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Stock bulls look to remain in control ahead of updated Retail Sales numbers and another round of bank earnings this morning. Wall Street is expecting a -0.3% decline in June Retail Sales following a +0.1% gain in May.
Investors will be scrutinizing the “Ex-Vehicles” results, which has been in negative territory for two months in a row now. Slowing consumer spending is considered good news as far as bringing inflation down but runs the risk of slowing too much, which could easily tank US growth, remember, consumer spending accounts for nearly two-thirds of the economy.
Other data today includes Import/Export Prices, Business Inventories, and the NAHB Housing Market Index. Bulls remain confident that the Federal Reserve can successfully beat inflation without killing growth and/or damaging the labor market, aka a “soft landing.”
Fed Chair Jerome Powell at an event yesterday said that he does not think a “hard landing” for the US economy is likely. He also noted that recent data has given him “greater confidence” that inflation is on a sustainable path toward the central bank’s +2% target rate.
Additionally, Powell reminded that the Fed does not intend to wait until that 2% target is hit before cutting rates. Meaning the Fed will cut rates before inflation gets that low because, “if you wait until inflation gets all the way down to 2%, you’ve probably waited too long,” said Powell.
The Fed’s next meeting is July 30-31 and officials are expected to leave rates "unchanged". There is a slim minority on Wall Street that think there’s a chance of a July cut but traders place the odds at less than 6%.
The market is however placing nearly 100% odds of a rate cut happening at the September FOMC meeting. Bears warn that Fed rate cuts may not provide as much upward momentum as some anticipate because markets have mostly priced in at least two -25 basis point cuts in 2024.
Turning to earnings, Bank of America, Charles Schwab, and Morgan Stanley are in the spotlight today. Goldman Sachs yesterday topped Wall Street’s estimates for both profit and revenue.
Other earnings of note today include Interactive Brokers, J.B. Hunt, Pinnacle Financial, and State Street.
BlackRock’s Larry Fink Says He’s a Major Believer in Bitcoin: BlackRock, the world’s largest money manager, announced a new high of $10.6 Trillion in assets under management, uop +13% from last year. Chief Executive Larry Fink pointed to record inflows to BlackRock’s ETF products as well as high levels of client interest in infrastructure products that invest in energy and data centers. Fink also said Bitcoin has the potential to be a way for everyday investors to guard against significant government turmoil, and that he sees a future for bitcoin after previously being a proud skeptic of the cryptocurrency. I’m a major believer that there’s a role for bitcoin in portfolios, Fink said Monday, calling it digital gold. BlackRock has become a significant player in crypto. The firm’s iShares Bitcoin Trust has raked in more than $18 billion since its launch in January, making it the biggest bitcoin exchange-traded fund. The firm has also filed to potentially launch an ether ETF. Fink said political risk and rising government debt are some of the reasons for investors to own bitcoin. I’m not trying to say there’s not misuses, like everything else, but it is a legitimate financial instrument that allows you to have non-correlated type of returns, Fink said. I believe it is an instrument that you invest in when you’re more frightened though. It is an instrument for when you believe countries are debasing their currencies by excess deficits, and some countries are. Source CNBC
China’s Lopsided Economy Might be Losing More Steam: China’s economy slowed sharply in the second quarter, piling pressure on the country’s leaders to act more aggressively to rev up growth as they gather in Beijing to chart the course of the economy over the next half-decade. Gross domestic product expanded 4.7% in the second quarter compared with the same quarter a year earlier, China’s National Bureau of Statistics said Monday. The result was weaker than the 5.3% growth rate recorded in the first quarter and lower than the 5.0% figure expected by economists polled by The Wall Street Journal. The world’s second-largest economy is losing momentum thanks to a festering property slump, tepid consumer spending and rising trade tensions with the rest of the world. Xi’s ambition is for China to develop into a technological powerhouse, secure from U.S. threats to cut it off from key technologies. To that end, the government has been steering money into China’s factories, boosting industrial production and exports but inflaming trade tensions with the rest of the world, with some governments seeing a rising tide of cheap Chinese imports as a threat to domestic jobs and industries. Industrial production in the first six months of the year was 6% higher than the same period a year earlier, data showed. But retail sales rose just 3.7% over the same period and real-estate investment was down 10.1%. New home sales were 26.9% lower Source WSJ
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America’s Split Economy: Affluent Americans say the economy is just fine — and they're spending like it is, too. Meanwhile, lower-income consumers are feeling the brunt of a slowdown. Deteriorating economic sentiment and activity among poorer Americans suggest the economy is at a turning point, even if it doesn't show up in headline data, since higher-income consumers make up a disproportionate share of aggregate spending. The share of consumers surveyed by the University of Michigan who volunteered that high prices were eroding their living standards in early July matched a peak first reached two years ago when inflation was at multidecade highs. The latest University of Michigan report shows that economic concerns are more prominent among poorer consumers than rich ones. "Despite expecting inflation to ease, consumers remain vociferously frustrated at the persistence of high prices," the survey's director Joanne Hsu wrote in a note. "In recent months, these comments have been much more prevalent among lower-income consumers, who typically have fewer financial resources to help buffer the pain of high prices," Hsu wrote. Hsu also noted that lower-income consumers were much more pessimistic about future earnings growth — in nominal and real terms — than higher-income counterparts. Source Axios |
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Boomers Are Retiring Abroad Because US is Too Expensive: There is a growing trend among US retirees, spurred by America’s retirement crisis, who are moving abroad instead of spending their golden years in the U.S. In December 2022, there were over 700,800 people receiving Social Security payments abroad, according to the most recently available data from the Social Security Administration. In 2000, that figure was less than 400,000. Some move abroad because they simply cannot comfortably live on a fixed retirement income in the U.S., where the costs of housing and healthcare, especially, are becoming increasingly unaffordable. A substantial number of retirees rely almost completely on Social Security payments to make ends meet in the U.S., which average around $1,900 per month. A growing portion of elderly Americans live in poverty, with social services few and far between, if they are accessible at all. Others always dreamed of travel and immersing themselves in other cultures. And still others could afford to stay in the U.S. but realized how much more they could get for their money abroad. Source Fortune
How Much Are Countries Paying Their Medal-Winning Olympians? Winning an Olympic gold medal can be life-changing. Depending on the athlete's nationality, it can also be pretty lucrative. Athletes who win individual gold at the 2024 Paris Olympics while representing Malaysia, Morocco or Serbia will receive upwards of $200,000 from their country's government or national Olympic committee, according to a survey of medal payouts conducted by USA TODAY Sports. At least six other countries − including Italy, which won 10 golds in Tokyo − are offering payouts north of $100,000. And some offer added perks, like apartments and vacation vouchers, or extra money if an athlete breaks an Olympic record. Particularly for athletes in less popular Olympic sports, where endorsement and sponsorship deals are harder to come by, the medal money can wind up making a huge difference. In the US, the payments offered through what the USOPC calls "Operation Gold" are unchanged for 2024. Athletes will earn $37,500 for every gold medal in Paris, $22,500 for every silver and $15,000 for each bronze. Those figures are slightly below the norm, among the countries surveyed by USA TODAY Sports − though the U.S. usually has to pay out more medal bonuses because it usually wins more medals. Team USA finished atop the Tokyo Olympics medal table, for example, with 39 golds, 41 silvers and 33 bronzes Source USA Today
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