North American News
US Stocks Mixed: Nasdaq Struggles Ahead of Nvidia Earnings, Dow Hits Record High
Tech Worries Weigh on Nasdaq, While Dow Reaches New Heights
US equity markets displayed a mixed performance as the Dow Jones Industrial Average hit a new record high, while tech-heavy indexes faced headwinds ahead of key earnings reports.
Closing Changes:
- S&P 500: -0.4%
- Nasdaq Composite: -1.0%
- DJIA: +0.1% (record high)
- Russell 2000: +0.2%
Market Highlights:
- Nasdaq Under Pressure: The Nasdaq Composite fell by 1% as investors remain cautious ahead of Nvidia’s earnings report scheduled for Wednesday. Nvidia’s stock was down 2.3%, reflecting growing apprehension about its upcoming results.
- Dow Jones Achieves Record: The DJIA closed at a record high, buoyed by broader market optimism and gains in other sectors.
- Small Caps Volatile: The Russell 2000 showed early strength but struggled to maintain gains, ending with a modest increase of 0.2%.
Key Drivers:
- Nvidia Earnings Anticipation: Concerns about Nvidia’s performance are contributing to tech sector weakness, with investors on edge before the report.
- Sector Rotation: While tech faces challenges, other sectors, particularly those in the Dow, are seeing positive momentum.
Outlook:
- Tech Sector Focus: Market participants will closely watch Nvidia’s earnings report for insights into tech sector health and broader market implications.
- Economic Data: Upcoming economic indicators and Fed comments will also be critical in shaping market sentiment.
Atlanta Fed GDPNow Growth Estimate Unchanged
- The tracker stays at 2%
In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 2.0 percent on August 26, unchanged from August 16 after rounding. After recent releases from the US Census Bureau and the National Association of Realtors, the nowcast of the contribution of the change in real net exports to third-quarter real GDP growth decreased from -0.28 percentage points to -0.30 percentage points.
US Dallas Fed manufacturing index -9.7 vs -17.5 prior
- The Texas-area manufacturing survey from the Dallas Fed
- General business activity: -9.7 vs -17.5 prior
- Company outlook: -9.6 vs -18.4 prior
- Prices paid: +28.2 vs +23.1 prior
- New orders: -4.2 vs -12.8 prior
- Shipments: +0.8 vs -16.3 prior
- Employment: -0.7 vs +7.1 prior
Comments in the report:
Food manufacturing
- Suppliers are demanding longer lead times. Some commodity prices have declined, but value-added items (packaging film) are seeing price increases. We’ll have an annual wage increase in October in the range of 3 to 8 percent. Wages for positions requiring physical work are increasing more than desk jobs.
- Agriculture is hurting. No farm bill, weather and falling prices for our commodities while input costs increase are putting a big squeeze on our industry.
- We are preparing for the recession.
- As the economy weakens, we are seeing modest growth in our category of dinner sausage. This category tends to grow when the economy weakens, as sausage is a good protein substitute for higher-priced proteins and can “stretch” consumers’ food budgets. Additionally, we are expanding our presence in other sales channels, such as food service, which we believe will help our sales in 2025.
Textile product mills
- Uncertainty is high, and we are very unsure how the next quarter will go.
Paper manufacturing
- Things are soft but steady.
Printing and related support activities
- We have a new large-machinery line arriving at the end of September that will complement our current line that is getting long in the tooth. It’s a huge investment for us, and I’m worried that with business activity slowing down, we may be in for some rough waters for a while. It should generate some healthy activity, and we know it will be much more efficient than our current line.
Chemical manufacturing
- Difficulties in ship travel to the Red Sea area have made it difficult to secure ships for bimonthly/quarterly shipments.
- Turbulence in the market, increased global instability and further concerns over U.S. political instability in the current administration have all fueled further weakening in the market.
Plastics and rubber products manufacturing
- Heading into the holiday season with an election in the near future, our customers are beefing up supplies from China for the near term but hitting pause beyond that.
Primary metal manufacturing
- Incoming orders continue their downward trend. Most of our customers are reporting few orders on their end, especially our building and construction customers, as well as the ones in the transportation segment (trailers). We continue to be negatively affected by foreign competition at much lower price offerings than we can meet.
