Investors today are anxious to see Q2 results from UPS, which just recently secured a new labor deal with union workers. How much this will add to costs is of high interest particularly amid the numerous other union negotiations that have been or are in the process of being inked this summer.
The company is also likely feeling pressure from higher fuel costs and a slowdown in shipping volumes, much like rival FedEx, which reported a -27% Q2 earnings decline in late June.
Other key earnings today include Barrick Gold, Duke Energy, Eli Lilly, Global Foundries, Ingredion, Rivian, Warner Music Group, and Zoetis. Economic data today doesn't include any market-moving reports with just the NFIB Small Business Optimism Index, International Trade in Goods & Services, and Wholesale Inventories.
The real highlights this week will be the Consumer Price Index on Thursday and the Producer Price Index on Friday, both of which will provide the updates on July inflation.
Bulls yesterday were cheering another decline in the Manheim Used Vehicle Value Index (MUVVI), which fell -1.6% and is now down -11.6% versus last year. Declining vehicle prices took -0.1% off the June CPI read.
It's also worth noting that the Fed's latest Consumer Credit report showed a decline in US consumer credit card balances, with revolving credit falling by -$604.5 million, the first decline in over two years. While total credit card debt is +11.6% higher than it was last year, it is down from a high of +18.4% last September.
More importantly, as a share of disposable income, consumer debt service payments are about where they were pre-pandemic. Meaning that while overall debt has risen, consumer incomes have kept pace. That feeds into the increasingly rosy outlook for the US economy which most economists now believe will beat inflation but avoid recession and widespread job losses.
Bears are quick to point out that these softening economic numbers are good for inflation right now but warn the pullbacks are still at risk of going too far. Most bears believe that many of the lagging effects of the Fed's rate hikes are yet to be felt, in particular tighter credit and increased lending standards that could create additional struggles for many smaller businesses.
Bears also still believe that "disinflation" will be a stronger headwind for companies in the quarters ahead, many of which are also at risk of seeing profits hit by slower sales growth as well as increased labor costs.
On the geopolitical front, a coalition of 40 countries met over the weekend to discuss Russia's war in Ukraine. Notably, Saudi Arabia and China - both Russia allies - took part in the talks. While nothing concrete came from the meetings, military experts believe the fact that Saudi Arabia and China even attended increases the pressure on Russia to find an exit of some sort sooner rather than later.
Ocean Temps Continue to Rise, Some Experts Very Concerned: The average surface temperature of the world’s oceans hit 20.96 degrees Celsius in late July, surpassing a previous record logged in 2016. Now, during the first few days of August, the average daily global sea surface temperature rose to 20.98 degrees Celsius (69.76 Fahrenheit), according to the latest data from the EU’s Copernicus Climate Change Service, far above the average for this time of year. The surface temperature of the world’s oceans would typically be expected to reach its highest in March rather than in August, which is sparking some uncertainty among many climate scientists. This extends an alarming run of increasingly higher temperatures for the planet’s oceans in early August. We have to remember, the world’s oceans are a critical life support system .The ocean generates 50% of the planet’s oxygen, absorbs 25% of all carbon dioxide emissions, and captures 90% of the excess heat produced by said emissions, according to a U.N. report. Source UN.Org
Tonight's Mega Millions Jackpot Surges to +$1.5 Billion! The Mega Millions jackpot has risen to an estimated $1.55 billion — in what would mark the largest in the game's history — after no winning tickets were sold in last Friday's drawing. If the estimate holds, it would also mark the third-largest overall jackpot in U.S. lottery history. A single winning ticket for the upcoming drawing would have the choice of taking an estimated lump sum payment of $757.2 million or going with the annuity option. That consists of an immediate payment followed by 29 annual payments that increase +5% every year. Many experts say, "Picking the lump sum payout is a ‘big mistake". If we assume that the curse of winning the lottery is real, then many need to think twice before taking the lump-sum payout. Andrew Stoltmann, a Chicago-based lawyer who has represented several lottery winners, says 95% choose the lump sum option, which he describes as a “big mistake.” There are three “big drains” on lottery winners: bad investments, relatives who ask for money and overspending, according to Stoltmann. If you opt for the annuity, “you can make those first-, second- or even third-year mistakes, and still have the majority of the winnings still coming your way." Tonight's drawing takes place at 10:00 pm CST
Banks Struggle to Dump Unappealing Property Loans: Lenders including Goldman Sachs Group Inc. and JPMorgan Chase & Co. have been trying to sell debt backed by offices, hotels and even apartments in recent month but are encountering a dried-up market with few options for an easy exit. Property sales, especially for office buildings, have slowed to a trickle, giving landlords and lenders few markers to determine the value of certain assets. In the absence of transactions, stakeholders are closely watching the loan sale market to see what price banks can ultimately nab for some of the loans. Goldman and JPMorgan, along with other banks including Capital One Financial Corp. and M&T Bank Corp., have sought to sell property debt in recent months, seeking buyers both for one-off sales and transactions for portfolios of loans. Capital One has struggled to offload a large office debt portfolio with a heavy concentration in the tri-state area including parts of New York, according to people familiar with the matter. JPMorgan is exploring a sale of a $350 million loan that’s backed by Manhattan’s HSBC Tower. The bank has approached potential buyers to sell the loan at par, while offering cheaper-than-market financing. Banks have also sought to sell debt on other types of real estate besides offices, such as apartments or hotels. Pricing has held up better for those property types, with apartment values dropping 16% over the past 12 months through July compared with a 27% decline for offices. Source Bloomberg
