Welcome to our weekly Market News Roundup 🗞️

A huge shoutout to our 18 new subscribers this week, thanks for being here! Here’s the agenda:

1. 🖼️ Big Picture: this week’s overall market sentiment

2. 📊 Interesting Set-Ups: a couple stocks worth watching

3. 🔭 Market Mood™ outlook for the week ahead

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Part 1: Overall News Sentiment 🖼️

• Overall news: -3% sentiment, neutral 🌑

• S&P 500 (large cap) news: +15% sentiment, neutral 🌑

• Russell 2000 (small cap) news: +40% sentiment, slightly bullish 🟢

In a relatively active week on the markets, the mood measured in stock market news coverage was notably neutral this week, finishing with a net sentiment score of -3% across all articles published. Zooming in, sentiment measured in conversation about the S&P 500 came in at a net score +15%, while sentiment measured in conversation about the smaller cap Russell 2000 came in at a more optimistic +40%. Here’s the highlights of the week:

📈 1. Stocks: market falls slightly as earnings season kicks off

• Market Performance: in a low volume week, the major stock market indexes recorded small declines, slipping for the 12th week out of the past 15. The S&P 500 fell -0.5% but ended the week with a sharp rally, while the Russell 2000 fell -1.2%. Tech stocks outperformed, while energy stocks underperformed.

• Q2 Earnings: a handful of major US banks kicked off Q2 2022 earnings season with mixed results. Entering earnings season, analysts were forecasting 2nd-quarter earnings for banks in the S&P 500 to fall -26% from a year ago, according to FactSet.1 Looking ahead, the majority of analysts agree that remaining earnings are likely to underperform this quarter, given how high expectations have been set over the past few quarters.

📑 2. Economy: inflation hits +9.1% and the yield curve stays inverted

• Inflation: after climbing to an annual rate of 8.6% in May, the Consumer Price INdex rose to 9.1% in June, its highest level since November 1981. Excluding volatile energy and food prices, core inflation rose 0.7% on a month-to-month basis, up from 0.6% in the previous two months.

• Yield Curve: the yield of the 2-year U.S. Treasury bond remained above the yield of the 10-year bond, and the gap widened as the week progressed, with the 2-year yield at around 3.13% on Friday and the 10-year at 2.93%. Such a so-called “yield curve inversion” is often seen as a sign that economic trouble is around the corner, as past inversions have often preceded recessions. 

📊 3. Other Assets: crypto market back above $1T, oil back below $100

• Cryptocurrencies: the price of Bitcoin climbed above $22,000 for the first time since June 18th, and is now up about +16% over the past month. On the whole, the total cryptocurrency market cap is now back on top of the $1T mark, though we’re still a long ways away from the $2.8T all-time high’s of November 2021.

• Oil Prices: after briefly falling below $100 per barrel the previous week, the price of U.S. crude oil fell below that threshold and stayed there as recession fears weighed on energy demand. On Friday, oil was trading around $98, down from a recent high of $122 on June 8. 

Part 2: Stocks to Watch 🔥🧊

here’s a quick look at two notable stocks to keep an eye on based on their sentiment expressed in stock market news coverage: Snap and Upstart

1. Snap Inc. ($SNAP) 👻 bullish sentiment 🟢

this week: 🔺+91% news sentiment | 🔻-6% stock price

Social media app Snapchat’s parent company Snap Inc. finished with somewhat surprisingly bullish news sentiment this week, coming in at a sentiment score of +91% after posting its first net-positive monthly share price change of the past year — now sits at $13.65 per share (+6% over the past 4 weeks). Snap’s news coverage was punctuated by a set of particularly optimistic headlines, including a revised “Buy” rating and $42 price target from JMP securities, which would signal some enormous upside if their analysts are correct.

