Weekly Financial Market Insights 📈
Trading Week 34 ... Student Loan Cancellations, Ford Layoffs, Twitter Whistleblower, PCE Inflation Data, and Zoom + Nvidia + Snowflake + Salesforce Earnings
Sunday Morning Markets ☕
Your weekly financial markets update, in less than 5 minutes. Market coverage for Monday, August 22 - Friday, August 26.
Last Week ⏪
Jerome Powell’s comments on Friday rocked markets, causing indexes to drop over 3% on the day. With one of the shortest Jackson Hole speeches in decades, Powell kept his outlook short and direct; taming inflation is their #1 priority. Shorter-term yields then continued to creep higher as markets price in a more restrictive Fed.
Ford announces layoffs, Biden cancels $10K in student debt, US Composite PMI hitting “recession” levels, Europe’s looming energy crisis — all that and more in this week of Sunday Morning Markets…
US Markets 🇺🇸
Fed Chair Jerome Powell warns of “pain” ahead in their fight against inflation. "While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell remarked during his speech at Jackson Hole on Friday.
Ford ($F) lays off 3000 employees from its global workforce, as the automaker attempts to lower costs as part of restructuring efforts. The cuts are for 2,000 salaried positions and 1,000 agency jobs in the U.S., Canada, and India.
PCE inflation declines 0.1% in July as price pressures eased. The price index was still 6.3% from a year earlier. Core PCE (excluding food and energy) was 0.1% higher than the previous month and 4.8% higher than the previous year.
S&P PMI data misses estimates as demand continues to weaken. The composite output PMI came in at 45, signaling a strong contraction and missing estimates of 47.7. Material shortages, delivery delays, hikes in interest rates, and strong inflationary pressures all served to dampen customer demand, according to panelists.
Biden cancels $10K in student loans for millions of borrowers who fall under the income cap of $125K. Some Democratic economists, including former Treasury Secretary Larry Summers, worry about the risk of debt cancellation exacerbating 40-year-high inflation.
Durable good orders go unchanged in July, missing expectations of +1.0% growth for the month. However, excluding transportation, new orders increased by 0.3%. Excluding defense, new orders increased by 1.2%.
Initial jobless claims drop to 243K for the week, lower than expectations of 255K and coming in nearly in line with last week’s reading of 245K. Continuing claims fell to 1.42M as the labor market continues its strength.
Twitter whistleblower says they mislead regulators about the company’s security risks. Anticipation is rising that this release will provide Elon Musk with fresh ammunition in his bid to get out of buying the company for $44 billion.
Rest of World 🌏
German electricity prices soar to all-time highs as it jumps past €700 per megawatt-hour for the first time ever. The level is about 14x the seasonal average over the past five years. The intense rally is being driven by fresh concerns over gas supplies via the Nord Stream pipeline from Russia.
Russia shuts down Nord Stream 1 for three days of maintenance work. The unscheduled maintenance on the pipeline deepens an energy standoff between Moscow and Brussels which has already sent inflation surging in the region and raised the risk of rationing and recession.
OPEC+ weighs oil production cut to address price slump. Crude oil prices have traded down to $93/bbl from the high of $130/bbl seen in June as investors weigh weakening demand and fears of a global economic downturn.
Pakistan's flood hits 33 million citizens as the country's climate change minister labels it "the worst humanitarian disaster of this decade." Since mid-June, 937 people have died from severe rain and flooding in the region.
U.S. & China reach preliminary agreement on audits for Chinese companies listed on US equity markets. This agreement marks a breakthrough in talks for the delisting of over 200 Chinese companies from US exchanges.
Crypto ⚡
Algorithmic stablecoin USDN falls from the peg by 9 cents to 91 cents. USDN is backed by the waves token (WAVES) and leverages the staking model of the Waves protocol’s underlying consensus algorithm. Concerns over the algorithm have previously been raised by the company's founder Sasha Ivanov.
