All posts by Greta Wall
Coffee With Greta: TSLA Props Up Tech Stocks
DJIA Futures: +34 (+0.1%) SPX Futures: +13 (+0.3%) NASDAQ Futures: +81 (+0.7%) Good morning friends! Futures are higher as traders digest more Q2 earnings. Let’s get right to it! Tesla Reports Mixed Q2 Results Tesla (TSLA) shares are up 3% ahead of the open after reporting mixed Q2 results. The electric automaker reported adjusted earnings of $2.27 per share on $16.93 billion in revenue. That topped analysts’ expectations for adjusted EPS of $1.81 but missed estimates for $17.1 billion in revenue. Revenue rose 42% annually but automotive gross margins shrank to 27.9% from 32.9% in Q1 and 28.4% a year ago. That drop was caused by inflation and more competition for parts. Tesla maintained its guidance for “50% average annual growth in vehicle deliveries,” over a “multi-year horizon”. United Airlines Tumbles After Q2 Profit Miss United Airlines (UAL) shares are dropping 6.8% in premarket trade after missing Q2 profit expectations. The airline reported adjusted earnings of $1.43 per share on $12.11 billion in revenue. It was the company’s first profitable quarter since before the pandemic but fell short of expectations. Analysts were expecting adjusted EPS of $1.85 on $12.12 billion in revenue. The CEO said, “It’s nice to return to profitability — but we must confront three risks that could grow over the next 6-18 months. Industry-wide operational challenges that limit the system’s capacity, record fuel prices, and the increasing possibility of a global recession are each real challenges that we are already addressing.” United estimated its Q3 capacity will be 85% of Q3 2019 levels and Q4 capacity would rise to 90% of 2019 levels. The airline lowered its growth expectations for 2023, now expecting to fly no more than 8% over 2019 levels vs its earlier forecast for 20% growth. American Airlines Slips On Weaker Outlook American Airlines (AAL) shares are slipping 3.7% ahead of the open despite reporting a profit in Q2. The airline reported adjusted earnings of $0.76 per share on $13.42 billion in revenue. That was in line with analysts’ adjusted EPS expectations and beat revenue estimates for $13.4 billion. Revenue rose 12% compared to pre-pandemic even as American flew 8.5% less of its Q2 2019 schedule. The company’s unit costs surged 45% in the quarter compared to 2019 as fuel prices and other expenses soared. American forecast Q3 revenue will be 10% to 12% higher than 2019 levels but flight capacity will be 8% to 10% lower. Amazon Announces Healthcare Acquisition Amazon (AMZN) shares are up 1.2% in premarket trade after announcing it will buy primary healthcare provider One Medical. One Medical operates under 1Life Healthcare Inc (ONEM) and trading in the stock has been halted. Amazon will buy the company in cash for $18 per share, totaling $3.9 billion. The stock closed at $10.18 on Wednesday. The senior vice president of Amazon Health Services said, “We think health care is high on the list of experiences that need reinvention.” Weekly Jobless Claims Continue to Rise Weekly jobless claims rose unexpectedly, signaling layoffs are rising across the country. The Labor Department reported 251,000 Americans filed initial unemployment claims last week. That was up 7,000 from the previous week and higher than expectations for claims to fall to 240,000. Continuing claims rose by 50,000 to 1.38 million in the week ending July 9. ECB Raises Rates for First Time in 11 Years The European Central Bank approved its first rate hike in 11-years today. The ECB pushed its benchmark rates up by 50 basis points, bringing the deposit rate to 0%. Rates had been in negative territory since 2014. The ECB said, “The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalization path than signaled at its previous meeting.” The decision comes after Eurozone inflation hit a record-high at 8.6% in June. Oil Prices Slump On Demand Worries Oil prices are falling today as demand worries squeeze the market. West Texas Intermediate crude futures are down 3.5% to $96.50 bbl while Brent crude futures are down 3.1% to $103.50 bbl The drop comes amid continued global recession fears after the ECB rate hike and as U.S. gas inventories rose sharply last week. The Energy Information Administration reported U.S. crude inventories fell by 400,000 barrels but gasoline stockpiles rose by 3.5 million barrels. The increase in gas inventories far exceeded expectations and comes as demand is slumping. Gas Prices Continue To Tumble U.S. gas prices fell for the 36th day in a row today as those high inventory levels outpace demand. AAA shows the national average for regular gas fell nearly 3 cents overnight to $4.440/gal. The national average for diesel also fell 2 cents overnight to $5.476/gal. In Case You Missed It The National Association of Realtors reported existing home sales tumbled 5.4% in June to a seasonally adjusted annual rate of 5.12 million units. That was lower than expectations and the slowest pace of sales since June 2020. The median price of an existing home sold last month rose to a new record-high of $416,000.
