Weekly Market Update: Fed coaches market through another 75 bps hike; Soft landing hopes remain alive
US stock markets entered the week riding at more than one month highs. Retreating global interest rates and a general stable read-through from Q2 earnings reports regarding the current business environment appeared to have stabilized equity sentiment. Clear signals of softening in recent economic readings, as well as high profile corporate pre-announcements like that of Walmart, bolstered hope that much of the Central banks’ heavy lifting in terms of tightening were starting to get the desired effects, potentially paving the way for a “softish” landing and potential Fed pivot into next year. Nevertheless growth concerns lingered as indicted by a deeper inversion in the benchmark 2-10 year Treasury yield spread, while market based inflation expectations continued to push lower ahead of another all but guaranteed “unusually large” 75 bps rate hike by the Federal Reserve on Wednesday.
The Fed did indeed follow through and hike by 75 bps, but it was language of the FOMC statement and Chair Powell that the markets latched onto. Investors cheered as Powell acknowledged slowing economic momentum and that rates were already likely in the ‘neutral’ range, stressed data dependency, scrapped forward guidance and declined to guide markets to expect another 75 bps hike in September. US Treasury yields continued to track lower and stocks surged sending the S&P back above 4100 for the first time in nearly 2-months. Thursday’s first look at Q2 GDP came in negative, meeting the criteria for the common definition of ‘recession’, seemly supporting the markets’ read of the Fed. Even Friday’s hotter than expected inflation readings, including Fed-favored PCE, did little to tamp down the hopes that slowing economic growth might encourage the Fed to raise rates at a slower clip down the road. By Friday, the US 10-year yield dropped back below 2.65%, gold prices were on the rise and risk assets like Bitcoin and stocks appeared to be breaking out to the upside. For the week the DJIA added 3% and the Nasdaq was up 4.7%, while the S&P gained 4.3% for the week and rose 9.1% in July for its best month since November 2020.
In corporate news this week, Walmart cut its guidance, citing pricing actions aimed to improve inventory levels and food inflation affecting customers’ ability to spend on general merchandise. Amazon shares however jumped the most since February after beating on the top line and providing some upbeat guidance. Apple shares gained after beating expectations, led by a solid iPhone sales, and declaring that growth is expected to continue into Q4 despite macro headwinds.
Microsoft missed consensus estimates but its rosy guidance pleased investors, sending shares higher post-earnings. Alphabet also rose after notching better-than-feared Q2 earnings, given the shaky macro advertising environment. Meta missed on its top and bottom line earnings and issued a weak outlook as its ad sales disappointed. Intel shares slumped after whiffing on its Q2 results and further slashing its outlook, pointing to the macro environment and its own execution issues. Several oil majors reported boffo results amid lucrative crude refining margins and soaring energy prices.
