Stock bulls have taken some steps back the past couple of weeks as the market digest some disappointing earnings results. Investors today may still be treading cautiously ahead of critical inflation data due out tomorrow (Friday), as well as a slew of key earnings coming up in the days and weeks ahead.

Investors this week have been mostly focused on earnings as economic data took a back seat but the PCE Prices Index coming up on Friday is very important as far as Wall Street’s outlook for Federal Reserve rate cuts.

Other inflation indexes have already shown a significant slowdown in June inflation and PCE Prices is expected to reflect the same. If Wall Street gets the +2.5% year-over-year read it expects for both the headline and “core” (strips out food and inflation) rates, it will further cement expectations for rate cuts to begin in September. Some think there is a case for the Fed to make its move at the upcoming July 30-31 meeting but traders put the odds at less than 5%, while odds of a September cut are over 95%.

Traders also now think three -25 basis points in 2024 are more likely (55%) than just two (39.5%). Data today includes the first estimate of Q2 2024 GDP (Gross Domestic Product) which is expected to show the US economy grew at an annual rate of +1.9% versus +1.4% in the first quarter. Advance reads on Retail Inventories, Wholesale Inventories, and International Trade are also out today.

Stock bulls could certainly use some supportive headlines amid worries about disappointing earnings results from big tech companies earlier this week. Bulls believe the pullback among big tech and more specifically the “Magnificent Seven” (Google-parent Alphabet, Amazon, Apple, Facebook-parent Meta Platforms, Microsoft, Nvidia, and Tesla) is just a healthy correction following an incredible rally so far this year.

The enormous breadth between the gains of those seven stocks and the rest of the S&P 500 has been a growing worry for Wall Street, though. The pullback in tech has seen money spread out to other parts of the market, something that is ultimately seen as beneficial for stocks over the long-term. Bears, however, believe big tech may be in the midst of a type of “AI bubble” and that an even sharper downturn is coming.

Bears are pointing to earnings from both Alphabet and Tesla on Tuesday that failed to impress Wall Street. While Alphabet did top earnings and revenue expectations, it was only by small amounts and the reaction from many on Wall Street was disappointment because the results didn’t provide any “excitement.” Many insiders argue that the stock was already priced somewhat to perfection so anything less than that was going to be viewed as a disappointment by the bulls, and that's what happened.

At the same time, Q2 capital expenditures rose by a whopping +91.4% versus last year as Alphabet directs more resources toward artificial intelligence.

At Tesla, owner Elon Musk reportedly wants Tesla shareholders to approve a $5 billion investment into his AI startup, xAI, even after the electric car company’s profits slid for a fourth quarter in a row. Overall, investors this quarter are heavily scrutinizing companies’ AI-spending frenzy and are anxious to start seeing profits that justify the ballooning investments.

Many Wall Street insiders have also grown concerned that there is not much more upside for some of this year’s biggest gainers, though the current pullback could provide better buying opportunities ahead.

The tech sector will dominate the headlines next week with Amazon, Apple, Facebook-parent Meta Platforms, and Microsoft all scheduled to report results.

The earnings highlights today are AbbVie, AstraZeneca, Carrier Global, Dow, Honeywell, Keurig Dr Pepper,  Norfolk Southern, Northrop Grumman, PG&E, Royal Caribbean, Sanofi, Total Energies, Tractor Supply, Unilever, Union Pacific, and Valero Energy.

Keep in mind, the S&P 500 just broke a streak of 356-days without a -2% decline. At the same time, traders are pointing to the Bank of Canada, who just cut rates for the second consecutive time, along with China and the ECB during the past week.

There seems to be more global concern that economies are slipping perhaps quicker than anticipated. This has some investors worried that the Fed might soon find itself behind the curve by reacting too slowly to signs of weakness.

Furniture Businesses Struggling, Some Filling Bankruptcy:  Conn’s HomePlus, a 134-year-old furniture and electronics retailer with locations primarily in the southern United States, has filed for bankruptcy and is closing nearly half of its 170 stores. The 73 Conn’s HomePlus stores closing are listed on its website. Florida is the most affected state with 18 stores soon shutting down, followed by Texas with 9 locations. Other states where stores are closing include Arizona, Colorado, North Carolina and Virginia. Shares of the company have fallen more than 90% for the year and the company received a delisting notice from Nasdaq a few weeks ago. Last year, Conn’s bought W.S. Badcock, another home goods retailer that operates in the southeast US under the “Badcock Home Furniture & more” name. That purchase increased the company’s total retail footprint to more than 500 stores among the two brands, however 35 Badcock stores are also closing. Major furniture retailers continue to struggle after a pandemic boom, particularly as Americans struggle with persistent inflation. Discretionary big-ticket items, such as furniture, have quickly dropped off the shopping list for more budget-conscious consumers. That has resulted in furniture chains Z Gallerie and Mitchell Gold + Bob Williams filing for bankruptcy within the past year and Wayfair drastically reducing its workforce.  Source CNN

