- US stocks were off by 0.91% while international equities fell by 2.31%. Bonds increased by 1.01%. The yield on the 10-year dropped by 16 basis points but the 3-month yield increased by a whopping 30 basis points. The 2-year treasury bond (3.13%) is inverted when compared to the 10-year (2.93%), a possible recession indicator.
- Earnings season started this week and companies representing 6% of the S&P 500 market cap reported, excluding financials, earnings beat estimates by 3.3%. Financials did not fare as well, JP Morgan and Wells Fargo missed estimates. JPM froze its buyback program and increased its capital cushion for potential future credit losses. WFC and Citibank did the same, setting aside hundreds of millions for possible future credit losses. Citibank Chief Executive Jane Fraser said, “While sentiment has shifted, little of the data I see tells me the U.S. is on the cusp of a recession…so while a recession could indeed take place over the next two years in the U.S., it’s highly unlikely to be as sharp a downturn as others in recent memory.”
- Inflation clocked in at 9.1%, the highest number in the last 40 years, and worse than expected. Grocery prices were 12.2% higher. Inflation is a backward looking indicator, but it was hard to find anything good in the report. The only good news, not reflected in this report, is that commodity prices have been falling hard in the last few weeks. Gas is now $4.577 per gallon compared to a June 14th peak of $5.016, according to the AAA.
- Retail sales were up by 1% in June, but that trailed the 1.3% increase in consumer prices. The sales numbers showed that for the most part, consumers are hanging in there with higher prices.
- The Fed said that manufacturing output fell for the second straight month in June. Home construction is slowing. And the University of Michigan index of consumer sentiment was close to the lowest level on record.
- Initial jobless claims were 244,000, up from 235,000. The number is still low historically has been been very slowly trending higher.