Markets struggle ahead of July retail sales data

Dow crawled up 26, decliners over advancers 3-2 & NAZ gained 143 after recent selling.  The MLP index was off 2 to the 235s & the REIT index pulled back 2+ to the 368s.  Junk bond funds fluctuated & Treasuries had more selling (but limited), raising yields.  Oil continued weak, dropping to the 82s, & gold was off 6 to 1940 (more on both below).

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Americans are feeling more optimistic about the odds that high inflation will continue to cool over the next few years, according to a key Federal Reserve Bank of New York survey.  The median expectation is that the inflation rate will be up 3.5% one year from now, according to the New York Federal Reserve's Survey of Consumer Expectations, down from a high of 7.1% recorded in Jun 2022.  It marks the lowest reading since Apr 2021.  Consumers also anticipate that inflation will keep declining in the coming years, according to the survey, estimating that it will hover around 2.9% 3 years from now & remain steady at 2.9% 5 years from now.  Still, that remains well above the Fed's 2% target, indicating that sticky inflation could be here to stay.  By comparison, central bank policymakers projected in their latest economic forecasts that inflation will fall to 2% by 2025.  "The decline at the one-year-ahead horizon was broad based across demographic groups and the July reading is the lowest since April 2021," the survey said.  "The survey’s measure of disagreement across respondents decreased at all three horizons."  Americans expect the cost of most items & services including homes, college tuition, medical care, rent, gasoline & food to fall over the next year.  The survey, which is based on a rotating panel of 1300 households, plays a critical role in determining how Fed policymakers respond to the inflation crisis.  That is because actual inflation depends, at least in part, on what consumers think it will be.  It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%.  Workers, in turn, will want a 3% pay raise to offset the rising costs.  Chair Jerome Powell has repeatedly stressed that policymakers are committed to wrangling inflation back to the Fed's 2% target goal.

Americans' inflation expectations drop to lowest level in two years

Kraft Heinz (KHC) North American pres will become CEO of the food giant next year, the company announced.  Carlos Abrams-Rivera will take the reins Jan 1 from Miguel Patricio, who has led KHC since 2019.  Patricio took over as CEO as KHC struggled with slumping sales, write-downs on a handful of its iconic brands & investor scrutiny over its business model.  Under Patricio's leadership, the company has tried to revive iconic brands such as Oscar Mayer & Maxwell House for younger consumers & grow its away-from-home business, with new products such as a customizable sauce dispenser for restaurants.  But demand for its products has fallen in recent months as higher prices push away budget-conscious consumers & its competitors spend more on promotions.  KHC fell 31¢.
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Kraft Heinz picks new CEO as sales slump in the face of higher prices

The Biden administration’s newly-proposed restrictions on US investments in China's tech sector have investors on the lookout for signs of retaliation by Beijing.  Last week, Pres Biden signed an exec order that prompted the Treasury Dept. to announce a proposed rulemaking that would restrict new US investments in China involving sensitive tech such as computer chips, artificial intelligence (AI) & quantum information technologies.  The move is intended to inhibit China's access to capital & knowledge that could bolster its military modernization efforts & economic competitiveness.  Some investments would be blocked outright, while others would have to be disclosed to regulators.  "It’s naive to think that there won’t be some type of retaliation from China," Tom Plumb, CEO of mutual fund Plumb Funds said.  He added that China may retaliate by restricting exports of rare earth minerals used in electronics, electric vehicles & other high-end technology that American firms source from China while taking further steps to reduce its own dependencies on vital goods from the US.  "This is obviously going to put China in a position where they’re going to try to reduce their dependency on any U.S. company for higher levels of technology," Plumb added.  China's Ministry of Commerce blasted the proposed trade restrictions, saying it was "gravely concerned" by the move & pledged to "resolutely safeguard its own rights and interests."  For its part, China’s Ministry of Foreign Affairs said the "true purpose" of the US restrictions "is to deprive China of its development rights and maintain its own hegemony."

New US tech restrictions on China have investors wary, watching for retaliation

Gold prices weakened for a 6th-straight session as weak economic reports from China sent investors to the $.  Gold for Dec closed down $2 to $1944 per ounce.  The drop came as China on Fri released Jul data showing plunging credit demand from consumers & businesses, while a weak property sector has another developer on the brink of default after missing bond payments.  Chinese property developer Country Garden (missed) bond payments over the weekend.  In addition, Chinese new credit data shows the slowest credit growth seasonally adjusted since 2014 suggesting the world's 2nd largest economy will continue to be a relative drag on the global economy this year.  Fears over the economic health of the country send the $ & treasury yields higher, both bearish factors for gold.  The ICE $ index was last seen up 0.23 points to 103.07.  The yield on the US 2-year note was last seen up 6.4 basis points to 4.956%, while the 10-year note was paying 4.168%, up 1.4 basis points.

Gold Closes Lower as China's Economic Woes Send the Dollar and Treasury Yields Higher

Oil’s rally sputtered amid a slump in summertime liquidity, leaving the commodity at the mercy of volatile, broader markets.  While signs of tightening physical supplies had in recent weeks pushed crude futures to the longest streak of gains in a year, West Texas Intermediate (WTI) today see-sawed in tandem with the stock market on fresh concerns about China’s economy.  Open interest in US crude is hovering near the lowest levels this year as investors travel during the summer.  Also dampening sentiment was the expectation that progress in Iran-US relations would lead to higher oil exports from the Middle Eastern country.  Physical markets have been strong thanks to OPEC+ supply curbs & demand holding up better than expected, helping oil to rise by about 25% since its lows in Jun.  The prompt spread in US crude, a reflection of supply & demand at the delivery point for benchmark futures at Cushing, Oklahoma, is near the strongest levels since Nov.  A snapshot of conditions in China will come Tues with industrial-production figures, including for the refining industry.  The country, the world's largest crude buyer, has been opening new plants, buoying import demand.  WTI for Sep delivery settled 0.82% lower at $ 82.51 & Brent for Oct eased 0.6% to settle at $86.21 a barrel.

Oil Rally Sputters on Thin Summer Trading, China Economic Fears

Stpcks continued to drift & stayed near even all day, looking for signs of strength in the US economy.  The monthly report on retail sales is coming tomorrow & the big retailers will be releasing their quarterly reports shortly.  The health of the Chinese economy & how it impacts the US economy is also being looked at more carefully.

Dow Jones Industrials