Both companies will offer further insight into consumer demand as well as the wider US tech sector. Apple's stock is already up about +48% so far this year while Amazon is up more than +50%. Apple is of course the largest company in the world with a valuation of more than $3 trillion. The company is also expected to report a third-quarter in a row of declining revenue due partially to declining iPhone sales. Apple does not usually provide a quarterly outlook but investors are still expecting company executives to provide some information about how artificial intelligence (AI) will play a role going forward.
AI is expected to be mentioned by Amazon executives as well but the bigger focus among investors is the company's cloud business. After Amazon and Apple wrap up, NVIDIA will be the only big US tech giant left to report earnings, which is scheduled for August 23, and it will likely be newsworthy.
Last quarter, the company projected $11 billion in revenue for Q2, which was +$4 billion higher than what analysts expected and would mark a growth rate of +64% compared to Q2 2022.
Aside from Amazon and Apple, other earnings today include Airbnb, Amgen, Block, Cigna, Coinbase Global, ConocoPhillips, Corteva, DraftKings, Gilead Sciences, Hyatt Hotels, Kellogg's, Moderna, Rocket Companies, The Southern Company, Stryker, Vulcan Materials, and Warner Bros. Discovery.
Investors today are also on edge ahead of the July Employment Report due out on Friday. ADP in its private payroll report yesterday showed job gains of +324,000, well above Wall Street estimates. It is also far higher than the +200,000 jobs expected to be reported by the Labor Department on Friday. ADP was way off the mark last month, though, so Friday's report could very well deliver a number more in-line with consensus.
The big worry is that if the labor market remains tight and continues putting upward pressure on wages, the Fed may feel it has no choice but to keep raising interest rates. The ISM Services Index today could provide some better clues as to the true trend of the labor market. The sub-components that track employment and inflation are both expected to contract from June, which would be moving in the right direction as far as the Fed goes. However, some economists worry that if the services sector slows too much, it could tip the economy into recession.
Activity last month came in at 53.9, barely above 50 - the level that marks contraction. The US manufacturing sector has been in contraction since last November.
The market might not be spending much time worrying about Fitch’s downgrade of US government debt, from AAA to AA+. Keep in mind, US Treasuries haven’t been the world’s “safest” since 2009 as German bunds now hold that title. It will be interesting to see if any more cracks start showing up as Fed lets off the rate hiking gas pedal and the effects of higher rates continue to ripple deeper into the economy.
Heat Wave Driving Up Gas Prices: Gas prices ticked up 15 cents in just the past week, as the heat wave hitting Texas and Louisiana slowed oil refineries down. Refineries, which turn crude oil into products like gasoline, don't function as efficiently in 100+ degree weather. Meanwhile, demand for gasoline typically rises in the summer. It's worth noting that prices are still nowhere near the high levels we saw last summer but with Hurricane season ramping up, severe weather could also impact refineries and add more risk-premium to prices. Net-net, rising energy prices will work to keep inflation levels elevated, which might further complicate the Fed's efforts. Source Axios
Many New Hires Are "Unprepared" for Work: The knock-on effect of years of remote learning during the pandemic is gumming up workplaces around the country. It is one reason professional service jobs are going unfilled and goods aren’t making it to market. It also helps explain why national productivity has fallen for the past five quarters, the longest contraction since at least 1948. The shortcomings run the gamut from general knowledge, including how to make change at a register, to soft skills such as working with others. Employers are spending more time and resources searching for candidates and often lowering expectations when they hire. Then they are spending millions to fix new employees’ lack of basic skills. Since 2020, when the pandemic began and remote learning moved students out of schools and into virtual classrooms, the pass rates on national certifications and assessment exams taken by engineers, office workers, soldiers and nurses have all fallen. Janet Godwin, chief executive of ACT, the nonprofit organization which administers the college admission test of the same name, said more high-school graduates today lack the fundamental academic skills needed for college and the workplace, with low-performing students facing the steepest declines. The problem even extends to the U.S. military, exacerbating pressures the services face from poor recruiting. Source WSJ
