Napalm, son. Nothing else in the world smells like that. I love the smell of napalm in the morning. -Lieutenant Colonel Bill Kilgore, Apocalypse Now It looks like traders are starting to worry about serious downside. Yesterday, I pointed out that safety assets were showing big gains amid rising geopolitical tensions. Today, the VIX jumped over 16 for the first time since November 10, 2016. And the VIX is stil trading as a massive premium to actual market volatility. And one of my favorite sentiment indicators — the CBOE Equity Put/Call ratio — skyrocketed to 0.79 yesterday. This is well above the YTD average of 0.65. As you can see in the chart below, we’ve seen 4 spikes to similar levels in the past 5 months. And all of those spikes occurred near interim lows in the S&P 500. Traders can rarely use sentiment indicators as buy/sell signals. They tend to only be useful at extremes. For the CBOE Equity Put/Call, a 0.79 is an outlier, but not a major league freakout. Nonetheless, this latest reading implies that traders are rapidly pricing a lot of fear into the market. When I complete my next Weekly Sentiment Update tomorrow, we should see even more bearishness than last week. The big question now becomes: is a lot of fear enough fear to form a bottom?
Continue Reading -->1) Another Day, Another Yawn I was really hoping that the Fed rate announcement and Dutch elections this week would spur some actual, real-life, lasting volatility. But following Wednesday’s post-Fed power rally, the market went right back into snooze mode. The S&P 500 fell -0.1% to 2378.25, with the Nasdaq flat. The Russell 2000 showed a little relative strength, which was nice to see. We also saw key large-cap tech stocks like Apple (AAPL) and nVidia (NVDA) rally intraday to finish near the highs of the day. Regional banks (KRE), which have been key in the post-election rally, also made a nice move off its morning low. 2) Levels to Watch in SPX This morning, T3 Live Chief Strategic Officer Scott Redler issued analysis of the S&P, saying the following: “Watch 2370-2377. We need to hold above that. Otherwise, more choppy downside can happen.” The S&P actually bottomed today at 2377.74, just missing Scott’s key range that would indicate trouble is ahead. So the bulls remain out of reach of the frustrated bears. 3) Quick Sentiment Update In yesterday’s Weekly Sentiment Update, I pointed out that the ISE Sentiment Index showed a huge surge in call options buying. But call buyers backed off quickly today. The ISE Sentiment Index fell to the low 70’s, indicating that traders went right back to buying up puts in anticipation of downside.. Increased put buying is actually good for the bulls, because it indicates that traders are still somewhat nervous. It’s very rare for traders to be skittish at the top.
Continue Reading -->1) A ‘Meh’ Jobs Report This morning, the US Bureau of Labor Statistics said that 235,000 nonfarm payrolls were added in February, beating the 200,000 consensus. The unemployment rate was 4.7%, in-line with expectations. However, average hourly earnings grew by just 0.2%, missing the expected 0.3% reading. That drove profit-taking in the US dollar, which has been moving higher in anticipation of a March rate hike. That said, the headline number was still pretty good, and traders are unwavering in their belief that March is in play. The CME’s FedWatch Tool shows that markets are pricing a 91% probability of a rate increase this month. 2) The Big Yawn Market While I was hoping for some volatility on today’s jobs numbers, we didn’t it. Stocks once again traded in a very tight range, with the S&P 500 trading up 0.3%. The Russell 2000 and S&P 500 also made modest gains. Like the US dollar, bank stocks saw profit-taking on the disappointing hourly earnings number. Meanwhile, rate-sensitive groups like gold miners and utilities caught a bid. The brightest spot of the day was biotech, which rallied nicely in the afternoon on speculation that sector leader Gilead (GILD) is about to announce an acquisition. Plus, President Trump is expected to appoint Scott Gottlieb, a doctor with deep ties to the pharma industries, as FDA commissioner. Presumably, he’d create the friendlier regulatory environment that Trump has promised. 3) Neutrality Last week, various sentiment indicators showed that traders were getting very cocky. This week, the picture is quite mixed. The AAII Sentiment Survey showed that individual investors have become much more cautious, even though the major indices barely moved. Click here to read my full Weekly Sentiment Update.
