VIDEO: Let's Check Our Roadmap for the Busy Week Ahead
Day by day, item by item, here's a rundown of what we’re focused on this week in terms of earnings, economic data, and the Fed.
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In today’s Daily Rundown video, Chris shares what the portfolio will be focusing on during a busy week of earnings, economic data and the Fed’s latest policy meeting.
He also revisits our thoughts on the market and discusses some of our current shopping list of stocks.
Transcript
CHRIS VERSACE: Hey, folks, Chris Versace here on Monday, July 29. And if you read Friday's comprehensive portfolio roundup, you know, we have a big week ahead of us as we close out the month of July and begin the second month of the current quarter. Now, that second month is going to bring the dog days of summer-- and in the next few weeks-- lighter-than-usual trading volumes as folks try to squeeze in the last of the summer vacation before-- that's right-- school is back in session.
Candidly, if you're starting to wonder where the summer went, I am right there with you. But as I said, we have a busy week ahead of us. So let's get to this week's roadmap, one that's going to be filled with earnings-- both in and out of the portfolio-- the start of economic data, which will start to give us some implications and expectations for third-quarter GDP, and of course, we have the Fed's latest policy decision and Chair Powell's press conference. Let's break it all down.
Monday-- we have no economic data out today and no Fed speakers because they are in their blackout period ahead of the conclusion of the policy meeting on Wednesday. In terms of earnings, really only two that we want to pay attention to-- the first is former portfolio holding, McDonald's. Why? Well, we want to see what it has to say about the impact of California in the higher fast-food minimum wage pressure that it had during the quarter and what it looks like to be for the second half of the year.
You know that we've seen comments about this from Domino's, from Chipotle. It's something that we're closely watching with bullpen resident Dutch Bros. We would like to revisit Dutch Bros. But again, even though the shares have pulled back a little bit, we want the full impact of their updated guidance and what it may say about California fast-food wage pressure to impact their outlook in the second half of the year. So we're going to continue to watch that.
But, as we suspected when we exited McDonald's, we're likely to see the California wage pressure impact McDonald's outlook for the second half of the year-- and potentially cause some margin pressure during the June quarter results. Also, on Monday, bullpen resident Welltower will report. So we might have a little bit of a check in on that bullpen resident as well.
Tuesday, we have some economic data. The piece that we'll be focusing in on most will be the June JOLTS report. Again, taking a look at the number of job openings-- are they up or are they down compared to April and May? Kind of another read on the job market-- but we also have a couple earnings as well. Corning, remember, they preannounced their June quarter results. That was a positive indication for AI and AI-related demand.
Now we'll get a sense to see what they say about the back half of the year. Is this something that we'll be watching for NVIDIA, for Marvell? You bet it will be. We'll also get quarterly results from LG Homes. This is another homebuilder. We've heard from a couple already. And by and large, the outlook in the current quarter for the number of homes to be closed is higher than the second quarter. That's helping support our shares of Builders FirstSource which had a very nice run last week. And they continue to contribute to the portfolio.
LG, what it says-- LG homes-- let me be careful there. What it says will help set the base for what Builders FirstSource source will report-- not this week but the following one. And then after the close, we've got a number of technology positions that are reporting-- Microsoft. So, of course, we'll be paying close attention to that and sharing our updated thoughts with you the morning after.
But we've also got Qorvo and Skyworks, two RF semi companies. We want to see what they have to say, not only about how the smartphone market improved in the June quarter, but what's the expectation for the back half of the year? Do they say anything constructive about the AI on smartphone upgrade cycle? We'll also get quarterly results from Starbucks after the close. We don't really have a dog in that fight, but it is something that we're watching on the sidelines.
Wednesday, we have the ADP employment change report. So what does ADP see, in terms of the number of jobs being added in the month of July compared to April, May, June? Are we seeing a pickup or a more pronounced slowdown? If it's a slower report, the market will think that speaks to what the Fed wants to see, continue cooling in the economy, a cooler job creation market, and potentially cooler wages as well.
That would, I think, help the market get even more comfortable that the Fed is that much closer to starting a rate-cutting cycle. We're also going to get the Employment Cost Index for the second quarter. Candidly, this will be a little bit backward looking, giving all the data that we've gotten. But we will want to see some improvement compared to recent quarters. So a nice trend line lower for the Employment Cost Index would be a positive, again, for the market's view on what the Fed is likely to do.
In terms of earnings on Wednesday-- Boeing, Mastercard, Amazon, Lam Research, Meta, and Qualcomm-- so it's going to be a busy afternoon for us, particularly with Qualcomm. I think this is going to be a very important earnings report for the company. Last week, the shares continued to be under pressure.
In the roundup and some other comments, we shared with you that we are going to stick with this stock, just given all the positive data that we've seen. I suspect that what we hear Tuesday from Qorvo, Skyworks will be very constructive and supportive of not only Qualcomm but also Apple when it reports later on Thursday.
