The stock market rally lost significant ground, with the Nasdaq reversing once again a major area of resistance. But the major indexes are pretty much back to end the week. Inflation jumped to a 40-year high of 9.1%, with underlying details indicating continued cost pressures even as fuel prices fall sharply this month. JPMorgan Chase (JPM) missed the revenues, but Citigroup (C) soar from low results. Service Today (NOW) warns of Europe’s weak needs. Delta Air Lines (DAL) did not watch EPS, but American Airlines (AAL) reported strong preliminary results. Taiwan Semiconductor (TSM) revenue and guidance raised chip stocks.
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The Stock Market Rally Was Not Broken
The stock market rally retreated for most of the week as the Nasdaq fell from the 10-week line, with hot inflation data raising Fed rate hike odds and recession risks. But major indexes rebounded from Thursday’s lows and rallied on Friday. Bank stocks are mixed with profits. Service Today (NOW) weighed on software. But the chip names bounced Taiwan Semiconductor (TSM) revenue and guidance. The 10-year Treasury yield has fallen sharply, with the upside yield curve showing recession concerns.
Hot Inflation Increases Fed Rate Odds
A trio of hot economic reports, highlighted by the new 40-year-high 9.1% CPI inflation rate, bolstered expectations for a 75-basis-point Federal Reserve rate hike on July 27 and raised the possibility of a full-percentage-point transition. The CPI report showed unexpected broad -based price pressures, with inflation of non -energy services hitting 5.5%, the highest in 31 years. Producer price inflation has also been hot, with wholesale inflation for finished products unexpectedly rising to 11.3%. A 1% increase in retail sales in June, both general and excluding vehicles, also topped expectations. Sales rose 0.7% excluding vehicles and gas compared to expectations of a slight decline. But inflation appears to be declining from its peak, with gas prices dropping nearly 10% from mid -June levels. Inflation expectations also fell slightly in July according to the University of Michigan sentiment survey.
Meanwhile, new claims for unemployment benefits rose 9,000 to 244,000 in the week of July 9. That was the highest since November and rose 78,000 from a half -century low in mid -March.
UnitedHealth Top Revenues
UnitedHealth (UNH) posted an 18.5% increase in EPS to $ 5.57 in Q2, falling short of previous estimates of 36 cents as revenue grew 12.6% to $ 80.33 billion. Coverage expansions, a lower cost of care and a substantial 30% increase in revenue per customer for Q2 results powered by its Optum health services division. The Dow Jones managed-care giant raised full-year earnings by 20 cents to midpoint in the $ 21.40 to $ 21.90 range. UNH stock rose on Friday, back to a buy point.
Mixed Income Bank
Lower income investment banking is a common theme for large banks in today’s income era. JPMorgan (JPM) at Morgan Stanley (MS) came in with a larger than expected decline in EPS. JPMorgan has temporarily suspended its share buyback. Morgan Stanley, which reported a 55% drop in investment banking revenue, raised its dividend. Wells Fargo (WFC) is mostly in line with revenues while revenue is deficient. Citigroup (C) revenues dropped, but views were easily defeated. Citi’s revenue jumped 11% to $ 19.6 million, driven by its institutional client segment. JPM stock fell for the week, but closed lows. Morgan Stanley, Wells Fargo and Citi rose, though all were on a long downtrend.
Travel Demand Resists Hiccups
Delta Air Lines (DAL) said it “is still seeing any significant pullback requested” and service interruptions are declining. But it plans to make flights available at June levels to restore stability to service, as airlines struggle to stay staffed following Covid-related job cuts in 2020. Revenue in the second- quarter per-share is lacking in estimates. Revenue adjusted. The carrier remained upbeat on a rebound in international and corporate travel later this year. But it forecasts an increase in costs, relative to 2019, as it limits flight capacity. American Airlines (AAL) during the week offers a more optimistic forecast for Q2 unit earnings.
The TSMC Posts Beat-And-Raise Report
Taiwan Semiconductor Manufacturing (TSM), known as TSMC, beat analyst estimates for the second quarter and gave a better than expected forecast for the current season. The chip foundry’s EPS jumped 67% while sales grew 36% to $ 18.16 billion. However, TSMC issued some cautious comments for late 2022 and early 2023, citing declining sales of PCs, smartphones and consumer electronics. Shares rose, leading chip stocks higher.
ServiceNow Warns On European Sales, Strong Dollar
Service Today (NOW) has crashed after CEO Bill McDermott told CNBC that the company’s sales cycle in Europe could be lengthening. McDermott also said exchange rates are causing a problem for software companies. Microsoft (MSFT) warned of currency swings a few weeks ago, with the US dollar rising against rivals. Many software makers, from Microsoft to highly valued growth plays, have fallen hard on ServiceNow’s warning.
BYD Dives On Buffett Rumor, Slashes Bankruptcy
A confrontation suggested Warren Buffett Berkshire Hathaway (BRKB) is selling some or all of its large long-term stake to the Chinese electric-car maker. But there is no confirmation. BYD later provided preliminary first half revenue results that were more than agreed. Shares, which crashed on Buffett’s rumors, rose in the emerging earnings report, but still fell sharply for the week. BYD will begin selling its Seal sedan, a rival of the Model 3, on July 18. Deliveries should begin within a few days.
Market Chop Hits BlackRock
Investment-management giant Black stone (BLK) and custody banks Bank of New York Mellon (BK) at State Street (STT) offered a mixed bag of second-quarter earnings. Shares of all three rose on Friday, even as BLK stock fell for the week. The results come as the industry tries to guide their investor clients through volatile markets, high inflation and rising interest rates. BlackRock CEO Larry Fink said investors were navigating “the worst start of the year for both stocks and bonds in half a century.”
News In Brief
Tesla (TSLA) AI chief Andrej Karpathy, who manages the company’s Autopilot development, has left the EV giant. Karpathy was on a month-long sabbatical, which raised speculation that she was leaving. Elon Musk said Tesla could lower prices if commodity prices dropped. Tesla stock fell for the week.
Twitter (TWTR) has filed a lawsuit against Elon Musk after the eccentric billionaire said he was ending his $ 44 billion deal to buy Twitter. Musk may have to pay Twitter more than $ 1 billion in breakup fees, with courts ordering him to execute the deal. Twitter stock dived to start the week but reduced losses.
Unity Software (U) will buy the app monetization and distribution company IronSource (IS) in an all-stock deal worth approximately $ 4.4 billion. Video game platform maker Unity collapsed, which also led to low profits.
Conagra Brands (CAG) reported that Q4 EPS grew 20%, just whip, while revenue rose 6% to $ 2.91 billion, almost in line. The agribusiness giant headed low for fiscal 2023. Shares fell.
Love (CTAS) matched fourth -quarter revenue expectations with a 13% gain of $ 2.07 billion. EPS climbed 14%. The business uniform giant guided 2023 sales and lined up for sales.
PepsiCo (PEP) reported that Q2 EPS grew 8% while sales climbed 5% to $ 20.23 billion, both beating views. The beverage and snack manufacturer also boosted its year -round revenue outlook. Pepsi has raised prices and downsized products to manage rising costs.
Fastener (FAST) revenues grew 19%, meeting views. Revenues only dropped, with the industrial supply-demand distributor warning, citing high inflation.
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