Stock indexes remain in record territory as Q2 2024 earnings season gets underway. Big Wall Street banks on Friday reported mixed results, with JPMorgan Chase and Citigroup delivering earnings and revenue mostly in line with expectations while and Wells Fargo disappointed.
Even with the beats, Wall Street is concerned about brewing trouble in banks’ lending businesses, especially credit cards, after all three banks raised their provisions for credit loss in Q2 and reported increases in net charge-offs. Charge-offs on loans in JPMorgan’s credit-card arm, which is the biggest in the US, rose by nearly two-thirds from a year earlier.
However, JPMorgan CFO Jeremy Barnum said that the bank's delinquency rates on credit cards currently reflect "normalization not deterioration" after years of artificially low interest rates and fiscal stimulus.
Barnum also said he saw “quite a healthy consumer” despite some weakness in the lower-income segment. Citi executives also noted that lower-income consumers are struggling. At the same time, JPMorgan CEO Jamie Dimon warned that inflation may not come down as much as Wall Street and the US Federal Reserve anticipate.
Dimon pointed to multiple inflationary forces, including “large fiscal deficits, infrastructure needs, restructuring of trade, and remilitarization of the world.” BlackRock, Goldman Sachs, and HDFC Bank report results today, followed by Bank of America, Charles Schwab, and Morgan Stanley tomorrow.
Big Wall Street bank results will wrap up with US Bancorp on Wednesday, though there a slew of small and regional banks still to come this week and next.
Investors this week are also anxious to see results from ASML Holdings on Wednesday and Taiwan Semiconductor on Thursday, both of which will be important to the AI-led tech rally that has sputtered a bit recently.
On the data front, the only thing due today is the Empire State Manufacturing Index.
This week’s main data highlight will be Retail Sales tomorrow. Keep in mind, Wall Street may be getting to a point where it starts to digest “bad news” as a negative rather than a positive amid the increased worries that the economy may be cooling off too much.
A steep pullback in Retail Sales could easily reinforce investors’ fears that consumers are really struggling, and an economic downturn is barreling our way.
The big news from the weekend is of course the attempted assassination of former-President Donald Trump at a campaign rally in Pennsylvania. The shooting has pushed the upcoming election and our country’s fractured politics to the forefront and could make it harder for Wall Street to tune out the “noise” leading up to November. For Wall Street, typically all that matters is who wins elections in the end, and most tend to tune out the campaign drama.
This awful incident, however, could fan fears about the potential for more widespread violence leading up to the election, as well as the possibility of the results being contested in a long, drawn-out battle that leaves markets in limbo. Wall Street does not perform well in the face of uncertainty and volatility could be more of a main theme as we move closer to November 5.
Remember, Democrats are increasingly calling for President Joe Biden to be replaced so the nominee on that side is still not locked in, adding yet another layer to the uncertainty.
For what it’s worth, today marks the first day of the Republican National Convention, which runs through Thursday and where Trump is expected to be named the party’s official nominee. The Democrats hold their nominating convention August 19-22. From everything I'm seeing, former President Trump is taking even a more commanding lead in the polls. Early market action following the shooting was somewhat similar to after the first debate... the US dollar showed a little strength, funds buying shorter-maturity notes and selling longer-term ones.
Many inside the trade think if Trump wins, the backend of the bond market will sell off. There's also some talk amongst Wall Street bears that a Trump win could bring back a re-inflation type trade, because Trump's stated policies are being viewed as more inflationary than Biden's. And if the Fed starts to sniff more inflation they may be less aggressive in cutting rates.
Shots Fired... Former President Donald Trump survived an assassination attempt at his Pennsylvania rally this weekend. Despite many questions remaining about how a 20-year-old-man carrying an AR-15-style rifle managed to get close enough to shoot at the 45th President from a rooftop during his campaign rally, Donald Trump assured his supporters that he would push on to the Republican convention and November election.
