The Committed Consumer – by Justin Vaughn

(Justin Vaughn, Editor, Options Trading Report)

The University of Michigan released its ‘Consumer Sentiment Index numbers for July, showing the highest levels since September 2021, on Monday, boosting investors and traders’ confidences. July’s 72.6 number bested the forecast of 65.5 by market gurus. The U.S. consumers are catching up to previous pre-pandemic levels, projecting little concern over rising retail prices. Car buying, new and used, travel of all sorts, major household items and dining out are expenditures that reveal the consumer is returning to a new ‘normal.’

Big Banks continued to ‘come in’ with better earnings and higher revenues, with Bank of America and Morgan Stanley leading the charge after JPMorgan released strong figures driving the market. Tuesday’s market was stronger with the Dow Jones Industrial Average bouncing up 336 points or 1%. Both the Nasdaq Composite and S&P 500 closed higher, radiating the many positive earnings reports. Jamie Dimon. CEO of JPMorgan Chase, said it best; “The consumer is in good shape. They’re spending down their cash.”

The market stayed positive into Wednesday as more ‘big-boys’ reported earnings with a few hiccups, namely Goldman-Sachs and Citi. Both narrowly missed key numbers of profits and revenues, but better than expected. All indices are up, reaching their highest levels in 15 months. The U.K. suffering with run-away-inflation reported it had recently fallen to a 15 month low of 7.9% in June, mirroring the U.S.’s direction. As Mr. Powell would say. “Persistent rate hikes have blunted inflation.”

Thursday’s opening cooled as all three indices were down reflecting key quarterly reports, and upcoming business concerns of Tesla and Netflix. Tesla bested earnings and revenues, however their concerns of lower production in the coming quarter of autos clouded the market. Even as Netflix released positive fiscal results, many in-house issues are rearing their heads, such as pass-word concerns, and strong developing competition. After a smooth sail from weeks start, the seas are a little choppy as Friday nears. The jobless claims report released early Thursday showed unemployment dropped again, this time down 9,000. Another positive sign that the labor market is adjusting and remaining strong defying a possible recession. Crude oil edged up a bit to the $75.00 range, with Brent Crude strong at $79.00.

China’s woes Continue…year over year, as corporate reporting is revealing lackluster production numbers and a very slow recovery from the Covid-19 pandemic. Add in the slow and dwindling loss of a major banking center [Hong Kong], and you have a struggling 2nd largest world economy in disarray. As India, Vietnam, Mexico, Malaysia and many more Far East countries step up production facilities, the ‘China-shift’ will change the ‘climate’ in manufacturing.

Putin has pulled the plug….Backing out of the wheat agreement, ‘The Black Sea Pack, signed by Russia, Turkey and Ukraine, and engineered by the U.S. It allows Ukraine safe passage of shipments of wheat, sunflower oil and other commodities through ports in Odessa. Putin, according to Yevgeniya Gaber, an Odessa based Ukrainian Diplomate, said, “Russia’s main motivation in suspending the deal was to blackmail the West into easing sanctions on Russia.” Russia has indicated that if it is allowed to export fertilizer and foodstuffs, it would activate the agreement again. Of course the shelling of the Odessa region started promptly upon the announcement.

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Jamie Dimon, CEO , JPMorgan Chase, WSJ “I don’t know whether it’s going to be a soft landing, a mild recession or a hard recession.”

Charlie Scharf, CEO of Wells Fargo, WSJ “The U.S. economy continues to perform better than many expected, and although there will likely be continued economic slowing and uncertainty remains, it is quite possible the range of scenarios will narrow over the next free quarters,” Mr. Scharf said on a call with analysts.

Screen Actors Guild President Fran Drescher on the decision to join the writers’ strike, Barron’s “The entire business model has been changed by streaming, digital, artificial intelligence. If we don’t stand tall right now, we will all be in trouble.”

Dog Kelly, portfolio manager at William Jones Wealth Management, WSJ “For me, the more steady broadening out is what we hope for,” said Mr. Kelly. “You can’t have trillion dollar stocks double every six months. That’s just not going to happen.”

Eric J. Savitz, writer of ‘TECH TRADER’ in Barron’s “As actors go on strike, Hollywood is reeling: Bob Eger says broadcast channels ‘may not be core’ to Disney’s future. Meanwhile, the portion of U.S. households subscribing to cable or satellite TV is about to drop below 50%.”