BlackMask Breaking News

(Reuters) – Federal Reserve Chair Jerome Powell said this week he’s looking for compelling signs that inflation is cooling before the U.S. central bank will let up on what’s so far been its most aggressive set of interest rate hikes in decades. In data released on Friday, he largely got the opposite.

Inflation by the Fed’s preferred measure, the personal consumption expenditures price index, jumped 6.8% in June, its steepest increase since 1982, and the rise in core prices – excluding food and energy prices and used by the Fed as an indicator of the inflation outlook – accelerated.

Meanwhile labor costs surged 5.1% in the second quarter from a year earlier, the fastest pace in decades. NB: the dreaded wage push inflation! The data prompted traders of futures tied to the Fed’s target policy to begin to price back in another 0.75-percentage-point interest rate increase at the Fed’s September policy meeting, putting the likelihood of that outcome at about a one-in-three, up from one-in-four earlier on Friday.

“I’m convinced we’re going to have to do more in terms of interest rate increases,” Atlanta Fed President Raphael Bostic  said in an interview on National Public Radio’s “Morning Edition” program before the release of the inflation and wage data. “Exactly how much and then what trajectory will depend on how the economy evolves over the next several weeks and months. We’re going to get a lot of data … before our next meeting” on Sept. 20-21. That data includes more than a dozen critical readings covering inflation, employment, consumer spending and economic growth. The Fed this week raised the target range for its policy rate to 2.25%-2.50%, and for the first time since the current cycle of rate hikes began in March, Powell declined to specify exactly how much he expected the central bank would have to raise rates at its next meeting. That, along with his comments about softening consumer spending and a nod to the eventual need for reducing the pace of Fed rate hikes, prompted some analysts and equities traders to conclude the Fed would stop its policy tightening soon. Much of Friday’s data appeared to undermine that thesis. The employment cost data, which Powell said on Wednesday he would be watching, “doesn’t provide any evidence that wage growth is slowing and leaves the Fed on track to lift the funds rate another 75bps at its September meeting,” Oxford Economics analysts wrote in a note. The Fed’s fast pace of rate hikes this year has already begun to slow the economy, contributing to a negative reading on gross domestic product in the second quarter and fanning worries that the economy is already, or soon will be, in a recession.

WASHINGTON (Reuters) -U.S. labor costs increased strongly in the second quarter as a tight jobs market continued to boost wage growth, which could keep inflation elevated and give the Federal Reserve cover to continue its aggressive interest rate hikes. Other data on Friday showed consumer spending accelerating in June, though the uptick was tied to higher costs for gasoline as well as a range of other goods and services, with monthly prices surging by the most since 2005. Soaring inflation contributed to the economy’s contraction in the first half of this year, leaving it on the brink of a recession. “The Fed will continue to grapple with trying to tame inflation without tipping the economy into a recession,” said Dante DeAntonio, an economist at Moody’s Analytics in West Chester, Pennsylvania “The data on wage and price growth will not do them any favors as upward pressure clearly remains even as the overall economy has weakened.” The Employment Cost Index, the broadest measure of labor costs, increased 1.3% last quarter after accelerating 1.4% in the January-March period, the Labor Department said.

Labor costs surged 5.1% on a year-on-year basis, the largest rise since the current series started in 2001, after increasing 4.5% in the first quarter.

The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation, as it adjusts for composition and job-quality changes. It is being closely watched for signs of whether wage growth has peaked as economists and investors try to gauge the pace of the Fed’s interest rate hikes. The U.S. central bank on Wednesday raised its policy rate by another three-quarters of a percentage point. It has now hiked that rate by 225 basis points since March. The Fed’s “Beige Book” report this month showed that “most districts continued to report wage growth,” and “a quarter of districts indicated wage growth will remain elevated for the next six months.” There were 11.3 million job openings at the end of May, with nearly two open positions for every unemployed person. Employment costs were boosted by strong wage gains. Wages and salaries shot up 1.4% in the second quarter after rising 1.2% in the first quarter. They were up 5.3% on a year-on-year basis. NB: still lagging the inflation rate. Rem,ember people burn fuel and eat food!! The private sector was the main driver of the increase, with wages and salaries there notching a 1.6% increase in the second quarter, up from 1.3% in the January-March period.

Major stocks on Wall Street closed on Thursday above the flatline after recording a volatile session following the release of the report that revealed the US economy slumped by 0.9% in the second quarter, indicating the country may be facing an economic downturn. Meanwhile, investors received corporate earnings by Merck & Co. Inc., Pfizer, and Comcast, while awaiting quarterly revenue reports by Amazon.com Inc., Intel Corporation, and Apple Inc. after the closing bell. The Dow Jones Industrial Average surged by 329 points or 1.02%, as Nike Inc. jumped by 4.05%. The Nasdaq 100 and the S&P 500 closed the trading session gaining 0.93% and 1.21% respectively with Constellation Energy Corporation pulling both indexes up by 16.32%. The euro was down 0.08% against the dollar, to change hands for $1.01865 at 3.57 pm ET. NN: to rally stocks with the gretaest inflation and economic slowdown in decades is the height of insanity. Like a major fund manager told me. I get paid to buy stocks…. If they go up that is nice if they go down its sad….. But i buy no matter… as long as i get paid!

