Stock investors await US Retail Sales for July as well as a string of earnings results from big US retailers. Wall Street economists are expecting a modest +0.4% increase in Retail Sales, which would mark a slight acceleration over the June increase of +0.2%. Retail Sales showed steady growth in Q2 after recovering from three months of contraction in the first quarter.

A big drag has been gas station sales, which have been racking up monthly declines of -1% to -2% or more. Economists say this has possibly skewed perceptions of US consumer health as steep declines in gas station sales have offset very healthy gains in other areas, such as furniture and online sales. That's also one reason why many Wall Street bulls think Q2 earnings from big retailers could cap off the season with a string of better-than-expected results and maybe breathe new life into this year's rally.

Home Depot kicks off the retail parade today and is expected to benefit from the typical summer lawn and garden boost. The company's forward guidance will be closely watched with many on Wall Street concerned about how the decline in home sales might be impacting the retail market.

Tomorrow the trade will be digesting Target's earnings, then on Thursday it's all about Walmarts numbers. Bears this week are raising alarms over China amid more troubles in the country's property and housing sector that some warn could tip the country into recession and possibly spread contagion to other areas of the financial system.

That includes China's +$3 trillion "shadow banking" system, or nonbank lenders, the majority of which are set up as trust firms. Since these institutions aren't regulated the same way banks are, their total exposure to the Chinese real estate market is not known, which adds to the angst.

It was reported yesterday that payments from investment products managed by at least two trust firms were missed over the weekend. Additionally, one of China's biggest surviving property developers suspended trading in some of its domestic bonds after missed bond coupon payments worth US$22.5 million last week, raising the risk of default.

Real estate and related industries are estimated to generate about 30% of China's GDP and many bulls believe the Chinese government will step in with more robust stimulus measures to help prop it up.

However, bears aren't so sure the Chinese government is willing to launch large-scale stimulus programs considering the size of the country's debt, which is nearly 3 times the size of gross domestic product (GDP).

Investors this morning are also digesting China's latest data on Industrial Production, Retail Sales, and Fixed Asset Investment.

Bottom line, the worlds #2 economy seems to be slipping further into uncertainty. It will be interesting to see if and when things spill-over and start to put more negative pressure on commodities and drive deeper worries about overall global growth.

Stock Market Faces a Crucial Summer Test: History shows that things can get ugly and volatile for the U.S. stock market in August and September. So a rocky start to the month shouldn’t be a big surprise. Indeed, even bulls might pine for some near-term consolidation after a torrid run that saw the S&P 500 index SPX rally nearly 20% over the first seven months of 2023. Through Friday’s close, the index is still up nearly 25% from its bear-market closing low of 3,577.03 hit on Oct. 12. But what would send the 2023 rally decisively off the rails? To answer that question, it helps to think about what has been driving the rally. Mark Hackett, chief of investment research at Nationwide, argues that the rally has largely been about fears that never materialized. I would say about 90% of the move that we’ve seen over the last 10 months has really been a walking back from the ledge of fear, Hackett told MarketWatch. Adding that the October 2022 lows came as the Federal Reserve was hiking the fed-funds rate in outsize 75 basis point increments, inflation was just coming off its June peak last year above 9% and expectations for an imminent recession, or “hard landing,” were running hot. A lack of obvious near-term catalysts could set the stage for the market to further struggle. A light week lies ahead for U.S. economic data, and slew of major retailers are set to deliver results as the second quarter earnings reporting season enters its final stretch. Nationwide’s Hackett said the market setup coming into August was nearly a mirror image of October’s gloomfest. Hedge funds and other large investors are no longer betting against the market, while longtime bears and pessimistic economists are throwing in the towel and issuing mea culpas. Source Market Watch

Economic Losers in the New World Order: The world’s biggest economies are offering huge subsidies in a cutthroat race to win the industries of the future. The losers are all the countries that can’t pay up. New tax credits for manufacturing batteries, solar-power equipment and other green technology are drawing a flood of capital to the U.S. The European Union is trying to respond with its own green-energy support package. Japan has announced plans for $150 billion of borrowing to finance a wave of investment in green technology. All of them are working to become less dependent on China, which has a big lead in areas including batteries and the minerals to make them. Now, some smaller players are getting left behind. Many are nimble economies that were on the rise during decades of free trade, but are at a disadvantage in a new era of aggressive industrial policy. Industrialized nations such as the U.K. and Singapore lack the scale to compete against the biggest economic blocs in offering subsidies. Emerging markets such as Indonesia, which had hoped to use its natural resources to climb the economic ladder, are also threatened by the shift. The U.S., which is offering $369 billion in incentives and funding for clean energy as part of the Inflation Reduction Act, is seeing a windfall of foreign investment. German carmaker BMW just broke ground for a new battery plant in South Carolina. South Korean firms Hyundai and LG announced a $4.3 billion battery plant in Georgia. Panasonic of Japan is building a plant in Kansas. Source WSJ

