Labor Market Is The New Focus on Wall Street

Earn While You Learn! ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, Why Big Tech May Not Matter in the Current Earnings Season Are you ready for the new inflation reading? This morning, the CPI data will be out. Wall Street is looking forward to the data because economists forecast the core CPI to rise 0.2% in June for a second straight month. Notably, it would be the smallest back-to-back gains since August. This reading would support the sentiment that the Federal Reserve will start cutting interest rates in September. - “June’s CPI report looks to be another ‘very good’ report that should boost the FOMC’s confidence about the inflation trajectory,” said Anna Wong at Bloomberg Economics. “That should set the stage for the Fed to start cutting rates in September.” Fed Chair Jerome Powell already said that inflation doesn’t need to run at a 2% pace before officials would start cutting rates. Why? He pointed out to the labor market where it has cooled “pretty significantly.” - “The key takeaway from his testimony is the Fed’s assessment of the balance of risks is shifting in ways that – if supported and sustained by incoming data – will deliver a rate cut in September,” said Krishna Guha at Evercore. Krishna Guha at Evercore (Photo: CNBC) The market has been calm in the last few weeks. Investors expect volatility to break out soon. The options market is pricing in a 0.8% move in either direction after today’s inflation report. It would be the biggest move since June 12. And of course, the earnings season will kick off this Friday when JPMorgan Chase and other big banks report their results. This season could be different from previous ones because Wall Street will pay attention to other sectors beyond the technology sector. The Magnificent Seven is expected to report another slower growth rate for the quarter. The slowdown is also expected in the third quarter. On the other hand, the rest of the S&P 500 companies are expected to grow again in the current quarter. Analysts see them to accelerate growth rates in the next three quarters after this one. - “While forecasts for the ‘Magnificent Seven’ remain robust, their earnings are expected to slow in the second quarter — just as the rest of the S&P 500 may finally post their first year-on-year growth in at least five quarters,” noted Bloomberg Intelligence strategists led by Gina Martin Adams. (Source: Bloomberg) This is critical because Wall Street will need to see other companies pick up the slack when the Magnificent Seven slows down. After all, they cannot carry the market forever. By the way, initial jobless claims will be out today. Friday will be busy with catalysts — University of Michigan consumer sentiment, PPI, and earnings reports from Citigroup, JPMorgan and Wells Fargo. The Greatest Momentum Stock to Own Right Now Today’s Stock Pick: Royal Caribbean Cruises (RCL) The cruise line industry is experiencing a tremendous momentum right now. It was the face of the beginning of the pandemic where a cruise experienced an outbreak that captured the world’s attention. But the industry has moved on from the disaster. Almost every major cruise company is growing rapidly. None is better than Royal Caribbean. Royal Caribbean is the clear-cut leader in the industry. It has historically enjoyed higher margins and stronger revenue growth than its rivals. Naturally, it grew the fastest in the positive business environment. The company has a proven formula to deliver long-term shareholder value: - Moderate capacity growth - Moderate yield growth - Strong cost control (Source: Royal Caribbean) The time is good for Royal Caribbean. Believe it or not, its load factor is at 107%. Their ships are filled up. It led to a +19.3% net yield growth in the recent quarter. (Gross yields represent total revenues per Available Passenger Cruise Day, so Net Yields represents Gross Yields less expenses.) (Source: Royal Caribbean) The company has grown its capacity by 8.1% in the recent quarter, and it is expected to deliver two new ships in 2024 — Utopia of the Seas and Silver Ray. (Source: Royal Caribbean) While its revenue growth is solid at low double digits, its cost control will lead to a huge increase in adjusted EPS growth. How much? Well, the company forecasts a whopping 60% year over year adj. EPS growth this year. (Source: Royal Caribbean) What is the current P/E ratio? Just 21.62. Wall Street is having hard time catching up Royal Caribbean’s momentum. The company beat EPS estimates by double digits in the last four quarters. Sure enough, Citi just boosted its price target from $165 to $205. It would represent a 26% increase from its current stock price. (Source: Motley Fool and Yahoo Finance) Bottom line: Royal Caribbean is enjoying phenomenal operating leverage, where its earnings are growing much more rapidly than revenue growth. Its P/E ratio is attractive when we consider its strong earnings growth guidance. This is a good stock to own in an industry that’s seeing huge momentum. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](