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That is an abridged transcript of the podcast.
Our high story up to now in at the moment’s session:
Generally the market will get what the market desires – and what it expects.
Fed doves and fairness bulls are cheering a June CPI that confirmed inflation coming down greater than anticipated, placing a second fee hike this 12 months in critical doubt.
By the numbers:
Headline CPI rose 0.2%, with the annual fee coming down to three%.
Extra intently watched by the markets, core CPI, which excludes meals and vitality, additionally rose 0.2%. That was the smallest month-to-month rise since August 2021. The annual fee dropped beneath 5% to 4.8%.
Pantheon Macro merely says “Core inflation is falling quick, with extra to return.”
The market response was swift.
Inventory index futures rallied and bond yields sank. Fed swaps instantly priced in a decrease likelihood that the Fed would hike once more after it raises charges within the July assembly.
Proper now the Nasdaq (COMP.IN) is up about 1.3%, main the S&P (SP500) and Dow (DJI), that are additionally rallying.
The two-year Treasury yield (US2Y), most intently tied to the fed funds charges, is close to 4.7% The ten-year yield (US10Y) is round 3.9%. Final week the 2-year had topped 5% with the 10-year above 4%.
Shelter accounted for 70% of June’s rise. However strategist Charlie Bilello famous that after 25 consecutive will increase, year-on-year Shelter CPI has moved down for 3 straight months, from 8.2% in March (the best since 1982) to 7.8% in June.
SA Investing Group Chief Lawrence Fuller says CPI “ought to give the Fed sufficient cause to finish its rate-hike marketing campaign, and strongly assist the uptrend in inventory costs.”
Amongst shares to look at, sticking with the inflation theme, control meals shares as meals costs rose simply 0.1% in June. Meals inflation continues to be at 5.7% yearly, although. Amongst elevated classes are cereals and bakery merchandise (+8.8%), bread (+11.5%), frozen fruit and veggies (+12.5%), and sweet and chewing gum and margarine (+13.2%).
Meat costs have been solely up 0.6% year-over-year, with pork costs truly dropping by 3.8%. Milk costs have been additionally down 1.9% from a 12 months in the past egg costs have been down 7.9% when in comparison with a 12 months in the past.
The Invesco Dynamic Meals & Beverage ETF (PBJ) is up slightly.
Airline shares are additionally in focus, with fares down 18.9% in comparison with a 12 months in the past. Analysts mentioned the downward development in fares is due largely to decrease gas costs and a more healthy total value foundation for carriers, with reserving demand remaining robust.
The U.S. International Jets ETF (JETS) is decrease.
Different shares within the highlight included ZIM Built-in Transport Providers (ZIM), which lowered full-year earnings steerage. That was due primarily to continued weak point in freight charges throughout all the corporate’s trades, significantly within the Transpacific, now anticipated to proceed throughout the second half of the 12 months.
Domino’s Pizza (DPZ) rallied after putting a worldwide settlement with Uber (UBER). The deal permits U.S. prospects to order Domino’s merchandise by means of the Uber Eats and Postmates apps with supply by way of drivers from Domino’s and its franchisees.
And Cathie Wooden’s ARK Innovation ETF (ARKK) shaved its Coinbase (COIN) place on Tuesday, promoting about $12 million price of shares because the inventory popped 10%. That was ARK’s first sale of the crypto trade’s inventory in virtually a 12 months.
In different information of observe, oil costs proceed to rally, with WTI (CL1:COM) up round $75.50 per barrel and Brent (CO1:COM) topping $80. That’s regardless of the IEA reporting an enormous rise in weekly U.S. inventories of practically 6 million barrels.
WTI is up by greater than 10% previously two weeks.
The Vitality Info Administration now expects the worldwide oil market to tighten this 12 months, reversing its forecast and extra intently aligning with bullish estimates by OPEC and the IEA.
Technical strategist Kim Cramer Larsson says WTI and Brent have bullishly damaged out of their week-long rangebound sample and he sees upside potential of 5% to 10%.
Within the ongoing Microsoft (MSFT)/Activision (ATVI) saga, Bloomberg stories that the UK’s antitrust authority might must do a brand new probe of the deal if the businesses restructure it. The report comes after the Competitors and Markets Authority and Microsoft agreed to remain litigation within the UK’s try to dam the merger.
However Microsoft bull Dan Ives says the choice by a federal courtroom to reject FTC’s transfer to dam the deal is a “trophy second.” Wedbush analyst Ives, who has an outperform ranking and value goal of $375 on Microsoft, mentioned Activision is a “key asset” for the tech big and will “catalyze its shopper franchise.”
Within the Wall Avenue Analysis Nook –
With all of the bullish sentiment, let’s not neglect that the bears aren’t hibernating.
After calling last-year’s fairness weak point, Morgan Stanley strategist Mike Wilson stays a stalwart bear regardless of the tech-driven rally. And he says liquidity needs to be a priority for bulls.
Morgan Stanley’s quant and derivatives technique group highlights the mixture of the Fed’s stability sheet, the Treasury’s common account and the reverse repo facility.
Wilson says “This gauge has additionally been intently aligned with the value of the S&P 500 till not too long ago. For a lot of the previous 12 months, this relationship has held pretty effectively, however over the previous month it has began to diverge fairly meaningfully.”
Up to now these divergences have signaled good instances to purchase or promote.
Wilson says now the divergence – and due to this fact the promote sign – is “as broad as we have witnessed in current historical past.”