“Markets are never wrong – opinions often are.” — Jesse Livermore

1. U.S. Home Sales and Prices Fell in August as Mortgage Rates Rose — sales of previously owned homes dropped 0.4% in August from July to a seasonally adjusted annual rate of 4.8 million, the weakest rate since May 2020, the National Association of Realtors said Wednesday. August sales fell 19.9% from a year earlier.
The housing market has slowed in recent months—with seven months of monthly sales declines through August—as the Federal Reserve aggressively raises interest rates to cool the economy and bring down high inflation. That has led to higher mortgage-interest rates and increased borrowing costs for home buyers by hundreds of dollars a month, pushing many out of the market. The average rate on a 30-year fixed-rate mortgage was 6.02% in the week ended Sept. 15, up from 2.86% a year earlier, according to housing-finance agency Freddie Mac.
2. Fed Raises Interest Rates by 0.75 Percentage Point for Third Straight Meeting — the Federal Reserve approved its third consecutive interest-rate rise of 0.75 percentage point and signaled additional large increases were likely at coming meetings as it combats inflation that remains near a 40-year high.
The decision Wednesday—unanimously supported by the Fed’s 12-member rate-setting committee—will lift its benchmark federal-funds rate to a range between 3% and 3.25%, a level last seen in early 2008. Most of the 19 officials who participated at the Fed’s policy meeting expect to lift the rate at least by another 1.25 percentage point by December, to a range between 4.25% and 4.5%, according to their new projections latest release. The Fed has two more meetings this year.
3. A Day After Fed Raises Rates, Reverse Repos Hit New Record — the Federal Reserve Bank of New York said that a day after the U.S. central bank pushed up its short-term target rate by a large 0.75 percentage point to between 3% and 3.25%, money-market funds and others parked a record $2.359 trillion at the New York Fed’s reverse repo facility. The facility last saw a record inflow on June 30, at $2.329 trillion. That surge came at the end of a quarter, often a time where the reverse repo facility pulls in a significant amount of money due to temporary market factors. The Fed’s reverse repo tool takes in cash, primarily from money-market funds. It is designed to help set a lower end for short-term interest rates. After the Fed’s rate rise Wednesday, the rate now stands at 3.05%, up from 2.30% in place before the Fed lifted rates.
The Fed uses another tool, called the interest on reserves balances rate, now at 3.15%, to set a high end for short-term rates. Together, both rates drive the market-based setting of the federal-funds rate, the central bank’s primary tool to achieve its inflation and job mandates.
4. Oil Falls Below $80 a Barrel — U.S. oil prices fell below $80 a barrel for the first time since January, dragged down by mounting fears of a global recession and a rapidly strengthening U.S. dollar. West Texas Intermediate crude futures dropped 5.7% to close at $78.74. The main U.S. oil price is down about 36% from its June peak and nearly to where it began the year. Brent crude, the global benchmark, shed 4.8% Friday to end at $86.15. Behind the slide: A string of major central banks—including the Federal Reserve, the Bank of England, the Swiss National Bank and Norway’s Norges Bank—raised interest rates this week. Tightening financial conditions on a near-global basis have ratcheted up fears about a widespread economic slowdown, which would also mean lower energy demand. Business surveys Friday indicated that economic activity in Europe declined sharply in September.

The week ahead — Economic data from Econoday.com:

“Every battle is won or lost before it’s ever fought” – Sun Tzu

1. U.S. Inflation Remained High in August — the Labor Department on Tuesday reported its consumer-price index rose 8.3% in August from the same month a year ago, down from 8.5% in July and from 9.1% in June, which was the highest inflation rate in four decades. The CPI measures what consumers pay for goods and services. So-called core CPI, which excludes often volatile energy and food prices, increased 6.3% in August from a year earlier, up markedly from the 5.9% rate in both June and July—a signal that broad price pressures strengthened.
On a monthly basis, the core CPI rose 0.6% in August—double July’s pace. Investors and policy makers follow core inflation closely as a reflection of broad, underlying inflation and as a predictor of future inflation.
2. Mortgage Rates Hit 6.02%, Highest Since the Financial Crisis — per WSJ, the average rate on a 30-year fixed mortgage climbed to 6.02% this week, up from 5.89% last week and 2.86% a year ago, according to a survey of lenders released late last week by mortgage giant Freddie Mac. The last time rates were this high was in the heart of the financial crisis in 2008, when the U.S. was deep in recession. The jump in mortgage rates is one of the most pronounced effects of the Federal Reserve’s campaign to curb inflation by lifting the cost of borrowing for consumers and businesses. Already, it has ushered in a sea change in the housing market by adding hundreds of dollars or more to the monthly cost of a potential buyer’s mortgage payment, slowing what was a red-hot market not so long ago. Higher rates are forcing some would-be buyers to continue renting. Other buyers are skimping elsewhere to make their mortgage payments.
3. U.S. Retail Sales Rose 0.3% in August, Showing Resilience in Face of Inflation — according to WSJ, U.S. consumers spent at a steady pace in August as gasoline prices fell, with purchases of vehicles and back-to-school items like clothing driving the gain. Retail sales, a measure of spending at stores, online and in restaurants, rose 0.3% in August from the prior month, the Commerce Department said Thursday. July spending was revised down to a 0.4% decline from a previous flat reading.
Much of August’s gain was due to higher spending on vehicles, with purchases at motor vehicle and parts dealers up 2.8% on the month. A measure of spending that strips out vehicle sales declined 0.3% from July. Stripping out both vehicle and gasoline spending, retail sales rose 0.3%.
4. FedEx Stock Tumbles After Warning on Economic Trends — The delivery giant’s shares lost 21% Friday—its biggest one-day percentage drop ever—after the company said a macroeconomic slowdown had led to lower volumes of goods moving around the world in recent weeks. FedEx and rival United Parcel Service Inc. have confronted lower volumes of packages this year as a pandemic boom in online shopping cools. Consumers have switched more of their spending to travel and entertainment, plus high inflation has reduced the number of items being purchased. Big retailers that are FedEx customers like Walmart Inc. have also pulled back on orders after they have been stuck with a glut of unsold goods.

