D&D Note (7.15.2022) ~ Stocks Get a Friday Relief Rally with Green Across the Screen ~
Stocks had a broad based relief rally today with all sectors finishing the day in the green along with the major US Indices.
Another round of bank earnings came out this morning with Citigroup soaring 13% after they beat estimates and Wells Fargo popped over 6% despite profits dropping 48% after setting aside funds for potential bad loans.
This led to a rally in the Financial Sector which was the leading sector on the day followed by Healthcare.
Retail sales rose 1% in June better than the expected 0.9% estimate.
The University of Michigan Consumer sentiment report came in at 51.1 better than the estimate of 50.
These two reports show the US consumer still has spending power despite the rise in gasoline, rent and food prices.
D&D shares the view of Wharton professor Jeremy Siegel that the US is already in a recession but one that is mild.
D&D also sees the overall year end FED Fund Rate slightly higher due to the 9.1% inflation report from June but that there will be a pull forward of hikes. We could see a 100bp hike in July but likely 75bp. In September we see a 50-75bp hike. We still see a pivot in September signaling moderation in policy and no hike in the December meeting. Our new forecast ads an additional 25-50bp hikes.
Traders have reduced bets on a 100 basis point July hike to now 42% on Friday which was almost double that just yesterday.
Stock Specific News:
Alphabet shares as of market close today will split 20 to 1.
UnitedHealth rallied 5.9% after reporting better-than-expected Q2 earnings and was D&D’s largest percentage gainer on the day.
Lockheed Martin was lower by 0.57% in most likely a sell the news event as their rocket systems where officially deployed into the battlefield today in Ukraine. LMT was the only holding in the red today for D&D.
Tesla can lower car prices if inflation ‘calms down’ according to Elon Musk.
TikTok’s global security officer, who oversees cyber security, is stepping down but remaining at the company.
Amazon announced they will start delivering packages via drones in Texas later this year.
Disney is raising the price of ESPN+ by 43% to $9.99 a month.
Solar stocks as a basket dropped today after Senator Joe Manchin said he won’t support the climate bill.
Closing Markets (as of 1:15pm PST)
DOW up 2.15%
S&P 500 up 1.92% (3,863.16)
NASDAQ up 1.79%
VIX down -8.14% to 24.25
2 Year Note down -1.31bp to 3.12%
10 Year Note down -4.15bp to 2.92%
Oil up 2.005% to $97.70 a barrel.
Gold down -0.1% to $1704.10 an ounce.
Bitcoin up 2.42% to $21,097.26
Ethereum up 6.07% to $1,263.81
~ Dave James / Principal Trader and Market Strategist