Tornado Cash developer arrested in Amsterdam as the Dutch financial crimes agency FIOD suspects the 29-year-old programmer of facilitating money laundering through the crypto-mixing service. On Saturday, over 50 protesters held posters with slogans including: “Free Alex Pertsev,” “Writing open source code is not a crime,” and, “Will you arrest a gun maker for facilitating public shooting?”
Tether decides not to ban Tornado Cash addresses as they see a freeze of addresses as premature, and await more clarity from U.S. authorities. The company noted that it had not yet been contacted by U.S. authorities or law enforcement with any such requests.
Coinbase launches an Ethereum-based staking token called Coinbase Wrapped Staked ETH (cbETH). The token can be used to stake ether (ETH) on Coinbase to generate extra yield on top of standard rewards.
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Earnings Reports 💰
Zoom ($ZM)
Revenue: $1.1B vs $1.12B expected and $1.02B year ago (+7.8% YoY)
EPS: $1.05 vs $0.94 expected and $1.36 year ago (-22.8% YoY)
Operating Income: $121.7M vs $294.6M (-58.7%)
Free Cash Flow: $229M vs $455M (-50.3% YoY)
Guidance: Q3 EPS of $0.82 - $0.83 on $1.095B - $1.1B in revenue. Analysts polled by Refinitiv had been looking for EPS of $0.91 on $1.15B in revenue.
Important Notes: 204K enterprise clients, up 18% from last year. 3,116 clients generating more than $100K in revenue, up 37% from last year. Agreed to acquire conversational artificial-intelligence software startup Solvvy.
Market Reaction (24hrs after report): -16.5%
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Intuit ($INTU)
Revenue: $2.41B vs $2.33B expected and $2.56B year ago (-6% YoY)
EPS: $1.10 vs $0.96 expected and $1.97 year ago (-44% YoY)
Revenue Breakdown by Segment:
Small Business & Self-Employed: $1,769M (+41% YoY)
Consumer: $145M (-83% YoY)
ProConnect: $25M (-52% YoY)
CreditKarma: $475M (+17% YoY)
Guidance:
Q1 FY’23 = Revenue growth of approximately 23% - 25%, including Mailchimp + non-GAAP diluted EPS of $1.14 - $1.20.
FY’23 = Revenue growth of approximately 14% - 16% + non-GAAP diluted EPS of $13.59 - $13.89.
Important Notes: Repurchased $1.9B of stock during FY’22. The Board approved a new $2B repurchase authorization, giving the company a total authorization of $3.5B to repurchase shares. Board approval for a quarterly dividend of $0.78 per share. This represents a 15 percent increase versus last year.
Market Reaction (24hrs after report): +3.6%
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Nvidia ($NVDA)
Revenue: $6.7B vs $8.1B expected and $6.5B year ago (+3% YoY)
EPS: $0.51 vs $1.26 expected and $1.04 year ago (-51% YoY)
Revenue Breakdown by Segment:
Data Center: $3.81B (+61% YoY and +1% QoQ)
Gaming: $2.04B (-33% YoY and -44% QoQ)
Visualization: $0.50B (-4% YoY and -20% QoQ)
Automotive: $0.22B (+45% YoY and +59% QoQ)
Guidance: Q3 revenue of $5.9B, well below estimates of $6.95B and would represent a 20% annual decline in sales.
Important Notes: NVIDIA completed $3.44B in share repurchases and cash dividends during the quarter. The company has $11.93B remaining under its share repurchase authorization through December 2023.
Market Reaction (24hrs after report): +4%
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Snowflake ($SNOW)
Revenue: $497M vs $467M expected $272M year ago (+83% YoY)
Gross Profit: $324M vs $166M year ago (+95% YoY)
Operating Loss: $208M loss vs $200M loss year ago (-4% YoY)
Free Cash Flow: $53.8M inflow vs $11.9M outflow year ago (+550% YoY)
Guidance: Anticipates Q3 product revenue will be between $500M - $505M million or 60% - 62% annualized growth. For the full year, they expect to report between $1.91B - $1.92B.
Important Notes: Total customers grew 36% YoY to 6,808. Total customers over $1M product revenue grew 112% YoY to 246. Q2 revenue retention rate of 171%.
