Nike is leading the race to the bottom.

Shares of the shoe behemoth fell over 20% on Friday after the company cut its full-year guidance, and said it expects sales to decline in the next fiscal year as the company continued its downward spiral.

The shoemaker reported adjusted earnings per share of $1.01, compared to the 83 cents that analysts expected. But its revenue came in at $12.61 billion, well below the $13.84 billion Wall Street was looking for, disappointing investors.

The company’s fall from grace over the past year has been marked by a slowdown in international demand, and the part of its business focused on “lifestyle” sneakers has particularly struggled. Overall, its annual sales growth for 2024 was at its lowest level since 2010, excluding the Covid-19 pandemic.

During yesterday’s earnings call, management said it expects revenue to drop to mid-single digits by next year, and projected a 10% decline in the first quarter due to slowing demand in China—far steeper than the 3.2% drop analysts projected. The company had previously projected sales growth over the next year, but now expects sales to fall by single digits in 2025.

A wave of analyst downgrades followed in the wake of the firm’s disappointing announcement.

Morgan Stanley equity analyst Alex Straton downgraded the stock to an “equal weight” rating from its previous overweight rating, explaining that “NKE’s long-term growth & profitability trajectory both unclear & below our prior hopes.”

UBS analyst Jay Sole downgraded the stock to “neutral.” “Our key conclusion is there will be no quick rebound for Nike's earnings. We believe Nike is embarking on what will be a multiyear reset of its business in order to return to healthy top-line growth rates,” Sole wrote.

Bank of America analysts took a more optimistic tone, writing that they “expect a growing penetration of innovation.” They maintained a “buy” rating, even as they lowered the price objective for the stock to $104 from its previous $113.

On the run

Can the legendary shoe company stage a comeback? CEO John Donahoe said 2025 would be a “transitional” year for the company during its earnings call. And the company’s former CEO has faith it will rise from the ashes.

"I have seen Nike’s plans for the future and wholeheartedly believe in them,” Nike's founder, Phil Knight, said in a statement on Friday.

But investors don’t seem to be taking his word for it.—LB

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🟢 What’s up

• Oliveda International, which makes beauty products from olive oil, rose 38.33% for no apparent reason. Maybe people just really like the feel of extra virgin olive oil on their skin?
• Infinera popped 16.38% after Nokia announced it would acquire the telecommunications hardware manufacturer for $2.3 billion.
• Synchrony Financial rose 6.17% after a Baird analyst initiated coverage of the financial services company with an outperform rating.
• Regional banking stocks rose on the hopes that a good PCE reading means a better chance of the Fed cutting rates soon. Regions Financial rose 3.83%, while Citizens Financial Group rose 3.16%.

What’s down

• Trump Media & Technology Group fell 18.09%, despite initially popping this morning after the first presidential debate.
• First Solar fell another 8.81% due to a Supreme Court ruling reducing federal agencies’ ability to regulate, which could negatively affect climate change efforts.
• Foot Locker shares fell 2.96% in sympathy with Nike’s terrible earnings report.
• Accolade bombed 44.29% after the health tech company reported decent earnings but revealed lower guidance for the year ahead than Wall Street expected.
• Kura Sushi USA, which is in fact a publicly traded sushi company, plummeted 24.04% due to worse-than-expected earnings, as well as poor full-year guidance.

During this unusually newsy summer Friday, you may have missed one positive update: The latest inflation data confirms that price increases are in fact decelerating.

The personal consumption expenditures price index (PCE), which is the Fed’s chosen gauge for inflation, showed core costs rose 0.08% in May, its smallest increase since late 2020. Core PCE, which excludes energy and food, is up about 2.6% from a year ago, in line with expectations, and 0.2% lower than in April.

In addition, consumer spending increased 0.3% in May, a stark contrast to when consumer spending fell in April by 0.1%.

EY-Parthenon Senior Economist Lydia Boussour said that the new numbers show, “A continued downshift in economic activity is underway with cooler consumer spending momentum and easing inflation.”

As more positive inflation numbers come in, the Fed can more thoroughly build its case to support September rate cuts, which is currently the consensus estimate among analysts.

“While Federal Reserve officials are likely to stay on message in the coming weeks, saying they are ‘data dependent,’ we will be paying attention to see if they try to talk down these rate cut expectations or perhaps even reinforce them,” explained John Kerschner, head of US Securitised Products at Janus Henderson Investors, in an emailed commentary. “We still have two rounds of inflation data before that meeting, and it is looking more and more likely that the slowing inflation data will give the Fed cover to start rate cuts later this year.”

So, while many Americans are still feeling the pain of high prices, we’re on a trajectory downward and the rate cut light at the end of the tunnel is getting closer.—LB

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• The smart money is getting out of tech stocks, according to Goldman Sachs. A report on hedge funds revealed they’re buying financials and energy stocks instead.
• July has been the best month for stocks since 1928, on average, with the S&P 500 finishing the month higher than where it started 60% of the time.
• Warren Buffett’s will stipulates that almost all of his massive fortune will go to a charitable trust managed by his children.
• The 20 worst stocks on the S&P 500 have dramatically underperformed their peers, with Walgreens Boots Alliance leading the losers. Take a look at the list to make sure none of them are in your portfolio.
• The NFL has been ordered to pay a $4.7 billion fine for violating antitrust law with its Sunday Ticket package.
• Farting farm animals will cost Danish farmers, after the country put a new tax in place on methane emissions.

After a week of big economic reports like GDP and PCE, plus the final push of earnings for the quarter, this coming week is a much calmer one here in the US. Markets are closed on Thursday for the 4th of July, and while Friday is technically a work day, don’t expect anyone to be checking their emails.

It’s a different story across the pond, with the first round of French elections this Sunday and the UK general election on Thursday. France and the UK account for a combined 40% of the MSCI Europe, and political upheaval in both countries has thrown European equities out of whack. Election results will determine economic policies, and once the votes are tallied investors will have more insight into what the future holds.

Back here in the States, these are the key economic releases to watch:

Monday: The June ISM Manufacturing index will give us a look at how the manufacturing sector has been faring lately.

Tuesday: The JOLTS report lays out how job openings and labor turnover looked in the month of May.

Wednesday: We’ll see a bunch of reports mid-week, including the ADP report and the ISM Services Index, not to mention factory orders and initial jobless claims. But the one to watch is the release of last month’s FOMC minutes, which will give investors some insight into how the Fed is feeling about the latest economic data.

Thursday: US markets are closed because FREEDOM

Friday: The big report of the week is the May jobs report. Economists expect the unemployment rate to stay steady at 4% from April, while payroll gains should slow from 272,000 to 225,000.

Turn off your work computer, turn off your brain, and enjoy your weekend!—MR