Jamie Dimon: Prices Will be Higher for Longer: - Year-over-year inflation is at its lowest rate in years, but Jamie Dimon still thinks high prices could last longer than anticipated. The longtime JPMorgan Chase CEO said in a note accompanying the bank’s second-quarter results Friday that despite a strong consumer price index report for June, other elements could play a role in lingering inflation. There has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us, large fiscal deficits, infrastructure needs, restructuring of trade, and remilitarization of the world, Dimon said in the statement. Therefore, inflation and interest rates may stay higher than the market expects. Last week's positive inflation report has some market participants predicting that the Fed will lower rates in the near future. San Francisco Fed president Mary Daly said Thursday’s CPI report could be a sign that the Fed should cut rates. Federal Reserve Chairman Jerome Powell’s comments on the growing unemployment rate before Congress this week also gave some investors hope that rate cuts could be on the horizon. However, Dimon joins other notable economists in warning about the ballooning U.S. deficit, which the Congressional Budget Office predicts could reach as high as $1.9 trillion, or 7% of the country’s GDP, up from its forecast of $1.5 trillion in February. Source Fortune
Gold Continues to Glitter: Gold spot prices are above $2,400 an ounce, and are flirting again with a record high of about $2,435 set in late May. Can the yellow metal continue to glitter? Some experts think gold should keep climbing as political uncertainty in the U.S. and abroad remains elevated. The increased likelihood of interest-rate cuts from the Federal Reserve later this year should also weaken the dollar and boost gold. Gold prices are up more than +17% so far this year, and have gained nearly +4% this month alone. Gold, in addition to being a good way to protect against inflation, also tends to do well when interest rates are falling. That’s because the U.S. dollar often weakens during easing cycles and gold, as a tangible asset with a finite supply, holds its value better than paper currencies that can fluctuate based on the moves of central banks. Central banks also have a more direct impact on gold. That’s because many of them around the world, particularly in emerging markets such as China, India, Russia, and Turkey, have been voracious buyers of gold. Adding gold to their reserves is a way to diversify their holdings and lessen their reliance on the U.S. dollar. That trend is unlikely to end soon. “Central banks continue to buy gold hand over fist,” said Everett Millman, chief market strategist with Gainesville Coins, a gold and silver bullion dealer. Millman told Barron’s that he wouldn’t be surprised to see gold prices rise to $2,700 an ounce by the end of the year. That’s nearly +12% above current levels. Source Barrons
What Data Shows About Stock Markets and Election Years: Election years have generally been good for the US stock market. The S&P 500 Index has risen in almost every election year since 1960. The exceptions were 2000 and 2008, which were marred by the dotcom bust and the great financial crisis, respectively. The record looks even better for recent election cycles. In the three election years since 2008 — 2012, 2016, 2020 — the benchmark index rose at least +10%. Taking a narrower view and focusing on just the last seven months of an election year gives a similar picture. Since 1950, the S&P 500 has risen in that time frame for 16 out of the 18 presidential elections, according to data and analysis from the Stock Trader’s Almanac. One down year was 2000, when the outcome was delayed for 36 days; the other was 2008. That said, there’s such a thing as too much uncertainty. Market pundits have already started to warn that this election may remain too close to call until the very last minute, and there are chances — albeit small — that a decision may not be clear days after the election. They point to the possibility of a contested or close election result as well as the ongoing adoption of vote by mail, where counting takes longer than machine votes. During the 2000 Florida election recount battle, the S&P 500 lost more than -4%, yields on 10-year Treasury notes fell -52 basis points, and gold prices jumped as investors piled into haven assets. The possibility that the election may end in a protracted dispute or worse, political violence, is one that investors are grappling with as well. Source Bloomberg