June low not the ‘final move’ for bear market

Intel Corporation revealed on Thursday that its revenue in the second quarter of 2022 reached $15.3 billion, plummeting by 22% from the same time span a year earlier, below the market expectations. Diluted earnings per share (EPS) dropped by 109% year over year to $0.11 in the second trimester, with the net income also falling to $500 million. “This quarter’s results were below the standards we have set for the company and our shareholders. We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues,” said Intel CEO Pat Gelsinger, adding that “we are embracing this challenging environment to accelerate our transformation.” Intel shares plunged by 8.34% in after-hours trading after the release of the earnings report.

Apple: Q3 EPS at $1.20 a year over year fall of 7.7%

(Bloomberg) — The drumbeat of recession grew louder after the US economy shrank for a second straight quarter, as decades-high inflation undercut consumer spending and Federal Reserve interest-rate hikes stymied businesses and housing. Gross domestic product fell at a 0.9% annualized rate after a 1.6% decline in the first three months of the year, the Commerce Department’s preliminary estimate showed Thursday. Personal consumption, the biggest part of the economy, rose at a 1% pace, a deceleration from the prior period.

“The more important point is that the economy has quickly lost steam in the face of four-decade high inflation, rapidly rising borrowing costs, and a general tightening in financial conditions,” Sal Guatieri, senior economist at BMO Capital Markets, said in a note. “The economy is highly vulnerable to slipping into a recession.”

The report will add to political headaches for President Joe Biden and complicate the Fed’s calculus over how aggressively to raise interest rates. In addition to the slowdown in household spending, the report also showed declines in business investment, government outlays and housing. Inventories also weighed on GDP, while a narrower trade deficit added to the figure. A key gauge of underlying demand that strips out the trade and inventories components — inflation-adjusted final sales to domestic purchasers — fell at a 0.3% pace in the second quarter compared with a 2% gain in the prior period. The report illustrates how inflation has undercut Americans’ purchasing power and tighter Fed monetary policy has weakened interest rate-sensitive sectors such as housing. That is likely to throw fuel on an already heated debate about if or when the US enters a recession. While the common rule of thumb for recessions is two consecutive quarterly declines in GDP, the official determination of ends and beginnings of business cycles is made by a group of academics at the National Bureau of Economic Research. “The contraction in second-quarter GDP significantly raises the risk that the economy will fall into recession by year-end…lagging momentum leaves the economy vulnerable to further adverse shocks such as a potential energy crisis in Europe or intensified supply strains in the second half of the year.” The personal consumption expenditures price index, an inflation measure followed by Fed officials, grew an annualized 7.1% for a second quarter. Stripping out food and energy, the index rose 4.4% after rising 5.2%. Monthly PCE price data will also be released Friday. NN: the economy is definitely in a recession. This is just the start and it will get far worse. Inflation is spinning out of controls… And Wall Street is in rally mode…… Makes sense to me.

See the interview… Talk about putting perfume on a skunk!

Boeing Co. reported a smaller second-quarter profit that fell short of Wall Street expectations as its defense business weakened and it remained unable to deliver any of its 787 Dreamliner planes.

The giant aircraft manufacturer reported a profit of $193 million Wednesday, down 67% from the second quarter of last year, on a 2% drop in revenue. Boeing generated more cash than in the first quarter by delivering more planes than it has since the start of the pandemic, and it sold more services to airlines and other airplane operators.

However, Boeing remained unable to deliver one of its best-selling planes, the 787, while regulators review steps the company is taking to eliminate production problems.

Boeing is also faced with the threat of a strike Monday by about 2,500 workers at three of its defense plants in Missouri and Illinois. The machinists’ union is asking for increases in wages and retirement benefits after, it says, Boeing took away a pension plan. CEO David Calhoun said on CNBC that Boeing will continue to talk to the union and that a strike would delay deliveries to the Pentagon, although he did not give details. Revenue from Boeing’s normally steady defense business fell 10% in the second quarter compared with a year earlier, and the company took charges totaling $240 million for an unmanned refueling plane being developed for the Navy and its Starliner spacecraft, which is designed to ferry crews to the International Space Station. A Boeing spokesman said the charge for the Starliner was unrelated to the announcement Tuesday by Russia’s top space official that his country will pull out of the ISS program after 2024 and build its own orbiting station. Calhoun, who became CEO as Boeing’s financial situation worsened following two deadly of Max jets, said the results showed that “we are building momentum in our turnaround” while acknowledging that “it has been a long road.” In a note to employees, Calhoun highlighted an increase in the number of 737 Max jets rolling off the assembly line — 31 a month, although that figure could fluctuate. He also said Boeing “is in the final stages” of working with the Federal Aviation Administration to resume deliveries of the larger, two-aisle 787. Second-quarter net income was $160 million, but the gain attributable to shareholders was $193 million. That was down from $587 million a year earlier. Excluding adjustments for retirement plan expenses and other special items, the company lost 37 cents per share. Analysts expected an adjusted loss of 13 cents per share, according to FactSet. Total revenue slipped 2% to $16.68 billion, falling short of Wall Street’s forecast of $17.57 billion, despite an increase in airliner deliveries to 121 planes from 79 a year earlier. Boeing gets much of the purchase price upon delivery. Shares of Boeing, based in Arlington, Virginia, rose 3% in morning trading Wednesday.  NN:  The joke of all jokes is after a bleak earnings report… with more bad news coming in future quarters the Einsteins rallied the stock 3%… ANOTHER BIG HURT IS COMING….