July 31th Pre-Market Brief

Good Morning

We made it. Second green day after the early weeks's beating. Seoul’s exchange closed up 17.9 percent for its best day on record. Amazon is carrying today, Apple is not.

Whiplash like this is telling me conviction is thin on both sides, but either way we are getting through earnings season with some serious moves so far on both sides.

Let's dig in...

Today's Big Picture

1. The Leverage Is Already Out

SK Hynix earned 64 billion dollars last quarter, more than its previous five years combined, and the stock got sold anyway. Borrowed money was coming out of the market and the number did not matter. JPMorgan's prime brokerage data shows Korean retail has fully unwound its leveraged positions and hedge funds are most of the way there, and Situational Awareness handed its book to Citadel this week to cover margin calls. The seller everyone was bracing for has already sold.

2. One Shortage, Two Verdicts

Apple beat on revenue, profit and iPhones, then guided September light because it cannot buy enough memory. Amazon raised capital spending to 220 billion dollars partly because memory prices keep climbing, and got paid for it. Same shortage, opposite reactions, because one company owns the squeeze and the other pays it. Apple has already raised Mac and iPad prices, so the buildout bill is reaching the checkout counter.

3. Long-Term Yields Want A Method

Core inflation came in below forecast Thursday and the 30-year still moved to its highest yield since 2007. Wage costs landed above forecast this morning, and pay has trailed consumer prices over the past year. Warsh recommitted to the inflation target Wednesday, then floated revisiting the framework after January. Bonds have priced the goal and are now waiting on the plan, which is why committee members talking in public matter more than the next print.

Market Overview

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Stock Spotlight (pre-market)

Replimune $REPL ( ▲ 1.12% )  
More than doubled after an FDA advisory panel voted in favor of its skin cancer drug trial data, and Wedbush upgraded on the vote. A panel vote is not an approval, so anyone up big this morning has to decide whether to hold through the FDA's actual ruling.

Novo Nordisk $NVO ( ▲ 0.06% )  
Down after its late stage heart drug failed to beat placebo on major cardiovascular events.

Tesla $TSLA ( ▲ 3.53% )  
The Journal says executives were told to prepare the China business for separation, clearing a path to a SpaceX merger.

Chevron $CVX ( ▲ 0.24% )  ExxonMobil $XOM ( ▲ 0.14% )  
Chevron beat with earnings up nearly fivefold on record U.S. production. Exxon doubled profit and still missed.

Reddit $RDDT ( ▲ 0.03% )  
Beat on both lines and guided above expectations, but the CEO called Google search referrals choppy and the stock sold off on that one word.

Roblox $RBLX ( ▼ 2.91% )  
Down after guiding to slower revenue growth and declining bookings while raising spending on AI and safety.

What to Watch

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

Hormuz
Tanker traffic through the strait is recovering, but a drone hit two ships at Egypt's Damietta port this week, Kazakh loadings in the Black Sea are suspended again, and Saudi Arabia is talking with 43 countries about a Red Sea shipping coalition. The market prices Hormuz because Hormuz is the headline.

Next Week Lands All At Once
SpaceX posts its first report as a public company Tuesday. More than a quarter of the S&P 500 reports, including AMD, Lilly, Palantir and Caterpillar. Payrolls Friday is expected near 91,000, the first jobs print from a Fed that has stopped telling you what it plans to do.

- John

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