Weekly Financial Market Insights 📈
Trading Week 31 ... Robinhood Layoffs, US Payroll Data, Pelosi Heads To Taiwan, Nomad Bridge Hack, and AirBnB + Uber + PayPal + Block Earnings
Sunday Morning Markets ☕
Your weekly financial markets update, in less than 5 minutes. Market coverage for Monday, August 1 - Friday, August 5.
Last Week ⏪
The week started with poor economic data from housing and consumer reports but finished strong with the blowout payroll report on Friday. In turn, bonds sold off and yields rose significantly as investors fear more rate hikes to come. Meta turns to the debt markets for the first time in its history. Layoffs continue with Robinhood falling as the next victim. House Speaker Pelosi’s trip to Taiwan dramatically elevated the tensions between China & the US. All that and more in this week’s Sunday Morning Markets report…
US Markets 🇺🇸
Payrolls increased 528,000 in July, nearly double the expectation of 258,000. Meanwhile, wage growth jumped 0.5% for the month and 5.2% for the year. Yields bounced following the report, as the market begins to price in more rate hikes in the future.
Credit card usage surges to record levels as consumers require more debt to make ends meet. Outstanding credit card balances jumped 13% from the year prior, the largest jump in over two decades. Delinquencies tick back up to pre-pandemic levels.
Home prices cool at an unprecedented pace as the annual rate of appreciation fell two percentage points from 19.3% to 17.3%. This slowdown comes on the back of mortgage rates more than doubling during this past year. Because of this, demand for homes has dropped significantly and the housing supply has begun to pick back up.
Robinhood ($HOOD) cuts 23% of headcount after reporting Q2 earnings. CEO Vlad Tanev said that the layoffs would mostly affect operations, marketing, and program management and blamed macro headwinds along with the rapid crash in the crypto markets as the reason for the layoffs.
Meta ($META) raises $10B in first-ever bond sale as the company laid out plans to use the proceeds for working capital and share buybacks. This is the first time Meta has ever turned to the debt markets for capital. The largest portion of the debt package is rumored to yield 1.65% above treasuries.
Lucid ($LCID) cuts production targets again as they were not able to surmount their intricate supply chain challenges. The company now expects to deliver just 6,000-7,000 vehicles during 2022, down from its original target of 20,000.
Rest of World 🌏
Pelosi’s trip to Taiwan spikes tension with China as many fear the two nations are falling farther apart. Pelosi met with Taiwan President Tsai Ing-Wen to discuss chip manufacturing, among other things. In response, China conducted military drills near Taiwan and sent missiles over the capital of Taipei.
Bank of England rolls out largest rate hike in 27 years and marks the sixth consecutive hike as rates near 1.75%. They expect inflation to peak at 13.3% in October and remain elevated for all of 2023. The MPC now predicts a recession to begin in Q4’22 and last until the end of 2023.
China’s manufacturing activity contracts in July as the PMI drops to 49.0 from 50.2 in June. Analysts were expecting the PMI to improve to 50.4. New orders and employment dropped as high raw material costs continue to eat away at the profitability of factories.
OPEC+ plans to raise output by just 100K barrels/day in September, much lower than what Biden hoped for after visiting Saudi Arabia last month. For context, 100K barrels represents about 86 seconds of global oil demand.
Crypto ⚡
Nomad Bridge hacked for $200M representing nearly all of the value hosted on the protocol. Cross-chain bridges have come under scrutiny again as this is not the first bridge to be exploited by hackers.
Blackrock and Coinbase team up to provide institutional investors direct access to crypto through Coinbase Prime. Customers who use Blackrock’s investment management platform, Aladdin, will have access to crypto trading, custody, prime brokerage, and reporting capabilities.
Voyager returns $270M to users as bankruptcy filings proceed. The company had just over $1B in liquidity remaining as they filed for chapter 11 in July. This bankruptcy estate’s liquidity will be dispersed to creditors which include 3AC, Alameda Capital, Galaxy Digital, Wintermute, and Genesis.
