Disney Gets Into Gambling With ESPN. Why Investors Could Hit the Jackpot.

Disney stock has also been beaten down, having declined more than 20% from 12 months ago. The entertainment giant reports earnings after the bell on Wednesday, giving investors a sense of how CEO Bob Iger is coping with a raft of problems at the company he returned to.

The ESPN Bet move could be a sign that the company is making plans to sell ESPN. It’s hard to imagine a place for gambling in Disney’s wholesome Magic Kingdom in the longer term. Beyond that, watch out for progress on the Disney+ streaming service, and whether parks business is perking up this year.

Investing is certainly a good option for those with billions–or less–in the bank. The stock market’s strong performance has led some of the most outspoken bears to change their tune recently.

Of course, a bullish consensus itself could be a contrary indicator. As any investor knows, it’s not enough to be right about a company to make money in the market–you have to be right and bet against the herd. When everyone expects values to rise, that may well be a sign they won’t.

For you, Mega Millions winner, playing the stock market may feel harder than playing the lottery. But at least your odds are better than the 1 in 302,575,350 that got you this far.

—Brian Swint

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China Consumer Prices Fall But It’s Not Quite Deflation

Chinese consumer prices fell in July for the first time since the depths of the pandemic the latest indication that the world’s second-largest economy is weak. It’s a sign that consumer demand isn’t strengthening enough after the country emerged from lockdowns at the end of last year.

• The consumer price index declined 0.3% from a year earlier, official statistics showed Wednesday, the first negative inflation reading since early 2021. That’s not quite deflation, which is usually defined as an extended period of falling prices and is considered detrimental to economic growth.
• Separate data Tuesday showed exports fell sharply, another blow to the outlook. That news dragged down global stocks. There’s also problems in the real estate sector, which is deeply in debt. On Tuesday Country Garden, China’s largest developer, missed interest payments on $1 billion of loans, which shook markets.
• President Joe Biden will soon announce bans on private-equity and venture-capital investments in some Chinese technology companies, The Wall Street Journal reported Wednesday.

What’s Next: China’s government and central bank have so far been reluctant to unleash massive stimulus to combat the slowdown, but it may still continue to come up with some more measures.

—Brian Swint

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Rivian, Li, Lucid Report. More EV Earnings Are Here.

Rivian Automotive beat expectations on second-quarter earnings and raised its outlook for electric vehicle production for the full year. It now expects to produce 52,000 vehicles in 2023, which is more than twice what it made last year and higher than its earlier forecast.

• Rivian’s per-share loss of $1.08 was narrower than expected and an improvement from one year ago. Revenue of $1.1 billion met expectations. Vehicle deliveries in the second quarter rose 59% from the first quarter.
• Chinese EV maker Li Auto also beat expectations and profit margins were 21.8%, higher than Tesla ’s 18.2%. After delivering a record number of EVs in July, Li said it expects third quarter deliveries of 100,000 to 103,000 vehicles. It delivered 86,533 units in the second quarter.
• Third-quarter deliveries of 100,000 vehicles would be up roughly 16% from the second quarter. If deliveries across the industry increased by the same amount, sales of battery-powered EVs would be up roughly 10% in China from last year.
• Lucid had a wider than expected second quarter loss of 40 cents. It sells $100,000 cars, a small market, and data show it’s better to sell $50,000 cars or $500,000 cars. Luxury cars account for about 2% of the total U.S. auto market, according to Cox Automotive.

What’s Next: Germany’s Porsche has cars that sell for more than $275,000. Its gross profit margin is 30%. Italy’s Ferrari is even more profitable. It sold 3,392 units in the second quarter at an average price of roughly $478,000, for a gross profit margin around 50%.

—Al Root and Liz Moyer

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Fed Officials Make Rounds as Attention Turns to September Meeting

The Federal Reserve won’t meet to discuss interest rates until September, but officials have been talking about what their next move could be. Philadelphia Fed President Patrick Harker said in a speech Tuesday that the central bank could be near a point where it can hold rates steady.

