TQ Morning Briefing
The tape will trade this morning's inflation gauge. The release next to it carries the first count of what American companies actually earned in the spring. That quarter ended two months ago and the number has never been published.
A Miss That Lifted Stocks
Consumer confidence hit a seven month low on Tuesday.
The market took it as rate relief. Yields fell. Every major index closed higher.
Nvidia (NVDA) snapped a seven session losing run, its longest since 2022. It reports after the close tonight.
Futures are flat and the Nasdaq is the softest of the four. The ten year Treasury yield is lower again.
Crude is falling hard for a third day. Gold is easing off a three month high and the dollar is firmer.
Market Implication
A confidence miss that lifts stocks is a market pricing the cost of money. That has been its only live input for weeks. The government supplies the missing one this morning.
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What The Second Estimate Is For
At half past eight the government publishes three things at once.
The second estimate of spring quarter growth. Personal income and outlays for July, which carries the personal consumption price index the Fed targets. And the advance report on durable goods orders for July.
The growth rate barely moves between the first count and the second. So the revision looks like housekeeping.
The revision is where corporate profits arrive.
The measure is corporate profits from current production. It strips out the accounting that flatters reported earnings.
The last count covered the winter quarter.
The increase came in at a fraction of the quarter before it.
For the spring we have only half the ledger. Business investment climbed, on equipment and on software.
So we know the buildout accelerated. We do not know whether the cash behind it did.
That is the gap this morning closes.
If the cash did not keep up, the difference is already sitting in the bond market. Companies have sold bonds at a record pace this year, and the rush lines up with the artificial intelligence build. Bank of America thinks it may be crowding out demand at the long end.
Structural Setup
A profit shortfall reaches the bond calendar before it reaches equities. Watch how much investment grade paper gets announced next week. That is the buildout saying out loud what it could not fund from cash.
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Semiconductors led Tuesday. Advanced Micro Devices (AMD) and Marvell Technology (MRVL) both rose hard.
Neither company said a word. The move came out of the rates market. The longest duration equities take that first.
Super Micro Computer (SMCI) was the one leader trading its own news. Prosecutors in Taiwan charged nine people over illegal chip exports and left the company itself off the list.
Even that was a court filing rather than a customer.
Not one name led on what it sold.
Sector Read
Watch the core capital goods line inside this morning's durable goods report. It is the one number today about volume rather than price. If orders climbed again last month, the industrials have a real order book under yesterday's long duration leadership. If they did not, the rally was a rates trade and nothing else.
He Removed The Instrument He Now Needs
Kevin Warsh gives the Jackson Hole keynote on Friday. It is his first as Federal Reserve chair.
He arrives with no forward guidance. He took it away himself in July.
He called it "a change for the better." He said the Fed was "just getting started."
He also has no fresh projections. The next dots land in September.
The committee behind him is split. The target range has held through five straight meetings. At the July meeting three members wanted a hike.
So Friday is a speech with no instrument attached to it.
Watch Signal
The inflation print is the only thing this morning that can move September. Hot and the hike comes back on the board. The market priced most of it out in the first half of this month. The front end reprices before Warsh reaches the podium.
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The Part You Cannot Cancel
Dycom Industries (DY) reports before the bell this morning.
It builds physical networks for a living. Trenching, splicing fiber, and lately the electrical work inside data centers.
Its last quarter set records on revenue and on backlog. Revenue rose by more than half against a year earlier. Close to half of that came without buying anything.
Roughly half the backlog is scheduled inside the next twelve months.
Now ask what a backlog like that actually is.
An equipment order can be cut inside a quarter. Every spending forecast in circulation is built out of those.
A construction backlog is a contract with a crew attached. Dycom had close to twenty thousand people on its books at the start of the year.
Its chief executive calls data center demand "insatiable." He says these build cycles run well into the next decade.
Chips did not sell those cycles. Fiber routes did, and power work.
A data center is useless until something connects it.
The Read
Equipment orders tell you what the buildout intends. A backlog tells you what it has already signed. When money gets expensive, intentions get cut first and signed work gets cut last. So this morning's backlog line is the honest count of how much of this has stopped being a plan.
Economic Data: MBA mortgage applications, 7:00am ET. Second estimate of Q2 GDP with the first count of corporate profits, personal income and outlays for July, and advance durable goods orders for July, all 8:30am ET. EIA petroleum status report, 10:30am ET. Treasury reopens the 2-year floating rate note at 11:30am ET and sells 5-year notes at 1:00pm ET.
Fed Speakers: None. The Jackson Hole symposium opens Thursday. Chair Kevin Warsh gives the keynote Friday, 10:00am ET.
Earnings: Dycom (DY), Kohl's (KSS), Abercrombie & Fitch (ANF), Bath & Body Works (BBWI), Williams-Sonoma (WSM), J.M. Smucker (SJM), Donaldson (DCI), Photronics (PLAB) before open | Nvidia (NVDA), Salesforce (CRM), CrowdStrike (CRWD), Synopsys (SNPS), HP (HPQ), Okta (OKTA), Agilent (A), Veeva Systems (VEEV), Urban Outfitters (URBN) after close. Several calendars list Dollar General, Dollar Tree, Best Buy, Burlington Stores and Hormel today; all five report Thursday, as do Gap and Ulta Beauty. Lululemon and Campbell's report September 3.
Overnight: Nikkei 225 +0.62%, Shanghai Composite +0.59%, FTSE +0.02%, DAX +0.36%
Two numbers land eight hours apart today.
The first arrives before the open. The government reports what American companies earned in the spring.
The second arrives after the bell. Nvidia says what it expects to sell next.
The market will trade the second one. The first one decides how it gets paid for.
Intuit (INTU) beat last night and guided soft. The stock is down hard this morning.
If profits recovered, tonight's forecast is funded out of cash. If they fall short, it comes out of the bond market. The price of long money there has been rising since June.
Either way the order book is the same size. The multiple is not.