Though Friday morning started slow and choppy, the afternoon was celebrated with substantial exuberance after the House passed a more than 700 billion dollar deficit spending bill.  The tech giants led the rally as they surged higher, extending the index charts until the day’s close.  Today we begin with reports from Empire State Manufacturing, followed by the Housing Market Index, some Fed speak, and short-term bond auctions as earnings inspiration slow.  Expect the market to rest sideways from this extended condition or begin a pullback at any time. 

During the night, Asian markets traded mixed as Chinese economic reports showed their economy continues to slow.  European markets trade flat but mainly bullish this morning, trying to build on the cautions gains of last week.  However, after a four-week winning streak, U.S. futures point to a modest gap down open with manufacturing and housing data pending. 

Economic Calendar

Earnings Calendar

With the bulk of earnings behind us, we will see many more small-cap reports with a few possible market movers mixed in but expect them to continue to decline.   Notable reports include BLND, COMP, FN, TME, TDUP, WEBR, WWE, & ZIP.

News & Technicals’

Retail sales grew by 2.7% in July from a year ago, the National Bureau of Statistics said Monday.  That’s well below the 5% growth forecast by a Reuters poll and down from growth of 3.1% in  June.   Likewise, industrial production rose by 3.8%, missing expectations for 4.6% growth and a drop from the prior month’s 3.9% increase.  In addition, investment in real estate fell at a faster pace in July than in June, while investment in manufacturing slowed its pace of growth.  Medicare is gaining the power to negotiate prices for certain drugs and punish pharmaceutical companies that don’t play by the rules.  The legislation represents a historic expansion of Medicare’s power that was fiercely opposed by the pharmaceutical industry.  But the negotiation powers are limited in scope, and some lawmakers argue that legislation doesn’t go far enough.  The fourth quarter will be “the challenge” for Malaysia’s economy if global headwinds such as Russia’s war on Ukraine and China’s zero-Covid policy persist, said Finance Minister Zafrul Aziz.   Growth momentum for July to September should be strong, but this could result from an unfavorable base effect from the same time in the previous year, Zafrul said.  On Friday, Malaysia’s central bank announced that the country’s economy grew 8.9% from April to June from a year earlier.  Starbucks, Kraft Heinz and Mondelez, are among the companies focusing on premium products during the cost-of-living crisis.  By “beefing up their premium proposition” as well as value products, companies can capture and retain trade-down audiences, says Paul Martin, KPMG’s head of retail.  Tesla has made over three million cars, CEO Elon Musk tweeted on Sunday.  “Congrats, Giga Shanghai, on making the millionth car!  Total Teslas made now over 3M,” Musk tweeted.  Treasury yields trade with little changed early Monday, with the 2-year at 3.25%, the 5-year at 2.96%, the 10-year at 2.83%, and the 30-year at 3.10%.

Trading on Friday started slow but picked up strongly in the afternoon, stretching the extended index charts with substantial exuberance.  Big tech names surged upward after the news that another more than 700 billion dollar spending bill had passed in the House.  The market loves deficit spending, while the T2122 indicator and bond inversions suggest a pullback could begin at any time.  Of course, Fed members warn that inflation is still unacceptably high and rate increases will continue, but the excitement of the rally has allowed traders to ignore that inconvenient truth.  Today we get a reading from Empire State Manufacturing, the Housing Market Index, some Fed speak, and short-term bond auctions. 

Trade Wisely,

Doug