Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Thursday, Aug. 3.
State of Play
That Fitch downgrade sure weighed on things yesterday, as the Nasdaq dropped 2%, its worst day in almost six months. As of 0635 risk appetite still seems subdued:
Stock index futures are pointing to small losses at the open, with S&P 500 and Nasdaq down 0.2% to 0.3%;
Bonds are seeing some selling, especially at the long end of the curve, in reaction to the Fitch downgrade. The 30-year yield is up 9 basis points to 4.25%, the highest level in about nine months. The 10-year is up 7bps to 4.14%. The 2-year is unchanged at 4.91% (yields move inversely to prices);
Not much happening in commodities. WTI crude oil is unchanged at $79.50/barrel. Copper is unchanged.
Known Events
Another massive day of earnings awaits. If this sounds like a broken record, it’s because we are now at the tail end of peak earnings season. In another couple of weeks it will all be over.
Anheuser-Busch-InBev (BUD 0.00%↑) just posted mixed results, beating analyst estimates for earnings but falling short on revenues. The bright spot is Bud Light sales, which cratered around a consumer boycott, didn’t hit earnings as badly as had been anticipated.
Also reporting before the open at 0930 are Warner Bros Discovery (WBD 0.00%↑), Wayfair (W 0.00%↑), and Hasbro (HAS 0.00%↑). We mentioned travel stocks as one area to watch in yesterday’s bottom line. Several of these are due to report this morning, including Spirit Airlines (SAVE 0.00%↑), Cedar Fun Entertainment (FUN 0.00%↑), Starwood Property (STWD 0.00%↑), and Hyatt Hotels (H 0.00%↑).
After the close at 1600 we’ll get Amazon (AMZN 0.00%↑), Apple (AAPL 0.00%↑), Square/Block (SQ 0.00%↑), Coinbase (COIN 0.00%↑), DraftKings (DKNG 0.00%↑) and (speaking of travel stocks) Airbnb (ABNB 0.00%↑) and Booking (BKNG 0.00%↑).
In terms of economic data, it’s Thursday so we’ll get initial jobless claims at 0830. Economists expect 227,000 new claims, not much changed from the 221,000 recorded last week and below the four-week average of 234,000.
Factory orders are out at 1000. The expectation here is for an increase of 2.2% month-over-month, a large increase over the 0.3% MoM recorded last month. If you strip out transport items the expectation is for 0.4% MoM after -0.5% one month ago.
The Bottom Line©️
The US credit downgrade is clearly still weighing on sentiment. The last time this happened, in 2011, it led to a drop in stocks, right to the brink of a bear market. But comparisons to 2011 may not be entirely fair as there were many other things going on then to impact risk appetite, primarily the sovereign debt crisis in Europe. More importantly, over the long term everything rebounded. Warren Buffett of all people told CNBC he’s not worried about this.
The Contrarian suspects this whole thing will blow over soon. He told you yesterday that this could be a buying opportunity — if you believe the narrative that the US economy is going through a ‘soft landing’. That however appears to be the bigger concern, and a story that could emerge from earnings and economic data. The downgrade is done. It supplied its shock. The next market reaction will likely come from somewhere else.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
The Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.
Be sure to check out our Substack notes, for more contrarian thoughts and missives throughout the day.
If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.
Also:
Please take the listener survey! It’s like, five questions and should only take a few minutes of your time. You can win free merchandise. A lucky respondent will be selected each month to receive a classic crew-neck T-shirt.
Referrals. The best way to support this work. Invite friends to subscribe and read/listen with us. Use this referral link:
There are benefits:
Get a 1 month comp for 3 referrals
Get a 3 month comp for 5 referrals
Get a 6 month comp for 25 referrals
Leaderboard leaders:
At the end of each month the current leader will receive a free Contrarian Investor mug. Will even pay for shipping!
More Earnings, Factory Orders