Last week, strong earnings reports and new trade deals with Japan and the EU boosted US stock indices, with tariffs on Japanese goods set at 15%. Despite the lower rates compared to April, the average trade-weighted tariff rate globally is closer to 20%. Companies like General Motors and Mattel have reported significant financial impacts due to tariffs, with potential risks of passing costs to consumers. However, the Fed may hold off on rate cuts until understanding the inflation impact of tariffs. Uncertainty remains on how trade policies will affect the economy long-term, as trade deals could ease business uncertainty, but also lead to increased inflation and economic divergence.
Preliminary data from the S&P Global PMI shows a mixed picture of economic growth in July, with services growing but manufacturing contracting. The overall growth rate accelerated, but signs of economic bifurcation are emerging. The Manufacturing Output Index fell to its lowest level in two months, indicating a slowdown. The decline in inventories may suggest customers bought ahead of expected tariff-related price increases, leading to weaker demand. Uncertainty remains over how the global economy and US trade policies will impact domestic growth, making it too early to predict the outcome. The Services Business Activity Index rose to 55.2, the fastest pace in seven months, but concerns remain about the uneven growth. New orders increased for services, but dipped slightly for manufacturers for the first time since 2024. Input and selling prices for manufacturers jumped, partly due to tariffs and wage pressures. Hiring was mixed, with manufacturers cutting payrolls while the services sector added employees. Capital spending declined in May, indicating potential challenges for the economy. The Leading Economic Indicators report suggests an increased risk of recession, with negative consumer expectations and declining new orders weighing on the outlook.
Existing home sales in the U.S. fell 2.7% in June to 3.93 million units, marking the third drop in four months. Inventory of unsold homes increased to a 4.7-month supply, suggesting slower price appreciation. Despite the decline in sales, the median price for existing single-family homes rose to $441,500. New home inventories grew 1.2% in June to 511,000 units, with a 9.8-month supply of units, the highest level since 2009. Sales of new houses increased slightly in June but are down 6.6% from a year ago, indicating weakening demand possibly tied to consumer spending pullback. The latest data shows that continuing jobless claims are still high, with 1.955 million people on unemployment benefits. Initial claims have declined slightly, but the focus remains on those facing long-term job challenges.
This week, key economic reports are expected, including the Consumer Confidence Index, S&P CoreLogic Case-Shiller Index, and the Fed’s statement on interest rates. The GDP growth for the second quarter will also be released, with a focus on how tariffs have impacted economic growth.
The week will end with the release of the July Jobs report and the Purchasing Managers Manufacturing Index, providing insights into the labor market and manufacturing sector.
Read more at 1. Apple announces new iPhone 13 models with improved cameras and faster processors. Sales expected to boost company’s revenue. – CNBC
2. Tesla’s stock price surges after record-breaking quarterly earnings report. Company predicts continued growth in electric vehicle market. – Reuters
3. Federal Reserve announces plans to gradually raise interest rates to combat inflation. Investors cautious as stock market reacts to potential impact on economic growth. – Wall Street Journal
4. Amazon faces antitrust investigation over alleged unfair practices in online retail market. Company denies accusations and vows to cooperate with authorities. – CBS MarketWatch: S&P 500 Eyes Gains Amid Trade Deals – But How Sustainable Is This Rally?