Surprise U.S. Credit Downgrade, Earnings Churn Along, Aug 4 Market Recap

Surprise U.S. Credit Downgrade, Earnings Churn Along, Aug 4 Market Recap

Indices 

• Dow 35,065, -394 or -1.11%. 
• Nasdaq 13,909, -407 or -2.84%. 
• MSCI EAFE 2143.22, -53.02 or –2.41%. 
• S&P 4,478, -104 or –2.27%. 
• USD10Y 4.06%, +9.1bp or +2.29%. 
• WTI Crude $82.64 bbl, +2.48 or +3.09%.  

Surprise U.S. Credit Downgrade  

On Tuesday, August 1, credit rating service Fitch, downgraded U.S. sovereign debt from AAA to AA+, highlighting the debt ceiling legislation that will have to be dealt with again in two years, the mounting borrowing needs of the U.S., and rising interest rates. This in addition to lackluster Apple earnings (beat their estimates but guided revenues lower for their next quarter) was enough to drag all the indices lower this week. 

Earnings Churn Along 

While Apple disappointed with their earnings report and Amazon blew out their numbers, the rest of the week was a mixed bag. Even so, 84% of the S&P 500 have now reported their earnings and 79% of those firms have beaten their earnings estimates; above the five- and ten-year averages of 77% and 73% respectively. Revenues have not been quite as good, with only 65% of those companies that have reported beating their estimates; in between the 5- and 10- year averages of 69% and 63% respectively. 

Next Week

Earnings continue along apace but with only a few big names this week: United Parcel Service (UPS), Eli Lilly (LLY), and Disney (DIS). Two big economic and inflation data points come out Thursday and Friday with July Consumer Price Index and Producer Price Index respectively. 

Economic Calendar 

• Monday – N/A. Earnings: Lucid Group (LCID). 
• Tuesday – N/A. Earnings: United Parcel Service (UPS). Eli Lilly (LLY), Rivian (RIVN) 
• Wednesday – N/A. Earnings: Disney (DIS). 
• Thursday – Initial Jobless Claims, July Consumer Price Index (CPI). Earnings: N/A. 
• Friday – July Producer Price Index (PPI). August preliminary University of Michigan Consumer Sentiment. 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. 

Aug 4 Daily Trading Recap… 

Monday – Dow +100 to 35,559, Nasdaq +29 to 14,346, S&P +6 to 4,588, USD10Y -1.0bp to 3.959%. 

• Eight of eleven S&P sectors traded higher, led by Energy, Real Estate, and Consumer Discretionary.

Tuesday – Dow +71 to 35,630, Nasdaq -62 to 14,283, S&P -12 to 4,576, USD10Y +9.2bp to 4.051%. 

• Nine of eleven S&P sectors traded down, led lower by Real Estate, Financials, and Consumer Discretionary. 
• July Final U.S. S&P Manufacturing PMI was in line with expectations at 49 vs last month’s 46.3 print. 
• July Final ISM Manufacturing Index was slightly lower than expectations at 46.4% vs 46.8% and vs June’s 46.0% print. 
• June’s Job Openings and Labor Survey (JOLTS) Index revealed 9.62 million job openings vs 9.6 million expected and vs 9.62 million in May. 
• Earnings: Caterpillar (CAT) beat on earnings and revenues but warned that margins and revenue estimates may be at risk for the third quarter; CAT traded up +8.85% in the regular session. Advanced Micro Devices (AMD) beat earnings and revenue expectations and traded up +2.72% in the extended session. Starbucks (SBUX) beat earnings but missed on revenues and traded down –1.26% post-close. Pfizer (PFE) beat on earnings but missed on revenues and traded down –1.25% during the regular session. 

Wednesday – Dow -348 to 35,282, Nasdaq -310 to 13,973, S&P -63 to 4,513, USD10Y +2.7bp to 4.078% 

• Nine of eleven S&P sectors traded down, led lower by Technology, Communication Services, and Consumer Discretionary. 
• July ADP Private Payrolls exceeded expectations at 324,000 jobs added vs 175,000 expected and vs 455,000 in June. 
• Earnings: Clorox (CLX) blew out their expectations and traded up +6.68% in the extended session. DoorDash (DASH) lost more than expected on better revenues and traded up +4.77% after hours. PayPal (PYPL) reported in line earnings and slightly better revenues but still traded down –7.24% after the close. Qualcomm (QCOM) missed their revenue expectations and guided lower than street expectations and traded down -6.94% post-close. TripAdvisor (TRIP) beat their revenue forecast and traded up +2.84% in the extended session. 

 Thursday – Dow –237 to 35,282, Nasdaq -13 to 13,959, S&P -11 to 4,501, USD10Y +10.4bp to 4.182%. 

• Eight of eleven S&P sectors traded down, led lower by Utilities, Real Estate, Industrials. 
• Jobless claims ticked slightly higher to 227,000 vs the 227,000 forecast and last week’s unrevised print of 221,000.  
• The July U.S. S&P Services PMI was slightly weaker than last month but still demonstrating expansion at 52.3 vs 52.4 expected and vs 52.4 last month. 
• The July U.S. ISM Services Index mirrored the S&P in that it was weaker than last month but still demonstrating expansion; 52.7% vs 53.3% and vs last month’s 53.9%. 
• Earnings: Amazon (AMZN) blew out their numbers, posting their biggest earnings beat since their 4th quarter 2020 earnings report; AMZN traded up +8.73% post-close. Apple (AAPL) beat their numbers but traded down –2.02% in the extended session. Airbnb (ABNB) beat their revenue and earnings estimates but came in light on nights and experience bookings; ABNB traded down –0.62% after hours. Coinbase (COIN) posted a narrower loss than expected and better revenues; COIN traded down –0.99% in the post-close. 

 Friday – Dow –150 to 35,065, Nasdaq –50 to 13,909, S&P –23 to 4,478, USD10Y –12.9bp to 4.06%. 

• Nine of the eleven S&P sectors traded higher down, led by Tech, Utilities, and Consumer Staples.  
• July U.S. Non-Farm Payrolls was lower than expected at 187,000 jobs created vs 200,000 expected and vs June’s 185,000 print. 
• July Average Hourly Earnings were the same as last month at +0.4% but a tad higher than the +0.3% expected. 
• July Unemployment Rate fell to 3.5% vs June’s 3.6% print. 
• 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. 

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.