“If you can keep your head when all about you are losing theirs …
If you can wait and not be tired by waiting …
If you can think – and not make thoughts your aim …
If you can trust yourself when all men doubt you …
Yours is the Earth and everything that’s in it.” — Warren Buffett

1. Kevin McCarthy Hits New Hurdles With Holdout Republicans — House Republican leaders worked to salvage a short-term spending bill that sparked angry disagreements among the party’s rank-and-file, but they remained short of the support needed to pass the measure and show the party could unite to avert a government shutdown. The short-term proposal outlined Sunday by leaders of the hard-right Freedom Caucus and more-centrist Main Street Caucus would fund the government past Sept. 30 and contains an 8% cut in discretionary nonmilitary spending and a border-security provision. But about a dozen lawmakers, some from the Freedom Caucus itself, immediately called the deal a nonstarter, raising questions of whether the proposal would move ahead.
2. Fed Leaves Rates Unchanged, Signals Another Hike This Year — With economic activity stronger than anticipated, most officials also expected they would need to keep interest rates near their current level through next year, according to projections released Wednesday at the conclusion of their two-day policy meeting. Fed officials raised their benchmark federal-funds rate at their previous meeting in July to a range between 5.25% and 5.5%. They began lifting rates from near zero in March 2022.
3. House recesses after Defense bill, government funding plan implode — the House failed to pass a measure that would have set the rules for debate on a Pentagon funding bill, which had been expected to come to the House floor for a final vote later Thursday. During that meeting, Republicans had largely agreed on the rough outlines of a CR that would slash topline government funding well below the levels McCarthy and President Joe Biden agreed to last summer during high-stakes debt ceiling talks.
4. US Existing-Home Sales Fall to Seven-Month Low on Rates, Supply — Sales of previously owned US homes declined in August to the lowest since the start of the year, restrained by limited inventory and historically high mortgage rates.
Contract closings decreased 0.7% from a month earlier to a 4.04 million annualized pace, National Association of Realtors data reported. The median estimate in a Bloomberg survey of economists called for a pace of 4.1 million. Borrowing costs are now hovering around the highest levels in decades, discouraging existing homeowners — many who previously locked in lower mortgage rates — from moving. The combination of high financing costs, diminished inventory and elevated prices has created one of the least affordable housing markets on record.

The week ahead — Economic data from Econoday.com:

“Trading is very competitive and you have to be able to handle getting your butt kicked.” – Paul Tudor Jones

1. U.S. Incomes Fall for Third Straight Year — americans’ inflation-adjusted median household income fell to $74,580 in 2022, declining 2.3% from the 2021 estimate of $76,330, the Census Bureau said Tuesday. The amount has dropped 4.7% since its peak in 2019. The figures add to the picture of the economic challenges facing households since Covid-19 hit in early 2020. Inflation hit a four decade high last summer as the pandemic upended supply chains and the Ukraine war drove up energy prices.
2. U.S. Inflation Accelerated in August as Gasoline Prices Jumped — the consumer-price index, a measure of goods and services prices across the U.S. economy, rose 0.6% in August from the prior month, a faster pace than in July as gasoline prices jumped, the Labor Department reported Wednesday.
Prices rose 0.3% when stripping out the volatile categories of food and energy, a hotter pace for so-called core inflation than the prior two months. The uptick in core prices reflected higher costs for items such as rent, vehicle insurance and medical care, the Labor Department said.
On an annual basis, prices overall were up 3.7% in August versus 3.2% in July. Annual core inflation edged lower to 4.3% in August from 4.7% the prior month.
3. U.S. Inflation Accelerated in August as Gasoline Prices Jumped — The consumer-price index, a closely watched inflation gauge, rose 0.6% in August from the prior month, the Labor Department reported Wednesday. More than half of the increase was due to higher gasoline prices.
So-called core prices, which exclude volatile food and energy items, rose by a relatively mild 0.3% last month after even lower readings in June and July. The August increase reflected higher costs for items such as airfares and vehicle insurance. The monthly core reading likely keeps Federal Reserve officials on course to hold interest rates steady at their meeting next week without resolving a bigger debate over whether they will need to raise them again this year to slow the economy and maintain recent progress on inflation.

The week ahead — Economic data from Econoday.com:

“I’m also a firm believer in predicting price direction, but not magnitude. I don’t set price targets. I get out when the market action tells me it’s time to get out, rather than based on any consideration of how far the price has gone. You have to be willing to take what the market gives you.”

1. Bank of Canada Expected to Keep Rates Unchanged on Weak GDP Data — expectations that the Bank of Canada would take a breather were reinforced last week after Statistics Canada reported the economy unexpectedly contracted in the second quarter—at an annual rate of 0.2%—on a pronounced slowdown in household spending, especially on items like cars and furniture, and a fifth straight quarterly drop in real-estate investment. The data also indicated the third quarter got off to a weak start, with gross domestic product expected to remain flat in July.