Continue Reading -->Coffee With Greta: Strangest Thing of the Year Is This NFLX Rally
DJIA Futures: -94, (-0.3%) SPX Futures: -11 (-0.3%) NASDAQ Futures: -22 (-0.2%) Good morning friends! Futures are lower as the market braces for more Q2 earnings. Let’s get right to it! Netflix Rallies On Smaller-Than-Expected Subscriber Loss Netflix (NFLX) shares are up 4.4% ahead of the open after reporting mixed Q2 results and a smaller subscriber loss than expected. The streaming giant reported earnings of $3.20 per share on $7.97 billion in revenue. That topped analysts’ expectations for EPS of $2.94 but missed revenue estimates for $8.035 billion. Netflix lost just 970,000 subscribers in the quarter, far below the company’s own guidance for a loss of 2 million. The “Stranger Things” producer said it expects a net addition of 1 million subscribers in Q3 vs expectations for 1.8 million. Netflix said it is aiming to unveil its new lower-cost, ad-supported tier in early 2023. Mortgage Demand Tumbles to a 22-Year Low Mortgage demand is dropping rapidly as buyers pull back due to higher mortgage rates. The Mortgage Bankers Association reported total application volume fell 6.3% last week, hitting the lowest level since 2000. Purchase applications fell 7% weekly and were 19% lower compared to the same week in 2021. Refinance applications dropped 4% weekly and plunged 80% year-over-year. The average 30-year contract rate rose to 5.82% from 5.74% the previous week. Treasury Yields Dip Treasury yields are pulling back this morning as markets attempt to gauge what the Fed will do at next week’s meeting. The 2-year yield is down 7 basis points to 3.18% while the 10-year yield is down 7 basis points to 2.95%. The yield curve is still inverted, signaling a recession is likely imminent. CME Group’s FedWatch Tool shows 66.8% of traders still expect a 0.75% hike while 33.2% expect a 1% move. Oil Prices Slip Ahead of U.S. Inventory Report Oil prices slip as the market awaits key inventory data from the U.S. West Texas Intermediate crude futures are down 1.8% at $102 bbl while Brent crude futures are down 1.9% at $105 bbl. The Energy Information Administration releases official inventory data later today. The American Petroleum Institute reported Tuesday that U.S. crude inventories rose by 1.9 million barrels last week and gasoline stockpiles rose by 1.3 million barrels. Gas Prices Continue To Tumble U.S. gas prices fell for the 35th day in a row today. AAA shows the national average for regular gas fell nearly 3 cents overnight to $4.467/gal. That’s down more than 51 cents from a month ago but still $1.30 higher than a year ago. The national average for diesel also fell nearly 2 cents overnight to $5.497/gal. Diesel prices have fallen by 32 cents in the past month but are up $2.22 compared to one year ago. Existing Home Sales Expected to Fall The National Association of Realtors reports existing home sales for June at 10:00 a.m. ET. That report is expected to show sales fell to a seasonally adjusted annual rate of 5.36 million units last month from an SAAR of 5.41 million units in May. Homebuyers have pulled back as mortgage rates rise. Freddie Mac shows the average 30-year fixed rate was 5.52% in June, up from 2.98% in June 2021. Tesla Earnings On Deck Tesla (TSLA) shares are up 0.6% in premarket trade as the electric automaker gears up to report Q2 earnings. Those results will be released after the close today. Consensus expectations are for Tesla to report earnings of $1.85 per share. The company previously reported it delivered 254,695 vehicles in the quarter. That was down 18% from Q1 as Covid restrictions in China dented production. That drop in deliveries is expected to result in lower revenue for the quarter. In Case You Missed It Twitter (TWTR) won its request for a speedy trial to force Elon Musk to go through with his $44 billion acquisition of the company. The Delaware Court of Chancery Chancellor ruled Tuesday that the five-day trial will take place in October. Twitter’s lawyer claimed a quick trial is imperative to stop the harm caused by uncertainty over the deal. But Musk’s team argued the expedited timeline will not give them ample time for discovery.
Continue Reading -->Coffee With Greta: Earnings In Focus
DJIA Futures: +169 (+0.5%) SPX Futures: +27 (+0.7%) NASDAQ Futures: +93 (+0.8%) Good morning friends! Futures are higher as Q2 earnings continue to roll in. Let’s get right to it! Johnson & Johnson Beats Profit Expectations, Trims Forecast Johnson & Johnson (JNJ) shares are up 0.8% ahead of the open after beating Q2 profit expectations. The pharmaceutical giant reported adjusted earnings of $2.59 per share on $24 billion in revenue. That topped analysts’ expectations for adjusted EPS of $2.54 on $23.8 billion in revenue. Overall revenue rose 3% year-over-year while pharmaceutical sales were up 6.7%. But Johnson & Johnson cut its full-year outlook, citing a stronger dollar. The company now expects adjusted earnings of $10 to $10.10 per share in 2022 vs previous guidance for $10.15 to $10.35. The full-year revenue forecast was lowered to $93.3 billion to $93.4 billion from $94.8 billion to $95.8 billion. Hasbro Reports Mixed Q2 Results Hasbro (HAS) shares are up 0.8% in premarket trade after mixed second-quarter results. The toymaker reported earnings of $1.15 per share vs analysts’ expectations for $0.94. But the company’s $1.34 billion in revenue was shy of estimates for $1.37 billion. Adjusted operating margins expanded to 18% from 16% even as freight costs rose. Hasbro said it saw stronger demand for its tabletop games, which cost less to produce. The company also benefited from higher prices on its toys like Nerf blasters and My Little Pony figures. IBM Beats Q2 Expectations, Stock Slips On Outlook IBM (IBM) shares are down 6% ahead of the open despite beating Q2 expectations on the top and bottom line. The company reported adjusted earnings of $2.31 per share on $15.54 billion in revenue. That topped analysts’ expectations for adjusted EPS of $2.27 on $15.18 billion in revenue. Revenue rose 9% year-over-year. The stock is dropping though after IBM cut its forecast for full-year free cash flow. The company now expects $10 billion in free cash flow for all of 2022, down from the previous range of $10 billion to $10.5 billion. Housing Starts Tumble in June U.S. home construction fell