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Morning Briefing: August 9th, 2023

Market Overview

  1. Rebounding Stocks: True to 2023’s unpredictable trend, market players are demonstrating a penchant to buy during periods of softness. This has primed stocks for a potential resurgence after yesterday’s downturn. The broader market has seen a boost this morning, largely credited to pre-open surges within many of the mega cap stocks.
  2. Mortgage Update: The weekly MBA Mortgage Applications Index saw a decline of 3.1%. Specifically, purchase applications receded by 3.0% and refinance applications decreased by 4.0%.
  3. Treasury Note Developments: The 2-yr Treasury note yield has risen by four basis points, currently at 4.79%. Meanwhile, the 10-yr note yield has increased by a single basis point, pegged at 4.04%.

Global Insights

  1. Italian Banking Scene: According to the Financial Times, the Italian government is in the process of ensuring that the impact of the windfall profit tax on banks is kept to a minimum. This follows news of a potential new tax on bank windfalls. In response, European stock markets have rallied. Notably, UniCredit SpA and Intesa Sanpaolo SpA, previously at the heart of the decline due to the tax revelation, have seen considerable gains. This boosted the Stoxx Europe 600 by up to 1%.
  2. US Inflation Outlook: Eyes are set on the upcoming US consumer price index release scheduled for Thursday. Current market indicators suggest elevated price pressures for years to come. The anticipated report is expected to show a 3.3% growth in consumer prices from July compared to the previous year.
  3. US Treasury Yields and Auctions: As the US prepares for another significant bond auction, 10-year Treasury yields have seen an uptick. The government is set to auction off $38 billion of new 10-year notes, a slight increase from the last debut in May. The past week saw Fitch Ratings downgrading the US’s top credit rating, sparking interest in how this auction will play out.

Corporate Highlights

  1. Positive Outliers:
  • PENN Entertainment: Showed an impressive performance with revenue in line and an earnings beat by $0.07.
  • Rivian Automotive: Exceeded expectations with a beat on both revenue and earnings, forecasting a production increase for 2023.
  • Akamai Tech: Impressive beats across the board, with positive guidance for Q3 and FY23.
  • Duolingo: Positive results with both earnings and revenue surpassing expectations.
  • Twilio: Optimistic performance with revenue and earnings beats, projecting positive revenue growth in 2024.
  1. Areas of Concern:
  • Doximity: Despite beating expectations, the company plans to cut its workforce by approximately 10%. Guidance for Q2 and FY24 revenues are below consensus.
  • Upstart: Beat earnings expectations but provided a concerning guidance below consensus for Q3 revenues.
  • Take-Two: Missed both revenue and earnings, with lowered guidance for FY24 EPS.
  • Topgolf Callaway Brands: Reported in-line revenues but a downward guidance for Q3 revenues.
  • Super Micro Computer: Suffered a significant stock drop despite beats on revenue and earnings.
  • GoodRx: Beat expectations but lowered the top end of its FY23 revenue guidance.

Final Thoughts

Today’s market movements are primarily driven by corporate earnings reports, global fiscal policies, and inflation expectations. While European stocks have found solace in Italy’s banking tax decision, the US market’s resilience will be tested with the upcoming inflation report. As investors weigh these factors, the market’s unpredictability continues, making cautious optimism the order of the day. Investors, analysts, and market participants will be keenly observing the upcoming US consumer price index release and the bond auction, which could set the tone for the market’s direction in the coming weeks.




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