Stock traders await key inflation data today and another heavy round of Q2 corporate earnings next week. The PCE Prices Index this morning is expected to show June inflation slowing to a headline rate of +3.0% year-over-year from +3.8% previously. The Fed's preferred "core" rate, which strips out food and energy, is seen slowing to +4.2% from +4.6%.

Today's results may not have much impact however on investor sentiment as upcoming data for July and especially August will have a greater influence on the Federal Reserve's next policy decision which doesn't happen until September 19-20.

The key reports to watch between now and then include the July Consumer Price Index (CPI) on August 10, July PCE Prices on August 31, and August CPI on September 13. Consumer Sentiment is also due out today with economists expecting it to hold steady. Despite the ongoing inflationary environment, economic data has so far not raised any major red flags about the health of US consumer, though there are clear signs that spending has slowed to some extent.

The Commerce Department's Gross Domestic Product (GDP) released yesterday showed consumer spending slipped to an annual rate of +1.6% in Q2 from +4.2% in Q1. Still, even with that pullback the US economy grew +2.4% in Q2, up from +2.0% the previous quarter and better than the +1.5% many on Wall Street were expecting.

Interestingly, the slowdown in consumer spending is being offset by increased spending by both the government and businesses. Government spending is being fueled by the Biden administration's infrastructure funding, which has allocated some +$225 billion toward 35,000 projects so far. Business investments in infrastructure projects (manufacturing plants, transportation equipment, etc.) lifted Q2 GDP by nearly +1%.

Next week will bring critical updates on the US job market with the Job Openings and Labor Turnover Survey on Tuesday, ADP's private payroll report on Wednesday, and the Labor Departments official July Employment Report on Friday.

On the earnings front, investors today are anxious to see Procter & Gamble's results which should also provide some key insights into the health of US consumers. Procter & Gamble is one of the world's largest consumer goods companies with a wide range of price categories, meaning the company is able to easily recognize if consumers are "downgrading" to lower priced brands.

Investors are also interested to learn if the company's sales growth slowed significantly following additional price hikes last quarter. Astra Zeneca, Chevron, ColgatePalmolive, Exxon Mobil, and T. Rowe Price also report today. The earnings calendar next week will again be packed with the top highlights arguably being Apple and Amazon results on Thursday.

Other key results will come from Arista Networks, AvalonBay, and Diamondback Energy on Monday; Advanced Micro Devices, AIG, Altria, BP, Caterpillar, Electronic Arts, Marathon Petroleum, Marriott International, Merck & Co., Pfizer, Pioneer Natural Resources, Starbucks, and Uber on Tuesday; Bunge, Clorox, CVS, DoorDash, Fortis, Humana, Johnson Controls, Kraft Heinz, MetLife, MGM Resorts, Novo Nordisk, Occidental Petroleum, Phillips 66, Qualcomm, PayPal, Shopify, Simon Property Group, Trane Technologies, Xylem, and Yum Brands on Wednesday; Airbnb, Amgen, Block, Cigna, Coinbase Global, ConocoPhillips, Corteva, DraftKings, Gilead Sciences, Hyatt Hotels, Kellogg's, Moderna, Rocket Companies, The Southern Company, Stryker, Vulcan Materials, and Warner Bros. Discovery on Thursday; and Berkshire Hathaway and Dominion Energy on Friday.

Bottom line, we have another huge week of US corporate earnings ahead of us and a long pause between now and the next Fed meeting. It will be interesting to see what the market decides to focus its attention on the next few weeks. Let's hope it's not the geopolitical unrest involving either Russia and or China.

Rail Freight From Canada to US Creating Backups... Why it Matters: Rail traffic from Canada into the U.S. had a third-straight weekly drop as a result of the on-again, off-again strike at the West Coast Canadian ports. The vessel and container gridlock is raising concerns for chemical companies that have critical materials stuck as a result, creating supply chain issues. Last week, total rail volume from Canada to the U.S. was down 12%, according to The Association of American Railroad’s latest rail traffic report for the week ending July 22. This was an improvement given the first full week of the strike saw a 46% decrease in rail trade from Canada, and the second week suffered a 36% decrease. There are currently nine containerships waiting at the Port of Vancouver and the average wait time to get into port is 7.8 days, according to MarineTraffic data . At the Port of Prince Rupert, six container vessels are anchored and the average wait to get into port is 8.9 days.Eric Byer, CEO of NACD, said that hundreds of chemicals are needed to complete the U.S. manufacturing of products that arrive through the West Coast Canadian ports. There are millions of dollars of chemicals stranded on the water. We have members waiting for chemicals to be unloaded in Vancouver and then railed down to Chicago, Byer said. That includes chemicals like sulfuric acid, which is used in drain cleaning products like Drano; phosphates used in laundry detergent and large amounts of anhydrous ammonia, potassium compounds, and urea, as well as millions of tons of raw materials used to produce fertilizer. Source CNBC

