Clean Energy Stocks Explode After Surprise Climate Bill Announcement

You’re reading Investor Junkie’s weekly newsletter that gets you caught up on the week’s financial news in less than five minutes.

Last week’s market summary (July 25th-July 29th, 2022):

S&P 500: +4.15%
Dow: +2.80%
Nasdaq: +4.67%
Bitcoin: +5.45%

Hey Junkies,

Last week, Senators Joe Manchin and Chuck Schumer shocked the world by putting aside their differences and announcing that they’d worked out a climate deal — and solar stocks benefited in a major way. The GDP declined again in Q2; but Wall Street saw plenty of silver linings as the stock market climbed its ways to the best month in nearly two years.

Amazon had a great week, Coinbase had a really bad week, and Spirit Airlines ditched Frontier in favor of a merger with JetBlue. Here’s my thoughts on each of these stories and on two upcoming economic events that I think are worth following.

Clint, Editor-in-Chief

Clean Energy Stocks Explode After Surprise Climate Bill Announcement

What Everyone’s Been Buzzing About

1. Green Stocks Soaked Up the Sun.

Less than two weeks after Manchin and Schumer’s public spat over federal spending, the two worked out a secret deal to pass a climate change and tax reform bill through reconciliation.

Manchin is touting that the bill will also fight inflation since billions of dollars will be devoted to reducing the federal deficit. In fact, he was even able to persuade his Democrat colleagues to name the bill the Inflation Reduction Act of 2022.

But savvy investors quickly realized what this bill could mean for the clean energy industry, especially solar stocks. Sunnova popped 33% after the announcement, Sunrun spiked 26%, and the Invesco Solar ETF jumped nearly 10%.

For more info about top green stocks, check out these guides.

5 Solid-State Battery Stocks to Watch or Buy in 2022

5 Best Hydrogen Stocks Worth Considering in 2022

The 5 Best Charging Station Stocks to Watch in 2022

2. U.S. GDP Declined For a Second Straight Quarter.

According the the estimate that was released by the Bureau of Economic Analysis, gross domestic product dropped by 0.9% in Q2. This follows a 1.6% reduction in Q1.

Despite the two consecutive down quarters, many are holding off on declaring that we’re in a recession due to other factors such as ongoing job growth. The White House even released its own pre-emptive explainer last week that breaks down how the National Bureau of Economic Research (NBER) defines recessions.

In any case, it’s clear that the economy is slowing down. Of course, that’s by design as the Fed has been raising interest rates to fight inflation. But as long as the economy isn’t thrown into a full reversal, a slowdown is ok.

Last week, the Fed raised rates by 0.75% for the second straight month. But during the meeting, Fed Chair Powell seemed hopeful that a third straight 75bp increase wouldn’t be needed thanks to indicators that inflation is beginning to subside.

Wall Street liked what it heard. All major stock market indices jumped after the Fed meeting and continued to rise throughout the week. In fact, the S&P 500 just finished its best month since November 2020.

3. Amazon’s Stock Jumped 14% After Its Q2 Earnings Report.

For the first time since 2014, Amazon recorded its second straight quarterly loss. Yet the company’s soared as high as 14% after the earnings call. What gives?

Well Amazon would have returned a profit were it not for the $3.9 billion that it lost in Q2 on its investment in electric vehicle company Rivian. Investors were also encouraged by the company’s revenue numbers (which beat expectations), the strong growth of Amazon Web Services (AWS), and Andy Jassy’s promising Q3 guidance.

4. Coinbase’s Regulatory Troubles Are Beginning to Pile Up.

Over the past two weeks, Coinbase has been sued by two different government agencies – the Department of Justice and the SEC. One of the suits accuses a former Coinbase manager of insider trading, but both cases hinge on the principle that Coinbase was selling unregistered securities.

Coinbase isn’t having any of it. In fact, its chief legal officer Paul Grewal authored a salty blog post titled “Coinbase does not list securities. End of story.”

While Coinbase may be poised for a fight with the SEC, it appears that many investors aren’t interested in tagging along for the ride. Its stock has fallen nearly 9% over the past week. And even Cathie Wood’s ARK Invest (one of Coinbase’s largest shareholders) dumped 1.4 million shares last week.

5. Spirit Airlines Broke Up With Frontier (But It’s Already Back in a Relationship With JetBlue)

Back in April, we reported that JetBlue was trying to spoil Frontier’s plans to merge with Spirit by making a bigger offer that the company couldn’t refuse. At the time, Spirit cried “fake news” and said it was moving forward with its Frontier agreement.

Well shareholders said “Not so fast.” Spirit couldn’t get enough of them to support the Frontier acquisition which forced the company to call off the deal last Wednesday. Less than 24 hours later, JetBlue announced that it had reached a deal to swoop in and buy Spirit for $3.9 billion.

Frontier’s CEO Barry Biffle alerted Spirit customers that the move would bring negative consequences. “If you are a Spirit customer, you will see the biggest inflation you have ever seen. You’re going to see fares jump up over 40%.” he said during a Yahoo Finance interview. Only time will tell if Biffle’s comments are based in truth or if they’re just the grumblings of an angry ex.

What To Keep Your Eye on This Week

1. Zillow Q2 Earnings (Thursday, August 4th)

Zillow’s stock has been shellacked in 2022 as the housing market has turned cold, mostly due to fast-rising interest rates. As of writing, ZG is down nearly 70% for the year. But this upcoming earnings report could provide the clearest picture yet of the company’s outlook throughout the remainder of the year and beyond.

As reported by MarketWatch, RBC Capital Markets analyst Brad Erickson said “Based on our Premier Agent (PA) checks, we think this is a bigger ‘back up the truck’ [quarter] where ZG estimates really get reset as 6 months of slowing buyer leads is driving an accelerated pullback in ad spend.”

Erickson still thinks that Zillow has great long-term upside potential. But the ride for investors may continue to be a bumpy one for the foreseeable future.

2. July NonFarm Payrolls (Friday, August 5th)

Last month, nonfarm jobs grew by 372,000 which far outpaced Dow Jones’ expectation of 250,000. (Nonfarm payrolls is one of those stats that the White House pointed to when making its case last week that the U.S. actually isn’t in a recession yet.)

The consensus estimate for July is once again 250,000 new jobs. If the report is able to meet (or beat) that number, investors may begin to feel more confident in the Fed’s ability to engineer a “soft landing” in its fight against inflation.