Surprise Economic Data & Earnings, All Eyes on Wed Core CPI (Aug 5 Market Recap)
Indices
- Dow 32,803 (42) or (0.12%).
- Nasdaq 12,657 +267 or +2.2%.
- S&P 4,145 +15 or +0.36%.
- USD10Y 2.84% +19.8bp or +7.5%.
- WTI Crude $89.01/bbl (8%).
Surprise Economic Data & Earnings
Strong economic data gave a huge boost to the markets this week. Both the July Manufacturing and Services PMI numbers came in better than expected. June Factory Orders were surprisingly strong. The Job Openings and Labor Turnover Survey (JOLLTS) showed a large decrease of 600,000 job openings month over month. That number was confirmed on Friday when the July Non-Farm payrolls number announced the addition of 528,000 jobs, a blowout number considering expectations were anticipating 258,000.
Earnings last week continued to roll in and while they may not have been spectacular, they certainly continued to exceed the market’s very modest expectations. So far, 435 of the 500 S&P companies have reported and 78% of them have beaten earnings expectations vs 66% in a typical quarter (since 1994). Revenue results have been solid as well with 70% of companies beating their numbers vs 62% on average.
CPI Wednesday
All this strong data shifts the market’s attention back to the inflation numbers. After Friday’s jobs report, odds for a 75bp hike in September jumped considerably and now stand at 66%. On Wednesday, July Core Consumer Price Index will be released. Expectations are for a decrease to headline number due largely to lower fuel costs and a slight uptick in the core number. Any sign that prices are not cooling should cement another 75bp rate hike at the Fed’s September meeting and pose a severe challenge for this market rally.
Off the Lows
Speaking of the market rally, while the indices are still considerably off their highs, since mid-June, all three have posted considerable gains…
- Dow +10.6%
- Nasdaq +19.8%
- S&P +13.98%
Next Week
Earnings season wanes a bit this week but not to fear as highly anticipated inflation numbers await the market with Wednesday’s Core CPI and Thursday’s Producer Price Index (PPI).
Economic Calendar
- Monday – N/A
- Tuesday – Earnings: Coinbase (COIN).
- Wednesday – July Core CPI. Earnings: Walt Disney (DIS),
- Thursday – Initial Jobless Claims, July PPI. Earnings: Rivian (RIVN)
- Friday – August University of Michigan Consumer Sentiment (preliminary), August University of Michigan 5-year Inflation Expectations (preliminary).
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.
Aug 5 Daily Trading Recap…
Monday – Dow (46) to 32,798, Nasdaq (21) to 12,368, S&P (11) to 4,118, USD10Y (3.6bp) to 2.606%.
- July S&P U.S. Manufacturing PMI printed in line at 52.2.
- July ISM Manufacturing PMI beat expectations at 52.8% vs 52.1%
- Activision Blizzard (ATVI) missed revenues due to weaker Call of Duty sales.
Tuesday – Dow (402) to 32,396, Nasdaq (19) to 12,349, S&P (26) to 4,092, USD10Y +13.5bp to 2.741%.
- June JOLTS (Job Openings and Labor Turnover Survey) came in lower than expected at 10.7 million opening down from last month’s 11.3 million.
- Earnings: Caterpillar (CAT) beat earnings but missed their revenue projections. Uber (UBER) beat revenues and missed their earnings but turned cash flow positive for the first time. Starbucks (SBUX) beat their metrics on strong demand for their cold drinks. Airbnb (ABNB) beat their earnings expectations, posted in line revenues, and announced a $2 billion buyback program. PayPal (PYPL) beat their metrics and announced a new $15 billion buyback program.
Wednesday – Dow +416 to 32,812 Nasdaq +319 to 12,668, S&P +63 to 4,155, USD10Y +0.7bp to 2.748%.
- Ten of eleven S&P sectors traded higher today, led by Technology, Consumer Discretionary, and Communication Services. Energy was the sole sector in the negative today, down 2.97%.
- July S&P U.S. Services final PMI beat expectations at 47.3 vs 47 expected.
- July ISM Services Index soundly beat expectations at 56.7% vs 54%.
- June Factory Orders were also much better, +2.0% vs expectations of +1.2%.
- Earnings: Bookings Holdings (BKNG) beat earnings but missed on revenues. eBay (EBAY) beat their metrics. EV maker, Lucid Group (LCID) cut their yearly production for a second time, to 6,000 units. Their original projection was for 20,000 units.
Thursday – Dow (85) to 32,726, Nasdaq +52 to 12,720, S&P (3) to 4,151, USD10Y (7.2bp) to 2.676%.
- Seven of eleven S&P sectors traded higher today, led by Consumer Discretionary, Technology, and Industrials. Energy was the worst performing sector again, down 3.59%.
- Jobless claims printed at 260,000 claims vs 259,000 expected and last week’s revised lower 254,000 print (originally was 256,000). Continuing claims rose to 1.42 million.
- WTI Crude Oil continued its slide as news earlier this week of increased U.S. inventories, greater than expected gasoline inventories, and fears of recession have sent the commodity below $90/bbl for the first time since before the Russian invasion of the Ukraine. WTI closed at $87.87/bbl. The national average for gasoline is now $4.139/gallon down from $4.807/gallon a month ago.
- Earnings: Expedia (EXPE) beat their metrics and traded up 5.6% after hours. Lyft (LYFT) traded up 4.07% after reporting better EBITDA and revenues. DoorDash (DASH) reported larger losses than expected on better revenues. DASH traded up 2.34% post-close.
Friday – Dow +76 to 32,803, Nasdaq (63) to 12,657, S&P (6) to 4,145, USD10Y +16.4bp to 2.84%.
- Only five of eleven S&P sectors traded higher in mixed action today, led by (a bounce back in) Energy, Financials, and Materials.
- June Non-Farm Payroll was a blowout with 528,000 jobs added vs expectations of 258,000 and last month’s 398,000 print.
- June Unemployment Rate lowered to 3.5% from 3.6% last month.
- June Labor Participation Rate fell to 62.1% vs last month’s 62.2%.
- Inverted Yield Curve Worsens: the USD2Y yield is now at 3.24%, 40bp higher than the 10-year yield, the widest gap since 2000.
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.