Weekly Recap: Stocks Rally in a Short Trading Week
Tesla, Voyager bankruptcy, and jobs data highlight the week
Monday, July 4th
Markets Closed
Over the weekend, Tesla announced Q2 deliveries came in at 254,695 vehicles, missing expectations of 264,000 vehicles. This is no surprise, as Shanghai lockdowns and ramp-ups in Berlin and Austin slowed production. This ends their streak of record deliveries.
Tuesday, July 5th
S&P 500: +0.19%
WTI Crude Oil plummeted over 8% to fall under $100 as many commodity prices fell due to increased fears over a recession. Recessionary fears spark sell-offs in commodities like oil due to fear of lower demand.
Stocks started off the day deep in the red territory, with the Dow Jones down over 2%, but rallied as the day went on. Even with its rebound, the Dow Jones finished red, while the S&P and Nasdaq finished green for the day.
Wednesday, July 6th
S&P 500: +0.35%
Amazon takes a small stake in food delivery service GrubHub, and offers benefits to Amazon Prime members. This caused DoorDash and Uber to sell off, as this ramps up competition in the food delivery space.
Crypto brokerage Voyager Digital files for bankruptcy protection after Three Arrows Capital, a cryptocurrency-based hedge fund, defaulted on its debt. Voyager saw heavy exposure to Three Arrows Capital, and may be a warning sign to Celsius, another cryptocurrency brokerage who also had exposure to Three Arrows Capital, that bankruptcy may be inevitable. Voyager pledges to return capital to users through a new cryptocurrency and shares in a “new” Voyager platform, but these will most likely be worthless.
FOMC minutes from their June meeting were released, here are some notable lines:
“After the release of the higher-than-expected inflation data, policy-sensitive rates pointed instead to a considerable probability of 75 basis point moves at both the June and July meetings”
“Market-based measures of inflation compensation continued to indicate expectations that inflation would decline notably incoming quarters, and measures of medium-term inflation compensation fell over the intermeeting period.”
“The labor market remained very tight, but there were some signs that momentum was slowing.”
“In their discussion of current economic conditions, participants noted that overall economic activity appeared to have picked up after edging down in the first quarter”
These Federal Reserve meeting minutes show they will do what it takes to get inflation down, and are not worried about slowing economic growth if that is the cost to bring down inflation. They do mention that economic growth picked up in Q2 2022, after a negative GDP read in Q1 2022.
Thursday, July 7th
S&P 500: +1.50%
On Thursday morning pharmaceutical company Merck was rumored to be buying Seattle Genetics, also known as SEAGEN, for a deal valued roughly $40 billion. Concerns over antitrust authorization have been raised in this deal due to the size of the deal.
The stock market rally continued into Thursday, with many “risk-on” assets being bought by investors. The tech-heavy Nasdaq rose 2.28%, with many stocks that have been beaten down this year rallying.
Oil and other commodities rose across the board, coming off of a two day losing streak. After a brief visit under $100, WTI Crude Oil returned over $100, correcting its price after a steep sell-off in previous sessions.
In the after-market, the Washington Post reported that there is doubt over Elon Musk’s Twitter deal. This came to be after Elon’s team failed to confirm Twitter’s own research on bot and spam accounts on their platform. There is belief that Elon wants out of the deal, or a lower price on the deal. Twitter’s board seems to be intent on going through court to take on Elon for backing out of the Twitter deal.
Friday, July 8th
S&P 500: -0.08%
Nonfarm payrolls, a measure of new jobs not in agriculture, were up 370,000 in June, beating the 250,000 expected. The unemployment rate remained at 3.6%. Education and Health Services led the way for job growth.
Average hourly wages rose 5.1% from a year ago, slightly faster than expected. This is mixed news, as growing wages can continue to fuel inflation, but wage growth is safe as long as it is lower than inflation.
This shows that the job market and economy are in a strong place, sparking hopes we can avoid recession. The counterargument to this would be that the Federal Reserve may be required to act more aggressively in their rate hikes to slow down the economy.
Off this news, bond yields rose to over 3%.
Looking Ahead
Next week, on the 13th, we get June CPI inflation data. With Bloomberg expecting 8.8% year over year inflation, there is reason to be concerned with this data, but there is hope with commodity prices falling in June.
Banks start off earnings season next week, with JP Morgan, Morgan Stanley, and most major banks reporting. Banks usually give us an idea of what to expect for the rest of earnings season, so it is important to listen to what they say.