Good morning investors! Stocks rallied yesterday as Bitcoin continues to struggle, while the economy is showing some good signs, despite being held up by government debt ($35.1 T).
Today we cover:
More positive economic data
Stocks hit new highs
Walmart and Alibaba report
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📊 Economy and News
That resilient economy
Retail Sales Show Strong Growth
The Commerce Department reported that retail sales rose by 1.0% in July, a substantial rebound from the downwardly revised 0.2% drop in June. This exceeded economists' expectations, who had forecasted a more modest increase of 0.3%, following initial reports that showed no change in June.
Unemployment Claims Lower Than Expected
In another positive development, the Labor Department announced that 227,000 Americans filed for unemployment benefits last week, which was lower than the expected 235,000 and a slight decrease from the revised 233,000 claims from the previous week.
Note: these figures are very frequently revised after a few weeks and the past couple of years it’s nearly always been revised downward.
Yields Experience Significant Increases
Following these reports, the yield on the benchmark 10-year note experienced its largest rise in over six weeks, while the two-year yield was set for its biggest daily increase in nearly 10 weeks.
Industrial Production Decline Has Limited Impact
Despite the strong economic data, the news that U.S. industrial production fell by 0.6% in July, more than the expected 0.3% decline, did not significantly alter the market’s direction. This is likely because manufacturing comprises a smaller portion of the economy compared to the consumer sector, which accounts for about 70%.
Fed Funds Futures and Market Sentiment
Fed funds futures indicate that traders now see a 75% chance of a 25 basis point cut in the Federal Reserve's 5.25%-5.5% policy rate at its next meeting, up from 65% late Wednesday, according to LSEG calculations.
Federal Reserve Officials Support Possible Rate Cut
Meanwhile, St. Louis Fed President Alberto Musalem and Atlanta Fed President Raphael Bostic expressed support on Thursday for a potential interest rate cut at the Federal Reserve’s policy meeting next month, a shift from their earlier reservations about lowering borrowing costs too soon.
Global hits:
Axis MF says India's economy, indices and earnings may be hit by US recession due to high export dependence.
Israel CPI gains further to breach target, hits 3.2% annual rate in July.
South African Reserve Bank to cut rates 25 bps to 8.00% on Sept. 19: Reuters poll.
New drug prices: The Biden administration released prices for the first 10 prescription drugs that were subject to landmark negotiations with Medicare.
The government estimates that the new prices could produce $6 billion in net savings for Medicare in 2026 alone, based on data from 2023.
It is a milestone in a controversial process that aims to make costly medications more affordable for older Americans, a policy the pharmaceutical industry has opposed.
It comes one day before the second anniversary of President Joe Biden’s signature Inflation Reduction Act.
Strikes: North American industry groups and shippers are bracing for an unprecedented simultaneous stoppage at both of Canada's main railway companies that could inflict billions of dollars' worth of economic damage. On the other hand, some fear that possible US seaport strike could back up goods for months.
Worrisome: This expert thinks that 2024 looks reminiscent of 1970 and 2001 recession years.
📈 Stocks
S&P 500 5,543.22 (+1.61%)
DJIA 40,563.06 (+1.39%)
NASDAQ 17,594.50 (+2.34%)
BRENT CRUDE 81.04 (+1.60%)
* Prices as of Aug 16th, 12:20 AM UTC
Stocks continue to fire
Stocks rallied on Thursday as investors regained confidence in the economy following encouraging consumer and labor data that helped ease recession worries.
After a more than 3% gain this week, the S&P 500 is now roughly 2% below its record. The three major U.S. indexes are now trading above their Aug. 2 closing level, which was the session before the global stock market rout on Aug. 5 that was largely driven by investors’ concerns about an economic slowdown and an unwinding of a popular hedge fund currency trade.
Encouraging inflation data this week had largely swept away investors’ recessionary fears prior to Thursday’s swath of economic data, and led to a rebound in equities following last week’s sharp global sell-off.
Dow component Walmart added to the momentum, with an earnings report that topped analyst estimates, sending shares up +7%. The discounter raised its full-year outlook on strength in the first half of the year and said it has seen steady consumer health, but was more cautious about the second half.
Elsewhere, Cisco Systems jumped +7% after announcing a fiscal fourth-quarter earnings and revenue beat and cuts to its global workforce.
Interesting: United CEO expresses ‘renewed confidence’ in Boeing after meeting with new leader Ortberg.
Alibaba’s missing magic: Alibaba missed top- and bottom-line expectations for the June quarter of 2024 as it continues to face headwinds in its core e-commerce business amid rising competition and a cautious Chinese consumer.
Here are the numbers:
Revenue: 243.24 billion Chinese yuan ($34.01 billion) versus 249.05 billion yuan expected.
Net income: 24.27 billion yuan versus 26.91 billion yuan expected.
Revenue was up 4% year on year, while net income dropped 29%. Alibaba said the net income fall was “primarily due to a decrease in income from operations” and “increase in impairment” from its investments.
💵 Personal Finance
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💰 Be a Better Investor
“Risk comes from not knowing what you're doing.”
Resources:
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👩🏽⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself. VanGogh.