SUN 7/24
(EU) ECB’s Holzmann (Austria, hawk): ECB may have to accept a moderate recession to stem price pressures if it sees signals that inflation expectations are rising
INFO.IN Reports Q1 $0.16 v $0.17 y/y; Rev $4.44B v $3.78B y/y
MON 7/25
PHIA.NL Reports Q2 adj EBITA €216M v €532M y/y, Rev €4.18B v €4.23B y/y; Cuts FY22 SSS outlook; US DoJ began discussions with Philips regarding the terms of a proposed consent decree to resolve the identified issues
VOD.UK Reports Q1 Rev €11.3B v €11.3Be; On track to deliver FY23 outlook
(EU) ECB's Kazaks (Latvia, hawk): Too weak Euro is a problem; Sept hike needs to be quite significant, should be open to talks to bigger hikes
(DE) GERMANY JULY IFO BUSINESS CLIMATE SURVEY: 88.6 V 90.1E
(CN) China Foreign Ministry spokesman Zhao Lijian: China is getting seriously prepared for US House Speaker Pelosi's Taiwan visit
(CN) China reportedly forced some of firms, including Foxconn, Huawei and CNOOC, to operate within a “closed loop” restricted system for seven days amid COVID outbreak in Shenzhen - press
(RU) Russia govt spokesperson Peskov: Russia will install repaired turbine for Nord Stream 1; Russia is not interested in complete gas supply cut off to Europe
INTC Intel and MediaTek announce a strategic partnership to manufacture chips using Intel Foundry Services’ (IFS) advanced process technologies
(RU) Reportedly there are several more turbines need to be repaired at Gazprom's Portovaya station; Repair of one turbine takes about three months - Russian press
GAZP.RU (RU) Company said to have halted one more Siemens turbine at Portovoya - press
*(US) JULY DALLAS FED MANUFACTURING ACTIVITY INDEX: -22.6 V -22.0E
WMT Cuts Q2 and FY23 profit guidance; Primarily due to pricing actions aimed to improve inventory levels at Walmart and Sam’s Club in the US and mix of sales
AMZN To raise Amazon Prime subscription prices by 20-43% in Europe, effective Sept 15th - press
BABA Seeking primary listing on the HKEX, will be dual primary listed on NYSE; Expects completion by end of 2022 [currently has a secondary listing on the HK Exchange]
COIN Said to be facing a probe from SEC on Cryptocurrency listings and if the company let digital assets trade that should have been registered as securities for people to trade - press
LOGI Reports Q1 $0.74 v $0.82e, Rev $1.16B v $1.18Be; Cuts FY23 outlook sharply; Raises share buyback authorization to $1.5B
TUES 7/26
BABA Said to be scaling back global expansion plans and has failed to meet B2B target of 1.0M new businesses signing up and new target is now 2.0K/yr - FT
UBSG.CH Reports Q2 Net $2.11B v $2.0B y/y, Adj PBT $2.61B v $2.6B y/y, Rev $8.92B v $8.98B y/y; To continue buyback as planned; Notes operating environment that remains uncertain
ETL.FR Eutelsat and OneWeb confirm to combine in $3.4B all-share transaction; Eutelsat and OneWeb shareholders would each hold 50% of the Eutelsat shares
UNA.NL Reports H1 Net €3.22B v €3.40B y/y, Rev €29.6B v €25.8B y/y
(HK) Macau to announce plan for COVID measures later this week - press
GM Reports Q2 $1.14 v $1.40e, Rev $35.8B v $36.5Be; Notes its outlook for H2 2022 is strong
UPS Reports Q2 $3.29 v $3.14e, Rev $24.8B v $24.7Be; Raises targeted share repurchases to $3.0B
