Don’s Notebook July 31, 2018

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Unexpected pressure in Tuesday’s key inflation readings — the core Personal Consumption Expenditure price index and the Employment Cost index – may have pressured for hawkish FOMC results on Wednesday. However, easing inflation pressure along with healthy consumer vital signs was signaled from the Personal Income & Outlays Report for June.

  • Both price indexes, the overall and the closely watched core rate which excludes food and energy, posted only marginal 0.1 percent gains in June with year-on-year rates favorable, at 2.2 percent overall and at 1.9 percent for the core, both unchanged from May.

Personal income rose a useful 0.4 percent with the wages & salaries component also at 0.4 percent.

  • The savings rate held unchanged in June at 6.8 percent.

Fed Notes:

  • Fed policymakers begin their latest two-day policy meeting today, with an interest rate decision due tomorrow afternoon at 2 p.m. ET.
  • No increase is expected at this meeting after hikes in March and June.

Economic Calendar Notes:

  • S&P/Case-Shiller releases May home prices at 10 a.m. ET.
  • The Conference Board’s July consumer confidence is released at 10 a.m. ET.

Overnight Trading Notes:

  • S. stock futures were higher this morning, with the Dow and S&P 500 on the last day of July up 4.27 percent and 3.1 percent, on track for their best monthly performances since January.
  • The MSCI Asia Pacific Index slipped 0.6 percent
  • Japan’s Topix index closed 0.8 percent lower following weak China data and the BOJ decision.
  • In Europe, the Stoxx 600 Index was broadly unchanged at 5:45 a.m. Eastern Time as investors digested earnings and economic data.
  • The Nasdaq was on its first three-session losing streak of more than 1 percent in nearly three years.
  • The recent tech stock retreat was led by Facebook’s nearly 22 percent three-session slide.

Earnings Notes:

Dow stock Apple was on a three-session decline of about 2.5 percent ahead of Tuesday’s after-the-bell earnings. Investors will be looking for hints as to how well the iPhone X has been selling.

  • Dow components Procter & Gamble and Pfizer reported earnings this morning. P&G beat on quarterly profit but missed on revenue. Pfizer beat on both the top and bottom lines.

Earnings Notables:

  • Honda Motor, Sony, BP, Unum Group, Sanofi, Shopify, Ralph Lauren, Pfizer, Taubman Centers, Vulcan Materials, Geox and Samsung
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