Inflation Takes Five, Rate Cuts Come Alive 📉

Good afternoon! Chip prices are popping, and this time we’re not talking about Nvidia. The cost of a 16-ounce bag of potato chips is up 30% since 2020. Now Americans are laying off the Lay’s.

MARKETS

• The S&P 500 and Nasdaq ended their winning streaks today, closing in the red for the first time in over a week, despite both reaching intraday highs. The Dow managed to finish in the green, though just barely.

• Gold surged past $2,400, nearing its record high of $2,449.89 set in May. Oil prices increased on today’s CPI news, with the expectation that if inflation slows and the Fed cuts rates, economic activity and demand for crude will rise.

• Bond yields fell on CPI data while prices climbed (more details below).

STOCKS
Winners & Losers

What’s up 📈

• QuantumScape ($QS) jumped 30.87% thanks to a deal to build solid-state batteries for Volkswagen

•  Uber ($UBER) gained 6.08%, and Lyft ($LYFT) rose 4.64% on the news that Tesla will delay the unveiling of its autonomous taxi until October.

• Builders FirstSource ($BLDR) climbed 7.46% on today’s inflation news, with hopes of rate cuts easing the housing market

•  D.R. Horton ($DHI) also increased 7.24%.

• MicroStrategy ($MSTR) advanced 4.05% after the bitcoin-loving company announced a 10-for-1 stock split

•  WD-40 ($WDFC) added 4.04% after third-quarter earnings results beat expectations

•  Pfizer ($PFE) slid up 1.08% as the pharma giant announced it’s developing a once-daily weight loss pill, instead of an injection like its competitors

What’s down 📉

• Nvidia ($NVDA) fell 5.57% as investors took profits following strong CPI data. Fellow semiconductor stocks also declined, with Advanced Micro Devices ($AMD) dropping 1.10% and Intel ($INTC) losing 3.93%.

• Delta Air Lines ($DAL) dropped 3.91% after missing earnings expectations in the second quarter and forecasting lower revenue ahead. Competitors United Airlines ($UAL) decreased 3.20% and American Airlines ($AAL) slid 3.77% in sympathy

•  ConAgra Brands ($CAG) dipped 1.53% due to weaker-than-expected fiscal earnings, marking the company’s fourth straight quarter of missing analyst expectations

ECONOMY
Inflation Takes Five, Rate Cuts Come Alive

If inflation were a Netflix show, we’d be at the part where everyone starts to exhale a little. The latest numbers show a 0.1% dip in inflation for June. That’s right, folks, the relentless price hikes have slowed down, with inflation now sitting at a cool 3% over the last year, the lowest we’ve seen since 2021.

Core inflation, which skips over the unpredictable food and energy prices, only inched up by 0.1% for the month and 3.3% over the year—its smallest rise since April 2021. Gas prices nosedived by 3.8%, balancing out small increases in food and housing costs.

• So, what does this mean for your wallet and those all-important interest rates? Investors are buzzing about the potential for the Fed to finally cut rates. With the labor market showing signs of cooling, the Fed’s long game of keeping rates high might be paying off, setting the stage for a softer economic landing.

• Experts are eyeing a possible rate cut in September, with more cuts potentially on the horizon if the economy continues to show signs of cooling. Investors are already reacting, with bond yields dropping and stocks enjoying a nice little rally.

So, what’s the play here? UBS Wealth Management’s Chief Investment Officer, Solita Marcelli, advised investors to prepare for rate cuts by investing in quality bonds, setting up bond ladders, and maintaining diversified fixed income portfolios with some exposure to riskier credits to boost overall yields. As the Fed starts cutting rates, these investments are likely to benefit, helping you navigate the economic shifts with a bit more confidence

NEWS
Market Movements

• Elon Musk’s Neuralink is preparing to implant its brain chip in a second human patient

• Samsung ($SSNLF) revealed its Galaxy Ring yesterday, competing with Oura in the smart ring market. Priced at $400, the ring is designed for continuous wear and uses AI to gather, analyze, and provide insights on a user’s health data

• AMD ($AMD) is acquiring Europe’s largest private AI lab to compete with Nvidia

• Goldman Sachs ($GS) is launching three new crypto tokenization projects

• Pfizer ($PFE) is progressing with a once-daily version of its weight loss pills after experiencing setbacks

