Mark Zuckerberg vs. Elon Musk

Stocks declined yesterday after Fed FOMC minutes reminded investors that the Central Bank was simply resting and has plans of a comeback fight. The jury is still out on whether the economy is in good shape or in a state of declining health.

What are your hopes? Wall Street is known for its vast array of adages but “ignorance is bliss” is not one of ours, though it is often borrowed by us. Just imagine that you were one of those “normies.” You know, a regular person that reads the sports pages, the comics, and thrusts the unopened, neatly folded business/markets section into the trash… er recycling bin ♻. You don’t even know what channels those financial news stations are on your television and your car radio is stuck on the [enter your favorite Country Music or Pop station here.] You have some stocks, but you really are not concerned with what they do on a daily basis. You have no idea who or what the Fed is. You own your car or truck, and you have a 30-year mortgage that you refinanced to “three-point-something” during the pandemic… because you were bored.

Work is OK. You are back on the job or in the office, which is kind-of annoying, but you are ok with it because back to normal is a good thing. You have heard that there may be layoffs coming, so you stop and think. You are NOT concerned because you know that there are lots of job openings, and if you switch jobs, you might even get a raise. On your way home, you stop at the grocery store to pick up a few things. You generally don’t look at prices, but you do recognize that the chicken that you typically buy now costs $15 when it used to be around $9. “Hm,” you think to yourself, “that’s interesting.” Into your basket goes the package of boneless, skinless chicken breasts. On the way to self-checkout, you pass the freezer section, and you decide to pick up some ice cream for your spouse because… why not, it will make them happy. You typically buy the big rectangular tub of chocolate, but something catches your eye. There is this other brand that comes in a cylindrical plastic package with a screw-on lid, and it looks… special. The ice cream looks especially chocolatey, and you read the front which says something like “death by chocolate – decadence galore – gluten free and sustainably created,” and you think, “that sounds fantastic.” You go to grab it, and as you do, you catch a glimpse of the price. For a brief second, you are shocked that this little, less-than-a-pint-which-can-easily-be-consumed-in-one-sitting jar of ice cream will literally double your grocery bill. You stumble for a second and that rectangular box of chocolate catches your eye. Into your basket goes the expensive ice cream… because things are OK.

Back in your vehicle a really heartfelt song comes on the radio, and you decide that you are going to book a vacation with your significant other because it has been a long time since you have gotten away, and the pandemic messed up plans you had in 2020. You know that things will cost a bit more because of inflation, but you don’t care. You are in love, and… things are OK. You pull into your driveway, and you get a silly notion to open your stock trading app on your phone and you notice that your portfolio value is bigger than it was the last time you checked, and you think “hm, must be that AI stuff everyone is talking about.” You close your stock app and open the travel app. Things are good… and ignorance IS bliss.

Really, I hope you smiled as you read this passage because I KNOW that you know better. Inflation is bothering you and you don’t like the fact that interest rates are going higher. You are happy that some of your stocks are doing well, but you are nervous because you have heard that economists are expecting a recession and the Fed keeps talking about raising interest rates even higher. You are concerned that stocks will sell off again like they did in 2022. The Fed has said that the labor market is tight which means that there are plenty of jobs available and the unemployment rate is low. The Fed must, therefore, consider raising interest again. On the other hand, a strong labor market also means that the likelihood of a so-called soft landing is increased. You think to yourself, “maybe things ARE good.”

STOCKS ON THE MOVE THIS MORNING

Exxon Mobil Corp (XOM) shares are lower by -1.32% in the premarket after the company revealed that lower natural gas prices and slimmer refining margins will reduce its Q2 earnings by some $4 billion, surprising analysts. The company is set to announce earnings later this month. Dividend yield: 3.40%. Potential average analyst target upside: +15.8%.

Meta Platforms Inc (META) shares are higher by +1.53% in the premarket after Instagram (owned by Meta) launched its long-awaited Threads app, which is a direct competitor to Twitter. The newly launched service gained 10 million subscribers in hours after the announcement, not quite as much as Twitter’s 300 million subscribers, but a start, nonetheless. Potential average analyst target upside: -3.1%. WHY IS THIS NUMBER NEGATIVE? Because the stock is currently trading higher than median average price targets of analysts. While that can be interpreted as the stock being overpriced, it does not mean that the stock will not continue to climb as analysts potentially raise price targets.

YESTERDAY’S MARKETS

Stocks slipped on hawkish Fed comments and minutes. The S&P500 declined by -0.20%, the Dow Jones Industrial Average fell by -0.38%, the Nasdaq Composite slipped by 00.18%, and the Russell 2000 Index dropped by -1.26%. Bonds fell and 10-year Treasury Note yields gained +7 basis points to 3.93%. Cryptos traded off by -3.7% and Bitcoin gave up -1.09%. The S&P ESG Index inched lower by -0.3%.

NEXT UP

• ADP Employment Change (June) is expected to reflect a +225k gain after a +278k increase in the prior month.
• Initial Jobless Claims (July 1) is expected to come in at 245k, up from last week’s 239k claims.
• JOLTS Job Openings (May) may have slipped to 9.885 million vacancies from the prior month’s 10.103 million vacancies.
• USM Services Index (June) is expected to have increased to 51.2 from 50.3.