GM Expect to double Rev to $275B-$315B by 2030; Improvement in China started in June with production levels beginning to recover - earnings slides
(RU) Russia govt spokesperson Peskov: Some problems with another Nord Stream turbine; First turbine for Nord Stream 1 is en route from Canada
GE Reports Q2 $0.78 v $0.38e, Rev $18.6B v $18.0Be; Continues to trend toward the low end of its FY22 outlook for all metrics except FCF; On track to create 3 independent companies
PHM Reports Q2 $2.73 adj v $2.58e, Rev $3.93B v $4.03Be
MMM Sees weakening consumer electronics demand, particularly smartphones, tablets and TVs; Expecting supply chain challenges to persist for foreseeable future - earnings slides
(EU) EU renews economic sanctions over Russia's aggression against Ukraine for further six months until Jan 31st, 2023 - press
KO Reports Q2 $0.70 v $0.67e, Rev $11.3B v $10.7Be; Raises FY22 Rev and EPS outlook; Sees $0.03 impact to comparable EPS from Russia exit
ADM Reports Q2 $2.15 adj v $1.75e, Rev $27.3B v $25.3Be; Will buyback $1B in shares in 2H 22
MCD Reports Q2 $2.55* v $2.46e, Rev $5.72B v $5.89Be
FISV Reports Q2 $1.56 v $1.54e, Rev $4.45B v $4.07Be; Raises guidance
PCAR Reports Q2 $2.07 v $1.81e, Rev $7.16B v $6.51Be
LOGI CEO: Chip shortage is not over, but moderating; Expect to be clear of problems by Q3 or by Q4 2022 at latest - post earnings comments
SHOP Reportedly to lay off 1K employees (10% of workforce); CEO says he was wrong that pandemic E-commerce boom would last - press
*IMF WORLD ECONOMIC OUTLOOK (WEO) CUTS 2022 GLOBAL GROWTH FORECAST FROM 3.6% TO 3.2%
*(US) JULY RICHMOND FED MANUFACTURING INDEX: 0 V -14E
*(US) JUN NEW HOME SALES: 590K V 659KE
ML.FR Reports H1 €1.18 v €1.44 y/y, Rev €13.3B v €11.2B y/y
ADS.DE Reports prelim Q2 Op €360M v €387M y/y, Rev €5.60B v €5.73Be; Cuts outlook; experiencing a slower-than-expected recovery in its business in Greater China
(DE) Germany Green Party leadership reportedly has come to conclusion that all options should be on table to respond to energy crunch, including extending life of nuclear plants - FT
MSFT Reports Q4 $2.23 v $2.29e, Rev $51.9B v $52.3Be
GOOGL Reports Q2 $1.21 v $1.27e, Rev $57.5B (Ex-tac) v $57.6Be
MDLZ Reports Q2 $0.67 v $0.63e, Rev $7.27B v $6.78Be; Raises dividend by 10% to $0.385 (indicated yield 2.45%)
V Reports Q3 $1.98 v $1.74e, Rev $7.28B v $7.06Be
TEVA Reaches nationwide opioids settlement; To pay up to $4.25B including already-settled cases spread over 13 years
*(AU) AUSTRALIA Q2 CPI Q/Q: 1.8% V 1.9%E; Y/Y: 6.1% V 6.3%E (highest annual pace since 2001)
(HK) Macau reports 0 new covid cases
WEDS 7/27
CSGN.CH Reports Q2 (CHF) Net -1.59B v +0.25B y/y, Pretax -1.2B v +0.8B y/y, Rev 3.65B v 5.1B y/y; Announces a comprehensive strategic review
MBG.DE Reports Q2 adj EBIT €4.94B v €4.24Be, Rev €36.4B v €35.2Be; Raises FY22 outlook; Expects healthy demand in all core markets in H2 2022; Sees a gas reduction potential of around 50% in Germany without impact if regional pooling is possible
DBK.DE Reports Q2 Net €1.05B v €692M y/y, Rev €6.64B v €6.24B y/y
BAS.DE Reports final Q2 Net €2.09B v €2.09B prelim, Adj EBITDA €2.34B v €2.34B prelim, Rev €23.0B v €23.0B prelim; Raises sharply FY22 Rev outlook
