In his podcast addressing the markets today, while commenting on the automotive industry, Louis Navellier offered the following commentary.
There was a significant Treasury bond rally this week and the 10-year Treasury bond yield fell below 2.9% on Friday. Naturally, if market rates fall this week, then it will take pressure off the Fed to raise key interest rates. However, a 0.75% key interest rate hike at the Federal Open Market Committee (FOMC) on July 27th is still likely, since the Fed remains behind market rates.
The Institute of Supply Management (ISM) on Friday announced that its manufacturing index slipped to 53 in June, which is the lowest reading in over two years (since May 2020). The new orders component declined to 49.2 in June, which is alarming, since any reading below 50 signals a contraction.
Also important is the backlog of orders component declined to 53.2 in June. However, the production component actually rose to 54.9 in June. Fully 15 of the manufacturing industries that ISM surveyed reported expanding in June, while three industries contracted, namely paper products, wood products, and furniture and related products. Overall, it is apparent that the manufacturing sector is working off its order backlogs, but is still growing for now.
Haunting Automotive Industry
Speaking of manufacturing, GM announced on Friday that its second-quarter sales fell 15% and that it built 95,000 vehicles without certain semiconductors, so supply chain woes continue to haunt the automotive industry. GM also lowered its second-quarter earnings guidance below analyst consensus estimates. Do not be surprised if more companies issue lower earnings guidance, because right now the analyst community has not cut their earnings estimates, so there is no “earnings recession” forecasted.
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Speaking of earnings, the other interesting news on Thursday was that Micron Technology (MU) posted a 6.6% second-quarter earnings surprise, but provided lower guidance looking forward, due to weak cell phone and personal computer demand. This demand weakness is partially attributable to China’s recent Covid-19 shutdown, but now that China is reopening there is a possibility that global economic growth may improve. One thing that will definitely help boost cell phone sales would be if Apple launches a folding OLED or micro-LED iPhone in late September to boost holiday sales. A folding 5G Apple iPhone would likely sell for approximately $2,000, be the hot holiday item and help to spark a big technology rally.
National pride in the U.S. has plummeted to an all-time low at 38%, as the fewest respondents in the history of Gallup's survey said they were extremely proud to be an American. Older Americans are found more likely to have extreme pride in the U.S. when compared with younger ones. Source: Statista. See the full story here.