Weekend Edition # 49

A whole bunch of macro numbers & the start of earnings season

July 17, 2022

Welcome to another issue of the Weekend Edition!

Thank you to all who’ve read and subscribed to the newsletter this week!

Here’s what we cover this week:

  • Market Recap - Some relief

  • Macro - A whole bunch of numbers

  • Earnings Season Started!

  • Premium Posts of the Week - Earnings season & Chinese Stocks

  • The Week Ahead - Economic & Earnings Calendar

  • Closing Thoughts

Let’s dive in ⬇️

Market Recap - 11 July - 15 July, 2022

Hot inflation numbers, earnings misses from the banks and higher PPI data all drove the market lower for the week. A positive retail sales and slightly positive consumer sentiment number however, led to a slight rebound on Friday. We also had monthly Options Expiry on Friday. It remains to be seen if we have a follow through day on Monday.

We have a number of big companies reporting next week and we’re bound to see more volatility. Both Goldman Sachs and Bank of America report on Monday.

Commodities continue to rollover with gold reaching new lows and soft commodities still not able to regain much momentum. Copper is still flashing a warning signal and the only two commodities that actually had a positive return for the week were Lumber and Natural Gas.

Macro - A whole bunch of numbers!

  • CPI Print came in at 9.1% YoY in June - the biggest number in 41 years. This was compared to 8.6% in May.

  • The largest mover was not surprisingly was Energy from 34.6% to 41.6% - thats a 7% acceleration. Gasoline from 49% growth to 60% growth.

  • Food at home (i.e., groceries also had quite an increase).

  • US PPI (YoY) for Jun 11.3% vs. 10.7% Est; 10.85% prior. PPI - the input costs - came in much higher than expected.

  • US Initial Jobless Claims for Jul 08 244.000K vs 235.000K Est; Prior 235.000K - Jobless Claims are now inching up, even if it is slightly. We may see some updates in payroll numbers.

  • US Core Retail Sales (MoM) for Jun 1.000% vs 0.800% Est; Prior -0.3% - This was actually somewhat of an upside surprise.

  • Michigan Consumer Sentiment For July came in slightly better - 51.1 Vs 49.9 Expected

So where do we stand with all these numbers? So the Fed Futures are pricing in a higher probability of a 100 bps increase. Fed’s Bullard says it doesn’t make too much of a difference whether they do 75 bps or 100bs at the July meeting but they are committed to bringing down inflation to 2%. Seems like a 100 bps hike is not off the table.

Earnings of the Week

We’ve only just begun earnings season. Both JP Morgan and Morgan Stanley missed their numbers - and much of it was because of the decline in investment banking revenues. My biggest surprise was Blackrock missing both top and bottom line. One problem cited was the stronger dollar on average AUM. The dollar has been appreciating significantly over the past quarter and this is definitely something to bear in mind, when looking at earnings this season.

Premium Posts of the Week (ICYMI)

The Week Ahead

Economic Calendar (time in ET)

Earnings Calendar

Closing Thoughts

We’re in full flow with earnings season. We’ve already seen a miss from the banks and it would seem that the market ahead is still in for some tough times.

I wrote an article earlier this week showing where demand has soared over the last two years. It stands to reason that this demand, i.e., still has enough of a buffer to see more downside decline this quarter.

The Fed’s aim now is to destroy demand and it shouldn’t come as a surprise when this trickles down through the companies in terms of lower sales and margin compression. Not to mention, the higher PPI numbers show that there will still be pressure on rising costs.

Here’s wishing you a happy weekend, and safe investing.

Sincerely yours,

Ayesha Tariq, CFA

There’s always a story behind the numbers

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None of the above is Investment Advice. I may or may not have positions in any of the stocks mentioned. I have a position in as of the date of publication of this newsletter. I have no affiliation with any of the companies other than that mentioned here.

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