Morning Reads


Todays Open Interest Change




This week will see some of the biggest companies report their second-quarter earnings, and expectations are quite low. Traders are hoping companies clear this low bar, which could in turn help the stock market defend this year's rally. The biggest name on this week's calendar is Tesla (TSLA), which already reported record Q2 deliveries. The remaining Big 6 banks will also report this week, apart from Netflix (NFLX) and IBM (IBM).

Expectations: Wall Street expects earnings for S&P 500 (SP500) companies to decline for the third straight quarter and see the steepest drop since Q2 2020. Consumer-discretionary companies are forecast to post the highest earnings growth, while the energy sector will likely see the biggest decline. "Leading into Q2 reporting, estimates have been revised down more than normal," said 22V's Dennis DeBusschere, adding that there's a growing risk of negative revisions to 2024 estimates.

YTD rally: U.S. stocks have rallied this year despite stubbornly high inflation, weak consumer demand and the Federal Reserve's drawn-out tightening cycle. All major indices gained YTD, with S&P 500 (SP500) up ~18%, Nasdaq Composite (COMP.IND) up ~36% and Dow Jones (DJI) 4% higher. The tech-heavy Nasdaq Composite index's rally was spurred by the recent AI wave, and investors will be on the lookout for more updates on the new technology.

SA commentary: "Earnings will need to be significantly better than expected... guidance must be good enough to turn earnings estimates from trending lower to higher," said Mott Capital Management's Michael Kramer. "If not, the recent rally will likely have been nothing more than a head fake." Investing Group Leader Fear & Greed Trader said the earnings season will be just fine, but expects the market to stall. But Jean Boivin believes earnings will come under more pressure.

Survey Monday

Following an impressive first half of 2023 for markets, investors are sizing up earnings season and forward-looking corporate forecasts. Given stock valuations over the coming quarter, the S&P 500...

· Will soar another 5%+ (this rally is unstoppable!)
· Post a moderate advance (easy to clear the low bar)
· Experience some sideways trading (uncertainty reigns)
· Lose some steam (bleak outlook means tapping the brakes)
· Will sink by around 5% (trouble ahead so look out below!)

Take the survey and see the results here

Chip talks

As China continues to retaliate with its own chip restrictions, the CEOs of Intel (INTC) and Qualcomm (QCOM) are expected to visit Washington this week to discuss China policy. The chief executives will meet U.S. officials to discuss market conditions, export controls, and other matters that impact their businesses. The talks come in the wake of the U.S. planning fresh restrictions on chip exports to China, while China imposed its own set of export controls. Intel CEO Pat Gelsinger's meeting in Washington may be especially crucial as the company works to get its $5.2B purchase of Tower Semiconductor (TSEM) across the finish line. (58 comments)

Debt relief

The Biden administration will forgive $39B in student debt for 804K borrowers, in an effort to fix the federal student loan system's income-driven repayment plans. According to the Education Department, payments that should have brought a borrower closer to paying off their debt hadn't been properly accounted for. The move came after the Supreme Court struck down President Joe Biden's plan to forgive up to $20K of student loans per borrower, saying it was unconstitutional. The ruling has pushed his administration to approach the student debt relief issue through a different route. (125 comments)

Gaming truce

Microsoft (MSFT) inked a binding deal with rival Sony (SONY) to keep the videogame Call of Duty on PlayStation once its acquisition of Activision (ATVI) is complete. The truce marks the end of a prolonged battle in which the Japanese conglomerate raised antitrust concerns over the $69B deal. The deal is similar to the 10-year pact with Nintendo (OTCPK:NTDOY). While the U.S. has approved the Activision deal, the U.K. is yet to clear it. U.K.'s antitrust regulator is expected to make a final decision by the end of August. Investing Group Leader Bram de Haas believes Microsoft is in a strong position in the U.K. "The odds for this deal to close have never before looked this good to me." (22 comments)

Today's Markets

In Asia, Japan closed. Hong Kong closed. China -0.9%. India +0.8%.
In Europe, at midday, London -0.2%. Paris -1.2%. Frankfurt -0.5%.
Futures at 7:00, Dow -0.2%. S&P -0.1%. Nasdaq flat. Crude -1.3% to $74.44. Gold -0.2% to $1,960.70. Bitcoin -0.2% to $30,256.
Ten-year Treasury Yield -4 bps to 3.78%.

Today's Economic Calendar

8:30 Empire State Mfg Survey

Companies reporting earnings today »

What else is happening...

China's economy grows less than expected in Q2.

Russia out of Black Sea grain deal, wheat prices surge.

First Tesla (TSLA) Cybertruck rolls off the production line.

Moscow takes control of Danone Russia, Carlsberg's Baltika.

United Airlines (UAL), pilots reach deal with solid pay raises.

Ripple ruling bodes well for Coinbase Global (COINand altcoins.

Solar, wind to produce a third of global energy by end of decade.

Eli Lilly (LLY), Merck (MRK) among Barclays' top pharma picks.

Is saving this year's summer box office an impossible mission?

For Q2, it's Spotify (SPOT) over Netflix (NFLXfor KeyBanc.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)