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Jobless Claims Decreased More Than Expected

Zacks Equity Research

Published: July 27, 2023 8:45 am

Last Updated: July 27, 2023 12:44 pm

Don’t look now, but the Dow is looking to notch its 14th straight trading day higher — something that hasn’t happened since 1897, back in the nascent days of the index. And pre-market reports, both on Q2 earnings and economic segments, are helping push pre-market futures higher at this hour: the Dow is currently up +160 points, the S&P 500 is +39 and the Nasdaq +230 points.

Being Thursday, Initial Jobless Claims are out this morning, surprising to the downside yet again. A headline of 221K was well below the 235K expected, and even beneath the unrevised 228K from the previous week. We’re well off the mid-June cycle highs north of 260K, and haven’t seen a headline this low since February of this year. Continuing Claims came in at by far the lowest level of the past 12 weeks at 1.69 million. In late April, we were seeing results above 1.8 million.

The advanced read on Q2 Gross Domestic Product (GDP) was higher than the +2% expected (and +2.0% reported in Q1) to +2.4%, the highest since the +2.6% in Q4 of last year. (So much for a mid-year recession.) Meanwhile, Consumption came way down quarter over quarter to +1.6% (from +4.2% in Q1) on a +2.2% pricing index and +3.8% on core Personal Consumption Expenditures (PCE), the lowest since Q4 of 2020. This is really the best of both worlds: a stronger economy that’s less reliant on the consumer spending a lot more. A full PCE report comes out tomorrow before the bell.

Durable Goods Orders for June — also a preliminary number — were also well ahead of expectations: +4.7% was more than 3x analyst estimates, and more than double the upwardly revised +2.0% for May. Ex-transportation, we see this come way down to +0.6%, though half a point higher than expected and only 10 basis points (bps) off the previous month’s +0.7%. Non-defense, ex-aircraft (a proxy for “regular” business spending) was a scant +0.2%, notably below the previous month’s downwardly revised +0.5%. Shipments were unchanged month over month.

Advance Trade Balance on Goods for June posted a narrower deficit than anticipated: -$87.8 billion, from -$97.5 billion previously. Advance Retail Industries notched +0.7% — easily ahead of the +0.4% estimate, and down 10 bps month over month. Advance Wholesale Industries came in -0.3%, beneath the 0.0% registered for May. Again, we see evidence of a cooling economy; the good news is we’re still growing in its most advantageous areas, at least for the near term.

McDonald’s (MCD) posted a strong Q2, with earnings and sales both well above estimates: earnings of $3.17 per share were +14.4% higher than the $2.77 expected (and $2.55 per share reported in the year-ago quarter), on revenues of $6.5 billion, which outpaced the $6.23 billion estimate by +4.3%. The quick-service restaurant giant saw double-digit comps in each of its segments, including China, which rose higher than expected. Shares are up +1.6% on the news in today’s pre-market, but still underperforming the S&P 500 year to date.

Southwest Airlines (LUV) technically beat estimates on both top and bottom lines this morning: by a penny to earnings of $1.09 per share and to a record-high $7.04 billion in revenues, higher than the $6.99 billion in the Zacks consensus. This is a smaller beat than we saw last week by airline competitors United (UAL) and American (AAL), as operating expenses rose +12% in the quarter (+7.5% ex-fuel prices) and the company has pilot negotiations to which it must attend. Shares are down -6% in early trading.

Royal Caribbean (RCL) shares are way up in today’s pre-market, +9%, on its robust Q2 results this morning: earnings of $1.82 per share was well ahead of the $1.58 expected (and another stratosphere from the -$2.08 per share reported in the year-ago quarter). Revenues reached a record high to $3.5 billion, above the $3.38 billion anticipated. Adjusted EBITDA was also a record high at $1.2 billion. In short, business is booming; pent-up demand panned out big-time this quarter for the cruise line major.

United Airlines Holdings Inc (UAL): Free Stock Analysis Report

Southwest Airlines Co. (LUV): Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report

McDonald’s Corporation (MCD): Free Stock Analysis Report

American Airlines Group Inc. (AAL): Free Stock Analysis Report

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