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Inflation Pressures Remain, But Letting Up a Tad

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Friday, July 30, 2021

It’s been an eventful week, both in terms of calendar Q2 earnings season shifting gears higher and economic data tracking the Great Reopening, inflation, etc. Today, another couple dozen companies put out earnings, but this is somewhat of a breather before the spigot opens wide again next week. Ahead of the bell, we do get new inflation data — importantly, among metrics the Fed always pays close attention to.

Personal Income for June flipped from an expected loss of -0.4% to a gain of +0.1%. Either way, it’s a big rebound from the downwardly revised -2.2% reported for May, and we’re at last free from the wild swings of volatility we saw as a result of government stimulus plans taking effect across the country. An all-time high in Personal Income of +21 in March was followed by a record low -13.6% in April.

Consumer Spending for June also outperformed expectations: +1.0% topped the +0.6% analysts were looking for, nicely ahead of the 0.0% reported a month ago for May. Real Personal Spending was 20 basis points higher than expectations, to +0.5% last month. We can see on the charts that consumption has gotten right back onto its upward trajectory it had been prior to the temporary collapse during the pandemic — almost as if it had never happened.

Year over year, the deflator came in at 4% — in-line with expectations and also with the upwardly revised headline for May. Month over month we’re +0.5%, +0.4% on the core PCE deflator. This is down from an expected +0.6%. Year over year on core, it’s +3.5%. Thus, we continue to see pricing pressure present, but perhaps letting up a bit from recent levels. It’s consistent with what we’ve seen in economic prints elsewhere of late.

Exxon Mobil (XOM - Free Report) posted results from its solid Q2 in oil prices with beats on both top and bottom lines ahead of the bell: $1.10 per share outperformed expectations by 8 cents, and easily surpassed the year-ago 70 cents per share reported. Revenues in the quarter were $67.74 billion, +6.29% better than analysts were projecting. This marks the fourth straight beat for the integrated supermajor, though shares are down slightly on the news. Exxon is +43% year to date. For more on XOM’s earnings, click here.

Chevron (CVX - Free Report) broke a string of three-straight quarterly earnings misses this morning, putting up $1.71 per share versus the expected $1.54, amounting to an 11% positive surprise. One of Exxon’s closest competitors, Chevron brought in $37.6 billion in quarterly revenues, up 5.5% from expectations, and almost triple what the company saw in the year-ago quarter. Shares are up modestly in early trading. For more on CVX’s earnings, click here.

Ahead of the open on this final trading day of the week, the Dow is down -100 points, the Nasdaq is -175 and the S&P 500 is flat. Lower volumes are expected on this summer Friday, but hopefully we’ll see sentiment turn around. It seems from this vista, however, that the good news for the week has largely been absorbed, and profits might be booked ahead of another raging earnings week starting Monday.

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