Weekly Financial Market Insights 📈
Trading Week 30 ... FOMC Meeting, US GDP For Q2, PCE Inflation and Alphabet + Amazon + Apple + Meta + Microsoft Earnings
Sunday Morning Markets ☕
Your weekly financial markets update, in less than 5 minutes. Market coverage for Monday, July 25 - Friday, July 29.
Last Week ⏪
US equities rally on stronger than expected earnings reports and falling yields, as markets continue to price growth fears. PCE inflation nears a record high. Fed hikes 75bps but offers some dovish viewpoints for the future. Mixed earnings results from the mega-caps. Keep an eye out next week as earnings season continues & new manufacturing data is released for the US.
US Markets 🇺🇸
Fed hikes interest rates 75 bps at back-to-back meetings with the aim of breaking the back of inflation. The Fed Funds Target Rate will now be 2.25%-2.5%. Powell stated that they’ve seen demand soften, and are nearing their “neutral rate”.
Chips bill gets passed by US House & Senate and is on the way to Biden’s office for the final stamp of approval. The bill provides over $50B to improve domestic chip manufacturing and increase investments in science & technology research.
PCE inflation hits the highest level since 1982, coming in at 6.8% year-over-year. Core-PCE inflation (excluding food & energy) rose 4.8% year-over-year and 0.1% from May. Both readings were slightly higher than expectations.
US GDP falls 0.9% in Q2, marking the second consecutive quarter of negative GDP growth. The Biden Administration was quick to report that the US economy was not in a recession, despite the successive quarters of negative growth. Over the last 70 years, the US has never seen back-to-back quarters of declining growth without being in a recession.
Jetblue acquires Spirit Airways for $3.8B, or $33.50 per share in cash. The deal was announced after the Spirit-Frontier merger was dropped on Wednesday.
Rest of World 🌏
IMF cuts global growth forecasts as its outlook becomes more uncertain in these troubling times. They now project 3.2% growth in 2022 (down from 3.6%) and 2.9% growth in 2023 (down from 3.6%). The IMF stated that global inflation, China’s slowdown, and the war in Ukraine were dragging down growth.
Shopify lays off 10% of its workforce or nearly 1000 employees. CEO Tobi Lutke said in a memo that he misjudged the e-commerce tailwinds that the company experienced during the pandemic. A majority of the layoffs will be in the recruiting, support, and sales teams.
Rents in Canada surge despite falling home prices. Landlords have begun to demand months of rent upfront as competition picks up. The average rent for a 1br apartment is up 13.7% since the beginning of the year, while year-over-year rents jump 18.5% in Toronto and 19.2% in Vancouver.
OPEC+ may hold oil output steady in September despite requests made by the United States. Saudi Arabia and the UAE are thought to be the only two countries in the group with the chance of raising output levels in September when OPEC meets next.
China locks down Wuhan’s Jiangxia district after discovering just four positive asymptomatic COVID cases in the district of over 1 million residents.
Crypto ⚡
Bable Finance loses $280M trading with customers’ funds. The Hong Kong-based crypto lending company suspended withdrawals last month amid liquidity issues. The company reportedly lost 8K BTC and 56K ETH from forced liquidations.
FTX offers cash to Voyager customers as an early distribution of their bankruptcy claims. Customers who take the offer will have an opening balance when they create their new account on FTX. Customers will be able to withdraw immediately or purchase digital assets on their account.
Ethereum continues to rally on the excitement surrounding the “Merge”. The options market for ETH has reached a record high as traders anticipate the long waited shift to Proof-of-Stake.
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Earnings Reports 💰
Alphabet ($GOOG)
Revenue: $69.7B vs $69.9B expected and $61.9B year ago (+13% YoY)
EPS: $1.21 vs $1.28 expected and $1.36 year ago (-11% YoY)
Youtube Ad Rev: $7.3B vs $7.5B expected and $7B year ago (+4.9% YoY)
Google Cloud Rev: $6.3B vs. $6.4B expected and $4.6B year ago (+35.6% YoY)
Guidance: No guidance provided.
Important Notes: Headcount grew 21% YoY to nearly 175K employees.
…
Amazon ($AMZN)
Revenue: $121.2B vs $119.1B expected and $113.1B year ago (+7% YoY)
EPS: ($0.20) vs $0.76 year ago
Op Cash Flow: $35.6B vs $59.3B year ago (-40% YoY)
Op Income: $3.3B vs $7.7B year ago (-57% YoY)
Guidance: Q3 revenue guidance of $125B - $130B, which implies 13-17% growth YoY.
Important Notes: Online store sales shrunk 4% YoY, while advertising grew 18% and AWS surged 33%.
…
Apple ($AAPL)
Revenue: $83B vs $82.8B expected and $81.4B year ago (+2% YoY)
EPS: $1.20 vs $1.16 expected and $1.30 year ago (-8% YoY)
Op Income: $23.1B vs $24.1B year ago (-4% YoY)
Guidance: No guidance provided.
Important Notes: Revenue breakdown: iPhone +3% YoY, Mac -10% YoY, iPad -2% YoY, Services +12% YoY, Other -8%. Apple spend $28B on share buybacks during the quarter.
…
Meta Platforms ($META)
Revenue: $28.8B vs $28.9B expected and $29.1B year ago (-1% YoY)
EPS: $2.46 vs $2.59 expected and $3.61 year ago (32% YoY)
FCF: $4.45B vs $8.51B year ago (-47.7% YoY)
Guidance: Q3 revenue between $26B to $28.5B, trailing expectations of $30.5B (2-11% decline YoY)
Important Notes: DAUs of 1.97B (+3% YoY). MAUs of 2.93B (+1% YoY). Ad impressions increased 15% YoY while price per ad fell 14% YoY. Headcount grew 32% YoY to 83,553 employees.
…
Microsoft ($MSFT)
Revenue: $51.9B vs $52.4B expected and $46.2B year ago (+12% YoY)
EPS: $2.23 vs $2.29 expected and $2.17 year ago (+3% YoY)
Op Income: $20.5B vs $19.1B year ago (+8% YoY)
Guidance: $49.25B-$50.25B in revenue for next quarter, which implies ~10% growth.
Important Notes: Azure grew 40% YoY (46% constant currency) as CEO Nadella says they continue to see “larger and longer-term commitments and a record number of $100M+ and $1B+ deals”.
Week Ahead 📅
Monday
S&P US Manufacturing PMI
ISM Manufacturing Index
Earnings Reports: Activision Blizzard ($ATVI), Pinterest ($PINS)
Tuesday
Job Openings & Job Quits
Credit Card Debt
Earnings Reports: AMD ($AMD), AirBnB ($ABNB), Uber ($UBER), PayPal ($PYPL), Starbucks ($SBUX), Caterpillar ($CAT), SoFi ($SOFI)
Wednesday
S&P US Services PMI
Earnings Reports: Booking Holdings ($BKNG), CVS ($CVS), Lucid Motors ($LCID), Moderna ($MRNA), Robinhood ($HOOD)
Thursday
Jobless Claims
Earnings Reports: Alibaba ($BABA), Block ($SQ), Amgen ($AMGN), Datadog ($DDOG), Eli Lilly ($LLY), Twilio ($TWLO)
Friday
Non-Farm Payrolls
Unemployment Rate
Earnings Reports: Berkshire Hathaway ($BRK), Draftkings ($DKNG)
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Until next Sunday…