Wednesday, July 31st, 2024
Pre-market futures are rallying this morning. This follows a rather tepid start to the week, which appeared to take a powder ahead of today’s Fed announcement on interest rates from the Federal Open Market Committee (FOMC), but now looks to break out to the upside — perhaps based on pre-market employment and earnings data (see below). The Dow is +100 points at this hour, the S&P 500 is +70 points and the Nasdaq has rocketed +410 points higher currently.
Jobs Week continues this morning. It began yesterday with the Job Openings and Labor Turnover Survey (JOLTS) for June, but this is the first employment print for July. Automatic Data Processing ADP has compiled private-sector payrolls, which only reached 122K for the month — below the 150K expected and the upwardly revised 155K for June. It’s the lowest print since January’s 111K, and brings the year-to-date monthly average of private-sector hires to 160K.
Medium-sized companies (50-499 employees) led the way, with +70K jobs filled. This was followed by +62K for large firms, which have a natural advantage over smaller businesses with stock options, matched 401k programs and health insurance packages. Small companies, without these advantages, actually lost -7K in the month. Services made up +85K of these new hires, with Goods-producing businesses bringing in +37K.
The ADP report breaks this data down further. Trade/Transportation/Utilities led the way with +61K jobs filled, followed by +39K in Construction. +24K in Leisure/Hospitality (gone are the days of a half-million hires in this industry per month) and +22K in Education/Healthcare. Manufacturing lost -4K positions in July, Information Services was down -18K and Professional/Business Services, which had for a time been among the highest-growing employment sectors, shed -37K jobs for the month.
In short, it’s a much different labor force picture being painted these days. Following yesterday’s JOLTS results, which saw job openings come down to 8.18 million from 8.23 million the previous month (and 33% fewer open positions since the 12.2 million peak in March of 2022), we’re now closing in on the number of job gains needed to replace the supply of retirees in the labor market. Friday’s non-farm payroll estimate is for +185K new jobs filled for July. ADP Chief Economist Nela Richardson said this morning, “If inflation goes back up, it won’t be because of labor.”
At 2pm ET today, a new Fed announcement will hit the tape. Following its two-day FOMC meeting, which ends this afternoon, it is with near certainty that the Fed funds rate will remain at 5.25-5.50%, where it’s been since July of last year. Most importantly from today’s report will be the forecast for future rate cuts, perhaps as soon as the next FOMCX meeting in September. Further color will come from the press conference with Fed Chair Jerome Powell at 2:30 pm ET today.
Boeing BA posted a -62% negative earnings surprise today. Its -$2.90 per share was well below the -$1.70 in the Zacks consensus, on $16.87 billion in revenues which came in -3.5% beneath estimates. This also marks the final full quarter of CEO Dave Calhoun’s tumultuous tenure, which came following Dennis Muilenberg’s reign which saw two fatal crashes of the 737 MAX. Former Rockwell Collins CEO Kelly Ortberg takes over for Calhoun on August 8th. For more on BA’s earnings, click here.
Mastercard MA beat estimates on top and bottom lines for Q2 this morning. Earnings of $3.59 per share outpaced the $3.51 consensus estimate, on $7.00 billion in quarterly revenues, ahead of the $6.85 billion analysts had expected. Purchase volume was the only line item coming in slightly below estimates, but otherwise another solid quarter for the credit card giant that has only missed earnings estimates once in the past five years. Shares are up +2.7% in the pre-market.
Norwegian Cruise Lines NCLH also outperformed in Q2 results ahead of the bell. The $8 billion market-cap leisure services company reported 40 cents per share versus 34 cents expected, for a +17.7% positive surprise. Revenues of $2.37 billion was a smidge hire than the Zacks consensus. It’s been a rough few years for the cruise line companies, but this marks its sixth earnings beat in the last eight quarters. Shares are up nearly +4% this morning, more than cutting in half its -7.4% performance year to date. For more on NCLH’s earnings, click here.
A full package of earnings reports will come out after today’s close, as well. Chief among them will be the former “F” in the so-called “FANG” stocks, Meta Platforms META, parent of Facebook, Instagram and What’sApp. Zacks consensus expects a fine quarter, with +45.5% earnings growth and +19.8% on revenues. Additionally, Qualcomm QCOM, MGM Resorts MGM and Etsy ETSY will report this afternoon, among many others.
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