If you can’t take a small loss, sooner or later you will take the mother of all losses. — Ed Seykota

1. US Payrolls Marked Down by Most Since 2009 in Preliminary Data — The number of workers on payrolls will likely be revised down by 818,000 for the 12 months through March — or around 68,000 less each month — according to the Bureau of Labor Statistics’ preliminary benchmark revision. It was the largest downward revision since 2009. Before the report, the BLS’s initial payrolls figures indicated employers added 2.9 million total jobs in the period, or an average of 242,000 per month. Now the monthly pace is more likely to be around 174,000 assuming the change is distributed proportionately, still a healthy rate of hiring but a moderation from the post-pandemic peak. Benchmark revisions are done every year, but they were particularly scrutinized this year by markets and Federal Reserve watchers for any signs that the labor market may be cooling faster than originally reported. Several economists said the initial payrolls data may have been impacted by a number of factors, including adjustments for the creation and closure of businesses and how unauthorized immigrant workers are counted.
2. Fed Minutes Showed Officials Discussed July Rate Cut, Ready to Cut in September — “All participants supported maintaining the target range for the federal funds rate at [5.25% to 5.50%,] although several observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points [a quarter of a percentage point] at this meeting or that they could have supported such a decision,” read the minutes from the Federal Open Market Committee’s July 30-31 meeting. Ultimately, while noting a better balance of risks to achieving their employment and inflation goals, officials decided to wait for more data before changing interest rates. Markets are betting the FOMC will vote to cut interest rates at their next meeting on Sept. 17-18.
3. U.S. Home Sales Edged Up in July, Prices Still Near Record Highs — Mortgage rates have fallen in recent weeks, which helped boost sales modestly in July. But the volume of existing-home sales has been stuck at low levels all year, and the spring selling season, usually the busiest time of year for the housing market, was a flop. Sales of previously owned homes in July rose 1.3% from the prior month to a seasonally adjusted annual rate of 3.95 million, the National Association of Realtors said Thursday. That was the lowest level for any July since 2010. On an annual basis, existing-home sales, which make up most of the housing market, fell 2.5%.

The week ahead — Economic data from Econoday.com:

“Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible.” — Ed Seykota

1. US Producer Prices Rise Less Than Forecast — The producer price index for final demand increased 0.1% from a month earlier, according to a Bureau of Labor Statistics. The median forecast in a Bloomberg survey of economists called for a 0.2% gain. Compared with a year ago, the PPI rose 2.2%. The PPI excluding the volatile food and energy categories was unchanged in July from the prior month, the tamest reading in four months. The core PPI rose 2.4% from a year ago. Against a backdrop of dissipating inflationary pressures, weak July jobs figures prompted economists to pencil in a series of Federal Reserve interest-rate cuts beginning next month.
2. Core US Inflation Eases a Fourth Month, Sealing Fed Rate Cut — The so-called core consumer price index — which excludes food and energy costs — increased 3.2% in July from a year ago, still the slowest pace since early 2021. The monthly measure rose 0.2%, a slight pickup from June’s surprisingly low reading, Bureau of Labor Statistics figures showed Wednesday. Economists see the core gauge as a better indicator of underlying inflation than the overall CPI. That measure also climbed 0.2% from the prior month and 2.9% from a year ago. BLS said nearly 90% of the monthly advance was due to shelter, which accelerated from June. Inflation is still broadly on a downward trend as the economy slowly shifts into a lower gear. Combined with a softening job market, the Fed is widely expected to start lowering interest rates next month, while the size of the cut will likely be determined by more incoming data.
3. US Retail Sales Beat Forecasts, Defying Calls of Weaker Consumer — The value of retail purchases, unadjusted for inflation, increased 1% in July and helped by a sharp snapback in car sales, Commerce Department data showed Thursday. Excluding autos and gasoline stations, sales were up 0.4%. Ten of the report’s 13 categories posted increases. Car sales bounced back strongly after a cyberattack on auto dealerships led to a sizable drop in June. Electronics and appliances also posted solid gains. E-commerce sales rose at a modest clip, potentially reflecting heavy discounting in the period by Amazon.com Inc.’s Prime Day and other promotions from Walmart Inc. and Target Corp.
4. Harris Calls for Expanded Child Tax Credit, 3 Million New Housing Units — Vice President Kamala Harris called for a substantial expansion of the child tax credit, set a goal of building 3 million new housing units and pledged to penalize companies that engage in price gouging, while warning that former President Donald Trump’s trade policies would raise prices. The vice president sought to contrast her approach with Trump’s, criticizing the former president for proposing an across-the-board tariff of at least 10% on imports.