more than expected in June. The Census Bureau reported housing starts fell 2% to a seasonally adjusted annual rate of 1.56 million units. That was worse than expectation for starts to be unchanged from May at an SAAR of 1.59 million units. Starts were down 6.3% compared to June 2021. Single-family starts plunged 8.1% from May while multi-family starts jumped 15%. Building permits slowed less than expected, falling 0.6% to an SAAR of 1.69 million units vs 1.68 million expected. Single-family permits tumbled 8.1% while multi-family permits rose 13.1%. Treasury Yields Rise, 2-year/10-year Curve Remains Inverted Treasury yields are rising this morning and a key part of the yield curve is still inverted. The 2-year yield is hovering around 3.17% while the 10-year yield is at 2.99%. The market’s Fed expectations held steady from yesterday. CME Group’s FedWatch Tool shows 66.8% of traders still expect a 0.75% hike while 33.2% expect a 1% move. Oil Prices Give Up Rally Oil prices turned lower today as recession fears takeover supply concerns. West Texas Intermediate crude futures are down 1.6% to under $101 bbl while Brent crude futures are down 1.4% to under $105 bbl. The dollar also fell to a one-week low level, making oil slightly cheaper for buyers holding other currencies. The American Petroleum Institute will report U.S. supply levels later today. Gas Prices Continue To Tumble U.S. gas prices fell for the 34th day in a row today. AAA shows the national average for regular gas fell nearly 3 cents overnight to $4.495/gal. The national average for diesel also fell 2 cents overnight to $5.515/gal. In Case You Missed It Homebuilder sentiment plunged in July as buyers pullback. The NAHB sentiment index dropped 12 points to 55 this month vs expectations for 66. It was the steepest drop on record besides the plunge at the start of the pandemic. Sentiment about buyer traffic dropped 11 points to 37, solidly in negative territory. Bloomberg reported Monday afternoon that Apple (AAPL) plans to slow hiring and spending growth due to concerns over a slowing economy. Sources say the cuts will not impact all teams at the company. Apple is reportedly still planning to launch a mixed reality headset in 2023.
Continue Reading -->Coffee With Greta: Goldman Crushes Earnings Expectations
DJIA Futures: +261 (+0.8%) SPX Futures: +29 (+0.7%) NASDAQ Futures: +110 (+0.9%) Good morning friends! Futures are higher following mixed results from 2 big banks. Let’s get right to it! Goldman Sachs Crushes Q2 Expectations Goldman Sachs (GS) shares are up 3.3% ahead of the open after crushing Q2 expectations. The investment bank reported earnings of $7.73 per share on $11.86 billion in revenue. That beat analysts’ expectations for EPS of $6.58 on $10.86 billion in revenue. Profits were still down 48% year-over-year and revenue fell 23%. Goldman said its fixed-income operations generated $3.61 billion in revenue vs $2.89 billion expected, due to “significantly higher” trading activity in interest rates, commodities, and currencies. Equities trading revenue rose 11% to $2.86 billion vs $2.68 billion expect3ed. The CEO said, “We delivered solid results in the second quarter as clients turned to us for our expertise and execution in these challenging markets.” Bank of America Posts Mixed Q2 Results Bank of America (BAC) shares are down 0.4% in premarket trade after reporting mixed second-quarter results. The bank reported earnings of $0.73 per share vs $0.75 per share expected, while $22.79 billion in revenue topped estimates for $22.67 billion. Profit dropped 32% annually and revenue rose 5.6%. Net interest income surged 22% to $12.4 billion as interest rates rose. The CEO said, “Solid client activity across our businesses, coupled with higher interest rates, drove strong net interest income growth and allowed us to perform well in a weakened capital markets environment.” Non-interest expenses rose 2% due to about $425 million in regulatory costs. Investment banking fees plunged 47% to $1.1 billion vs $1.24 billion expected. Fixed-income trading revenue rose 19% to $2.3 billion while equities trading revenue rose 2% to $1.7 billion, both in line with expectations. Alphabet Stock Split Takes Effect Alphabet (GOOGL) shares are up about 0.4% ahead of the open after the company’s 20-for-1 stock split went into effect. The stock is trading around $112.50 per share after closing at $2.255.34 on Friday. Alphabet announced the split in February, in an effort to make its shares more accessible to more traders. Yield Curve Remains Inverted Treasury yields are higher this morning as a key part of the yield curve is still inverted. The 2-year yield is up 5 basis points to 3.18% while the 10-year yield is up 8 basis points to just under 3%. The market is now leaning toward a 75 basis point rate hike at next week’s Fed meeting. CME Group’s FedWatch Tool shows 66.8% of traders expect a 0.75% hike while 33.2% expect a 1% move. Oil Prices Jumps On Tight Supply Oil prices are higher as tight supply concerns offset worries about a recession and Covid lockdowns in China. West Texas Intermediate crude futures are up 2.2% to just under $100 bbl while Brent crude futures are up 2.6% to just under $104 bbl. President Biden’s trip to Saudi Arabia last week failed to yield any pledge from the kingdom to boost the global oil supply. Gas Prices Fall Further U.S. gas prices fell for the 33rd day in a row today. AAA shows the national average for regular gas fell more than 1 cent overnight to $4.521/gal. The national average for diesel also fell about 1 cent overnight to $5.535/gal. The continued decline in prices comes amid lower demand. The Energy Information Administration reported gas demand fell to 8.06 million barrels per day last week while gasoline inventories rose sharply. In Case You Missed It Elon Musk and Twitter (TWTR) are battling over the timeline for a trial. Twitter asked for the trial to be held in mid-September because the original merger agreement said both parties could exit free of charge if it weren’t complete by October 24. But Musk’s lawyers asked for it not to begin until February 2023, claiming a speedy trial would limit discovery and expert analysis. Musk’s team said, “The only relevant date is the outside date for the debt financing, April 25, 2023.” The judge will determine the trial date at a hearing on Tuesday.
