Mixed Earnings but Inflation and GDP Data Reassure – July 26 Market Recap
Indices
- Dow 40,589, +302 or +0.75%.
- Nasdaq 17,357, -369 or -2.08%.
- S&P 5,459, -46 or -0.84%.
- MSCI EAFE 2337.39, -23.12 or -0.98%.
- USD10Y 4.20%, -3.9bp or -0.92%.
- WTI Crude $76.81 bbl, -$5.39 or -6.56%.
Mixed Earnings
As this blog mentioned two weeks ago, markets seemed to be priced to perfection heading into the Q2 earnings season. That theory was born out this past week as Alphabet (GOOGL) beat their numbers and yet investors focused on light advertising revenues from their YouTube division and punished the stock, driving it down nearly 8% for the week. Meanwhile, Tesla (TSLA) beat their earnings estimates but missed on revenues and reported their lowest profit margins in five years; TSLA traded down nearly 11% on the week. Ford (F) posted a disastrous quarter and traded down more than 20%. This week will be an important week for tech and communication services as four of the Magnificent 7 are reporting. Whether the rotation out of those sectors continues will largely depend on their earnings reports and forward guidance given this week.
Coca-Cola (KO), Chipotle Mexican Grill (CMG), General Motors (GM), and Southwest Airlines (LUV) all beat expectations although only KO and LUV were positive for the week.
Inflation and GDP Data Reassure
As far as economic data is concerned, last week was about as Goldilocks as one could have hoped. Q2 GDP roared back at +2.8% annualized rate helping quell fears that a recession could be looming after Q1’s lackluster +1.6% print. Most importantly, the June PCE reports, both Headline and Core, were in line with expectations and led to a slightly lower year-over-year Headline number and an unchanged Core reading. This now gives the Fed the last bit of evidence they need to begin cutting rates in September (no change is expected at this week’s meeting).
The Upcoming Week: July 29 – Aug 2
Following last week’s huge data dump, the markets are bracing for another week chock full of economic reports and earnings. Regarding the former, the June JOLTS report, July Private Payrolls, the FOMC interest rate decision, S&P and ISM Manufacturing PMIs, and July Non-Farm Payrolls are all on tap. Earnings are highlighted by four of the Magnificent 7 (MSFT, META, AMZN, and AAPL) along with energy giants Chevron (CVX) and Exxon Mobile (XOM).
Economic Calendar
- Monday – N/A. Earnings: McDonald’s (MCD).
- Tuesday – June Job Openings and Labor Turnover Survey (JOLTS). Earnings: Microsoft (MSFT), Starbucks (SBUX).
- Wednesday – July ADP Private Payrolls, FOMC Interest Rate Decision, Fed Chair Powell Press Conference. Earnings: Boeing (BA), Meta (META), Qualcomm (QCOM).
- Thursday – Initial Jobless Claims, July S&P and ISM Manufacturing PMI. Earnings: Apple (AAPL), Amazon (AMZN), Coinbase (COIN), DoorDash (DASH).
- Friday – July Non-Farm Payrolls, July Unemployment Rate, July Average Hourly Wages. Earnings: Chevron (CVX), Exxon Mobile (XOM).
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Last Week‘s Daily Trading Recap…
Monday – Dow +127 to 40,415, Nasdaq +280 to 18,007, S&P +59 to 5,564 USD10Y +2.1bp to 4.26%.
- Nine of eleven S&P sectors traded higher today, led by Technology, Communication Services, and Industrials.
- Technology roared back after a tough last week’s rotation out of the sector. Investors are betting that Alphabet and Tesla earnings due out tomorrow will continue to lift the sector.
- Markets were apparently unfazed by President Biden’s withdrawal from the Presidential race and Vice President Harris’ fait accompli replacement as the Democratic nominee for President.
Tuesday – Dow -57 to 40,358, Nasdaq -10 to 17,997, S&P 500 -8 to 5,555, USD10Y –2.1bp to 4.239%.
- Nine of eleven S&P sectors traded down today, led lower by Energy, Utilities, and Consumer Staples.
- Earnings: Alphabet (GOOGL) beat top and bottom-line estimates, but YouTube advertising revenues were light; GOOGL traded down -2.18% post close. Tesla (TSLA) beat revenue estimates but missed their earnings projections and posted their lowest profit margins in five years; TSLA traded down -7.76% after hours. Visa (V) traded down –2% after missing their revenue projections. General Motors easily beat their revenue and earnings expectations and guided full-year earnings higher. Coca-Cola (KO) beat their estimates and raised full-year revenue estimates. United Parcel Service (UPS) missed both earnings and revenue expectations.
Wednesday – Dow -504 to 39,853, Nasdaq -655 to 17,342, S&P -128 to 5,427, USD10Y +4.7bp to 4.286%.
- Seven of eleven S&P sectors traded down today, led lower by Technology, Consumer Discretionary and Communication Services.
- July Flash S&P Manufacturing PMI was lighter than expected at 49.5 vs 51.5 and vs last month’s 51.6 print.
- July Flash S&P Services PMI was better than expected at 56 vs 55 and vs last month’s 55.3 print.
- Earnings: Chipotle Mexican Grill (CMG) beat revenue, earnings, and same store sales estimates; CMG traded +4.36% post close. Ford Motor (F) reported a disastrous quarter, missing earnings estimates by 30% though they reported a slight beat on revenues; F traded down 11.156% in extended trading. International Business Machines (IBM) beat their earnings estimates but missed their revenue projections; IBM traded up +2.95% post close.
Thursday – Dow +82 to 39,935, Nasdaq -161 to 17,181, S&P -27 to 5,400, USD10Y -3.0bp to 4.256%.
- Jobless claims rose to 235,000 vs 237,000 forecast and vs. last week’s slightly revised higher print of 245,000 (originally 243,000).
- Q2 GDP was a robust +2.8% vs expectations of +2.1% and Q1’s +1.6% annualized number.
- Earnings: Southwest Airlines (LUV) beat revenue and earnings expectations and announced an end to their open seating philosophy.
Friday – Dow +654 to 40,589, Nasdaq +176 to 17,357, S&P +59 to 5,459, USD10Y -5.6bp to 4.20%.
- All eleven S&P sectors traded higher today, led by Industrials, Materials, and Real Estate.
- The June Personal Consumption Expenditure report was in line with expectations at +0.1%. Year-over-year PCE declined to +2.5% vs +2.6% last month.
- The June Core PCE report increased by +0.2%, also in line with expectations. YoY Core PCE was unchanged at +2.6%.
- Earnings: American Express (AXP) beat their earnings estimates on lower-than-expected revenues and increased their full year earnings guidance.
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Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ACHR, AVGO, BITB, ETHE and GBTC.