Market 07/27: FOMC has not decided whether to raise interest rates in September

FED has no decision on the future - Powell does not see a recession scenario

FOMC raises interest rates by another 0.25% as markets forecasted with Powell stating that the future of interest rate policy was not decided at all in the just-concluded meeting, raising investors' hopes for ending the hiking cycle.

• Unemployment rate currently is similar to the time when Fed started raising interest rates in March last year while financial conditions currently much easier than in September last year.

• S&P500 index has returned to levels similar to when Fed started raising interest rates, and this is not the outcome Powell wants in the fight against inflation.

Commodity prices are also starting to rise, it seems that economic indicators and markets do not support FED's decision to raise interest rates. 

• The decision to keep or raise interest rates will be made next September.

• Powell does not expect this inflation level to return to 2% until 2025.

• FOMC will look at data from now until September to decide the direction

• Policy is not tough enough and not long enough to curb inflation

• FED does not see the US economy entering a recession with the strength of the labor market and consumer spending

Will FED achieve the 'soft landing' goal for the economy?

Q2 GDP exceeds target, surges 2.4% despite interest rates

New home sales in the United States unexpectedly surge in May

New home sales (new home sales) instead of declining as expected, surged 12.2% MoM, 20% YoY.

This figure reaches the highest level since February 2022

However, looking at selling prices, the average new home price is 416,300 USD, although slightly up but still down -19.1% compared to 6 months ago.

This creates the hypothesis that this is just the effect of buyers rushing to buy when prices drop.

Meta ER - surges nearly 10% on positive Q2 results

• Q2 revenue reaches 32 billion USD, up 11% YoY. Beat EPS $2.98 vs $2.91 exp. Q3 revenue guidance reaches 32-34.5 billion USD, far exceeding the expected 31.18 billion.

• Advertising revenue growth contributes the most, reaching 31.5 billion USD, up 12% YoY.

• Reality Labs revenue down 39% YoY and expected to decline further in 2023.

For the first time Meta announces over 3 billion monthly users, with Facebook at 3.03 billion users, up 3.4% YoY.

Average revenue per user reaches 10.63 USD, up 8% YoY.

Upgrades

• ABT: Wolfe Research Upgrades to Peerperform from Underperform

• ED: BofA Securities Upgrades to Buy from Neutral - PT $103 (from $92)

• FOR: BTIG Upgrades to Buy from Neutral

• HOG: DA Davidson Upgrades to Buy from Neutral - PT $47 (from $38)

• MMC: BofA Securities Upgrades to Neutral from Underperform - PT $210 (from $189)

• SLG: Piper Sandler Upgrades to Overweight from Neutral - PT $41 (from $27)

• VWE: Canaccord to Hold from Sell - PT $1.10 (from $1)

• WNS: Baird Upgrades to Outperform from Neutral - PT $86

Downgrades

• ATVI: Roth/MKM Downgrades to Neutral from Buy - PT $95 (from $88)

• AZPN: Loop Capital Downgrades to Hold from Buy - PT $170 (from $240)

• BX: JPMorgan Downgrades to Neutral from Overweight - PT $111 (from $102)

• CVNA: Piper Sandler Downgrades to Neutral from Overweight - PT $48 (from $29)

• CVNA: Piper Sandler Downgrades to Neutral from Overweight - PT $48 (from $29)

• DFS: Piper Sandler Downgrades to Neutral from Overweight - PT $112 (from $130)

• DFS: Piper Sandler Downgrades to Neutral from Overweight - PT $112 (from $130)

• EQIX: Wells Fargo Downgrades to Equal Weight from Overweight - PT $810

• ENVX: TD Cowen Downgrades to Market Perform from Outperform - PT $20 (from $19)

• FND: Jefferies Downgrades to Hold from Buy - PT $108 (from $110)

• HRI: BofA Securities Downgrades to Underperform from Buy - PT $140 (from $150)

• KNX: Evercore ISI Downgrades to In Line from Outperform - PT $52 (from $60)

• LECO: Oppenheimer Downgrades to Perform from Outperform

• NOVA: BMO Capital Downgrades to Market Perform from Outperform - PT $25 (from $27)

• SIRI: Deutsche Bank Double Downgrades to Sell from Buy - PT $6.25

• SIRI: Evercore ISI Downgrades to Underperform from In Line - PT $4.50

• SIRI: Pivotal Research Downgrades to Sell from Hold - PT $4.50 (from $4)

• STNG: BofA Securities Downgrades to Neutral from Buy - PT $45 (from $60)

• XPEV: JPMorgan Downgrades to Underweight from Neutral - PT $10 (from $7.50)

Coverage Initiated

• ARWR: TD Cowen initiates at Outperform

• ATAT: Daiwa Securities initiates at Buy - PT $24

• GDTC: Benchmark initiates at Speculative Buy - PT $5

• LFMD: Cantor Fitzgerald initiates at Overweigh

• LYV: Oppenheimer initiates at Outperform - PT $110

• OLMA: Oppenheimer initiates at Outperform - PT $21

• PPBT: Jones Trading initiates at Buy - PT $8

• TVTX: JPMorgan initiates at Overweight - PT $26