😆 US GDP grows

Good morning investors! The market tried to recover yesterday but couldn’t sustain.

Today we cover:

• US GDP data

• Earnings report

• Boeing saga continues

📊 Economy and News 

US economy grows higher than expected

Economic activity in the U.S. was significantly stronger than anticipated in the second quarter, driven by robust consumer spending, increased government expenditures, and a notable inventory buildup, according to an initial estimate released Thursday by the Commerce Department.

Real gross domestic product (GDP), representing the total output of goods and services from April to June, grew at an annualized rate of 2.8%, adjusted for seasonality and inflation. This exceeded economists' expectations, as those surveyed by Dow Jones had predicted a 2.1% growth following a 1.4% rise in the first quarter.

The growth was largely fueled by consumer spending, private inventory investment, and nonresidential fixed investment, as indicated in the first of three estimates from the department.

Personal consumption expenditures, a key indicator of consumer activity in the Bureau of Economic Analysis report, increased by 2.3% for the quarter, up from 1.5% in Q1. Both services and goods spending saw substantial increases.

Inventories contributed significantly to the overall growth, adding 0.82 percentage points. Government spending also provided a boost, with federal expenditures rising 3.9%, including a 5.2% increase in defense spending.

However, imports, which detract from GDP, surged 6.9%, marking the largest quarterly rise since Q1 2022, while exports increased by only 2%.

Following the report, stock market futures edged higher and Treasury yields declined.

Global hits:

• Disneyland avoids what would have been its first strike in 40 years.

• Britain will soon lay out new plans to regulate ‘buy now, pay later’ firms like Klarna after delays.

• Wealth of global top 1% grew by $42 trillion over past decade: Oxfam.

Also check: China to use ultra-long bonds for consumer, trade-in policy support as worries about retail sales slump grow.

📈 Stocks

S&P 500 5,399.22 (-0.51%)
DJIA 39,935.07 (+0.20%)
NASDAQ 17,181.72 (-0.93%)
BRENT CRUDE 82.55 (+0.44%)
* Prices as of Jul 26th, 12:20 AM UTC

Earnings and more

A lot happened yesterday, here’s all you need to know:

• Shares in Gucci-owner Kering fell after the luxury group announced a sharp decline in revenue in the first half of the year.

• Southwest profit falls 46% as airline takes ‘urgent’ steps to increase revenue. The company forecast an increase of as much as 13% in nonfuel costs for the third quarter. The carrier plans to start assigning seats and offering an extra-legroom product to increase sales. Southwest is under pressure from an activist investor after it lagged competitors.

• Shares of Viking Therapeutics jumped after the biotech company a day earlier announced plans to advance its experimental weight loss injection into a late-stage trial earlier than expected. It brings the drugmaker one step closer to joining the highly popular market for GLP-1s, which analysts say could grow into a $150 billion market by the end of the decade. Viking previously said it was expecting to start another mid-stage trial on its weekly injection, called VK2735, after reporting positive results from another phase two study in February. 

• Ford is leading a decline in major U.S. automotive stocks after missing Wall Street’s bottom-line earnings for the second quarter. Shares of Ford were off by more than 17% in early trading Thursday — on pace for their worst decline since 2009. Shares of both General Motors and Stellantis were notably off as well after the companies reported their results this week.

• American Airlines slashed its profit forecast for the year after a backfired sales strategy and an industry-wide glut of flights. The carrier’s profit fell 46% during the second quarter even though revenues rose.

• Toy company Hasbro beat Wall Street expectations for the second quarter on Thursday, thanks in part to growth in its digital gaming segment. Hasbro reported a net income of $138.5 million, a significant gain from the same quarter last year, when it reported a net loss of $234.9 million. CEO Chris Cocks said during the company’s earnings call that it’s going “all in” on digital gaming.

• Unilever shares popped after the consumer goods giant raised its full-year margin guidance and said the spinoff of its ice cream business was on track to complete by the end of 2025. Underlying price growth was 1% in the second quarter of this year, compared with 8.2% in the same period of 2023.

• SK Hynix, best known for being a Nvidia supplier, said that a continuous rise in overall prices of its memory products — thanks to strong demand for AI memory including high-bandwidth memory — led to a 32% increase in revenue compared with the previous quarter. Operating profit in the June quarter hit its highest level since the second quarter of 2018, rebounding from a loss of 2.88 trillion won in the same period a year ago.

Worth checking out: Disney, Hulu and Max launch streaming bundle at up to 38% discount.

💵 Personal Finance

Dividend investing

The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. The reciprocal of the dividend yield is the total dividends paid/net income which is the dividend payout ratio.

Dividends aren't fixed and companies are known for increasing and decreasing dividends.

A company that has recently increased dividends is JPMorgan, which recently hiked its dividend to $1.25 from $1.15 per share. It also authorized a $30 billion stock buyback. JP has done this several times in the past.

This makes JP a good option for people looking for a regular flow of income. Yields from 2% to 6% are generally considered to be a good dividend yield, and JP is no offering 2.30%.

A good dividend yield does not mean you should buy a stock. Sometimes, companies increase dividend to remove attention from other issues, including a deteriorating financial situation.

So, a high dividend does not alone make JPMorgan a good investment? We’ll have a critical look at JPMorgan in this week’s PRO issue and determine if it’s a buy.

Upgrade now to ensure you don’t miss out on the special issue.

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.

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