Today's Scoop:

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Here’s what you need to know today…

1. Regional banks are likely to face more trouble ahead.

2. Corporate profits have been stronger than expected.

3. Consumers don’t think it’s a good time to buy a home.

S&P 500: 4,499.38
1Mo: +2% | 1Yr: +9% | 5Yr: +59%

The market drifted lower today without much shocking news. The economy is performing perfectly mediocre, so there’s not much to get excited or scared about right now.

Higher interest rates will likely make things harder for smaller banks. Financial ratings agency Moody’s sent out a warning about the health of regional banks, lowering its scores for ten smaller banks like M&T Bank, Pinnacle Financial, BOK Financial, and Webster Financial. This comes as no major surprise after the collapse of multiple banks in March. Moody’s said the US banking system is still strong overall, but these smaller banks will likely find it more challenging to make money as they pay out higher interest on savings accounts and compete for deposits.

Corporate profits have been mostly better than expected. We’re most of the way through second quarter corporate financial updates, and so far, about 80% have reported higher profit than investors projected. Overall, corporate profits are 5% lower than a year ago, but earnings are projected to grow in the next two quarters, according to Factset estimates.

People are staying out of the real estate market, given the expensive mortgage rates and low affordability. A new report from Fannie Mae revealed 82% of US consumers think it’s a bad time to buy a home, the highest percentage on record.

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• Kraft Heinz pledges to cut 20% of its virgin plastic use

• AMC Theaters catches a rebound but still might run out of money [🤓]

• Beyond Meat can’t find customers and might need a cash influx [🤓]

• UPS’s new worker deal for higher pay will eat into profits

• Lucid Motors has more cash, but can’t attract buyers [🤓]

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How do companies raise money?

Companies sometimes need extra money. When sales aren't covering their expenses or plans for expansion, companies can take out regular loans from banks, open revolving credit facilities like a corporate credit card, or borrow from investors with bonds.

If they don't want debt, companies can also sell an ownership stake in their business for cash, aka stock or equity. The first time they sell shares to public investors is called an Initial Public Offering (IPO), where they raise money from public investors like us. Anytime they sell new shares after that is called a secondary offering or issuance.

Companies only get money from selling new portions of their company for the first time. Once the stock is out there, we're all just buying and selling from each other.

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