In this issue of the peel:

• July’s employment report might be the biggest macro vibe killer since the pandemic. Labor market data came in weak, but it is confirmed that the Fed will cut in September and probably should’ve started cutting a long time ago. 

• DoorDash’s solid earnings give us some hope that laziness among American consumers could still buoy the economy. 

• Donald Trump’s media “company” has a new innovation, while Snap and Intel had some of their worst days ever. 

• Amazon’s latest earnings failed to impress investors. The firm gave Wall Street nearly everything they were looking for, but a selloff ensued. Find out why below.

Market Snapshot

Banana Bits

• Berkshire is dumping its equity holdings as Warren Buffett’s firm raises its cash balance to a record $277bn. The Oracle sold half its stake in Apple.

• Mortgage rates plunge to a 15-month low, and boomer homeowners are finally selling their homes.

• A full breakdown on the timing of Apple’s AI integration

• The Latin American Amazon, Mercado Libre, took off on stellar Q2 numbers.

• Chapter 11 bankruptcy (the “good” kind of bankruptcy) just set a new high for the decade.

• A much-needed sanity check after the recent market selloff.

The Daily Poll

Previous Poll:

Will the U.S. enter a recession before the end of 2025?

Yes: 46.39% / No: 53.61%

Macro Monkey Says

Canaries Leaving The Coal Mine

Finding a likable nerd to be the Chair of the Federal Reserve is hard enough.

Finding one that can also read vibes as well as a Miami nightclub bottle girl is damn near impossible.

Fed Chair JPow certainly checks off the first two boxes. But, his vibe-reading has been more like that of my dog when he decides we’re waking up at 5 am on Sunday.

There’s data dependent, then there’s too data dependent. July’s jobs report is the perfect case study for when too nerdy becomes a problem. Let’s get into it.

The Numbers

My parents always told me to take “everything in moderation.” And now, in reaction to the Fed’s extreme data dependency in making decisions, the labor market is moderating.

Last month, the U.S. added 114k non-farm payrolls. In English, 114k jobs were added in July.

That was well below the establishment economists guesstimate, and, at the same time, unemployment jumped to its highest level in 3 years at 4.3%.

To be clear—the U.S. is still in good condition. We’re coming out of a Goldilocks economic period, so almost any changes will be for the worse. But just because it’s “worse” doesn’t necessarily mean it's “bad.”

The truly bad part is simply the fact that blistering job and wage growth is over. It might take more than a pulse and two brain cells to get a job in the U.S. now, but there is some good news alongside this report.

For the past few months, respectable economists like Professor Jeremy Siegel and RenMac’s Neil Dutta have asked, "What is Powell waiting for?” to cut rates and loosen policy.

Now, they have their answer.

In addition to the slowing job creation, growth in average hourly earnings hit more than a 3-year low in July at just 3.6%. 

Wage growth is still outpacing inflation, which is great, but the signs of a problematic labor market are starting to pile up.

When hearing stories of others struggling to negotiate for raises, promotions, or in the search for a new job, workers across the U.S. are saying, “Me too.”

As a result, calls for the Fed to cut rates have reached their loudest levels since March 2020.

Now, the consensus expectation is basically that the Fed f*cked up by not cutting at last week’s meeting. According to the CME Group’s chart of dollar-weighted, market-implied odds for the next FOMC meeting, there’s an 80% chance of a 50bp cut.

The “smart money” in fixed-income markets is pricing this in as well. Yields across the maturity spectrum have cratered in recent weeks as worsening economic data suggests increased odds of a rate cut and potential other loosening maneuvers on the horizon.

Yields on both the 2 and the 10-year Treasury notes set fresh annual lows in response to Friday’s labor market data. The curve remains wildly inverted and has only grown more so in response to this weakening data.

The Takeaway?

Finance pros like to use real-world analogies to pretend a lot of what happens on Wall Street actually makes sense.

A favorite this year has been looking for “canaries in the coal mine,” referring to the old practice of miners bringing canaries into coal mines to detect an overabundance of carbon monoxide.

Now, there are no canaries in the coal mine of the U.S. economy… because they’ve all already left.

The beast of inflation has been killed. But, its rotting corpse is starting to attract bugs in the form of rising unemployment, weakening consumer spending, long-time lows in treasury yields, and long-time highs in the Volatility Index (VIX). 

Put your seatbelts on, apes. We’re getting the cuts we wanted, but like many contestants on Love Island or The Bachelor, they’re here for the wrong reasons.

