Stocks continue to rise
The market rose again in the afternoon, with the Dow up more than 300 points. The top performers of the 30-stock average include Disney, Merck and Apple.
The S&P 500 is now up nearly 3% for the week.
– Jesse Pound
Michael Burry warns of ‘addictive’ consumer behaviour: ‘Winter is coming’
“The Big Short” investor Michael Burry, known for calling the subprime mortgage crisis, warned that “addictive” consumer spending is signaling more trouble ahead.
“Net consumer credit balances are rising at record rates as consumers choose violence over spending cuts in the face of inflation,” Burry said in a tweet on Friday. “Remember the oversaving problem? No more. The COVID helicopter cash taught people to spend again, and it’s addictive. Winter is coming.”
Burry suggested that consumers were still splurging on goods and services at a time when inflation remained at a multi-decade high.
The investor, who now runs hedge fund Scion Asset Management, has been bearish on markets and the economy. In May, he drew parallels between today’s market environment and that of 2008, saying it’s like “watching a plane crash.”
— Yun Li
The chips are back after the struggles of the first week
A rough start to the week for semiconductors has turned into a small blip for the stock market, Bespoke Investment Group noted on Twitter.
Following earnings notices from Nvidia and Micron, the VanEck Semiconductor ETF fell sharply on Monday and Tuesday. But the ETF is now up slightly for the week.
Meanwhile, Nvidia is down just 2.6% for the week after falling 10% on Monday and Tuesday. Micron is up 4% for the week.
– Jesse Pound
Stocks extend earnings
Stocks are rising as the afternoon begins. The Dow is up about 250 points, while the S&P 500 and Nasdaq Composite are up 1% and 1.4%, respectively.
—Jesse Pound
The S&P 500 could be close to indicating whether the market has already bottomed out
The S&P 500 has climbed above a key technical level for a second day, and if it closes there, historically it could be a sign that stocks have already bottomed.
For a second day on Friday, the S&P 500 traded above the 4,231 level, the 50% pullback from its peak to low. It has not closed above this level.
Chart-watching strategists say that if this level is cleared, it would usually indicate that the market has seen its bottom and will not return to the lows.
“It means we’re not going down, but it doesn’t mean we’re going straight from here,” said BTIG’s Jonathan Krinsky. He said the big question is whether it will hold the level and close there, or just touch it intraday.
According to Krinsky, in data going back to 1950, the S&P has never returned to its lows after closing above a 50% retracement.
He noted that in May 2001, the S&P 500 rallied above the 50% retracement, but only on an intraday basis, and the bear market continued for another 18 months.
But even if it closes above the level, the S&P 500 could still be in for a rough ride.
“Previous 50% pullbacks in 1974, 2004 and 2009 saw decent shocks shortly after clearing this threshold,” Krinsky noted.
-Patti Domm
Wells Fargo Cuts Petco Price Target, But Still Says Buy
Pedestrians cross a street in front of a Petco Animal Supplies Inc. store. in New York, USA, on Wednesday, September 9, 2020.
Angus Mordant | Bloomberg | Getty Images
There’s an improving risk-reward outlook for Petco, but second-half performance estimates are set to drop, according to Wells Fargo.
The company cut its retail price target to $22 from $27, citing a difficult second quarter and the need for the company to manage its expectations for the second half of the year. Petco is expected to report earnings on August 24th.
Still, the company maintained its buy rating on the company, and its new price target represents a more than 40% upside to the stock’s current share price.
Longer term, the “growth story remains attractive, the business continues to take part and the category is more defensive than getting credit. Taken together, we see a solid entry point for LT,” analyst Zachary wrote Let’s do it on a Friday. note
— Carmen Reinicke
Lumber prices are on track for the best week of 2022
Back-to-back inflation reports this week showed a reduction in price pressures, but not everything is in the right direction. Case in point: Lumber futures prices are up 22% this week alone, for their first positive week in five and the best week since mid-November. Undoubtedly, lumber prices are still down more than 40% this year.
Zoom in on the Arrows icon pointing outwards
— Yun Li, Gina Francolla
Cryptocurrencies are poised for another weekly gain
Cryptocurrencies are about to extend their winning streak.
Bitcoin has gained 3.9%, according to Coin Metrics. It rose to its highest level since June 13 earlier in the week, before falling to a low as investors digested two better-than-expected inflation reports. The cryptocurrency is currently on pace for its third week of gains in the last four.