Continue Reading -->Welcome to your weekly trading preview! We added a Table of Contents to help you jump around: Table of Contents This Week’s Trading CalendarThe Week in Review…It’s Inflation Time!Earnings Season Slows Down But It’s Not OverSo How Has Earnings Season Been?Traders Are in a Rotten MoodA Look at Sector Performance in 2023:Factoid of the WeekGet to Know Sami Abusaad This Week’s Trading CalendarClick the calendar image to enlarge it, then scroll down to see what’s coming down the pipe the week of May 8: The Week in Review…What a week! We survived:Big earnings from Apple (AAPL), AMD (AMD), Starbucks (SBUX), Shopify (SHOP), and Qualcomm (QCOM)The FOMC and ECB Rate DecisionsThe Nonfarm Payrolls ReportThe regional bank collapseAnd with Apple leading a big Friday surge, our big 4 horsemen ETFs recovered some of the midweek damage, with the QQQ’s even getting in the green for the week:Year-to-date, the QQQ’s are still crushing the other big ETFs thanks to huge moves in names like Apple, Nvidia (NVDA), and Microsoft (MSFT). The QQQ’s also have no exposure to banks or energy, which have underperformed. So it’s been smooth sailing in 2023:Now let’s look forward to next week. By the way, Scott Redler is hosting a free week in the Alpha Team VTF®, and he can walk you through all the events we’ll talk about. It’s Inflation Time!We’re walking into a big week for inflation… and it’s worldwide thing. Yes, the US has CPI on Wednesday and PPI on Thursday. Traders will be looking for evidence inflation is breaking down to support expectations that the Fed will pause after this past week’s 25 bps rate hike. The CME FedWatch Tool implies a 96.1% probability that the Fed does not hike at the June 14 Feed meeting. FedWatch also shows the market is pricing in a 38.1% chance of a 25 bps cut in July. We’ll see if the CPI/PPI numbers sway these expectations. And overseas, we get:Wednesday: Germany CPI, China CPI & PPIThursday: New Zealand Inflation ExpectationsFriday: France, Spain, Brazil, and Russia CPIEngland in particular has a busy economic calendar next week with:Monday: Retail SalesTuesday: House Price IndexThursday: Bank of England Rate Decision & Meeting Minutes, Industrial ProductionFriday: GDP, Manufacturing Production Earnings Season Slows Down But It’s Not Over85% of the S&P 500 have reported earnings (more on this below), but we’ve still got some notable reports hitting the tape this week. Several consumer names report, including PayPal (PYPL) on Monday, AirBnB (ABNB) and UnderArmour (UAA) Tuesday, and Disney (DIS) on Wednesday. Even with high inflation, The consumer seems to have unlimited money for things they desire (like iPhones and McDonald’s fries), so it will be interesting to see if these companies show strength or strain. AirBnB and Disney will also give us reads into travel demand. Electric vehicle enthusiasts will be watching Lucid Group (LCID) on Monday and Rivian Automotive (RIVN) on Tuesday. Tesla (TSLA) got slapped on earnings in April because of margin pressure, and Ford (F) is losing buckets of money in its EV business. We’ll find out if Lucid and Rivian do any better. And don’t forget about Carl Icahn! His company Icahn Enterprises LP (IEP) moved its report to Wednesday, May 10. IEP got smashed this week after Hindeburg Researched accused Icahn of accounting irregularities. Look at this rollercoaster of a chart — we’re all eager to see how this one turns out: So How Has Earnings Season Been?According to FactSet… not bad — at least relative to expecations. 85% of S&P 500 companies have reported, and so far:79% of companies beat EPS estimates75% of companies have beaten sales estimates.Earnings have declined by -2.2% vs. expectations for a -6.7% declineNobody’s celebrating a -2.2% decline in earnings but it’s not as bad as -6.7%. Remember, the market’s about expectations, and expectations were too low coming into earnings season. Speaking of low expectations… Traders Are in a Rotten MoodInvestors and traders remain remarkably bearish despite the market’s stability. According to AAII, just 24.1% of investors are bullish. That’s well below the 37.5% long-term average. Plus, AAII said “bullish sentiment is unusually low for the 50th time out of the past 70 weeks,” and “bearish sentiment is still above its historical average of 31.0% for the 71st time out of the past 76 weeks.” This is despite the SPY’s 7.8% gain in 2023 and the QQQ’s 21.2% rally. Now let’s dig below the surface to see what’s been working this year: A Look at Sector Performance in 2023:2023’s been a bizarre year. It’s almost like we’re risk on and risk off at the same time. On the risk on side: Housing (ITB) is leading the market despite a slowdown in housing, Tech (XLK, SMH) is booming and ARKK rebounded from a messy 2022. And on risk off, gold (GLD) is outperforming and Treasuries (TLT) are up. Who could have imagined both ARKK and gold outperforming? Factoid of the Week According to Bespoke Investment Group, nonfarm payrolls have exceeded economists’ estimates for 13 straight months.This chart is bonkers. Non Farm Payrolls has now exceeded expectations for a record 13 straight months. https://t.co/UaURbFdG6a pic.twitter.com/4urENerxmy— Bespoke (@bespokeinvest) May 5, 2023 Maybe we should stop trusting economists’ long-term predictions? After all, they can’t predict anything even one month out… Get to Know Sami AbusaadHow did Sami achieve greatness as a trader? Find out here:
