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Good morning and Happy Bastille Day, though of course in France they don't call it Bastille Day but rather La Fête Nationale (the national celebration) or simply Le Quatorze Juillet (the fourteenth of July). Here at the Brew we call it a good reason to listen to French rap all day. Who's your favorite artist?
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Nasdaq
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14,677.65
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S&P
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4,369.21
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Dow
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34,888.79
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Bitcoin
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$32,556.42
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10-Year
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1.423%
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PepsiCo
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$152.96
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*Stock data as of market close, cryptocurrency data as of 6:00pm ET.
Here's what these numbers mean.
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Markets: Investors didn’t have much of a reaction to 1) a key report showing high inflation or 2) strong earnings numbers from blue-chip companies. One of those companies with a strong quarter, PepsiCo, rose to a record high.
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Budget: The US federal budget deficit narrowed by 80% this June over last year, which reflects lower government spending and last year’s delay in tax collection to July. Still, the budget deficit for the entirety of 2021 is expected to be the second-largest since 1945, only eclipsed by last year.
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Inflation is getting so bad Arizona might have to raise the price of its iced tea above $0.99.
Okay, it's not that horrific yet, but consumer prices did surge 5.4% in June from a year ago, the biggest increase in 13 years.
What happened: As the US reopened for business, consumers swiped their credit cards with fury. Combine that with supply shortages across the economy and massive government stimulus, and you get sweeping price increases.
But there are nuances
The WSJ’s David Harrison divided the inflation report into four categories to show that price hikes aren’t occurring uniformly across the economy. In some sectors...
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Prices that plummeted early in the pandemic and are surging to catch up. Think airfares (24.6% annual increase in June) and hotels (16.9%).
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Prices that are booming thanks to supply shortages. Used cars are the star of this category, with their price increases accounting for more than a third of June’s total price hikes. Economists expect prices to return to normal levels when supply chain wrinkles are ironed out.
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Prices that will remain higher permanently. You could be paying more at restaurants over the long term thanks to an extended labor shortage and higher wages.
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Prices that aren’t increasing that much. Rents are inching upward at a rate of 1.9% per month. For comparison, rents on a primary residence rose at a nearly 4% rate before the pandemic.
As always with inflation stories, we must close by turning to the Fed, whose main job is to keep prices stable. Will June’s inflation boom change Chair Jerome Powell’s view that price hikes are transitory?
Probably not. As we mentioned, the bulk of the price increases were in sectors battered by the pandemic (hospitality) or those battling supply shortages (used cars). Higher inflation might stick around a little longer than initially expected, but investors are betting more typical price growth will return, just like the handshake.
+ For laughs: We had some inflation fun with readers on Twitter.
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"Jamie Dimon, CEO of JPMorgan Chase" (CC BY 2.0) by jurvetson
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Two banks and a food giant turned in quarterly report cards you'd be proud to show off to your parents. Here are execs' most quotable quotes from yesterday's earnings calls.
1. JPMorgan CEO Jamie Dimon: “Their house value is up. Their stock value is up. Their incomes are up. Their savings are up. Their confidence is up.”
Consumers are "raring" to spend more this summer (great for JPMorgan’s credit card biz), but the company’s trading revenue dropped sharply in Q2 as the economy opened up.
2. Goldman Sachs CEO David Solomon: “Obviously if there was some sort of a disruption or an economic slowdown sometime in the future, that would wear on confidence and slow that, but that doesn’t seem likely.”
Goldman’s net revenue from investment banking jumped 36% annually to $3.6 billion in Q2 thanks to an army of unicorns rushing to go public this year.
3. PepsiCo CFO Hugh Johnston: “This quarter, all of a sudden people started going out.” In food service, “we saw the business double in a relatively short period of time.”
Pepsi sales jumped the most in a decade last quarter as restaurant demand for its drinks returned. However, while people are getting out more, “they are not anywhere near where they were,” Johnston said.
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Impulse purchasing could get even easier: Apple is working on adding a buy-now-pay-later (BNPL) feature to Apple Pay, dipping a gargantuan toe into one of retail’s fastest-growing segments, per Bloomberg. Here’s what we know about the service, known as “Apple Pay Later”:
- It’ll offer two ways to pay: four bi-weekly, interest-free installments or a long-term monthly plan with interest.
- The service will work with any Apple Pay-enabled card, so no Apple Card is required.
- Goldman Sachs, which is already Apple Card’s partner, has been tapped as the service’s lender.
