Good Morning!

Especially to the G.O.A.T. (aka Warren Buffett) who is sitting on nearly $150 billion in cash money.

📈 The US economy added fewer jobs than expected in July. Job growth slowed to 187k (from a downwardly revised 185k in June) compared to the market’s consensus of 200k. After beating estimates for 14 consecutive months, payroll data has now come in softer than expected for 2 consecutive months. July’s print brought the 3-month average down to 217k, which is well below the 312k monthly gain the labor market has averaged over the last year. Even so, the reading remains roughly twice the rate needed to keep up with growth in the working-age population. The unemployment rate also remains near 50-year lows, dropping to 3.5% (from 3.6%).

📉 While the slowdown in job growth signals progress in the Fed’s effort to cool the labor market, wages have proved more stubborn. Average hourly earnings increased by 0.4% in July, unchanged from the previous month but above market expectations of +0.3%. On an annual basis, earnings grew 4.4%, topping estimates of 4.2%. The average workweek ticked down by 0.1 hours. While labor market strength continues to pose a risk for higher prices, consumer resilience combined with recent inflation data suggests increased odds of a “soft landing” outcome.

🪨 LK-99 has social media and the science community in a frenzy - what is it? LK-99 is rock. But not just any rock. It’s a rock made from lead, oxygen, phosphorus, and copper. What makes it special is that it has the potential to conduct electricity with zero resistance at room temperature. Currently, all known superconductors require either extreme cooling or pressure to function. This makes many applications impractical. Applications for room-temperature superconductors, on the other hand, would be virtually endless. Right now, scientists around the world are rushing to verify breakthrough claims made by a paper published out of South Korea. With that said, any real-world implementations (assuming claims are confirmed) are still years (or even decades) away.

• Monday: Consumer credit change, used car prices

• Tuesday: NFIB Business Optimism Index, imports/exports, IBD/TIPP Economic Optimism, API crude oil stock change

• Wednesday: MBA mortgage data, EIA stocks change

• Thursday: CPI, initial jobless claims

• Friday: PPI, Michigan consumer sentiment

🙃 The 2s/10s yield curve has been inverted for over a year now. This is to say: 10-year Treasury notes have been yielding less than their shorter-dated 2-year cousins since July 2022. Typically, markets demand more yield for longer risk. With investors shifting bets to reflect a changing environment, that trend is reversing. Yields on the 10-year have risen to their highest since November as markets anticipate high rates for longer. Meanwhile, with positive economic data putting less pressure on the Fed to continue hiking, yields on 2-year Treasuries have paused their upward march. In other words, the yield curve is steepening.

🌡️ Taking the market’s temperature. FINRA margin data according to Goldman Sachs show the largest increase in leverage on record over the last 6 months. Flows from BofA reveal a massive inflow to tech funds over the past month totaling nearly $6 billion. Data from Vanda Research point to retail investors aggressively buying the recent dip. Finally, meme stocks as proxied by ETF $MEME have outperformed on virtually all timeframes YTD. Investors: still bullish.

🛢️ Oil is hovering around 4-month highs. Prices got a fundamental boost last week after Saudi Arabia extended its voluntary production cuts on Thursday. Over the weekend, they got a different, unconventional boost after Ukraine launched a drone attack on a key oil export hub in Russia’s Novorossiysk port. Separately, Baker Hughes's crude oil rig count fell for the 8th consecutive week to the lowest since mid-March 2022.

📊 With 84% of the S&P 500 reported, here’s how companies have fared:

• 79% have topped EPS estimates (above the 5- and 10-year averages).

• 65% have beaten revenue estimates (below the 5- but above the 10-year average).

• Reported earnings and revenue have come in 7.2% and 1.6% above estimates (both below the 5- but above the 10-year averages).

• Blended earnings and revenue growth rates are -5.2% and -0.6%, respectively.

• Looking ahead, analysts expect Q2 to have marked the bottom for earnings.

👀 What we’re watching today:

• KKR KKR & Co.

• PLTR Palantir

• OKE ONEOK

• BNTX BioNTech

• CTRA Coterra Energy

• IFF International Flavors & Fragrances

• TSN Tyson Foods

• SWKS Skyworks Solutions

• LCID Lucid

• CE Celanese

• VTRS Viatris

• PARA Paramount Global

• EM rotation: There’s a rotation from bonds to stocks underway in emerging markets.

• Global food prices: Inflation in food prices remains sticky across the world.

• Corporate spreads: The spread between yields on the riskiest and safest US corporate debt is narrowing.

• Crypto hedgies: Despite Bitcoin’s +70% YTD performance, around 13% of crypto hedge funds have shut down in 2023 due to weak performance.

• Apple x AI: Apple is hiring for multiple roles to strengthen its generative AI expertise.

• Nuclear fusion: US scientists achieved a net energy gain in a fusion reaction for just the second time ever.

• Box office hit: Barbie has topped $1 billion in global box office sales.

• Cage fight: Elon Musk says his proposed cage fight with Mark Zuckerberg would be live-streamed on Twitter–err–X.

• Strained relationship: Baker Hughes has reduced its stake in software maker C3.ai.

• Healthcare takeover: Bain Capital’s $551 million bid for Australian aged care operator Estia Health sent shares surging.

• Restaurant M&A: Authentic Restaurant Brands will acquire Pollo Tropical for $225 million.

• Short-seller: Despite the significant impact of its short reports on targets, Hindenburg has generated relatively low gains.

• Party spin-off: Party City is considering spinning off its balloon manufacturing and retailing businesses.

Sources:

• https://realeconomy.rsmus.com/u-s-july-jobs-report-gradual-and-orderly-cooling-in-the-labor-market/

• https://www.theverge.com/23820077/lk-99-superconductor-experts

• https://www.dailychartbook.com/p/daily-chartbook-252

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