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AUGUST 4, 2023

SLOWER JOB GROWTH

According to the Labor Department’s report, job growth in July was less than expected, pointing to slower growth in the U.S. economy. Nonfarm payrolls expanded by 187,000 for the month, slightly below the Dow Jones estimate for 200,000. Despite this, the headline number represented a modest gain from the downwardly revised 185,000 jobs added in June. The unemployment rate was 3.5%, which beat the consensus estimate of 3.6%, and it remains just above the lowest level since late 1969. Following the release of key labor market data that could influence the Federal Reserve’s policy decisions, Treasury yields remained steady, with the 10-year yield holding at 4.192%.

COINBASE’S RESILIENCE

Following the challenges Coinbase has been facing in regards of increased legal pressure from regulators, including a lawsuit from the Securities and Exchange Commission (SEC), the largest cryptocurrency exchange in the U.S. experienced a drop in revenue from crypto trading during the second quarter. Consequently, the company experienced a 13% decrease in fees earned from customer trades compared to the previous quarter and a 50% decline from the previous year, resulting in a net loss of $97 million. Nevertheless, despite the low trading activity, Coinbase’s revenues were better than expected and its stock performance has not been significantly impacted by the legal action. Additionally, Coinbase has seen growth in non-trading revenue, with $335 million generated from subscriptions and services, surpassing trading fees for the first time, and it has reduced expenses by 50% through staff reductions.

IMPRESSIVE RETURNS

Amazon reported its second-quarter earnings, and the results not only sailed past analysts’ estimates but also provided optimistic guidance for accelerating revenue growth. The company’s earnings per share (EPS) came in at an impressive 65 cents, surpassing the expected 35 cents, while revenue reached a staggering $134.4 billion, exceeding the estimated $131.5 billion. In addition, Amazon Web Services (AWS) also performed exceptionally well, generating revenue of $22.1 billion, which was higher than the projected $21.8 billion. These outstanding results were largely attributed to the successful cost-cutting efforts spearheaded by CEO Andy Jassy, which have started yielding significant profits. Moreover, Amazon’s net income surged to an impressive $6.7 billion compared to a loss of $2 billion in the previous year, and looking ahead, the company has strong guidance for the third quarter, with expected sales between $138 billion and $143 billion, which reflects the resounding success of Amazon’s 48-hour Prime Day event held in July. Furthermore, advertising remains a robust business for Amazon, with revenue skyrocketing 22% in the second quarter. Overall, Amazon’s remarkable performance and rebounding results signal a highly promising outlook for the tech giant in the market, and as the last of the mega-cap tech companies to release its earnings report, Amazon’s impressive results capped off the earnings season with a notable rebound in the large-cap tech sector.

DECLINES DESPITE POSITIVE EARNINGS

Apple’s fiscal third-quarter results presented a mixed picture as although earnings and services sales surpassed expectations, with an impressive 8% year-over-year growth, the overall sales declined by 1% compared to the previous year due to weaker iPhone, Mac, and iPad sales. Moreover, looking ahead, Apple’s Chief Financial Officer, Luca Maestri, expects the sales slump to continue into the next quarter, which fell short of analysts’ predictions for flat sales. As a result, investor sentiment was dampened, and Apple’s shares fell over 2% in extended trading. On the other hand, Airbnb reported an encouraging 18% year-over-year growth in revenue for the second quarter, with net income reaching an impressive $650 million. Although these results exceeded analysts’ expectations on earnings and revenue, Airbnb’s shares experienced a decline due to fewer nights and experiences booked than projected. Nonetheless, despite this setback, Airbnb’s shares have performed remarkably well this year, and the company remains optimistic about the future, with plans to explore additional revenue opportunities by expanding their services.

BEST LEVELS IN YEARS

The recent actions from the Federal Reserve have helped individuals seeking low-risk investments for a shorter duration. Treasury bills are now providing the highest yields in years following the recent quarter-point increase in the Fed’s benchmark lending rate. With rates now above 5% after a recent benchmark lending rate increase, a one-year T-bill yields 5.36%, up from 3.09% a year ago, while a six-month T-bill offers 5.52% compared to 3% previously, and a three-month T-bill stands at 5.53%, up from 2.56% a year ago. These returns surpass those of most online savings accounts and short-term certificates of deposit. Moreover, experts maintain that the U.S. Treasury market remains a global safe haven, unaffected by recent credit rating downgrades, and its consistency and reliability continue to attract investors seeking stability during market volatility.

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