Stock bulls are hoping to get the rally back on track now that the Federal Reserve policy decision is out of the way. The Fed yesterday raised its benchmark rate by +25 basis-points, which brings the target range to 5.25% to 5.5%, the highest level in more than 22 years.

In his follow-up press conference, Fed Chief Jerome Powell was noncommittal about the central bank's next moves, saying it's possible they raise rates again in September but also possible that they choose to hold steady. The market is giving a hike in September less than 30% odds. In fact, the market is now giving less than 50% odds that we see another rate hike at all in this cycle.

Powell again reiterated the Fed's intention to remain data-dependent and make decisions on a “meeting-by-meeting” basis. Notably, Powell said that some Fed officials have started to forecast interest rate cuts next year considering the recent fall in inflation and slowing economy.

As I mentioned above, Wall Street bulls believe that this will be the last rate hike in 2023 and likely the last rate hike of this cycle. Bulls also believe that Fed officials may be "acting" more hawkish than they really are because they don't want investors to start pricing in even more and deeper rate cuts for next year, which could deflate longer-term interest rates and add more fuel to the economy.

It's also worth mentioning that Fed economists are no longer predicting a recession. Powell said that while they are forecasting a "noticeable slowdown in growth" later this year, he believes there is now at least a “pathway” to a soft landing— where inflation fades but recession is avoided.

Bears warn that it is too soon to declare an end to inflation and point to areas where it may be primed to take off again, particularly food and energy, but also delayed impacts from major labor union contract wins. Meaning companies are likely going to pass their considerably higher salary costs on to consumers.

Bears are also pointing to comments from executives on recent earnings calls that indicate future price hikes are still on the table. Bulls today are hoping blowout earnings from Facebook-parent Meta will generate some new excitement. Meta after the close yesterday topped expectations across the board, including forward guidance that suggests growth of more than +15% in Q3. Meta's results follow better-than-expected earnings and revenue from Google-parent Alphabet and Microsoft earlier this week.

Bulls of course hope Apple and Amazon will deliver the same when they report next Thursday, which could help further boost outlooks for the quarters ahead.

Today's earnings highlights are AbbVie, Boston Scientific, Bristol Myers Squibb, Carrier Global, Comcast, Deckers Outdoor, Ford, Hershey, Honeywell, Intel, KLA, Live Nation, Mastercard, McDonald's, Northrop Grumman, Royal Caribbean, Southwest Airlines, Texas Roadhouse, Tractor Supply, and Valero. Today's economic data includes the first estimate of Q2 2023 Gross Domestic Product (GDP), Pending Home Sales, and advance reads on International Trade and Retail and Wholesale Inventories.

Keeping my eye on copper, as it starts to gain a bit more momentum and the energy markets as they might be signaling some strength in the global economies.

Top Economists Do U-turn on Recession Forecasts as Most Now See it as Unlikely in Next Year: A 71% majority of economists put the odds of a recession in the next 12 months now at less than 50%, according to a survey by the National Association for Business Economics. That includes a sizable chunk who are especially optimistic, with one-fourth saying a recession has a probability of 25% or less. This is a turnabout from just a few months prior. In April, economists were about evenly split. And in the March NABE survey, 58% said the US was either already in a recession or that it would come sometime in 2023. The shift in sentiment stems from broader positivity across the economy, as recent metrics demonstrate resilience and receding inflation trends. Results of the July 2023 NABE Business Conditions Survey reflect an economy of rising sales and profits, as materials costs decline and stabilizing wages prove less challenging, said NABE President Julia Coronado. In fact, for the first time since 2021, a majority said wages at their firms were steady in the second quarter. Meanwhile, the share reporting higher wages tumbled to 47% from 63% in the April survey. Source Business Insider

You Might be Surprised to See What Actually Cost Less Than Last Year, Despite Inflation: With inflation still relatively high, some goods are actually significantly cheaper than last year, including airfare, televisions and major appliances. As inflation continues to decelerate, down from a year-over-year peak of 9.1% to 3% as of June, the cost of some items has dropped by 10% or more, based on price tracking measured by the consumer price index. The price of many goods and services are still much higher than they were before the pandemic, but with recent price drops, they’re something of a bargain compared with last year. The chart below takes a look at items with some of the largest declines in price since June 2022. Source CNBC

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Leading Automakers Partner to Create Massive EV Charging Network: Seven of the largest automakers announced a joint venture to create a sprawling vehicle recharging network across North America. The goal is to install at least 30,000 charge points in urban and highway locations accessible to nearly any EV by offering Combined Charging System (CCS) and North American Charging Standard (NACS) connectors. The group includes BMW Group, General Motors, Honda, Hyundai, Kia, Mercedes-Benz Group and Stellantis NV. In short, these automakers want their own Tesla Supercharger network. The venture is expected to be established later this year, pending customary closing conditions and regulatory approvals. The planned charging locations sound like modern gas stations. Universal compatibility is the goal. With both CCS and NACS chargers, nearly any EV can recharge at these stations. The first U.S. stations are scheduled to be open in the summer of 2024. The charging ecosystem in North America is lagging behind the rollout of electric vehicles. Shoppers still state — and with good reasoning — that range anxiety is a concern. If this venture is approved, it would create the second-largest EV charging network behind only Tesla’s. Source Techcrunch

