US FINANCIAL MARKET
Stock Traders Hold Back on Big Moves After Rally: Markets Wrap – Bloomberg, 7/31/2023
- Wall Street traders refrained from making big moves at the start of a busy week for corporate earnings, with the stock market still on pace to notch its longest streak of monthly gains since August 2021.
- Investors have looked past concern about an earnings recession as data bolstered hopes on a soft landing despite the Federal Reserve’s rate hikes.
- Still, valuation worries have resurfaced, with the market trading near overbought levels.
- While many investors are betting the great tech rally that drove this year’s advance has staying power, there’s a growing view the sector is due for a breather — which could weigh on the broader market.
- The S&P 500 was little changed Monday, while still on pace for its fifth consecutive monthly advance. The benchmark has risen about 3% in July.
- The Nasdaq 100 rose 0.2%. The Dow Jones Industrial Average rose 0.1%.
- The megacap space also saw subdued action, with Apple and Amazon.com due to report earnings in the coming days.
- The Nasdaq 100 headed toward its longest streak of monthly gains since August 2020.
- Treasury 10-year yields hovered near 3.95% while the dollar was little changed.
- In corporate news, SoFi Technologies gained after the online bank raised its revenue guidance, citing benefits from deposit growth and lower funding costs on loans.
- Johnson & Johnson fell as a judge dismissed the company’s second attempt at using a unit’s bankruptcy case to press thousands of cancer victims to drop their lawsuits and accept an $8.9 billion settlement.
- Fed Bank of Chicago President Austan Goolsbee said Monday that data showing slower inflation is “fabulous news,” but he hasn’t yet decided on whether to support pausing rate hikes at the next policy meeting.
- Over the weekend, his Minneapolis counterpart Neel Kashkari said the inflation outlook is “quite positive,” though the central bank’s aggressive monetary tightening campaign will likely result in some job losses and slower growth.
- Elsewhere, the yen dropped after the Bank of Japan announced unscheduled bond-purchase operations to buy debt. The BOJ was seeking to contain a selloff after it said Friday it will allow yields to rise above a 0.5% cap.
- The Stoxx Europe 600 rose 0.3%.
- West Texas Intermediate crude rose 0.6% to $81.09 a barrel.
- Gold futures rose 0.4% to $2,006.90 an ounce.
SoFi Surges Most in a Year After Boosting 2023 Revenue Forecast – Bloomberg, 7/31/2023
- SoFi Technologies shares rose the most in almost a year after the online bank raised its revenue guidance, citing benefits from deposit growth and lower funding costs on loans.
- Total deposits at the end of the second-quarter reached $12.7 billion, up from $7.34 billion at the end of last year, the San Francisco-based lender said.
- SoFi now expects adjusted net revenue this year of $1.97 billion to $2.03 billion, up from its prior guidance of $1.96 billion to $2.02 billion, the financial-technology company said Monday.
ON Semiconductor 2Q Profit Up Despite Flat Sales – Market Watch, 7/31/2023
- ON Semiconductor’s second-quarter profit rose but revenue was flat as demand stabilized.
- Revenue was roughly flat at $2.09 billion. Analysts expected revenue of $2.02 billion, according to FactSet.
- Sales fell 9% in the advanced-solutions unit, while revenue rose 6% in the power-solutions segment and 4% in the intelligent-sensing group.
- Stripping out one-time items, adjusted earnings came to $1.33 a share.
- Analysts surveyed by FactSet expected adjusted earnings of $1.21 a share.
Apple’s iPhone 15 Pro will reportedly feature new charging port, titanium edges – CNBC, 7/31/2023
- Apple is preparing to unveil its next generation of devices this fall, and the high-end iPhone 15 models will reportedly feature some major changes.
- The company has used its proprietary Lightning charger for iPhones since 2012, but the iPhone 15 and iPhone 15 Plus will be compatible with USB-C charging, according to a report from Bloomberg.
- The report said the iPhone 15 Pro and Pro Max models will feature titanium edges instead of stainless steel.
- That may help make those phones a bit lighter.
