Market 07/16: June retail sales better than expected

Retail sales slow down but better than expected

• June retail sales unchanged: 0% MoM (> estimate -0.3% MoM | previous +0.3%).

  • Core retail sales (ex-auto sales) up: +0.4% MoM.

• May data also revised up +0.1% to +0.3% - best revision since last year.

• On unadjusted basis, retail sales up +0.2% YoY.

Auto sales drop sharply - Online sales drive growth

• Overall retail sales limited by the decline -2.3% MoM from auto dealers.

  • Auto makers say sales only slowed and expect recovery in July.

• Control group (used in GDP calculation) up +0.9% MoM (far exceeding expectations +0.2% MoM) - highest increase since April 2023

Market reaction: Small cap rally, Big Tech down

Investors not only interested in Big Tech — but more confident in earnings of small caps and other US industries after better-than-expected retail sales report!

• Both Small Cap (Russell 2000) and Dow Jones up today:

• Big Tech down again (reasons as mentioned above):

  

• USD also up after retail sales higher than expected.

• Market expects 6 rate cuts over the next year, with first cut in September this year.

Import prices lower than expected: paving way for corporate profit growth

• June import prices unchanged: 0% MoM (< expected +0.2% MoM).

  => Lower-than-expected import prices create conditions for retailers to boost profits.

• While export prices down -0.5% MoM, down more than expected -0.1%.

Fed officials' statements: Powell, Daly

Fed Chair Powell:

• No need to wait for inflation to fall to 2% before starting rate cuts.

• Economy expected to slow this year.

• Hard-landing unlikely.

Fed Chair Daly:

• Interest rate adjustment possible in the near future.

• Inflation is approaching the 2% target.

Company earnings reports: Bank of America, Morgan Stanley

Bank of America ER: Revenue beats expectations due to higher investment banking and asset management fees

• EPS: 83 cents (est. 80 cents/share)

• Profit down -6.9% YoY, down to 6.9 billion USD

• Revenue: up less than +1% YoY, reaching 25.54 billion USD (est. 25.22 billion USD).

  • Investment banking fees up +29% YoY to 1.56 billion USD.

  • Asset management fees up +14% YoY to 3.37 billion USD due to positive stock market.

• Net interest income down -3% YoY down to 13.86 billion USD

Morgan Stanley ER: Profit up 40% YoY

• EPS: 1.82 USD, beats estimate 1.65 USD.

• Profit up +41% YoY, to 3.08 billion USD.

• Revenue: up +12% YoY, to 15.02 billion USD (vs. 13.46 billion USD last year).

• Investment banking revenue up +51% YoY, to 1.62 billion USD.

• Asset management revenue up +2% YoY, to 6.79 billion USD.

Q3 forecast: EPS: 1.61 USD - Revenue 13.15 billion USD.

FY 2024 forecast: EPS: 6.75 USD - Revenue 57.77 billion USD.

Crypto market: Spot Ether ETFs likely to start trading next week

1. Spot Ether ETFs likely to start trading on Tuesday next week.

2. Trump receives 3 million USD in crypto donations for campaign.

   • Cameron and Tyler Winklevoss (co-founders of crypto exchange Gemini) donate 1.6 million USD in BTC.

   • Jesse Powell, co-founder of crypto exchange Kraken, donates 845,000 USD in ETH.

Some other news:

1. Republican Party officially nominates Donald Trump as presidential candidate, JD Vance as vice presidential candidate.

• Elon Musk to donate 45 million USD/month to Super PAC supporting Trump.

2. Business inventories for May increase +0.5% MoM, stronger than expected.

   • Inventories excluding autos flat at 0%.