Fed Signals More Restrictive Rate Hikes

• 3 min read
Fed Signals More Restrictive Rate Hikes

MARKET MOVERS

  • Fed sees interest rate hikes continuing until inflation eases substantially, minutes show. Fed officials at their July meeting indicated they likely would not consider pulling back on interest rate hikes until inflation came down substantially, according to minutes from the session released Wednesday. Officials noted that future rate decisions would be based on incoming data. But they also said there were few signs that inflation was abating.

  • Retail sales little changed in July amid a fall in gas prices and a drop in auto sales. Retail activity was flat in July as falling fuel prices held back gas station sales and consumers turned more heavily to online shopping, the Census Bureau reported Wednesday. While advance retail sales were unchanged, total receipts excluding autos rose 0.4%. The numbers are adjusted seasonally but not for inflation.

  • Target’s profit drops as it offloads inventory. Target’s profit plunged as it slashed prices to clear out a glut of unwanted inventory. “If we hadn’t dealt with our excess inventory head-on, we could have avoided some short-term pain on the profit line, but that would have hampered our longer-term potential,” Target’s CFO said. The retailer maintained its outlook for the year, however.

  • Lowe’s reports mixed second-quarter results. The company said improved operations offset lower-than-expected sales that were hurt by a shortened spring. Lowe’s saw an increase in sales to professionals such as contractors and electricians. Transaction volume was down 6% over the quarter, but average tickets rose 6.5% partially due to inflation. CEO Marvin Ellison said despite rising costs, the consumer looks healthy. Read more here.

  • Elon Musk says he was joking about buying Manchester United. The Tesla CEO first tweeted about buying Manchester United and let 4 1/2 hours go by before clarifying he was kidding about purchasing the English football club listed on the New York Stock Exchange. Musk’s Manchester United tweets could attract fresh regulatory attention since the club has traded on the NYSE since 2012.

  • The cooling housing market appears to be affecting all brokerages evenly. Deeper cuts announced as Compass' cash burn continues. Compass' challenge is that it burned through another $45 million in Q2, typically the most profitable quarter of the year for real estate brokerages. The cooling market appears to be affecting all brokerages evenly, regardless of brand, tech platform, agent compensation, or anything else.

WHAT TO WATCH

  • The bottom is not in, Bank of America claims. The Rule of 20 is one of the signposts to gauge a market bottom. The rule, which is the sum of year-over-year consumer price inflation plus trailing price-to-earnings has been lower than 20 at previous market bottoms. Currently, this number is 28.5. Bringing it down below 20 would require inflation to dramatically fall or for stocks to see a significant decline or for earnings to grow exponentially.
    Read more here.

  • Goldman says battery storage, hydrogen, and other clean energy stocks are where investors should be. Energy reliability and energy security are top of mind after Russia’s invasion of Ukraine upended global energy flows, and Goldman Sachs believes companies exposed to these themes will outperform looking forward. Globally, they see several regulatory initiatives that could provide tailwinds to accelerate solutions to Energy Reliability issues. Read more here.

  • American Airlines moves supersonic travel closer to reality. The airlines announced an agreement to purchase 20 supersonic jets from Boom Supersonic. American also has options to purchase 40 more planes, which are dubbed Overture, from the start-up. That’s cash Boom can use to develop its technology which is still years away. Entry to commercial service is planned for 2029.

  • Facebook and Instagram are losing their 'cool' appeal. They are too big to be going anywhere but MTV is still around too. The top-rated TV networks are still unchanged for so many decades. Fox News, MSNBC, and CNN. It's a possibility that Facebook and Instagram are evolving akin to those networks in terms of demographic appeal. Stable and huge but not growing enough for the youth. Internet networks grow until they stop growing and then they lose their advertising demographic. Read more here.
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