Earnings Season Mostly Positive

Mike Verity | August 11, 2022

Stocks opened higher this morning, but quickly faded. The Dow is still up 140 points, but the Nasdaq is flat. Commodities are broadly higher on the day. WTI crude oil bounced back to $93/barrel. The bond market is giving back some recent outperformance. Long-term Treasuries are down over 1%.

Today’s Producer Price Index (PPI) report provided fresh evidence of decelerating inflation. PPI, which measures cost inflation for domestic manufacturers, fell .5% in July from the prior month. Compared with a year ago, PPI slowed to 9.8% growth from 11.3% in the prior month. Improvement was pretty much confined to energy and goods. But it was good so see that prices for services increased only modestly. Prices are still rising for warehousing, transportation and food. CNBC’s Rick Santilli concluded, “We don’t need to be rocket scientists to see that inflation is coming down.”

Earnings season continues apace, with most companies reporting decent numbers. Disney (DIS) reported much better than expected second quarter results and the stock shot up 5.5%. The company’s streaming services (Disney+, ESPN, Hulu) added over 14 million new subscribers, bringing the total subscriber base even with Netflix. And planned price hikes should help make the services profitable in the future. Disney’s total sales were 26% higher than the year-ago quarter driven by theme parks. Spending per park attender was up huge from pre-Covid levels.

Waste Management (WM) reported 12% sales growth and 13% profit growth for the second quarter. Not bad for a trash hauler. The CEO pointed out strength in the “special waste” business, which implies that US industrial activity will remain strong for the immediate future. “We’re not seeing them turn that off.” The stock climbed almost 3% following the announcement.

Marriot (MAR) sees no “signs of a slowdown in global lodging demand.” In fact, “pent-up demand for all types of travel” is a reality. Significantly, second quarter sales were almost exactly the same as in the second quarter of 2019 (pre-Covid).