The S&P 500 didn't recover that lost ground until May of this year. Most Wall Street economists expect Powell will toe the middle between cautious optimism that inflation has slowed considerably and a firm reminder that the Fed's end rate remains a moving target and there's still some work to be done.
Powell's speech last year was also memorable for how short it was, with the Fed Chief opting for a very stern delivery that left many investors feeling like they'd just received a scolding for their overly optimistic outlooks. Bulls are hoping for a more relaxed Powell this year that signals the Fed is happy with how things are progressing and is near the end of its current hiking campaign. Bears believe Powell will likely be less hawkish than last year but still firm on the Fed's intentions to keep rates high for longer than previous tightening cycles, and possibly much longer than Wall Street is penciling.
Keep in mind, bond yields have been surging higher mostly on bets that the Fed is going to hold rates for longer than once thought. Bears also think it will be tough to generate much upward momentum from here with stocks currently at very expensive levels and bulls lacking any new catalyst.
The Fed doesn't meet again until September 19-20 and Q2 earnings season is mostly a wrap. Bulls may get some fresh meat to chew on with August jobs data next Friday, September 1, and the August Consumer Price Index on September 13, but otherwise the next several weeks are lacking any major economic events.
Bulls may be coming up against stronger seasonal headwinds as well. August and September are notoriously poor months for stocks, with September actually the worst.
The S&P 500 has averaged a -0.5% loss in September over the past 20 years and a -1% loss over the past 10 years. Next week, other key economic data includes the S&P Case-Shiller Home Price Index, Consumer Confidence, and the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday; ADP's Employment Change, the second estimate of Q2 Gross Domestic Product (GDP), and Pending Home Sales on Wednesday; the PCE Prices Index on Thursday; and Construction Spending and the ISM Manufacturing Index on Friday. Earnings of note include Best Buy and Hewlett Packard on Tuesday; Chewy, CrowdStrike, Prudential, and Salesforce on Wednesday; and Broadcom, Campbell Soup, Dell, Dollar General, Hormel Foods, and Lululemon on Thursday
Is a Recession Right Around the Corner? According to Wall Street's most talked-about recession indicator, the long-awaited economic downturn should be nearly upon us. And yet, there's virtually no evidence the U.S. economy is contracting, putting this indicator's run of correctly predicting recessions, it's called everyone since 1955, in peril. We're talking about the inverted yield curve, which has been in territory that supposedly signals a looming recession for nearly one year. The curve "inverts" when yields on short-term government bonds are higher than those on long-term bonds, the opposite of the usual state of affairs. The curve remains inverted but is clawing its way back toward normal, as the yield differential between these two securities shrinks. Back in May, the three-month Treasury bill was yielding almost 2 percentage points more than the 10-year Treasury note. Now, the gap has narrowed to about 1 point. In the bond world, this is known as a "re-steepening" of the yield curve. According to yield curve watchers, the initial inversion is what signals a coming recession, usually within 18 months or so. But the recession tends to actually arrive once the curve starts re-steepening. There is re-steepening that happens sometimes before and definitely during a recession, said Campbell Harvey, a professor of finance at Duke University whose research is credited with first identifying the predictive power of the yield curve. In the last four recessions, re-steepening happened right before the recession began, he said, adding that it's possible that a recession could still be in the nearby cards. Source Axios
National Dog Day... Why Not, Everybody Else Has a Day! Tomorrow is National Dog Day. It was founded in 2004 by Animal Welfare Advocate and Pet Lifestyle Expert, Colleen Paige. National Dog Day celebrates all breeds, mixed and pure, and serves to help galvanize the public to recognize the number of dogs that need to be rescued each year, either from public shelters, rescues and pure-breed rescues. National Dog Day honors family dogs and dogs that work selflessly to save lives, keep us safe, and bring comfort. Dogs put their lives on the line every day - protecting our families and homes, their law enforcement partners, their blind companions, and the disabled, for our freedom and safety by detecting bombs and drugs and helping to locate and rescue victims of accidents and tragedy. Our family has always had dogs and we love having them around. Below is our Lara
US Department Stores Report Higher Credit Delinquencies: Major U.S. department stores including Macy's and Nordstrom are flagging delays in store credit card repayments, another risk to revenues as consumers pull back from discretionary spending ahead of the crucial holiday shopping season. Macy's executives disclosed earlier this week that rising delinquencies cut credit card revenues to $120 million in the second quarter, down $84 million from the previous quarter. While Nordstrom's credit card revenues rose 10% in the first half of this year, company executives said this week that delinquencies are now above pre-pandemic levels and could "result in higher credit losses in the second half and into 2024." While consumer spending remains relatively resilient according to U.S. retail sales data, investors and experts say rising delinquincies could signal growing pressure on some consumers. The percentage of delinquent payers rose by 23.1% to 38.2% between the second quarters of 2022 and 2023, with the biggest change among consumers in their 40s and 50s, according to data from the Federal Reserve Bank of St. Louis. Source Reuters
US Teen Finds Farmer's Lost Wallet with $2,000 Inside: A 14-year-old angler failed to land a big fish on a recent trip to a lake in Minnesota but did manage to hook a wallet with $2,000 cash inside that had been lost by a farmer a year earlier. Connor Halsa was fishing on Lake of the Woods when he felt his rod snag on something. “I thought I had a big fish, and I set the hook really hard,” Connor told WDAY in Fargo, North Dakota. But when the boy’s cousin brought Halsa’s catch out of the water in a net it was instead a billfold stuffed with soggy cash and – crucially – a business card with a man’s name on it. The name on the card was Jim Denney, a farmer from Iowa who had lost the wallet while fishing on a boat on the lake a year earlier. He was stunned to get a call returning the lost cash. “I have the billfold in my hands, and it is still hard to believe,” Denney told WDAY Source Guardian
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