Happy Friday!
Banks kick off earnings season with a thud. Mixed inflation data causes market volatility and could delay interest rate cuts. An outsized gift to medical students and ice cream college!
#1 – Weekly Market Recap – Mixed inflation data created volatility for stock and bond markets this week.
All three major US stock indices rose more than +1% on Wednesday. That trend reversed on Thursday following the lower-than-expected June CPI inflation data.
Through yesterday’s close, the more value-oriented Dow Jones lead the way for the week rising +1.0%, with the S&P 500 slightly positive with +0.3% gains and the Nasdaq down -0.9%.
All three stock indices were positive Friday in early morning trading with the Nasdaq up +1.1%, the S&P 500 rising +0.9% and the Dow Jones up 0.8%.
This morning kicks off Q2 earnings season with some of the big banks reporting mixed results. Early morning trading saw bank stocks under pressure with JPMorgan (-1.8%), Citigroup (-2.9%) and Wells Fargo (-6.9%) down to start the day.
Besides the banks, another trend worth watching closely is the rise in the Russell 2000 Small-Cap Index. Yesterday, small cap stocks rose +3.5% and had its largest outperformance over the Nasdaq since November of 2020. Historically small cap companies perform well in falling interest rate environments – perhaps yesterday’s small cap rally was a signal that rate cuts are on the horizon.
#2 – Mixed Inflation Data – Consumer inflation, measured by CPI, fell to +3.0% in June, its lowest level in three years. Similarly, core consumer inflation (excluding food and energy), declined to +3.3%, also the lowest level in 3 years.
June’s consumer inflation data showed that consumer inflation slowed to levels not seen since the pandemic. In Q2, annualized consumer price inflation slowed to just +1.1%, the lowest quarterly inflation reading since the Q2 2020.
However, this morning’s Producer or wholesale inflation report showed a different story. June’s Producer Price Inflation (PPI) data showed that wholesale prices rose by +2.6%, the largest increase since March 2023, and much higher than expected. Excluding food and energy inflation, core PPI rose 0.4% in June and is up +3.0% over the last year.
Combined,the inflation reports show a mixed pictureof inflation. Wholesale inflation, which is often viewed to be a precursor to consumer inflation, unexpectedly rose in June.
Whether June’s higher than expected producer inflation report was an anomaly, or a sign of persistent inflation pressure for the future, remains to be seen. But it does appear to show that additional patience may be required by the Federal Reserve before it starts to cut interest rates.
At DSG Advisors, we think this morning’s elevated PPI report takes a July rate cut off the table (we didn’t think this was likely anyway). With the elections coming in a couple of months, we wouldn’t be surprised to see the first rate cut delayed until after the elections.
#3 – Gargantuan Gifting – Thanks to a $1 billion gift from businessman Michael Bloomberg’s philanthropic organization, many students pursuing medical degrees at Johns Hopkins will no longer pay tuition.
Bloomberg Philanthropies announced Monday a $1 billion gift to Johns Hopkins University, a private university in Baltimore, Maryland. Bloomberg graduated from Johns Hopkins in 1964 and has donated heavily to his alma mater in the past, including a $1.8 billion gift in 2018 for undergraduate financial aid.
Beginning this fall, full tuition will be covered for students from families earning less than $300,000. In addition, living expenses and fees will be covered for those students from families earning up to $175,000. Nearly two-thirds of current and incoming medical students will be eligible for the benefits.
Johns Hopkins’ medical school graduates had an average of $105,000 in student loan debt in the 2023-2024 school year according to the University.
In addition to medical school students, the gift will also increase financial aid for students at the University’s schools of nursing, public health and other graduate schools.
“As the US struggles to recover from a disturbing decline in life expectancy, our country faces a serious shortage of doctors, nurses and public health professionals,” said Michael Bloomberg, founder of Bloomberg Philanthropies and Bloomberg LP. “By reducing the financial barriers to these essential fields, we can free more students to pursue careers they’re passionate about – and enable them to serve more of the families and communities who need them the most.”
Source:NPR
#4 – Ice Cream 101 – Did you know there is a college course offered specifically on making ice cream?
Each year, Penn State University offers a one-week course called “Ice Cream Short Course,” or as it’s more commonly referred to “ice cream college.”
The Berkey Creamery at Penn State University is where people that are serious about ice cream go to learn. In addition to home aficionados, some ice cream companies send people every year. The class has welcomed employees from Tillamook, Hershey, Baskin Robbins, Jeni’s and even the Ben and Jerry, from Ben & Jerry’s, have attended.
Dr. Bob Robers, Ph.D., Head of the Food Science at Penn State said, “Our target audience is people who are serious about ice cream.”
For the professional ice cream makers, the course is “just that extra notch in our belt to make us a little bit stronger in our field of expertise,” said Ruben Urrutia, Director of Plant Operations for Tillamook. Urrutia likened the course to NFL players reviewing game film.
The Penn State Ice Cream Short Course has a 132-year history. The school describes itself as “cow to cone,” meaning students can see the on-campus herd of about 200 cows milked in the milking parlor, follow the milk as it gets made into ice cream and eventually sold at the famous Berkey Creamery, all on school grounds.
Understanding the science of how milk, cream, sugar and all the other ice cream goodness interacts at a molecular level can make a big difference in the quality, taste and appearance of the ice cream.
Making ice cream is a science and the Penn State course is just like any other college course – with homework, studying, help sessions and exams – it is just a little sweeter with taste testing along the way!
Source: CNN