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 -->Is the Market Breaking the Downtrend?
Sami explains what shows the market may be breaking the downtrend: What needs to happen for the downtrend to end Where BCAB is poised for a breakout Where to set the target on a long swing The buy setup he sees in IBM Why he sees IMTE crashing further
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 -->Elon Musk Dumped Twitter. Should You Buy?
We have mostly red arrows to start the week on negative pandemic news out of China. Macau is shutting down many businesses including casinos. The Shanghai is -1.2% with the Hang Seng -2.7%. SPX futures are -24 and we’ll see if there’s any commitment to last week’s rally as we wait for Wednesday’s CPI and then bank earnings at the end of the week. Now let’s dig into some big social media and tech names: TWTR: I’m glad I got out at $52+ when the deal was announced. I haven’t played it since then. It would be cute if it opened lower and went green. $35ish is a spot to watch. If I played it, I’d use a 5-15-30 minute low to trade against. Be very careful. SNAP was a decent tactical buy last week. I still have some left. It needs to hold $14ish. We’ll see how it responds to the Elon Musk news. TSLA: some think it should have been up more on the TWTR news. We’ll see what happens for sentiment today. See if it stays green or if sellers get more comfortable. $723 is key support. A move above $764 opens the door for higher prices META was cut to underperform by Needham. If it can’t reclaim the $167 area, it can roll back over. This has been a problem stock all year. AMZN participated last week and seems to be getting tighter. If it can hold $113ish, it looks like it can clear $117. Scott’s Positions Disclosure:
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.
Continue Reading -->David Prince Interview: How to Succeed as a Trader in 2022
In this exclusive interview, David Prince, leader of Inner Circle, discusses what’s working and what’s not in 2022. David discusses: Why so many traders have the wrong goals Why 2022 has been so different than 2021 and 2020 When to bet on low quality stocks, and when to chase them The trick for knowing when to dump a popular “story stock” The reason stock picking is the easy part The role psychology plays in your probability of success Go here to learn more about Inner Circle =>
Continue Reading -->Coffee With Greta: GameStop Splits!
DJIA Futures: +170 (+0.6%) SPX Futures: +16 (+0.4%) NASDAQ Futures: +49 (+0.4%) Good morning friends! Futures are up as the S&P 500 looks to extend its gains for the third straight day. Let’s get right to it! GameStop Rallies After Announcing Stock Split GameStop (GME) shares are up 5.9% ahead of the open after the company announced a 4-for-1 stock split after hours on Wednesday. The video game retailer said its board of directors approved the split. Shareholders who own the stock before the close on July 18 will get three additional shares for each one they own. The dividend will be distributed after trading closes on July 21 and GME will start trading at the split-adjusted price on July 22. Samsung Earnings Guidance Boosts Chip Stocks Chip stocks are rising in premarket trade after Samsung released better than expected Q2 earnings guidance. The VanEck Semiconductor ETF (SMH) is up 1.8% ahead of the open. Samsung said today it expects Q2 revenue to rise 22% year-over-year with operating profit expected to grow 12%. The South Korean chipmaker will release detailed second-quarter results later this month. Weekly Jobless Claims Hit 6-Month High Weekly jobless claims rose unexpectedly last week in a sign layoffs are increasing. The Labor Department reported 235,000 Americans filed initial claims for unemployment benefits. That was an increase of 4,000 from the previous week and the highest level since January. The 4-week moving average of new claims also rose to 232,500, a 6-month high as well. Continuing claims also rose by 51,000 to 1.38 million in the week ending June 25. U.S. Trade Deficit Shrinks in May The U.S. trade deficit decreased in May to $85.5 billion. That was down 1.3% from April but higher than expectations for $84.9 billion. It’s still the lowest trade gap so far this year after the deficit hit a record-high two months ago. Exports rose 1.2% to a record $255.9 billion while imports rose 0.6% to $341.4 billion. Adjusted for inflation, the real goods deficit rose to $116.6 billion in May. The lower trade deficit will be positive for GDP growth as the record-high gap in March was blamed for the contraction in Q1. Treasury Yields Rise, Curve Remains Inverted The curve between the 2-year and 10-year Treasury yields is still inverted, signaling a recession is on the horizon. The 2-year Treasury yield is up about 3 basis points to over 3% while the 10-year yield is up just over 1 basis point to 2.95%. This part of the yield curve first inverted on March 31 and then again briefly in June. Yields are rising today after the Fed minutes on Wednesday showed the bank is leaning toward another 75 basis point hike this month. Oil Prices Rise Oil prices are rebounding today after plunging on global recession fears Wednesday. West Texas Intermediate crude futures are up 1.1% at just under $100 bbl while Brent crude futures are up 0.7% at over $101 bbl. Both closed at their lowest price since April 11 on Wednesday as recession fears overtook supply concerns. The Energy Information Administration reports U.S. crude and gas inventories at 11:00 a.m. ET today. Analysts expect that report to show oil stockpiles fell by 1.2 million barrels in the week ending July 1 while gas inventories are expected to have dropped by 500,000 barrels. The American Petroleum Institute reported a 3.8 million barrel increase in crude inventories and 1.8 million decrease in gasoline stockpiles on Wednesday. Gas Prices Still Dropping U.S. gas prices fell for the 22nd day in a row. AAA shows the national average for regular gas fell to $4.752/gal today. Diesel also fell by more than a cent overnight to $5.698/gal. The sharp decline in oil prices is expected to continue pushing U.S. gas prices down. In Case You Missed It The number of available jobs is still outpacing workers by about 2 to 1. The Labor Department’s JOLTS shows there were 11.25 million job openings in May. That was down from 11.67 million in April but just 5.95 million unemployed workers were counted in May. The Great Resignation continued to slow with 4.27 million workers quitting their jobs in May. The Fed’s June meeting minutes show the bank is committed to lowering inflation even if it causes a recession. The Fed released those minutes on Wednesday afternoon, showing another 0.75% rate hike is on the table for the July meeting. FOMC members acknowledged that tighter policy will likely slow the pace of economic growth but they see inflation returning to 2% as “critical to achieving maximum employment on a sustained basis”.
