An inflation gauge that the Federal Reserve uses as its primary barometer jumped to its highest 12-month gain in more than 40 years in June.  The personal consumption expenditures price index rose 6.8%, the biggest 12-month move since 1982. The index rose 1% from May, tying its biggest monthly gain since 1981.

Apple reported fiscal third-quarter earnings that beat Wall Street expectations for sales and profit but showed slowing growth for the iPhone maker.  Apple’s revenue rose 2% during the quarter to $83 Billion, compared to 36% growth during the same period last year and over 8% growth in the March quarter. Apple’s iPhone sales exceeded Wall Street expectations, suggesting that demand for iPhone 13 models remains strong even in the second half of the product’s annual release cycle. Apple typically releases new iPhones in September and sales fall as customers anticipate new models. 

Shares of Amazon are higher after the company reported better-than-expected second-quarter revenue and gave an optimistic outlook.  Revenue grew by 7% in the second quarter which topped estimates, bucking the trend among its tech peers, most of which have all reported disappointing results.

US consumer confidence declined in July to the lowest level since February 2021 on dimmer views of the economy amid persistent inflation.  This was third monthly decline for the index in a row.  The steady weakening in sentiment risks causing consumers to cut back on discretionary purchases at a time when the economy is struggling for momentum. Inflation has dented confidence and forced the Federal Reserve to pursue aggressive interest-rate hikes geared at curbing demand.

U.S. new home sales plunged 8.1% to a seasonally-adjusted rate of 590,000 in June, from a revised 642,000 in the prior month, according to the Commerce Department.  The number of new homes sold is the lowest since April 2020, during the depths of the coronavirus pandemic. Sales have fallen since hitting a peak of 1.04 million in August 2020.

Microsoft shares are higher even after the software maker reported fiscal fourth-quarter results that were lower than Wall Street estimates.  Microsoft’s revenue increased by 12% year over year in the quarter, which ended on June 30, compared with 18% growth in the previous quarter.  The company also lowered guidance for income based on changing foreign exchange rates.

Home prices in May were 19.7% higher compared with the same month last year, according to the S&P CoreLogic Case-Shiller National Home Price Index.  This marks the second month of slower increases, as the housing market cools due to higher mortgage rates and increasing concern over inflation. Cities seeing the strongest gains were Tampa, Miami and Dallas.

The Conference Board Leading Economic Index, a gauge of the economic outlook over the next three to six months, fell 0.8 percent in June to 117.1, the fourth consecutive month of decline.  Consumer pessimism about future business conditions, moderating labor market conditions, falling stock prices, and weaker manufacturing new orders drove the LEI's decline in June.

General Motors reported second-quarter earnings this morning that missed Wall Street’s estimates after the company was unable to ship nearly 100,000 vehicles by quarter-end due to parts shortages.  But the company maintained its previous earnings guidance for the full year, saying it’s confident it will be able to ramp up production in the second half of 2022. It also confirmed it has locked in sufficient supplies of critical battery-related materials to support its mid-decade EV plans.

This may be the most important week of the summer for the markets with the Fed announcing their next decision on interest rates in the middle of the week.  We also get earnings reports from Apple, Microsoft, Google, and Facebook.  1/3 of the companies in the S&P 500 report earnings this week.  Investors will also find out if the US economy expanded or contracted in the 2nd quarter when the GDP report comes out on Thursday.

Companies have continued to surprise on the upside in the past week, with 75.5% of the S&P 500 earnings coming in better than expected.  Even more impressive is that the growth rate of earnings for the second quarter continued to grow.  As of Friday, S&P 500 earnings have grown by 6.2% year over year.

Meanwhile, concerns over the state of the U.S. economy also weighed on sentiment after the release of more downbeat economic data. A reading that tracks activity across the services and manufacturing sectors — fell to 47.5, indicating contracting economic output. That’s also the index’s lowest level in more than two years.

The tech sector rallied broadly yesterday, with the exception of SNAP. The Snapchat owner posted its weakest-ever quarterly sales growth as a public company, with revenue growth significantly below forecasts. Net losses swelled by 178% Y/Y to $422M, prompting shares to plunge 27% in extended trading, after losing nearly three-quarters of their value over the past year.

An agreement to release 18M tons of wheat, corn and other crops from Ukraine is set to be signed today following the Russian invasion in February that blocked key ports in the Black Sea. It's a big deal for Ukraine, as well as many developing nations that rely on its grain across Africa, the Middle East and Southeast Asia. It also raises hopes that an international food emergency could be avoided, with prices spiraling in recent months and exacerbating an inflation crisis.