Continue Reading -->Coffee With Greta: Higher Prices Boost Retail Sales
DJIA Futures: +188 (+0.6%) SPX Futures: +17 (+0.4%) NASDAQ Futures: +31 (+0.3%) Good morning friends! Futures are higher as traders digest the latest economic data and more big bank earnings. Let’s get right to it! Retail Sales Rise More Than Expected U.S. retail sales rose more than expected in June, as prices for gas and food soared. The Commerce Department reported retail sales rose 1% last month to $680.6 billion. That beat expectations for a 0.9% gain and was 8.4% higher than June 2021. Retail sales excluding autos also rose 1% vs 0.7% expected. The jump does not necessarily reflect an increase in purchases but likely consumers paying higher prices for the same goods. Gas station sales soared 49.1% year-over-year while sales at restaurants and bars jumped 13.4% annually. Short-Term Treasury Yields Rise, Yield Curve Remains Inverted The key 2-year and 10-year Treasury yield curve is still inverted as short-term yields pop higher this morning. The 2-year yield is up 2 basis points to 3.14% while the 10-year yield is down 4 basis points to 2.93%. Traders and investors have been monitoring the yield curve closely after it inverted earlier this month as that inversion is typically a sign of an impending recession. That inversion hit its deepest level since 2000 this week. Traders Pullback Fed Expectations The market is now split on its expectations for the Fed meeting later this month. CME Group’s FedWatch Tool shows 50.1% of traders expect a 0.75% rate hike while 49.9% are leaning toward a 1% hike. Fed Governor Christopher Waller calmed down fears of a larger move on Thursday, saying he’s still planning on a 75 basis point hike but is “open” to a larger move based on the data. The CPI surged to a fresh 41-year high at 9.1% annually in June. But no more inflation data will be released before the Fed meeting. The Central Bank meets July 26-27 and the June PCE Price Index will be released July 29. Wells Fargo Slips On Revenue Miss Wells Fargo (WFC) shares are down 0.7% ahead of the open after mixed Q2 results. The consumer bank reported adjusted earnings of $0.82 per share, better than analysts’ expectations for $0.80. But the bank’s $17.03 billion in revenue fell short of estimates for $17.53 billion. Profits declined 48% year-over-year as Wells Fargo set aside more funds for bad loans. The bank also said “market conditions” forced it to post a $576 million second-quarter impairment on equity securities tied to its venture capital business. Citigroup Rises On Earnings Beat Citigroup (C) shares are up 4.5% in premarket trade after beating Q2 expectations. The investment bank reported earnings of $2.19 on $19.64 billion in revenue. That beat analysts’ expectations for EPS of $1.68 on $18.22 billion in revenue. Citi benefits from higher interest rates and strong trading results. The CEO said, “In a challenging macro and geopolitical environment, our team delivered solid results and we are in a strong position to weather uncertain times, given our liquidity, credit quality and reserve levels.” Pinterest Soars As Activist Investor Takes Stake Pinterest (PINS) shares are surging 12.9% ahead of the open after the Wall Street Journal reported Elliott Management acquired a stake in the company. The activist investment group is now the largest shareholder in Pinterest, with a more than 9% stake. Sources say the two had been in discussions over the past several weeks. Elliott has a history of taking on struggling tech companies. Oil Prices Rise Oil prices are higher today on optimism the Fed will stick with a 75 basis point hike later this month. West Texas Intermediate crude futures are up 1.4% to $97 bbl while Brent crude futures are up 1.6% to $100 bbl. Uncertainty about the Fed pushed both contracts to the lowest close since February 23 on Thursday. Demand concerns have also weighed on the market amid uncertainty about new Covid restrictions in China. Gas Prices Fall Further U.S. gas prices fell for the 30th day in a row today. AAA shows the national average for regular gas fell nearly 3 cents again overnight to $4.577/gal. The national average for diesel also fell 2 cents to $5.572/gal.
