America's biggest retailer Walmart will deliver second quarter results before the market opens this morning. Wall Street insiders are expecting a lift in same-store sales as consumers turn to the retail giant for value and to stock their fridges, bookshelves, and backpacks ahead of the back-to-school season.
Another round of retail results is still to come next week, including Lowe’s, Best Buy, and Macy’s.
Turning to the Fed, "minutes" from the central bank's July meeting also delivered a somewhat mixed message. Stock bears are highlighting that "most officials" in July still felt inflation posed an ongoing threat, according to the minutes. Bulls however note that officials saw “a number of tentative signs that inflation pressures could be abating." The minutes of the July 25-26 meeting also highlight the tricky juncture that the Fed's inflation fight has now reached with officials citing the risks of not sufficiently finishing the job, as well as the dangers of tightening policy too much. Overall, the "hawks" still outnumbered the "doves" in July with only "a couple" of Fed officials implying they would have supported holding rates steady.
The vote to hike was unanimous. There is no Fed policy meeting this month but central bankers will gather for the annual Jackson Hole Economic Symposium next week, with Fed Chief Jerome Powell delivering remarks on Friday August 25. Fed Chairs in the past have used the conference as a chance to clarify the central bank's intentions and perhaps adjust investor thinking.
Last year, Powell sent stock markets reeling when he insisted the Fed would continue raising rates and hold them at higher levels until it was confident inflation was under control, even if it meant job losses.
Before Powell's speech, investors were increasingly optimistic that the Fed was going to pivot to rate cuts by the end of 2022. There are concerns that investors may similarly be on the wrong side of the Fed again this year, especially amid recent economic data that indicates inflationary pressures may be returning.
Perhaps most worrisome for the bulls is the fact longer-term real rates continue to push higher. The yield on the 10-year US Treasury hit a 15-year high this week, and many bears think it will keep working its way higher, which could force many bulls to rethink their longer-term outlook on corporate profits as borrowing costs stay higher for longer.
Vanguard Top Economist Says A Lot More Americans Are About to Start Losing Their Jobs... and that will spoil the Fed's dream no-recession scenario. Joe Davis, Vanguard's head economist, agrees with most banks that say unemployment will spike above 4% in the next 12 months as the central bank's aggressive interest-rate hikes filter into the labor market. He adds that while those job losses are set to suppress wage growth and help inflation fall to the Fed's target level of 2%, they could also scupper its hopes for a so-called "soft landing," when soaring prices cool but there's no recession in the US. It's going to take some labor market weakness to go that last yard, as many call it, from 3% trend inflation down to 2%, Davis said. Almost everyone has a rise in the unemployment rate of at least 30 or 40 basis points, so going above 4% over the next year, and historically, that has been 100% associated with a recession now, not necessarily deep in magnitude, but a recession. Davis's comments come after the Fed itself said it's no longer expecting there'll be a recession in the US this year. Source Business insider
Amazon Plans to Double Its 'Same Day Service' Facilities: As of July, the company said it delivered more than 1.8 billion packages on the same or next day to US Amazon Prime members this year, almost four times the amount of same or next-day deliveries it made over the same time period in 2019. The news of the company's expansion of its same-day delivery network comes just months after Amazon ramped up its number of same-day deliveries for US prime customers. Since the beginning of this year, Amazon said it decreased the distance between its delivery sites and customers by 15%, which means that delivery drivers, as well as the company's vendors and selling partners, can reach customers more efficiently and thereby lowering Amazon's costs. Source WSJ
Pig Kidney Transplanted Into Human is Still Working a Month Later: A genetically modified pig kidney transplanted into a brain-dead person has worked for 32 days and counting, advancing efforts to use animals to ease perennial shortages for humans. Dr. Robert Montgomery and colleagues at NYU Langone Health in New York City transplanted the pig kidney into 57-year-old Maurice Miller on July 14. The results, which haven’t been published, might provide researchers with data to support clinical trials testing animal-to-human transplants. NYU Langone researchers had previously studied pig hearts and kidneys in humans for up to 72 hours. The shorter period allowed them to see whether the human immune system would immediately reject the pig organs. Extending the duration of studies in brain-dead humans to 30 days and beyond provides new insights, including whether immunosuppressive drugs used in standard kidney transplants can help prevent rejection of pig organs, Montgomery said. Doctors at NYU Langone are among those to seek guidance from the Food and Drug Administration on how to begin clinical trials. Researchers haven’t received FDA clearance. The FDA has asked for additional evidence from pig-organ transplants in baboons before clearing trials in people, researchers said. Source WSJ