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DJIA Futures: +13 (+0.04%) SPX Futures: +2 (+0.1%) NASDAQ Futures: +10 (+0.1%) Good morning friends! Futures are flat as traders gear up for new economic data. Let’s get right to it! Futures Flat with JOLTS, Fed Minutes Ahead Futures are flat with the focus on new jobs data and the Fed. The Labor Department releases the May Job Openings and Labor Turnover Survey (JOLTS) at 10:00 a.m. ET. That is expected to show the number of available jobs fell to 11.1 million from 11.4 million in April. The Fed then releases the minutes of its June meeting at 2:00 p.m. ET. Traders are eyeing that readout for more clarity on the bank’s plans for larger rate hikes moving forward. The Fed raised rates by 0.75% in June and the Fed Chair signaled they will consider more hikes of that size to combat inflation. Treasury Yields Fall, Curve Remains Inverted Recession alarms are sounding as a key part of the Treasury yield curve is still inverted. The 2-year Treasury yield is down about 5 basis points at 2.77% while the 10-year yield is down 5 basis points at 2.75%. An inversion between the 2-year and 10-year yields is typically seen as a sign the economy is weakening and a recession is on the horizon. Mortgage Demand Falls Despite Lower Rates Mortgage demand slipped last week even as rates dropped for the second week in a row. The Mortgage Bankers Association shows purchase applications fell 4% weekly and 17% year-over-year. Refinance applications dropped 8% weekly and tumbled 78% compared to a year ago. The average 30-year contract rate pulled back to 5.74% from 5.84% the prior week. The drop in rates followed the decrease in Treasury yields as mortgage rates typically track with the 10-year yield. Oil Prices Rebound on Supply Concerns Oil prices are bouncing back after Tuesday’s drop as supply worries take over. West Texas Intermediate crude futures are up 1% at over $100 bbl while Brent crude futures are rising 1.8% to over $104 bbl. The rebound comes after WTI crude closed below $100 bbl for the first time since late April on Tuesday. Analysts expect volatility to continue as the market grapples with supply worries against economic growth concerns. Gas Prices Continue Pullback U.S. gas prices are still falling as demand drops. AAA shows the national average for regular gas fell to $4.779/gal today. That’s down nearly 10 cents from a week ago and nearly 24 cents from the record-high. Diesel also fell to $5.716/gal, down a full cent from yesterday. The Energy Information Administration shows U.S. gasoline demand at 8.93 million barrels per day, down from 9.11 million bpd at the same time last year. Amazon Partners with Grubhub Amazon (AMZN) Prime members will now get a free year of Grubhub deliveries. The online retail giant announced that deal with the food delivery service today. It also includes an option for Amazon to acquire an up to 15% stake in the company. The news is dragging down competitors like Uber (UBER) and DoorDash (DASH). UBER shares are down 3.3% ahead of the open while DASH is tumbling 6.9%. Spirit Wins Newark Peak-Hour Flights Spirit Airlines (SAVE) shares are flat ahead of the open after the government shifted peak-hour runway timings at Newark Airport to the company. The U.S. Transportation Department said this “secures low-cost service options for Newark customers and improves competition in the Newark market.” Southwest Airlines (LUV) previously operated those timings but pulled out of Newark in favor of LaGuardia in 2019. Spirit beat out JetBlue (JBLU) and Alaska Air Group (ALK) for the approvals. Spirit said it will “continue to promote competition and offer affordable, high-value travel options for guests traveling in and out of the New York Metropolitan area.”
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