Continue Reading -->DJIA Futures: -313 (-1.0%) SPX Futures: -42 (-1.1%) NASDAQ Futures: -136 (-1.1%) Good morning friends! Futures are tumbling as the market heads for big weekly losses. Let’s get right to it! FedEx Tanks After Withdrawing Guidance FedEx (FDX) shares are plummeting 20.3% ahead of the open after missing fiscal Q1 expectations and withdrawing its full-year guidance. Here’s how the shipping giant’s results compared to analysts’ expectations: Adjusted EPS: $3.44 vs $5.14 expected Revenue: $23.2 billion vs $23.59 billion expected FedEx withdrew its full-year forecast as global shipping volumes dropped. The CEO said “Global volumes declined as macroeconomic trends significantly worsened later in the quarter… While this performance is disappointing, we are aggressively accelerating cost reduction efforts.” The company also announced new cost-cutting initiatives which include closing 90 office locations and five corporate office facilities. FedEx will also defer hiring efforts, reduce flights, and cancel some projects. The guidance cut is also weighing on FedEx’s competitors with UPS (UPS) shares down 6.5% and XPO Logistics (XPO) shares falling 5.9% ahead of the open. Uber Gets Hacked Uber (UBER) is investigating a cybersecurity incident after a hacker gained control over the company’s internal systems. In a statement on Twitter, Uber said, “We are currently responding to a cybersecurity incident. We are in touch with law enforcement and will post additional updates here as they become available.” A New York Times report claims the hacker gained access after compromising an employee’s Slack account. The Times says it spoke with the hacker directly. Uber shares are down 4.3% in premarket trade. Oil Prices Steady Oil prices have stabilized this morning but are still on track for weekly losses. West Texas Intermediate crude futures are up 0.3% to $85.30 bbl while Brent crude futures are up 0.7% to $91.50 bbl. The market has been in a back and forth all week between demand fears and supply concerns. This will be the third consecutive weekly loss for both contracts. Both WTI and Brent are down by 20% so far in Q3, the worst quarterly percentage declines since the start of the pandemic. Consumer Sentiment Expected to Improve The University of Michigan reports consumer sentiment for September at 10:00 a.m. ET. That index is expected to rise to 60 from 58.2 in August. But the main focus is on consumers’ 5-year inflation expectations, which stood at 2.9% in August. That outlook is of extra importance ahead of next week’s Fed meeting. Fed Chair Jerome Powell said that surprisingly higher inflation expectations ahead of the June meeting were part of what swayed the bank to approve another 0.75% rate hike instead of pivoting back to 0.5%. CME Group’s FedWatch Tool shows 80% of traders anticipating another 75 bps rate hike while 20% are predicting a 100 bps move. In Case You Missed It Adobe (ADBE) logged its worst day since 2010 on Thursday as the stock plunged 16.8%. The drop came after the company announced a $20 billion cash and stock deal to acquire design software firm Figma. Figma was valued at just $10 billion in its last funding round in 2021. Adobe also announced mixed fiscal Q3 results Thursday morning and issued mixed guidance for fiscal Q4.
Continue Reading -->DJIA Futures: -299 (-1%) SPX Futures: -40 (-1%) NASDAQ Futures: -125 (-1.1%) Good morning friends! Futures are slipping after the release of the Fed’s favorite inflation gauge. Let’s get right to it! Core PCE Inflation Cools The Fed’s favorite inflation measure cooled slightly in May. The Bureau of Labor Statistics Core Personal Consumption Expenditures (PCE) Price Index rose 0.3% monthly and 4.7% year-over-year. That index excludes food and energy prices. The gain was lower than expectations for a 0.4% monthly increase and 4.8% annual jump in prices. It was a slowdown from 4.9% in April but is still the highest reading since the 1980s. The headline PCE Price Index rose 0.6% monthly and 6.3% annually. That was sharply higher than the 0.2% monthly increase in April and unchanged on an annual basis. Personal incomes rose 0.5% but disposable incomes fell 0.1%. Headline personal spending rose 0.2% monthly but when adjusted for inflation that spending