Good morning investors!

If this is your first time reading, welcome to The Investor’s Edge — a thriving community of more than 16,000 subscribers striving to be better investors with an edge in the market.

Every weekend we publish “The Weekly Wrap-Up” — your ticket to being well informed and staying ahead in the investment game!

This report is designed to help investors of all skill levels break down important stories/topics within the stock market. And best of all, we cut through all of the BS and give you exactly what you need to know in easy to digest, bite sized pieces of content.

Grab your coffee and let’s dive in.

Market Talk

The S&P and Dow ended the week slightly lower while mega caps and tech pushed the Nasdaq higher.

3 Stories Moving the Market

These are some of the biggest stories from the second half of the week that had an influence on market action.

Key Fed measure shows inflation rose 2.6% in May from a year ago

An important economic measure for the Federal Reserve showed that inflation in May slowed to its lowest annual rate in over three years.

The core personal consumption expenditures (PCE) price index rose by just 0.1% for the month and 2.6% year-over-year, both matching estimates. This is the lowest annual rate since March 2021.

Including food and energy, headline inflation was flat for the month and up 2.6% annually, also meeting expectations.

The Fed prefers the PCE inflation reading over the consumer price index because it provides a broader measure and accounts for changes in consumer behavior.

Amazon plans to launch discount store in bid to fend off Temu and Shein

Amazon is set to launch a new section on its site for low-priced fashion and lifestyle items from Chinese sellers, allowing direct shipping to U.S. consumers.

This move aims to compete with e-commerce rivals Temu and Shein, which have gained traction in the U.S. with their low prices.

The storefront will offer unbranded items, many priced under $20, and products will be delivered within 9 to 11 days. This approach is intended to reduce costs for Chinese sellers and allow for small-batch production to test new items.

In 2023, the number of items sold by Chinese sellers on Amazon grew by over 20%, and the number of Chinese merchants with sales over $10 million increased by 30%.

Amazon shares rose nearly 5% this week.

Federal Reserve says all 31 banks in annual stress test withstood a severe hypothetical downturn

The Federal Reserve announced that the largest banks in the U.S. could withstand a severe recession scenario while maintaining their lending capabilities.

All 31 banks in the regulatory exercise met the minimum capital requirements, despite a stress test scenario with 10% unemployment, a 40% drop in commercial real estate values, and a 36% decline in housing prices.

The Fed reported that large banks would incur nearly $685 billion in hypothetical losses but still maintain more capital than required. The banks' aggregate capital levels fell by 2.8 percentage points, worse than the previous year, due to increased consumer credit card loans and downgraded corporate bonds.

JPMorgan noted that the Fed's projections for "other comprehensive income" seemed too large, suggesting that their stress losses might be slightly higher than the Fed's estimates.

📚 EDGE-UCATION: What is a bank stress test?

A bank stress test is an analysis conducted to determine how financial institutions, such as banks, can handle severe economic conditions. These tests simulate crisis scenarios to assess whether banks have enough capital to absorb losses while continuing to operate and provide lending services. Here are some key points about bank stress tests:

1. Purpose: The main goal is to ensure the stability and resilience of the financial system by evaluating how banks would cope with adverse economic situations.

2. Scenarios: The tests include hypothetical scenarios like a significant increase in unemployment, a sharp decline in housing prices, or a severe economic recession.

3. Regulatory Oversight: Regulatory bodies, such as the Federal Reserve in the U.S., design and administer these tests to monitor and evaluate the health of the banking sector.

4. Capital Requirements: Banks are assessed on their ability to maintain minimum capital levels during the stress scenarios. This capital acts as a buffer to absorb potential losses.

5. Results and Actions: If a bank fails the stress test, it may be required to raise additional capital, reduce dividends, limit share buybacks, or take other measures to strengthen its financial position.

6. Transparency and Confidence: The results of stress tests are often made public to enhance transparency and boost confidence in the financial system among investors, consumers, and other stakeholders.

By conducting stress tests, regulators aim to identify vulnerabilities in the banking sector and ensure that banks are prepared to withstand economic shocks without compromising their operational stability.

In Other News

Introducing a new section: we'll be curating a selection of news headlines we think you'll find interesting. If a topic catches your eye, click the provided links to read more about it.

• Nike shares tumble after missing revenue estimates and cutting guidance

• Walgreens stock plunges as drugstore chain slashes profit guidance in ‘challenging’ consumer environment

• Micron shares slide after revenue forecast fails to top estimates

• FedEx shares jump as massive cost-cutting measures kick in

• Warren Buffett donates record $5.3 billion in Berkshire shares

• Nvidia CEO Jensen Huang addresses rising competition at shareholder meeting

• New home sales plummet to 6-month low amid high mortgage rates

IE+ Posts of the Week

We continue to push out more and more content every week to give investors that edge. Here are the posts Investor’s Edge+ subscribers received this week.

Edge Report

Mondays are for the investors. Every Monday morning we share exactly what we’re watching in the week ahead, how we’re positioning, and even share a sneak peek into our systems and models. This week we discussed the upcoming inflation report and shared our outlook for the second half of the year. See the latest full report here:

Stock Deep Dive - Disney

Our Deep Dive focused on Disney this week. We not only broke down the financials of the world’s largest fast-food restaurant but we also shared our valuation models and price targets for 2024. You can see the full analysis here:

Earnings Recaps

Every week during earnings season we share a recap of the quarterly reports from stocks that we cover. You can see this week’s earnings recaps here:

The Week Ahead

Next week is a holiday shortened week, though we do get several major jobs reports.

Earnings Reports

Earnings season is behind us and we actually get a break for a few weeks before banks kick off the next round of reports.

Here is the full calendar of scheduled earnings releases:

Economic Reports

Next week’s major catalysts will be the nonfarm payrolls report, though we also get job openings, ADP employment and the unemployment data. There will also be several PMI reports, a speech from Jerome Powell and the release of the minutes from the Fed’s latest meeting.

The Investor’s Edge Discord is growing!

Our brand-new Discord server is growing quickly and we are excited to hear from so many intelligent minds!

The channel is tailor-made for investors like you who want to dive deeper into stocks, share insights, and engage directly with us.

Here's what happened in the Discord this week:

🗨️ Chat rooms: Investors discussed the the huge moves from names that reporting earnings like Crowdstrike, Lululemon and Dollar Tree, and shared their insights on the earnings. Members also dove into the number of jobs reports and shared their views on the overall economy.

🚨 Trade Alerts: Chris and Mark shared several trades, including additions to the portfolio and trades that set up their portfolios for the week.

Join us on Discord and let's level up our investing game together. The future of trading awaits—and you're invited to be a part of it! 🌟

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Thank you for reading this edition of the Weekly Wrap-Up. Have a great weekend!

Until next time investors!

Mark & Chris

The Investor’s Edge

Disclosure

This is not investing advice. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.