Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Tuesday, July 25. Cover art by the author. More of his work is viewable at the dedicated Instagram account.
State of Play
As of 0635 all is pretty quiet. Don’t expect that to last with all the earnings:
Stock index futures aren’t doing much. The Nasdaq (QQQ 0.00%↑) is the only one moving at all from the break-even point, up 0.3%;
Commodities are looking to moving higher with copper up 1.5%. WTI crude oil is unchanged at $79/barrel;
Bonds are seeing a little bit of selling, with the yield on the 2-year up 4 basis points to 4.88% and the yield on the 10-year up 5bps to 3.90%.
Known Events
It’s a massive day for earnings. GE (GE 0.00%↑) just beat on top- and bottom-line estimates and raised guidance. That stock is moving higher in the pre-market.
GM (GM 0.00%↑), 3M (MMM 0.00%↑), and GE Healthcare (GEHC 0.00%↑) also beat estimates and raised guidance. Would expect those stocks to move higher and take the indexes with them in short order. We’re still waiting to hear from Raytheon (RTX 0.00%↑), Albertsons (ACI 0.00%↑), Sherwin-Williams (SHW 0.00%↑), Dow Chemical (DOW 0.00%↑) and several others before the open at 0930.
Spotify (SPOT 0.00%↑) is dropping after reporting earnings. Subscriber numbers were up but earnings were down. This after announcing a small increase to premium pricing.
After the close at 1600 it’s big tech time, with Google/Alphabet (GOOG 0.00%↑) and Microsoft (MSFT 0.00%↑) due to report. Also Visa (V 0.00%↑), Snap (SNAP 0.00%↑), and Teladoc (TDOC 0.00%↑) among others.
Case-Shiller Home Prices are out at 0900. Economists expect an increase of 1.5% month-over-month to the 20-city index, the most widely watched gauge that Case-Shiller keeps. That would translate to a drop of 2.2% year-over-year, worse than the -1.7% seen last month. That would be the third negative print in a row and the smallest growth in more than a decade:
The Bottom Line©️
Home prices don’t seem to be scaring anybody. The number has been negative for months and nobody seems to care. Eventually you figure this is going to create problems because dropping home prices and rising interest (and therefore mortgage) rates is kind of a toxic combination. For now, it just doesn’t look to be an issue, for whatever reason.
Earnings will once again be the driver today. GE’s report was certainly nice. Too bad that isn’t a Dow stock anymore (hasn’t been since 2018). The Dow Industrials is working on an 11-day winning streak. We don’t talk about the Dow much here because it’s only 30 stocks and really only amateurs watch it. The bigger indexes like the S&P 500 and Russell 2000 are where it’s at. But these amateurs certainly contribute to bullishness — and to FOMO.
It’s getting to be about that time when your mother-in-law or auntie (or high school buddy) starts pestering you about stock picks. That elusive shoe-shine boy parable. It may even be true but have seen this attributed to many people, including J.P. Morgan. True or not, it’s certainly a good contrarian indicator. Of course, timing is everything and nobody knows exactly when the turn will come. But we’re one day closer.
Housekeeping
Today’s cover art was created by the contrarian as he hones his latest hobby. There are other such creations at the Instagram account dedicated to this purpose.
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Home Prices, Many Earnings