Of the 91 S&P 500 companies that have reported so far, inflation has been mentioned on 85 of the analysts calls, according to a search of FactSet transcripts. Most say they’ve managed to navigate difficult times spurred by inflationary pressures at their highest level in more than 40 years. They report cutting costs, raising prices and generally trying to adapt models to the uncertainty of what’s ahead.
 

Semiconductor stocks were electrified yesterday ahead of 64-34 vote in the Senate over subsidizing domestic chip production. The bill would provide around $52B to encourage manufacturers to build foundries, and broadly invest in the sector, in the U.S., which both parties agree is a national security necessity. While the measure has cleared its first procedural hurdle, other details of the legislation are still being worked out.

The pain in the mortgage market is only getting worse as higher interest rates and inflation hammer American consumers. Mortgage demand fell more than 6% last week compared with the previous week, hitting the lowest level since 2000, according to the Mortgage Bankers Association’s seasonally adjusted index. Applications for a mortgage to purchase a home dropped 7% for the week and were 20% lower than the same week in 2021. Buyers have been contending with high prices all year, but with rates almost double what they were in January, they’ve lost considerable purchasing power.

China’s holdings of U.S. debt have fallen below $1 trillion for the first time in 12 years, and about $100bn below this time last year.  Japan is now the leading holder of U.S. debt with $1.2 trillion.

Earnings season is kicking into high gear as Netflix reports its Q2 results after today's closing bell. It's all going to come down to churn rate over the past three months, with the streamer previously projecting a loss of 2M subscribers for the period. That's 10 times the 200K net losses it experienced during Q1, when the stock plunged 35% in a single day after posting its first quarterly sub decline in a decade (NFLX shares have cratered 68% YTD).

Apple is joining a slate of tech giants that are tapping the brakes on their hiring plans due to concerns about a possible economic slowdown. The decision isn't part of a company-wide policy, but will rather be implemented in different business groups depending on product sales, supply chain issues and consumer demand. Apple still intends for an aggressive slate of product releases through 2023 despite the move to limit job growth and expenditures.

The Russian state-owned gas monopoly, Gazprom, has declared that due to unforeseeable circumstances it is not in a position to comply with gas contracts in Europe, and has claimed “force majeure” on its supplies. Officials in Germany and elsewhere in Europe have become increasingly concerned about the possibility of a complete shutdown of gas supplies from Russia. These fears intensified after Nord Stream 1 — a key gas pipeline from Russia to Germany — was closed earlier this month for maintenance work, with some doubting that flows will be fully restored after the work is concluded on July 21.

Earnings reports will dominate the week as big names like Bank of America, Netflix, Tesla, and Twitter report amid plenty of drama. While investors have already baked into share prices that the earnings season will show some disappointments and downward revisions, the latest reads on consumer demand, labor shortages, and supply chain issues will still be critical. The economic calendar next week includes updates on housing starts, existing home sales, and the Philadelphia Fed Manufacturing Index.

The Senate could vote on a slimmed-down measure to boost the U.S. semiconductor industry as soon as this week as lawmakers struggle to compromise on broader legislation targeting Chinese competitiveness. The scaled-back bill would likely provide $52B in grants, tax credits and other financial incentives to build out the American chip sector.  Congress will need to kick things into high gear before the August recess, which is only several weeks away.

Goldman Sachs posted profit and revenue that exceeded analysts’ estimates as fixed income traders generated roughly $700 million more revenue than expected. Second-quarter profit fell 48% to $2.79 billion, or $7.73 a share, driven by industrywide declines in investment banking revenue. Still, the per share results were more than a dollar higher than the average analyst estimate

After spending a few days in Israel to reassert America's presence in the Middle East, President Biden today will become the first U.S. leader to fly directly from Tel Aviv to Saudi Arabia. On the itinerary is somewhat of a resetting of relations, including energy security, Israeli-Saudi ties and establishing a cohesive regional front to counter Iran. The trip will be a big policy U-turn for Biden, who has previously labeled the Kingdom a "pariah" and refused to talk with Crown Prince Mohammed bin Salman. Biden is set to ask Saudi Arabia to pump more oil.

A new round of bank results from Wells Fargo and Citigroup offered further insight into the state of the economy. Wells Fargo profits declined 48% and the bank set aside funds for bad loans. Citigroup is higher as the bank beat estimates and benefitted from a rising rate environment.

Retail sales rose 1% in June, slightly better than the 0.9% estimate. The numbers are not adjusted for inflation, which rose 1.3% on a monthly basis, indicating that real sales still were slightly negative.  Gasoline stations, online sales and bars and restaurants were some of the biggest contributors.
 

