July 16th Pre Market Brief

Good Morning

Yesterday the data handed out gifts. This morning it showed up asking for them back. Fewer layoffs, factories humming, and suddenly rate hikes are back in the conversation. Funny how good news for the economy became bad news for the market.

I’m getting over the flip-flop discussions of the Fed rates but the reality is it could go either way these next 5 months.

Let's dig in...

Today's Big Picture

1. TSMC Had A Record Quarter And The Stock Fell Anyway
TSMC posted its fifth straight record quarter overnight and the stock is still down this morning. Some blame its bigger spending plans, now up to $64 billion this year, but Goldman Sachs data shows big funds cut their chip holdings to the lowest level of the year before these earnings even came out. Goldman is now telling clients to put that money into companies like Meta, Alphabet, and Oracle instead. The selling isn't about TSMC's business. The buyers simply moved on.

2. The Economy Is Running Hot?
New unemployment claims fell to 208K this morning, meaning fewer people are losing jobs than expected. A survey of factories in the Philadelphia region came in at its strongest since 2021, and a similar survey of service businesses in New York turned positive for the first time in almost two years. Strong economic data like this keeps pressure on the Fed to hold rates high, or even raise them. South Korea's central bank actually did raise rates overnight, its first hike in over three years, to fight rising inflation.

3. The War Is Costing Companies Money Even Though Oil Looks Calm
The U.S. hit Iran for a fifth straight day, and Trump says power plants and bridges are next if Iran won't negotiate. Traffic through the Strait of Hormuz has collapsed: 21 ships crossed Tuesday versus 30 a day last week, and most used the route Iran controls. Oil prices are barely moving, but United Airlines just said the conflict will cost it an extra $6 billion in fuel and cut its profit forecast. The damage is showing up in company earnings before it shows up in the price of oil.

Market Overview

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Stock Spotlight (pre-market)

Eli Lilly $LLY ( ▲ 0.36% )  

Confirmed it's buying psychedelic drugmaker AtaiBeckley for $2.8 billion upfront, a big premium to yesterday's close. Lilly is buying a Phase 3 depression drug to feed its neuroscience push, and every small cap psychedelic name just got a valuation comp.

Netflix $NFLX ( ▲ 0.2% )  

Reports after the bell, the first major earnings this season from outside banks and AI. Growth fund managers hiding from chips need this print to work, because it's where a lot of that rotated money went.

United Airlines $UAL ( ▲ 0.52% )  

Cut its profit outlook on that $6 billion fuel bill. Holders across the airline group now have to reprice every carrier for a long war, whether their airline flagged it yet or not.

GE Aerospace $GE ( ▲ 1.87% )  

Beat and raised its full year forecast, and the stock is down. At record highs, a beat and raise is the entry fee, and anyone who bought the run up is learning that this morning.

SpaceX $SPCX ( ▼ 0.6% )  

Closed below its $135 IPO price for the first time yesterday, over a trillion dollars off the peak, and is ticking up premarket. Starship's thirteenth test flight is expected today, so the stock gets a binary headline either way.

Dell $DELL ( ▼ 9.81% )  

Extending yesterday's steep drop on AI overbuild fears. If hyper scalers are overbuilding, the companies selling them servers find out first, and the market is treating Dell as the canary.

What to Watch

IPO’s

MarketBeat did an excellent job on this free IPO guide on IPO’s happening this year.

Trump's Next Iran Move (Any Day)
He's been briefed on seizing Kharg Island and bombing the Pickaxe Mountain nuclear site, and hasn't decided. He has walked back every big threat so far, which is why oil is calm. The trade if he doesn't this time: refiners and defense catch a bid, airlines take the hit first.

EU Banking Rulebook (Friday)
Europe announces plans tomorrow to let its banks hold less money in reserve. Banks that hold less in reserve can lend more, trade more, and pay shareholders more, which is a big reason U.S. banks have been eating Europe's lunch for fifteen years. Goldman, JPMorgan, and Bank of America just hit all-time highs on record trading profits, and their stock prices assume that dominance continues.

- John

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