Stocks Stuck In Range For Fifth Straight Week

Earnings Recap

It’s Friday, so we’ll spare you the details and give you a quick recap of the names that helped kick off earnings season today. 📰

First, we had Citigroup, which beat analyst earnings and revenue expectations by a wide margin. As a result, the stock rallied over 13% today, leading the entire financial sector higher. 💪

It was the only bank that topped revenue expectations this week, as its operations benefited from rising interest rates and strong trading results.

Wells Fargo missed on revenues but beat adjusted earnings expectations by $0.02. Weakness in its mortgage revenue and venture capital businesses drove results, with net interest margin improving and expenses declining in the quarter.

Despite the weaker than expected results, the stock rebounded with the rest of the financial sector, closing up 6.17%. 

Blackrock shares managed to stay green today despite the Asset Management giant seeing profits fall by 30% YoY. 😐

The company said a challenging macro environment and falling asset prices pressured its AUM and raised costs. However, despite the market volatility and strong U.S. Dollar headwinds, the firm still managed $89.6 billion in total net inflows for the quarter. 

State Street rallied 9.74% after the financial giant reported better than expected earnings and revenues that declined less than expected. 📈

United Healthcare also topped earnings and revenue expectations, causing the stock to pop 5.44% today. 👍

Lastly, a reminder that earnings season kicks into high gear next week! 

Keep track of it all with the Stocktwits’ earnings calendar! 📅

Economic Recap

This week’s focus was on inflation around the world, which in aggregate remained at record levels. There was some deceleration in the “core” measures, excluding energy and food prices, but not enough to prevent the market from pricing aggressive rate hikes at the Fed’s next two meetings.

Meanwhile, the jawboning from Fed officials continued today as Fed Governor Bostic hinted that he favored a 75 bp hike at the upcoming July 26th-27th meeting.

He noted that moving interest rates “too dramatically” could undermine positive economic trends and unnecessarily add more uncertainty. 💭

Regardless, a hefty hike is coming at the end of the month. The market will argue over whether it will be 75 or 100 bp until then.

Central banks worldwide will continue to raise rates aggressively to combat inflation for the foreseeable future. We get more data supporting that view every day. For example, inflation in Israel hit a 14-year high in June, setting its central bank up for another rate hike in August. 📈

But, those measures do not come without a cost to growth…which is what the market continues to fret about.

Just today, we saw China’s Q2 GDP rate come in at just 0.4%, missing forecasts of 1.0% and adding to global recession fears. 😨

Meanwhile, consumer spending in the U.S. continues to fall in real terms, as this chart from Wells Fargo shows.

Consumer spending is two-thirds of the U.S. economy, and right now, we’re all spending more and getting less. It’s hard for that to go on forever. 💳

And from a forward-looking perspective, consumer sentiment remains in the dumps, and banks like JPMorgan are ramping up their bad debt reserves, both of which point to a weakening of consumer health.

As a result of these and several other indicators softening, Wall Street has begun to ratchet up its recession forecasts. With that said, given that the labor market remains strong, the consensus is that any U.S. recession will be short and shallow. 😐

I guess we’ll just have to wait and see. 🤷‍♂️

Bullets From The Day:

📺 Streaming sports is about to get more expensive. Competition in the streaming space has pushed content costs to new heights, and ESPN+ hopes to pass on some of that burden to customers as they raise prices from $6.99 to $9.99/month. Given the inflation throughout the entire economy, it’s unlikely they’ll be the only ones trying to squeeze in price increases. The Verge has more.

🦄 Mexican fintech Stori becomes a unicorn. Many companies are looking to capitalize on the digital banking adoption spreading throughout Latin America, and many are raising significant amounts of money to do so. This week, Mexican fintech company Stori is raising $50 million at a $1.2 billion valuation and another $100 million in debt financing. Its new valuation is roughly 25% higher than its last raise in September. More from TechCrunch.

🛢️ Russia plans to launch a national oil trading platform. As western countries continue to impose heavy sanctions on Russia and discuss a potential price cap on oil, the government is looking for ways to sell its most precious asset. Reports are that Russian officials and oil producers are discussing a way to create a global benchmark for Russian crude oil, though it’s unclear what makes today’s efforts any different than their attempts over the last decade. Markets Insider has more.

🎓 College has never been more costly than today. Higher education costs are not immune to the inflation we see across the economy, and now higher interest rates are increasing the cost of borrowing — presenting a serious double whammy for students. More from CNBC.

🤖 FCC asks for more power in the fight against robocalls. The Federal Communications Commission just hit one robocaller’s operation with one of the most significant fines ever, $116 million, but it’s still losing the overall war. Although the agency has the power to define and propose fines/damages, it has to rely on the Justice Department to collect — a system that has left a lot to be desired. So now, the agency is petitioning lawmakers to give it more power to combat robocallers and other scammers in a more effective/efficient manner. TechCrunch has more.