Economic reports, Q2 results rule out interest rate cut in July

Tuesday, July 16, 2024

We got to work in this morning’s pre-market. The second-quarter earnings season will bring us key numbers on the performance of all kinds of publicly traded stocks over the next four weeks, while key economic data helps us rate forecasters track the likelihood of an impending rate cut. The Dow, which closed at an all-time high yesterday, is up another +150 points on the hour, the S&P 500 is +16, and the Nasdaq is +62 on the hour.

If we are counting on a July interest rate cut, we can stop crossing our fingers now. This Morning Retail sales for June were much stronger than forecast, and only a downside surprise was expected to put a rate cut back on the table this month (July 31, two weeks from now tomorrow). The headline figure of 0.0% last month beats the expected -0.4%, and the previous revision to +0.3% is 20 basis points (bps) higher than the initial print in May.

Excluding autos, we jump 30 basis points from expectations. That +0.4% headline is up from a +0.1% revision from the previous month, which turned positive from -0.1% reported a month ago. Excluding autos and gasoline, the number jumps to +0.8%, half a point above the upwardly revised +0.3% for May. The check figure, which is filed in economic report compilations like PCE (due out a week from this Friday), came in at +0.9%, the highest we’ve seen since +1.2% in April 2023.

Import prices were also higher than expected. Another headline 0.0% beat the -0.2% that analysts were expecting, and the -0.4% originally reported last month was halved to -0.2% after a revision. Fuel imports, excluding fuel, are hovering at +0.2% from -0.2% expected. Year-on-year, +1.6% for imports is the highest since December 2022, with the May revision up 30 basis points to +1.4%. Export was -0.5% month on month, compared with a downwardly revised rate of -0.7% in May, with an increase of 20 basis points year on year to +0.7%.

The second-quarter profit reports of the largest corporations turned out to be much better than the previous ones. Bank of America BAC beat earnings estimates by +5% to 83 cents per share, though still below the 88 cents reported a year ago. This is the seventh consecutive earnings beat for the large Charlotte, N.C.-based bank. Revenue of $25.38 billion beat estimates by +0.76%. Shares were up +1.4% on the news in premarket trading, up +24.4% year to date. For more on BAC’s earnings, click here.

Morgan Stanley MS easily beat estimates. Q2 earnings of $1.82 per share easily beat the Zacks consensus of $1.65 (and the $1.24 per share reported in the year-ago quarter), while revenues of $15.02 billion beat estimates of $14.18 billion. However, shares fell -3% on lower Wealth Management data and a drop in interest income. Morgan Stanley is up +12% year to date, underperforming the S&P 500.

UnitedHealthcare UNH also beat expectations in Q2. Earnings of $6.80 per share beat the $6.65 estimate by +2.24%, while revenues of $98.86 billion slightly beat estimates by +0.15%. Pre-market trading was up +2.6% at this hour, more than doubling the health insurance giant’s negative returns year-to-date. UNH carries a Zacks Rank #4 (Sell) with today’s earnings report. To read more about UNH’s earnings, click here.

After today’s open, we’ll get Business Inventories for May and the new Homebuilders Confidence Index for July. Both are expected to improve slightly from the previous month. This is also a 10. Amazon AMZN Prime Day, which is expected to bring in +7% over the prior year’s earnings of $12.5 billion. Since the original Prime Day, Amazon has added a holiday shopping sale in October for the past two years and a Big Spring Sale earlier this year.

Questions or comments about this article and/or the author? Click here>>

Want the latest recommendations from Zacks Investment Research? Today you can download the 7 best stocks for the next 30 days. Click to get this free report