All about Earnings… and some US data

• AAII survey shows majority of individuals bullishness hits highest levels since April 2021
• Fed swaps suggest peak rate of 5.419% at November meeting (up from yesterday’s 5.402%)
• Dow poised for a 9-day winning streak as the mega-cap tech trade cools

The Dow is having its best winning streak since 2019 and what makes this so impressive is that it occurs as the AI trade appears to still be in early cycle. Market breadth seems like it wants to improve as the mega-cap tech trade takes a break. Also helping sentiment is that retail traders are back in full force. ​ The latest AAII survey was positive for a seventh consecutive week as traders have not been this bullish in 27 months.

Even another strong labor market reading was unable to rattle investors. ​ Initial jobless claims were widely expected to increase given all layoff announcements telegraphed by the larger corporations, but this week’s release showed there is still a healthy demand for workers. ​ Jobless claims fell from 237,000 to 228,000, while continuing claims rose 33,000 to 1.75 million. The Philly Fed Business Outlook showed business conditions remain depressed, but also that prices received surged from 0.1 to 23.0, a reminder that the disinflation process won’t be a one-way move. ​ Existing home sales also weakened more than expected as low inventories are being countered by high prices. ​ US home resales fell 3.3% to 4.16 million, a five-month low. ​ Inventories are still too low and that should keep prices elevated for a while longer. ​ ​ The bond market took notice to the data and sent yields sharply higher. ​ The dollar looks like it is ready for a rebound. ​

American Airlines

American Airlines delivered a $1.3 billion profit as travelers went wild this summer, but the outlook going forward won’t be as robust. ​ Share prices are lower as the Q3 EPS guidance of $0.85 to $0.95/share was in-line with Wall Street expectations. A weaker consumer and rising fuel prices will likely weigh on travel demand in the second half of the year. ​ ​ ​ ​

Blackstone

One standout metric came from Blackstone earnings: Assets under management hit the $1 trillion threshold. ​ The private equity firm signaled optimism that the year-long struggles of dealmaking should be ending soon. ​ Earnings were weak, falling 39% to $1.2 billion, but expectations are for a major turnaround going forward. ​ It might take a little more time than a quarter or two, but the overall consensus is becoming that the deal market will bounce back strongly. ​

Netflix

Netflix shares are plunging as investors lock in profits after a mixed quarter that saw revenue disappoint but subscriber growth come in more than double analysts’ expectations. Netflix scrutiny is growing as the password sharing crackdown and new advertising tier are not living up to expectations. ​ Netflix is still the lion in the streaming world, but they are making less revenue per customer and costs might surge next year once the actors and writers are back to work.

Tesla

Tesla’s falling margins and uninspiring earnings call are weighing on its share price. ​ Tesla was ripe for a pullback as profitability concerns grow given all the discounts given earlier in the year. ​ This earning report showed that they will have to invest significant amounts of capital into supercomputers and their new Cybertruck. ​ Long-term the company has a solid vision as they make progress with full self-driving, but for now it seems the stock is ripe for a deeper drop. ​

J&J

J&J shares are rising as robust medical technology sales allowed them to raise their full-year profit guidance. ​ J&J delivered a powerful textbook earnings report that included strong top and bottom line beats with upgraded guidance. ​ This is the type of earnings report that excites Wall Street as it drives hope that market breadth could improve when the mega-cap tech trade cools. ​