What's Ripe

DoorDash (DASH) 8.35%

• The bull market in laziness is raging as consumers are paying poor people to deliver them food in record numbers. Washington would be so proud.

• Delivery app DoorDash posted killer earnings, reporting a loss of $0.38/sh on $2.63bn in revenue, a beat on the top line and uncomparable on the bottom.

• Sales grew 23% YoY, and losses narrowed. Total orders grew 19%, indicating improved monetization, and guidance came in higher than expected.

Trump Media & Technology Group (DJT) 7.39%

• We all know that every American is dying for even more news about Donald Trump and politics in general. Thankfully, someone’s finally delivering.

• TMTG’s latest globe-changing innovation, announced Friday, will bring a new streaming network to cover these “neglected” “news” stories.

• The network will be “uncancellable,” and I can only assume they’re referring to subscriptions because I have no idea how else they plan to make any money.

What's Rotten

Snap Inc (SNAP) 26.93%

• Sending pictures must also be hitting recession territory, with Snap tumbling after a bad Q2. Competing for eyeballs with everyone from TikTok to Instagram is tough.

• Friday’s results were disappointing, as 16% YoY revenue growth wasn’t enough to beat estimates on the top or bottom line.

• Daily active users did beat estimates at 432mn, but ARPU missed wide at $2.86. Guidance was even worse than getting ghosted, triggering this humiliating selloff.

Intel (INTC) 26.06%

• Intel took the Olympics to New York on Friday. It won gold and set a new world record for “Biggest Vibe Killer.” However, its earnings triggered a global selloff in chip stocks.

• The American chip maker delivered EPS of $0.02/sh on $12.83bn in sales, a 1% YoY decline. Both missed estimates for $0.10/sh on $12.94bn.

• On a GAAP basis, Intel actually lost $1.61bn in Q2, triggered by restructurings to enable enhanced production of its AI chip line. Safe to say the market’s not too confident…

Thought Banana

Earnings Spotlight: Amazon.com Inc (AMZN, 8.8%)

Here’s a business idea: a store that sells literally everything.

F*ck, wait, it already exists? Everyone’s always stealing my ideas before I have them. 

Anyway, it turns out this idea-thieving company just dropped earnings and its stock price, so let’s check it out.

The Numbers

The world’s sixth most valuable company delivered Q2 earnings of $13.5bn, or $1.26/sh, a 101% annual jump. Sales grew 11% to $148bn.

Despite the solid growth and easy beat on the bottom line, Mr. Market laughed at their $148bn in sales. He was expecting $148.5bn.

Revenue from North American e-commerce and Amazon’s Advertising segment both came in lighter than expected, acting as the quarter's greatest detractors.

North American consumers have been cutting their discretionary spending, of which Amazon is the primary sugar baby. 

Plus, sites like Temu and Shein have exploded in popularity recently, cutting into Amazon’s volume and starting a price war.

However, Amazon’s most important unit for growth—its legendary AWS cloud segment—did its job. Sales grew 19% to $26.3bn, beating the $26bn estimate.

Spitting in the face of this good news, Amazon finished up its Q2 report with guidance similar to the U.S.’s gold medal count so far this Olympics—weaker than expected.

The firm expects revenue between $154bn and $158.5bn, implying a midpoint of $156.25bn. That’s below the $158.24bn consensus expectation of what Amazon’s expectation would be in Q3.

The Takeaway?

Amazon just confirmed two of my least favorite facts to hear—American consumer spending is falling, and Big Tech valuations are as shaky as a tired gymnast’s arms.

Does anyone have a blue pill I can swallow to ignore this?

If not, get ready for similarly subpar results from other mega-retailers like Walmart and Target when they report later this month.

The tide of Big Tech valuations has gone out. Turns out everyone was swimming naked.

The Big Question: Will other retailers perform as poorly as Amazon in their North American units? Are you buying this dip?

Banana Brain Teaser

Previous

A grocer has 400 pounds of coffee in stock, 20 percent of which is decaffeinated. If the grocer buys another 100 pounds of coffee, of which 60 percent is decaffeinated, what percent, by weight, of the grocer’s stock of coffee is decaffeinated?

Answer: 28%

Today

What is the perimeter, in meters, of a rectangular garden 6 meters wide that has the same area as a rectangular playground 16 meters long and 12 meters wide?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Jasper, Ankit & Patrick

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