Fed Too High Too Long? Manufacturing and Jobs Scare Investors – Aug 2 Market Recap
Indices
- Dow 39,737, -852 or -2.10%.
- Nasdaq 16,776, -581 or -3.35%.
- S&P 5,346, -113 or –2.07%.
- MSCI EAFE 2291.33, -46.06 or -1.97%.
- USD10Y 3.792%, -40.8bp or –9.71%.
- WTI Crude $76.93 bbl, +$0.12 or +0.16%.
Fed Too High Too Long?
As expected, the Federal Open Market Committee voted to keep rates unchanged at their meeting which concluded on Wednesday this week past. During his press conference, Fed Chair Powell intimated that the Fed could begin cutting rates in September if the inflation data continued to demonstrate improvement. This news was expected and well received by the markets and all three indices rallied with the Nasdaq leading the way on the back of semiconductor strength.
Manufacturing and Jobs Scare Investors
However, on Thursday, cracks in the confidence of investors began to appear as U.S. Manufacturing data was weaker than anticipated and not only were weekly initial jobless claims worse than expected but they were also much higher than their four-week moving average. On Friday, investors sold stocks first and tried to find answers to their questions later as the Non-Farm Payroll number was weaker than expected and unemployment jumped to 4.3% vs 4.1% last month.
Recession Fears
These four data points on Thursday and Friday reignited recession fears despite the fact that the economy just posted a +2.8% annualized GDP print two weeks ago (this writer acknowledges that this data point is backward looking) and that U.S. Hourly Wages, a much-watched inflationary data point was lower than expected (good inflation data). Without any economic data until the week of the twelfth (CPI, PPI, Retail Sales), all eyes will be on earnings this week as investors search for any insights as to the state of the economy.
The Upcoming Week: Aug 5 – Aug 9
After two very busy weeks of economic data, the calm follows the storm; other than U.S. Services data on Monday and Initial Jobless Claims on Thursday, it is a light week for economic data. Earnings, however, continue unabated; meat producer Tyson Foods, freight and rail company CSX, industrial giant Caterpillar, fast-food conglomerate Yum Brands, hailing service Uber, electric truck maker Rivian, entertainment giant Walt Disney, the once darling of DeFi, Robinhood, and travel booking company Expedia are the headliners this week.
Economic Calendar
- Monday – July S&P and ISM Services. Earnings: Tyson Foods (TSN), CSX (CSX).
- Tuesday – N/A. Earnings: Caterpillar (CAT), Uber (UBER), Yum Brands (YUM), Rivian Automotive (RIVN).
- Wednesday – N/A. Earnings: Walt Disney (DIS), Robinhood (HOOD).
- Thursday – Initial Jobless Claims. Earnings: Expedia (EXPE).
- Friday – N/A. Earnings: N/A.
If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.
Last Week‘s Daily Trading Recap…
Monday – Dow -49 to 40,539, Nasdaq +12 to 17,370, S&P +4 to 5,463 USD10Y -2.2bp to 4.178%.
- Seven of eleven S&P sectors traded higher today, led by Consumer Discretionary, Communication Services, and Real Estate.
- Earnings: McDonald’s (MCD) missed both its earnings and revenue estimates and reported negative same store sales for the first time since 2020, yet the stock bucked the trend of the market punishing poor earnings reports and traded up +3.74%.
Tuesday – Dow +203 to 40,743, Nasdaq -222 to 17,147, S&P 500 -27 to 5,436, USD10Y -3.5bp to 4.143%.
- Seven of eleven S&P sectors traded higher today, led by Energy, Financials, and Real Estate.
- The June Job Openings and Labor Turnover Survey (JOLTS) was 8.18 million vs 8.1 million expected and vs 8.23 million in May.
- Earnings: Microsoft (MSFT) beat revenue and earnings estimates but guided their current quarter revenue estimates lower; MSFT traded down -2.76% post close., Starbucks (SBUX) reported in line earnings but missed on revenues. Apparently, investors were expecting worse, SBUX traded up +3.63%.
Wednesday – Dow +99 to 40,842, Nasdaq +451 to 17,599, S&P +85 to 5,522, USD10Y -3.4bp to 4.109%.
- Seven of eleven S&P sectors traded higher today, led by Technology, Consumer Discretionary and Communication Services.
- Technology and semiconductor chip stocks soared today on the back of Advanced Micro Devices (AMD) earnings and news of potentially less severe export restrictions on chips bound for China.
- July ADP Private Payrolls were lower than expected at 122,000 vs 150,000 expected and vs 155,000 in June.
- The FOMC held interest rates steady as expected but Fed Chair Powell in his comments to the press said a cut could come as soon as September if economic data continues to show progress on inflation.
- Earnings: Boeing (BA) lost more than expected on fewer earnings; BA traded up +2%. Meta (META) beat earnings and revenue estimates and guided current quarter revenues higher; META traded up +1.51% post close. Qualcomm (QCOM) beat their estimates and guided current quarter revenues higher; QCOM traded up +8.39%.
Thursday – Dow -494 to 40,347, Nasdaq -405 to 17,194, S&P -75 to 5,446, USD10Y -13.3bp to 3.976.
- Jobless claims rose to 249,000 vs 236,000 forecast and vs. last week’s print of 235,000 and well higher than the 4-week moving average of 238.000.
- July S&P Manufacturing PMI fell to 49.6 vs 51.6 in June.
- July ISM Manufacturing also missed expectations at 46.8% vs 48.9% and vs 48.5% last month. This is the lowest reading since last November.
- Earnings: Apple (AAPL) beat on top and bottom-lines and traded up +0.57% post close. Amazon (AMZN) beat on earnings but missed on revenues and guided current quarter revenue lower; AMZN is trading down -6.88% in the extended session. Coinbase (COIN) blew out their numbers and traded up +3.23% after the close. DoorDash (DASH) beat their revenue expectations although their loss per share was unclear vs Street expectations; DASH traded up 11.84% in after-hours trading. Intel (INTC) reported a disaster of a quarter, missing earnings, revenues, announcing layoffs of 15% of its workforce and suspending its fourth quarter dividend; INTC is trading down -18.90% post close.
Friday – Dow -610 to 39,737, Nasdaq -417 to 17,677, S&P -100 to 5,346, USD10Y -18.4bp to 3.792%.
- Eight of eleven S&P sectors traded down today, led lower by Consumer Discretionary, Financials, and Energy.
- July Non-Farm Payrolls fell to 114,000 vs 185,000 expected and vs 179,000 last month.
- The July Unemployment Rate rose to 4.3% vs 4.1% last month.
- July U.S. Hourly wages increased less than expected; +0.2% vs +0.3% expected and vs +0.3% last month.
- Earnings: Exxon Mobile blew out their numbers on record production from Guyana and the Permian Basin; XOM traded nearly flat on the day. Chevron (CVX) missed their earnings expectations on higher revenues but lower margins. They also announced the relocation of their headquarters from California to Texas; CVX traded down 2.67%.
If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.
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.