Monday's Scoop: Cruising ☀️

Hey friend - hope you had a stellar weekend!

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Here’s what you need to know today to inform your work, spending, and investments…

1. Wages aren’t keeping up with the rising cost of living.

2. America’s biggest companies are raking in profits.

3. Corporations are showering shareholders with rewards to boost their stock prices.

Inflation Rate: +3.4% (YoY), +0.3% (MoM)
^{Policymakers aim for 2% YoY inflation (April CPI)}

Wages aren’t keeping up with the cost of living. The Labor Department reported average hourly earnings rose only 0.2% in April, trailing the 0.3% increase in the cost of living. The -0.2% decline in real hourly wages means Americans earned less because our paychecks buy less stuff. Real hourly and weekly earnings have declined or stayed flat for four months straight after gaining some ground on the cost of living last year. When adjusting for inflation, average weekly and hourly earnings have increased only 0.5% over the past year after declining for more than two years.

The Market: ⬆️ +0.1%
S&P 500: 5,308.13
1Mo: +6% | 1Yr: +27% | 5Yr: +88%

The market floated higher on Monday as investors chased optimism that corporate profits would continue climbing, inflation would stay under control, and economic policymakers would soon make it cheaper to borrow money.

Profits are still booming for America’s biggest businesses. Nearly all of the companies in the S&P 500 have provided their first-quarter financial updates, and 78% have reported higher profits than investors projected. According to FactSet, that’s above average for the earnings seasons of the past decade. Corporate profits have climbed by 5.7% over the past year, the fastest growth since early 2022. Much of that success has come from cost efficiency and price increases. Sales have slowed significantly, with revenue up only 4.2% over the past year. Fewer companies than usual exceeded investor revenue expectations, and those that have exceeded did so by a smaller margin than normal.

Corporations have been using their profits to reward their shareholders and boost their stock prices. The number of companies buying back their own shares from the market to inflate their stock price surged this past quarter, up 16% from last year, according to an analysis from the Wall Street Journal. The total amount spent by the S&P 500 companies on share repurchases could reach $1 trillion over the next twelve months.