The U.S. debt gets downgraded

Fitch Downgrades The U.S. Debt Rating, The Labor Market Is Starting To Simmer, Bill Ackman Shorts 30-Year Treasuries, Brazil Cuts Interest Rates

Hello! Hope you all had a great weekend. Major events have led to market tremors this week, which could potentially shake up how the markets perform for the rest of the year. We’ll summarize the most important topics, and also review the top stocks ranked by their lobbying expenditure, reflecting the intersection of finance and government policy.

In today’s newsletter:

  • 🔻 Fitch Downgrades U.S. Debt Rating

  • 📊 The Labor Market Is Starting To Simmer

  • 📉 Bill Ackman Shorts 30-Year US Treasuries

  • 🔄 Bank of America Reverses Recession Call

  • 🇧🇷 Brazil Cuts Interest Rates

  • 🏠 Foreign Purchases of U.S. Homes Reaches All-Time Low

  • 💰 Top Stocks Ranked By Amount Spent Lobbying The Government

Let’s dive right in!

Read time: 4 minutes 30 seconds

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Data as of 8/6/23 1 PM EST

🔻 Fitch Downgrades U.S. Debt Rating [CNN]

Fitch Ratings has lowered the US debt rating from AAA to AA+, attributing the decision to deteriorating governance standards, including fiscal management issues and recent political instability. This downgrade, which could affect mortgage rates and global contracts, was met with disagreement from the Biden administration.

📊 The Jobs Market Is Starting To Simmer [WSJ]

The U.S. economy added 187,000 jobs in July, a slowdown from the previous year's average of 400,000 jobs per month, signaling a cooling economy and reducing pressure on the Fed to raise interest rates. The unemployment rate dipped to 3.5%, wages grew by 4.4%, and sectors such as healthcare, financial activities, and construction saw job increases, while areas like temporary services, tech and information companies, and retailers cut staff.

Source: WSJ

📉 Bill Ackman Shorts 30-Year US Treasuries [BB]

Hedge Fund Manager Bill Ackman is betting on a decline in 30-year US Treasuries due to anticipated increases in the supply of Treasuries needed to fund the current budget deficit, future spending plans, and higher refinancing rates.

🔄 Bank of America Reverses Recession Call [BB]

Bank of America economists have abandoned their prediction for a US recession due to recent data indicating persistent economic growth, low unemployment, and gradual improvements in wage and price pressures, making them the first large Wall Street bank to reverse their recession forecast.

🇧🇷 Brazil Cuts Interest Rates [R]

In an unexpectedly aggressive move, Brazil's central bank cut its benchmark interest rate by 50 basis points due to improved inflation projections, and signaled further similar reductions in the coming months.

🏠 Foreign Purchases of U.S. Homes Reaches All-Time Low [WSJ]

Foreign purchases of U.S. homes have reached a record low, with 84,600 homes bought in the year ending March, a 14% drop from the previous year, though signs of a turnaround are emerging due to easing Covid restrictions and increased interest in rental properties.

Major Earnings Recap Week of July 31st:

  • Apple ($AAPL) has weathered the general downturn in the smartphone industry, buoyed by its iPhone sales and the strength of its services business, despite a decline in iPad and Mac sales. The company is also focusing on growth in emerging markets such as India, with increased market share. [WSJ]

    • 🟢 EPS $1.26 Beats $1.19 Estimate

    • 🟢 Sales $81.8B Beats $81.69B Estimate

  • Amazon ($AMZN) reported better-than-expected Q2 growth and profit, aided by improvements in delivery logistics and a resurgence in its cloud computing division, AWS. Despite facing market challenges, the company continues to innovate, particularly in AI, and plans significant capital investments in generative AI initiatives, all while managing cost reductions. [R]

    • 🟢 EPS $0.65 Beats $0.35 Estimate

    • 🟢 Sales $134.4B Beats $131.5B Estimate

  • AMD ($AMD) outperformed estimates for Q2 sales and profit despite an 18% revenue decline, and expects growth in its data center and embedded divisions. The company is navigating a weaker PC market and a slight decline in its gaming segment. [CNBC]