First Smart Gun Finally Coming to Market... Will Anyone Buy It? The new weapon is the Colorado startup Biofire’s 9mm Smart Gun, which can only be fired if it recognizes an authorized user with a fingerprint reader on the grip or a facial recognition camera on the back. Guns that use technology to ensure that they can only be fired by their owners, called smart guns, have been developed and debated since the 1990s. The Biofire Smart Gun will be the first widely available for sale if it ships in December as planned. Proponents tout smart guns as a way to reduce accidental shootings and firearm thefts. Gun-rights supporters have been wary, in part over concern that governments could outlaw sales of weapons that don’t have smart-gun technology. Source WSJ

Commercial Real Estate Is in Trouble, but Maybe Not for the Reason You Think: In the rush to predict the demise of office buildings, investors are at risk of missing another category of real estate properties staring down the barrel of a massive paradigm shift. In aggregate, the commercial real estate market is big, diverse, and highly regional. Offices soak up just 15% of that market, equivalent to roughly $3.2 trillion. The biggest category of commercial real estate is actually multifamily residential, which are typically apartment complexes that are owned by commercial landlords. A significant chunk of property developers took out loans in 2021 to finance new construction and redevelop existing stock while rates were cheap. The interest rates on multifamily mortgages effectively reset after a certain period of time has passed—typically two to three years. That means many property developers for multifamily units are just now about to enter the gauntlet of higher rates. What does all that mean? It means that an $8 billion tsunami of multifamily commercial mortgage-backed securities—or CMBS, for short—is expected to come due, starting in the second half of this year. Some in the real estate market are calling it the “Red October. Source Morningstart

FAA Exploring Regulations for Commercial Human Spaceflights: The Federal Aviation Administration is launching a new initiative exploring possible regulations on commercial human spaceflight, a first for a nascent industry that is rapidly increasing the number of humans that visit space. The new rulemaking committee will “help the FAA plan, conceive, and implement—when the time is right—a well-informed, thoughtful, regulatory regime for commercial human spaceflight occupant safety,” the FAA said in a statement. The committee will gather recommendations from major stakeholders, which will no doubt include companies that operate human spaceflight services, including Blue Origin, Virgin Galactic, and SpaceX, and submit them to the FAA next summer. While the committee is a step toward regulations, the FAA does not have any rulemaking authority over this aspect of human spaceflight in itself. Instead, the FAA simply requires that crewmembers be made away of the risks and hazards of spaceflight and sign an extensive “informed consent” form. For the FAA’s authority to change, Congress would need to act – and it appears that they might, and soon. Source Techcrunch

New-Hire Bonuses Have Staying Power in Post-Pandemic Job Market: American businesses continue to hand out signing bonuses far more than they used to before the pandemic, even as wage growth cools down, according to job listings service Indeed. While it’s fallen slightly, the share of jobs with a signing bonus remains three times higher than it was in early 2020, Indeed said in a research note. Roughly 5% of all posts offer some kind of incentive, and the number was sharply higher for jobs requiring more in-person work, like nurses and medical technicians. The numbers show how companies still face tough competition for talent in a labor market where US workers have plenty of options. Signing bonuses allow employers to lure workers without being locked into paying higher salaries. Health care is one industry where the incentives have become particularly widespread. About one-in-six nursing jobs, for example, now comes with a hiring bonus according to Indeed. Source Bloomberg

Which US Workers are More Exposed to AI on Their Jobs: Historically, changes in technology have often automated physical tasks, such as those performed on factory floors. But artificial intelligence (AI) performs more like human brainpower and, as its reach grows, that has raised questions about its impact on professional and other office jobs – questions that Pew Research Center seeks to address in a new analysis of government data. In 2022, 19% of American workers were in jobs that are the most exposed to AI, meaning in which the most important activities may be either replaced or assisted by AI. 23% of workers have jobs that are the least exposed to AI, in which the most important activities are farther from the reach of AI. Other workers, nearly six-in-ten in all, are likely to have varying levels of exposure to AI. Jobs with a high level of exposure to AI tend to be in higher-paying fields where a college education and analytical skills can be a plus. In fact, workers with a bachelor’s degree or more (27%) are more than twice as likely as those with a high school diploma only (12%) to see the most exposure. A greater share of women (21%) than men (17%) are likely to see the most exposure to AI. This is because of differences in the types of jobs held by men and women. In 2022, workers in the most exposed jobs earned $33 per hour, on average, compared with $20 in jobs with the least amount of exposure. Source Pew Research

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