Wells Fargo (WFC) earnings; CPI, PPI inflation data key in week ahead
Wall Street finished higher for the holiday-shortened trading week, with tech stocks leading the way. The Dow Jones Industrial Average gained under 1% for the week. The S & P 500 and Nasdaq , which both closed at record highs Friday — rising nearly 2% and 3.5%, respectively, for the week. The first week of July continued the strength seen in June, the second quarter, and the first half of 2024. The S & P 500 technology sector was the big winner this past week, with Apple and Broadcom as our top Club stocks. Consumer discretionary and communication services, featuring Club name Meta Platforms and Alphabet , were also strong. Energy led to the downside this week, followed by health care and industrials. Looking back on the week, short as it was given the early close on Wednesday and Thursday off, we got some notable updates on the economy and heard from Club holding Constellation Brands . The Corona and Modelo brewer’s quarterly results Wednesday were decent , and the stock initially popped on the news. We told members that we were taking some profits in Constellation shortly before the open . However, the troubled wine and spirits business remained a problem that management must address in the coming quarters. Shares finished Wednesday down more than 3%, though they recovered much of that on Friday for a relatively flat week. Helping Friday’s largely higher session was drop in bond yields – precipitated by an uptick in June’s unemployment rate to 4.1% and only modestly higher than expected nonfarm payrolls additions of 206,000. Wage inflation was right in line with expectations. Taken as a whole, the government’s monthly jobs report card supported the case of the Federal Reserve to cut interest rates at its September meeting. While market odds favor a second cut in December, the Fed projected after its June meeting just one rate cut this year. This past week also brought updates on the manufacturing sector. On Monday, June’s ISM Manufacturing purchasing managers index came in weaker than expected and pointed to a faster-than-expected contraction, and on Wednesday, May’s factory order numbers showed a monthly decline versus expectations for a small increase. The ISM’s services PMI for June, out Wednesday, also disappointed, as it showed a contraction in the services sectors. Economists had been expecting to see an expansion. These readings were also green lights for the Fed to start cutting rates. We hope everyone had a good July 4 th and has a restful weekend. You’ll want to take advantage of the lull because believe it or not, earnings season is back. Three of the four big money center banks report this coming Friday, including Club name Wells Fargo . The government also delivers key data on consumer and wholesale inflation. Economic data : The June consumer price index (CPI) is out on Thursday morning, and the June producer price index (PPI) is out on Friday morning. Of the two, CPI carries more weight given that it more closely represents what consumers are paying for a basket of goods from one year, or month, to the next, which is the Fed’s main concern. However, PPI is important to track because it tells us what is happening at the cost input level for corporations. That speaks to margin dynamics – and therefore, it can inform us on both profitability and potential price actions companies may need to take in the future to protect profitability. Within the CPI data, be sure to watch the shelter component, which has been a huge thorn in the Fed’s side. Shelter, a barometer of what people pay for housing, has proven a very sticky source of inflation – a problem because, for most Americans, it represents a large and unavoidable cost. For headline CPI, economists are looking for a 3.1% annual increase, according to FactSet as of Friday. Core CPI, which excludes food and energy prices, is expected to increase 3.5% year over year. If realized, that would represent a slight deceleration at the headline level but a slight acceleration at the core level. As for PPI, economists are looking for a 2.3% annual increase at the headline level and a 2.5% year-over-year rise at the core level. Those numbers would be slightly higher than what we saw in May. Earnings season : Within the portfolio, net interest income (NII) guidance is going to be a key watch item when Wells Fargo reports its quarter this coming Friday. At an industry conference Tuesday, CFO Michael Santomassimo reiterated guidance for NII to be down 7% to 9% year over year. We still think this outlook could be conservative since the Fed’s higher-for-longer policy is generally a tailwind to net interest income. However, other factors like muted loan demand have prevented Wells Fargo from raising its outlook this year. Recognizing strong recent runs in shares of Wells Fargo and our other Club bank Morgan Stanley , we took some profits this past Friday. Morgan Stanley is set to deliver its earnings on Tuesday, July 16. We’re also interested to hear management’s thoughts on the intended pace of share repurchases in the second half of the year, now that the results of the stress test are in. Wells Fargo – and our other bank name Morgan Stanely – both passed, indicating they have strong capital positions with excess money to return to shareholders. Other higher-level watch items in the Wells Fargo report include commentary on the state of consumer savings, an indication of further buying power, and the real estate market, which has been something we’ve been monitoring as the world finds a new normal post-Covid. Monday, July 8 No major events Tuesday, July 9 No major events Wednesday, July 10 No major events Thursday, July 11 8:30 a.m. ET: Consumer price index 8:30 a.m. ET: Initial jobless claims Before the bell earnings: PepsiCo (PEP), Delta Air Lines (DAL), Conagra Brands (CAG) Friday, July 12 8:30 a.m. ET: Producer price index Before the bell: Wells Fargo (WFC), JPMorgan Chase (JPM), Citigroup (C) (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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U.S. flag is seen hanging on New York Stock Exchange building on Independence Day In New York, United States on America on July 4th, 2024.
Beata Zawrzel | Nurphoto | Getty Images
Wall Street finished higher for the holiday-shortened trading week, with tech stocks leading the way.