Continue Reading -->Coffee With Greta: Traders Bet on a BIG Rate Hike
DJIA Futures: -445 (-1.4%) SPX Futures: -48 (-1.3%) NASDAQ Futures: -99 (-0.8%) Good morning friends! Futures are lower as traders bet on a BIG Fed rate hike amid the release of more hot inflation data. Let’s get right to it! Traders Bet On A 1% Rate Hike CME Group’s FedWatch Tool shows the majority of traders are now expecting the Fed to get even more aggressive at this month’s meeting. 88.1% of traders are now expecting a 1% rate hike later this month, up from the 0.75% hike in June. Those expectations come after inflation surged to a fresh 41-year high at 9.1% annually in June. The Fed meets July 26-27. Wholesale Inflation Surges Higher Producer-side inflation pushed higher again in June. The Bureau of Labor Statistics’ producer price index jumped 1.1% monthly and surged 11.3% year-over-year. That was higher than expectations for a 0.8% monthly gain and up from the 10.9% annual gain in May. The core PPI, which excludes food, gas, and retail trade margins, rose just 0.3% monthly. The report shows more inflation is in the pipeline for consumers, as companies pass down higher costs. Largest Yield Curve Inversion Since 2000 A key part of the Treasury yield curve is inverted at the steepest level since 2000. The 2-year yield is up nearly 9 basis points to 3.24% while the 10-year yield is up about 4 basis points to 2.97%. The difference between the two is over 26 basis points, the highest in more than 20 years. The inversion deepened after the release of hot inflation data and is seen as a near-term recession warning sign. Big Banks Miss Expectations JPMorgan Chase (JPM) shares are down 2.7% ahead of the open after profits slumped in the second quarter. The largest bank in the U.S. reported earnings of $2.76 per share on $31.63 billion in managed revenue. That missed analysts’ expectations for EPS of $2.88 on $31.95 billion in managed revenue. JPMorgan’s profit was down 28% year-over-year as the bank built up its loan reserves. Morgan Stanley (MS) shares are also down 0.6% after missing Q2 expectations. The investment bank reported earnings of $1.39 per share on $13.13 billion in revenue. That missed analysts’ estimates for EPS of $1.53 on $13.48 billion in revenue. Morgan Stanley’s profits dropped 29% annually while revenue was down 11%. The miss was mostly due to the 55% decline in investment banking revenue. Equities trading produced $2.96 billion in revenue, above the $2.77 billion estimate. Fixed-income trading revenue of $2.5 billion beat expectations for $1.98 billion. But the wealth management division produced $5.74 billion in revenue, below the $5.99 billion estimate. Weekly Jobless Claims Hit 8-Month High Weekly jobless claims rose to an 8-month high last week. The Labor Department reported 244,000 Americans filed initial claims for unemployment benefits. That was up 9,000 from the previous week and sharply missed economists’ expectations for a slight decline. It’s the highest level of claims since early November 2021, as the labor market shows signs of weakening. Continuing claims fell by 41,000 to 1.33 million in the week ending July 2. Oil Prices Drop on Rate Hike Jitters Oil prices are falling today as traders are on edge about the potential of a larger rate hike later this month. West Texas Intermediate crude futures are down 1.6% to under $95 bbl while Brent crude futures are down 1.4% to $98 bbl. The Energy Information Administration reported a sharp jump in U.S. crude and gas inventories last week. Crude stockpiles rose by 3.3 million barrels vs 1.4 million expected. Gasoline stockpiles rose by 5.8 million barrels vs expectations for a 200,000 barrel decline. Gas Prices Fall Further U.S. gas prices fell for the 29th day in a row today. AAA shows the national average for regular gas fell nearly 3 cents overnight to $4.605/gal. Diesel also fell about 2 cents to $5.592/gal. Netflix, Microsoft to Partner on Ad-Supported Service Netflix (NFLX) shares are down 1% ahead of the open after naming Microsoft (MSFT) its partner for a new ad-supported streaming service. Netflix’s COO said Wednesday, “Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.” The streaming company announced plans in April to launch an ad-supported tier as its struggles to keep and add subscribers. In Case You Missed It Mortgage demand fell last week despite rates holding steady and prices moderating. The Mortgage Bankers Association reported a 1.7% decline in total applications. Purchase applications fell 4% weekly and 18% annually. Refinance applications rose 2% weekly but were still down 80% compared to a year ago. The Fed’s Beige Book showed elevated fears about inflation and a recession across the country on Wednesday. The report showed the economy grew at just a “modest” pace across all 12 Fed districts since mid-May. Business contacts in 5 districts expressed “concerns over an increased risk of recession.” The Beige Book also showed “substantial price increases” across the country but businesses say they have still been able to pass along those increases to customers.
Continue Reading -->Coffee With Greta: Inflation is Still Boiling Over
DJIA Futures: -418 (-1.4%) SPX Futures: -71 (-1.9%) NASDAQ Futures: -293 (-2.5%) Good morning friends! Futures are tumbling after the latest inflation data came in HOT. Let’s get right to it! Inflation Surges Above 9% The Bureau of Labor Statistics consumer price index shows inflation pressures soared in June. The CPI shows prices rose 9.1% year-over-year last month, higher than expectations for 8.8% and up from 8.6% in May. That’s a fresh 41-year high as gas prices surged 11.2% in June compared to May. Grocery prices were up 10.4% annually, gas prices soared 59.9% year-over-year, and oil prices skyrocketed 98.5% compared to a year ago. On a monthly basis, the CPI rose 1.3% vs 1.1% expected. The core CPI, which excludes food and energy prices, also came in hotter than expected at 0.7% monthly and 5.9% annually vs estimates for 0.5% and 5.7%. Treasury Yields Pop on Hot Inflation Treasury yields popped higher after the CPI release. The 2-year yield is up 15 basis points to 3.20% while the 10-year yield is up 8 basis points to 3.06%. The curve between the 2-year and 10-year yields remains inverted, signaling a recession is likely to happen soon. Oil Prices Slip After Hot Inflation Report Oil prices turned lower after the release of