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Coffee With Greta: Stocks Rise Ahead of the Fed


DJIA Futures: +145 (+0.5%)

SPX Futures: +35 (+0.9%)

NASDAQ Futures: +179 (+1.5%)

Good morning friends!

Futures are higher as traders gear up for today’s Fed decision and digest big tech earnings.

Let’s get right to it!

Fed Decision Day

The Federal Reserve wraps up its two-day policy meeting today with the FOMC rate hike decision set to be released at 2:00 p.m. ET.

CME Group’s FedWatch Tool shows 73.9% of traders are still expecting a 75 basis point rate hike.

That would be the second hike of that size in a row. 

Analysts expect Fed Chair Jerome Powell to maintain a hawkish tone on inflation during his press conference at 2:30 p.m. ET.

The decision comes ahead of Q2 GDP data on Thursday and the Fed’s preferred inflation gauge on Friday.

Microsoft Shakes Off Weak Earnings, Jumps On Outlook

Microsoft (MSFT) shares are up 3% ahead of the open despite missing fiscal Q4 expectations on the top and bottom line. 

The tech giant reported adjusted earnings of $2.23 per share on $51.87 billion in revenue. 

That was short of analysts’ expectations for adjusted EPS of $2.29 on $52.44 billion in revenue. 

Revenue rose 12% year-over-year, down from 18% growth in fiscal Q3. 

Microsoft’s Chief Financial Officer forecast fiscal Q1 revenue between $49.25 billion and $50.25 billion vs $51.44 billion expected.

But cloud revenue is expected to stay strong. 

The CFO projected revenue of $20.3 billion to $20.6 billion for the cloud segment vs $20.58 billion expected. 

She also maintained guidance for double-digit percentage growth in full-year revenue and operating margins.

Alphabet Rising On Better-Than-Expected Q2 Ad Revenue

Alphabet (GOOGL) shares are up 3.6% in premarket trade despite missing Q2 expectations for both profits and revenue. 

The Google parent company reported earnings of $1.21 per share on $69.69 billion in revenue. 

That missed analysts’ expectations for EPS of $1.28 on $69.9 billion in revenue. 

Overall ad revenue rose just 12% to $56.3 billion as companies rein in their spending due to inflation. 

But that still topped analysts’ estimates for $55.89 billion, which is boosting the stock.

YouTube ad revenue came in short of estimates at $7.34 billion while Google Cloud revenue also missed expectations at $6.28 billion.

Traffic acquisition costs were lower than expected at $12.21 billion vs estimates of $12.41 billion. 

CEO Sundar Pichai said, “In the second quarter our performance was driven by Search and Cloud. The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term.”

Shopify Slides On Q2 Miss, Weak Guidance

Shopify (SHOP) shares are down 2.5% ahead of the open after missing Q2 expectations and forecasting weakness will continue. 

The company reported an adjusted loss of $0.03 per share on $1.3 billion in revenue. 

That missed analysts’ expectations for adjusted earnings of $0.02 per share on $1.33 billion in revenue. 

Gross merchandise volume, which represents the total amount of merchandise sold on the platform, came in at $46.9 billion vs $48.8 billion expected.

Shopify said it expects the Q3 operating loss to “materially increase” from Q2 as rising interest rates “will pressure consumers’ wallets for purchases of goods.”

The results come after Shopify announced Tuesday that it will lay off 10% of its global workforce.

Those cuts will impact roughly 1,000 employees. 

In a memo to employees, the CEO said the company had misjudged how long the Covid boom in e-commerce would last. 

He said, “Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.”

Laid-off workers will receive 16 weeks of severance pay, plus one week for every year they were at the company.

Spotify Rises On Strong User Growth, Outlook

Spotify (SPOT) shares are rising 8.2% in premarket trade after topping Q2 user growth and revenue expectations.

The music streaming giant reported a loss of €0.85 per share on €2.86 billion in revenue. 

Although that was a larger loss than the €0.68 per share analysts were expecting, revenue topped estimates for €2.81 billion. 

Spotify’s monthly active users rose to 433 million in Q2, beating analysts’ expectations for 428 million.

The company forecast 450 million monthly active users in Q3, higher than 444 million expected.

Spotify did confirm it will slow hiring by 25% in the second half of this year.

Price Hikes Boost Chipotle’s Q2 Profits

Chipotle Mexican Grill (CMG) shares are up 7.9% ahead of the open after topping Q2 profit expectations. 

The restaurant chain reported adjusted earnings of $9.30 per share on $2.21 billion in revenue. 

That beat analysts’ estimates for adjusted EPS of $9.03 but missed expectations for $2.24 billion in revenue. 

Chipotle said it faced higher costs for ingredients like avocados, beef, and dairy during the quarter. 

But menu price increases helped offset those rising costs. 

The company said it plans to hike prices again in August.

Although the higher prices boosted Chipotle’s top line, analysts believe they’re responsible for the weaker-than-expected sales. 

Same-store sales rose 10.1% last quarter vs expectations for 10.9% growth. 

Chipotle forecast Q3 same-store sales growth in the mid-to-high single digits.

Boeing Rises Despite Q2 Miss

Boeing (BA) shares are up 2.5% in premarket trade despite a steeper Q2 loss than expected.

The plane maker reported an adjusted loss of $0.37 per share on $16.68 billion in revenue.

That was worse than analysts’ expectations for a loss of $0.14 on $17.57 billion in revenue. 

The company delivered 121 commercial aircraft in the quarter, up from 79 a year ago. 

Boeing burned through about $200 million in Q2, down from $3.6 billion in Q1 and lower than expectations for $520 million.

The CEO said, “We made important progress across key programs in the second quarter and are building momentum in our turnaround. As we begin to hit key milestones, we were able to generate positive operating cash flow this quarter and remain on track to achieve positive free cash flow for 2022.”

Oil Prices Rise On U.S. Inventory Drop

Oil prices are rising today after a drop in U.S. inventory levels. 

West Texas Intermediate crude futures are up 1.1% to $96 bbl while Brent crude futures are up 1% to $105 bbl.

The gains comes after the American Petroleum Institute reported U.S. crude inventories fell by 4 million barrels last week. 

That was quadruple expectations for a 1 million barrel decrease. 

The Energy Information Administration reports official inventory data today.

Gas Prices Continue Pullback

U.S. gas prices fell for the 42nd day in a row today.

AAA shows the national average for regular gas fell nearly 3 cents overnight to $4.302/gal.

The national average for diesel also fell about 2 cents overnight to $5.365/gal.

In Case You Missed It

  • The International Monetary Fund slashed its global GDP forecast for 2022 on Tuesday. The IMF now expects the global economy to grow just 3.2% this year, down from 6.1% in 2021. The group forecast growth will fall to 2.9% in 2023. That’s just above the 2.5% growth level the IMF typically considers a global recession. The revised forecast comes amid expectations for major slowdowns in the U.S., China, and Europe. The IMF also warned there are still risks that could dent growth even further.
  • U.S. home price growth slowed for the second straight month in May. The S&P Case-Shiller National Home Price Index rose 19.7% year over year. That was down from the 20.6% annual gain in April. The 20-city index rose 20.5%, down from 21.2% in April while the 10-city index rose 19%, down from 19.6%. Tampa, Miami, and Dallas saw the largest increases in home prices at 36.1%, 34%, and 30.8% respectively.

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