Market Reaction (24hrs after report): +23%
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Salesforce ($CRM)
Revenue: $7.72B vs $7.69B expected and $6.34B year ago (+22% YoY)
EPS: $1.19 vs $1.02 expected and $1.48 year ago (-20% YoY)
Operating Income: $193M vs $332M year ago (-42% YoY)
Free Cash Flow: $131M vs $173M year ago (-24% YoY)
Guidance:
Q3: EPS of $1.20 - $1.21 on $7.82 - $7.83B of revenue
FY: EPS of $4.71 - $4.73 on $30.9 - $31.0B of revenue
Important Notes: Authorized share repurchase program of $10B. Raising Slack pricing for first time since 2014.
Market Reaction (24hrs after report): -3.5%
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Affirm ($AFRM)
Revenue: $364.1M vs $356.3M expected and $261.8M year ago (+39% YoY)
EPS: ($0.65) loss vs ($0.73) loss expected and ($0.46) loss year ago (-41% YoY)
Gross Merchandise Volume: $4.396B vs $2.484B year ago (+77% YoY)
Customers: 14M vs 7.1M year ago (+96% YoY)
Transactions Per Customer: 3 vs 2.3 year ago (+31% YoY)
Guidance:
Q1 FY’23 = Revenue of $345M to $365M representing +31% annualized growth at midpoint of estimates, and operating margins of (12%) to (10%)
FY’23 = Revenue of $1.625B to $1.725B, representing +24% annual growth at midpoint of estimates, and operating margin of (6.5%) to (4.5%)
Market Reaction (24hrs after report): -21.3%
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Peloton ($PTON)
Revenue: $679M vs $718M expected and $937M year ago (-28% YoY)
Profitability: $1.24B loss vs $313M loss year ago (-297% YoY)
Fitness Subs: 2.966M vs 2.331M (+27% YoY and 0% QoQ)
Segment Breakdown:
Fitness Hardware: Revenue of $296M (-55% YoY and -50% QoQ) and gross profit of -$290M or a -98% gross margin.
Subscription: Revenue of $383M (+36% YoY and +4% QoQ) and gross profit of $260M or a 68% gross margin.
Guidance: No guidance provided.
Important Notes: Monthly subscriber churn jumps to 1.41% from 0.75% last quarter. Platform workouts dropped 4% from the same quarter last year to 148M. Burned through $412M in cash during the quarter, after the $1.3B of negative cash flow it saw in the prior two quarters. It ended with $1.25B in cash reserves and a $500M revolving credit facility.
Market Reaction (24hrs after report): -18.3%
Week Ahead 📅
Monday
Dallas Fed Manf. Activity 🇺🇸
Earnings Reports: Heico Corporation ($HEI) 💰
Tuesday
S&P Case-Shiller U.S. Home Price Index 🇺🇸
Job Openings & Job Quits 🇺🇸
New York Fed President John Williams Speaks 🇺🇸
Germany CPI 🇩🇪
China Manf. PMI 🇨🇳
Earnings Reports: Baidu ($BIDU), CrowdStrike ($CRWD), HP Inc ($HPQ), Chewy ($CHWY), Best Buy ($BBY) 💰
Wednesday
Chicago Manf. PMI 🇺🇸
Cleveland Fed President Loretta Mester Speaks 🇺🇸
Atlanta Fed President Raphael Bostic Speaks 🇺🇸
Earnings Reports: Veeva Systems ($VEEV), MongoDB ($MDB), Okta ($OKTA), Samsara ($IOT), SentinelOne ($S) 💰
Thursday
Jobless Claims 🇺🇸
ISM Manf. Index 🇺🇸
Atlanta Fed President Raphael Bostic Speaks 🇺🇸
S&P Eurozone Manf. PMI 🇪🇺
Earnings Reports: Lululemon ($LULU), Hormel Foods ($HRL) 💰
Friday
Nonfarm Payrolls 🇺🇸
Labor Report (unemployment, wages, participation rate) 🇺🇸
Factory & Durable Good Orders 🇺🇸
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Until next Sunday…