With a near certainty of a 25bp hike baked in, (boy we hope JPowell does Nada) the markets have pared back some recent trend moves. The Nasdaq is well off some 400 points or so from its highs, and the US fixed income markets have given up some recent gains via a bear flattening move over the last week. With the market so certain of a 25bp hike, we won’t go against the tide, but what an Ace move it would be if the FOMC did not hike. We aren’t even sure why they would hike given the recent collapse in inflation data. Yea, yea we keep hearing housing is still elevated, but is it? Mishtalk.com posted this chart:
That number doesn’t look elevated to me it looks like its some 34% off its peak!
We also keep hearing how corporations are still paying record low interest and how its defying the higher rates that we have…well we just have to say, its a duration thingy and when a Corporate Treasurer issues 5Y notes we can’t help but think 2018 and 2019 vintages will have the same interest payment now will they? In fact a recent S&P Global Ratings report stated that U.S. financial and nonfinancial corporate debt maturing through 2024 totals $4.8 trillion!
By what factor will this debt be rolled over the next year and a half? 2x,3x? So charts like this are not defying anything, they are just a delayed pretext to what is coming down the pipes, which will be a steep red spike upwards:
The US Govt issued new 2Y notes yesterday and a new 5Y today, today’s auction was a bit better than yesterday, but the supply has definitely assisted the flatter curve trend as of late. We also had two heavy weights report after the close today, Microsoft and Google, per Zerohedge, here are the MSFT highlights:
Revenue $56.19 B, consensus $55.49 B
Revenue at constant currency +10%, estimate +8.52%
EPS $2.69, beating exp. $2.55
Operating income $24.25 billion, beating estimates of $23.28 billion
Capital expenditure $8.94 billion, beating estimates of $7.85 billion
In afterhours trading per MarketWatch MSFT is -3.7% at $338.00:
As far as Google (Alphabet) per Zerohedge:
*ALPHABET 2Q REV. $74.60B, EST. $72.77B
*ALPHABET 2Q EPS $1.44, EST. $1.32
Advertising revenue $58.14 billion, estimate $57.45 billion
YouTube ads revenue $7.67 billion, estimate $7.41 billion
Google other revenue $8.14 billion, estimate $7.17 billion
Google Services revenue $66.29 billion, estimate $64.67 billion
Google Cloud revenue $8.03 billion, estimate $7.83 billion
Other Bets revenue $285 million, estimate $231.7 million
Per MarketWatch, Google is +6.05% just a tad under $130.00 :
Keeping the great news train going for the economy, United Parcel Service (UPS) and the International Brotherhood of Teamsters have reached an agreement over a five-year labor contract, preventing a potential strike by roughly 330,000 package-delivery drivers and package sorters. -WSJ
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