- Our company is spending significant capital dollars to bring a new product line to our manufacturing operations. This will allow us to enter markets we currently do not service.
Fabricated metal product manufacturing
- The hurricane interruption caused us to miss two weeks of production.
Machinery manufacturing
- The slowdown is settling in with business activity at a very low level.
- Things are just plain bad all over. There is no skilled labor available.
- Our business usually has seasonal decreases in the summer months, but the decrease this summer is more significant than usual. We are now not so sure about the future.
- November cannot come soon enough! We’ve stagnated as has our competition along with our customer base. It’s like we all know the world will continue regardless of who wins, but we’re all sitting on our hands until a winner is announced.
Computer and electronic product manufacturing
- It appears the industry is approaching a cyclical bottom; we see signs of several markets beginning to correct. Regionally, China was strong, U.S. was OK, Europe was weak, and Japan was very weak.
- We are getting more resistance to higher prices from our customers. We are also seeing orders reduced or delayed from a few of the more price-sensitive ones. The biggest uncertainty is about the election; a lot of our customers are taking a “wait and see” approach. All small business owners that I talk to are very concerned about the high-tax, anti-growth and anti-small business policies that [we think] are certain to come from a [Kamala] Harris presidency.
Furniture and related product manufacturing
- We are experiencing slower pay on accounts receivable. There is a continued shortage of skilled carpenters and saw operators. Project size has increased from general contractors. Inexperienced architects and construction project managers cause significant construction timeline delays.
Miscellaneous manufacturing
- It is increasingly looking like the U.S. has lost its position of strength in geopolitics, and the vacuum is encouraging war and violence, which pose significant risk to international trade and reduce opportunities for U.S. companies. Anti-business, tax and spend rhetoric is not conducive for long-term investments and is going to further reduce U.S. business competitiveness especially against China’s government-supported industries and firms.
US July durable goods orders +9.9% vs +5.7% expected
- US durable goods orders for July 2024
- Prior was -6.7%
- New orders for manufactured durable goods jumped 9.9% to $289.6 billion in July
- Blows past market forecasts, reverses June’s 6.9% decline
- Transportation equipment orders skyrocketed 34.8% to $102.2 billion, driving the increase
- Ex-transport -0.2% vs -0.1% expected
- Prior ex-transport +0.4% (revised to +0.1%)
- Excluding defense, new orders rose 10.4% vs -7.2% prior (revised to -7.5%)
- Nondefense capital goods orders (ex-aircraft) slipped 0.1%vs +0.0% expected
- Prior nondefense capital goods orders +0.9% (revised to +0.5%)
- Unfilled orders up 0.2% to $1,386.5 billion, marking 47 increases in 48 months
- Inventories inched up 0.1% to $529.7 billion
Fed’s Daly: Labour market is in complete balance
- Comments from SF Fed President Mary Daly on August 26, 2024
- Hard to imagine anything that could derail Sept rate cut
- Time to adjust policy is upon us
- Don’t want to keep making policy tighter as inflation comes down
- The risks to our goals are now balanced
- Most likely outcome is that we continue to see gradual inflation slowing, sustainable pace of labor market growth
- If labor market weakens more than anticipated, we we would need to be more aggressive
- We do know one thing, the direction of rates is down
- I don’t want to declare that we’re on the path to neutral
- Policy rate is highly restrictive, we need to ‘right-size’ it
- I see further signs that the labor market is slowing as unwelcome
- We don’t want to see additional weakness in the labor market
- We will find the neutral rate as we go, we have a long ways to go to get to 2.50% or 3%
- I think we’re close to trend, around 1.5-2%.
- NFP was inconsistent with other indicators, the revisions bring it back into line
Fed’s Barkin: I’m hearing that consumers are still spending but they’re choosing
- Comments from Barkin to Bloomberg
- Will take a ‘test and learn’ approach to rate cuts
- Current ‘low-hiring, low-firing’ approach companies now take to employment is unlikely to persist
- Risk is that firms will resort to layoffs if economy weakens
- Disinflation has spread beyond goods to the rest of the economy, boosting confidence it will continue
- I’m hearing that consumers are still spending but they’re choosing
- I’ve talked to hotel chains where every room is booked but the second they raise prices, no one will buy
- Prices are up, people are aware of it and people are adjusting
- People are trading down
- It’s rare that people I talk with are planning layoffs, and that kind of thing takes 3 months to plan
- I see a loosening labor market being driven by a lot more supply
- The data has come in a ‘very consistent manner’ in the past 3-4 months. Inflation is coming down. Labor market is loosening.
