Stocks capped off their fourth straight week of gains with a broad-based rally — here’s what you missed.
We kept today’s issue light since it’s a summer Friday, covering big news from Peloton and a potential real-time inflation measure. 👇
Here’s today’s heat map.
Every sector closed green, with consumer discretionary (+2.26%), technology (+1.99%), and materials (+1.88%) leading. 💚
In economic news, the University of Michigan’s preliminary consumer sentiment reading ticked up more than expected. Lower gas prices buoyed the overall data and reduced consumers’ future inflation expectations by 0.2%. Additionally, U.S. import prices saw their first month-over-month decline since December, also driven by lower fuel prices. 👍
In individual stock news, micro-cap company Twin Vee PowerCats Co. ($VEEE) designs, manufactures, and markets recreational and commercial power catamaran boats. The stock soared nearly 80% today after reporting better than expected earnings…hence today’s title. 🚀
Best Buy is cutting jobs across the country just weeks after reducing its sales outlook. ❌
Hyundai announced a $400 million AI and robotics institute powered by Boston Dynamics (the maker of those robot dogs you see all over the internet). 🤖
And finally, Royal Caribbean followed Norweigan Cruiselines in (partially) dropping its vaccine requirement. 🚢
In crypto news, Coinbase had its credit rating and outlook cut to “negative” by S&P due to weak earnings and increasing competition. The alleged developer of the recently sanctioned platform “Tornado Cash” was arrested in Amsterdam. Outside of that, the total crypto market cap index rose for the sixth straight week. ₿
Here are the closing prices:
The headline readings get all the attention but are highly volatile and a lagging indicator.
Instead of focusing on the month-to-month changes in these measures, an alternative way to get a read on inflation may be to take a step back and look at the trend of the underlying commodity. After all, we do have a real-time view of these prices changing at the wholesale level…so why not use them? 💭
An easy way to measure crude oil’s trend is by applying a simple moving average. Below we’ve got a chart of prices with a 63-day (purple line) and 252-day (blue line) moving average, which tell us the average price over the last quarter and year, respectively.
As we can see, the 252-day moving average is trending firmly higher, though the slope of its ascent has slowed marginally. A rising moving average tells us that the average price of crude over the last year has been rising and putting upward pressure on the inflation measures. 📈
Meanwhile, the 63-day moving average is sloping downward, showing that the average price has fallen over the last quarter, which is what we’re seeing the impact of in the July inflation data. 📉
While this is by no means a perfect measure, it gives us a general idea of what to expect in the inflation print by tracking the trend of oil prices in real-time.
Think about it — it would be difficult for the energy prices that go into the government’s inflation measures to come down if the underlying commodity’s price hasn’t gone down, right? 🤔
Additionally, it will take time for falling crude prices to work their way through the system. Futures prices are the starting point, and the inflation measures generally track the price of final goods (what you see on the shelves), so it’s going to take a sustained decline (or stalling) in crude prices to make a meaningful difference across all the goods/services measured.
But, that’s what the Fed is looking to do by raising rates. They can’t affect the supply side of things, so they’re trying to crush demand…which has had mixed results. With that said, weakness in the global economy may start helping them out. Today, OPEC lowered its 2022 oil demand estimates for the third time since April, so we’ll have to see what happens. 🤷♂️
The broader point here is that various Fed officials have reiterated that tightening will continue until long-run inflation makes meaningful progress towards 2%.
A big piece of that will be oil, so keep this chart on your radar in the weeks and months ahead. 🗓️
Peloton shares rose faster than my heart rate during one of their cycling classes after the company announced significant changes in a push towards profitability. 😮
In today’s announcement, the company told employees it is cutting about 780 jobs, closing a significant number of its stores, and hiking prices on some equipment. These changes mark the second major shakeup for the company this year. In February, its founder passed the reigns to new CEO Barry McCarthy as the company slashed 2,800 jobs.
Its CEO Barry McCarthy said in today’s memo, “We have to make our revenues stop shrinking and start growing again,” also stating, “Cash is oxygen. Oxygen is life.” 😮💨
The struggling at-home fitness company has seen its value plummet from a high near $50 billion just ~18 months ago to under $3 billion as of mid-July, which many would say warrants an aggressive strategy shift. 🔻
It’s been a big year of change for the company, and some investors seem to be coming around to its turnaround story. With today’s rally, the stock is at its highest level in about three months, though it still has a lot of work to do to get back to its post-IPO price and pandemic-fueled highs.
Maybe the primary driver of the stock’s gains is the rebound in the overall market or the tech sector. Or maybe it’s that investors are truly believers of the new strategy…only time will tell. ⌛
Bullets From The Day:
💊 Pharma stock investors get heartburn over drug litigation charges. GSK, Sanofi, and Haleon shares sold off heavily this week over investor fears of potential U.S. litigation charges focused on the popular heartburn drug Zantac. While this has been a known issue since 2019, when regulators launched their safety review, the first scheduled legal proceeding renewed investor concerns and shone a spotlight on the potential fines and industry ramifications that could result. CNBC has more.
🏦 Recent bank hostage situation highlights a growing global sentiment. An armed man took hostages at a bank in Beirut, Lebanon, and took hostages after the bank refused him access to the $210,000 in his account needed to pay his father’s medical bills. Since 2019 there have been various limits placed on the amount of hard currency available for withdrawal to avoid bank runs that could collapse the country’s financial system. As the situation unfolded, many citizens came to support the man and vent their frustrations over how the banks and government have handled the ongoing economic crisis. This sentiment is something seen across various countries over the years and is unlikely the last time we’ll hear stories like this. The Washington Post has more.
👎 The FCC rejects Starlink’s bid for subsidies because its speeds are too slow. The company, which is a subsidiary of Elon Musk’s SpaceX, applied for nearly $1 billion in subsidies for offering broadband internet services to rural areas in the U.S. However, the Rural Digital Opportunity Fund requires companies to meet specific standards, namely a minimum 100Mbp download and 20 Mbps upload speed, which Starlink failed to achieve. Right now, the FCC chairwoman sees Starlink as a “still developing technology” and says that the organization must protect its scarce funds and deploy them to their best possible use. PC Gamer has more.
📱 New Amazon service allows companies to build their own 4G mobile networks. The company first announced its AWS Private 5G program late last year, but it’s now available to AWS customers in various regions of the U.S., with an international launch soon. Essentially, the service allows companies to order the hardware and special SIM cards directly from Amazon, which then provides all the necessary software and APIs for the businesses to set up an on-site private mobile network. Despite its name, the program currently only supports 4G service but will be expanded to 5G in the future. More from TechCrunch.
📉 Five Chinese state-owned companies to delist from NYSE. As tensions between the U.S. and China heat up, some Chinese state-owned companies are pulling their listings from U.S. exchanges. The five companies were among those in the U.S. SEC’s flagging of companies that failed to meet U.S. auditing standards in May. However, the companies’ delisting announcements did not address that specifically. The ongoing disagreements about auditing standards and tensions over the U.S.’s involvement in Taiwan suggest this may just be China flexing its muscles as the countries face off over various issues. Reuters has more.