BN.FR Reports H1 Net €1.05B v €1.00B y/y, Recurring Op €1.61B v €1.55B y/y, Rev €13.3B v €11.8B y/y; Raises FY22 LFL Rev outlook
GSK.UK Reports Q2 Adj EPS £0.35 v £0.28e, Rev £6.93B v £6.26Be; Raises FY22 outlook
MBG.DE CEO: Could implement measures to reduce gas consumption by up to 50% within 2022; Have already reduced gas consumption by 10% while maintaining full operations; Incoming orders remain high - post earnings comments
7211.JP Reports Q1 Net ¥38.6B v ¥6.09B y/y, Op ¥30.8B v ¥10.6B y/y, Rev ¥528.7B v ¥431.9B y/y; Raises FY22 outlook
UMC Reports Q2 (NT$) Rev 72.1B v 50.9B y/y; Notes semiconductor industry is now in a period of inventory correction
(HK) Macau said to possibly ease COVID measures from Aug 2nd if cases are low; May allow dining-in during stable period - press
HLT Reports Q2 $1.29 v $1.06e, Rev $2.24B v $2.00Be
BG Reports Q2 $2.97 adj v $3.40e, Rev $17.93B v $17.9Be
CCJ Reports Q2 C$0.18 v -C$0.10 y/y, Rev C$558M v C$359M y/y
GPI Reports Q2 $12.11 v $10.65e, Rev $4.15B v $4.12Be; Continue to see the majority of new vehicles in US either presold or sold shortly after delivery
TMUS Reports Q2 -$0.09 v +$0.41e, Rev $19.7B v $20.1Be; Raises FY22 outlook
ADP Reports Q4 $1.50 adj v $1.48e, Rev $4.13B v $4.05Be
BMY Reports Q2 $1.93 v $1.79e, Rev $11.9B v $11.5Be
WM Reports Q2 $1.44 adj v $1.36e, Rev $5.03B v $4.84Be; Raises guidance
BA Reports Q2 -$0.37 v -$0.08e, Rev $16.7B v $17.7Be; Affirms it expects FY22 FCF positive; Working with FAA on final actions to resume 787 deliveries, currently producing 787 at very low rate
*(US) JUN PRELIMINARY WHOLESALE INVENTORIES M/M: 1.9% V 1.5%E
*(US) JUN PENDING HOME SALES M/M: -8.6% V -1.0%E; Y/Y: -19.8% V -13.5%E
(US) Atlanta Fed GDPNow: raises Q2 GDP forecast from -1.6% to -1.2%
KER.FR Reports H1 Recurring Net €1.99B v €1.48B y/y, Recurring Op €2.82B v €2.24B y/y, Rev €9.93B v €8.05B y/y; remains confident in its growth potential for the medium and long term
AIR.FR Reports H1 adj Net €1.90B v €2.23B y/y, Adj EBIT €2.65B v €2.55Be, Rev €24.8B v €25.9Be; Cuts FY22 delivery targets
(US) Association of American Railroads weekly rail traffic report for week ending July 23rd: 499K total units, -0.8% y/y
(US) Senate votes to pass $52B semiconductor manufacturing bill - press
*(US) FOMC RAISES TARGET RANGE BY 75BPS TO 2.25-2.50% (AS SPECULATED); RECENT INDICATORS OF SPENDING AND PRODUCTION HAVE SOFTENED, THOUGH JOB GAINS ARE ROBUST
META Reports Q2 $2.46 v $2.51e, Rev $28.8B v $28.7Be; CFO David Wehner to become Chief Strategy Officer; Names Susan Li as new CFO; effective Nov 1st; Notes it reduced its hiring
F Reports Q2 $0.68 v $0.43e, Rev $40.2B v $32.7Be; Raises quarterly dividend $50% to $0.15/shr from $0.10/shr prior
LRCX Reports Q4 $8.83 v $7.31e, Rev $4.64B v $4.21Be; Guides Q1 strong
URI Reports Q2 $7.86 adj v $6.57e, Rev $2.77B v $2.70Be; Raises FY outlook
BBY Cuts again FY22 Enterprise SSS -11.0% (prior -6.0% to -3.0%), Op margin 4% (prior 5.2-5.4%); Pauses share buybacks; Notes consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened even further since May
(US) Senator Manchin (D-WV): Reached agreement with Leader Schumer to support the 'Inflation Reduction Act' that will pay down national debt, and lower energy and healthcare costs
