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Market Perspective for July 24, 2022


It was good week within the inventory market with all main market indexes exhibiting positive aspects, although Friday was a down day. Friday’s second-quarter earnings report from Snap prompted the Nasdaq to drop 1.9 %.

Snap reported that income per person fell 4.5 % year-over-year, they usually weren’t going to offer steerage for the third quarter as a result of present monetary local weather. Snap blamed this on competitors from TikTok, Apple’s iOS 2021 replace, and slowing demand for its on-line platform.

Shares of Snap fell 39 % on Friday and at the moment are down nearly 65 % for the yr. Tech shares have been closely bought this yr, with Meta (Fb) down 45 % and Amazon down greater than 25 % year-to-date. Shares of Netflix are down 63 % for the yr. Netflix reported Tuesday they misplaced practically 1 million subscribers throughout the second quarter, which was lower than the forecasted 2 million.

Verizon reported second-quarter earnings on Friday and lowered steerage for the yr. They now count on their wi-fi service to extend from 8.5 % to 9 % for the yr, as a substitute of the beforehand anticipated progress fee of 9 % to 10 %. They count on progress from service and different income will vary from flat to down by 1 %.

Shares of Verizon (VZ) misplaced 7 % on Friday to shut at $44.45, a brand new 52-week low and a year-to-date lack of 14.45 %.

Regardless of Friday’s losses, the Dow Jones Industrial Common was up 2.0 %, the S&P 500 gained 2.6 %, and the Nasdaq was up 3.3 % final week. 12 months-to-date, the Dow is down 12.2 %, the S&P 500 is down 16.9 %, and the Nasdaq continues to be down by 24.4 %.

Based on Factset, the second quarter earnings are beginning to look weaker than anticipated. On a year-over-year foundation, the S&P 500 has reported the bottom earnings progress for the reason that fourth quarter of 2020. The variety of S&P 500 firms which have reported optimistic earnings surprises is under their five-year common.

Six of the 11 inventory market sectors have reported year-over-year earnings progress, with the power and industrial sectors main the way in which. Out of the 5 sectors reporting a decline in earnings, financials are down probably the most.

The current rally in shares has been encouraging, although these rallies are usually not unusual in a bear market. Every inventory market rally this yr has been accompanied by a pullback within the 10-year yield.

Additionally serving to has been the sharp drop in commodity costs, which ought to proceed to assist with inflation. Oil costs at the moment are down 20 % from the current peak, copper is down 32 %, and lumber is down 60 %.

Final week, Russia and Ukraine signed a deal supported by the United Nations that can permit grain exports from Ukraine to renew via the Black Sea. However on Saturday, Russian missiles damaging the Black Sea port of Odesa. It seems that this places the grain deal in query.

Present residence gross sales for June fell 5.4 % from Could, the identical quantity they fell in Could 2020. Regardless that gross sales fell, the value of houses hit one other report excessive. The nationwide median worth for a beforehand owned sits at $416,000, a rise of 13.4 % year-over-year.

Gross sales declined to five.12 million houses in Could, which is 14.2 % decrease than in June 2021. Exterior of the pandemic, that is the slowest gross sales tempo since January 2019.

There have been 1.26 million houses in the marketplace on the finish of June, a rise of two.4 % over final June and the primary year-over-year achieve since 2019. At this sale tempo, stock is now at a three-month provide, which continues to be thought-about low.

Based on Freddie Mac, the typical fee for a 30-year mounted fee mortgage is at 5.54 %, up 0.03 % since final week.

Subsequent week shall be probably an important week of the summer time for the inventory market and bond market with earnings, financial information, and the Federal Reserve assembly. The second quarter gross home product shall be launched on Thursday. On Friday morning, the private consumption expenditures inflation knowledge comes out together with the employment value index. On Tuesday and Wednesday, the Fed is assembly. The market expects a 75-basis level fee hike.



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