Powell’s Fed is “prepared to raise rates if appropriate” and inflation “remains too high” and “intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective” comments alongside his sporty fleece vest were fairly expected out of Wyoming. Inflation is significantly better managed than 1 year ago, so he doesn’t have to give a speech about “doing whatever it takes” this year, but he’s straddling more Greenspan and less Volker, it seems, trying to sell us the sleeves off his vest. What he’s really saying is that he wants to kick the can down a road a bit before giving a solid statement. The odds of a Sep hike are at 20%, and the odds of a hike in Nov are 50%, per a chart by BTIG prior to the speech. We’ll see what they are at the day’s end.
Thanks to UBS for a chart that summed up yesterday’s price action here in the US. Traders are finally realizing that rates aren’t going down soon. They may pause, but the impact of higher-for-longer will sting. But CTAs are still holding onto their narrative. The FT is out with a story on how CTAs are suffering a tough year with positioning for lower rates.
China announced a stimulative policy to ease home purchase rules, and at first their stock market rose on the news, followed by a ho-hum, sell-the-news move back down. Even in HK, traders didn’t get excited about a report from Reuters on how China plans to cut the stamp duty on domestic stock trading by up to 50%. Probably doesn’t help that China is asking its financial folks to prop up the market. With that known, who wants to be the sucker buying in?
Traders are worried about the US budget deficit, per Bloomberg. The CBO is projecting a massive fiscal shortfall, such that rates could go even higher (which then pressures governments who have to pay the higher interest). The deficit more than doubled to $1.6 trillion with a T, driven by a host of factors (tax cuts, industrial subsidies, pandemic rescues) across political lines. Probably why Fitch downgraded the US’ sovereign credit rating. Given the amount of debt per US’ GDP, a ratio commonly reviewed, it looks like the US is getting too fat to tie its own shoes.
Oh, Mike Wilson…we know you’re a bear. And your temporary bullish reversal this summer didn’t last long. But isn’t your call for MS a bit short-term reactive? During low volume vacation time? Calling the rally “exhausted” because Nvidia’s earnings didn’t rally the entire market—and then projecting that to mean more declines to come—is a bit premature, no? It doesn’t mean our crystal ball is 100%, but we try to be a bit more data dependent.
Wells Fargo agreed to pay $35mm in penalties to settle allegations it overcharged almost 11k advisory accounts. The overcharges at 2 units totaled over $26.8mm! I think most of us who used to love the Stagecoach are now driving an EV…
OK, maybe not, but resort-goers and stock-holders aren’t having the same feeling these days about Disney. Its stock closed at its lowest level in almost 9 years as investors turn bearish, per Reuters. Lots of turnaround initiatives, cost cutting, etc. that has to happen.
Gap reported mixed 2Q23 results with a decline in sales across all brands. Nordstrom warned of a tough 2H23 because consumers are holding back spend, per Reuters. BBG had a story this morning about items held at Asian ports because of too much inventory over here. So, it sounds like we should collectively wait for the fall for some nice bargains as retailers are forced to get ahead of a potential new inventory glut. Warning—I’m watching you, Bose noise-cancelling headsets…. And this year’s Holiday Gift Deals should be looking extra toasty…
Per the FT, China imported a record amount of chipmaking equipment ahead of curbs by Japan and Netherlands.
The former head of JPM’s precious metals desk and his top trader are headed to prison for spoofing, fraud, and attempted market manipulation.