‘Buy On The Cannons, Sell On The Trumpets’ — NICHOLAS VARDY

1. Hiring Accelerated With 336,000 Jobs Added Last Month — Employers added 336,000 jobs in September, the strongest gain since January and up sharply from the prior month’s upwardly revised 227,000 gain, the Labor Department said Friday. Job growth was also stronger in July than previously estimated. The unemployment rate held steady at 3.8% last month, near historically low levels. Employers raised pay at a solid pace as they competed for a limited pool of workers. Average hourly earnings rose 4.2% in September from a year earlier, down slightly from 4.3% in August. That was slower than last year but well above the prepandemic rate.
2. UAW Forgoes Additional Walkouts For Now, Citing Progress in Talks — The head of the United Auto Workers said Detroit’s automakers would be spared additional walkouts Friday, citing progress made in negotiations with all three companies. The UAW’s ongoing strike—the first to hit all three automakers simultaneously in the union’s 88-year history—enters its fourth week with about 25,000 factory workers on picket lines across five assembly plants and dozens of parts-distribution centers at GM GM 1.95%increase; green up pointing triangle, Ford and Stellantis. Fain had called additional work stoppages at facilities across the companies’ operations for three straight weeks.
While the issues of wage increases and retirement benefits are central in the negotiations, the automakers’ plan to collectively spend billions of dollars on new U.S. battery plants has hung over the talks. Union leaders have said they want those factories to be unionized, in part because of concerns about job losses or reduced wages as the companies transition to electric vehicles.
3. Biden Administration to Resume Border Wall Construction in Policy Reversal — in a public notice posted Wednesday, the Department of Homeland Security outlined its intent to build up to 20 new miles of Trump administration-era border barriers in the Rio Grande Valley of Texas, one of the busiest crossing spots for migrants attempting to enter the U.S. The about-face by the administration—which halted all border-wall construction on the first day of Biden’s presidency—shows its increasing desperation to tamp down illegal border crossings, which have surpassed two million for each of the last two years.
4. Kaiser Permanente Employees Enter Second Day of Largest Healthcare Strike — the largest health care strike in US history is now in its second day after more than 75,000 Kaiser Permanente workers began walking off the job on Wednesday. The striking employees, who work across California, Colorado, Washington and Oregon, are represented by a coalition of unions that comprise 40% of Kaiser Permanente’s staff. Nearly 200 workers from Kaiser facilities in Virginia and Washington, DC, joined the picket lines for a single day on Wednesday, as well. The union coalition is demanding higher pay among other benefits, including a strategy to fix a chronic staff shortage that workers say has left them overworked and burnt out, especially in the wake of the pandemic. Employees in a wide array of roles at Kaiser are on strike, including nursing staff, dietary workers, receptionists, lab technicians, and pharmacists.

The week ahead — Economic data from Econoday.com:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” ― Warren Buffett

1. Standoff in Congress Brings Government to Brink of Shutdown — House Speaker Kevin McCarthy (R., Calif.) rebuffed a bipartisan short-term funding bill from the Senate in favor of a House Republican plan driven by conservatives, as dim prospects for a deal raised the likelihood of a partial government shutdown starting this weekend.
Many lawmakers now anticipate that Congress will fail to fund the government past Sept. 30, a lapse that will partially close federal agencies and temporarily withhold pay for federal workers and active duty-military personnel. Both the House and Senate are moving ahead with their own stopgap proposals intended to keep the government open while work continues on full-year funding legislation. Each plan is considered a nonstarter in the other chamber, however, with sharp differences on spending levels, Ukraine and border security.
2. UAW Threatens More Strikes as GM, Stellantis Try to Keep Repair Parts Flowing — the United Auto Workers union pledged to widen its strike on Friday barring significant progress in talks with Detroit carmakers, as the companies take steps to keep critical parts flowing to their dealerships. Parallel talks between the UAW and General Motors, Ford Motor F -0.32%decrease; red down pointing triangle and Chrysler-parent Stellantis STLA -0.16%decrease; red down pointing triangle continued, a union official said Wednesday, nearly two weeks into a limited strike at all three automakers. The UAW official said the union would identify new strike targets at 10 a.m. Friday, with walkouts to begin at noon, unless bargainers make headway in negotiations for new four-year contracts. Last week, the UAW expanded the strike beyond three assembly plants—one at each company—to include 38 parts-distribution centers owned by GM and Stellantis. The union spared Ford from more walkouts, saying it was making progress in contract talks with the automaker.
3. Underlying Prices Cooled in August, Giving the Fed More Evidence of Softer Inflation — the Fed’s preferred inflation gauge, the personal-consumption expenditures price index, rose a seasonally adjusted 0.4% last month, largely reflecting energy costs. Core prices, which exclude food and energy, rose just 0.1% in August, the weakest monthly increase since 2020, the Commerce Department reported.
Over the three months through August, core prices rose at a 2.2% annualized rate. If that trend continues in the coming months, inflation would be running very close to the Fed’s 2% target. But higher energy prices pushed up overall inflation last month, highlighting why officials aren’t ready to declare victory.
4. UAW Expands Strike to GM Plant in Michigan, Ford Factory in Chicago — UAW President Shawn Fain said during a livestream address Friday that Chrysler-parent Stellantis STLA -0.73%decrease; red down pointing triangle would be spared from further walkouts for now, saying the company delivered a proposal that made significant progress on the union’s demands, including cost-of-living adjustments. The new walkouts would add nearly 7,000 workers to the roughly 18,000 UAW members on strike across the three companies, at three assembly plants and dozens of parts-distribution facilities. The Detroit companies combined have about 146,000 union workers.
5. McCarthy’s Bill to Avoid Government Shutdown Defeated in House — the bill failed in the Republican-led House with 198 in favor and 232 against, with 21 GOP lawmakers joining all Democrats in voting No. The defeat marked the latest embarrassing floor setback for McCarthy and underscores the bind facing GOP leadership. With a narrow 221-212 Republican majority in the House, McCarthy has repeatedly crafted legislation to win over the hard-line conservatives in his conference—only to see the bills fail anyway. The intraparty deadlock has left Republicans with no clear path forward, sidelined any talks with Democrats and put McCarthy’s job at the top of the party in peril. The McCarthy proposal would have extended government funding through Oct. 31, but at a $1.471 trillion annual rate, down from $1.6 trillion in fiscal 2023. The bill also included strict new border-security measures and the creation of a fiscal commission charged with coming up with ways to balance the budget and improve the country’s fiscal outlook.

In addition to the above events, the following economic data releases also had an impact on the market last week:

— ISM Manufacturing PMI: The ISM Manufacturing PMI for September was 49.8, below the consensus forecast of 50.2. This suggests that the manufacturing sector is contracting.
— ISM Services PMI: The ISM Services PMI for September was 53.6, above the consensus forecast of 53.2. This suggests that the services sector is still expanding, although at a slower pace than in previous months.
— Nonfarm payrolls: The US economy added 170,000 jobs in September, below the consensus forecast of 187,000. However, the unemployment rate remained at 3.7%, its lowest level since 1969.

“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:

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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