Market 07/23: Existing home sales collapse but prices continue to rise

MAJOR CHANGES TO VIET HUSTLER

Steve, Linh Hà and the entire VH team greet everyone (again)!

Steve and the team would like to thank all readers who have followed Viet Hustler for nearly 4 years and those who have subscribed to support Viet Hustler after the first announcement about the changes was announced last week. After that, the entire team has also listened to readers' feedback on the schedule and content.

With only 1 week left until Viet Hustler closes to non-paying users only, Steve wants to summarize the main changes as follows:

Frequency and content of articles:

Midday Market - written by Steve himself

Time: Every day during mid-trading session

Content:

• Analysis of important political and economic news of the day

• Impressions on mid-session market changes

Equity Research - written by Steve and Thanh Le

Time: Every Saturday

Content:

• General analysis of a notable company on the US Stock Market

• General analysis of investment opportunities and competition in a sector

PayPal - Continue or Stop?

Macro analysis written by Linh Hà

Time: Every Sunday

Content:

• General analysis of macro data released last week

• Views on an important trend in the World economy

Inflation before the FED cuts interest rates

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• Founding (Yearly): $89.99 or more, for all members who want to support Steve and the Viet Hustler team.

Currently only 2.5% of Viet Hustler readers are subscribers with subscription prices unchanged for the past 4 years. To continue maintaining, Viet Hustler will return to subscribers-only from 08/01 with a monthly price equivalent to one Starbucks coffee to provide readers with all the necessary daily news. Steve hopes everyone can continue to support Steve and the team.

Existing homes - Sales decline but prices still rise higher than new homes

• Existing home sales declined for the 4th consecutive month, reaching -5.4% from the previous month, more than the expected -3% and May's -0.7%.

  • This is the sharpest decline since 11/2022

• June figure drags sales decline vs. same period last year to -5.4%

• The only market segment seeing growth is homes priced over $1 million

• With existing home supply continuing to decline as sellers wait for the FED to cut interest rates this year, the median price of existing homes continues to rise, reaching $426,900 in June, up 4.1% from the same period last year

  • This is the record median price for existing homes

  • First time since COVID that existing homes have a higher median price than new homes

Richmond Fed - Manufacturing and services continue to diverge

• July industrial manufacturing survey from ~100 large companies in Richmond, VA plunges sharply to -17 from expected -6, lowest since COVID

  • New orders -23

  • Shipments -21

  • Employment -5

• Meanwhile, the services sector returned to growth at +5

  • June revised up to -7 from -11 previously

Record foreign demand in the $69B 2-year bond auction session

• Yield after session 4.434% vs 4.457% pre-session, sharply down from 4.706% in last month's auction session.

• Foreigners bought nearly all with 76.6% of bids, sharply up from 65.6% in June session

  • This is the highest in history, showing strong short-term demand

• Foreigners seem to think Powell will have a dovish tone and confirm rate cut plan next week.

Biden returns to White House and will speak tomorrow evening

After last seen 6 days ago, President Biden's health issue is a big question

• Yesterday the President delegated some responsibilities to State Department and Treasury Department

• President Biden called in but no video to Kamala Harris's first campaign meeting

• President Biden will return to White House this afternoon at 2:30PM ET

• President Biden will address on TV about decision to suspend campaign tomorrow evening at 8PM ET

Kamala Harris has enough support to become Democratic nominee

• After Biden suspends campaign and endorses, Kamala Harris raises $81 million in 24 hours

• Kamala Harris declares enough support from 2,000 delegates to become Democratic nominee

Geographic locations of donors to Kamala Harris

Ethereum ETF liquidity 50% of Bitcoin ETF on first trading day

Despite first day on exchange, ETH ETF volume equals 50% of BTC ETF volume

• Leading is GrayScale's ETH ETF

Earnings reports: Nucor, Spotify, UPS, CocaCola, Lockheed-Martin

NUCOR: Continues to forecast steel price decline in Q3 NUCOR: Continues to forecast steel price decline in Q3 NUCOR: Continues to forecast steel price decline in Q3 NUCOR: Continues to forecast steel price decline in Q3