Inflation hit hard at the wholesale level in June, as producer prices surged a near-record amount from a year ago due to a big jump in energy.  The producer price index, a measure of the prices received for final demand products, increased 11.3% from a year ago.  Of that gain, almost 90% came from a 10% increase in final demand energy costs as prices for oil, natural gas and other products soared during the month.

Google is the latest tech company to hit the brakes on hiring amid tightening Fed monetary policy and recession concerns.  The tech giant will slow hiring this quarter, according to an email to staff from CEO Sundar Pachai. Google will prioritize engineers and other roles it deems critical.  The move is similar to Facebook’s recent plan to scale back on new hires. On June 30th, the social media giant's CEO Mark Zuckerberg warned of an economic downturn.  Earlier in June, Tesla's CEO Elon Musk ordered a hiring pause.  JPMorgan's CEO Jamie Dimon also warned of an economic hurricane ahead as the Federal Reserve continues its process of normalizing interest rates.

A mixed earning report from Delta Airlines dragged all of the airlines lower,  as hot demand for summer travel failed to offset higher costs. Delta operations returned to 82% capacity (vs. 84% forecasted) during the second quarter as adjusted operating revenue rebounded 99% compared to pre-pandemic levels. Delta Air Lines has distinguished itself as the only major airline that has been profitable over the last 12 months.

Americans are canceling deals to buy homes at the highest rate since the start of the pandemic.  The share of sale agreements on existing homes canceled in June was just under 15% of all homes that went under contract, according to a new report from Redfin. That is the highest share since early 2020, when homebuying paused.  Higher mortgage rates and surging inflation are causing many potential homebuyers to reconsider their purchases. Higher mortgage rates have also caused some borrowers to no longer qualify for the loans they want.

For the first time in 20 years, the exchange rate between the euro and the US dollar is nearly the same -- the two currencies are less than one cent away from parity.  The euro is down nearly 15% since the start of the year. Fears of recession on the continent abound, stoked by high inflation and energy supply uncertainty caused by Russia's invasion of Ukraine.  Now is the time for Americans to plan that European vacation.

Some good news for inflation-weary Americans: There will be no price hike on Costco’s hot dogs.  During a CNBC interview the Costco CEO was asked if he would raise the signature food court item’s price:  His answer was no, never.

Wall Street is looked ahead to a big week of company earnings reports and key inflation data, on the heels of a strong employment report.  On Friday the Dow and S&P finished trading slightly lower, while the Nasdaq Composite rose for a 5th straight day.  All of the major averages secured a winning week after a stonger-than-expected jobs report Friday showed that the economic downturn worrying investors has not yet arrived and added to positive sentiment.

Billionaire Elon Musk wants to end his $44 billion deal to buy Twitter, according to a letter sent by a lawyer on his behalf to the company’s chief legal officer.  But Twitter’s board chair Bret Taylor said the company is still committed to closing the deal at the agreed-upon price and plans to pursue legal action to enforce the agreement.

China factories are feeling some heat as US and European demand is slowing.  Chinese manufacturers are starting to see demand for consumer goods in developed economies tail off, after a strong rebound from pandemic shocks. Spot ocean freight rates between China and major U.S. and European markets are falling as consumer demand retreats.  Goods demand is “normalizing” leading to a significant slowdown in global growth and trade but not quite a recession yet.

Job growth accelerated at a much faster pace than expected in June, indicating that the main pillar of the U.S. economy remains strong despite pockets of weakness. Nonfarm payrolls in June increased by 372,000, topping the 250,000 estimate. The unemployment rate remained at 3.6% Average hourly earnings rose 5.1% from a year ago, a touch faster than estimates. Education and health services led job creation, followed by professional and business services and leisure and hospitality.

Treasury yields are rising again as traders digested strong numbers in the latest jobs report that is likely to keep the Federal Reserve aggressive against inflation. The strong report would likely mean another sharp interest rate hike in July as the Federal Reserve focuses on bringing down inflation. On Thursday, two Fed officials — Christopher Waller and James Bullard — emphasized their support for another 75-basis-point increase this month.

Already up a hefty 7% last year, the dollar has soared another 12% this year, consistently exceeding nearly every forecaster's expectations on how long its winning streak would last. The greenback's strength will be most acutely felt by the ones who have little to no interest rate backing them.Indeed, the euro, the Japanese yen and the British pound, whose central banks have either not hiked rates or failed to keep up with the Fed's aggressive policy tightening, have weakened by double-digit percentages this year.

