Earnings Are Working

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

If you wish to listen to this commentary, please click here. 

Earnings Do Work

Apple Inc (NASDAQ:AAPL) had better than expected earnings and while Amazon.com, Inc. (NASDAQ:AMZN) had an earnings loss, their sales were much better than expected. Amazon also said that consumers are still spending – good news after Walmart’s warning earlier this week that got everybody worried saying consumers were being a little bit more thrifty.

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The other thing that happened is Chevron Corporation (NYSE:CVX) and Exxon Mobil Corp (NYSE:XOM) announced and beat expectations. The stocks are up sharply and crude oil is also up sharply today. Energy stocks are our strongest performers. This is evidence that when earnings come out, they do work. I believe that energy stocks will have the best earnings for the next two quarters. 

The stock market is getting a little overbought and it is going to have to backfill a bit, but earnings are working.

Wages Exceeding Inflation

Today, the Commerce Department reported that the Fed’s favorite inflation indicator, namely the Personal Consumption Expenditure (PCE) index rose 1% in June, which is the biggest monthly increase since February 1981. Ouch. In the past 12 months, the PCE has risen 6.8%.  The core PCE, excluding food and energy, rose 0.6% in June and 4.8% in the past 12 months. 

The good news from the Commerce Department was that consumer spending rose 1.1% in June and was exceeding the PCE inflation pace. Another positive sign was that the employment cost index rose 1.3% in June, which is indicative that wages are finally exceeding inflation.  Overall, this latest data is not indicative of a recession, so the Fed will likely continue to raise key interest rates in September to squelch PCE inflation.

Wall Street is celebrating the good earnings and the Fed's dovish statement.  I believe the Fed is going to have its last rate increase on September 21st and right now I'd say it's going to be 50 basis points because of the decline in treasury bond yields.

Coffee Beans

Lockdowns and other restrictions that the pandemic brought about curtailed the most common childhood vaccinations. Vaccination rates for polio, tetanus, tuberculosis and Hepatitis B fell by 3-4 percentage points. This means that currently between 82% and 85% of 1-year-olds have received these vaccines worldwide. Source: Statista. See the full story here.