Markets waver ahead of signs on inflation and the economy

Dow was down 20, decliners over advancers about 5-4 & NAZ went up 142.  The MLP index stayed in the 274s & the REIT index fell 3+ to the 406s.  Junk bond funds were mixed & Treasuries hardly budged, raking yields up a smidgen (more below).  Oil  gained 1+ to the 78s (more below) & gold jumped 20 to 2493 (record territory).    

Dow Jones Industrials

The US economy has remained remarkably strong even amid persistent inflation & high interest rates.  And yet, 59% of Americans falsely believe that the US is currently in a recession, according to a recent survey of 2000 adults by Affirm in Jun.  Citing higher costs & difficulty making ends meet, most respondents said they think a recession started roughly 15 months ago, in Mar 2023 & could last until Jul 2025, Affirm found.  Officially, the National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”  The last time that happened was early in 2020, when the economy came to an abrupt halt.  In the last century, there have been more than a dozen recessions, some lasting as long as 1½ years.  Still, regardless of the country's economic standing, many Americans are struggling in the face of sky-high prices for everyday items, & most have exhausted their savings & are now leaning on credit cards to make ends meet.  “Money is top of mind,” said Vishal Kapoor, senior vice president of product at Affirm.  “Consumers are resilient but they’re feeling the pinch of higher prices.”  Economists have wrestled with the growing disconnect between how the economy is doing & how people feel about their financial standing.  As more consumers stretch to cover increased prices & higher interest rates, there are new indications of financial strain.  A growing number of borrowers are falling behind on their monthly credit card payments.  Over the last year, roughly 9.1% of credit card balances transitioned into delinquency, the New York Fed reported for the 2nd qtr of 2024.  And more middle-income households anticipate struggling with debt payments in the coming months. 

59% of Americans wrongly think the U.S. is in a recession, report finds

Treasury yields were lower as investors looked ahead to the latest inflation prints & other key economic data slated for the week.  The yield on the 10-year Treasury edged down by roughly 1 basis point at 3.928% & the 2-year Treasury was last 2 basis points lower at 4.034%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Amid continued uncertainty about the state of the US economy, investors looked ahead to fresh inflation data due this week.  Jul's producer price index, which tracks wholesale prices, is due tomorrow, followed by the consumer price index for the same month on Wed.  When the Fed met last month, it left rates unchanged, but hinted that a Sep rate cut was on the table, depending on signals from economic data, both on the inflation & labor market front.  That was followed by a weaker-than-expected jobs report which prompted recession fears, which were however soothed slightly by the latest weekly initial jobless claims figures that came in below forecasts last week. Markets are pricing in a 100% chance of a rate cut from the Fed in Sep, but traders were last split on the size of the cut, CME Group's FedWatch tool showed.  Also this week, retail sales figures for Jul are expected & could provide additional hints about the state of the economy & how US consumers are faring.

Treasury yields fall as attention turns to inflation data 

US crude oil topped $77 per barrel today, rising for the 5th day as the Pentagon dispatched more forces to the Middle East in anticipation of an Iranian attack on Israel.  Defense Secretary Lloyd Austin ordered a carrier strike group, including F-35 warplanes, to accelerate its deployment to the region.  Austin also ordered a guided-missile submarine to the Middle East.  West Texas Intermediate Sep contract was $77.69 per barrel, up 85¢ (1.1%) & YTD US crude oil has gained 8.4%.  Brent Oct contract was $80.37 per barrel, up 74¢ (0.9%) & YTD the global benchmark is ahead 4.3%.  Israel has been preparing for strikes by Iran and the Hezbollah militia for nearly 2 weeks, after the assassination of a Hamas leader in Tehran.  US crude oil is trading higher even as OPEC lowered its global demand growth forecast by 135K barrels per day, citing softening consumption in China.  “The oil markets reacted strongly to the increased geopolitical risk even as OPEC has shown some concern about its demand growth,” said Phil Flynn, senior market analyst at the Price Futures Group, though he said the market is still on track for a deficit as inventories fall.  US crude oil finished last week more than 4% higher, snapping a 4-week decline, as the stock market recovered most of its losses from a flash sell-off caused by mounting fear of a recession & after the Bank of Japan lifted interest rates a fraction.

U.S. crude oil tops $77 as Pentagon sends more forces to Middle East

Stocks are coming off a whipsaw week that has left markets jumpy & on edge.  Though the major indices practically ended last week where they had started, it didn't come without volatility throughout the week & that is likely to continue.  Markets are seeing a slowing economy, which has shifted the debate from whether the Federal Reserve should cut interest rates in Sep to how much they should cut them.  Volatility this week may depend on the signals that are introduced.  As can be expected, gold is in demand.