Good Economic News Has Its Limits; Rivian (RIVN) Posts Mixed Q2

Despite a second-straight day of better-than-expected inflation data, market indices could not hold onto their bullish sentiment into Thursday’s close, and finished the session flat overall. The Dow gained a scant +0.08% while the S&P 500 countered -0.07%; the strongest indices of the past few sessions — the tech-heavy Nasdaq and the small-cap Russell 2000 — closed -0.58% and +0.18%, respectively.

Producer Price Index (PPI) numbers this morning continued the narrative begun by the Consumer Price Index (CPI) yesterday, tracking a downward slope in inflation metrics from June to July. We’re still at historically high price levels overall, which may have given market participants pause today, lest they run too far ahead of expectations. That said, both the Nasdaq and S&P are on pace for their fourth-straight up-week in trading.

All major indices are up over the past five trading days and the past month, which has provided the most robust buying we’ve seen all year. Currently, the Dow is now down single-digits year to date (-8.9%), the S&P is -12.3% over that time period and the Nasdaq — now finally out of its bear-market trading range for the first time in three months — is -19.3% from the first of the year. The Russell has outperformed on both five-day and one-month time frames — +3.85% and +14.5%, respectively — and now trades at -13.1% since the first of the year.

After Thursday’s close, upstart electric vehicle manufacturer Rivian RIVN reported better-than-expected Q2 results on both top and bottom lines: -$1.62 per share reported was 5 cents better than the Zacks consensus, while $337 million in quarterly sales was notably higher than the $337.7 million analysts were expecting. Guidance of a -$700 million greater revenue loss for the fiscal year initially caused the stock to fall -5% in late trading, but Rivian is now back +3.7% in the after-market.

The reason for this is likely the still-strong guidance in vehicle production: the company reiterated for 25K electric vehicles by the end of 2022. The company noted supply chain constraints in the first half of the year, while it reports 8K vehicles as of June 30th, 4467 deliveries in Q2 alone. This suggests productivity is increasing for the Irvine, CA-based manufacturer. Rivian also reported 98K pre-orders for Q3 and expects to launch its latest model, the R2, in 2025.

Consider the good news on the inflation front mostly priced-into the current market. We still have a couple more weeks of earnings reports from which to draw conclusions on Q2 and a forward-outlook toward the end of the year. Next week brings us new Housing data and Production/Capitalization, but not before tomorrow’s Import Price Index and University of Michigan consumer sentiment survey. Following all this data, though none of speaks as loudly as CCPI and last week’s Jobs Report, will be key to sensing the market’s appetite for keeping this mini-rally alive.

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