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What The Nasdaq-100 Will Look Like After July 24

Economists expect this morning’s retail sales data to show the strongest growth since January. If a recession is coming, somebody forgot to tell the consumer!

Market

Prices as of 4 pm EST, 7/17/23

Macro

China represents the world’s largest market for chipmakers.

  • In 2022, it was responsible for $180 billion of $555.9 in global semiconductor purchases.

  • The White House has recently taken action to impose restrictions on the sale of chips and related US tech to China.

  • Industry players at home, naturally, have warned against such action.

  • Yesterday, industry executives met with Biden administration officials to urge them to avoid further restrictions.


Manufacturing activity unexpectedly expanded for the second straight month in July.

  • Expected to fall into contraction, The Empire State Manufacturing Survey’s general business conditions index dropped less than expected to 1.1.

  • Underlying components were mixed as new orders and employment increased but shipments declined.

  • Outlook for the next 6 months also deteriorated.

  • In a positive for inflation, prices paid and received fell to their lowest since August 2020 and July 2020, respectively.


Yesterday we noted how economists were (again) pushing out recession expectations.

  • Goldman Sachs has similarly cut its odds of a US recession within the next 12 months to 20% from 25%.

  • The bank’s main reasons for optimism–like those of said economists–are continued progress on inflation and strong fundamentals despite significantly higher borrowing costs.

  • Treasury Secretary Janet Yellen agrees: she told reporters yesterday she does not expect a US recession.

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Goldman Sachs

Stocks

Here’s something you already know: the Nasdaq-100 has become too concentrated.

  • Currently, the top 7 stocks account for 56% of the index.

  • After July 24, their collective weight will be brought down to 44%.

  • Stocks seeing the biggest declines in weight: NVDA (NASDAQ:NVDA) (3%), MSFT (NASDAQ:MSFT) (3%), AAPL (NASDAQ:AAPL) (0.6%).

  • It will be just the second such “special rebalance” in 25 years (the previous one in 2011 had no clear impact on the affected stocks).

  • Here’s what the index will look like after the rebalancing:


EPS estimates are seeing more positive revisions than negative ones as we head into earnings season.

  • In fact, consensus EPS has seen fewer pre-season cuts than usual.

  • At the same time, earnings uncertainty—a measure of analyst forecast dispersion—has been falling for the S&P 500 as a whole.

  • Uncertainty surrounding Tech earnings, however, has been rising:

Energy

OPEC, the International Energy Agency (IEA), and the US Energy Information Administration (EIA) all see oil demand rising in Q3 (chart).

  • They also forecast tightening supply in the second half of the year.

  • In fact, according to Standard Chartered, the global market is already in a deficit.

  • Don’t tell that to oil investors – traders have remained sellers amid warnings of a tight market.

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@mikezaccardi

Earnings

With 30 companies representing 11% of S&P 500 earnings having reported, here’s a (very) early look at Q2 trends:

  • Companies are reporting a -7.1% YoY decline in earnings.

  • The beat rate is above average at 77% but below last quarter’s 90%.

  • In aggregate, reported earnings have topped estimates by 8.8%.

02-s&p-500-earnings-surprise-percent-five-year

Fact Set


What we’re watching today:

  • Bank of America (NYSE:BAC)

  • Novartis (NYSE:NOV)

  • Morgan Stanley (NYSE:MS)

  • Lockheed Martin (NYSE:LMT)

  • Prologis (NYSE:PLD)

  • Goldman Sachs (NYSE:GS)

  • Charles Schwab (NYSE:SCHW)

  • PNC Financial (NYSE:PNW)

  • Bank of NY Melon (NYSE:BK)

  • Omnicom (NYSE:OMC)

  • JB Hunt (NASDAQ:JBHT)

  • Synchrony (NYSE:SYF)

  • Interactive Brokers (NYSE:IBKR)

  • Pinnacle Financial (NASDAQ:PNFP)

  • Western Alliance (NYSE:WAL)

Top Headlines

  • Euro AI battle: France and the UK are competing to establish themselves as the leading country for AI in Europe.

  • Survey says: BofA’s Global Fund Managers survey reveals increasing optimism about a soft landing.

  • Diversification rules: Large US investment funds are being restricted from purchasing more shares in popular tech stocks.

  • Telecom slump: AT&T shares fell to their lowest closing price in 30 years following a WSJ investigation.

  • Ridesharing: Shares of Uber dropped following a court victory for its drivers.

  • Ford EVs: Ford reduced the price of its base model F-150 Lightning by 17% to ramp up competition.

  • Twitter writedown: Cathie Wood’s ARK wrote down its Twitter stake by 47%.

Crypto

Prices as of 4 pm EST, 7/17/23

  • Steady inflows: A $742 million, inflows into crypto products last month hit their highest level since 2021.

  • Addresses surge: The number of unique addresses on the Bitcoin network has topped 500k for the first time since May 2021.

  • COIN goes to DC: Coinbase (NASDAQ:COIN) CEO Brian Armstrong will meet with House Democrats tomorrow to discuss legislation and regulation.

  • Reddit tokens: Reddit’s MOON and BRICK tokens surged after the company explicitly allowed for trading of its Community Points.

  • Crypto liquidation: Celsius’ $160 million liquidation has begun with a $63 million transfer to FalconX.

Deals

  • Finish line: The $69 billion Microsoft/Activision deal is unlikely to close by its deadline (today).

  • Space investments: Private investment in space companies is showing signs of stabilization after years of steady declines.

  • Space unicorn: Rocket startup Firefly is close to announcing the closure of an oversubscribed capital raise.

  • Mining M&A: Glencore has agreed to acquire the remaining 18% stake in PolyMet Mining for ~$73 million.

  • BTC mining SPAC: Bitcoin mining company Bitdeer has become one of the world’s largest crypto miners just 3 months after its SPAC merger.

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