July 19, 2023

📰 News Organizations

• Bank of America, Morgan Stanley Earnings Beat Estimates. Bank of America earned $7.41 billion, up 19% from $6.25 billion a year earlier. BofA posted earnings of 88 cents a share, vs. 84 cents a share estimate from Refinitiv. Meanwhile, Morgan Stanley's profit falls due to lower trading revenue but beats estimates on record wealth management revenue. Morgan Stanley posted earnings of $1.24 a share, vs. $1.15 per share Refinitiv estimate.
  

• Lockheed Martin Forecasts Higher Sales Amid War-Driven Orders Lockheed Martin reported better-than-expected sales and profit in the second quarter, leading to an increase in full-year guidance. The world's largest defense company achieved a net profit of $1.68 billion for the three months ending June 30, compared to $309 million the previous year.

• US Banks to Face Stringent Residential Mortgage Mandates. US banks' residential mortgages are set to encounter mandates exceeding global standards as part of the US version of the Basel III accord. The Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency plan to unveil the changes on July 27.

• Chipotle Expands into the Middle East with First Franchise Partner. Chipotle has signed an agreement with Kuwait-based Alshaya Group, its first-ever franchise partner in the Middle East, with plans to open locations in Dubai and Kuwait. CEO Brian Niccol shared that two locations will initially be launched in each country.

• Cathie Wood's ARK Writes Down Twitter Stake. ARK has written down its stake in Twitter by 47%, though Cathie Wood remains optimistic about Twitter's long-term outlook and the write-down does not reflect ARK's fundamental outlook or belief in the long-term return on investment.
  

• US Homebuilder Sentiment Hits 13-Month High Amid Tight Supply. The National Association of Home Builders/Wells Fargo Housing Market Index reported that builder sentiment in the single-family home market increased by 1 point in July to 56. This is the seventh consecutive month of gains. The low supply in the resale market is driving demand for new construction.

🐦 Twitter

• Prepare for pain in the commercial real estate market warns Morgan Stanley which believes that prices could drop by as much as 27.4% from peak to trough by the end of 2024. And McKinsey believes prices could slide by as much as 42% in a worst-case scenario. Source.
  

• The US is now running twin deficits that are as severe as those experienced during the worst parts of the Global Financial Crisis. This factor has contributed to the recent weakness in the US dollar. Of even greater concern is the indication that this represents an ongoing structural issue that is still in the process of evolving. Source.
  

• Investors keep piling into risk-on ETFs, with largest inflows going to large-cap equities, global equities, and high yield corporate bonds ... market cap still a big influence given large-/mid-cap ETFs have taken in slightly >50% of monthly inflows. Source.

• Americans are having a much harder time accessing credit. The rejection rate for loan applicants jumped to 21.8% in the 12 months through June, the highest level in 5 years: Fed data. The rejection rate for auto loans exceeded the application rate. Source.
  

• What's Driving Inflation Down? Almost everything. As compared to last June, we have lower rates of inflation in Fuel Oil, Gasoline, Gas Utilities, Used Cars, Medical Care, Apparel, New Cars, Food at Home, Electricity, and Transportation. Source.
  

• Goldman Sachs’ forecast model thinks the unemployment rate will stay below 4% through 2026, and the 10-year Treasury yield will average 3.75% in 2024-26. Source.

📓 Online Publications

• US Retail Sales Show Modest Increase in June. June 2023 saw a 0.2% increase in retail and food services sales in the US, with figures adjusted for seasonal variations and trading-day differences. Sales were up 1.5% compared to June 2022, and the April 2023 to May 2023 percent change was revised to up 0.5%.

• Industrial Production Declines in June, but Q2 Shows Growth. Industrial production decreased for the second consecutive month in June, but the second quarter showed a 0.7% annual rate growth. Manufacturing output declined 0.3% in June but rose 1.5% in the second quarter. Capacity utilization in June was 78.9%, 0.8 percentage point below its long-run average.

• US Median Home Sales Price Reaches Second-Highest Level in History. Despite elevated mortgage rates, and fierce competition among buyers in the face of limited inventory drove June's median home sales price to the second-highest level in US history. Most inventory indicators hit record lows during the month, with the total number of homes for sale dropping by 15% year over year.

• Only a Tenth of Mortgages Have an Interest Rate Above 6%. Only 9% of existing mortgages in the US have interest rates above 6%, causing homeowners to be disincentivized from moving and obtaining new mortgages. This phenomenon is one of the key reasons behind the low supply in the housing market.

🎧 Podcasts

• BlackRock Gives Retail Investors a Say in Its Biggest ETF. BlackRock is giving investors a chance to influence companies through its biggest exchange-traded fund. The fund is known as IVV and it has more than $340 billion in assets. Starting next year, BlackRock will let investors have a say on how the asset manager votes shares in annual general meetings and mergers and acquisitions. Source(5:14)
  

• Challenging Year Ahead with Mixed Markets. According to Dale Pinkert, 2024 is anticipated to present challenges, with signs of a substantial bear market in equities while witnessing significant bull markets in commodities, particularly in grains. Agricultural commodities like corn, beans, and gold hold a positive outlook, influenced by climate and geopolitical developments such as the Russian Black Grain deal, which impacts supply dynamics in the market. Source(20:40)
  

• Bob Iger’s Rough Ride. CEO Bob Iger extended his contract through 2026 after a rough first year, telling the market he needed more time at the Mouse House to address the challenges before him. At the top of the list is contending with Disney’s TV networks, as that part of the business appears to be in a worse state than Iger had imagined. Source(17:19)
  

• Eli Lilly's Donanemab Reduced Alzheimer's Progression by 40%. Eli Lilly said it filed an application for full U.S. FDA approval of the company’s Alzheimer’s treatment, donanemab, and expects the agency to make a decision by the end of the year. Eli Lilly also presented the final results from an 18-month phase three trial on the monthly antibody infusion, which showed the drug significantly slowed disease progression by 40-60%. Source(7:29)