The excitement surrounding the merger continues to help the price of Ether, which has led the crypto market lately. Ether is up 12.2% for the week and is on track for its fifth positive week in the last six.
— Tanaya Machel
A decline in earnings seems less likely, Stoltzfus says
Over the summer, Wall Street has worried about a pending decline in corporate earnings.
But the second-quarter reporting season showed earnings holding up decently, and recent economic data has eased concerns about an impending recession.
That could mean earnings in the coming quarters could be a positive surprise, according to Oppenheimer’s John Stoltzfus.
“Based on what the jobs number showed us this week, and what the CPI and PPI in particular showed us this week, that may work out pretty well for earnings…The fundamentals are improving , although many challenges remain. in the landscape,” Stoltzfus said on “Squawk on the Street.”
– Jesse Pound
Leading economists cut GDP outlook and raise inflation expectations
Economic growth will be slower going forward and inflation higher than expected, according to a closely watched survey of economists released on Friday.
The Survey of Professional Forecasters, compiled every three months by the Philadelphia Federal Reserve, led to a sharp reduction in the GDP outlook and a considerable increase in the inflation outlook.
Third-quarter growth is now expected to be just 1.4%, down from the previous forecast of 2.5%. For the full year, GDP is expected to grow by 1.6% (up from 2.5% previously) and by 1.3% in 2023, a point below previous forecasts.
The 12-month inflation outlook for the third quarter, as measured by the consumer price index, has increased to 6.7% (vs. 4.5%), while the projection for the whole year, expressed in four quarters from Q4 to Q4, now stands at 7.5% (vs. 6.1%). Core PCE inflation, which is the Fed’s preferred measure, is set at 4.5% for 2022, up from 4.1% previously.
Fed officials watch the survey closely and use it to help make monetary policy decisions. Some of the 35 participants include Jan Hatzius of Goldman Sachs, Mark Zandi of Moody’s and Ellen Zentner of Morgan Stanley.
—Jeff Cox
Consumer sentiment beats expectations
The preliminary reading of the University of Michigan consumer index was 55.1, beating expectations of 52.5, according to Dow Jones.
One-year inflation expectations fell to 5.0% from 5.2%, although 5-year expectations rose slightly to 3.0% from 2.9%.
The survey has taken on increasing importance in recent months after Fed Chairman Jerome Powell pointed to its inflation expectations component as motivation for the Fed to move to bigger rate hikes.
– Jesse Pound
Stocks open higher
Stocks opened higher on Friday, putting the S&P 500 and Nasdaq Composite on track for their fourth consecutive positive week. The Dow gained more than 100 points, led by Disney up nearly 2%.
– Jesse Pound
Walmart’s concerns may be overblown, Morgan Stanley says
Concerns about Walmart’s upcoming earnings release may be overblown, even after the company cut its quarterly and annual profit outlook, according to Morgan Stanley. The company has a buy rating and a retail price target of $145.
The firm sees some reasons why Walmart may be in better shape than feared after analyzing numerator data.
1. Walmart is experiencing big declines in discretionary categories like tools and home improvement, home and garden, electronics and sporting goods. But, these are consistent with what the industry is seeing and the shift in consumer spending that the company has seen. On the other hand, apparel sales at Walmart look solid in the second quarter, suggesting its downsizing strategy is working, Simeon Gutman wrote in a note Thursday.
2. The second-quarter gross margin contraction is likely primarily due to markdowns, which may extend into the second quarter and second half of the year, but should not carry over into 2023.
3. There are signs that higher income households are cutting back on shopping at Walmart. This is positive for the retailer even though inflation remains high.
Walmart will report its latest quarterly earnings on August 16. Shares closed at around $129 in late Thursday trading.
— Carmen Reinicke
Citi says it’s too early to look for Fed pivot
Signs of peak inflation and negative GDP growth have some on Wall Street speculating that the Fed could change course on a rate hike, but investors shouldn’t bet on that, according to Citi.
Strategist Jamie Fahy said in a note to clients late Thursday that the Fed is likely to keep its foot on the gas pedal in the coming months.
“Inflation levels remain subdued and the labor market is still very tight, so the Fed will want to continue until inflation returns to target or the labor market breaks down. So the labor market data has of being very weak. and CPI needs to see another big mistake for the Fed to start its victory lap,”…