Consumer Credit Rises More Than Expected but Shows Signs of Softening: The June US consumer credit data, published by the Federal Reserve, came in stronger than expected, rising +$17.8 billion to a total of $4.977 trillion. The consensus was looking for a +$13 billion increase while there was an upward revision to borrowing in May of around +$2 billion. Nonetheless, the trend is one of softening growth in consumer credit, particularly for revolving credit, which is predominantly credit card borrowing. In fact, outstanding revolving credit fell -$600 million to $1.262 trillion. This is the first decline since April 2021 and likely reflects the sharp increase in interest rates charged for credit cards, which as of May was 20.68% – the highest since the Fed's data begins in 1972 and up from 14.51% in January 2022. Non-revolving credit, such as personal loans and vehicle loans, rose +$18.5 billion to $3.735 trillion. Here too there has been a slowdown over recent months, likely reflecting higher loan interest rates, but June was a good month for car sales, which helped support the numbers. Source ING
Trucking Firm Yellow Officially Files for Bankruptcy: Some 30,000 workers at Yellow Corp were looking for jobs on Monday after the major trucking company filed for Chapter 11 bankruptcy protection, potentially saddling U.S. taxpayers with losses from a government rescue of the long-troubled carrier. The nearly 100-year-old company, which halted operations on July 30, has been a dominant player in the "less-than-truckload" segment that hauls cargo for multiple customers on a single truck. It laid blame for the bankruptcy, likely the largest ever for a U.S. trucking firm, at the feet of the International Brotherhood of Teamsters union that represents about 22,000 of its employees. Teamsters leadership "was able to halt our business plan, literally driving our company out of business," Yellow CEO Darren Hawkins said in a statement late Sunday. The International Brotherhood of Teamsters blamed Yellow executives for the company's demise. Financial analysts traced the company's persistent financial woes to acquisition-related debt, the high cost of operating disparate companies and low shipping rates that depressed revenue. Source Reuters
Covid Vaccine Makers' Stocks Crash To Multiyear Lows: Moderna and BioNTech shares both cratered to their lowest price in years Monday as the companies behind the most widely-circulated mRNA Covid-19 vaccines grapple with investor disappointment with crashing revenues. BioNTech and Moderna’s stocks fell -8% and -6%, respectively, a decline spurred by BioNTech’s earnings report revealing the German firm’s sales fell -95% year-over-year last quarter. Moderna’s fresh decline came after it reported a -93% annual decline in quarterly revenues in its own earnings release Thursday. BioNTech, which developed a Covid vaccine with Pfizer, said Monday it expects to generate $5.5 billion in Covid vaccine sales this year, a -70% decline from 2022, while Moderna’s $6 billion to $8 billion in forecasted Covid jab sales is similarly about two-thirds below its $18 billion of revenue in the unit last year. Source Forbes
Why Heat Attacks are Rising in Young Adults: Despite declines among older adults, the proportion of heart attacks among younger adults is increasing across the globe—which many doctors who spoke to National Geographic consider a public health emergency. (Young adults are loosely defined as those between 20 to 50 years old.) Because cardiac arrest can be caused by several conditions, it’s difficult for doctors to study and determine whether it’s becoming more common in young adults. But research does show that heart attacks are on the rise in younger people. A study of more than 2,000 young adults admitted for heart attack between 2000 and 2016 in two U.S. hospitals found that 1 in 5 were 40 years old or younger—and that the proportion of this group has been increasing by +2% each year for the last decade. In fact, increases in heart disease among younger adults in 2020 and 2021 are responsible for more than +4% of the most recent declines in life expectancy in the U.S., according to an editorial published in March in JAMA Network. And though heart attacks typically strike men more often than women, recent studies have suggested that more younger women are experiencing heart attacks compared to younger men—and that their outcomes are worse. Source National Geographic
Flexible Workplaces Hiring Talent Faster Than Those Requiring Full-Time Attendance: Two years into the return-to-office battle, and it’s becoming apparent that its staunchest supporters are facing headwinds. Employers following in the footsteps of Goldman Sachs and JPMorgan by mandating a full-time office return may be inadvertently making themselves unattractive to job seekers, new research shows. According to an analysis of more than 4,500 companies by Scoop, a software firm that tracks workplace policies, and People Data Labs, a data technology company, companies with remote or hybrid policies appear to be hiring people at about twice the rate of those requiring full-time attendance. Over the past three months, Scoop Technologies’ analysis found that “fully flexible” companies—ones where all employees work remotely or have complete autonomy over whether they go into the office—grew headcount by +1.9% on average. Meanwhile, those with “structured hybrid” work policies grew by +1.5%. In comparison, employers that were fully in-office grew their headcount by just +0.8%. Over the past 12 months, fully flexible companies grew headcount by +5.6%, which dropped slightly to +4.1% for hybrid companies. Meanwhile, full-time in-office companies grew by +2.6%—less than half the rate of flexible firms. Source Fortune
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