hot inflation data today. West Texas Intermediate crude futures are down 1% to under $95 bbl while Brent crude futures are down 1% to about $98 bbl. The market is also still worried about lower demand that could be a results of new Covid restrictions in China. The American Petroleum Institute reported Tuesday that U.S. crude inventories rose by 4.8 million barrels last week, beating expectations for a decline. The Energy Information Administration reports official numbers today. Gas Prices Extend Decline U.S. gas prices fell for the 28th day in a row today. AAA shows the national average for regular gas fell more than 2 cents overnight to $4.631/gal today. Diesel also fell to $5.611/gal. Although gas prices have pulled back sharply in recent weeks, the average regular price is just 36 cents lower than the record-high set in June. The average price is nearly $1.50 higher than a year ago. Dollar Surges, Euro Hits Lowest Level Since 2002 The euro fell even with the U.S. dollar for the first time in two decades on Tuesday. The euro hit a low of $0.9998 against the dollar, marking its lowest level since December 2002. The U.S. dollar index jumped to $108.56, its highest level since October 2002. That index shot higher today after the CPI, jumping to $108.58. The falling value of the euro comes amid growing recession fears in Europe due to uncertainty over the energy supply. Twitter Sues Musk for Attempting to Ditch Takeover Twitter (TWTR) shares are up 1.5% ahead of the open after suing Elon Musk over his request to terminate his takeover deal. The social media company officially filed suit against the Tesla (TSLA) CEO in the Delaware Court of Chancery after-hours on Tuesday. Twitter alleges Musk now “refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.” The company said the Tesla boss, “apparently believes that he— unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.” Twitter is seeking to enforce the original merger agreement “upon satisfaction of the few outstanding conditions.” Delta Posts Q2 Profit Delta Airlines (DAL) shares are down 4.8% in premarket trade after reporting a smaller Q2 profit than analysts were expecting. The airline reported adjusted earnings of $1.44 per share vs $1.73 expected. Delta’s $13.82 billion in revenue topped expectations for $13.57 billion. Costs for each seat it flew a mile rose 22% compared to 2019 while fuel expenses jumped 41%. Delta said domestic corporate travel sales are 80% recovered from the pandemic and rose 25% from Q1. The airline flew 18% less capacity last quarter than Q2 2019 but revenue was 10% higher than the same period three years ago, as customers paid higher fares. In Case You Missed It The NFIB small business index dropped 3.6 points in June to 89.5. That was the lowest reading since the start of the pandemic and lower than expectations for 93. Business owners cited inflation as their number one problem. 50% of those with job openings said they could not fill the positions while 94% said they cannot find qualified workers. A recent Magnify Money survey found 68% of Americans don’t feel financially prepared for a recession. 70% said they believe a recession is coming, with 59% expecting one in the next 6 months. 68% of six-figure earnings predict a recession in the next 6 months.
Continue Reading -->Coffee With Greta: Recession on the Brain
DJIA Futures: -183 (-0.6%) SPX Futures: -12 (-0.3%) NASDAQ Futures: +34 (+0.3%) Good morning friends! Futures are mostly lower as traders worry about a global recession. Let’s get right to it! Recession Fears Linger, Dollar Surges Futures are mostly lower as worries over global economic growth take over. The drop in stocks come as Treasury yields are falling with investors fleeing to safety in bonds. The yield curve is still inverted with the 2-year yield down 6 basis points to 3.03% and the 10-year yield down 6 basis points to 2.93%. The U.S. dollar index also popped 0.5% to 108.51 with the euro on the brink of parity with the dollar as recession fears grip Europe. The dollar index is up 13% YTD. Traders are also on edge for earnings season to begin with focus on future forecasts amid rising rates and recession worries. Even High Earners Are Worried About Inflation A new CNBC/Morning Consult survey shows even high-earning Americans are worried about inflation. 96% of respondents who earn $100,000 or more said they were “concerned” about inflation while 65% said they are “very concerned”. 34% said they are worse off financially this year compared to a year ago and 46% have cut household spending due to higher prices. 38% said they plan to make those cuts if inflation gets worse. The survey showed dining out is the first place where consumers cut their spending, followed by entertainment, and travel. The Bureau of Labor Statistics’ consumer price index on Wednesday is expected to show the pace of headline inflation picked up again in June. EV Maker Canoo Skyrockets on Walmart Deal Canoo (GOEV) shares are surging 76% in premarket trade after Walmart (WMT) agreed to buy its electric delivery vans. The two companies signed a definitive agreement for Walmart to purchase at least 4,500 and up to 10,000 of the vans. The retailer will use the vans for local deliveries of online orders. Canoo will build the vehicles at its facility near Dallas and the vans are expected to go into service next year. Lordstown Rises After Naming New CEO Lordstown Motors (RIDE) shares are up 3.5% ahead of the open after naming a new CEO. The company’s president, Edward Hightower, was named CEO effective immediately. The former CEO, Daniel Ninivaggi, will become the company executive chairman. Hightower will lead the new joint venture with Foxconn to design and develop electric vehicles that will be manufactured by Foxconn. Ninivaggi said, “With over 30 years of automotive experience and having made significant contributions to the Endurance launch preparation and Foxconn transactions, Edward is the perfect person to lead the company and launch our product development efforts with Foxconn.” Rivian Drops on Layoff Plans Rivian (RIVN) shares are down 0.2% ahead of the open on news the company is planning layoffs. Bloomberg reported the electric automaker is planning to trim its workforce by about 5% because it grew too quickly in some departments. Rivian has about 14,000 employees which means the cuts would impact around 700 workers. Sources told Bloomberg