Pandemic Motor-Home Bubble Bursts: Recreational vehicles were in high demand during the pandemic, but Americans’ interest in the motor-home life seems to be dwindling. Shipments of RVs are down -49.2% year to date, according to the RV Industry Association, with a -46.4% drop in June compared to the same period last year. For the year to date, sales of all trailers totaled 105,975 units. Last year at this time, the number stood at 228,740. But the trade group says it expects the slump to end soon. Virtually all categories of trailers saw sharp declines both in June and year to date. Only one, mini-trailers (also called Class A), has posted gains, with overall sales up nearly +3% in 2023. At present, Reuters reports, RV sales in 2023 are on track to hit their lowest level since 2015. Beyond lowered demand, a sharp rise in interest rates has also dented sales. RV sales have historically been a gauge of upcoming recessions. Economists, though, say that might not be the case this time around, since there was such a surge in interest during the pandemic. Source Fortune

Luxury Home Sales Post Smallest Decline in a Year: Nationwide, luxury sale prices are still higher than they were last year. The median sale price of luxury homes rose +4.6% year over year to a record $1.2 million in the second quarter. Luxury home sales fell -24.1% year over year in the second quarter. While that’s a substantial decline, it’s the smallest in a year. Non luxury sales dropped -19.4%. The gap between luxury and non luxury sales is shrinking; at the start of the year, luxury sales were down a record -42%, while non luxury sales were down -31.4%. Redfin analysts say the gap is likely narrowing in part due to an improving stock market and easing recession fears. Luxury home prices in San Francisco are falling faster than anywhere else in the nation. The median sale price of luxury homes in San Francisco fell a record -12.7% year over year to $4.8 million in the second quarter—the largest decline among the 50 most populous U.S. metropolitan areas. In Seattle, luxury sale prices decreased a record -12.3% to $2.5 million—the second biggest drop in the country. Next came Oakland, CA (-11.1% to $2.8 million) and San Jose, CA (-10.3% to $4.3 million). Source Redfin

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Extreme Heat, Drought Drive Opposition to Data Centers: We tend to think of the internet as immaterial, but websites exist in the real world as rows of servers that never turn off, filling data centers that need to be cooled to prevent technical failures. With drought spreading around the globe, battles are emerging between data center operators and adjacent communities over local water supplies in places such as Chile, Uruguay and parts of the southwestern US. While data centers have faced scrutiny over their electricity use, little is known about their water consumption—including by tech companies themselves. A survey conducted last year by the Uptime Institute, a consulting firm, found that only 39% of data centers even tracked their water use. Companies say data centers are getting more energy-efficient, but the increase in overall demand for computing power is outpacing such gains. The race to build large language models used in generative AI has created a surge in demand for more powerful processors. The specialized chips required for AI—broadly known as accelerators—emit so much more heat than general-purpose chips do that data center operators are having to rethink their cooling systems entirely, says Colm Shorten, a data center sustainability expert at real estate investment firm JLL. Source Bloomberg

Mastercard Moves to Ban Cannabis Purchases on Its Debit Cards: Mastercard has told financial institutions to stop allowing marijuana transactions on its debit cards, dealing a blow to an industry already on the fringes of the financial system in the United States. Most banks in the country do not service cannabis companies as marijuana remains illegal at the federal level despite several states legalizing its medicinal and recreational use. "As we were made aware of this matter, we quickly investigated it. In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connects them to Mastercard to terminate the activity," a spokesperson for the company said on Wednesday. Source Reuters

Cardboard-Box Sales Down Most Since Great Recession: For many months now, a debate has been raging among experts whether the US economy is facing a recession, following the Federal Reserve's steepest interest-rate increases in four decades. But a rather offbeat indicator has been signaling a level of economic weakness not seen since the global financial crisis of 2008-2009 – and that's the shipments of cardboard boxes. Packaging Corp. of America, the No. 3 containerboard company in the US, reported this week that sales of cardboard boxes fell 9.8% last quarter from a year earlier in one of the biggest slumps on record. That added to a 12.7% plunge during the first quarter. The combined six-month decline is the biggest since early 2009, according to a report by FreightWaves Research. The thinking goes that cardboard boxes can act as a barometer for the health of the economy, since they play such a crucial role in transporting goods. Some experts see the slide in cardboard box shipments as a sign of broader economic trouble. But it could also simply be a sign of demand returning to pre-pandemic levels. Source Insider

Highly Coveted Apple Sneakers on Sale for $50,000: A pair of “ultra-rare” custom-made sneakers designed to be a one-time giveaway for Apple employees in the mid-’90s is for sale by auctioneer Soetheby’s with a $50,000 price tag —more than seven times the price of Apple’s most expensive available computer. The shoes—which arrive new in the box—are mostly white, in a similar shape to the trendy Nike Air Forces, feature the old school rainbow Apple logo on the tongue and lateral quarter, and come with an extra pair of red shoelaces. Sotheby’s is not auctioning the shoes, rather they’re available for immediate purchase through the Buy Now marketplace arm of the site. The shoes were never available to the general public, making the pair “one of the most obscure in existence,” according to the Sotheby’s listing. Old Apple merchandise is having a moment this summer. Earlier this month, a first-generation iPhone from 2007 was auctioned off for $190,373. That’s about 380 times the phone’s original price of $499. ABC News reported that was the third original iPhone to be auctioned at a record price after an 8GB model sold for $63,356 in February and another sold for $39,340 last October.

Source Forbes

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