Wall Street widely expects the central bank will lift rates by another +25 basis-points but the outlook from here remains uncertain. The Fed's last rate projections, the so-called "dot plot," indicated that officials anticipated two more quarter point hikes today being one of those.
Bulls doubt the Fed will need to raise beyond this month's hike. The next Fed meeting isn't until September 19-20 and bulls believe two more months of "disinflation" will likely push the so-called core inflation rate (strips out food and energy) below +3% by that time.
The Fed's target rate is +2%. Bears aren't so sure the Fed will be easily convinced that the threat of inflation has passed, however, pointing to the still strong labor market and signs that consumer spending remains resilient, and that energy and food inflation may keep them concerned.
Fed officials have repeatedly singled out strong wage growth as an ongoing inflationary threat. However, many economists say that with as tight as the labor market is, the only way wage gains are likely to cool is if the Fed tightens policy enough to push the economy into recession and more people start getting laid off.
Bears also point out that underlying inflation pressures in the food and energy sectors may be reigniting, which could reverse some of the progress the Fed has made so far and require even more tightening than Wall Street is currently anticipating.
With basically two months before the next Fed's meeting, bulls expect monetary policy will take a back seat for a little while and investors over the next couple of weeks will be mostly focused on Q2 2023 earnings.
Microsoft and Google-parent Alphabet released mostly positive results yesterday. Both companies topped analyst expectations on earnings and revenue but they also revealed rising operating costs as they build out their artificial intelligence capabilities. The real AI-related growth is expected to be generated across the companies' cloud businesses but the offerings are still in the early stages so it's too soon to say whether AI is shaping up to be the major growth driver that investors are betting on.
Facebook-parent Meta Platforms delivers the key big tech earnings today.
Other releases today include AT&T, Boeing, CME Group, Coca-Cola, eBay, Edwards Lifesciences, Old Dominion, O'Reilly Automotive, Thermo-Fisher Scientific, and Union Pacific. On the economic data front, today's highlight is New Home Sales for June which are expected to ease.
If you look back at the S&P 500 chart you can see that the market rallied hard in June, July and part of August, then fell apart. Some say it was the Fed talk at the Jackson hole meeting in August that broke the market... just something to think about and add to our radar screen.
IMF Raises Global Growth Forecast Despite China Losing Steam: The International Monetary Fund on Tuesday raised its 2023 global growth prediction by 0.2 percentage points to 3%, up from 2.8% in its April assessment. The IMF kept its 2024 growth forecast unchanged at 3%. In terms of inflation, the fund also expects an improvement from last year. Headline inflation is projected to reach 6.8% this year, falling from 8.7% in 2022. However, core inflation, which strips out volatile items, is seen declining more slowly to 6% this year, from 6.5% last year. The IMF highlighted concerns with tighter credit conditions, depleted household savings in the U.S. and a shallower-than-expected economic recovery in China from strict Covid-19 lockdowns. In the United States, excess savings from the pandemic-related transfers, which helped households weather the cost-of-living crisis and tighter credit conditions, are all but depleted. In China, the recovery following the reopening of its economy shows signs of losing steam amid continued concerns about the property sector, with implications for the global economy, Pierre-Olivier Gourinchas, chief economist of the IMF said. The U.S., the world’s largest economy, is set to grow 1.8% this year and 1% in 2024, according to the IMF. In China, gross domestic product is seen falling from 5.2% this year to 4.5% for 2024 Source CNBC
MUST SEE: India Now Has an AI News Anchor: Add news anchors to the list of jobs that artificial intelligence is coming for as a quiet takeover of the news reader's desk has now reached India. AI-generated anchors presented the news in India for the first time back in April as a trial, the South China Morning Post reported. One of them, named Lisa, however, is now a full-time news presenter on Odisha TV. At first glance, Lisa could pass for a human news presenter. Upon closer inspection, however, the AI's slow blinking and robotic monotone make it somewhat easy to identify her as a non-human. But if you're just listening to the news while being surrounded by the low hum and chatter of the office, you could easily mistake her for a human. Lisa can also be found on Odisha TV's Twitter account Click HERE. This stuff kind of freaks me out. I hate the fact my kids and grandkids are going to live in a world where they have to try and decide who is real and not real. Crazy times. Source Business insider
Heat-Related Refinery Issues are Pressuring Pump Prices: Record-breaking heat across much of the U.S. has led to some refinery outages in Texas, said Patrick De Haan, head of petroleum analysis at GasBuddy. Typically, these outages are short, but the “heat dome is expected to stay in place for another few days so outages could drag on, limiting supply of gasoline at a time when inventories are at their lowest July level since 2015.” Extreme heat can cause “equipment upsets,” and even power outages that sometimes accompany high temperatures and power demand, De Haan explained. That can “knock a refinery out for at least a few days.” Following the refinery outages, gasoline prices are just starting to spike up with the national average on Monday marking its largest daily jump since March, he said. “Many states are just starting to see the surge translate to pump prices.” There’s also been a handful of oil refinery unit issues at Port Arthur in Texas and Baton Rouge in Louisiana, recently, and an ongoing problem with a gasoline making unit at Bayway in New Jersey, said Brian Milne, product manager, editor and analyst at DTN. For now, drivers haven’t seen bigger gasoline price increases at the pump because, while gas demand this summer is above the summer of 2022’s consumption rate, it trails the demand pace in 2018 and 2019, Milne said. Source Marketwatch