dropped 0.4%. Weekly Jobless Claims Fall Less Than Expected Weekly jobless claims fell slightly last week as the labor market remains tight. The Labor Department reported 231,000 Americans filed initial claims for unemployment benefits last week. That was down 2,000 from the previous week but higher than expectations for 228,000. It was the second weekly drop in a row but claims are still hovering near a five-month high. Continuing claims fell by 3,000 to 1.328 million in the week ending June 18. Walgreens Slips Despite Earnings Beat Walgreens (WBA) shares are down 2.3% ahead of the open despite beating fiscal Q3 expectations. The drugstore chain reported adjusted earnings of $0.96 per share on $32.6 billion in revenue. That beat analysts’ expectations for adjusted EPS of $0.92 on $32.06 billion in revenue. Sales were down year-over-year as demand fell for Covid vaccines. The company administered 4.7 million vaccines in Q3, down from 11.8 million in Q2 and 15.6 million in Q1. Walgreens reiterated its full-year forecast, expecting adjusted earnings growth in the low single-digits. RH Tumbles After Slashing Outlook RH (RH) shares are tumbling 8.6% in premarket trade after slashing its full-year outlook after-hours on Wednesday. The high-end furniture chain now expects annual sales to fall between 2% and 5% this year. That’s down from previous guidance for sales to rise 0% to 2%. In a statement, RH’s CEO said, “With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year-end, our expectation is that demand will continue to slow throughout the year.” Gas Prices Continue Decline U.S. gas prices are continuing to fall. AAA shows the national average for regular gas fell to $4.857/gal today. That’s down about 16 cents from the record high earlier this month. Diesel prices are also continuing to decline. The national average for diesel slipped to $5.772/gal today, down from the peak of $5.816/gal on June 19. Oil Prices Slip Oil prices are falling today as the market weighs supply concerns against an increase in fuel product inventories in the U.S. West Texas Intermediate crude futures are down 1.2% at $108 bbl while Brent crude futures are slipping 0.8% to $115 bbl. U.S. oil inventories fell more than expected last week. The Energy Information Administration reported crude stockpiles fell by 2.8 million barrels vs 800,000 barrels expected. But U.S. crude-oil production also rose by 100,000 barrels per day to 12.1 million bpd, the highest level since mid-April 2020. The EIA reported gas inventories rose by 2.6 million barrels last week vs expectations for an 800,000 barrel drop. The gas increase comes as U.S. refineries are running at 95% capacity in an effort to keep up with demand and lower prices. Bitcoin Drops Below $19,000 The crypto crash is continuing with Bitcoin briefly falling below $19,000 today. Currently, the largest coin in the world is down 4.3% at $19,200. Ethereum is down 6.8% at just over $1,000 per coin. Crypto has been hit hard by macroeconomic pressures like inflation and the possibility of a recession. Bitcoin has fallen more than 70% from its record-high. In Case You Missed It Fed Chair Jerome Powell told other Central Bankers around the world on Wednesday that the Fed cannot “guarantee” a soft-landing for the U.S. economy. Speaking at a conference in Portugal, Powell said the bank is still optimistic the economy can handle tighter monetary policy. But he said recent events have made that goal more challenging. He said the Fed is aiming to “growth moderate” to allow the supply chain to catch up with demand. JPMorgan (JPM) analysts say they now see a “reasonable” risk of a recession this year. In a note on Wednesday, Bruce Kasman and Joseph Lipton said “it is reasonable to consider the risk that the US and/or global economy slips into recession this year.” They added, “rising concern about persistent inflation shocks has combined with news of a more aggressive Fed and sliding sentiment to materially shift our views on 2022 growth.” This is a reversal from last week’s global markets outlook that showed no risk of a recession this year.
Continue Reading -->Editor’s Note: Coffee With Greta is a FREE morning update from our newest contributor Greta Wall. Want to get it by email every day? Click here. ******** DJIA Futures: -461 (-1.5%) SPX Futures: -68 (-1.8%) NASDAQ Futures: -231 (-2%) Good morning friends! Futures are tumbling as the market gives up Wednesday’s post-Fed rally. Let’s get right to it! Treasury Yields Jump Treasury yields are rising today as central banks around the world join the U.S. Fed in getting more aggressive on inflation. The 10-year yield is up 13 basis points at 3.42% while the 2-year yield is up just 4 basis points at 3.26%. Those yields rise as traders sell-off Treasury notes and bonds. The recent spike in yields is a signal the market does not have faith