What’s the strategy? Apple currently earns a cut of every Apple Pay purchase, so the more users buy, the more it makes. And a BNPL service could lead Apple users to make more big-ticket purchases.
Zoom out: If Apple does release this product, it’ll be trampling on several other fintech companies’ turf. Affirm, Klarna, PayPal, and Sezzle all offer similar layaway programs. Following the Bloomberg report, Affirm shares fell as much as 13%.
Apple’s core advantage (ha), and this goes for most new arenas it’s looking to play in, is that the tech giant’s already in so many people’s pockets.
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SPONSORED BY THE MOTLEY FOOL
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This kid knows something. And judging by the size of his smile, it’s not just what’s on the inside of that arts and crafts box.
No, this kid is smiling like his parents read him Motley Fool’s latest stock picks—and now he’s armed with stock market knowledge that’ll potentially put him in a good position to upgrade to a fancier pencil one day. You know, one that’s not a log.
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Click here to read the Fool’s “Five Growth Stocks Under $49."
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Toby Howell
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Stat: Peloton has the highest artist payout rate of any music streaming service: 3.1 cents, compared to Spotify (.35 cents), Apple Music (0.68 cents), and YouTube (0.15 cents), according to Trichordist’s Streaming Price Bible. While its payouts are more generous, Peloton only accounts for 0.07% of global streams.
Quote: “It’s time to build some new used cars.”
Bloomberg’s Joe Weisenthal has the jokes for the boom in used car prices.
Read: Jason Sudeikis is having one hell of a year. (GQ)
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The 2021 Emmy nominations were released yesterday, and it looks like Netflix’s single-handed domination could soon turn into a battle royale thanks to a pack of streaming toddlers.
In 2018, Netflix knocked HBO off its perch as the top nominee-getter for the first time in 17 years, which symbolized the shift from cable → streaming. Netflix sat alone at the top for a while, nabbing the all-time nomination record last year with 160.
But Disney+, HBO Max, and Apple TV+, all of which are less than three years old, are starting to nip at its heels with 71, 36, and 34 nominations this year, respectively. Netflix accounted for about 60% of all streaming nominations in 2020, but this year, its share is down to less than 40%.
Big picture: The success of newer streamers at the Emmys may not matter for the average Netflix-and-chiller, but it reflects the fast growth of infant platforms. All the whippersnappers with strong Emmys showings revealed impressive viewership gains this year.
+ The more you know: The Mandalorian and The Crown topped the nominations with 24 each. Ted Lasso only got 20, but he was perfectly content with that.
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The death toll in the Surfside, FL, condo collapse will likely be between 95 and 99 people, officials said as they began to wrap up search-and-rescue efforts.
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President Biden has recruited pop star Olivia Rodrigo to help encourage vaccinations among young people.
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Panda Express is adding Beyond Meat Orange Chicken to its menu at some locations, expanding from its current veggie offerings of “steamed white and brown rice.”
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Boeing is cutting production on its 787 plane for a few weeks to fix a structural issue it identified.
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Kraft and Van Leeuwen are releasing limited-edition, macaroni and cheese-flavored ice cream today. If you’re looking for a conversation starter to kick off a meeting...this could work well.
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SPONSORED BY THE MOTLEY FOOL
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If you have $1000 to invest, put it here. The Motley Fool has been identifying tech trends and analyzing how those trends could affect the stock market for decades. Take streaming, for example. The Fool was high on Netflix as early as 2004. The next potentially big thing the Fool spies on the horizon? 5G. See which stock could benefit from the trend most here.
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Arcade wars: To celebrate the 40th anniversary of Donkey Kong this month, make sure you watch the movie (for free on YouTube) that explores the cutthroat battle to become the king of Kong.
Dream job alert: McCormick is hiring a Director of Taco Relations. The “responsibilities” include traveling across the country in search of the latest taco trends and helping to develop new taco recipes.
You learn something new every day: Read a series of blog posts exploring tacit knowledge and why it’s so important.
Resale is exploding: Learn about resale’s impact on traditional retail and sustainability at a Retail Brew event next week. Register here.
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Word search: Our new Hump Day tradition asks you to find the words prompted by the visual clues. Try it here.
The Price Is Right
Because used cars have been the biggest contributor to inflation this summer, we decided to go shopping for one on cars.com.
Here's the question: How much is a 2019 Ford F-150 XLT with 16,371 miles being sold for in Bend, Oregon? Price Is Right rules—you can’t go over.
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