UPS Strike Averted with Planned 5-Year Deal: UPS and its Teamsters union have signed a tentative contract deal for about 340,000 U.S. workers at the parcel delivery firm, one week ahead of a threatened strike that could have cost the economy billions and disrupted a quarter of the nation's package shipments. Tuesday's agreement, which must be ratified by union members, cinches another win for transportation labor groups. Railroad, airlines, and West Coast seaport workers have all seen their bargaining hand strengthened by labor shortages and public support for those who risked their lives early in the pandemic to keep the U.S. economy functioning. The planned Aug. 1 strike by workers at UPS, which handles about 20 million packages a day across the United States, could have also driven customers into the arms of rivals like FedEx, which is still embroiled in talks with its pilots union. Early details on the deal "suggest the union won greater first-year wage increases than we'd expected ... while UPS retained flexibility in return" on issues like personal vehicle drivers and a possible move to seven-day operations, Susquehanna analyst Bascome Majors said in a client note. Source Reuters
Downsizing Boomers Could Add +27 Million Homes to Market: If baby boomers follow the pattern of past generations, retirement means downsizing to condos or small homes, or moving to some type of retirement community. This could put a significant number of homes, particularly single-family properties, on the market over the next decade. The multi-billion-dollar question, however, is: will they sell? Some data indicates that boomers will age in place longer than past generations because they have the health and wealth to do so. Census Bureau analysis, in fact, shows that the proportion of homeowners staying put after 65 and into their 70s and 80s has been increasing steadily over the past few decades. This trend is expected to continue as the last of the baby boomer generation moves into those age ranges. Fannie Maepoints out that while the proportion of boomer homeowners choosing to move out may be less than previous generations, the sheer scale of baby boomer homeownership will mean a huge increase in the number of properties that will be sold. The Census Bureau estimates that homeownership by those 65 and older in 2026 will drop by 12 million, with a further drop of 15 million in the subsequent decade. This could mean an additional 27 million properties available to the market over that period. Source Housing Wire
IRS Announces It Will End Most Unannounced Visits To Taxpayers: That unexpected knock on your door? It is likely not an IRS employee. The nation’s tax agency has announced a major policy change: it will end most unannounced visits to taxpayers by agency revenue officers. The change is being made, IRS says, “to reduce public confusion and enhance overall safety measures for taxpayers and employees.” This is a significant turnabout for the 2,300 IRS Revenue Officers, whose duties include visiting taxpayers to resolve their account balances by collecting unpaid taxes and unfiled tax returns. Safety is clearly an issue. The IRS notes that Revenue Officers routinely faced hazards and uncertainty making unannounced visits to attempt to resolve delinquent tax matters. Despite recent misrepresentations, those visits were made by IRS Revenue Officers who were unarmed. There have also been concerns about scams. The growth in scam artists bombarding taxpayers has increased confusion about home visits by IRS Revenue Officers. Sometimes scam artists appear at the door posing as IRS agents, creating confusion for taxpayers and local law enforcement. Source Forbes
Biometric Scanners for Age Verification Gain Traction: Move over, fake IDs: Biometric systems that can "read" a person's face or palm image and determine if they're too young for a beer are gaining traction at sports stadiums and liquor shops. While these tools are handy for alcohol sellers — and can offer more privacy for consumers than handing over a driver's license to a store clerk — they tap into fears about potential abuses of facial recognition systems. Legislative proposals in New York and Washington state would let bars, restaurants and other purveyors of adult products verify a customer's age through biometric data — like a finger or palm image, or a retinal or face scan. The New York bill would require all biometric data to be encrypted and prohibit businesses from selling it to third parties. At the same time, biometric ID systems — sold by Amazon, Microsoft, CLEAR and many smaller vendors — are already rolling out in real-world locations. Some systems require pre-enrollment — which can be done quickly through an app — but others use neural networks to estimate the age of the person looking at the screen at a checkout. Source Axios
Yosemite Might Bring Back Reservations: This year Yosemite dropped a reservation system it launched at the start of the pandemic to keep too many people from entering at once and potentially spreading Covid-19. With no restrictions on attendance, tourists are flooding the park. In June, 65,136 vehicles entered through one of Yosemite’s busiest entrances, called Arch Rock, up more than 50% from a year earlier. Park leaders are now laying the groundwork to bring the reservation system back in order to get a handle on out-of-control crowds. Visits to Yosemite are down 24% through June this year compared with 1.7 million a year earlier. Crowding has been worse, however, because several roads were closed after the park was buried under record snow last winter. Yosemite typically attracts about four million visitors annually. Source WSJ
Schedule A Call Now
Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.
Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.
CTG Daily Commentary is published by Capital Trading Group, LLLP and Nell Sloane is the editor of this publication. The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.
It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.
Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.