005930.KR Reports final Q2 (KRW) Net 10.95T v 9.45T y/y; Op 14.1T v 14.0T prelim (12.6T y/y); Rev 77.2T v 77.0T prelim (63.7T y/y)
THURS 7/28
*(DE) GERMANY JULY CPI NORTH RHINE WESTPHALIA M/M: +1.1% V -0.1% PRIOR; Y/Y: 7.8% V 7.5% PRIOR
SAN.FR Reports Q2 Business EPS €1.22 v €0.84e, Op €2.75B v €2.27B y/y, Rev €8.56B v €8.4Be
NESN.CH Reports H1 (CHF) Net 5.2B v 5.8Be, Op 6.68B v 6.99B y/y, Rev 45.6B v 44.9Be
SAF.FR CEO: sees supply chain problems will probably last into 2023, may even stretch towards end-2023 - post earnings comments
SHEL.UK Reports Q2 CCS $1.54 v $0.71 y/y, Adj CCS Net $11.5B v $5.53B y/y, Rev $100.1B v $60.5B y/y; Announces up to $6B share buyback
TTE.FR Reports Q2 adj Net $9.8B v $9.37Be, adj EBITDA $18.7B v $8.67B y/y, Rev $74.8B v $47.0B y/y; Plans share buyback of up to $2B in Q3
DGE.UK Reports FY21/22 Preliminary Net £3.25B v £2.66B y/y, adj Op £4.4B v £3.73B y/y, Net Rev £15.5B v £12.7B y/y
7201.JP Reports Q1 Net ¥47.1B v ¥114.5B y/y, Op ¥64.9B v ¥75.7B y/y, Rev ¥2.14T v ¥2.01T y/y
STM.FR CEO: Sees signs of demand softening in consumer electronics - post earnings comments
(RU) Russia said to aim ending payments in US dollars for its oil exports and instead use Chinese yuan (CNY) and UAE dirham (AED) as soon as possible; Could happen as early as Aug - press
(CN) China Politburo: Reiterates stance to stabilize employment and prices in H2; Will stick to dynamic zero-COVID policy; Will stabilize property market and ensure delivery of property projects
SWK Reports Q2 $1.77 v $2.12e, Rev $4.39B v $4.77Be; Cuts EPS outlook; Implements global cost reduction program
LIN.DE Reports Q2 $3.10 adj v $2.98e, Rev $8.46B v $8.38Be
VLO Reports Q2 $11.36 v $9.70e, Rev $51.6B v $40.6Be
HON Reports Q2 $2.10 v $2.03e, Rev $8.95B v $8.70Be; Notes macro crosscurrents are clouding the global economic growth outlook
MRK Reports Q2 $1.87 v $1.67e, Rev $14.6B v $13.9Be
LUV Reports Q2 $1.30 v $1.17e, Rev $6.73B v $6.68Be
PFE Reports Q2 $2.04 v $1.72e, Rev $27.7B v $26.3Be
CMCSA Reports Q2 $1.01 v $0.92e, Rev $30B v $29.8Be
LECO Reports Q2 $2.18 v $1.98e, Rev $969.6M v $933Me; Organic Rev +20.5% y/y
*(DE) GERMANY JULY PRELIMINARY CPI M/M: 0.9% V 0.6%E; Y/Y: 7.5% V 7.4%E
WING Reports Q2 $0.45 v $0.35e, Rev $83.8M v $84.8Me; Raises dividend to $0.19 from $0.17 (indicated yield 0.76%)
MA Raises FY22 adj Rev (cc) up low-twenties (prior up high-teens); Notes inflation yet to significantly impact spending - earnings slides
*(US) INITIAL JOBLESS CLAIMS: 256K V 250KE; CONTINUING CLAIMS: 1.359M V 1.39ME
*(US) Q2 ADVANCE GDP ANNUALIZED Q/Q: -0.9% V +0.4%E (moves into a technical recession); PERSONAL CONSUMPTION: 1.0% V 1.2%E
*(US) Q2 ADVANCE GDP PRICE INDEX: 8.7% V 8.0%E (highest pace since 1981); CORE PCE Q/Q: 4.4% V 4.4%E
(US) Nevada reports June casino gaming Rev $1.28B, +8.1% y/y; Las Vegas strip Rev $734.8M, +22.7% y/y
OPEC+ Aug 3rd meeting reportedly will keep oil output steady or raise output slightly in Sept; Will likely discuss a 'modest output increase' - press
(CN) In today's talks, Xi told Biden that on the Taiwan issue, those who play with fire will get burned; China firmly opposes Taiwan independence and external interference - Chinese press