The week ahead — Economic data from Econoday.com:

“The stock market is never obvious. It is designed to fool most of the people, most of the time- Jesse Livermore” ― Jesse Livermore

1. Liz Truss to Become Next U.K. Prime Minister, Succeeding Boris Johnson — U.K. Foreign Secretary Liz Truss won the race to lead the ruling Conservative Party and become Britain’s next prime minister, taking the helm of a nation heading into an economic storm. The new prime minister faces a daunting array of challenges. The U.K. economy is spiraling toward recession as inflation ramps up. Ms. Truss has only a narrow base of loyalists within the Conservative Party and polls show limited support for her across the country at-large.
2. U.S. Plans Shift to Annual Covid Shots as New Boosters Roll Out — U.S. health authorities plan to recommend that people get Covid-19 boosters once a year, starting with the new shots now rolling out, a shift from their current practice of issuing new advice every several months.
The annual cadence would be similar to that of flu shots, White House officials said Tuesday, though elderly people and those with weakened immune systems may need more frequent inoculations. To date, health authorities had recommended the extra doses based on the ebbs and flows of the virus’s evolution and new insights into people’s waning immunity. Yet the authorities wound up making recommendations for booster doses to different groups every several months.
3. Fed on Path for Another 0.75-Point Interest-Rate Lift After Powell’s Inflation Pledge — the Federal Reserve appears to be on a path to raise interest rates by another 0.75 percentage point this month in the wake of Chairman Jerome Powell’s public pledge to reduce inflation even if it increases unemployment. St. Louis Fed President James Bullard said in an Aug. 18 interview he was leaning in favor of a 0.75-point rate increase at the coming Fed meeting. “We should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation,” he said. Fed officials have raised rates this year at the fastest clip since the early 1980s, taking their benchmark federal-funds rate from near zero in March to a range between 2.25% and 2.5% in July.
4. ECB Raises Interest Rates by a Historic 0.75 Point as Europe Stares at Recession — the ECB Bank said in a statement that it would increase its key rate to 0.75% from zero—its second hike this year following a 50-basis-point rise in July—and signaled that further rises were likely this year. The increase mirrors recent moves by other major central banks, including the Federal Reserve, which is expected to unveil a third successive 0.75-point rate rise later this month. Canada’s central bank raised its policy rate on Wednesday by 0.75 percentage point to 3.25%, a 14-year high.
Rising borrowing costs will likely increase the risk of a slide into recession for Europe’s currency union, which is wrestling with surging energy costs and sagging confidence among households and businesses, driven by the war in neighboring Ukraine. With governments piling on debt to shield consumers and businesses from the impact of rising prices, a national election in Italy later this month could exacerbate strains in the region’s bond markets.
5. Queen Elizabeth II, Longest-Reigning British Monarch, Dies — Queen Elizabeth II, the longest-reigning monarch in British history and a symbol of stability in an era of sweeping social and political change, has died at age 96. During her seven decades on the throne, the British Empire was dismantled and the U.K.’s role in the world shrank dramatically. Growing pressure for independence in Scotland and arguments for Irish unification threatened to redraw the U.K.’s own borders, and ruptures within her family raised questions about the monarchy’s future role.
But at the end, Queen Elizabeth remained head of state of 14 countries in addition to the U.K., and the leader of a Commonwealth that now includes 54 countries with a combined population of over two billion people. The new monarch is her eldest son, Charles, whose son, William, becomes next in line for the throne.

The week ahead — Economic data from Econoday.com:

THERE WILL NOT BE ANY POSTING FOR THE WEEK OF SEPT 2ND 2022 — WE ARE AWAY FOR THE LONG WEEKEND.

The week ahead — Economic data from Econoday.com: