Stock bulls remain cautiously optimistic ahead of the Federal Reserve's upcoming policy meeting next week. Fed officials are currently in the "blackout" period and there is really no data due this week that would hold much sway over next week's decision.

Most expect the Fed will pause its rate hiking campaign but an unexpected rate hike by Australia's central bank yesterday is fueling some doubts over how long that might last. RBA paused its rate hike cycle in April but decided they needed to resume amid "increasing upside inflation risks." Specifically, RBA cited core inflation that is not falling more quickly.

US investors are anxious to see what Bank of Canada does today, after pausing rate hikes at both its March and April policy meetings. Many investors already anticipate the US Fed issuing one more 25-basis point increase in July so other central bank moves don't necessarily alter expectations. There is no policy meeting in August, so investors are guaranteed that rates will at least remain flat from July til the September 19-20 meeting.

There is not really any economic data due out the rest of this week that would sway current expectations for the Fed.

However, investors are nervously eyeing some other events playing out that could put upward pressure on inflation again. One is the war in Ukraine where a key dam has been blown up, allegedly by Russia in order to hinder Ukraine's military advance. The resulting flooding threatens some of Ukraine's most productive farmland and has already helped push some grain prices higher, which could in turn send global food prices soaring again.

Military experts are worried that the destruction of the Kakhovka dam could also change the trajectory of the war, with Russia gaining an advantage, at least in the short term. Western officials don't think it will be enough for Russia to "win," but many are worried that it could lead to a stalemate that drags on for years.

There is also the ongoing issue with US West Coast ports where ongoing labor negotiations have led to multiple work stoppages that experts worry could jam up supply chains again.

Additionally, the global oil supply and demand balance remains a big unknown with OPEC expanding and extending its cuts.

Right now, Chinese demand is not nearly as high as most anticipated. However, most still see that continuing to rise through the end of the year, potentially throwing global oil supplies into a deficit and sending energy prices soaring again. Needless to say, there are still a lot of moving parts.

Today, investors will be digesting International Trade in Goods and Services and Consumer Credit. Campbell Soup is today's earnings highlight.

I'm Reading and Hearing More Stuff Like This... Park Hotels and Resorts, the investment firm that owns Hilton San Francisco Union Square and Parc 55 hotels, said this week that is has ceased payments on a $725 million loan as looks to reduce its presence in the city. The hotels have nearly 3,000 rooms, combined. “Unfortunately, the continued burden on our operating results and balance sheet is too significant to warrant continuing to subsidize and own these assets,” the CEO concluded. The hotels will be given back to the lender. The Wall Street Journal recently reported that nearly $1.5 trillion in commercial mortgages are coming due over the next three years, according to data provider Trepp. Many of the commercial landlords on the hook for the loans are vulnerable to default in part because of the way their loans are structured. Unlike most home loans, which get paid down each year, many commercial mortgages are known as interest-only loans. Borrowers make only interest payments during the life of the loan, with the entire principal due at the end. Interest-only loans as a share of new commercial mortgage-backed securities issuance increased to 88% in 2021, up from 51% in 2013.

EIA Predicts Record-High '23 and '24 U.S. Oil Production: In its monthly Short-term Energy Outlook report released Tuesday, the Energy Information Administration raised its 2023 forecast for U.S. benchmark West Texas Intermediate crude prices to $74.60 a barrel, up 1.3% from the May forecast. For 2024, it increased its forecast by 13% to $78.51. For global benchmark Brent crude, the government agency lifted its 2023 forecast by 1.1% to $79.54 and its 2024 forecast by 12.1% to $83.51. After the EIA raised its oil-price forecasts for this year and next, it said they expect U.S. output to hit record highs as global supplies tighten following a decision by major oil producers last weekend to extend their production cuts through 2024. The EIA’s forecasts for total world consumption of crude oil and liquid fuels are generally unchanged, at 101.01 million bpd for 2023 and 102.71 million bpd for 2024. Source MarketWatch

Crypto Investors Pull Billions from Coinbase and Binance within Hours: Net outflows from the crypto exchange Binance and its U.S. arm reached -$791 million in 24 hours according to crypto research firm Nansen. The outflows spiked after Binance and its founder, Changpeng Zhao, were charged with 13 securities violations by the SEC. Then on Tuesday the U.S. Securities and Exchange Commission sued Coinbase, accusing the largest U.S. cryptocurrency platform of operating illegally because it failed to register as an exchange. Coinbase suffered about -$1.28 billion of net customer outflows following the lawsuit, according to initial estimates from data firm Nansen. Both civil cases are part of SEC Chair Gary Gensler's push to assert jurisdiction over the crypto industry, which he on Tuesday again labeled a "Wild West" that has undermined investor trust in the U.S. capital markets. "The whole business model is built on a noncompliance with the U.S. securities laws and we're asking them to come into compliance," Gensler said. Crypto companies say the SEC rules are unclear, and that the agency is overreaching by trying to regulate them. Paul Grewal, Coinbase's general counsel, in a statement said the company will continue operating as usual and has "demonstrated commitment to compliance." Ten U.S. states led by California also on Tuesday accused Coinbase of securities law violations concerning its staking rewards program. I'm no expert, but I don't think they want to fight the government. I think the crypto exchanges and platforms need to get on the same page with the regulators sooner than later. Compliance and transparency are the keys to building investor trust. I think more regulations are important and should be welcomed. Source Reuters

Americans Are Waiting Longer and Longer to Get Married: Young adults have come to view marriage as a capstone event where couples used to marry and build a life together, now, they build the life first. The share of U.S. adults who are married by age 21 sank from about 33% in 1980 to 6% in 2021. The share who tied the knot by 25 plunged from around 66% down to 22%. Young marrieds are a vanishing breed, in 1980, the average American male married at 25, the average woman at 22, U.S. Census data shows. Today, the average first-time groom is 30, and the bride is 28. Over recent decades, family researchers have tracked the rise of “unpartnered” Americans. In the prime adult years, ages 25 to 54, the share of married Americans has dwindled from more than two-thirds in 1990 to barely half today. Roughly 1 adult in 10 cohabits with a partner. Everyone else, in romantic terms, lives alone, and the rising marriage age is only the most dramatic among several demographic trends that signal a postponement of American adulthood. Source The Hill

Supply Chain Concerns Mount as West Coast Labor Dispute Clogs Ports: Intermittent disruptions at several key US West Coast ports stretched into their fifth day Tuesday amid ongoing labor-contracts negotiations. Pacific Container Terminals at the Port of Long Beach has canceled cargo operations for Tuesday’s first shift, according to a notice sent to the trucking community. The notice didn’t cite a reason for the closure. At least one terminal at the Port of Los Angeles canceled cargo operations Monday, while two terminals at the Port of Long Beach were closed Monday “based on operational needs” and will reopen for the evening shift, Executive Director Mario Cordero said in a statement. West Coast dockworkers and their employers have been holding labor contract negotiations for over a year, with the occasional slowdown or work stoppage interrupting the flow of cargo that goes through the US’s biggest import hub. The National Retail Federation on Monday renewed calls for the White House to intervene in the contract talks. “As we enter the peak shipping season for the holidays, these additional disruptions will force retailers and other important shipping partners to continue to shift cargo away from the West Coast ports until a new labor contract is established,” David French, senior vice president of government relations at NRF, said in a statement. ILWU, which represents about 22,000 dockworkers on the US West Coast, has been negotiating a new labor contract with PMA since May of last year. The previous contract expired on July 1, 2022. Source Bloomberg

Four Tech Giants Accounted for Over +16% of Fortune 500 Earnings in 2022: The tech sector had a tough year in 2022. With interest rates soaring amid rising inflation, the economy slowed and many tech companies that borrowed heavily to invest in their growth faced increased costs. As a result, they sought to reduce their expenses, including by slashing staff, leading more than 153,000 tech workers to lose their jobs last year, according to data from In the stock market, the tech-heavy Nasdaq took a beating as well, falling over 30% as investors sought safer assets amid Wall Street’s consistent recession predictions. But despite the dark headlines, falling stock prices, and job cuts, big tech companies still dominated the 69th annual Fortune 500 list. The top 10 Fortune 500 companies included three big tech firms, even as the wider sector faced one of its worst years in the past decade. On top of that, just four big tech companies—Apple, Microsoft, Alphabet, and Meta Platforms—were able to rake in $255.7 billion in profits in 2022, or roughly 16.4% of the Fortune 500’s total earnings for the year. Apple pulled in $99.8 billion, while Microsoft notched $72.7 billion, and Alphabet and Meta Platforms earned $59.97 billion and $23.2 billion, respectively. Source Fortune