- Ministers from EU member states gave final approval to a common charger law late last year, which means that by 2024, electronic devices — including mobile phones and tablets — will need to support USB-C charging.
- In other words, Apple’s Lightning charger will no longer cut it in some markets.
- “Obviously we’ll have to comply,” Greg Joswiak, Apple’s senior vice president of worldwide marketing, said at The Wall Street Journal Tech Live conference in October.
Amazon Doubling Same-Day Delivery Facilities in Push for Speed – Bloomberg, 7/31/2023
- Amazon.com will double the number of US same-day delivery facilities in the “coming years,” the company announced Monday, an investment executives are counting on to maintain Amazon’s lead in the $1.4 trillion online shopping market.
- Speedy delivery remains a major imperative for Amazon, and the company said more than half of all orders placed by Prime subscribers in the 60 largest metropolitan areas during the most recent quarter arrived the same or next day.
- Amazon also said that it has delivered more than 1.8 billion units to Prime members in the US with same-day or one-day delivery so far this year, up about fourfold from the same period in 2019.
- “These hybrid facilities allow us to fulfill, sort and deliver all from one site, making the entire process of delivering customer packages even faster,” Amazon’s Worldwide Stores chief Doug Herrington said in the announcement.
- “Amazon selection varies by city, as we regularly update our product offering based on what we’re seeing as top customer items purchased or based on seasonal demand in the area.”
Trucking Giant Yellow Shuts Down Operations – Wall Street Journal, 7/31/2023
- Yellow, one of the oldest and biggest U.S. trucking businesses, shut down on Sunday, wrecked by a string of mergers that left it saddled with debt and stalled by a standoff with the Teamsters union.
- The 99-year-old company is known for its cut-rate prices and has more than 12,000 trucks moving freight across the country for Walmart, Home Depot and many other smaller businesses.
- The Nashville, Tenn., company sent out notices to customers and employees saying it was ceasing all operations at midday Sunday.
- A failure imperils nearly 30,000 jobs, including around 22,000 Teamsters members.
US ECONOMY & POLITICS
Fed’s Goolsbee Says Next Rate Move Is Open Even as Inflation Eases – Bloomberg, 7/31/2023
- Federal Reserve Bank of Chicago President Austan Goolsbee said data showing slower US inflation is “fabulous news” but he hasn’t yet decided on whether to support pausing interest-rate increases at the next policy meeting.
- “I haven’t made up my mind for what should happen in September,” Goolsbee said Monday in an interview on Yahoo! Finance.
- “But this golden path — which so far, we’re sticking on that line — that would be a triumph, and it’s certainly a possibility at this point,” he said, referring to being able to get inflation to the Fed’s goal without triggering a recession.
- Goolsbee, a voter on monetary policy this year, said the Fed will have to “play by ear” on whether the policy rate is sufficiently restrictive.
- “We’ll get several more major data points before the next meeting,” he said.
- “But it’s looking like we’re walking the line pretty well.”
Traders Brace for $102 Billion Wave of Treasury Bond Sales – Bloomberg, 7/31/2023
- The US Treasury is set this week to begin a ramp-up in issuance of longer-dated securities that’s likely to stretch into next year, forced by a rapidly deteriorating budget deficit and soaring interest rates.
- For the first time since early 2021, the Treasury will boost its so-called quarterly refunding of longer-term Treasuries, to $102 billion from $96 billion, the consensus among dealers suggests.
- Wednesday’s announcement will likely also see debt managers hoist regular auction sizes for securities across the yield curve — with potential exceptions or smaller bumps for notes less in demand.
- Dealers will be on watch separately for an update on a coming program to buy back older Treasuries.
- The consensus of dealers’ projections shows the following for the upcoming refunding auctions:
- $42 billion of 3-year notes on Aug. 8
- $37 billion of 10-year notes on Aug. 9
- $23 billion of 30-year bonds on Aug. 10
Small-Business Lending Is About to Change, With Simpler Requirements – Wall Street Journal, 7/31/2023
- The federal program for small-business lending is undergoing its biggest makeover in decades.