Goldman Says Rate Cuts Are Coming as Soon as May '24: The Federal Reserve will likely cut interest rates in the second quarter of next year regardless of whether the US economy enters a recession, Goldman Sachs economics team wrote in a new research note on Sunday. The cuts in our forecast are driven by this desire to normalize the funds rate from a restrictive level once inflation is closer to target, not by a recession,"Goldman Sachs Chief US economist David Mericle wrote. After one of the most aggressive rate hiking campaigns in history, the Fed's benchmark interest rate currently sits in the range of 5.25% to 5.5%, the highest level since 2001. With economists across Wall Street seeing less likelihood of a recession, and Goldman Sachs own team projecting 'unspectacular growth' but not a growth scare, inflation is the most likely catalyst for rate cuts. And inflation appears to be headed in the right direction. Goldman isn't alone in having the second quarter of 2024 circled next year. Bank of America and Wells Fargo both see cuts in that time frame as well. Bank of America's team of economists, which recently pushed back their projection for another Fed rate hike to November, sees cuts coming in June. Source Yahoofinance

Startup "Robomart" Brings Self-Driving Grocery Stores Directly to Customers: The last few years have dramatically disrupted the way many people get their food. What started as a safety precaution has become an everyday occurrence for many, as people are skipping restaurant waits and grocery store lines for the convenience of apps like Instacart and Seamless. Of course, the apps have their own drawbacks, including mistakes,Robomart unfulfilled orders, and general frustration. was built around the premise of “store-hailing.” It’s pretty much what it sounds like: Instead of ride-hailing services like Uber and Lyft, it brings a small cross section of a store directly to consumers by way of a small, stocked-up, self-driving vehicle. The company's "Oasis" vehicle is primarily targeted at restaurants, counting Ben & Jerry’s among its existing customers. The vehicle - which is more akin to a customized minivan than a Nuro-style self-driving cart — launched in beta at the end of 2020. Around 100 of the vehicles have been contracted out. The "Haven" model, which is set to start delivering in 2025, is focused on supermarkets and convenience stores.Source Techcrunch

Severe Drought in Panama Hits Global Shipping Industry: High temperatures and one of the driest years on record have led authorities in Panama, which is usually one of the world’s wettest, to lower the number of crossings and bar ships with heavy loads from using the Panama Canal. The restrictions — rare during Panama’s wet season, which lasts from May to December — have led big carriers including German group Hapag-Lloyd to announce surcharges for routes that rely on the gateway between the Atlantic and Pacific. While lower demand for goods exports has lessened the impact, vessels with loads still light enough to use it are facing extended waits of more than two weeks. More than 3% of world trade by volume, including liquid gas from the US and soft fruits from South America, passes through the canal, and up to 29% of container trade crossing the Pacific travels through the canal, according to data provider MDS Transmodal. The Panama Canal is the only big maritime route dependent on freshwater, with more than 50mn gallons needed for each ship to cross. The lack of water pushed the Panama Canal Authority, or ACP, to toughen restrictions and in May it imposed a depth limit of 44 feet on the largest ships, capping the amount of cargo they can carry. From the end of July it also limited daily crossings to 32, down from an average of 36. That had contributed to a backlog of 264 ships waiting to cross the canal on Friday, a +16% increase compared with the same day last year, according to shipment tracker MarineTraffic Source Financial Times

Share of US Homes Worth $1 Million or More is Near All-Time High: Just over 8% of U.S. homes are worth $1 million or more, near June 2022’s all-time high of 8.6%, according to Redfin. That’s because home prices are rising on a year-over-year basis after falling at the beginning of the year. The median U.S. home-sale price rose 3% in July, the biggest increase since last November. Prices are rising faster for high-end homes, with the median sale price of U.S. luxury homes up 4.6% year over year to $1.2 million in the second quarter. Today’s elevated mortgage rates are discouraging potential home sellers, with homeowners staying put to keep their relatively low mortgage rates. Inventory is so low that even though many buyers are sidelined by high rates, those who are in the market are competing for the few homes for sale. That’s driving home prices up and pushing many of those on the cusp above the million-dollar mark. And for buyers using loans, monthly payments on million-dollar homes are even more expensive than they were a year ago. A buyer purchasing a $1 million home would have a monthly mortgage payment of $6,604 with June’s average 6.7% mortgage rate, up from $5,984 with last June’s typical rate of around 5.5%. Source Redfin

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Number of Homeless Increasing at a Record Rate: The U.S. has seen a record increase in homeless people this year as the Covid-19 pandemic fades, according to a Wall Street Journal review of data from around the country. The data so far this year are up roughly +11% from 2022, a sharp jump that would represent by far the biggest recorded increase since the government started tracking comparable numbers in 2007. The next highest increase was a +2.7% jump in 2019, excluding an artificially high increase last year caused by pandemic counting interruptions. This year’s surge reflects a host of pressures around the U.S. such as rising housing costs, lack of affordable rental units and the nation’s continuing opioid crisis, according to reports from nonprofits and government agencies counting the homeless. The biggest driver remains high housing costs, which are now taking a heavier toll following the wind down of pandemic-era relief spending and policies such as eviction moratoriums, according to advocates for the homeless. Some places, particularly New York City, say an influx of migrants have also inflated homeless counts. Source WSJ

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