Stocks edge higher, better retail earnings, claims improves, crypto bearish sentiment remains

US stocks are rallying as investors viewed both the Fed’s Minutes as a commitment to only gradual tighten policy to fight inflation and after a few retailers provided optimistic outlooks.  The Fed locked itself into delivering a couple of half-point rate increases until the Jackson Hole Symposium and that has removed the risk of aggressive tightening in the short term.  For some traders, having a strong idea on when the Fed will end its hiking cycle is the key for giving everyone the greenlight to buy equities and that could happen at the end of the summer.

The last several trading sessions saw stock market weakness driven by downbeat outlooks by Target, Walmart and Snapchat, but today that temporarily changed.  Macy’s, William Sonoma, and Dollar General gave reason to be a little bit optimistic about the US consumer. Macy’s raised their full-year EPS guidance and noted that they continued to see strong sales in luxury goods items.

Williams Sonoma noted that this year should meet their long-term financial targets which comes as no surprise for some as the mid-to-high income households are still handling the current wave of pricing pressures.  The standout earnings update came from Dollar General, as they were able to raise their guidance despite ongoing uncertainties arising from product cost inflation and continued pressure in the supply chain.  The inflation impact is hitting low-income households hardest and Dollar General seems to be benefitting.  If Dollar General was cutting guidance, that would be very troubling for betting on the US consumer.

The latest round of US data delivered a sigh of relief for the labor market as initial jobless claims declined, putting a temporary end to the upward trend. The hot labor market appears to be remaining in place and that is good news for the economy.  The second look at first-quarter GDP and personal consumption showed a weaker number for growth and a boost for consumer spending.

Bearish sentiment remains the theme for cryptos as bitcoin edged lower despite a modest rebound with risky assets. Ethereum is selling off as many crypto traders start to doubt Ethereum 2 will be successful.  Ethereum 2 merge was delayed until August, but it won’t truly let Ethereum be scaled up; they will use a multi-chain system and will connect to a wrath of Layer 2 scaling solutions. Ethereum has too many competitors that can do a better job of scaling up and this latest update might force people to jump ship.