Thursday, July 25, 2024
Today is an important day for market data. Not only is this the biggest session of the second-quarter earnings season yet, but all pre-PCE numbers such as Thursday’s unemployment claims, durable goods orders, and new gross domestic product (GDP) Announced before publication. This data has helped guide pre-market indexes upward since much of this data was released after the worst trading day so far this year. The Dow is +55 points, the S&P 500 is +5, and the Nasdaq is +25 points. At this time.
First look at Q2 GDP is +2.8%. This would double the final value of Q1 GDP, but we are far from final on this as two revisions are pending in the coming months. As yesterday’s inventory indicators show, inventory growth is responsible for at least some of this GDP increase (and inventory is the “worst” type of growth; if the goods in storage don’t sell) (need to reduce inventory; may inhibit future growth). However, this is above expectations of +2.1% and is the highest growth rate since +3.4% in the fourth quarter of last year.
Another pre-PCE statistic, the price index, fell noticeably in the quarter. The headline +2.3% was 30 basis points (bps) lower than expected and -80 bps from the +3.1% reported last month. This is also the lowest since +1.6% in the fourth quarter of last year. Meanwhile, the core price index rose 20 bps more than expected, to +2.9% from +3.7% in Q1 (printed +2.0% in Q4). Excluding high inventories, domestic growth at low prices is about as Goldilocks as we can hope for.
Initial jobless claims were in line with expectations at 235,000. This is a -10,000 decrease from last week’s upwardly revised 245,000. Since late May, there have been two weeks above 240,000 and two weeks below 230,000, indicating a range of new unemployment claims about 20,000 higher than seen this spring. . The number of continuing claims reported to be one month overdue after new claims reached 1.851 million, the seventh consecutive week above 1.8 million, but so far there are no signs of major strain in the labor market.
Durable goods orders fell sharply by -6.6%. The forecast was for +0.3%, making it the first negative month since January’s -6.9%. However, if you remove volatile transportation items (think airplane parts), this number turns positive from the expected -0.1% to +0.5%. Non-defense and aircraft-related orders, which represent “normal” business spending, recorded a healthy growth of +1.0%, reversing the previous month’s -0.9% revision. Shipments were +0.1%, up from -0.7% previously.
Here’s a quick summary of our second quarter earnings report, which will be released this morning. This is by no means a complete list.
Hasbro HAS stock is up +9% premarket. That’s because second-quarter earnings rose 58% to $1.22 per share, beating expectations of 77 cents. Revenue was +5.6%, beating the Zacks Consensus due to a strong quarter in digital games (compared to traditional toys and games). Click here to learn more about HAS earnings.
American Airlines AAL is in an even worse situation. The major airline beat expectations by 5 cents on the bottom line, but the bottom line was slightly below expectations at -0.6%. This, coupled with a significant cut in forward guidance, caused the stock to decline by -6.6% pre-market. Click here to learn more about AAL’s earnings.
Southwest Airlines LUV also released second-quarter numbers this morning. The airline beat estimates for both revenue and bottom line by +16% and +0.41%, respectively, but is still down -5% in today’s premarket. Click here to learn more about LUV’s earnings.
Honeywell HON also exceeded market expectations, leading to a decline in pre-market futures prices. Sales of +1.86% and bottom line earnings of 7 cents per share were both impressive, but mixed guidance sent the stock down -4.5% in early trading. Click here to learn more about HON’s earnings.
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