Breakfast on Wall Street: The New Ticket

Monday Survey

Welcome to earnings season! Nearly a quarter of the S&P 500 companies will report their second-quarter results this week, including Alphabet, Coca-Cola, Tesla, and Visa. Following the recent rotation, how will the latest numbers impact the S&P 500?

· Boost the index (you can’t stop the rally for very long)
· Pull the benchmark index down (results lower than those of the first half)
· Flat line (still too many uncertainties)

Take the survey here and don’t forget to share your thoughts in the WSB comments section.

New ticket

Under overwhelming pressure from his top Democrats, President Biden abandoned his reelection bid in a fraught announcement that many had anticipated. He endorsed Vice President Kamala Harris as the party’s new presidential nominee, one month before the DNC and just 100 days before the general election. State Democratic Party chairs have since thrown their support behind her candidacy, though other leading Democrats are calling for an open process to nominate a candidate (possible challengers?), while others will likely wait for her to choose a running mate.

Chronology: Things have only gotten worse for Biden since his faltering performance in the June 27 presidential debate. The press conferences and interviews that followed have never recovered, with errors like confusing the names of Harris and Trump, as well as Zelenskyy in Ukraine and Putin in Russia, and referring to Defense Secretary Lloyd Austin as “the Black man.” In contrast to Biden’s ramblings, his main rival has made headlines for his persistence, particularly after an assassination attempt at a campaign rally in Pennsylvania that resulted in iconic photographs of a bloodied Trump raising his fist in defiance.

Stock futures opened slightly higher after Biden formally handed over the reins to Harris, with no significant policy uncertainty seen as a follow-up to the latest announcement. She is a vocal advocate of Biden’s economic approach, such as infrastructure upgrades (Infrastructure Investment and Jobs Act), green project subsidies (Inflation Reduction Act) and the relocation of critical industries (CHIPS and Science Act), and is also expected to largely stick to his foreign policy playbook. Harris’ next interaction with the press will be at 11:30 a.m. ET today at an event on the South Lawn celebrating NCAA championship teams.

What does this mean for markets? “Not much at this point,” TS Lombard wrote in a new research note. “Polls before candidates start running are notoriously wrong (DeSantis). Markets are priced in on a Trump win and a possible Republican win. Once the Democratic president and vice president are chosen, run, and impact the polls, will there be a market reaction (polls are now underestimating Democrats). On economic policy, each side reflects a Jacksonian rather than Hamiltonian tilt. Yield curves don’t need to wait for the Fed to turn sharply positive.” (10 comments)

Rate reduction

The People’s Bank of China became the latest central bank to cut interest rates, a move aimed at “strengthening countercyclical adjustments to better support the real economy.” China’s economy has been struggling of late, with the latest GDP figures missing estimates and June retail sales growing at the slowest pace since December 2022. Over the weekend, the country also unveiled plans to boost the finances of indebted local governments by transferring more tax revenue from central coffers, following the ruling Communist Party’s third plenum. (1 comment)

Mark the spot

Ethereum (ETH-USD) spot ETFs are set to begin trading tomorrow, but crypto traders appear to be underestimating the full impact of the highly anticipated launch. Ether has surged about 49% The cryptocurrency market has seen a broader rally this year, but its performance has lagged behind its peers, according to South African analyst Richard Durant. While the SEC has approved key requirements for potential spot ETF issuers such as BlackRock (BLK) and VanEck, their S-1 filings have yet to be greenlit. If approved, crypto experts see ether rising more than 25% and ETF inflows exceeded $20 billion in the first few months. (12 comments)

Middle East Watch

Tensions in the Middle East continue to escalate after the Israeli military carried out airstrikes on a major Houthi-controlled port on Saturday in retaliation for a drone attack by the group near the U.S. Embassy in Tel Aviv. Israeli warplanes struck the Yemeni port city of Hodeida, which Prime Minister Bibi Netanyahu said was serving as an entry point for Iranian-supplied weapons. The Houthis have vowed to retaliate, while the United States has reaffirmed its “unwavering commitment” to Israel’s right to defend itself. The latest attacks could also complicate a ceasefire agreement between Israel and Hamas that had been in the works, and will likely worsen ongoing shipping disruptions in the Red Sea. (3 comments)