Perhaps the most bullish news for Snap this week came indirectly as the result of regulatory pressures on its major Chinese-based competitor Tik-Tok; according to reports, the FTC wrote an open letter to Apple and Google requesting that the Tik-Tok app be removed from US app stores due to privacy violations, amongst other things (which, if it comes to fruition, would undoubtedly bode well for Snapchat). Lastly, Snap exec’s announced plans to introduce a premium $3.99 subscription service called Snapchat+ in the coming months, which could provide some much-needed help in increasing revenue generation from its core user base. Snap is scheduled to report Q2 earnings on Thursday — more information below on what to expect from MarketBeat:

2. Upstart Inc. ($UPST) 💳 bearish sentiment 🔴

this week: 🔻-96% news sentiment | 🔻-1% stock price

AI-based consumer lending platform Upstart finished with some of the lowest news sentiment on the market, ending the week at a sentiment score of -96%; after losing -33% in share price over the past month, now sits at $25.73 per share. A majority of Upstart’s negative news coverage came in reaction to the release of the monthly Consumer Price Index report, which revealed that inflation re-surpassed its 40-year high to reach +9.1% in June — given Upstart’s revenues are highly predicated on the interest rate environment, most analysts agree that Upstart will be one of the hardest hit as interest rates rise in response to record inflation.

With the economic headwinds worsening, Upstart’s management released a warning about its upcoming earnings (scheduled for August 8th), announcing that its Q2 loss is expected to be -24% worse than previously forecasted. The company had originally forecasted a bottom-line figure between breakeven and a loss of $4M; now, its executives are expecting a loss between $27M and $31M. To make matters worse, JMP Securities downgraded their Upstart rating to market perform from outperform last week after seeing the company’s earnings estimates. Now, just two of the 13 analyst agencies tracked by FactSet who cover Upstart’s stock have buy-equivalent ratings on the once high-flying name (for reference, the company had 9 of 13 buy ratings as of late April). All in all, the near-term road ahead looks rough for Upstart, here’s more on what to expect:

Part 3: Market Mood™ Outlook 🔭

The mood of market news coverage finished this week considerably neutral overall, driven by highly polarized sentiment. The major stock market indexes finished the week relatively unchanged (declining slightly), while the first crop of Q2 earnings reports came in with mixed reviews. More bullish news centered around receding oil prices and rallying cryptocurrency prices — though both remain a long way from where they were at the beginning of 2022, investors responded positively.

On the bearish hand, June inflation reached a 40-year high of 9.1%, the yield curve remains inverted, and conversation volume about the possibility of a US recession has reached a fever pitch (shown above) — roughly 1 in 5 finance articles published this week mentioned the word “recession”, while a few major banks (particularly Bank of America) are officially forecasting a “mild” recession towards the second half of the year.

On the whole, this week’s neutral news sentiment may be viewed as a bit of a relief; however, it’s important to keep in mind the broader trend we’re seeing. Over the past 8 weeks, sentiment expressed in news coverage has continued to trend downwards, finishing with a negative score in each of the past 5 weeks:

Weekly net news sentiment scores, past 8 weeks:  

• 🟢 May 31st: net bullish, +36%

• 🟢 June 6th: net bullish, +35%

• 🟢 June 13th: net bullish, +22%

• 🔴 June 20th: net bearish, -17%

• 🔴 June 27th: net bearish, -8%

• 🔴 July 4th: net bearish, -24%

• 🔴 July 11th: net bearish, -16%

• 🌑 July 18th: net neutral, -3% 

The question: what will the next 8 weeks look like? In my view, it appears more likely than not that the current trend of negative news coverage continues. This will be highly dependent on two major factors:

1. the Federal Reserve’s upcoming meeting on July 26-27th will determine the trajectory of interest rate hikes as it continues its efforts to curb inflation. While some expect the Fed to maintain a rate hike of 75 basis points (predicated on inflation softening over the next few months), others expect the Fed to increase rates by 100bp. For more info here, I’d recommend checking out this Twitter thread from legendary investor Bill Ackman.

2. Q2 earnings season will be in full effect over the next two weeks, and will likely confirm (or deny) if the US is actually in a recession. While analysts are not yet pricing in worse-than-expected earnings (forecasts have remained largely unchanged for the year), many argue that estimates are too high and that earnings compression is on the horizon, including Michael Burry (famous for nailing the housing crisis of 2008) — more on his take here. The complete schedule of Q2 earnings season from @eWhispers on Twitter below:

As always, the future remains to be seen. That’s all for this week — let us know if there’s anything we missed by commenting below, replying to this email, or sending us a text at +1 (833) 878 9106. And if you liked this post, please support us by clicking the like button! Best of luck to all of you in the markets this week, and thank you for reading. 😎

Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.