Market veteran Ed Yardeni says the U.S. economy has shifted from a “rolling recession” to a “rolling recovery”. He says large parts of the residential real-estate sector had been in a recession for eight quarters. But a sharp rise of 12% in new home sales (among other sectors) in May marked the start of the recovery.
Market
Prices as of 4 pm EST, 7/5/23
Macro
June’s FOMC minutes were released yesterday—here are the main takeaways:
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Almost all participants agreed with last month’s pause, but some division is starting to arise.
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It may be more difficult for Powell to keep the FOMC united in the coming months.
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Almost all see additional rate increases as appropriate.
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They still see a mild, two-quarter recession starting in Q4.
Student loan debt holders are getting a lifeline, albeit a temporary one.
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According to the Consumer Financial Protection Bureau, 20% of borrowers may struggle once payments resume.
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The Biden administration announced new provisions giving borrowers more flexibility.
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From October 1 to September 30, 2024, borrowers will be protected from severe consequences if they fall behind on payments.
Factory orders fell short of expectations in May, rising just 0.3% (vs. +0.8% est).
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Excluding transportation, orders dropped 0.5% for the 4th consecutive monthly decline.
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On an annual basis, factory orders have declined for a record 8 straight months.
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They’ve also gone negative for the first time since October 2020.
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The Fed’s higher interest rates are having a clear impact on demand.
Bespoke
Stocks
Years of pent-up demand is fueling better-than-expected auto sales in the US.
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With improvements to semiconductor supply, automakers have increased production and refined supply chains.
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And they’re posting strong Q2 sales numbers across the board: Tesla (83% YoY), Honda (45% YoY), GM (19% YoY), Hyundai (14% YoY), Rivian (59% QoQ).
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It also doesn’t hurt that the average amount paid for new cars has remained near record levels.
AI is still all the rage but ChatGPT is getting less attention.
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According to BofA, downloads fell 38% MoM in June.
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They estimate website visits were down 11% on a monthly basis.
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Separately, a pair of authors claim OpenAI used their books to train ChatGPT without their consent.
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In what likely won’t be the last suit of its kind, the authors have sued OpenAI for violating copyright law.
Wall Street’s biggest bull is getting more bullish.
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Fundstrat’s Tom Lee raised his S&P 500 price target to 4,825 from 4,750.
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That implies a ~9% upside from the current level.
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Earnings estimates for the index, meanwhile, have dipped lower in recent weeks: estimates for 2023 and 2024 are down 4.7% and 2.5% this year, respectively.
DataTrek Research/Fact Set
Energy
Organization of Petroleum Exporting Countries: “Help wanted”.
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OPEC is actively recruiting new members.
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Countries recently visited by the group’s secretary-general include Malaysia, Brunei, Azerbaijan, and Mexico.
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To join, members must be net exporters of oil and have goals aligned with those of OPEC (i.e., keep oil prices high).
Earnings
What we’re watching today:
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Levi Strauss LEVI
Top Headlines
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Yellen in China: Janet Yellen arrives in Beijing today where she’ll look to improve US-China relations.
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Work week: Weekly hours worked have declined and are reaching an inflection point.
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Quitters: Americans are not quitting their jobs as rampantly as they were during the pandemic.
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Auto sales: GM reported an 18.8% YoY rise in US auto sales in Q2.
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Sluggish spending: Eurozone retail sales fell 2.9% on an annual basis in May.
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UK rates: Investors in the UK expect interest rates to reach 6.5% by March 2024.
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Zuck lands a punch: Twitter competitor Threads saw more than 10 million signups in its first seven hours.
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Oil production: OPEC expects its market share to increase to 40% by 2040-2045.
Crypto
Prices as of 4 pm EST, 7/5/23
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Democratize crypto: BlackRock CEO Larry Fink wants to democratize crypto and make it cheaper for investors.
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CFTC vs. Celsius: The CFTC says Celsius broke US rules and will vote on bringing a case as soon as this month.
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Fix rejected: BlockFi’s bankruptcy plans are being opposed by FTX, 3AC, and the SEC.
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Everything App: Twitter received approval from 3 US state regulators to serve as a money transmitter.
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Royalties optional: The enforcement of NFT royalty payments has declined to a 2-year low.
Deals
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Follow-ons: Secondary stock offerings rebounded sharply in Q2, raising the most since Q3 2021.
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Insurance: Brookfield Reinsurance will acquire the rest of American Equity in a $4.3 billion deal.
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VC spending: VC funding for new startups in the US fell by almost half in Q2 from a year ago.
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Airlines: JetBlue will end its partnership with American Airlines in the northeastern US.
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Crypto M&A: The number of crypto mergers and acquisitions dropped 50% YoY in Q2.
Meme Of The Day
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