in the short-term strength of the economy and a recession is likely looming. Fed Gets Aggressive Stocks rallied on Wednesday after the Fed approved a 0.75% rate hike, its largest since 1994. The Dow closed up 1% while the Nasdaq settled 2.5% higher and the S&P 500 rose 1.5%. Fed Chair Jerome Powell signaled the Central Bank will stay aggressive on inflation moving forward. In his post-meeting press conference, Powell said the Fed determined the larger rate hike was needed after the “upward surprise” in the May CPI. He said the bank will consider either a 50 or 75 basis point hike at the July meeting and they believe “front-loading” rate hikes is appropriate. The Fed also modified its projections for rates and the economy. The bank now sees the federal funds rate rising to 3.4% by the end of this year, up 1.5% from the March forecast. The Fed is projecting PCE inflation to remain at 5.4% at the end of 2022 vs 4.3% in March. The bank also slashed its 2022 GDP forecast to 1.7% from 2.8% in March. Check out the updated projections here. Weekly Jobless Claims Fall Less Than Expected Weekly jobless claims fell less than expected last week, remaining near a 5-month high. The Labor Department reported 229,000 Americans filed initial unemployment claims. That was down 3,000 from the previous week’s revised level but higher than expectations for 220,000. Continuing jobless claims were unchanged at 1.31 million in the week ending June 4. Housing Starts, Building Permits Tumble In May Homebuilder stocks are falling ahead of the open after U.S. home construction slowed sharply in May. The Census Bureau reported housing starts plunged 14.4% last month to a seasonally adjusted annual rate of 1.55 million units. That missed economists’ expectations for a SAAR of 1.68 million units. Toll Brothers (TOLL) shares are down 2.3% while Lennar (LEN) is slipping 2.5%. That slowdown in building is expected to continue as building permits fell 7% to a SAAR of 1.7 million units vs 1.78 million expected. Starts on single-family homes fell 9.2% with permits falling 5.5%. Apartment starts plunged 26.8% and permits dropped 10%. Higher mortgage rates are slowing demand across the housing market, including for new construction. Mortgage News Daily shows the average 30-year rate slipped to 6.03% today after hitting 6.28% earlier this week. Gas Prices Fall U.S. gas prices fell further overnight. AAA shows the national average for regular gas dipped to $5.009/gal today, down from $5.014/gal on Wednesday. That price is still 52 cents higher than a month ago and $1.934 higher than a year ago. But diesel prices are still pushing to new records. The national average for diesel jumped to $5.786/gal today from $5.780 on Wednesday Oil Prices Fall After Fed Rate Hike Oil prices are falling today on economic growth concerns after the Fed rate hike on Wednesday. West Texas Intermediate crude futures are down 1.3% at under $114 bbl while Brent crude futures are down 1.2% at $117 bbl. The Energy Information Administration reported Wednesday that U.S. crude production increased by 100,000 barrels per day last week to 12 million bpd. That’s the highest level since April 2020. The EIA also reported that U.S. crude inventories rose by 2 million barrels vs expectations for 1.1 million barrel decrease. But gas stockpiles fell by 700,000 barrels vs expectations for a 100,000 barrel increase. In a letter to Exxon Mobil (XOM) and Chevron (CVX), President Biden said, “At a time of war – historically high refinery profit margins being passed directly onto American families are not acceptable.” He demanded U.S. refineries “take immediate actions to increase the supply of gasoline, diesel, and other refined product.” Revlon Files for Bankruptcy Revlon (REV) shares have been halted in the premarket session after the cosmetics giant filed for Chapter 11 bankruptcy protection. The company filed Wednesday evening, citing a large debt load and supply chain struggles. Revlon said it expects to receive $575 million in debtor-in-possession financing from its existing lenders. The filing said the company is unable to timely fill nearly 1/3 of consumer demand due to issues in the supply chain. The President and CEO said, “Today’s filing will allow Revlon to offer our consumers the iconic products we have delivered for decades, while providing a clearer path for our future growth.” She added, “Our challenging capital structure has limited our ability to navigate macro-economic issues in order to meet this demand.” In Case You Missed It Homebuilder sentiment tumbled to a 2-year low this month. The National Association of Homebuilders sentiment index fell 2 points to 67, in line with economists’ expectations. That was the lowest reading since June 2020. Buyer traffic tumbled 5 points to 48, falling into negative territory for the first time since June 2020.
