Friday Morning Rebel Brief — Adobe Earnings, Fear Index, and More

After two weeks of heavy declines, the market is up marginally this morning. The S&P 500 and the Dow Jones are both up roughly half a percent, and the Nasdaq is up over 1%. 

Let’s look at the stories that are moving markets this morning. 

Adobe (ADBE) Beats Earnings, Offers Weak Guidance

Adobe posted an EPS beat of $3.35 vs $3.31 expected, and a revenue beat of $4.39B vs $4.34B expected. So why is the stock down more than 5% in the premarket? One word: guidance.

The market is forward looking. That makes guidance one of the most important things in any earnings report. A company could come out with poor earnings and potentially be saved from a steep sell off if they surprised the market with better than expected guidance. 

That’s the opposite of what happened in Adobe, which issued full year EPS guidance of $13.50 vs $13.66 expected, and full year revenue guidance of $17.65B vs $17.90B expected. This morning’s decline sets shares of Adobe more than 38% lower year-to-date. 

Alibaba (BABA) Soars On Ant Filing

Remember when the Chinese Government was cracking down on its biggest companies? They’ve reversed course.

The FXI, KWEB, and most notably Alibaba are all trading significantly higher this morning on the back of news that the Chinese Government has accepted Ant Group’s application to set up a financial holding company. This comes after the government has floated the idea of its own version of quantitative easing and loose financial policy. 

Fear & Greed Index Once Again Reads Extreme Fear

The CNBC Fear & Greed Index is a tool that measures investor sentiment using 7 key indicators:

• Market Momentum
• Stock Price Strength
• Stock Price Breadth
• Put and Call Options Ratio
• Market Volatility 
• Safe Haven Demand
• Junk Bond Demand

As of right now, 5/7 are rated at “extreme fear”, with the remaining two rated at “fear”. Here’s a look at the gauge and a timeline of the Fear & Greed Index readings over the past year.

Coupled with this strong feeling of fear in the market is this set of two charts depicting the one-year low in stocks above their 50 & 200 day moving averages, and of stocks at their 52-week highs. 

Basically, investors are feeling scared. Or, as one Wall Street Bettor put it…Nice.

72% of Gen Z’ers Think They’ll Be Rich One Day

According to a poll by investment advisors MagnifyMoney, 72% of Gen Z’ers believe that they will be rich one day. The poll also revealed that Gen Z is the first generation to believe that stocks are a better investment than home ownership. 

From a headline perspective, this sounds like an easy target for memes and jokes. And if the gist was, “Gen Z believes that becoming an influencer is a viable path to long term wealth”, those memes would be justified. But when you dig into the poll, you’ll find that Gen Z is uniquely interested in investing their money into the stock market — at a greater rate, and with greater optimism than the generations before them. An easy criticism is, “Well, the market has always gone up in their lifetime! Of course they are!”… except this poll was taken during what is the worst start to the year for the market since 1939. 

The bottom line: they’re probably being overly optimistic. But investing in the market at an early age and getting really interested in building long term wealth is a pretty good start.

For more quick takes on this morning’s market-moving news, check out 60 Seconds With Jon Najarian!

Ready to start trading? Try Unusual Option Activity Essential. Learn how you can follow the “smart money” with a fresh UOA trade idea each week – including technical levels so that you know where to enter and exit!