Mortgage Rates Surge to Highest Point in 22 Years: The last time U.S. mortgage rates were this high, Amazon was still a plucky startup, Enron was a star of the energy sector and Tom Brady had yet to win a Super Bowl. The average rate on 30-year mortgages climbed to 7.31% this week, up from 7.12% last week, according to Bankrate’s weekly national survey of large lenders. The average rate on 30-year home loans last topped 7.3 percent in May 2001, according to Bankrate research. That was just before a wave of corporate scandals and the Sept. 11 terror attacks led the Federal Reserve to slash interest rates, and well before the Great Recession spurred the Fed to keep rates low. “This move back up through the 7 percent level has been rapid and somewhat surprising, adding insult to injury for those already struggling with housing affordability,” says Mark Hamrick, Bankrate’s senior economic analyst. “We might not yet be at a peak for mortgage rates given recent economic momentum and lack of clarity on Federal Reserve policy.” Over the past 52 weeks, the benchmark 30-year fixed-rate mortgage has averaged 6.67%. A year ago, the 30-year fixed-rate mortgage was 5.63%. Source Bankrate
US Airlines Want to Double Flights to China: The three largest US airlines plan to more than double the number of flights to China in the coming months as they take advantage of a deal between the nations to ease pandemic-era travel restrictions. American Airlines Group Inc. told Bloomberg on Wednesday it would add three weekly flights between Dallas and Shanghai early next year. The decision came after rivals Delta Air Lines Inc. and United Airlines Holdings Inc. disclosed plans for new and expanded US-China routes in the coming months. The carriers are rushing back into the transpacific market after the US Transportation Department on Friday said the limit on flights between the countries would increase in each of the next two months. In total, the three companies — which currently operate just four weekly flights apiece to China — have proposed adding 19 more by the end of January, pending regulatory sign-off. The tentative plans exceed the flying limits announced by US officials, suggesting some of the new flights might not be approved. Source Bloomberg
QuikTrip Convenience Store Chain Ventures Into Urgent Care: QuikTrip had been providing primary care services to its own employees for years, through third parties and eventually at its own clinics. Five years ago, longtime “QuikTripper” Brice Habeck was tasked with leading a team to figure out how the company could offer such medical services to the general public, too. His team quickly realized that urgent care had a lot in common with their retail spaces. “It’s about access. It’s about convenience,” said Habeck, who started his career as a clerk at a QT, as the stores are often branded, and is now the executive director of the company's urgent care venture called MedWise. So far, MedWise has opened 12 clinics, all in the Tulsa area. The company is owned by QuikTrip, but the two businesses don’t share buildings or a name. As much as people love the gas station, Habeck said, company leaders didn’t want patients to think the person checking their vitals had just wiped down a gas pump. Source USA Today
Coinbase Gets Green Light to Offer Crypto Futures to Retail Investors: Coinbase Global has won approval to offer cryptocurrency futures in the U.S., a rare regulatory win for the crypto broker that will allow it to tap the largest market in digital assets and more directly compete with Binance, the world’s largest token exchange. Coinbase said it secured the permission from National Futures Association (NFA), a self-regulatory organization designated by the Commodity Futures Trading Commission (CFTC). The approval comes as Coinbase squares off against the Securities and Exchange Commission in court in the Southern District of New York. The federal securities regulator has alleged that Coinbase is operating as an unregistered securities exchange, broker, and clearing agency. The case will likely boil down to whether certain crypto assets should be considered securities or commodities in the US. Coinbase filed for approval to offer regulated crypto products shortly after its IPO two years ago. In 2022, it acquired CFTC-regulated futures exchange FairX, now rebranded to Coinbase Derivatives Exchange. The company has since launched trading in bitcoin and ether futures for institutional investors. Earlier this year, it also announced plans to spin out a derivatives platform for non-US citizens. Source Yahoofinance
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