Merck Sues US Government Over Drug Price Negotiation: Global drugmaker Merck on Tuesday sued the Biden administration over Medicare’s new powers to substantially reduce drug prices for seniors under the Inflation Reduction Act, the opening salvo in the pharmaceutical industry’s efforts to weaken the program. Merck called the law’s drug price negotiation program a “sham” and “tantamount to extortion” in a scathing complaint in federal court in Washington D.C. The company also accused the federal government of employing what the suit describes as an unconstitutional scheme to take private property for public use without just compensation in violation of the Fifth Amendment. Merck’s complaint asks a judge to block the U.S. Health and Human Services Department from compelling the drugmaker to participate in the program. Merck last year booked $2.8 billion in revenue from its Type 2 diabetes drug Januvia, a medication that it said will be subject to Medicare price negotiations in 2023. The company also anticipates its blockbuster cancer immunotherapy treatment Keytruda and its other diabetes drug Janumet will be subject to the program in subsequent negotiation cycles. The drugmaker booked $21 billion in sales from Keytruda in 2022 and $1.7 billion in sales from Janumet. Source CNBC

Subway Is for Sale: Subway, the privately held sandwich chain that has more U.S. locations than McDonald’s, is for sale. Forsaking an initial public offering or strategic tie-up, its owners are close to wrapping up what could be a massive private-equity deal worth a hoped-for $10 billion. Restaurants used to be a popular leveraged-buyout target but, as with so much else, the Federal Reserve’s rate hikes and consumer caution in the face of high inflation have dulled investors’ appetite. Even during boom times, though, Subway would be a mouthful. The next-biggest restaurant LBO, when 3G Capital bought Burger King from three other private-equity firms in 2010, was worth less than $4 billion. The last year with more than a billion dollars in total U.S. restaurant private-equity deal value was 2019, according to Dealogic, and the largest U.S. restaurant strategic acquisition of recent years was Arby’s owner Inspire Brands’ $8.8 billion purchase of Dunkin’ Brands Group, excluding debt. Source WSJ

China Asks Big Banks to Cut Deposit Rates to Boost Growth: Chinese authorities asked the nation’s biggest banks to lower their deposit rates for at least the second time in less than a year, according to people familiar with the matter, marking an escalated effort to boost the world’s second-largest economy. The request was communicated through the central bank’s interest rate self-disciplinary mechanism, the people said. Banks are assessing the request and may adjust rates as early as this week, said the people, adding that the move isn’t mandatory. Beijing has rolled out a raft of measures to prop up the economy after a series of crackdowns on multiple industries and lengthy lockdowns due to Covid Zero. The authorities are seeking to boost lending to bolster a recovery after recent data showed a slowdown. After spiking in the first quarter, credit and new loans weakened in April as consumers and businesses curbed their borrowing. Households are saving more and paying down their mortgages, rather than taking on more debt, while businesses are faced with falling demand and declining profits. Source Bloomberg

PGA Tour Merges with Saudi-Backed Rival LIV Golf: The PGA Tour has agreed to merge with Saudi-backed rival LIV Golf in a deal that would see the competitors squash pending litigation and move forward as a larger golf enterprise. The two entities signed an agreement that would combine the PGA Tour’s and LIV Golf’s commercial businesses and rights into a new, yet-to-be-named for-profit company. The agreement includes DP World Tour, also known as the PGA European Tour. LIV Golf is backed by the Saudi Arabia Public Investment Fund, an entity controlled by the Saudi crown prince and has been embroiled in antitrust lawsuits with the PGA Tour in the last year. The deal announced Tuesday would end all pending litigation. Source CNBC

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