hires aspirational instructors, TSC hires “lifestylers” with ranching and farming backgrounds to establish credibility. A description of one employee: "farmer's daughter, barrel racer."
  • Events: Instead of doubling down on e-marketing, TSC partners with local orgs to host on-site events like pet clinics for your cow. As one employee put it: "Learn their pet's name, and you've got a customer for life."
  • Community: TSC opens stores in areas with high concentrations of cattle farmers, and has expanded its fast-growing “Neighbor's Club” loyalty program, which already has 21M+ members.
THE TAKEAWAY

Niche sounds small, but it can be big... Unlike Home Depot, TSC isn't targeting the needs of everyone with a house — just like Peloton isn't targeting everyone who likes to sweat. TSC's core customers are "recreational farmers, ranchers, and all those who enjoy living the rural lifestyle." It was able to pull in big profits last quarter by catering to these farm-specific needs (“Fly Control Strategies for Your Barn,” anyone?). TSC says that this "specialized market niche" is what sets it apart from the competition.

What else we’re Snackin’
  • Hacky: The Biden admin is blaming hackers tied to China's main intelligence service for this year's huge cyberattack on Microsoft's email software.
  • UVax: A federal judge ruled that Indiana University’s Covid vaccination requirement can stay for now, which could encourage other colleges to implement one.
  • UnSPAC: Billionaire investor Bill Ackman will buy up to 10% of Universal Music Group through his hedge fund instead of a SPAC, after regulators questioned his use of the blank-check company model.
  • Bills: The Biden admin proposed sharply higher penalties for large hospitals that don’t make their prices public.
  • Zoomy: Zoom is buying call center software maker Five9 for a massive $14.7B, as it tries to boost its enterprise biz.
  • Boosted: AT&T struck a $5B deal to carry Dish Network's cellphone customers over its wireless network, as the telecom rivals join to pursue 5G tech.
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Tuesday
  • Earnings expected from Netflix, Philip Morris, and Chipotle

Authors of this Snacks own shares of: Microsoft

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