(US) Freeport LNG terminal expansion approved by regulators after explosion earlier this year - press
(US) House of Representatives has enough votes to pass the CHIPS Act as expected, vote ongoing - press
AMZN Reports Q2 -$0.20* (inc $3.9B pretax valuation loss) v $0.15e, Rev $121.2B v $119.7Be
INTC Reports Q2 $0.29 v $0.69e, Rev $15.3B v $17.9Be; Cuts outlook sharply
INTC Notes deteriorating macro, inventory and supply disruptions, competitive pressures; Expect 10% decline in 2022 PC TAM; Prolonged supply chain challenges - earnings slides
X Reports Q2 $3.86 v $3.87e, Rev $6.29B v $5.81Be; Announces $500M share buyback
EMN Reports Q2 $2.83 v $2.69e, Rev $2.78B v $2.75Be; To continue raising prices
AAPL Reports Q3 $1.20 v $1.14e, Rev $83.0B v $82.0Be; Notes Mac, iPad remain supply constrained
FRI 7/29
RNO.FR Reports H1 Net Cont Ops €657M v €199M y/y, Rev €21.1B v €21.1B y/y; Raises FY outlook
*(FR) FRANCE Q2 PRELIMINARY GDP Q/Q: 0.5% V 0.2%E; Y/Y: 4.2% V 3.7%E
ENI.IT Reports Q2 adj Net €3.81B v €3.14Be, adj Op €5.84B v €5.24Be, Rev €31.6B v €16.3B y/y; Raises share buyback to €2.4B
066570.KR Reports final Q2 (KRW) Net 193.1B v 425Be, Op 792.2B v 792B prelim. Rev 19.5T v 19.5T prelim
6758.JP Reports Q1 Net ¥218.2B v ¥211.8B y/y, Op ¥307.0B v ¥280.1B y/y, Rev ¥2.31T v ¥2.26T y/y
*(FR) FRANCE JULY PRELIMINARY CPI M/M: 0.3% V 0.3%E; Y/Y: 6.1% V 6.0%E
*(ES) SPAIN JULY PRELIMINARY CPI M/M: -0.2% V -0.3%E; Y/Y: 10.8% V 10.6%E
*(ES) SPAIN Q2 PRELIMINARY GDP Q/Q: 1.1% V 0.4%E; Y/Y: % V 5.5%E
WY Reports Q2 $1.06 adj v $1.02e, Rev $2.97B v $2.80Be; Guides "remain constructive on long-term demand fundamentals"
*(DE) GERMANY JULY NET UNEMPLOYMENT CHANGE: +48.0K V +17.0KE; UNEMPLOYMENT CLAIMS RATE: 5.4% V 5.4%E
*(IT) ITALY Q2 PRELIMINARY GDP Q/Q: 1.0% V 0.3%E; Y/Y: 4.6% V 3.7%E
*(DE) GERMANY Q2 PRELIMINARY GDP Q/Q: 0.0% V 0.1%E; Y/Y: 1.4% V 1.7%E
*(EU) EURO ZONE Q2 ADVANCE GDP Q/Q: 0.7% V 0.2%E; Y/Y: 4.0% V 3.4%E
(RU) Russia govt spokesperson Peskov: Does not see possibility for negotiations with Ukraine; There are no plans for contacts between Putin and Biden yet
CVX Reports Q2 $5.82 adj v $5.02e, Rev $68.8B v $55.8Be; Raises top-end of its share buyback program to up to $15B (prior $10B)
XOM Looking ahead to 2023, Plans add'l refining capacity of 1Mbpd, excluding China, should help to meet recovering demand; Expects its US Gulf Coast refining capacity to increase by 17% or about 250Kbpd in Q1 2023 - earnings slides
PG Reports Q4 $1.21 v $1.23e, Rev $19.5B v $19.4Be; Sees FY23 FX impact to be a headwind of ~3% to all-in sales growth
PG CEO: Seeing some input costs roll over while others continue to go higher so can't say that inflation has peaked yet - CNBC
(US) Fed's Bostic (non-voter, hawk): Does not believe US is in recession but clear there are a number of people hurting - media comments
ABBV Reports Q2 $3.37* v $3.31e, Rev $14.6B v $14.7Be
*(US) Q2 EMPLOYMENT COST INDEX (ECI): 1.3% V 1.2%E
*(US) JUN PERSONAL INCOME: 0.6% V 0.5%E; PERSONAL SPENDING: 1.1% V 1.0%E
*(US) JUN PCE DEFLATOR M/M: 1.0% V 0.9%E; Y/Y: 6.8% V 6.8%E
(US) Atlanta Fed GDPNow: Forecasts initial Q3 GDP at 2.1%
(US) June Dallas Fed Trimmed Mean PCE +6.9% v +5.2% m/m
(ES) Reportedly Spain confirms death linked to monkeypox - Sky News