Cracks are forming in the market and economy
Jobless claims are at their highest level since October 2021. The regional banking crisis isn't over. And Disney earnings show more streaming media fatigue.
Recession alarm bells chimed slightly louder Thursday morning. Is the Federal Reserve listening?
The US labor market is beginning to cool off at long last. Initial jobless claims rose to 264,000 last week, more than economists expected. While that’s still historically low, it is the highest level since October 2021. The trend is not encouraging.
Corporate layoffs are mounting. And it could get worse, especially in the financial services sector. The regional banking crisis is far from over. Struggling PacWest revealed in its latest 10-Q filing with the SEC Thursday that its deposit base tumbled nearly 10% last week. Consumers pulled money from the bank in the wake of the collapse of First Republic…which was bought by JPMorgan Chase following its failure.
Shares of PacWest plummeted more than 20% on the news and are now down about 80% this year. Several other regional banking stocks fell in sympathy.
And then there’s Disney. Although the media giant reported solid numbers from its theme park unit, investors are worried about the stunning decline in its streaming business. Disney+ lost subscribers and the streaming division continues to bleed red ink.
Media companies (like my former employer Warner Bros. Discovery) went all in on streaming, hoping that consumers would have an insatiable appetite for binge-worthy content. Turns out that they didn’t….especially now that there are concerns about the broader economy softening due to rampant inflation that is only now starting to cool.
Disney is planning to merge Hulu, the streaming service it has a controlling interest in, into the Disney+ service. That follows WBD’s decision to combine its HBO Max and discovery+ streamers into one platform simply called Max.
Shares of Disney fell 8% Thursday morning, sinking the Dow and S&P 500 in the process.
Add up all of today’s news and it seems clear that the economy is losing momentum. The post-pandemic job market recovery appears to be ending. Banks are in trouble due to the crypto collapse, spike in interest rates and a slowdown in the housing market. And Disney’s earnings clearly show that streaming is a luxury that many consumers seem content to live without once times get tough.