those layoffs could be announced in the coming weeks. Pepsi Rises on Earnings Beat PepsiCo (PEP) shares are up 1.1% ahead of the open after beating Q2 earnings expectations. The company reported adjusted earnings $1.86 per share on $20.23 billion in revenue. That was better than analysts’ expectations for adjusted EPS of $1.74 on $19.51 billion in revenue. The CFO told CNBC, “We are facing inflation like everyone else, and we think that is going to persist for a while, but we are taking enough pricing to be able to manage the inflation, and our focus is really much more on how do we drive costs out of the business.” Pepsi hiked its full-year revenue growth forecast to 10% from 8% previously and still expects earnings growth of 8%. Gap Slides As CEO Steps Down Gap (GPS) shares are down 7.3% in premarket trade after announcing its CEO and president is stepping down after-hours on Monday. Sonia Syngal is leaving her position effective immediately. The current executive chairman of the board will serve as interim president and CEO. Syngal said she is “thankful to have the board’s support in stepping down, ushering in a new opportunity for fresh perspective and rejuvenated leadership to carry Gap Inc. forward.” The company also announced former Walmart Canada CEO and president Horacio Barbeito will take over as the Old Navy CEO on August 1. Natural Gas Prices Jump as Russia Halts Flow to Europe U.S. natural gas prices are up 3.9% as the largest pipeline between Russia and Germany is shutdown. The Nord Stream 1 pipeline was closed Monday for maintenance work that is set to run through July 21. That pipeline is the largest transporter of Russian natural gas into Europe, through Germany. It carries around 55 billion cubic meters of gas per year. Europeans are fearful the shutdown could last longer than the planned 10 days. The EU currently receives 40% of its gas via Russian pipelines. Oil Prices Slide on China Covid Surge Oil prices are sliding as a Covid surge in China prompts concerns about demand. West Texas Intermediate crude futures are down 4.4% to $99 bbl while Brent crude futures are down 4% to just under $103 bbl. The fresh Covid restrictions in China pile on top of rising recession fears for the oil market. The American Petroleum Institute releases its report on oil and gas inventories today followed by the official Energy Information Administration report on Wednesday. Gas Prices Extend Decline U.S. gas prices fell for the 27th day in a row today. AAA shows the national average for regular gas fell more than 2 cents overnight to $4.655/gal today. Diesel also fell nearly 2 cents to $5.625/gal. In Case You Missed It Consumers’ short-term inflation expectations hit a record-high in June. The New York Fed’s Survey of Consumer Expectations shows Americans expect inflation to remain at 6.8% 1-year from now. Consumers’ 3-year expectations fell to 3.6% while 5-year
Continue Reading -->Coffee With Greta: Elon Musk Has Commitment Issues, Dumps Twitter
DJIA Futures: -201 (-0.6%) SPX Futures: -30 (-0.8%) NASDAQ Futures: -103 (-0.8%) Good morning friends! Futures are falling as traders gear up for inflation week and the beginning of Q2 earnings season. But first, Elon Musk’s commitment issues are on full display as he seeks to dump his Twitter deal. Let’s get right to it! Musk Seeks to Terminate Twitter Buyout Twitter (TWTR) shares are down 6.3% ahead of the open as the company gears up for a legal battle with Tesla (TSLA) CEO Elon Musk. Musk informed the social media company on Friday that he wants to terminate his $44 billion takeover deal. But it’s not as simple as paying a fee and walking away. In a tweet, Twitter Chairman Bret Taylor said, “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.” Musk alleges Twitter violated the terms of the agreement by misrepresenting the number of spam users on the platform. TSLA shares are up 1.1% in premarket trade on optimism over Musk’s desire to ditch the deal. Traders Brace for Inflation, Earnings This week is all about inflation after the hot June jobs report on Friday. The Bureau of Labor Statistics releases the June consumer price index Wednesday morning. Economists expect the CPI to show prices rose 8.8% annually last month which would be an increase from 8.6% in May. That jump would mostly be due to higher energy prices, particularly gas. The core CPI, which excludes food and energy prices, is expected to decrease to an annual pace of 5.7% from 6% in May. The producer price index will also be released Thursday morning and is a leading indicator for consumer prices. It’s also the beginning of Q2 earnings season with big banks reporting later this week. JPMorgan Chase (JPM) and Morgan Stanley (MS) report Thursday morning followed by Citigroup (C) and Wells Fargo (WFC) Friday morning. Klarna Valuation Tumbles in Latest Funding Round Buy now, pay later service Klarna’s valuation plummeted in its latest funding round. The company raised $800 million in financing at a valuation of just $6.7 billion. That’s down sharply from a $45.6 billion valuation in June 2021. The company said, “the adjustment in Klarna’s valuation is on par with its public peers”. A partner at one of Klarna’s investors, Sequoia, said, “The shift in Klarna’s valuation is entirely due to investors suddenly voting in the opposite manner to the way they voted for the past few years.” The company is reportedly considering going public this year but the CEO has previously said market volatility makes him “nervous” about an IPO. The drop in Klarna’s valuation is weighing on other buy now, pay later firms with Affirm (AFRM) shares falling 2.2% ahead of the open. Oil Prices Fall Oil prices are lower as the market continues to weigh recession fears against supply concerns. West Texas Intermediate crude futures are down 3.5% at just over $101 bbl while Brent crude futures are down 2.9% at just under $104 bbl. The drop comes after both contracts posted weekly losses last week. Gas Prices Still Tumbling Lower oil prices are pushing U.S. gas prices even lower as the national average fell for the 26th day in a row. AAA shows the national average for regular gas fell to $4.678/gal today. Diesel also fell to $5.642/gal. The continued decline comes despite an increase in gasoline demand. The Energy Information Administration reported gas demand rose to 9.41 million barrels per day from 8.92 million bpd ahead of the 4th of July.
