Q2 GDP: Choo Choo

The FED might be winning the war on inflation. Their preferred metric for inflation the PCE Inflation Index surprised below expectations at 4.1%. PCE inflation is now at the lowest reading since 2021. The trend is finally our friend!

Market

Prices as of 4 pm EST, 7/27/23

Macro

Rainy day funds at America’s biggest banks might be getting bigger.

• Under new rules proposed by US regulators, banks with over $100 billion in assets would need to raise their capital requirements by ~20%.

• The bigger the bank, the bigger the requirement.

• The goal is to mitigate operational risk across activities like lending, trading, and so on.

• Banks oppose the move, naturally, arguing the measures are extreme and would prove more costly than expected, ultimately hurting consumers.

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To quote Fed Chair Powell, the labor market is “very tight”.

• Last week’s data did nothing to change that with initial jobless claims falling well below expectations to their lowest in 5 months.

• And workers aren’t staying unemployed for long as continuing claims dropped to the fewest in 6 months.

• Another sign that demand for labor remains high? Close to 5% of job postings in the US feature a signing bonus

  That’s more than 2x the pre-pandemic average of 1.8%, according to Indeed.

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For an economy feared to be on the brink of a recession, the US looks to be full steam ahead.

• After growing at a 2% pace in the first 3 months of the year, GDP expanded at 2.4% in Q2, crushing expectations of 1.8%.

• Highlighting the print was the largest growth in business spending in 6 quarters.

• Personal consumption also outpaced estimates, showing resilience among consumers.

• Meanwhile, core PCE prices—which the Fed watches closely—fell more than expected to 3.8% (vs. 4% est).

@callieabost

Stocks

Elon Musk has some explaining to do.

• A new investigative report from Reuters alleges Tesla deployed a secret team to combat thousands of customer complaints.

• The “Diversion Team” was tasked with and incentivized to cancel as many service appointments as possible.

• The principal complaint that sparked the special team’s creation?

• A (much) lower-than-expected driving range.

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The Dow ended its winning streak of 13 straight sessions in the green yesterday.

• It was the longest since 1987.

• Both retail and institutional investors remain optimistic.

• According to the AAII Sentiment Survey, the net percentage of bullish retail investors is in the 77th percentile.

• Turning to the NAAIM Exposure Index, active managers’ exposure to equities ticked up to the highest since November 2021 and is now in the 97th percentile.

• Separately, a reversal higher in margin debt points to higher risk appetite among investors:

@ISABELNET_SA

Energy

US oil prices are headed for the 5th consecutive weekly gain.

• The last such win streak for WTI took place from December 2021 to January 2022.

• Gas prices, meanwhile, are at their highest in 3 months at $3.73 and have been rising steadily since December.

• Driving higher prices: seasonally low inventories and refinery outages caused by extreme heat.

Earnings

Yesterday’s highlights:

Intel INTC: $0.13 EPS (vs. -$0.03 expected), $12.9 billion in sales (vs. $12.13B expected).

• Revenue fell 15% YoY but the company reversed two straight quarters of losses with a return to profitability.

• Despite “persistent weakness” across all segments, it guided revenue and profits for the current quarter slightly above analysts’ estimates.

Ford FORD: $0.72 EPS (vs. $0.55 expected), $42.43 billion in sales (vs. $40.38B expected).

• Strong pricing and demand for ICE vehicles offset lower-than-expected EV sales.

• The company raised its full-year guidance for both earnings and free cash flow.

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What we’re watching today:

• Exxon Mobil XOM

• Procter & Gamble PG

• Chevron CVX

• AstraZeneca AZN

• Sanofi SNY

• Rio Tinto RIO

• Aon AON

• Colgate-Palmolive CL

• Charter Communications CHTR

• Centene CNC

• T. Rowe Price TROW

• Church & Dwight CHD

• CNH Industrial CNHI

• WP Carey WPC

• Booz Allen Hamilton BAH

• Franklin Resources BEN

• Avantor AVTR

• Saia SAIA

Top Headlines

• Japan shocker: The BOJ surprised markets by loosening its yield cure control.

• Commodity outlook: The world’s largest miners are increasingly worried about weak commodity prices.

• Bank buybacks: The Fed’s new rules for lenders mean fewer buybacks for bank stocks.

• Office space: The amount of office space in the US is declining for the first time…ever.

• Streaming ads: Netflix is making moves to revive its struggling ad business.

• Short squeeze: Shares of meme stock Tupperware are up over 340% in the last 5 sessions.

• SEC warns: Gary Gensler is warning investors over risks in leveraged Treasury trades.

• PSA: Stocks currently remind Jim Cramer of the 80s and 90s when they were the best asset class.

Crypto

Prices as of 4 pm EST, 7/27/23

• Binance motion: Binance argues the CFTC doesn’t have jurisdiction over its entities outside the US and is seeking a dismissal of charges.

• Cybersecurity reporting: The SEC is requiring crypto firms to publish annual reports detailing significant cybersecurity breaches.

• Downsized: Sequoia Capital more than halved its crypto fund from $585 million to $200 million.

• Crypto hedgies: CoinShares is pursuing the launch of its first hedge fund open to accredited US investors.

• Settlement: FTX has reached an agreement in principle with Genesis, its largest creditor with $226 million in claims.

Deals

• Metals M&A: Brazilian miner Vale will sell a 13% stake in its metals unit for $3.4 billion.

• Steel M&A: Teck Resources is still mulling offers for its steelmaking business while also fighting off a takeover approach by Glencore.

• Fast-fashion: Amid rumors of a potential US IPO, Chinese retailer Shein reported record profitability in the first half.

• High-fashion: Luxury conglomerate Kering will acquire a 30% stake in Valentino for €1.7 billion with an option to buy.

• EV plans: Chinese EV-maker BYD is considering dropping its $1 billion investment plan to build cars in India.

Meme Of The Day