Other key tech results coming up include Meta on Wednesday, and Amazon and Apple next Thursday (August 3). These five stocks have been responsible for a significant share of market gains this year so there is no doubt a lot is riding on their results.
Bears warn that if earnings and guidance disappoint, it could trigger a selloff that drags down the wider markets. Bulls are optimistic that new artificial intelligence innovations will bolster outlooks for the quarters ahead and help dispel worries that the tech rally is overblown.
Beyond tech company results, other earnings today include 3M, ADM, Albertsons, Chubb, Dow, General Electric, KimberlyClark, NextEra Energy, Nucor, Raytheon Technologies, Sherwin Williams, Snap, Texas Instruments, Verizon, and Visa.
These companies, similar to the calendar the rest of the week, span a wide range of sectors and will start to give investors a more complete picture of the health of American businesses.
Today also marks the start of the Fed's two-day policy meeting which wraps up tomorrow.
Most expect a +25 basis-point rate hike, which many on Wall Street think could be the last of this tightening cycle. Investors won't likely know whether that's the case until the next meeting in September, however, so inflation and employment data over the next two months will be closely watched. Economic data today includes Consumer Confidence, the Richmond Fed Manufacturing Index, and the Case-Shiller Home Price Index.
It's worth noting that the PMI Composite Flash yesterday showed business activity remained strong in July, though still mostly driven by the services sector. However, manufacturing activity ticked up more than expected to near expansion territory.
Bulls see this as a positive sign that the US economy is strong enough to continue growing (albeit at a slower pace) despite significantly tighter monetary policy, which should in turn help the US to avoid a deeper recession down the road.
Bottom line, more bears are throwing in the towel, thinking the US labor market and consumer confidence is strong enough to keep the US economy from falling off a cliff.
Globally, however, there's still a lot of geopolitical uncertainty brewing with China, Russia, North Korea, etc..
Second US Nuclear Sub Arrives in South Korea Amid Tensions With North Korea: The U.S. docked a second nuclear submarine at an island in South Korea on Monday. South Korea’s military said a nuclear-powered submarine, the USS Annapolis, arrived at the island of Jeju to resupply while on a broader operations mission, according to the South Korean military. The arrival comes about a week after another nuclear-powered submarine, the USS Kentucky, docked at Port Busan in the first visit by a U.S. nuclear submarine to South Korea since 1981. Last week, North Korea responded to what it has perceived as Washington’s nuclear aggression by issuing a stern warning of the possibility of a nuclear response from Pyongyang. North Korea also conducted at least two missile tests following the docking of the Kentucky.
Old Houses Now Cost as Much as New Ones: New data shows the median price for an existing single-family home, as opposed to a newly built one, stood at $416,000 in June. That's basically the same price that a newly built house was selling for in May. For the last 10 years, prices for new single-family homes have been on average about +$60,000 more than existing home sales. The surge of mortgage rates over the last year, and the overall lack of inventory continue to upend the housing market in surprising ways. It's worth mentioning that home builders are offering smaller, more affordable houses to tap into demand from first-time buyers facing low inventories of existing homes, and as a result, the price points between this old house, and that new one, have really converged. (Axios)
Goldman Sachs Expects ‘All Time High’ Oil Demand to Spur Large Deficits, Boosting Prices: Goldman’s head of oil research Daan Struyven told CNBC’s “Squawk Box Asia” on Monday that the company expects record demand in oil markets to drive crude prices higher in the near term. Adding that they expect pretty sizable deficits in the second half with deficits of almost 2 million barrels per day in the third quarter as demand reaches an all-time high. Stryven says the bank forecasts Brent crude to rise from just above $80 per barrel now to $86 per barrel by year-end. While Struyven acknowledged that U.S. crude oil production has risen significantly over the past year to 12.7 million barrels per day, he said that pace of growth will slow throughout the rest of 2023. The U.S. oil rig count recently hit its lowest level in 16 months, down 15% from its late 2022 peak, a recent Goldman report observed, citing data from Baker Hughes and Haver and last week, Baker Hughes reported U.S. oil rigs fell by 7 to 530 the lowest since March 2022. Struyven also suggested that the lack of an agreement following the G20 energy ministers’ meeting indicates “very substantial” uncertainty about long-run oil demand
Regional Banks Cutting Back on Some Lending to Preserve Capital: Regional banks are trying to slim down. Their customers might have to tighten their own belts as a result. One way for banks to relieve the many pressures on them right now has been to shrink. Doing less lending or selling investments can mean less need to gather deposits at a time when it is increasingly expensive to do so. Banks that unload low-yielding bonds or loans, or let them mature and not replace them, can raise the average interest rates they earn on their assets, and improve the margins they earn on lending and investments. It can also help preserve a bank’s capital, which is especially useful when government capital requirements are set to rise significantly. But this also has consequences down the road. For one, loans are particularly attractive to cut back on, since under government rules they are often weighted much more heavily than bonds in calculating how much capital a bank must hold. This puts things like auto loans, home mortgages or commercial-real estate financing in banks’ crosshairs for cutting back. That could be felt by banks’ customers and ripple through the economy, affecting car dealers, home buyers or big-city office districts. Source WSJ
US Restaurants Set for Second-Half Profit Boost as Costs Ease: Restaurant chains including McDonald's and Chipotle Mexican Grill are expected to report strong profits in the second half of 2023 as commodity costs finally ease at a time when demand for items including burgers and tacos has remained fairly resilient. U.S. restaurant chains kick off their quarterly earnings this week. Investors will be keen to see how the American fast-food customer is faring amid still-high food prices and a pressured overall spending environment. Meanwhile, prices of commodities such as chicken and dairy have eased, offsetting higher costs of some items like beef and potatoes, while wage pressures have also stabilized, with restaurants now back to operating a fuller workforce. Even as footfall has remained choppy with lower-income consumers ordering fewer items or visiting outlets less often, Wall Street analysts have said fast-food companies are yet to see a notable sales slowdown. Source Reuters
How Does Whole Foods' New "Palm Reader" Payment System Work? Thanks to new technology, paying for groceries at Whole Foods Market stores is now, quite literally, in the palm of your hands. Amazon is set to roll out its new palm recognition payment technology at the 400-plus Whole Foods Market U.S. stores by the end of 2023. The technology is created by Amazon One, Amazon Web Service’ palm recognition system that works for identification, payment, loyalty membership and store entry. Those who opt into the Amazon One service can hover their palm over an Amazon One device, paying for their purchase instead of by phone or wallet. The technology “evaluates multiple aspects of your palm” to verify the person’s identify, with cameras helping capture some of those details, the release added. Right now, more than 200 Whole Foods Market locations in the U.S. have the technology available. Source The Hill
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