• Tesla ($TSLA) has postponed the launch of its Robotaxi from August 8 to October

• MicroStrategy ($MSTR) has announced a 10-to-1 stock split

• Bill Hwang, the founder of Archegos Capital Management, was convicted of fraud and other charges by a Manhattan jury after a two-month trial

• The IRS reports it has collected $1 billion in back taxes from high-wealth individuals

CONGRESS
Capitol Gains: The Lawmaker Stock Trading Ban Resurfaces

A bipartisan crew of senators is at it again with a fresh attempt to halt stock trading by Congress members, rolling out the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act. This new proposal, backed by four Democrats and one Republican, aims to put an end to the market maneuvers on Capitol Hill.

Here’s the rundown:

• Congress members, their spouses, and dependent kids must divest their assets starting in 2027.

• Lawmakers would face a trading freeze for 90 days post-enactment.

• Violators would be fined either their monthly salary or 10% of the offending asset’s value—whichever hits harder.

• Assets in blind trusts? Yeah, those have to go too.

This isn't the first rodeo. The STOCK Act of 2012 was supposed to keep lawmakers in check by mandating trade disclosures over $1,000 within 45 days. But with a laughable $200 fine for late reporting, it didn’t exactly strike fear into the hearts of our elected officials. Numerous other proposals have floundered before even making it to committee.

Silver lining: The public’s outrage over political profiteering has spurred fintech innovations that spotlight these shady dealings.

• ETFs tracking Democratic and Republican trades have outperformed both the S&P 500 and the Dow Jones.

• The Autopilot app lets users mirror trades from figures like Nancy Pelosi’s husband, Paul—whose portfolio is up a whopping 45% this year.

Next up, the ETHICS Act is slated to move to the Homeland Security and Governmental Affairs Committee for markup by July 24. Stay tuned as the quest to clamp down on congressional trading unfolds.

EARNINGS
Delta’s Q2 Earnings: Travel Demand Soars, Profits Don’t Quite Follow

Despite record-high travel demand, Delta Air Lines ($DAL) missed earnings expectations for the June quarter. 

Here’s the quick rundown:

• Adjusted net income: $1.528 billion vs. $1.531 billion expected

• Adjusted EPS: $2.36 vs. $2.38 expected

• Revenue: $15.41 billion vs. $15.44 billion expected

CEO Ed Bastian noted "very, very healthy" summer travel demand but acknowledged increased price sensitivity among consumers. Delta expects strong Q3 earnings, though slightly lower than last year’s.

Travel demand hit new highs, with 2024 outpacing 2023 by 6%, averaging 145,860 more passengers daily. However, airfare prices dropped 5.9% in May from last year due to increased capacity and popular destinations.

Delta’s stock dipped nearly 8% in premarket trading but remains up over 16% year-to-date.

International Moves

• Delta is expanding routes to Latin America, the Caribbean, and South America, boosting Q2 international travel revenue by 4%.

• Recently, Delta announced a partnership with Riyadh Air to start next summer, enhancing its strategic expansion.

With robust travel demand and strategic partnerships, Delta aims to turn the travel surge into stronger profits in the coming months.

Calendar
On The Horizon

Tomorrow

Big Banks Set to Kick Off Earnings Season

Get ready for a financial fiesta as big banks roll out their earnings reports tomorrow morning. Leading the charge are JPMorgan Chase ($JPM), Wells Fargo ($WFC), and Citigroup ($C), all stepping into the spotlight before the opening bell.

This time, the stakes are higher than your credit card limit, with banks navigating several tricky terrains:

• Last year's bank busts: The collapse of regional banks like Silicon Valley Bank rattled confidence. Investors are eager to see if the big guns have fortified their balance sheets to avoid a repeat.

• Commercial real estate woes: With a mountain of commercial real estate loans on the books, banks could face a migraine if defaults start piling up.

• Consumer spending slump: Inflation is putting the squeeze on wallets, leading to rising credit card delinquencies. If consumers don’t pay up, banks could be left holding the bag.

• Fed’s interest rate rollercoaster: Banks have been basking in the glow of higher net interest income thanks to the Fed’s elevated interest rates. But with rate cuts potentially on the horizon this fall, investors are anxious about a possible profit dip.

Buckle up—it’s going to be a wild ride as the earnings season kicks off!