Lending markets

Pre-marketing Try again for gains; J&J and Halliburton defeat in the second quarter – July 19, 2022

Tuesday, July 19, 2022

Pre-market futures signal investors will try again today: We’re up on major indices, as we were 24 hours ago – before the trading session lost its mojo on forecasts weaker than Apple (AAPL Free report) in its hiring practices. Today we see slightly higher levels that haven’t changed much since the fall in second quarter economic and earnings data: the Dow is +160 points, the Nasdaq is +95 and the S&P 500 is + 25 dots.

A new Housing starts The June report came out this morning, with a new cycle low set at 1.56 million annualized seasonally adjusted units – down -2% from expectations of +1.4%. The May stock was revised higher to 1.59 million, which would still have been the lowest figure since October last year. As recently as April of this year, we were still north of 1.8 million new housing starts.

Building permit – seen as a predictor of future housing starts – performed slightly better than expected at 1.69m vs. 1.68m expected, down -0.6% from the unrevised 1.70m the previous month . But today’s headline is still the lowest figure since the 1.62 million new permits we saw issued in September last year. Looking at housing starts and permits, it is clear that the US housing sector is losing steam after its robust period of the past six months or so.

The biggest weakness in this data is also where the sector leans the most: single-family homes, which fell -8% in both housing starts and permits, -11% year-on-year. Multifamily is improving, which is good news for housing as a whole; the market needs new multi-unit rental properties. But the real gains are in single-family homes, which are declining.

This is good news for lowering the pressure on US inflation, even if it is a short-term test for owners wishing to put their property on the market. Since the start of the Fed’s interest rate hike, we have seen the housing market cool off noticeably. In fact, you could say that we saw Q1 real estate activity pulled out of Q2 in anticipation of higher interest rates leading directly to higher mortgage costs.

Before today’s bell, Johnson & Johnson (JNJ Free report) reported second-quarter earnings two cents ahead of expectations at $2.59 per share, higher than the $2.48 reported in the year-ago quarter. J&J is one of those companies that never misses its bottom line – scroll through its earnings charts for over a decade for proof. Revenue of $24.02 billion in the quarter beat expectations by +0.45%.

Stocks are up +1.1% on the news in today’s pre-market; the company is trading in the green throughout 2022, up +4.6% over the last six months. This, even if the company reduces hedges on its forecast for the rest of the year. To learn more about JNJ earnings, click here.

Meanwhile, the oil services giant Halliburton (HAL Free report) posted a strong second quarter in its report this morning: Earnings of 49 cents per share on $5.07 billion in quarterly sales topped the Zacks consensus by +8.9% and +7.7%, respectively. The company benefited from high oil prices during the quarter, and Zacks Rank #2 (Buy) stock has only missed one bottom line in the last five years. Equities are up +1.5% in the pre-market, +20% since the start of the year. To learn more about HAL’s earnings, click here.

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