The Internal Revenue Service is Going "Paperless": The IRS has unveiled plans to offer digital correspondence for the 2024 tax season, building on the agency’s decade-long overhaul of improved service, technology and compliance. By 2025, the agency aims to achieve “paperless processing” for tax returns and so-called information returns, used by employers and financial institutions. The IRS expects to eliminate up to 200 million pieces of paper every year, slash processing times by half and speed up refunds by several weeks, the U.S. Department of the Treasury announced on Wednesday. The IRS currently receives 76 million paper tax returns and forms every year, along with 125 million pieces of correspondence, responses to notices and other forms, which have delayed service and added to backlogs. The processing change is expected to cut back on the $40 million per year that the agency spends storing more than 1 billion historical documents. Roughly 213.4 million returns and other forms were filed electronically in fiscal year 2022, which represents 81.2% of all filings, according to IRS data. Source CNBC
A 5% US Mortgage Rate Seen as Tipping Point to Unlock Supply: US homeowners are nearly twice as willing to sell if their mortgage rate is 5% or higher, but just one in five mortgaged homes meet that criteria. For those who have a mortgage rate of at least 5%, 38% said they’re planning on selling their homes, according to a quarterly survey by Zillow. Just 21% of holders with rates below that dividing line said the same. Existing-home sales have fallen almost every month since the start of last year as higher mortgage rates disincentivize owners from moving. Prospective buyers have sought out new construction instead since inventory on the resale market is so low. About 80% of mortgage holders reported having a rate of less than 5%, and about 90% have a rate of less than 6%, Zillow said. Almost a third reported a rate of less than 3%. Mortgage rates “are unlikely to return to 5% in the near future,” said Orphe Divounguy, a senior economist at Zillow Home Loans. “That means many homeowners will move only for major life events, like a new baby or retirement.” Even so, nearly a quarter of homeowners are considering selling their home in the next three years or currently have their home listed for sale — significantly higher than the 15% of homeowners who said the same one year ago, Zillow said. That suggests inventory could be on the rise soon. Source Bloomberg
Amazon Extends "Fresh" Grocery Delivery to Some Non-Prime Members: Amazon is making its Fresh grocery delivery service available to people without Prime memberships in select U.S. cities. In the past, Fresh grocery delivery was only available to people who had a Prime subscription. With this expansion, people in a dozen cities will be able to order groceries online from Amazon Fresh stores and warehouses. Non-Prime members who place an order under $50 will have to pay a $13.95 fee, while people who place an order between $50 and $100 will have to pay a $10.95 fee. Orders over $100 will have a $7.95 fee. Amazon plans to launch the offering nationwide by the end of the year and eventually include products from Whole foods and other grocery stores. Source TechCrunch
Understanding America's Fiscal Time Bomb Amid Fitch's Downgrade: Fitch's downgrade of the U.S. credit rating caused some jitters, but investors have come to think of warnings about America's fiscal profligacy as something to politely ignore or, on the rare occasion it has affected stocks, as a buying opportunity. That might not work forever, though. The U.S. has the benefit of borrowing in its own currency. But the latest downgrade happens to come at a time of rapidly-rising financing costs for the U.S. government that could hit stocks and, more significantly, limit the government's room for maneuver. With interest costs set to make up three-fourths of non-defense discretionary spending, the next emergency, like a war, pandemic or financial accident could have a meaningful impact on Americans' wealth and income. That could come through taxes, inflation, spending cuts or some combination of those things. Source WSJ
Young Chinese Paid to Be "Full-Time Children" Amid Record Youth Unemployment: Unemployment in the world’s second largest economy is a huge challenge, as three years of China’s draconian “zero COVID” policy greatly slowed the economy. In June, the unemployment rate for Chinese people aged 16 to 24 was a staggering 21.3%—an all-time high, up from 20.8% in May. With one in five Chinese Gen Zers out of work, some adult children are being paid allowances as large as the national average salary, in exchange for basically being a kid. Full-time children get paid to be their parents’ kids, including spending time with them, joining them on outings, and doing household chores. They serve as hybrids of kids and multitasking assistants who shop, cook, and clean for their parents. Most of these full-time children also have the benefit of free room and board in their parents’ homes. Over 4,000 full-time children populate a community forum on the Chinese social site Douban. Some believe that Chinese Gen Z’s burnout can be partially attributed to the highly competitive education culture that was reinforced by the previous generation. The pressure cooker of academic and career competition may have been untenable across several generations, inspiring a sweeping trend of defeatism in the country’s youngest workers. Source Fortune
Schedule A Call Now
Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.
Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.
CTG Daily Commentary is published by Capital Trading Group, LLLP and Nell Sloane is the editor of this publication. The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.
It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.
Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.