Marin Wealth Advisors, LLC.

Registered investment Advisor

July 30, 2023

PCE Falls Precipitously, Earnings Surprising, July 28 Market Recap

Indices 

  • Dow 35,459, +232 or +0.66%. 
  • Nasdaq 14,316, +284 or +2.02%. 
  • MSCI EAFE 2196.24, +19.66 or +0.90%.  
  • S&P 4,582, +46 or +1.01%. 
  • USD10Y 3.969%, +13.2bp or +3.44%. 
  • WTI Crude $80.16 bbl, +$3.33 or +4.33%.  

PCE Falls Precipitously 

The Fed was given more cover to pause their rate hiking cycle at their next meeting in September when their preferred gauge of inflation, the Personal Consumption Expenditure fell more quickly than expected on Friday. Both the month-over-month (MoM) headline and core (ex-food and energy) numbers rose by only +0.2%. As a result, the Year over year (YoY) numbers fell significantly; +3.0% vs June’s +3.8% and Core +4.1% vs last month’s +4.6% print.  

Earnings Surprising 

The PCE data notwithstanding, stocks were on pace to have a good week prior to the welcomed inflation data on Friday. Surprisingly, earnings have been pushing the markets higher and last week saw good tech results on the strength of artificial intelligence demand (MSFT, GOOGL, INTC, META, and LRCX), ongoing strong consumer demand (V, MA, GM, F, MCD, KO) and a good industrial result with Boeing’s earnings report. According to FactSet Data with 51% of the S&P having reported, 80% of those firms have beaten their estimates, which is higher than the 5-year average of 77%. 

Next Week 

Next week sees 1/3 of the S&P reporting including heavyweights Apple (AAPL), Amazon (AMZN) and Caterpillar (CAT). In addition, the economic data on tap will include final July Manufacturing and Services data, July ADP Private Payrolls, and the big one, July Non-Farm Payrolls and Average Hourly Earnings. 

Economic Calendar 

  • Monday – N/A. Earnings: N/A. 
  • Tuesday – July Final U.S. S&P Manufacturing and ISM PMI. June JOLTS. Earnings: Caterpillar (CAT), Advanced Micro Devices (AMD), Pfizer (PFE). 
  • Wednesday – July ADP Private Payrolls. Earnings: Clorox (CLX), DoorDash (DASH), PayPal (PYPL), Qualcomm (QCOM), TripAdvisor (TRIP). 
  • Thursday – Initial Jobless Claims, July Final U.S. S&P and ISM Manufacturing. Earnings: Amazon (AMZN), Apple (AAPL), Airbnb (ABNB), Coinbase (COIN). 
  • Friday – July U.S. Non-Farm Payrolls, July Average Hourly Earnings. Earnings: N/A.

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

July 28 Daily Trading Recap… 

Monday – Dow +183 to 35,411, Nasdaq +26 to 14,058, S&P +18 to 4,554, USD10Y +0.2bp to 3.857%. 

  • Nine of eleven S&P sectors traded higher, led by Energy, Financials, and Real Estate. 
  • July Flash S&P U.S. Manufacturing PMI was 49, above expectations of 46.7 and better than May’s 46.3 print. 
  • July Flash S&P Services PMI was below expectations at 52.4 vs 54 and vs May’s 54.4 print. 

Tuesday – Dow +26 to 35,438, Nasdaq +85 to 14,144, S&P +12 to 4,567, USD10Y +5.5bp to 3.912%. 

  • Six of eleven S&P sectors traded down, led lower by Real Estate, Financials, and Consumer Discretionary. 
  • July Consumer Confidence soared to 117 vs 112 expected and last month’s 110.1 print. 
  • Earnings: Alphabet (GOOGL) beat their earnings and revenue expectations; GOOGL traded up +6.08% post-close. Microsoft (MSFT) beat both revenue and earnings expectations but lowered quarterly revenue guidance; MSFT traded down -3.7% in the extended session. General Motors (GM) beat their numbers and raised their guidance, but the Street is worried about EV component supplies; GM traded down -3.51% in the regular session. Visa (V) beat their earnings and revenue numbers on strong travel related spending but traded down slightly during the normal trading session. 

Wednesday – Dow +82 to 35,520, Nasdaq -17 to 14,127, S&P -1 to 4,566, USD10Y -6.1bp to 3.851% 

  • Six of eleven S&P sectors traded down, led lower by Technology, Materials, and Energy. 
  • As expected, the FOMC raised rates 25bp and left their statement largely unchanged. Fed Chair Powell said the committee will move forward on a meeting-by-meeting data dependent basis, that rate cuts were unlikely this year, that the labor market was still very tight, and that rates would most likely stay higher longer. 
  • Earnings: Meta Platforms (META) beat earnings and revenue estimates and raised guidance for the third quarter; META traded up +6.89% post-close. Boeing (BA) lost less money on better-than-expected revenues and traded up +8.72% during the regular session. Chipotle Mexican Grill (CMG) beat earnings but missed revenue estimates and traded down -8.76% after hours. Coca-Cola (KO) beat earnings and revenue estimates and raised its full year guidance; KO traded up +1.29% during the normal session. Lam Research (LRCX) beat their earnings and revenue estimates on the back of the AI boom and traded up +2.00% during the extended session. 

Thursday – Dow –237 to 35,282, Nasdaq -77 to 14,050, S&P -29 to 4,537, USD10Y +16.1bp to 4.012%.  

  • Ten of eleven S&P sectors traded down, led lower by Real Estate, Utilities, and Financials. 
  • Jobless claims fell for a third consecutive week to 221,000 vs the 235,000 forecast and last week’s unrevised print of 228,000.  
  • Q2 GDP was surprisingly strong at +2.4% vs +2.0% expected. 
  • Earnings: Ford Motor (F) beat both earnings and revenue estimates and raised 2023 guidance based on strong truck demand; F is trading up +1.6% post-close. McDonalds (MCD) beat earnings and revenue estimates and traded up +1.18% during the regular session. Intel (INTC) returned to profitability after consecutive losing quarters and beat on earnings while missing on revenue estimates. However, the chipmaker guided Q3 higher and the stock traded up +7.0% in extended trading. Mastercard (MA) also beat their top and bottom-line estimates based on strong travel demand. 

Friday – Dow +176 to 35,459, Nasdaq +266 to 14,316, S&P +44 to 4,582, USD10Y –4.73bp to 3.969%.  

  • Nine of the eleven S&P sectors traded higher today, led by Communicaiton Services, Consumer Discretionary, and Technology. 
  • The June Personal Consumption Expenditure (PCE) Headline number was up only +0.2% and the Year over Year number fell dramatically from +3.8% to 3.0%. 
  • The June Core PCE was also up +0.2% MoM and the YoY number fell to +4.1% from +4.6% last month. 
  • Earnings: Exxon Mobile (XOM) missed earnings but beat on revenues and traded down –1.2% in the regular session. Chevron (CVX) beat on both top and bottom-line metrics, but the stock traded down –0.49%.

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, 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, ETHE, GBTC, and TSLA.