    • 🟢 EPS $0.58 Beats $0.57 Estimate

    • 🟢 Sales $5.36B Beats $5.31B Estimate

  • Starbucks ($SBUX) exceeded earnings expectations for Q3 but sales fell short, with same-store sales in North America decelerating and earnings guidance narrowing for the fiscal year. However, the company saw significant growth in China and an increase in its loyalty-rewards program membership in the US, indicating strong long-term prospects. [B]

    • 🟢 EPS $1 Beats $0.95 Estimate

    • 🔴 Sales $9.17B Misses $9.29B Estimate

  • PayPal’s ($PYPL) Q2 margins were impacted by higher provisions in its credit portfolio, overshadowing its strong future earnings forecast. Additionally, the company is in the final stages of selecting a new CEO to replace retiring Dan Schulman, with strategic shifts expected to impact results in the future quarters. [R]

    • ⚪️ EPS $1.16 Meets $1.16 Estimate

    • 🟢 Sales $7.29B Beats $7.27B Estimate

Biggest Companies Reporting Earnings This Week:

Some of the biggest companies reporting this week include Palantir ($PLTR), Eli Lilly ($LLY), UPS ($UPS), Coupang ($CPNG), Roblox ($RBLX), Disney ($DIS), Alibaba ($BABA), and Datadog ($DDOG).

The Lobbying Disclosure Act of 1995 (LDA) is a U.S. law that makes federal lobbying more transparent. It defines what counts as lobbying, and says that lobbyists must register with government officials. They also need to report twice a year on what they've done, including what issues they're lobbying for, who they're working for, who they've contacted, and how much money they've spent or earned. If lobbyists don't follow these rules, they can be fined or even go to jail. This law has been updated since 1995 to make it stronger and close some of its loopholes.

Below is a breakdown of the top stocks based on lobbying expenditures. We see a diverse array of industries from big pharma to big tech as well as airlines and telecommunications.

Source: Quiver Quant

Major Trades Published 7/31 - 8/4 [Source: 2iQ]

Buys:

Kathy Manning [D] Purchased $15K-$50K of Blackstone Group ($BX)

Bill Keating [D] Purchased $15K-$50K of Meta Platforms ($META)

Steve Cohen [D] Purchased $15K-$50K of FedEx ($FDX)

Tom Carper [D] Purchased $2K-$30K of ProShares Short QQQ ($PSQ)

Virginia Foxx [R] Purchased $1K-$15K of Altria ($MO)

Lois Frankel [D] Purchased $1K-$15K of Pfizer ($PFE)

Sells:

Tom Carper [D] Sold $15K-$50K of Ranger Equity Bear ETF ($HDGE)

Bill Keating [D] Sold $1K-$15K of Electronic Arts ($EA)

All times in ET

  • MONDAY, AUGUST 7

    • 3:00 pm Consumer Credit - June

  • TUESDAY, AUGUST 8

    • 6:00 am NFIB Optimism Index - July

    • 8:15 am Philadelphia Fed President Harker Speaks

    • 8:30 am U.S. Trade Balance - June

    • 8:30 am Richmond Fed President Barkin Speaks

    • 10:00 am U.S. Wholesale Inventories - June

  • WEDNESDAY, AUGUST 9

    • None scheduled

  • THURSDAY, AUGUST 10

    • 8:30 am Initial Jobless Claims - August

    • 8:30 am Consumer Price Index- July

    • 8:30 am Core CPI - July

    • 8:30 am CPI (year-over-year)

    • 8:30 am Core CPI (year-over-year)

    • 2:00 pm Treasury Budget - July

  • FRIDAY, AUGUST 11

    • 8:30 am Producer Price Index - July

    • 8:30 am Core PPI - July

    • 8:30 am PPI (year-over-year)

    • 8:30 am Core PPI (year-over-year)

    • 10:00 am Consumer Sentiment (Prelim) - August

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