Continue Reading -->Coffee With Greta: Stocks Drop on BIG Jobs Report Beat
DJIA Futures: -79 (-0.3%) SPX Futures: -22 (-0.6%) NASDAQ Futures: -122 (-1%) Good morning friends! Futures are dropping as Treasury yields pop after the release of a strong June jobs report. Let’s get right to it! June Jobs Report Comes in Hot Job growth sharply beat expectations in June showing the U.S. labor market is still strong. The Labor Department reported the U.S. economy added 372,000 jobs last month vs economists’ expectations for 250,000. The unemployment rate was unchanged from May at 3.6%. April and May were both revised lower by 74,000 total jobs. The labor force participation rate was little changed at 62.2%, still below the pre-pandemic level of 63.4%. Average hourly earnings rose 0.3% monthly and 5.1% annually, still far behind inflation. But analysts expect the strong job growth to slow soon as the Fed continues and aggressive tightening schedule. Treasury Yields Spike on Strong Jobs Report Treasury yields popped higher after the release of the June jobs report but the yield curve is still inverted. The 2-year yield is up 10 basis points to 3.12% while the 10-year yield is up 8 basis points at 3.08%. The rally in the bond market is dragging down stock prices. The strong job growth gives the Fed more room to stay aggressive on inflation without concern about hurting the labor market. Fed Officials Support More Large Rate Hikes Two Fed officials are expecting another 0.75% rate hike later this month. Speaking at an event on Thursday, Fed Governor Christopher Waller said, “I’m definitely in support of doing another 75 basis point hike in July, probably 50 in September, and then after that we can debate whether to go back down to 25s.” St Louis Fed President James Bullard, who is a voting member of the FOMC this year, echoed that sentiment in a separate speech. Bullard said, “I think it would make a lot of sense to go with the 75 at this juncture. I’ve advocated and continue to advocate getting to 3.5% this year, then we can see where we are and see how inflation’s developing at that point.” Both officials downplayed fears over a recession but Waller did admit a slowdown may come with getting inflation under control. Waller said, “We’re going to get inflation down. That means we are going to be aggressive on rate hikes and we may have to take the risk of causing some economic damage, but I don’t think given how strong the labor market is right now that that should be that much.” GameStop Fires CFO, Announces Layoffs GameStop (GME) shares are down 6% ahead of the open after firing its CFO and announcing layoffs after-hours on Thursday. The company’s CEO Matt Furlong made that announcement in a memo to employees obtained by CNBC. Furlong said GameStop is “making a number of reductions to help us keep things simple and operate nimbly with the right talent in place.” He also said they will be “making a significant investment in our Store Leaders and field employees.” The CFO is being immediately replaced by GameStop’s current Chief Accounting Officer. Furlong said, “These changes will enable us to operate in a profitable manner as we execute against our strategy of pursuing sales growth in our commerce business and launching new products that empower customers within the digital asset and web3 gaming verticals.” Twitter Slashes Recruiting Team Twitter (TWTR) shares are falling 3.9% in premarket trade after announcing layoffs Thursday evening. The company is cutting 30% of its talent-acquisition team as part of cost-cutting efforts. The cuts will impact less than 100 employees. Sources also told MarketWatch Twitter is pausing nearly all hiring. A separate Washington Post report on Thursday claimed Elon Musk’s acquisition deal may be in jeopardy. That report said talks have cooled after Musk’s team was unable to verify Twitter’s claims about the number of spam accounts. Levi Strauss Tops Q2 Expectations Levi Strauss & Co (LEVI) shares are up 3.8% ahead of the open after beating Q2 earnings expectations. The clothing retailer reported adjusted earnings of $0.29 per share on $1.47 billion in revenue. That beat analysts’ expectations for adjusted EPS of $0.23 on $1.43 billion in revenue. Sales rose 15% year-over-year as digital sales jumped 20%. Levi maintained its full-year guidance for revenue growth between 11% and 13% and adjusted earnings between $1.50 to $1.56 per share. The company hiked its quarterly dividend to $0.12 a share from $0.10 a share. Oil Prices Stay Volatile Oil prices are dipping today as the market remains torn between supply worries and recession fears. West Texas Intermediate crude futures are down 0.4% to $102 bbl while Brent crude futures are slipping 0.2% to $104.50 bbl. Both contracts are on track for weekly losses for the second week in a row. The Energy Information Administration reported Thursday that U.S. crude inventories rose by 8.2 million barrels last week while gasoline stockpiles fell by 2.5 million barrels. Gas Prices Tumble U.S. gas prices fell for the 23rd day in a row. AAA shows the national average for regular gas fell more than 3 cents overnight to $4.721/gal today. Diesel also fell by more than 2 cents overnight to $5.675/gal. The EIA reported Thursday that product supplied rose to 20.5 million barrels per day last week. Overall gasoline demand was down over 5% compared to a year ago. In Case You Missed It Goldman Sachs (GS) economists slashed their Q2 GDP outlook on Thursday. The group now sees the economy expanding just 0.7%, down from the previous forecast for 1.9% growth. But the Atlanta Fed’s GDPNow tracker shows an expected 1.9% contraction in Q2. If that is the case, the U.S. would officially be in a recession.
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