M&A hasn't been so hot recently with dealmakers and companies getting nervous about a coming recession. Kohl's just called off its sale to Franchise Group following months of negotiations, while Walgreens Boots Alliance scrapped plans to sell U.K. pharmacy chain Boots. Rising borrowings haven't helped the situation by making financing more expensive, while a downturn in equity markets have hurt company valuations. Reports suggest that Merck is in advanced discussions to acquire Seagen and is hoping to finalize an agreement to buy the cancer-focused biotech in the next few weeks. A potential deal could be worth about $40B or more.

There’s growing recognition Chinese technological dominance in the transition to cleaner energy. The International Energy Agency was the latest to warn about the consequences in a special report on the solar sector, a key element in plans for the world to reach net zero emissions by 2050. In fact, China's share in all the manufacturing stages of solar panels currently exceeds 80%, and for key elements including polysilicon and wafers, it is set to rise to more than 95% in the coming years.

Initial filings for unemployment benefits totaled 235,000 for the week ended July 2, a gain of 4,000 from the previous period. Another report indicated that companies announced 32,517 layoffs in June, a 57% jump from a month ago and the highest total since February 2021.

Three weeks ago, the Federal Reserve's Federal Open Market Committee made news when it announced its biggest rate hike since 1994, in an effort to show markets that it's serious about taming inflation. Today, the central bank will release the minutes from the June 14-15 policy meeting, giving investors a window into the FOMC's decision-making process. The details could provide more clues on how the Fed made its decision to go with the three-quarters of a percentage point increase, triple its standard 25-bps increase, and if it will go for another at the end of July.

Tesla is no longer the world's biggest electric vehicle maker as the EV pioneer takes a backseat to BYD. The Chinese automaker, which is backed by Warren Buffett, sold 641,350 new energy vehicles in the first six months of 2022, representing a 315% increase from the same period last year. Tesla, on the other hand, only delivered a total of 564,743 vehicles in H1 as it contended with supply chain problems, factory lockdowns and sales disruptions in China.

Just hours after telling an energy summit in Abuja that the oil industry was "under siege" from years of under-investment, OPEC's Secretary-General Mohammad Barkindo has died at the age of 63. Barkindo had served in the role since 2016.  Recession fears slammed oil prices on Tuesday, with crude tumbling 8% to under $100 a barrel as investors fretted over a soaring dollar and a downturn that could slam demand.

Trouble is brewing in Europe, where the euro just hit its lowest level against the dollar since 2002. Traders are gauging the amount of hiking the ECB will be able to pull off, given growing fears of a recession. That would translate into a tougher time matching U.S. interest rate hikes, on top of risk-averse investors that continue to pile into the safe-haven greenback (the dollar is up 9% vs. the euro since the start of the year). On the geopolitical front, Russia next week will shut down the Nord Stream 1 pipeline for summer maintenance activities, but many regulators and analysts fear the EU's biggest piece of gas import infrastructure won't be turned back on.

Chinese tariff relief appears to be back on the table at the White House as the Biden administration continues to confront red-hot inflation readings. The Biden administration has been divided over the matter, with Treasury Secretary Janet Yellen calling for the reduction of "unnecessary burdens," and the USTR's Katherine Tai and NSA's Jake Sullivan viewing tariffs as economic leverage to get concessions out of Beijing

Speaking of inflation, another Twitter feud erupted over the weekend between the White House and Jeff Bezos, who is increasingly becoming vocal on social media.  After President Biden criticized the energy industry, Bezos replied: It's either straight ahead misdirection or a deep misunderstanding of basic market dynamics

Americans raised spending in May by just 0.2% — the smallest increase in 2022 — as high inflation made them more cautious about what they buy and how much.  Rising prices due to high inflation is altering consumers’ spending habits.  A key measure of inflation included in the report rose sharply again in May.  Incomes rose a somewhat stronger 0.5% last month, but inflation is still rising faster than wages and leaving most Americans worse off financially.  The rate of inflation as measured by the so-called PCE index rose 6.3% in the 12 months ended in May. The better-known consumer price index has climbed 8.6% same span to mark the highest level since 1981.  As a result, inflation-adjusted disposable income has shrunk 3.3% in the past year.

The OPEC oil cartel and allied producing nations decided today to boost production of crude by an amount that will likely do little to relieve high gas prices at the pump and energy-fueled inflation plaguing the global economy.  The increase of 648,000 barrels per day in August still leaves the world thirsty for oil as it rebounds from the pandemic and runs up against the inability of the 23-member OPEC+ alliance to meet its production quotas.

Average long-term U.S. mortgage rates eased back this week after shooting up nearly three-quarters of a point in recent weeks.  Mortgage buyer Freddie Mac reported today that the 30-year rate fell to 5.70% this week from 5.81% last week. One year ago, however, the average 30-year rate was 2.98%.