The CPI rose at its fastest pace since 1981
It was a relatively dismal week on Wall Street, as July marched on and investors scrambled to find some sort of footing amid the daily deluge of recession fears and and a global economic slowdown. On Monday, the major indexes logged quiet losses as many focused their attentions on the weekend's Twitter (TWTR) drama, and the social media company's lawsuit after Elon Musk announced the termination of his $44 billion buyout deal. Tuesday saw similarly shaky trading while traders dumped riskier assets and looked ahead to the start of another earnings season and several key economic indicators.
The consumer price index (CPI) was all anyone could talk about on Wednesday. The closely watched inflation reading rose at its fastest level since 1981 in June, topping analysts' estimates and marking a rise from the previous month's reading. Stocks took a nosedive in response, while the 10-year and 2-year Treasury yields saw their biggest inversion level since 2000. Thursday brought even more anxiety-inducing economic data, after weekly jobless claims hit their highest reading since November 2021, causing stocks to sink even deeper. The Dow and S&P 500 both strung together their fifth-straight losses, while the Nasdaq just barely eked out a gain. There was some hope for markets on Friday, as all three major indexes staged a bounce on the back of upbeat retail data. However, as of this writing, the Dow, Nasdaq, and S&P 500 are still pacing for big weekly drops.
Finance Giants Kick Off Another Earnings Season
It feels like earnings season just passed when another one is already here, with plenty of bank and financial names giving investors a taste of what's to come. Unfortunately, that taste might be hard to swallow, if this week's bevy of reports serve as any sort of guidepost. Two major players in the sector to report this week were JPMorgan Chase (JPM) and Morgan Stanley (MS).
Expectations were low ahead of the reports. Several analysts slashed their price targets on JPM ahead of the event. Meanwhile, covering brokerages had already priced in an 8.7% year-over-year drop in revenues for Morgan Stanley's second quarter. This sentiment was far from unfounded, and the two companies incited an options trading frenzy after they both shared an earnings and revenue miss. Citigroup (C) also faced a bit of pessimism ahead of its report, though the third-biggest bank name proved some of these naysayers wrong with an earnings and revenue beat. PNC Financial Services (PNC), on the other hand, posted an earnings beat but a revenue miss, and its stock was seen on Friday struggling for direction.
Brokerage Bunch Responds to Looming Recession Fears
The current economic slowdown and blanketing anxieties over a potential recession have analysts jumping to make adjustments to their portfolios. No sector is safe it would seem, and many brokerages cited inflationary pressures as the reason for their bear notes. Gap (GPS), in particular, was downgraded for this reason, while homebuilder Lennar (LEN) got hit with a bear note after J.P. Morgan Securities noted softer sales and higher incentives.
Meanwhile, both Cisco Systems (CSCO) and American Express (AXP) caught downgrades over spending concerns, and finance concern BlackRock (BLK) stumbled over a slew of pre-earnings price-target cuts. It wasn't all bad, though. Goldman Sachs highlighted Mattel (MAT) as a market standout, even amid increasing macroeconomic uncertainty.
Big Tech and Blue Chip Earnings Abound Next Week
In addition to a slew of corporate earnings next week -- including American Airlines (AAL), AT&T (T), Bank of America (BAC), Biogen (BIIB), Boston Beer (SAM), Cal-Maine Foods (CALM), IBM (IBM), Netflix (NFLX), Snap (SNAP), Tesla (TSLA), Twitter (TWTR), United Airlines (UAL), and Verizon (VZ) -- investors can expect key manufacturing and services data. In the meantime, Schaeffer's Senior Quantiative Analyst Rocky White tells you everything you need to know abouth the 10- and 2-year Treasury yield curve inversion.