Today's Scoop:

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Here’s what you need to know today…

1. Consumers are still spending and supporting the economy.

2. The housing shortage might see some relief soon.

3. Corporate profits are holding up better than feared.

S&P 500: 4,554.98
1Mo: +4% | 1Yr: +16% | 5Yr: +63%

The market continued floating to another new 2023 high today. Investors feel more confident about the economy's resilience after more signs that inflation is going away and positive commentary from big bank CEOs.

Consumers are still spending. The Census Bureau reported retail sales rose 0.2% in June and revised spending numbers for May even higher. People spent more online and in areas where they had been cutting back, like electronics and furniture. Department stores, gas stations, and food and beverage stores saw less traffic. Consumer spending powers two-thirds of the economy, so it’s important to watch.

Homebuilders feel confident again, signaling more construction and relief from the housing shortage ahead. The National Association of Home Builders’ Confidence Index rose for the seventh straight month in June to the highest level in a year. Home prices have remained high due to a very low supply on the market.

Corporate profits are holding up better than feared. So far this earnings season, 84% of companies have reported higher profits than investors expected, according to Factset. We’re only about a week into earnings season, the few weeks after each quarter when most public companies provide quarterly financial updates—more updates to come. [🤓]

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• Verizon’s trying to figure out how much it’s poisoned America

• Ralph Lauren’s hiking prices to build prestige

• Ford’s cutting prices after improving production

• Bank of America beat earnings expectations [🤓]

• Lockheed Martin has a fighter jet problem

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Understanding Beats and Misses

Earnings season is full of "beats" and "misses." News articles typically reference whether the company reported more or less profit/revenue/whatever for the quarter than investors expected.

Wall Street Analysts make projections, and then media outlets will compare the reported financial figures to the average of the Analysts' expectations. Having a tiny bit more or less revenue (sales) or earnings (profit) than the average of a range of expectations isn't typically something to worry about, especially when it's only three months of a company's lifetime. The important stuff is the report's context and whether the company feels confident about the future.

One important thing to keep in mind: Beats and misses are just short-term relative terms, so they’re not that helpful for understanding the company’s financial health. A company can “beat” and still report declining sales and profits if analysts projected a decline. The company may have lost a little less money than expected, but it still lost money. The same is true the other way. A company could report surging profits, but if analysts had high expectations, it would be classified as a “miss.” Make sure to read into the news a little more closely.

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