The good traders are the ones who can hold their ground the majority of the month and participate in that small handful of trades that are windfalls. — Linda Raschke

1. U.S. Home Sales Fell in July, Extending Prolonged Slump — Home sales fell in July for the fourth time in five months, extending one of the deepest housing slumps in recent memory.
Sales of existing homes, the majority of purchases, decreased 2.2% in July from the prior month to a seasonally adjusted annual rate of 4.07 million, the National Association of Realtors reported. That was the slowest monthly sales pace since January, and the slowest July pace since 2010. The combination of high mortgage rates, near-record home prices and limited inventory has been suffocating sales, which were down 16.6% from a year earlier in July. With mortgage rates last week rising back above 7% to a two-decade high, sluggish home sales activity is expected to continue for a while.
2. China, Russia Deliver Broadsides Against the West at Brics Summit — Russia and China used a summit of countries known as the Brics this week to air their grievances against Western powers, present themselves as defenders of developing economies and set out the case for an alternative international order. Leaders of Brics nations Brazil, India, China and South Africa, gathered in Johannesburg with Putin—who faces an international arrest warrant for alleged war crimes in Ukraine—joining by video.
3. Dick’s Sporting Goods, Macy’s Flash Warning Signs on U.S. Consumer Spending — The sporting-goods chain slashed its profit targets for the year after missing Wall Street forecasts for the second quarter. Sales slowed after a pandemic-fueled surge for outdoor gear, leaving it with excess inventory. Executives said thefts of merchandise were also higher than they expected.
Macy’s reported declining sales in the June quarter and warned that more shoppers are late on their credit-card payments. Delinquencies are viewed as a proxy for consumer health, and missed payments endanger a key source of revenue for the department-store chain. The readouts from Dick’s and Macy’s illustrate the economic challenges that persist among sellers of consumer goods. Spending on items such as apparel, electronics and sporting goods surged early in the pandemic but slowed significantly starting last year, causing whiplash among retailers that bet on buying patterns continuing at higher levels.
4. Powell Says Fed Will ‘Proceed Carefully’ on Any Further Rate Rises — Federal Reserve Chair Jerome Powell cautioned that past interest-rate increases had yet to fully slow the economy, an argument for holding rates steady for now, even though stronger and sustained growth could require higher rates to keep inflation declining. Fed officials lifted their benchmark federal-funds rate last month by a quarter-percentage-point to a range between 5.25% and 5.5%, a 22-year high, continuing the most rapid series of increases in four decades. Their next meeting is Sept. 19-20.
Powell’s speech illustrated how he is trying to thread the needle between slowing hiring, investment and spending to bring down inflation without providing so much restraint as to create a needlessly severe economic slowdown.

The week ahead — Economic data from Econoday.com:

“I really value the fact that I’ve learned to trade as a craft. Like any craft, such as piano playing, perfection may be elusive – I’ll never play a piece perfectly, and I’ll never buy the low and sell the high – but consistency is achievable if you practice day in and day out.” – Linda Raschke

1. Retail Sales Rose in July for Fourth Straight Month — Retail sales—a measure of spending at stores, online and in restaurants—rose a seasonally adjusted 0.7% last month from the month before, the Commerce Department reported. That was a faster pace than in June and was higher than the 0.2% increase in consumer prices last month, a sign that Americans’ spending is outpacing inflation. Consumer spending is driving a resilient economy, despite rate increases by the Federal Reserve. Employers added jobs at a steady pace in July and wages rose briskly, the Labor Department said earlier this month. Inflation is also easing, providing consumers with some relief from rapid price increases in recent years and likely deterring the Fed from raising interest rates at its September meeting.
2. China Cuts Rate by Most Since 2020 as Economic Woes Deepen — the People’s Bank of China lowered the rate on its one-year loans — or medium-term lending facility — by 15 basis points to 2.5% on Tuesday, the second reduction since June. All but one of the 15 analysts surveyed by Bloomberg had predicted the rate would stay unchanged. A short-term policy rate was also cut by 10 basis points. The surprise move came shortly before the release of disappointing economic activity data for July showing growth in consumer spending, industrial output and investment sliding across the board and unemployment picking up. The surprise policy move suggests heightened concern from policymakers about the deteriorating outlook, especially in the real estate market, where another major property developer now faces a debt crisis and home sales continue to decline. Risks are also spreading to the financial sector, where an affiliate of a major financial conglomerate, which had exposure to the real estate sector, missed payments on some investment products.
3. Fed minutes of July 25-26 policy meeting — “Most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” according to minutes of the US central bank’s July 25-26 policy meeting published Wednesday in Washington. But two Fed officials favored leaving rates unchanged or “could have supported such a proposal,” instead of the rate hike the Federal Open Market Committee ultimately authorized at the conclusion of the meeting, the minutes showed. The July rate hike brought the target range for the Fed’s benchmark rate to 5.25% to 5.5%, the highest level in 22 years. That marked a resumption of increases after officials left rates unchanged at the previous gathering for the first time since they began tightening in early 2022.
4. Mortgage Rates Hit 7.09%, Highest in More Than 20 Years — the average mortgage rate rose to 7.09%, its highest level in more than 20 years, according to data released last week by mortgage giant Freddie Mac. The increase extends a lengthy stretch of high borrowing costs that has slowed the housing market to a crawl. This marked the first time since last fall that the rate on a 30-year, fixed-rate mortgage rose above 7%. A year ago, rates were around 5%.
The housing market is the part of the economy hit most directly by the Federal Reserve’s high-rate policies. The resulting slowdown in refinancing and purchase activity has battered some mortgage lenders, leading to tens of thousands of layoffs in the industry and weighing on economic growth.
5. U.S. Plans New Tariffs on Food-Can Metal From China, Germany and Canada — the Commerce Department said an investigation found that steelmakers from the three countries sold their tinplate products in the U.S. at unfairly low prices, justifying new import duties. Chinese products would be subject to the highest tariffs of the three countries—a levy of 122.52% of their import value. That rate partly reflects Chinese companies’ refusal to cooperate with the investigation to prove their independence from the Chinese Communist Party, an administration official said. The U.S. presumes state-owned companies from economies such as China sell products in the U.S. at prices distorted by subsidies, unless these enterprises can prove otherwise.
The tariff rates—still preliminary until a final ruling in January—are proposed at much lower rates of 7.02% for German companies including Thyssenkrupp Rasselstein and 5.29% for Canadian companies such as ArcelorMittal Dofasco.

The week ahead — Economic data from Econoday.com:

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