Jobless Claims Tick in Low, But Higher Than Expected
It’s a big morning for stock market and economic data this morning. Weekly Jobless Claims, a revision to Q2 GDP, Retail/Wholesale Inventories and the latest Advances Trade Balance join a flurry of late Q2 earnings reports ahead of today’s opening bell.
Pre-market futures look to have absorbed the earnings results from NVIDIA NVDA after yesterday’s close, and even though the GPU titan is trading down -3% at this hour, the Nasdaq is up +75 points currently, the S&P 500 is +20 and the Dow is surging +290 points in early trading. Bond yield rates are up a smidge: to +3.89% on the 2-year and +3.86% on 10s.
Weekly Jobless Claims Remain Well-Behaved
There has been a solid consistency with weekly jobless claims this season, which can be either comforting or suspicious, depending on your views regarding the domestic labor market as a whole. Initial Jobless Claims came in at 231K, a notch above expectations but slightly below the previous week’s upwardly revised 233K. We remain notably below the spike in late July to 250K, which looks more and more like a near-term one-off.
Continuing Jobless Claims did bump up a bit, to 1.868 million. This follows a downwardly revised 1.855 million the prior week, and marks the 12th straight week north of 1.8 million (without touching 1.9 million; 2 million longer-term jobless claims marks the psychological threshold between a healthy employment scenario and a relatively unhealthy one).
Before moving onto other economic metrics, it’s worth pointing out that jobless claims may not be the most faithful tracker of labor realities these days. The reason? The youngest of the Baby Boomer generation — still the second-largest population sample behind Millennials — are turning retirement age. Those who may be getting laid off at this stage of their careers (and this includes some Gen-Xers, as well) may simply opt for retirement, thereby not filing for unemployment.
Q2 GDP Revised Higher
The first revision to 2nd-quarter Gross Domestic Product (Q2 GDP) this morning ratchets up 20 basis points (bps) to +3.0% from the flat +2.8% expected. This is now the highest quarterly productivity metric since the +3.4% reported in Q4 of last year. Much of this upward revision comes from Consumption, which grew 60 bps on the revision to +2.9%.
Preliminary price index data (we get the full Personal Consumption Expenditures [PCE] report Friday morning) was mixed, with the quarterly Price Index stepping up 20 bps to +2.5% — still down from the +3.1% reported for Q1 of this year — while core PCE (minus fuel and food costs) quarter over quarter stepped down to +2.8%.
Trade Balance Drops to -$102.7 Billion
Advanced Balance of Trade in Goods for July slipped to negative 12-figures (!) for the first time since May 2022 to -$102.7 billion, lower than the -$96.6 billion reported a month ago. During the Covid pandemic, we did see some paying down of this balance, to the -$60+ billion range, but it’s clear we’ll need to turn this thing around again.
Advanced Retail Inventories for July ticked up 10 bps to +0.8%, while Advanced Wholesale Inventories also notched up to +0.3% from +0.2% the previous month. Growth in inventories does count toward GDP growth, though it is the “worst” kind of growth there is, as any stored goods that go unsold must be moved before new production can fill the gap.
Q2 Earnings Roundup: BBY, DG, MBUU
Best Buy BBY beat earnings estimates in its Q2 report this morning by +16.5%, with $1.34 per share outpacing the $1.15 expected. Revenues of $9.29 billion in the quarter surpassed the Zacks consensus by +0.63%. As a result, shares are bounding nicely, +13% in the pre-market, more than doubling the company’s gains year to date.
On the other side of the coin, Dollar General DG underperformed expectations in its Q2 report this morning: earnings of $1.70 per share missed the $1.79 consensus by -5%, while its $10.21 billion in quarterly sales came up short by -1.61%. The stock, which had already been down -9% year to date, is dropping another -24% in today’s pre-market.
Zacks Rank #5 (Strong Sell)-rated Malibu Boats MBUU posted a deeper-than-expected decline on its bottom line this morning: -39 cents per share versus the -31 cents anticipated, for a negative earnings surprise of more than -25%. Its $158.17 million reported on the company top-line missed expectations by -12%. Thus, shares are down another -6% in early trading, compounding the stock’s loss of -36% year to date.
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