Salt Lake City, UT, to Host 2034 Winter Olympics: The 2034 Winter Olympic Games will be held in Salt Lake City in February 2034, followed by the Winter Paralympic Games the next month. Olympic-related events are also planned for other cities along the Wasatch region. If you remember, the 2002 Winter Olympics were also hosted in Salt Lake City, UT. The only other times the winter games have been played in the US include Lake Placid, N.Y., hosted the 1932 and 1980 Winter Games, while California’s Squaw Valley hosted the games in 1960. 

Here Come the Robot Delivery Vehicles:  Vayu Robotics debuted what it says is the world’s first on-road delivery robot today in San Francisco. They’ve also signed an agreement with an unnamed “large e-commerce player” for 2,500 robots which will enable “ultra-fast goods delivery.” The robot is Vayu One, and it looks something like a very miniaturized version of an Amazon delivery truck. About waist-high and six feet long, Vayu One can carry 100 pounds in multiple packages of varying sizes to multiple destinations at a maximum speed of 20 miles per hour. The robot does not use lidar for guidance, relying instead on “passive sensors,” AKA cameras, and Value’s proprietary AI mobility software. It also responds to voice command. The company is billing it as the first on-road delivery robot, and a company representative says that regulatory permissions to operate on public roads were requested and obtained, though they will vary by city and state across the United States. Source Forbes

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The Hottest Job Market in a Generation Is Over: Americans’ once-in-a-generation job market has come to an end. While the market is still healthy by many measures, signs of difficulty are creeping in. The unemployment rate ticked up to 4.1% last month—the first time it has crossed above 4% since 2021. That’s still low by historical measures, but it’s up from 3.4% early last year. Workers have stopped quitting jobs at a frenzied pace, and college grads are having a hard time breaking into the market at all. The number of open positions for every unemployed person is back to the prepandemic level of 1.2, down from over 2 in 2022. And while the risk of getting laid off is still low, hiring has fallen beneath its pre-Covid level. Wage growth has fallen back to earth, hitting +3.9% year-over-year last month, higher than the +3% or so of the months before the pandemic but down from a peak of nearly +6% in 2022. Many economists see a job market that has come back into balance, though some worry that conditions could continue worsening.  Source WSJ

Russia Could Ban Diesel Exports if Prices Rise Further: Russia is considering banning the export of diesel if prices rise further, Russian daily Kommersant reported on Wednesday, citing several sources. The Russian government could ban diesel exports if prices spike in the near term, but no decision has been made yet, according to Kommersant’s sources. There are no conditions for a complete ban on diesel shipments abroad yet. The government is restoring a ban on gasoline exports from August 1. In the autumn of 2023, Russia banned exports of diesel and gasoline in an effort to stabilize domestic fuel prices. The bans lasted only a few weeks. At the end of March, Russian Deputy Prime Minister Alexander Novak said the government doesn’t plan to ban diesel exports again. However, diesel demand and prices have increased in recent weeks. Source OilPrice.com

Young US Adults Have Very Different Policy Priorities Than Older Generations: A recent Pew Research study finds that majorities of U.S. adults under 30 say dealing with global climate change (59%), preventing the spread of weapons of mass destruction (56%) and taking measures to protect the United States from terrorist attacks (55%) should each be a top foreign policy priority for the country. These three issues stand out as the only ones that majorities of young adults see as top priorities, according to the Pew Research Center survey that asked about 22 long-term foreign policy goals. While dealing with global climate change is a top foreign policy priority for about six-in-ten young adults, it is a lower priority for older adults. Some 38% of adults ages 30 to 49 say it should be a top priority, as do 43% of those 50 to 64 and 39% of those 65 and older. For adults ages 30 and older, the top priority is protecting the U.S. from terrorist attacks. These adults were alive for, and are likely to remember, the terrorist attacks of Sept. 11, 2001, unlike many 18- to 29-year-olds. Somewhat surprisingly, young adults also do not especially prioritize two technological goals included in the April survey: being a leader in developing artificial intelligence and being a leader in space exploration. For example, just 26% of U.S. adults under 30 say that leading the way on AI should be given top priority. A similar share (28%) says this should be given no priority. Source Pew Research

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