Continue Reading -->Editor’s Note: Coffee With Greta is a FREE morning update from our newest contributor Greta Wall. Want to get it by email every day? Click here. ******** DJIA Futures: +191 (+0.6%) SPX Futures: +31 (+0.8%) NASDAQ Futures: +115 (+1%) Good morning friends! Futures are rising as traders brace for a big Fed rate hike. Let’s get right to it! Fed Decision Day The Federal Reserve releases its rate hike decision at 2:00 p.m. ET today with Chair Jerome Powell’s press conference at 2:30 p.m. ET. CME Group’s FedWatch Tool shows the market sees a 98.6% chance the Central Bank will raise the federal funds rate by 0.75%. Traders ramped up those expectations after the May CPI and PPI both came in hot. It would be the biggest hike in 28 years, as inflation stands at a more than 40-year high. Analysts expect a steep sell-off if the Fed sticks with a 50 basis point hike instead as the bank appears to be way behind on inflation. The bank is also expected to adjust its future outlook for more aggressive hikes. Economists expect the Fed to lower its GDP forecast and raise its forecast for inflation and unemployment. Retail Sales Drop U.S. retail sales fell for the first time in five months in May as inflation squeezes consumer spending. The Commerce Department reported retail sales fell 0.3% last month to $672.9 billion. That missed economists’ expectations for a 0.1% increase. Gasoline sales surged 43.2% compared to a year ago as gas prices began their record-breaking climb in May. The monthly drop in overall retail sales was mostly due to a decline in auto purchases. Excluding autos and gasoline, so-called core retail sales rose 0.1%. But that was lower than expectations for a 0.8% increase. And when adjusted for inflation, real retail sales tumbled more than 1%. Crypto Collapse Continues The meltdown in the crypto market is continuing. Bitcoin is down 4.6% in the past 24 hours at just over $21,000 while Ethereum is 7.6% lower at $1,100. Bitcoin hit a low of around $20,200 earlier in the morning. The coin is down more than 70% from its all-time high in November. Coinbase (COIN) shares are sliding 1.9% ahead of the open. Gas Prices Slip from Record-High U.S. gas prices took a break from their record-breaking climb today. AAA shows the national average for regular gas dipped back to $5.014/gal today, down from $5.016/gal on Tuesday. That price is still 54 cents higher than a month ago and $1.938 higher than a year ago. But diesel prices did not follow suit. The national average for diesel jumped to $5.780/gal today from $5.775 on Tuesday. Oil Prices Fall Ahead of Fed Rate Hike Oil prices are slipping amid fears of an economic slowdown ahead of the Fed rate hike. West Texas Intermediate crude futures are down 0.4% at $118 bbl while Brent crude futures are falling 0.2% to $121 bbl. The American Petroleum Institute reported late Tuesday that U.S. crude inventories rose by 736,000 barrels last week while gasoline stockpiles fell by 2.2 million barrels. The Energy Information Administration reports official inventory levels today. Analysts expect the EIA to report a 1.1 million barrel decline in crude inventories and a 100,000 barrel increase in gas inventories. Mortgage Demand Rebounds, Rates Soar Mortgage demand rose slightly last week but is still down sharply compared to a year ago. The Mortgage Bankers Association reports new purchase applications rose 8% weekly but were down 16% year-over-year. Refinance applications were up 4% weekly and plunged 76% annually. Overall application volume was down 52.7% compared to a year ago. The average 30-year contract rate rose to 5.65% last week from 5.40% the week before. But that rate has since skyrocketed. Mortgage News Daily shows the average 30-year rate rose 10 basis points on Tuesday alone, to 6.28%. That jump came after a 33 basis point increase on Monday. It’s the first time mortgage rates have been above 6% since 2008. Homebuilder Sentiment Expected To Fall The National Association of Homebuilders releases its June sentiment index at 10:00 a.m. ET. That survey is expected to fall to 67 from the 2-year low of 69 in May. The index measures sentiment about current market conditions, buyer traffic, and expectations for 6-months from now. It would be the fifth straight month of declining sentiment as builders struggle with ongoing supply chain issues, a labor shortage, and now rising mortgage rates. In Case You Missed It Compass (COMP) and Redfin (RDFN) announced job cuts on Tuesday as the housing market slows. Compass is cutting 10% of its total workforce while Redfin is laying off about 8% of its employees. The job cuts come as rapidly rising mortgage rates have squeezed homebuyers.
