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Briefing.com Summary:
*Microsoft (MSFT) has powered to a 10% gain after its better-than-expected report and outlook, offsetting weakness in Meta Platforms (META) and Qualcomm (QCOM) after their reports.
*Oil prices are down, as last night's retaliatory strikes by the U.S. did not impact oil infrastructure
*A trove of economic data conveyed a generally solid economic backdrop, albeit one still dealing with sticky inflation.
Microsoft (MSFT) reported better-than-expected results and issued better-than-expected guidance after yesterday's close, and, boy, did the market need that. It was looking dicey for a brief time in the after-hours session.
The market had just come off an ugly slide that was precipitated by rising oil prices and increasing concerns that the Fed isn't moving quickly enough to get inflation back down to its 2.0% target. Those concerns manifested themselves in a rising 10-yr note yield as Fed Chair Warsh conducted his press conference, talking the talk about delivering price stability.
The 10-yr note yield sits at 4.68% today, up six basis points from yesterday's cash settlement but down three basis points from the overnight high of 4.71%. Sliding oil prices (WTI -0.3% to $84.22/bbl) have helped as we move into today's cash session.
Last night's strikes by the U.S. were targeted at degrading Iran's military capabilities but, importantly, did not involve Iran's oil infrastructure. In other words, they had teeth—baby teeth—from the market's viewpoint.
That is partly why there is some lullaby music playing this morning, as the market works to calm down after yesterday's sell-off.
Currently, the S&P 500 futures are up 52 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 502 points and are trading 1.5% above fair value, and the Dow Jones Industrial Average futures are up 249 points and are trading 0.3% above fair value.
Will this calm persist? The answer is going to be provided by the bond market and oil prices as the session progresses. For now, it is copacetic, and this morning's trove of key economic data has kept things relatively calm.
- The Advance Q2 GDP report showed real GDP increasing at an annual rate of 1.5% (Briefing.com consensus: 2.3%) on the heels of a 2.1% increase for Q1. The GDP Price Index increased by a whopping 6.3% (Briefing.com consensus: 3.7%) following a 3.6% increase in Q1.
- While the headline GDP print is a bit disappointing, it is not as soft as it appears knowing that net exports subtracted 1.01 percentage points. The bright spot was the pickup seen in personal spending (+3.2% from +0.5%) and final sales to private domestic purchasers (+3.9% from +1.7%).
- Initial jobless claims for the week ending July 25 increased by 9,000 to 197,000 (Briefing.com consensus: 203,000). Continuing jobless claims for the week ending July 18 decreased by 7,000 to 1.782 million.
- The key takeaway from the report is initial claims remaining below 200,000, which is an historically low level and indicative of a solid labor market where layoff activity is quite low.
- Personal income increased 0.2% month-over-month in June (Briefing.com consensus: 0.3%), personal spending jumped 0.3% (Briefing.com consensus: 0.4%), the PCE Price Index was down 0.1% (Briefing.com consensus: -0.1%), and the core-PCE Price Index rose 0.1% (Briefing.com consensus: 0.2%). On a year-over-year basis, the PCE Price Index was up 3.7% versus 4.1% in May, and the core-PCE Price Index was up 3.3% versus 3.4% in June.
- The key takeaway from the report, taking into account Fed Chair Warsh's demonstrative statement that the Fed doesn't have a soft inflation target but a hard target of 2.0%, is that the PCE Price Index remains well above 2.0%.
Up next is the not-so-tiny matter of earnings reports after the close from Apple (AAPL) and Amazon (AMZN).