- The Small Business Administration is simplifying loan requirements, automating more of the process and expanding the pool of nonbank lenders licensed to issue SBA loans.
- The moves, many of which take effect Aug. 1, will make it easier for financial-technology firms to participate.
- SBA officials say they want to boost credit to small businesses that have struggled to get financing as banks favored bigger commercial borrowers.
- “These are the most sweeping changes I have seen in my 40-year career,” said Tony Wilkinson, chief executive of the National Association of Government Guaranteed Lenders, a trade group for current SBA lenders.
- One of lenders’ most important jobs is to say no when it is appropriate, he added, rather than give small-business owners loans they can’t repay.
Biden administration launches new SAVE student loan repayment plan – CNBC, 7/31/2023
- The Biden administration has launched a beta application for its new repayment plan for student loan borrowers.
- The Saving on a Valuable Education, or SAVE plan, is an income-driven repayment plan that may cut many borrowers’ previous monthly payments in half, and will leave some people with no monthly bill.
- The U.S. Department of Education says borrowers can begin enrolling now in what it calls, “the most affordable repayment plan yet.”
- Instead of paying 10% of their discretionary income a month toward their undergraduate student debt under the previous Revised Pay As You Earn Repayment Plan, or REPAYE, plan, borrowers will eventually be required to pay just 5% of their discretionary income under the SAVE plan.
- Those who make less than $15 an hour won’t need to make any payments under the new option, the Education Department says.
- Some of these benefits of the SAVE plan, including the change from 10% of discretionary income to 5%, won’t fully go into effect until next summer because of the timeline of regulatory changes.
EUROPE & WORLD
Euro Zone Returns to Growth as Core Inflation Stays Strong – Bloomberg, 7/31/2023
- The euro-area economy returned to growth while underlying inflation pressures persisted — supporting early arguments for the European Central Bank to raise interest rates again.
- Second-quarter gross domestic product advanced by 0.3% from the previous three months after shrinking and stagnating in the two earlier periods, according to Eurostat data published Monday.
- A Bloomberg survey of economists saw an increase of 0.2%.
- A separate release showed consumer prices rose 5.3% from a year ago in July, as expected.
- But in a sign of lingering dangers, the closely watched underlying inflation measure that excludes volatile costs like food and energy overshot estimates by a touch to stay at 5.5%, surpassing the headline gauge for the first time since 2021.
- While the euro zone’s GDP number looks encouraging, it was buoyed by a bumper three months from Ireland, which expanded by 3.3%.
- The country comprised less than 4% of the bloc’s overall output last year, and contributed about 0.1 percentage point to second-quarter growth.
China Stops Short of Direct Consumer Support to Spur Economy – Bloomberg, 7/31/2023
- China is seeking to boost consumption to spur the economy’s recovery, although the government has stopped short of providing direct fiscal support to consumers and companies to increase spending.
- The National Development and Reform Commission, China’s top economic planning agency, released a wide-ranging policy document Monday focusing on removing government restrictions on consumption, such as car purchase limits, improving infrastructure and holding promotional events like food festivals.
- “We’ve noticed that the growth momentum of some consumption categories is still not solid yet, and some residents have relatively weak confidence to spend,” NDRC Vice Chairman Li Chunlin told reporters. “This requires further policy support.”
- Like the measures announced Friday — which are focused on boosting manufacturing in the consumer-goods industries — the latest steps are targeted toward improving the supply of goods in the economy, rather than demand.
Walmart Pays $1.4 Billion to Boost Flipkart Stake – Wall Street Journal, 7/31/2023
- Walmart has paid $1.4 billion to buy out a large investor in Flipkart, further cementing its control of the Indian e-commerce giant.
- In recent days, Walmart bought the remaining shares of Flipkart owned by Tiger Global, according to a letter the New York hedge-fund sent to its investors that was reviewed by The Wall Street Journal.
- The transaction valued Flipkart at $35 billion, down from nearly $38 billion when it sold shares to Japan’s SoftBank, Walmart and other investors in 2021.