Continue Reading -->Editor’s Note: Coffee With Greta is a FREE morning update from our newest contributor Greta Wall. Want to get it by email every day? Click here. ******** DJIA Futures: -427 (-1.3%) SPX Futures: -60 (-1.5%) NASDAQ Futures: -213 (-1.7%) Good morning friends! Futures are falling after a hotter-than-expected inflation report. Let’s get right to it! Inflation Surges Higher U.S. inflation pressures surged more than expected in May. The Bureau of Labor Statistics consumer price index jumped 1% monthly and skyrocketed 8.6% annually. That’s the highest pace of annual inflation since 1981. It was also an increase from 8.3% inflation in April and higher than analysts’ expectations for that to be unchanged. The increase was led by soaring rent, food, and gas prices. Grocery prices jumped 11.9% annually, gas prices were up 50.3%, and shelter prices rose 5.5%. The CPI also shows oil prices surged 106.7% from a year ago. The core CPI, which excludes food and energy prices, rose 0.6% monthly and 6% annually. That was also higher than analysts’ expectations but a slight cooldown from 6.2% annual inflation in April. Short-term Treasury Yields Surge After CPI Short-term Treasury yields are rallying after the release of that hot inflation data. The 2-year yield is up 12 basis points to 2.92%, the highest level since 2018. Short-term yields are more sensitive to the Fed’s rate hikes. The 10-year yield is flat at 3.06%. Stitch Fix Drops On Widening Loss, Layoff Announcement Stitch Fix (SFIX) shares are tumbling 15.8% ahead of the open after the company announced wider losses in Q3 and layoffs. The online personal styling service reported a loss of $0.72 per share on $492.9 million in revenue. That was steeper than the $0.18 per share loss on $535.6 million in revenue a year ago. Stitch Fix forecast Q4 revenue between $485 million and $495 million. That would be lower than $571.2 million last year. The disappointing quarterly results come after CEO Elizabeth Spaulding announced Stitch Fix is laying off 15% of its salaried employees in a memo on Thursday. Roughly 330 employees were notified of layoffs, representing about 4% of the company’s total workforce. Spaulding said, “We’ve taken a renewed look at our business and what is required to build our future. While this was an incredibly difficult decision, it was one needed to make to position ourselves for profitable growth.” Stitch Fix said it “expects annual cost savings of $40 million to $60 million in fiscal year 2023,” as a result of the layoffs. Rent the Runway Rallies On Q1 Sales Beat Rent the Runway (RENT) shares are rising 7.4% in premarket trade after beating its own Q1 forecast. The clothing rental service reported a Q1 loss of $0.67 per share on $67.1 million in revenue. That topped the company’s forecast for revenue between $63.5 million and $64.5 million. It was also an improvement from the $3.75 per share loss on $33.5 million in revenue a year ago. Rent the Runway forecast Q2 revenue between $72 million to $74 million. DocuSign Plummets On Q1 Miss DocuSign (DOCU) shares are plunging 25.4% ahead of the open after missing Q1 expectations. The electronic-documents company reported adjusted earnings of $0.38 per share on $588.7 million. That missed analysts’ expectations for adjusted EPS of $0.46 but beat estimates for $583 million in revenue. The CEO announced DocuSign is moderating its hiring plan “to appropriately balance growth and profitability.” The company forecast Q2 revenue between $600 million and $604 million vs analysts’ expectations for $601 million. DocuSign expects full-year revenue between $2.47 billion and $2.48 billion vs analysts’ estimates for $2.479 billion. Average U.S. Gas Price Still Approaching $5 The national average for a gallon of regular gas is still inching closer to $5. AAA shows that price rose to $4.986/gal today. That’s up more than 60 cents from a month ago and more than $1.91 from a year ago. Gas price tracking site GasBuddy.com showed the national average spiked above $5 on Thursday. Oil Prices Hover Around 3-Month Highs Oil prices are still hovering around 3-month highs as the market weighs new Covid restrictions in Shanghai and Beijing. West Texas Intermediate crude futures are up 0.7% at over $122 bbl while Brent crude futures are up 0.6% at nearly $124 bbl. WTI is on track for its seventh straight weekly gain and Brent is set to rise for the 4th week in a row. Consumer Sentiment Expected To Bounce The University of Michigan releases the preliminary reading of its June consumer sentiment index at 10:00 a.m. ET. That survey is expected to improve to 59 from 58.4 at the end of May. The index also includes consumer expectations for inflation over the next 12-months and 5-years. In Case You Missed It CNBC’s Q2 CFO Council Survey shows American CFOs are worried about inflation and a recession. 40% of respondents cited inflation as the #1 external risk to their business. 100% said they expect a recession, with 68% expecting one in the first half of 2023. 77% expect the DJIA to fall below 30,000. Freddie Mac reported Thursday its average 30-year mortgage rate rose to 5.23% last week. That was up 14 basis points from the prior week. The average 15-year rate rose 6 basis points to 4.38%. The chief economist at Freddie Mac said, “The housing market is incredibly rate-sensitive, so as mortgage rates increase suddenly, demand again is pulling back.”