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Earnings Reports 💰
AirBnB ($ABNB)
Revenue: $2.10B vs $2.11B expected and $1.34B year ago (+58% YoY)
EPS: $0.56 vs $0.43 expected and ($0.11) year ago
Adj EBITDA: $711M vs $217M year ago (+228% YoY)
Bookings: 103.7M vs 83.1M (+25% YoY)
Guidance: Q3 revenue between $2.78B-$2.88B, higher than the $2.77B expected
Important Notes: Gross booking value per night increased 40% to $163.74 vs pre-pandemic levels of $117.14. Longer-term stays (28+ days) were the fastest growing booking type on the platform, growing 25% year-over-year
Market Reaction (24hrs after report): +3.7%
…
Block ($SQ)
Revenue: $4.4B vs $4.33B expected and $4.68B last year (-5.9% YoY)
Gross Profit: $1.47B vs $1.14B last year (+29% YoY)
EPS: $0.18 vs $0.16 expected and $0.49 last year (-63.3% YoY)
Gross Payment Volume: $52.5B vs $42.8B last year (+22.7% YoY)
Guidance: Forward revenue should be similar to their three-year CAGR
Important Notes: Cash App’s segment revenue dropped 20% YoY, led by deep decline in Bitcoin trading volume. However, Cash App’s segment profitability still increased 29% as the app executed on higher margin products. Block took a $36M impairment loss on their BTC holdings
Market Reaction (24hrs after report): -2.2%
…
PayPal ($PYPL)
Revenue: $6.81B vs $6.79B expected and $6.2B year ago (+9% YoY)
EPS: $0.93 vs $0.86 expected and $1.15 year ago (-19% YoY)
FCF: $1.3B vs $1.1B year ago (+22% YoY)
Users: +400K net new active users (NNAs) to 429M total accounts (+6% YoY)
Guidance: For the FY, PayPal expects $3.87 to $3.97 in adj EPS, up from $3.81 to $3.93 that they provided in April and higher than expectations of $3.82. They also expect revenue to hit $27.85B, representing a ~10% annual growth rate
Important Notes: Announce a $15B share buyback program. Expects to reduce costs by $900M this year, and they project the cost cuts to save $1.3B in 2023
Market Reaction (24hrs after report): +9.3%
…
Uber Technologies ($UBER)
Revenue: $8.07B vs $7.39B and $3.93B year ago (105% YoY)
EPS: ($1.33) vs $0.58 year ago
Adj EBITDA: $364M vs ($509M) last year
Gross Bookings:
- Total gross bookings $29.1B, up 36% from year ago
- Mobility gross bookings $13.4B, up 57% from year ago
- Delivery gross bookings $13.9B, up 12% from year ago
- Freight gross bookings $1.8B, up 428% from year agoGuidance: Gross Bookings of $29B - $30B and Adj EBITDA of $440M - $470M
Important Notes: GAAP EPS figures listed above include a $1.7B impairment on investments (Mainly Aurora, Grab, and Zomato) & $1.9B mark up last year. Loss from operations, which excludes these equity valuation adjustments, was $713M this quarter vs $1.19B last year, representing a 39% YoY improvement
Market Reaction (24hrs after report): +18.9%
Week Ahead 📅
Monday
Earnings Reports: Palantir ($PLTR), Monday.com ($MNDY), Upstart ($UPST)
Tuesday
Worker productivity (exp -5.0% YoY)
Unit labor costs (exp +9.5% YoY)
Earnings Reports: Coinbase ($COIN), Roblox ($RBLX), Trade Desk ($TTD), Unity ($U), Plug Power ($PLUG)
Wednesday
Consumer Price Index (CPI) (exp +8.7% YoY)
Earnings Reports: Disney ($DIS), NIO ($NIO), Fox ($FOX), Bumble ($BMBL), Marqeta ($MQ), Wix.com ($WIX)
Thursday
Jobless Claims (exp 264,000)
Producer Price Index (PPI) (exp +0.2% MoM)
Earnings Reports: Rivian ($RIVN), Toast ($TOST),
Friday
UMich Consumer Sentiment Index (exp 52.5)
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Until next Sunday…