But also, after Wednesday's close-- like I said, we have Amazon, so we'll be updating our thoughts on that. And then Lam Research, we'll be reading into that as it relates to applied materials. And I said Meta will also report on report on Wednesday.
So one other thing is that this past week, we had a Google report-- capital spending higher than expected for the back half of the year. We'll be looking to see if Amazon, Microsoft, and Meta signal the same. If they do, that says that, one, they will be spending more than the market expected. That could drag those shares down.
But it will also confirm robust spending levels that should be positive for NVIDIA and Marvell. So we'll be putting all those pieces together for you in our comments in the second half of the week, once we have time to collect all the data. But Wednesday afternoon, the big thing that the market's going to focus in on is the Fed's policy decision.
And nobody really expects that they're going to announce a surprise rate cut, especially after last week's initial GDP print for the second quarter and, of course, the flash July PMI from S&P Global that showed the economy accelerated a little bit in July compared to June. And the new orders found in that report suggest that we're not going to see the economy roll over anytime soon.
So I don't think the Fed will surprise us on that. The focus will be what the Fed says about the prospect for rate cuts in the balance of the year. And in Friday's video, I walked you through my thinking. But just in a nutshell, I do see a risk that Fed Chair Powell may not be as dovish as the market expects. Remember, the core PCE figure for June was unchanged with May, so we didn't see that tick down that the market was looking for.
Another of other indicators, of course, showed further progress. But this June core PCE number, again, was unchanged. And I doubt that Powell is going to be jawboning the market towards rate cuts when we've got data for July and August coming before the Fed's September meeting. I think, like he has tended to be, he's going to be cautious. He's not going to stick his neck out, just in case the July or August data-- perhaps for the core PCE-- doesn't show additional progress-- so something to be mindful of.
And if the market doesn't like what Powell has to say, that could weigh on the market. But on the other hand, if Powell signals that the Fed is that much closer to rate cuts, that could be positive for the market. So we'll have to parse Powell's words, his tone, his body language very carefully during his press conference next week.
That brings us to Thursday. Thursday, we've got the ISM
and S&P Global July manufacturing PMIs. Expectation is that they will probably show that part of the economy contracting. We know this, not only from the flash July PMI report but also from some comments from companies tied to the industrial space, like we shared from waste management last Friday.
Thursday also brings the June construction spending report. So we'll be digging into this, looking to see primarily what's going on with nonresidential construction spending. Is it ticking higher? Is it starting to see those difficult comps that we talked about last week when we trimmed back another slug of the very profitable position we have in United Rentals?
Other earnings out Thursday-- Utz Brands. We'll be watching those for PepsiCo, Shake Shack, California, fast-food minimum wage. But from the portfolios perspective, on Thursday, we have earnings from Labcorp, Apple, and Universal Display. So we will be chewing through all of those, most likely updating expectations in terms of price targets, reflecting on what the outlook for the second half of the year is. You won't want to miss those notes.
And then on Friday, we have the all-important employment report. Questions here will be pace of jobs, slowing-- something the Fed and the market would like for rate cuts-- or did we see yet again a surprise, in terms of the number of jobs that were added? That's going to determine possibly what some Fed speakers will say the following week. So we'll have to be mindful of that.
We also will want to pay attention to the wage data inside the employment report. Are we seeing real wage growth? And I say this because when we looked in the June personal income and spending report, it appears that real wage growth might have stalled. That's one metric for it. But we're going to want to look at others, including what the wage data in the July employment report has to say. And then on Friday, we have a couple of holdings inside our Excel ETF position, their reporting. So we'll be mindful of that as well.
Now, here's the thing. It's a busy week, like I said. But as we go through all of these events, we'll be updating our thoughts on the market, the portfolio, and the shopping list. Late last week, we shared with you that we're closely watching the shares of Costco, Trade Desk, and Qualcomm. And as I alluded to a few minutes ago, we're continuing to keep an eye on the shares of Dutch Bros as well.
In Friday's roundup, we also shared that we were likely to tread very carefully, given all that's unfolding this week because it's going to be a big week. And a number of Big Tech earnings-- Apple, Microsoft, Meta, Amazon-- they're all heavily weighted in the S&P 500. So those results, if they're not pristine, could have an impact on the market. So, again, we're going to want to tread carefully.
And as we do that, we'll be watching to see if the market holds at the support level at the 50-day moving average. We'll be also looking to see, Is the market OK if Powell has less-than-dovish comments? and what the week's economic data says about job creation, inflation, and the speed of the economy.
And while we may not make many-- if any-- moves with the portfolio, because there will be so much to unpack in the coming days, please be sure to check your emails, your alerts, maybe even a little more frequently than usual so you can get our latest thoughts and any actions we may take with the portfolio. Why? As you know, it's because we want you right there with us. Thanks for watching.
