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Fed raises interest rates to highest level in 22 years

Fed Raises Interest Rates To Highest Level In 22 Years, U.S. Economy Grew By 2.4% YoY In Q2, UK Faces Highest Debt Costs Globally, Japan’s Central Bank Shakes Up Bond Rules

Author

Carbon Finance
July 30, 2023

Hello! There’s been a lot of news this week with major companies reporting earnings and several key economic events. We’ve summarized everything you need to know into a quick read!

In today’s newsletter:

  • 🔺 Fed Raises Interest Rates To Highest Level In 22 Years

  • 📈 U.S. Economy Grew By 2.4% YoY In Q2

  • 🇬🇧 UK Faces Highest Debt Costs Globally

  • 🇯🇵 Japan’s Central Bank Shakes Up Bond Rules

Let’s dive right in!

Read time: 3 minutes

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🔺 Fed Raises Interest Rates To Highest Level In 22 Years [CNBC]

The Federal Reserve has raised its funds rate to 5.25%-5.5%, the highest level in over 22 years, in a widely anticipated move. However, further hikes may be put on hold as officials assess the impact of this increase on the economy.

📈 U.S. Economy Grew By 2.4% YoY In Q2 [NYT] 

The U.S. economy experienced a stronger-than-expected recovery in Q2 with a 2.4% annual growth rate. This was driven by robust consumer spending, a resurgence in business investment, and government spending, although concerns remain about a potential slowdown in the second half of the year.

🇬🇧 UK Faces Highest Debt Costs Globally [FT] 

The UK is facing the highest debt interest costs globally in 2023 due to high inflation and an unusual number of government bonds tied to price rises. As a result, the country's public finances are strained and rating agencies have a negative outlook on the UK's credit rating.

🇯🇵 Japan’s Central Bank Shakes Up Bond Rules [BB]

The Bank of Japan (BOJ) has loosened its control on bond yields, increasing the flexibility of its monetary policy. This move has ignited market speculation about future policy normalization.

Major Earnings Recap Week of July 24th:

  • Microsoft’s ($MSFT) latest quarterly revenue forecasts fell short of analysts' predictions, but Q4 earnings and revenue exceeded expectations. Notably, Microsoft’s Intelligent Cloud, buoyed by Azure's 26% growth, surpassed $110 billion in annual revenue. [CNBC]

    • ✅ EPS $2.69 Beats $2.55 Estimate

    • ✅ Sales $56.19B Beats $55.47B Estimate

  • Alphabet’s ($GOOG) Q2 profits exceeded expectations, thanks to a recovery in advertising spending and rising demand for Google Cloud services. Amid overall company growth, Alphabet's CEO Sundar Pichai highlighted continued leadership in AI as a driving force behind their success. [G]

    • ✅ EPS $1.44 Beats $1.34 Estimate

    • ✅ Sales $74.6B Beats $72.82B Estimate

  • Meta Platforms ($META) reported an 11% increase in Q2 revenue and a 16% rise in profits, beating expectations and signaling an improving online ad market. CEO Mark Zuckerberg attributes the strong performance to advancements in AI-driven advertising technology, and despite massive layoffs and ongoing investments in AI and the metaverse, Meta's stock is up 160% year to date. [NYT]

    • ✅ EPS $2.98 Beats $2.91 Estimate

    • ✅ Sales $32B Beats $31.12B Estimate

  • Coca-Cola ($KO) raised its annual revenue and profit forecasts following higher pricing and strong demand, with Q2 average selling prices rising 10% while volumes remained largely stable. Despite concerns over consumer spending, the firm now predicts an 8-9% increase in organic revenue for the year, and expects a 5-6% increase in full-year core earnings per share. [R]

    • ✅ EPS $0.78 Beats $0.72 Estimate

    • ✅ Sales $11.97B Beats $11.75B Estimate

  • McDonald’s ($MCD) exceeded Q2 earnings and sales estimates, attributing the growth to strategic menu price increases and high diner volume. Despite these strong results, the company anticipates sales moderation due to a challenging macro environment, elevated costs, and lower customer spending, while also noting that lower-income diners are becoming more price-sensitive. [B]

    • ✅ EPS $3.17 Beats $2.79 Estimate

    • ✅ Sales $6.5B Beats $6.27B Estimate

Biggest Companies Reporting Earnings This Week:

Major Trades Published 7/17 - 7/28 [Source: 2iQ]

Buys:

Michael McCaul [R] Purchased $400K-$1M of Conocophillips ($COP)

Michael McCaul [R] Purchased $130K-$300K of Nvidia ($NVDA)

Michael McCaul [R] Purchased $150K-$300K of Oshkosh Corp. ($OSK)

Bill Keating [D] Purchased $15K-$50K of General Motors ($GM)

Sells:

Michael McCaul [R] Sold $200K-$500K of Meta Platforms ($META)

Michael McCaul [R] Sold $200K-$500K of Netflix ($NFLX)

Michael McCaul [R] Sold $200K-$500K of Morgan Stanley ($MS)

Mark Green [R] Sold $100K-$250K of Energy Transfer ($ET)

Shelley Moore Capito [R] Sold $15K-$50K of Microsoft ($MSFT)

All times in ET

  • MONDAY, JULY 31

    • 8:30 am Chicago Business Barometer - July

  • TUESDAY, AUGUST 1

    • 9:45 am S&P Final U.S. Manufacturing PMI - July

    • 10:00 am Job Openings - June

    • 10:00 am ISM Manufacturing - July

    • 10:00 am Construction Spending - June

  • WEDNESDAY, AUGUST 2

    • 8:15 am ADP Employment - July

  • THURSDAY, AUGUST 3

    • 8:30 am Initial Jobless Claims - July

    • 8:30 am U.S. Productivity (prelim) - Q2

    • 9:45 am S&P Final U.S. Services PMI - July

    • 10:00 am ISM Services - July

    • 10:00 am Factory Orders - June

  • FRIDAY, AUGUST 4

    • 8:30 am U.S. Nonfarm Payrolls - July

    • 8:30 am U.S. Unemployment rate - July

    • 8:30 am U.S. Hourly Wages - July

    • 8:30 am Hourly Wages Year Over Year

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