What’s happening? (7-13 August)
Prices cool down a bit
After months of prices going higher and higher with no sign of letting up, last month brought some relief. New inflation data on Wednesday showed the Consumer Price Index rose 8.5 percent in the year to July, a marked slowdown from June, when prices rose 9.1 percent. Falling prices for airfares, used cars, hotel rooms and gasoline fueled the decline, with the national average for a gallon of gasoline down sharply since early summer. But the inflation report is not the absolute good news it may seem at first. A measure that excludes volatile food and fuel costs rose 5.9 percent, suggesting underlying inflation pressures remain strong. Still, the overall pace of moderation is likely to reassure Fed policymakers, who will see July’s data as a step in the right direction. And it is a victory for President Biden, for whom high inflation is a political liability. What happens next, however, is uncertain: Last year, inflation accelerated in the fall after cooling off in the summer.
Disney overtakes Netflix in subscribers
As analysts had expected, the Walt Disney Company lowered its ambitious subscriber target for Disney+, admitting that it might not reach 230 million to 260 million subscribers by 2024 as it once said. But the company announced another noteworthy subscriber benchmark: surpassing Netflix. Disney+ added more than 14 million subscribers in the most recent quarter, far exceeding Wall Street’s forecast and bringing Disney’s portfolio of streaming services to 221 million subscribers. (Netflix, which has been losing subscribers, now has about 220.7 million.) The news from subscribers was just one of the highlights in Disney’s blockbuster earnings report last week. Disney said its profit rose 50 percent, boosted by strong demand for its theme parks, an indication that consumer confidence remains high despite economists’ concerns that inflation is driving Americans to adjust your budgets.
More pain for Crypto
Cryptocurrency companies continue to fall to new lows. Coinbase, the largest crypto exchange in the United States, on Tuesday reported a 63 percent decline in revenue in the second quarter and moved on to a loss of $1.1 billion from a year earlier. The outlook for the next three months isn’t much better, he said, predicting its user numbers: below 9.2 million—would continue its decline in the third quarter. Coinbase blamed the industry’s “fast and furious” downturn for its gloomy report. The success of the company is highly dependent on the broader crypto market, which has suffered a sharp decline in recent months. Coinbase had a leg up on its competitors in the early days of crypto, but it has been losing its lead, and not just because of the industry downturn. The company has made a number of strategic missteps, including failing in an effort to expand into India and embarking on a hiring spree that ultimately led to mass layoffs.
Whats Next? (August 14-20)
Inflation may hurt retailers
Walmart and Target will release their second-quarter earnings reports this week, and both may suffer. Last month, Walmart lowered its earnings outlook, pointing to inflation as the reason customers were making fewer purchases of general merchandise. A larger portion of the retail giant’s sales came from its grocery business rather than its more expensive stock of electronics and clothing, as consumers felt pressure from higher prices, it said. The previous month, Target said it was facing similar challenges and announced a plan to get rid of excess inventory it had built up as a result of changing consumer habits. Target had already lowered its earnings forecast in May, when it released a dismal first-quarter report that sent its shares plummeting. Together, the performance of retailers could help signal whether inflation continues to hold back spending or the worst is over.
The Fed shares its notes
Policymakers at the Federal Reserve will release minutes from their July meeting on Wednesday, providing clues as to how the central bank is thinking about its way to rein in inflation. After two months of huge rate hikes, some economists expect the Fed to start taking a more dovish approach, opting for a half-point hike over three-quarters of a point next month. But even with inflation cooling in July, the Fed is likely inclined to see its job far from over. Wages and rents continue to rise rapidly across the country, and the central bank is still well above its 2 percent inflation target.
stocks on the rise
After a dismal first six months of the year, Wall Street’s worst start to the year in half a century, stocks are poised for their best stretch of 2022. The rally may seem counterintuitive, given talk of a potential recession. But investors have been encouraged by signs of cooling inflation, a still-booming job market and, in some cases, better-than-expected corporate earnings. They have also been increasingly unfazed by Fed policy moves and now have reason to believe the central bank will start to ease its drive to cool the economy, easing fears of a serious recession. Many experts say the stock is likely to go even higher. Others are more cautious, warning that it is not unusual to see short-term gains in the market over a longer period of losses.
What other thing?
Chipotle has agreed to pay $20 million to settle a lawsuit with the City of New York for violations of worker protection laws. Digital media company Axios has agreed to sell to Cox Enterprises for $525 million. Johnson & Johnson said it would stop selling baby powder globally by 2023 and use cornstarch in its product.