- The investment offers the U.S. retail behemoth greater exposure to the fast-growing global digital-consumer market.
Russia Says It Downed Three Ukrainian Drones Over Moscow – Wall Street Journal, 7/31/2023
- Russian authorities said they downed three drones targeting Moscow early Sunday, in an attack that Russian state media said injured one person and forced the temporary closure of one of the capital city’s main airports.
- The Ukrainian Air Force, meanwhile, said on its Telegram messaging channel that it destroyed eight Russian drones overnight, including four Iranian-made Shahed drones and four reconnaissance drones over the Kherson and Dnipropetrovsk regions.
- Russia’s Ministry of Defense said two drones were brought down over Moscow with electronic jamming equipment, and then crashed into a commercial building complex in the city.
- The other was destroyed in the air over the Odintsovo district in the Moscow region.
- The assault, which Russian officials described as an “attempted terrorist attack” by Ukraine, marked the fourth such strike on the capital this month, exposing serious vulnerabilities in the Kremlin’s ability to defend its territory since invading Ukraine nearly 18 months ago.
Hungary Delays Ratification of Sweden’s NATO Accession Bid Again – Bloomberg, 7/31/2023
- Hungarian Prime Minister Viktor Orban’s lawmakers boycotted an extraordinary meeting of parliament that opposition parties had called to ratify Sweden’s accession to NATO.
- The legislative session was adjourned on Monday after ruling party members, who wield a two-thirds majority in the chamber, failed to show for the meeting.
- Parliament may approve Sweden’s inclusion in the military alliance in the autumn, Cabinet Minister Gergely Gulyas told reporters last week.
- Hungary and Turkey are the only two NATO members who have yet to ratify Sweden’s inclusion in the military alliance, a bid that was prompted by security concerns following Russia’s invasion of Ukraine last year.
- Turkey lifted its objections earlier this month after Sweden pledged a new plan to crack down on Kurdish separatist groups in the Nordic country.
China Curbs Drone Export After US Says It Aids Russia War Effort – Bloomberg, 7/31/2023
- China slapped restrictions on the export of drones and certain components used in their manufacture, a move that could hurt production abroad of the aerial vehicles including types employed by armed forces in the Ukraine war.
- Exports of certain classes of drones, their engines and infrared imaging equipment won’t be allowed without a license starting Sept. 1, government agencies, including the top-ranked Central Military Commission, said in statements on Monday, adding that China is not targeting any specific country.
- The restriction on drone shipments will be effective for no longer than two years, the agencies said.
- “We have not marketed nor sold our products for military or war purposes,” DJI said in a statement to Bloomberg News. “We will strictly abide by the export control measures the Chinese government unveiled today.”
- Meanwhile, the authorities “see rising risks of civilian drones being used for military purposes,” China’s Ministry of Commerce said in one of the statements.
- “China has notified relevant countries of the measures.”
BOJ Wades Into Bond Market After YCC Tweak Triggers Yield Spike – Bloomberg, 7/31/2023
- The Bank of Japan sprung another surprise on Monday, announcing an unscheduled bond-purchase operation to tamp down rates after adjusting policy on Friday to allow benchmark yields to climb as high as 1%.
- It was the first time since February that the BOJ has waded into the market this way, suggesting that it will continue to smooth any sharp upward moves.
- With yields spiking to a fresh nine-year high in morning trading, the BOJ announced that it would buy the equivalent of more than $2 billion bonds at market rates.
- The 10-year yield dropped back below 0.6% and the yen reversed its advance against the dollar.
- Columbus arrived at the island of Trinidad. – 1498
- The Marquis de Lafayette became a major-general in the American Continental Army. – 1777
- The first U.S. patent was issued to Samuel Hopkins of Vermont for a process of making fertilizer. – 1790
- Andrew Johnson, the 17th president of the United States, died in Tennessee. – 1875
- Mount Godwin-Austen (K2), the world’s second-highest peak, was climbed for the first time, by an Italian team led by Ardito Desio. – 1954
- The U.S. space probe Ranger 7 transmitted pictures of the Moon’s surface. – 1964