Stocks edged higher Friday, rebounding from an initial slump that was spurred by an unfavorable consumer sentiment reading.
The University of Michigan's consumer sentiment reading declined to its lowest point in nearly a decade with a reading of 70.2, which was much lower than the expected rise to 81.6 from June's reading of 81.2.
Economic setbacks aside, earnings reported on Thursday Friday were positive. Disney (DIS) advanced after reporting profits of $0.80 per share, outperforming estimates for $0.55 per share. Improved subscriber revenue from Hulu was a highlight of the report, which helped the company cut its operating loss in half to $300 million.
Meanwhile, Covid-vaccine makers marched higher Friday after the FDA approved booster shots for certain immunocompromised individuals. Included in the list eligible for a third shots are solid organ transplant recipients and those with conditions that put them at equivalent levels of immunocompromise.
InflationThe inflation narrative took steps in either direction this week showing moderation in price increases on the consumer end following several consecutive months of elevated readings, while producer prices rose.
First up to bat this week was the Consumer Price Index. The all-inclusive index showed consumers faced a 0.5% increase in prices during July, which was in-line with consensus estimates. Energy prices increased the most during the month, rising 1.6% as a whole and being chiefly moved by a 2.4% increase in gasoline.
Meanwhile, the Core CPI reading - which excludes volatile food and energy prices - came in better than expected with an increase of 0.3%, against estimates for a rise of 0.4%. Used vehicle prices finally slowed its roll, increasing 0.2% during July, following sharp increases of 10%, 7.3%, and 10.5% during the previous three months as shortages and labor issues saw less new vehicles enter the market.
The key takeaway from these reports is how it plays into the "peak inflation" narrative. Both the core and headline numbers moderated from 0.9% increases in June, which encouraged investors that inflation will cool during the coming months. The year-over-year numbers reinforced this narrative as core CPI increased 4.3% during the past year, a step down from the yearly increase of 4.5% in June. Non-core CPI remained steady at 5.4%, which - when considering it includes the most volatile figures - is a win of its own.
Producer Prices complicated the matter Thursday. Prices increased 1% in both the core and regular PPI readings, matching June’s increase. According to the report, nearly three-fourths of that reading can be attributed to a 1.1% advance in the prices for final demand services.
Further confusing the inflation narrative over the past 72-hours was the fact that, unlike consumer prices, the producer side didn’t step down from its peak. Instead, year over year core-PPI increased to 6.2% in July from 5.6% in June. Meanwhile, PPI increased 7.8% in July following a 7.3% rise in June, which represents the largest advance since it was first calculated in November 2010.
EarningsEarnings were mostly solid this week as companies report the highest revenue growth in - at least - 13 years. Year-over-year revenue growth has risen thus far, on average, 24.7% in the second quarter. While this revenue growth shows a solid recovery, it is likely heavily influenced by transitory effects as, during this time last year, a lot of companies were reduced to extremely low revenues as parts of the economy remained shuttered due to the pandemic.
Throughout earnings season, a trend had formed of subscription services underperforming analyst expectations after showing weak subscriber and/or user growth.
FuboTV (FUBO) managed to buck that trend in the second quarter, the streaming service grew advertising revenues 281% year-over-year, while subscription revenues surged 189% over the past year. Total subscribers rose by 91,291 subs during the quarter to bring Fubo’s total subscribers above 680,000, which represents a 138% increase since this time last year. Unlike Fubo’s rivals, the company provided upside guidance for both the current quarter and the year. Fubo soared 19.36% this week.
Another interesting earnings report came from Airbnb (ABNB) after Thursday's close. Airbnb reported a loss of $0.11 per share against estimates for a loss of $0.43 per share. The company's revenues surged 298.7% and came with a bullish third-quarter outlook, with ABNB projecting its strongest quarterly revenue on record. However, investors were unsure of the outlook after the company juxtaposed its guidance with expectations that Covid variants would continue to affect overall travel behavior, likely playing a part in the alternative-travel company’s slump following the earnings report.
Lastly, Covid-vaccine maker BioNTech (BNTX) flexed this quarter, reporting a ridiculous year to year revenue growth of 12,599.8%. The company had profits of $10.77 per share, which was well above the projected $7.55. The party didn’t stop there for the company the company, or the other Covid vaccine makers, as the FDA announced Friday that booster shots will be made available to certain immunocompromised individuals.
All told, the S&P 500 gained 0.71% this week while the Nasdaq lost 0.09% and the Dow Jones Industrial Average Added 0.87%.