Stock bulls are coming off another winning week with the S&P 500 back at levels not seen since the Federal Reserve first started its rate hiking campaign last March.

Investors have a relatively quiet week ahead with a very light schedule for both economic data and earnings.

The main highlight will be Fed Chair Jerome Powell's two-day testimony before Congress. He appears before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday. Powell will no doubt face a drilling over the Fed's June decision to pause its interest rate hiking campaign as well as projections for two more rate increases in 2023.

Lawmakers also likely have questions about the ongoing impact of the Fed's hiking campaign, particularly surrounding bank stability and tighter lending standards. Investors hope Powell's testimony might shed more light into the central bank's current train of thought as Wall Street debates whether the Fed will need to carry through on its recent projection of two more rate hikes in 2023.

While most still anticipate one more 25-point hike at the July 25-26 meeting, bulls argue that expected improvements in upcoming inflation data combined with signs that the US economy continues to slow will prevent the Fed from pulling the trigger on a second increase.

Bears are pointing to data showing that inflation isn't so much going away as it is hopping around. Meaning it slows down in one sector but reignites in another, keeping overall inflation elevated at more than twice the Fed's +2% target rate.

Several other Fed officials will also weigh in this week, including St. Lous Fed President James Bullard and New York Fed President John Williams today.

The other big topic of debate among investors is whether the current rally has run out of steam. Bulls believe the rally has more room to run with a ton of money still sitting on the sidelines.

Keep in mind, we are less than two weeks from the end of the first half of 2023 and investors that have missed market gains so far are likely feeling pressured to catch up or join in. Let's just say FOMO (Fear Of Missing Out) is real and may bring more money off the sideline as some decide to chase the market higher.

According to Bank of America's latest fund manager survey, money managers remain "broadly underweight stocks." Bears, however, believe the hype in all things "artificial intelligence" is creating a bubble in the tech sector that is not sustainable long-term, particularly with profit margins feeling the strain of lower consumer spending, higher borrowing costs, and still high operating costs.

Bears also warn that many investors may be looking to book profits with the S&P 500 having now recovered all the losses it racked up since the Fed's rate hikes began.

Today, the key economic data is Housing Starts and Building Permits for May while FedEx is the earnings highlight. For what it's worth, FedEx results are viewed as an early peak at what companies might deliver during Q2 earnings season, which "unofficially" kicks off on July 14 with big bank results.

Owning a Home a Sizable Goal: Just before the pandemic, the average home price in the U.S. was $313,000—a figure that has since jumped by +40% to $436,800 today. As home prices and mortgage rates increase, home ownership is becoming an unrealistic dream for some.

Gas Prices Ease as Americans Hit the Road for Summer Travel: Good news for road-trippers this summer as gas prices appear likely to be lower this driving season after last year’s oil spike caused widespread pain at the pump. A gallon of regular averaged about $3.58 on Friday, according to AAA, down from a record high of $5 a year ago when the war in Ukraine sent energy markets into a tailspin and fanned the flames of inflation globally. Recession fears, a stalling economic restart in China, and an uninterrupted flow of Russian crude into markets have pressured global oil prices to around $75 a barrel, down from more than $120 last summer. However, gasoline prices remain elevated compared with previous years. They averaged $3.66 in May, the second highest for that month in nine years, according to the U.S. Energy Information Administration. The average price now is down to about $3.58 per gallon. We are also seeing diesel prices lower than gasoline prices in some areas. Interestingly, Americans are seeing energy decline as a share of their household budgets. Source WSJ

US Homebuilder Sentiment Increases to Almost One-Year High: Homebuilders are getting a big boost from the lack of existing homes for sale, and that appears to be outweighing some of the challenges they’re facing from financial markets. Builder confidence in the market for newly built single-family homes rose 5 points in May to 50, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). It’s the fifth straight month of gains and the first reading of builder sentiment since July that wasn’t negative, which would be a reading below 50. Sentiment stood at 69 in May of last year. “New home construction is taking on an increased role in the marketplace because many home owners with loans well below current mortgage rates are electing to stay put, and this is keeping the supply of existing homes at a very low level,” said NAHB Chairman Alicia Huey, a homebuilder from Birmingham, Alabama, in a release. Builders are benefiting from a very lean existing home market. New listings in April were down nearly 22% year over year, according to “In March, 33% of homes listed for sale were new homes in various stages of construction. That share from 2000-2019 was a 12.7% average. With limited available housing inventory, new construction will continue to be a significant part of prospective buyers’ search in the quarters ahead,” said Robert Dietz, NAHB’s chief economist. Source CNBC

Rail Car Shortage is Latest Supply Chain Challenge: Car dealers and buyers alike are feeling some deja vu these days as vehicle inventories again start to shrink. Only this time the automakers have the parts they need to build their cars. They just can't get the finished vehicles from the factories to dealerships because of a shortage of railroad cars. The problem has been escalating in recent months and has grown widespread, affecting food and grain shipments, too. In the auto industry, it slows domestic shipments from U.S. factories to dealerships as well as shipping vehicles made in Mexico to the United States, railroad experts said. There are currently "at least 70,000" new vehicles stranded across the industry unable to move to dealerships to be sold, according to one prominent regulator. A person familiar with General Motors' Fort Wayne Assembly in Indiana, for example, told the Detroit Free Press there are thousands of finished Chevrolet Silverado and GMC Sierra pickups parked in the Fort Wayne area and no rail cars available to ship them to market. The rail car shortage has grown serious enough to prompt the auto industry's lobbying group, Alliance for Automotive Innovation, to implore the U.S. Surface Transportation Board — the federal agency charged with the economic regulation of various modes of surface transportation, mostly freight rail — to step in. The specific problem is a shortage of autoracks — the rail cars that carry vehicles. Source USA Today

The Great Global Baby Bust is Under Way: Across the world, birth rates are declining more rapidly than expected. That creates worries for pensioners and policymakers alike. In 2010, there were 98 nations and territories with fertility rates below 2.1 (known as the replacement rate) according to the United Nations. In 2021, that number had risen to 124, or more than half the countries for which data were available. The world’s 15 largest economies all have fertility rates below the replacement rate. As the proportion of children declines, average ages are rising, particularly as old people live longer (though the rise in longevity has slowed in recent years: in Britain lifespans are flatlining and in America they are falling). Some long-running demographic trends are changing, too. Educated women have for decades tended to have fewer children. But fertility among the less educated is now falling. On a global level the link between national incomes and fertility rates has also weakened. All of this poses a huge economic challenge. In parts of the world where birth rates were already low, the shortfall of young employees, who are needed to subsidize the retired, will be felt keenly. Source Economist

Most Fortune 500 CEOs Didn't Attend Ivy League Colleges: Since 1999, David Kang has pursued a peculiar hobby. That year, after Fortune released its annual Fortune 500 issue, Kang began to wonder about where chief executives of companies on the list had attended college. To keep track, the college professor did some research and manually entered their alma maters into a spreadsheet. After completing the task, Kang, then a professor at Dartmouth College’s Tuck School of Business, was shocked by what the data revealed. “The results were stunning,” he told Fortune. “Like everyone else, I thought Ivy Leagues would dominate. But the largest place they had gone to was no college at all.” But the numbers told all: A fancy degree isn’t required for business success, and top-tier corporate executives usually don’t have elite educations. Kang continued to track Fortune 500 CEO education numbers over the following two decades, and said there was little change through the years from the initial findings. The consistent pattern for 20 years has been top leaders attending a diversity of colleges, he said. Source Fortune


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