Continue Reading -->Editor’s Note: Coffee With Greta is a FREE morning update from our newest contributor Greta Wall. Want to get it by email every day? Click here. ******** DJIA Futures: +88 (+0.3%) SPX Futures: +24 (+0.6%) NASDAQ Futures: +120 (+1%) Good morning friends! Futures are rising as new data shows inflation pressures are slowing. Let’s get right to it! PCE Inflation Cools The Bureau of Labor Statistics personal consumption expenditures index shows inflation pressures slowing in the U.S. economy. The headline PCE price index rose 0.2% monthly and 6.3% year-over-year. That was a slowdown from 0.9% monthly and 6.6% annually in March. The core PCE price index, which excludes food and energy, rose 0.3% monthly and 4.9% annually. That was also a slowdown from March and in line with economists’ expectations. The core PCE index is the Fed’s preferred measure of inflation. The data supports the Fed’s theory that inflation may have already peaked and is now trending downward. The PCE index also showed an increase in incomes and consumer spending last month. Personal incomes rose 0.4% monthly, slightly lower than expectations for 0.5%. Consumer spending was up 0.9%. Adjusted for inflation, disposable incomes were flat and consumer spending rose 0.7%. Gap Plunges After Slashing Guidance Gap (GPS) shares are plunging 18.8% ahead of the open after slashing its full-year guidance. The clothing retailer reported a fiscal Q1 loss of $0.44 per share on $3.48 billion in revenue. Revenue was down 13% year-over-year but slightly ahead of analysts’ expectations. Same-store sales dropped 14% year-over-year vs expectations for a 12.2% decline. Online sales were down 17% compared to a year ago and in-store sales fell 10%. Gap sales dropped 11%, Old Navy sales tumbled 22%, Athleta sales fell 7%, and Banana Republic sales rose 27%. The company forecast fiscal 2022 adjusted earnings between $0.30 and $0.60 per share, that’s down from previous guidance for4 $1.84 to $2.05. Analysts were looking for EPS guidance of $1.34. Gap’s CFO said the revised outlook accounts for “executional challenges” at Old Navy, uncertain macroeconomic conditions, and inflationary pressures. Big Lots Tumbles On Surprise Q1 Loss Big Lots (BIG) shares are falling 17.3% in premarket trade after reporting a surprise loss in the first quarter. The retailer reported a loss of $0.39 per share on $1.37 billion in revenue. That was sharply lower than analysts’ expectations for a profit of $0.91 per share on $1.46 billion in revenue. Big Lots said same-store sales slowed in April, prompting it to markdown prices. The CEO blamed that slowdown on inflationary pressures. The company’s gross margin rate shrunk to 36.7% last quarter from 40.2% a year ago. Big Lots expects comparable sales to fall year-over-year in Q2 and its gross margin rate to be in the low-30s as costs rise. Costco Sales Growth Falls Short Costco (COST) shares are down 1.6% ahead of the open after beating fiscal Q3 revenue expectations but missing growth estimates. The big-box retailer reported earnings of $3.04 per share on $52.6 billion in revenue. That was in-line with analysts’ EPS expectations and better than revenue estimates for $51.56 billion. But same-store sales growth fell short. Costco said sales at stores open for at least a year jumped 10.8% year-over-year vs expectations for 11.8% growth. Ulta Rallies On Earnings Beat, Strong Guidance Ulta (ULTA) shares are up 8.1% in premarket trade after beating Q1 expectations and raising its full-year outlook. The beauty retailer reported earnings of $6.30 per share on $2.34 billion in revenue. That was better than analysts’ expectations for EPS of $4.46 on $2.12 billion in revenue. Comparable sales jumped 18% year-over-year, with double-digit increases across all major categories. Ulta also said it has opened 10 new stores this year. The company forecast full-year revenue between $9.35 billion and $9.55 billion with comparable sales growth between 6% and 8%. That was up from the previous forecast for comparable sales growth between 3% and 4% with revenue between $9.05 billion and $9.15 billion. Ulta also expects full-year earnings between $19.20 to $20.10 per share vs the previous outlook for $18.20 to $18.70. The company still plans to open 50 new stores total in 2022. Dell Jumps On Earnings Beat Dell Technologies (DELL) shares are up 11.5% ahead of the open after crushing fiscal Q1 earnings expectations. The laptop maker reported non-GAAP earnings of $1.84 per share on $26.1 billion in revenue. That beat the company’s own forecast for EPS of $1.25 to $1.50. Analysts were expecting $25 billion in revenue. Sales in Dell’s Infrastructure Solutions Group (ISG) jumped 16% year-over-year to $9.3 billion. That was better than Wall Street’s expectations for 5% growth to $8.3 billion. The Client Solutions Group, which is Dell’s PC business, brought in $15.6 billion in revenue. That was up 17% compared to a year ago and higher than consensus estimates for $15.5 billion. Twitter Shareholders Sue Twitter and Musk Twitter (TWTR) shareholders are suing the social media company and Elon Musk over their chaotic handling of Musk’s acquisition deal. The proposed class-action suit accuses Musk of violating California’s corporate laws and engaging in market manipulation by creating doubt he would go through with the deal. It says, “Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down substantially in order to create leverage that Musk hoped to use to either back out of the purchase or to re-negotiate the buyout price by as much as 25% which, if accomplished, would result in an $11 billion reduction in the Buyout consideration.” The suit also claims he financially benefitted by delaying the disclosure of his stake. Shareholders allege Musk bought the stock while he knew insider information from private conversations with board members and executives, including former CEO Jack Dorsey. TWTR shares have seen volatile swings since the Tesla (TSLA) boss originally disclosed his investment in early April. The stock popped to a high of $54.57 per share on April 5, the day after Musk revealed his stake.
Continue Reading -->