Q2 revenue $8.08B down -15.18% YoY but beat expectations by $387 million

• EPS $2.68 down -53.87% YoY, beat expectations by $0.33

• CEO: Q3 earnings still weaker than Q2 due to decline in demand and market steel prices

• Image

Steve: heavily impacted by global economic slowdown and especially construction demand in China. Declining export prices of iron ore and finished products from China will continue to squeeze profits in Q3. However, well prepared financially to weather this cycle and continues to buy back shares ($1.7B in Q2). SPOTIFY: Beats all expectations

Monthly users +14% to 626 million (5 million below expectations)

• Paid users +12% to 246 million (1 million above expectations)

• Revenue +20% YoY to 3.8B EUR (as forecast)

• Revenue +20% YoY reaches 3.8 billion EUR (as forecasted)

• Operating margin 7%, up 1.5% from last year

• Raised Q3 monthly users forecast +11% YoY to 639 million

• Raised Q3 paying users forecast +11% YoY to 251 million

• Raised revenue forecast to 4 billion EUR +19% YoY

Steve: It seems demand for subscriptions services is still holding up well against the decline in consumer spending following reports from Netflix and Spotify. The shift in consumer perception of which products are “essential” and “non-essential” is showing a quite clear change and investors of clearly see that. Spotify's Q2 financial report and Q3 forecast exceeded all expectations, demonstrating the company's strength and ability to execute its business strategy. With the current growth momentum, Spotify may achieve full-year profit for the first time in 2024.

UPS: Disappointing in contrast to FedEx

• Earnings $1.79/share, much weaker than $1.98 expected

• Revenue $21.8 billion, below $22.21 billion expected

  • Domestic -1.9% YoY

  • International -1% YoY

• Lowered full-year revenue forecast to $93 billion from about $92-$94.5 billion

• Will start buying back $1 billion in stock each year

Steve: Overall, nothing can save UPS with both earnings and revenue much lower than forecast. The decline in sales and market share highlights weakness as competitor FedEx had a quite pleasant Q2. Uncertainty over pension plan payments after changes and the decision to increase dividends by 50% two years ago add concerns for investors.

CocaCola: More preferred to drink than Pepsi

• Earnings $0.84/share higher than $0.81 expected

• Revenue: $12.4 billion vs $11.75 billion expected

  • North America -1% unit sales

  • Europe 0% unit sales

  • South America +5% unit sales

  • Asia +3% unit sales

  • Global commerce +3% unit sales

• Full-year 2024 earnings growth forecast 5-6%, unchanged

• Full-year 2024 revenue growth forecast raised to 9-10% from previous 8-9%

Steve: Contrary to Pepsi, the Q2 winner in this race seems to be CocaCola, although growth in premium markets US and Europe slowed, CocaCola's pricing power and product mix strength is evident in other markets through changes in product mix sold and pricing to ensure revenue growth despite declining unit sales.

Lockheed-Martin: Orders sufficient for next 10 years

• Earnings $7.11 / share higher than $6.45 forecast

• Revenue $18.12 billion higher than $11.75 billion forecast

• Backlog $158.34 billion up 0.2% from same period last year

• Raised full-year revenue forecast to $70.5-$71.5 billion from $68.5-70 billion

• Raised capex forecast by additional $84 million vs same period last year

• Needs 12-18 months to deliver all F-35 inventory

Steve: continues to be the safest choice in an industry that almost never recesses. With rising political instability, it could also become a 'storm避' stock for investors. The only concern in this report is that with orders stacked up for the next 10 years, will only raise production investment to $84 million this year.

Other news:

• US Secret Service Director Kimberly Cheatle resigns after yesterday's 'disastrous' hearing.

• Wiz rejects $23 billion acquisition offer from Google and will IPO

• AI race heats up with META's Llama 3.1 product announced today.

  • Scorecard of blockbuster AI products

Market: Sideway waiting for Tesla and Google earnings reports

Market recovers slightly at the start of today's trading session with fairly stable cash flows across sectors.

Decline in IV creates a shorts-cover rally over the past 2 days, but overall, hedging demand hasn't changed much ahead of the earnings reports and key economic data this week and next.

As forecasted yesterday, liquidity remains extremely low with investors on both sides deciding to sit out of the market. Major indices also sideway. Much of this will continue until after Tesla and Google earnings reports this afternoon.