• Harker, a voting member of the policy committee this year, said absent any alarming new data between now and the September meeting, the Fed could be at the point where it can “be patient” and let the actions it has already taken do their work.
• He told an audience at an event organized by the Philadelphia Business Journal that if they are at that point, they’d have to keep rates there for a while, and there isn’t any likely circumstance that could call for an immediate easing.
• Harker said he expects core PCE inflation to dwindle to just below 4% on an annual basis by the end of 2023, before falling below 3% next year and leveling out at the 2% target rate in 2025. Consumer price index data for July is due out Thursday.
• Richmond Fed President Thomas Barkin, speaking elsewhere on Tuesday, said it’s too soon to say whether a September rate increase is appropriate. He told reporters that with two job and two inflation reports between now and the meeting, “I don’t see any reason to pre-judge.”

What’s Next: New York Fed President John Williams told the New York Times they’re close to what a peak rate would be. Indicators say the economy is strong, but he expects “we will need to keep a restrictive stance for some time.” It depends on the data, he said.

—Liz Moyer

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AMC Beat Expectations, and Earnings Didn’t Even Include ‘Barbenheimer’

Movie theater giant AMC Entertainment reported a surprise profit for the June quarter. But better things are yet to come, it noted, as the mega-hit movie combo of Barbie and Oppenheimer only arrived in theaters in the third quarter, making July revenue the highest in the 103-year old AMC’s history.

• AMC’s second quarter earnings of 1 cent a share was the first quarterly profit since the fourth quarter of 2019, before the Covid-19 pandemic. Second quarter attendance, 66 million moviegoers worldwide, was also the highest since then.
• But it isn’t an absolute Hollywood ending. A strike by writers and actors could delay new releases into next year, and AMC still faces some liquidity hurdles, as CEO Adam Aron acknowledged in the earnings report.
• AMC had $643 million of quarter-end liquidity, and its ability to continue to raise capital is vital to its recovery, Aron said. “There are real and potentially severe liquidity hurdles on the horizon,” he said, adding they have risen to meet challenges in the past.
• AMC’s plan to convert its AMC Preferred Equity units to common stock was blocked by a Delaware judge, and AMC is trying to modify it. The plan was supposed to help raise capital to eliminate debt. Wedbush analyst Alicia Reese says AMC still faces bankruptcy risk if the conversion plan fails.

What’s Next: AMC stock surged last month after the judge blocked its stock conversion proposal but the opposite could happen if the company’s modified plan addresses the court’s concerns.

—Jack Denton and Liz Moyer

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Another Lottery Drawing; Another $1 Billion Jackpot

Someone in Florida has won the Mega Millions jackpot, which had grown to $1.58 billion, the largest in its 21-year history. No winning ticket had been drawn since April. The winner could get a lump sum amount of $783.3 million before taxes.

• Winning the top prize requires a player to match all five white balls with numbers from 1 to 70 and then the one gold Mega Ball numbered 1 to 25. Odds are 1 in 302,575,350.
• For perspective, the odds of getting struck by lightning once in life are 1 in 15,300, according to the National Weather Service. A second Mega Millions prize of $1 million, for winning all five of the white balls, has odds of 1 in 12,607,306.
• The lottery says there’s no best way to pick numbers. Players have the option of letting the machine pick or using their own picks. A ticket costs $2 and is sold in 45 states, Washington, D.C., and the U.S. Virgin Islands.
• Mega Millions is one of two multistate lotteries in the U.S., and the prizes have been getting bigger. Mega started in 2002 and had its first $1 billion jackpot in 2018. There have been four subsequent $1 billion-plus Mega grand prizes, including the current one.

What’s Next: Tuesday’s jackpot amount was the third biggest lottery grand prize in U.S. history. The player with the winning ticket has the option to claim it as an annuity, including an upfront payment and then 29 annual payments that increase 5% each time.