Here is a summary of how the major indexes performed last week:
The major U.S. stock indexes closed lower last week, with the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all posting weekly declines of around 1%. The declines were driven by a combination of factors, including concerns about rising inflation, the potential for more interest rate hikes from the Federal Reserve, and the ongoing war in Ukraine.

The market is likely to remain volatile in the coming weeks, as investors continue to assess the risks to the economy. The release of the August CPI data on Wednesday will be a key event to watch, as it will provide an update on inflation. If inflation continues to rise, it could force the Federal Reserve to raise interest rates even more aggressively, which could further hurt the stock market.

The week ahead — Economic data from Econoday.com:

The third important ingredient for achieving peak performance is attitude. Attitude is how you deal with the inevitable adverse situations that occur in the markets. Attitude is also how you handle the daily grind, the constant 2 steps forward and 2 steps back. — Linda Raschke

1. US Job Openings Decline to 8.83 Million, Lowest Since Early 2021 — US job openings fell in July by more than expected to a more than two-year low, offering fresh evidence that labor demand is cooling. The number of available positions decreased to 8.83 million from 9.17 million in June, the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, . It marked the sixth decline in the last seven months. The so-called quits rate, which measures voluntary job leavers as a share of total employment, dropped to 2.3%, the lowest since the start of 2021. That implies Americans are less confident in their ability to find another job in the current market.
2. US Second-Quarter Growth Rate Cut to 2.1% on Business Spending — Gross domestic product rose at a revised 2.1% annualized pace in the second quarter, below the government’s previous estimate. The downward revision to GDP reflected less inventory and nonresidential fixed investment. Household spending, the engine of the US economy was revised higher, to a 1.7% pace. A gauge of the income generated and costs incurred from producing goods and services — gross domestic income — rose 0.5% after contracting in the prior two quarters, Bureau of Economic Analysis figures showed Wednesday. A measure of US profit margins widened. After-tax profits as a share of gross value added for nonfinancial corporations, a measure of aggregate profit margins, rose in the second quarter to 14.3% from 13.8%.
Meanwhile, key inflation gauges watched closely by the Fed were revised lower. The personal consumption expenditures price index excluding food and energy rose at a 3.7% pace in the second quarter, the slowest in more than two years.
3. Core personal consumption expenditures price index Rise Moderately — The core personal consumption expenditures price index, which strips out the volatile food and energy components, rose 0.2% in July for a second month. The overall PCE price index also increased 0.2%, Bureau of Economic Analysis data showed. The subdued inflation figures underscore the progress the Fed has made over the past year in taming price pressures. That said, the central bank is far from declaring victory, and the strength of consumer spending presents a fresh concern for policymakers seeking to ensure inflation continues to dissipate.
Low unemployment, pandemic-era savings and wage growth are providing Americans the wherewithal to keep spending, allowing the economy to power ahead. Many economists have had to push out their recession calls, or in some cases, scrap them altogether as a result. The latest figures point to a strong start to economic growth in the third quarter.
4. Money-Market Fund Assets Climb to Fresh Record $5.58 Trillion — about $14.37 billion poured into US money-market funds in the week through Aug. 30, according to data from the Investment Company Institute. Total assets reached $5.58 trillion, versus $5.57 trillion the previous week. Investors have piled into the money funds ever since the Federal Reserve began one of the most aggressive tightening cycles in decades last year to quell runaway inflation. Last month officials raised their main policy rate to between 5.25% and 5.5%, the highest in 22 years. Money funds have been quicker to pass on the benefits to investors than banks. In a breakdown for the week to Aug. 30, government funds, which invest primarily in securities like Treasury bills, repurchase agreements and agency debt saw assets rise to $4.59 trillion, an $8.44 billion increase. Prime funds, which tend to invest in higher-risk assets such as commercial paper, saw assets rise to $878 billion, about a $4 billion increase.
5. US Payrolls Rise by More Than Forecast While Wage Growth Cools — Nonfarm payrolls rose by 187,000 after the prior two months were revised significantly lower, a Bureau of Labor Statistics report showed Friday. The unemployment rate climbed to 3.8%, the highest since early last year and largely reflecting a pickup in participation.
The payrolls figure also showed a combined drop of 54,000 jobs in the film and trucking industries, mainly due to an entertainment strike and the shutdown of a major carrier, the report showed. The unemployment and pay figures likely add to the case for the Federal Reserve to hold interest rates at a 22-year high this month and potentially leave them there for awhile. However, officials have indicated they may still consider another hike this year, especially if inflation fails to keep cooling.

The week ahead — Economic data from Econoday.com: