DHUnplugged #663 – Non-Belching Bulls

YIELDS and the Curve - getting weirder.

Bear Twist -Tucked and ran.

Earnings season update - big change this week to end the season.

The Closest to The Pin standings!

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Warm Up

- Musk/Zuck cage-fight news

- Yields spike - Yield curve spreads

- Prominent Bear - begs for mercy (Bullish Bear?)

- Beer Ball - Reversing The Trend

- Banks - Bowie: Under Pressure (who Else was featured on that song?)

Market Update

- Market Moving - earnings and ECO

- Eco report was confusing many - what is the deal?

- Earnings - some big hits and some big misses

- An update on earnings season

- Markets bummed - more downgrades, China data sucks

30 Second Shameless Host Plugs

Inflation

- Key CPI report out this week (tomorrow) - but many looking for consistent drop (AH sees potential for near-term bounce higher in inflation)

- 3.5% - but weaker additions to payroll/jobs.

- Wage growth kicking up again

- Manheim Used Car Index -1.6% m/m, -11.6% yr/y (seeing moderation, but prices still high)

Employment

China Eco

- China said Tuesday that exports fell by 14.5% in July from a year ago, while imports dropped by 12.4% in U.S. dollar terms.

- That's worse than what analysts had expected.

- A Reuters poll predicted a 12.5% decline in exports in July from a year ago, in U.S. dollar terms. Imports were expected to have dropped by 5% during that time, according to the poll.

Yield Curve

- The U.S. yield curve steepened by 20-30 basis points last week - the biggest steepening since March - and the steepening of the 2-year/30-year yield curve by 30 basis points was one of the biggest weekly moves in over a decade.

- Lots of talk from Bill Ackman about shorting the long end of the curve (20-30 yr)

Earnings Season - Almost ending

- The blended year-over-year earnings decline for the second quarter is -5.2% today, compared to an earnings decline of -7.4% last week and an earnings decline of -7.0% at the end of the second quarter (June 30).

- If -5.2% is the actual decline for the quarter, it will mark the largest year-over-year earnings decline reported by the index since Q3 2020 (-5.7%). It will also mark the third straight quarter in which the index has reported a year-over-year decrease in earnings.

- Big mega-cap numbers helped over last week

DOWNGRADES

- Ratings agency Moody's downgraded the credit ratings of several U.S. banks on Monday and warned it was reviewing the status of some of the nation's biggest lenders.

- Moody's cut the ratings of 10 U.S. banks by one notch and placed some banking giants on review for potential downgrades. The agency also changed its outlook to negative for several major lenders. Overall, it changed the assessments for 27 banks in the sector.

- The downgraded banks include M&T Bank, Pinnacle Financial Partners, Prosperity Bank and BOK Financial Corp .

- The banks placed on review for downgrade include BNY Mellon, US Bancorp, State Street and Truist Financial.

-"Many banks’ Q2 results showed growing profitability pressures that will reduce their ability to generate internal capital," Moody's wrote in a note.

Italy! - How Do You Say Morons in Italian?

- deficiente OR il ritardato

- Italian banking shares took a beating on Tuesday morning after Italy's cabinet approved a 40% windfall tax on lenders' "excess" profits in 2023.

- Just off negative rates and banks being punished again

- Italian Deputy Prime Matteo Salvini told a press conference on Monday that the 40% levy on banks' extra profits derived from higher interest rates, amounting to several billion euros, will be used to cut taxes and offer financial support to mortgage holders.