The week ahead — Economic data from Econoday.com:

1. Harris Picks Minnesota Gov. Tim Walz as Running Mate — Vice President Kamala Harris on Tuesday picked Minnesota Gov. Tim Walz, an avuncular former high-school teacher with a progressive streak, as her running mate in a move that added a white man to the first-ever ticket led by a woman of color. A two-term governor and current chairman of the Democratic Governors Association, Walz could be especially helpful in the battleground states of Wisconsin and Michigan. He is already well known in western Wisconsin because it shares media markets with Minnesota, while Michigan has some economic and cultural similarities with the state he now governs.
2. Bank of Japan Walks Back Talk of Rate Increases After Roiling Markets — The pledge by Bank of Japan Deputy Gov. Shinichi Uchida led to a sharp recovery in Tokyo stock prices and a fall in the yen. That moved markets closer to where they were before the July 31 news conference by Gov. Kazuo Ueda, in which he suggested he wanted to keep raising rates despite lackluster consumer spending in Japan. The Bank of Japan lifted its policy interest rate to 0.25% on July 31. Combined with Ueda’s hawkish comments and the prospect of Federal Reserve rate cuts soon, the move pushed up the yen sharply.
That in turn pushed down Japanese stocks, and the Nikkei on Monday suffered its biggest single-day percentage loss since 1987. Global stock markets including the U.S. followed suit.
3. US Initial Jobless Claims Decline by Most in Nearly a Year — Initial claims decreased by 17,000 to 233,000 in the week ended Aug. 3, according to Labor Department data released Thursday. That was helped by fewer applications in states that had registered large increases in recent weeks, such as Michigan, Missouri and Texas. The decline in initial applications may help reassure markets that the workforce is simply reverting to its pre-pandemic trend rather than rapidly deteriorating. That was the consensus until last week, when the jobs report showed employers substantially scaled back hiring in July and the unemployment rate rose for a fourth month, triggering a key recession indicator.
4. Stock market may retest Monday lows in 4-step recovery process, history suggests — based on past history from the past VIX volatility shock, history suggests a retest of those Monday lows is likely in order. The good news is that the market is likely to regain its mojo in the coming weeks, as long as a recession remains at bay and the latest episode proves to be nothing more than an economic growth scare based on Ned Davis Research. Chart below displays the result of the research.

The week ahead — Economic data from Econoday.com:

“It Ain’t About How Hard You Hit, It’s About How Hard You Can Get Hit And Keep Moving Forward.” — Rocky

1. US Labor Costs Rise Less Than Forecast as Inflation Eases — The employment cost index, which measures wages and benefits, increased 0.9% in the April-to-June period, after rising by the most in a year at the start of 2024, according to Bureau of Labor Statistics figures out Wednesday. The median estimate in a Bloomberg survey of economists called for a 1% rise. The figures corroborate recent data that show the labor market is moderating toward its pre-pandemic trend. Other measures also point to cooling wage growth, as well as a slower pace of hiring and rising unemployment.
2. Powell Says Fed Could Cut Rates ‘As Soon As’ September Meeting — Federal Reserve Chair Jerome Powell said an interest-rate cut could come as soon as September after the US central bank voted to leave its benchmark at the highest level in more than two decades. His comments followed a Federal Open Market Committee decision to leave the federal funds rate in a range of 5.25% to 5.5%, a level they have maintained since last July. Policymakers also made several adjustments to the language of a statement released after their two-day meeting in Washington, signaling they are closer to reducing borrowing costs. Notably, the committee shifted to saying it is “attentive to the risks to both sides of its dual mandate,” rather than prior wording focused just on inflation risks.
3. U.S. Hiring Slowed Sharply, With 114,000 Jobs Added in July — ob growth slowed sharply in July and the unemployment rate rose to its highest level since 2021, adding to evidence that a labor market whose strength is fading could actually be on its way to weakness.

America is still adding jobs, but no longer at a red-hot pace. The Labor Department reported on Friday that employers added 114,000 jobs last month, missing expectations. The unemployment rate jumped to 4.3%—its highest level in nearly three years, when the labor market was still clawing its way back from the pandemic.
4. Intel has worst day on Wall Street in 50 years, falls to lowest price in over a decade — Intel
shares plunged the most in 50 years on Friday, reaching a price not seen since 2013, after the chipmaker reported a big earnings miss and announced a massive restructuring.

The stock plummeted 26% to $21.48 at the close. It was the second worst day ever for the shares, behind only a 31% drop in July 1974, which was three years after Intel’s IPO. The company’s market cap is now below $100 billion. Intel said it won’t pay its dividend in the fiscal fourth quarter of 2024 and lowered its forecast for full-year capital expenditures by over 20%. The company said it would lay off more than 15% of its employees as part of a $10 billion cost-reduction plan.