Photo by Steve Wrzeszczynski on Unsplash
 

Today is shaping up to be a repeat of the last few days - equity futures in the read while bond yields, including those for 10-year Treasuries inch higher. If you’re thinking this week is a bit like the movie Groundhog Day, we would agree with you given the lack of economic data, a Fed speaker, and another wave of less than market moving earnings reports. That will change significantly next week when we get the April CPI, PPI, and Retail Sales data, but the road to that will include one more relatively quiet market day tomorrow. 

While some may describe it as a period to digest, the market has been choppy and remains short-term overbought. We’re also about to undergo a shift to earnings reports to companies that rely on consumer spending. Comments collected so far this earnings season point to consumers being more selective and trading down. We share a signal for our Consumer Inflation Fighter model below that speaks to just that because of sky-high restaurant prices.  That signal also helps explain why Costco (COST) reported its April sales rose 7.1% year over year last night with its US comp sales ex-gas and ex-FX up 5.2%. When we look at Costco’s fresh, grocery, and sundry offerings, it’s easy to see why the company continues to win consumer wallet share.  

Despite the lack of market-moving earnings this week, this morning, the market is digesting the recent wave of reports from Uber (UBER), Airbnb (ABNB), and Arm Holdings (ARM) that fell short of market expectations. Some of what we’re seeing, in the case of ARM shares, is the reaction to overexuberant stock price moves. Ahead of its earnings report, ARM’s shares were up more than 50%, suggesting the company needed to deliver not just a good quarter, but an outlook that contained an upside surprise. 

That’s not what the Arm delivered, and as impressive as the 47% increase in quarterly revenue was, guidance that only bookended consensus forecasts left the market wanting. On its earnings conference call Arm did speak to AI-enabled smartphones shipping in 2H 2024, something we see as a positive for both our Artificial Intelligence and Digital Infrastructure models.

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