Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, July 29. The Bottom Line segment of today’s podcast starts at (3:29) for listeners who want to skip ahead. Be sure to check out the new ‘Stocks on the Contrarian Radar’ segment at the bottom of this page and (4:39) on the podcast.
State of Play
Stocks rallied on Friday, recovering some ground from the previous trading days. As we look at our board of indicators for signs of direction at 0645, risk on seems to be the story:
Stock index futures are pointing to a higher open, led by tech and small caps. The Nasdaq and Russell 2000 are both up 0.6%, with S&P 500 futures right behind them at +0.5%;
Cryptos are rallying as well, with Bitcoin up 3% to trade around $69,500, its highest level in more than a month;
Bonds are seeing a few bids, with the 2-year yield down 2 basis points to 4.37%, its lowest level of the year, whilst the 10-year yield is down 4bps to 4.16% (yields move inversely to prices);
Commodities aren’t doing anything. WTI crude oil is unchanged at $77/barrel. Copper is down 0.3%.
Today’s Known Events
It’s a big week, with a bunch of earnings, the Fed meeting that concludes Wednesday, and non-farm payrolls on Friday. For today however, things are pretty quiet.
We do have some earnings, with McDonald’s (MCD 0.00%↑) this morning the biggest name. This should be particularly interesting in light of what Lamb Weston (LW 0.00%↑) said in its earnings about restaurant traffic.
onsemi (ON 0.00%↑) is another name reporting before the open at 0930. After the close we’ll hear from Tilray (TLRY 0.00%↑) and Sprouts Farmers Market (SFM 0.00%↑).
The Bottom Line©️
So is last week’s selloff forgotten already? If we’re already looking ahead to earnings, the Fed, and payrolls, the logical conclusion is that whatever was troubling investors last week is no longer a key concern.
Maybe that will turn out to have been a buying opportunity. Maybe even for AI chip stocks…
Stocks on the Contrarian Radar
Has to be McDonald’s (MCD 0.00%↑) and not just because of what they may say about restaurant traffic. This stock has taken on water lately and is down 15% year-to-date. This is particularly painful when you hold it up against the S&P 500, which is up 15% this year. It’s almost like MCD decided to diverge from the SPY and has gone its own way ever since:
Unfortunately, at >20x forward earnings (going in to today’s earnings) and almost 7x forward sales, MCD is not exactly cheap. But if earnings fall short today, and it drops further…
Also as McDonald’s goes, so go Wendy’s (WEN 0.00%↑) and Burger King parent QSR 0.00%↑ …
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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