DHUnplugged #660: Exuberance

bank earnings are out - same pattern as usual.

China economy slipping further. Oil prices coming up as summer disruptions hit pipelines.

Massive raises in the airline sector - 40%. At the same time, Ford slashing prices.

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Warm Up

- Bank Earnings - Friday the usual

- Markets Trying very hard to stay positive - key analyst upgrades

- Toffee Pretzels with Old Bay - Client Sent me a batch - McAllens Best Toffee  (reasonably priced too!)

- Big price hikes and bigger price cuts

- M&A - Microsoft deal makes DOJ look silly and may pave way for more activity

- A look at a very bad stock chart - you probably won't believe the company

Market Update

- China economics - from bad to worse (what happened to that re-opening trade?)

- All about AI - wait to hear in the next batch of earnings reports

- Luxury firms feeling the heat after China's poor eco readings

- Technicals - MOMO and FOMO - Ahead of Earnings

- Clearly some excess exuberance in markets

ECO

- Two-year U.S. inflation expectations embedded in the Treasury market fell as low as 1.88% on Friday and held at 1.90% on Monday, well below the Fed's 2% target.

- Surveys showing surging U.S. household confidence in June, as real wage growth turns positive and jobs remain plentiful, saw a hesitation in interest rate markets on Friday as Fed officials enter a blackout period before the July 26 decision.

- Crude moving higher (this week it was because of supply disruptions and OPEC cuts)

- Bets are that Fed will increase by 0.25% next week and probably be done. (Even though they are strutting around still talking about at least 2 more hikes and no thoughts about a cut anytime soon.

- USD lowest level against a basket of currencies since April 2022 (also showing that expectations are for a Fed to chill out)

---10Y Treasuries - Down from triple top near 4.10% to 3.8%

Retail Sales

- Total retail sales in June increased a weaker-than-expected 0.2% month-over-month (Briefing.com consensus 0.5%), yet May sales were revised up to 0.5% (from 0.3%). Excluding autos, June retail sales also increased a weaker-than-expected 0.2% (Briefing.com consensus 0.3%) following an upwardly revised 0.3% increase (from 0.1%) in May. After accounting for the upward revisions to May sales, the June results were roughly consistent with expectations.

(Briefing) The key takeaway from the report is that control group sales, which are used in the computation for personal spending in the GDP report, were up a solid 0.6%, leaving them far afield of an economy in recessionary distress.

- Motor vehicle and parts dealer sales increased 0.3% month-over-month following a 1.5% increase in May.

- Gasoline station sales declined 1.4% month-over-month after declining 2.1% in May.

- Building material and garden equipment and supplies dealer sales dropped 1.2% month-over-month after increasing 1.4% in May.

- Food and beverage store sales decreased 0.7% month-over-month after being unchanged in May.

- Nonstore retailer sales jumped 1.9% month-over-month after increasing 0.7% in May.

- Food services and drinking places sales rose 0.1% month-over-month after increasing 1.2% in May.

- Electronics and appliance store sales increased 1.1% month-over-month following a 2.1% increase in May.

Bank Earnings

- Schwab comes up smelling sweet - Big flood of new accounts, deposits and decent earnings

-  Bank of America - Reports Q2 (Jun) earnings of $0.88 per share, $0.04 better than the FactSet Consensus of $0.84; revenues rose 11.1% year/year to $25.2 bln vs the $24.98 bln FactSet Consensus. (Stock up 4%)

----- Revenue, net of interest expense, increased 11% to $25.