Thoughts For Thursday: Debate Wait
The market eked out some small gains on Wednesday. Thursday, which is debate night, may prove to be an intermittent wait day till the Personal Consumption Expenditures (PCE) inflation data is reported on Friday.
Wednesday the S&P 500 closed at 5,478, up 9 points, the Dow closed at 29,128, up 16 points and the Nasdaq Composite closed at 17,805, up 87 points.
Chart: The New York Times
Most actives were led by Nvidia (NVDA), up 0.2% followed by Tesla (TSLA). up 4.8% and Carnival Corp. (CCL), up 3.1%.
Chart: The New York Times
In morning futures trading, S&P 500 market futures are down 10 points, Dow market futures are down 71 points and Nasdaq 100 market futures are down 48 points.
TalkMarkets contributor Patrick Munnelly updates us with his Daily Market Outlook - Thursday, June 27.
"After a decline in late trading for major US tech titans, Asian markets also experienced a drop. The JPY, which had plummeted on Wednesday, stabilized, leading to speculation that the government may step in to support the currency. With South Korea, China, Japan, and Hong Kong stocks all falling, the MSCI Asia Pacific index was on track for its first loss in three days. Following Micron Technology's disappointing projection, which did not meet the high expectations for the tech sector that has been driving the stock market's growth, US equity futures also decreased. The JPY bounced back by 0.3% after dropping 0.7% to 160.87 per USD, its lowest point since 1986.
Thursday will bring the release of Eurozone confidence, services, and economic sentiment surveys, as well as the final U.S. GDP data. However, the focus is expected to shift to the PCE reading on Friday, which is the Federal Reserve's preferred inflation measure.
CNN will also air the first U.S. presidential debate, where topics such as debt and the dollar are likely to be discussed. The market has been struggling to fully understand the potential impact of the November election outcome. During the debate. A new Reuters/Ipsos poll found that voters see Republican candidate, Trump as better for the economy, but they prefer Democratic rival President Biden's approach to preserving democracy. However, a Washington Post poll in swing states shows that more voters trust Trump to safeguard democracy."
Contributor Crispus Nyaga reports US Dollar Index Sits And Waits For The NFP Inflation Data.
"The US dollar index (DXY) continued rebounding this week as the focus shifted to the upcoming US GDP and inflation report. It rose to $106.11 on Thursday, its highest swing since May 1st. It has jumped by more than 1.85% from its lowest swing this month.
US PCE data ahead
The US dollar index has continued rising as it emerged that the Fed will be one of the last major central banks to start cutting interest rates.
The European Central Bank (ECB) slashed rates by 0.25% in its recent meeting in June. Similarly, the Bank of Canada (BoC) and Swiss National Bank (SNB) cut rates by 0.25% as inflation in their countries retreated.
In the UK, the Bank of England (BoE) left interest rates unchanged but signaled that it would start cutting rates soon since inflation has moved to its 2% target. Analysts expect it to slash rates in its August meeting.
The Fed, on the other hand, left interest rates unchanged in its last meeting and pointed to just one cut this year. A few months ago, the Fed was signaling that it would deliver three rate cuts this year as inflation retreated.
I believe that the Fed will deliver its first rate cut in its December meeting as cutting earlier will lead to criticism that it is biased against Donald Trump.
Looking ahead, the next important data that will move the US dollar index will come out on Thursday when the US releases the final estimate of Q1. The data is expected to show that the economy slowed to 1.6% after growing by 3.4% in the previous quarter.
The GDP data will likely have a minimal impact on the DXY because it is the third estimate. Instead, traders will focus on Friday’s PCE inflation data, which looks at price changes in urban and rural areas.
Economists expect the report to show that the headline and core inflation remained above 2.5% in May. As a result, the Fed will have the justification to maintain higher interest rates for longer.
Still, some analysts, including Mohamed El Erian have made the case for Fed rate cuts, citing high-frequency data that have shown that the economy is slowing. Indeed, recent data showed that consumer confidence, manufacturing, and industrial production dropped in May."
Crispus Nyaga also, provides us a PayPal Stock Price Analysis: Why Is PYPL Falling Apart?
"PayPal’s share price has crashed hard after peaking during the pandemic. In this period, the stock has fallen from over $300 to below $60 today. Along the way, its market cap has dropped from over $300 billion to about $60 billion.
PayPal’s performance is mostly because the company is no longer the growth machine it was a few years ago. The number of users in its ecosystem has continued dropping and stood at about 427 million in the last quarter.
The most recent results revealed that PayPal’s double-digit growth period has ended. Its revenue rose by 9% to $7.7 billion as the total payment volume rose to $403 billion. Payment transactions increased by 11% to $6.5 billion.
Analysts expect that PayPal’s growth is expected to continue slowing in the foreseeable future. The average estimate is that its revenue for the year will be $32 billion followed by over $34 billion in 2025.
PayPal’s biggest challenge is that competition in its unbranded business is rising. This competition is coming from the likes of Klarna, Affirm, AfterPay, Google Pay, Apple Pay, and others.
Still, PayPal has now become a value company, which explains why its valuation multiples have tanked. PayPal has a price-to-earnings ratio of about 14, which is lower than the S&P 500 index multiple of 21.
While its growth has slowed, PayPal (PYPL) still has over 427 million users and a strong balance sheet with over $17.7 billion in cash. It is also returning substantial sums of money to shareholders, with these returns totaling about $1.5 billion in the last quarter. It has also repurchased 81 million shares in the trailing twelve months.
Analysts have a positive outlook for the company, with the average estimate being $76.57, up from the current $58.26. Some of the Wall Street shops bullish on PayPal are Citigroup, Mizuho, Wells Fargo, and New Street Research."
Talkmarket contributors at the Staff of Alpari inform readers that Amazon Joined $2 Trillion Dollar Club.
"Amazon shares rose 3.9% on Wednesday, June 27, pushing the company's market capitalization above $2 trillion for the first time.
The company's cloud services unit has been at the heart of its recent success. In its most recent earnings report, AWS posted the strongest revenue growth.
Contributing to higher margins, the company has also implemented a number of cost-cutting initiatives, including the layoff of more than 27,000 employees.
Looking ahead to the next earnings season, analysts expect Amazon to report (for Q2) revenues of $151.44 billion (12.69% YoY growth) and EPS of $1.04 (60.44% YoY growth).
According to the Bloomberg Consensus, the stock is estimated to grow at 13.7% over the next 12 months.
Amazon (AMZN) also announced that its 10th annual Prime Day will take place between July 16 and 17. Last year, the company posted a record $12.7 billion in online sales (375 million items were sold)."
Kudos to Amazon and Caveat Emptor as always, to potential investors.
That's a wrap for today.
Have a good one.
Peace.
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