Current and Aspiring Home Owners Feel “Stuck”: High home prices and current mortgage rates have created a chilling effect on the housing market, stymying aspiring first-time buyers and those looking to move. The 30-year mortgage rate has bounced around 7% for the past several months, versus the sub-3% levels seen in the early years of the pandemic. On the other side of the equation, Zillow’s home value index topped $360,000 in May, a nearly +50% increase from the same month five years ago. In turn, affordability is down sharply compared with a few years ago. Nationally, the share of income needed to own the median-priced home last came in above 43%, per the Atlanta Fed. Any percentage over 30% is considered unaffordable. The Atlanta Fed also found that the negative effects of high rates and prices more than outweighed the benefits from growing incomes for the typical American. Rates at these levels resulted in more than -875,000 fewer home sales in 2023, according to the team behind a FHFA working paper released earlier this year. That’s a sizable chunk, as the National Association of Realtors reported around 4 million existing houses were sold in the year. On top of that, the FHFA found that a homeowner is 18.1% less likely to sell for every 1 percentage point their mortgage rate is under the current level. The typical borrower had a mortgage rate that was more than 3 percentage points below what they would have gotten in the final quarter of 2023. If a homeowner had instead bought at the end of last year, the FHFA team found that their monthly principal and interest payments would cost around +$500 more. Source CNBC
Hotter Temperatures Are a Problem for Airlines: Airline stocks could be facing a much more existential threat than disappointing second-quarter earnings after Delta’s update fueled a hellish Thursday for the sector. The climate crisis is driving up temperatures in the U.S. and across the world—and it might not be long before excessive heat starts chipping away at airlines’ earnings by slashing demand for travel to warmer climates, limiting availability of takeoff slots, and making flight paths more turbulent. That’s the argument being put forward by Wall Street investment bank Citi, which said in a research note that legacy carriers like Delta, American Airlines, and low-fare alternatives like Southwest and Spirit could all experience turbulence. Hotter temperatures could chip away at airlines’ earnings by slashing demand for travel to warmer climates, limiting availability of takeoff slots, and making flight paths more turbulent, they added. Still, don’t let Citi’s pessimism scare you away from making a good trade. Trent said that airline stocks who fly to cooler climates could benefit from global warming, at the expense of rivals who focus on hotter areas. Source Barrons
Anesthesia Risk Linked To GLP-1 Drugs, EU Warns: European medical officials advised patients taking GLP-1 weight loss and diabetes drugs who will be sedated for an upcoming surgery to warn their doctors about their medication use to avoid the risk of a rare respiratory complication called aspiration, a connection several other medical organizations have looked into in the past. GLP-1s are medications designed to manage type 2 diabetes and obesity by lowering blood sugar and A1C, interacting with the hunger part of the brain to suppress the appetite and slowing down the process of food emptying from the stomach, causing patients to feel full for longer. As a result of the delay in stomach emptying, food can remain in the stomach even if a patient fasted the night before surgery, which can lead to rare respiratory complications called aspiration and aspiration pneumonia, according to the EMA. Though the agency said it couldn’t find a causal link between GLP-1s and aspiration, it found a “biologically plausible risk” after reviewing available evidence like case reports, scientific papers and clinical and non-clinical data to support its decision. Source Forbes
Home Insurance Premiums Are Surging—and States Are Allowing It: Home insurers are pushing for big rate increases and weakened consumer protections—and increasingly getting what they ask for. State regulators across the U.S. appear to be buckling to industry demands for fear that insurers will pack up and exit their regions, leaving residents with few coverage option. In the last 12 months alone, one state has decided its regulator can no longer veto rate requests and another has made it easier for insurers to reduce storm coverage. A third has agreed to expand the types of costs companies can take into account when setting rates. States are also giving home insurers almost everything they ask for on rates, an analysis conducted for The Wall Street Journal suggests. The average state-approved increase since the start of last year is just 0.2 percentage point below the increase requested by the industry, according to the analysis by S&P Global Market Intelligence. Ten states where regulators can reject requests upfront have all greenlighted double-digit increases since the start of last year, with half those increases close to or above the 20% national average, the S&P data show. Consumer advocates accuse insurers of using threats to harm state economies, as a way of extracting concessions on prices or policies. Home insurers racked up a $16 billion underwriting loss last year, the biggest amount since at least 2000 and losses are expected to continue. “The industry is definitely playing hardball at the moment,” Colorado Insurance Commissioner Michael Conway said. “They’re doing that because they’re scared of forecast extreme-weather losses.” Source WSJ
|
![]() |
![]() |
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.
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.
|