- I didn’t take that much out of the non-farm payrolls revisions
- What’s different in the labor market is the increase in supply — people entering workforce and immigration
- I think there is a lot of demand out there for housing once rates come down
“The phrase I have been using is that ‘people aren’t hiring, but they’re not firing’ and that’s just not likely a sustainable outcome. Either demand will continue and people will start hiring again or there will be layoffs,” he said.
Canada to slash the number of temp foreign workers. Trudeau hints at immigration revamp
- Big backlash builds against immigration in Canada
Canada’s governing Liberal party is being destroyed in the polls and will almost surely lose in an election that must be called between now and October 20, 2025 at the latest. The election will almost-certainly be fought over immigration levels and the housing and infrastructure crunch that came with it.
The government has seen the writing on the wall and Prime Minister Justin Trudeau is facing a revolt within his party. He’s holding a cabinet retreat this week and seen the writing on the wall and announced:
- Places where the unemployment rate is 6% or higher will not be able to hire temporary foreign workers (the national level is 6.4% so this is much of the country)
- There are limited exceptions in agriculture, food processing, construction and health care
- Employers will no longer be allowed to higher more than 10% of their total workforce via temporary foreign workers
- Temporary foreign workers will be limited to one year contracts from two years previously
- Trudeau said government will review overall immigration levels this fall
“We’ll be looking at unemployment rates and opportunities to make further adjustments over the course of this fall as we come forward with comprehensive level plans that will respond to the reality that Canada’s facing now and in years and decades to come,” Trudeau said.
Commodities
Gold Near All-Time Highs Amid Rising Geopolitical Tensions and A Fed Rate Cut
Gold advances as geopolitical tensions escalate and Fed signals potential rate cuts
Gold prices have surged to near all-time highs, trading in the $2,520s on Monday, just below the peak of $2,531. This rally is driven by a combination of heightened geopolitical risks and a shift in expectations regarding US interest rates.
Market Performance:
- Gold Price: $2,520s (just off all-time highs of $2,531)
Key Drivers:
- Geopolitical Tensions: The escalation in the Middle East, including recent clashes between Israel and Hezbollah, has heightened safe-haven demand. The fear of further involvement by Iran adds to the uncertainty, boosting gold’s appeal as a protective asset.
- Federal Reserve Expectations: Gold’s upward momentum was also fueled by Fed Chair Jerome Powell’s speech on Friday at the Jackson Hole symposium. Powell’s remarks indicated a potential shift toward lower interest rates, as he highlighted the need to address cooling labor market conditions and downside risks to employment.
- Durable Goods Orders: A significant 9.9% rise in US Durable Goods orders for July provided a mixed signal, suggesting economic resilience despite broader pessimism. Although this initially caused a brief slip in gold prices, the safe-haven appeal quickly prevailed.
Technical Outlook:
- Resistance and Targets: Gold is currently testing the $2,550 resistance level, with the broader uptrend intact. A successful break above this target could push gold to new highs.
Market Sentiment:
- Safe-Haven Appeal: Rising geopolitical tensions and the Fed’s dovish stance continue to support gold’s strong performance, as investors seek stability amid global uncertainties.
Upcoming Factors:
- Further Fed Guidance: Market participants will closely watch for additional comments from Fed officials and upcoming economic data to gauge the likelihood of future rate cuts and their impact on gold prices.
Oil Rebounds Strongly, Up 3.5%
Oil prices surged by 3.5% today, bouncing back from recent lows and trading at $77.48, just below the 200-day moving average and within the summer range.
Market Performance:
- WTI Crude Oil: +3.5% to $77.48
Market Drivers:
- Libya Production Shutdown: The rebound was primarily fueled by Libya’s decision to shut down oil production and exports, which has temporarily tightened the market.
- Technical Bounce: After dropping to its lowest levels since early February, oil prices have recovered, but the rally is contingent on continued supply disruptions.
Outlook:
- Resistance Level: Oil will need to break above the August high of $80.15 to challenge existing short positions and sustain the rally.
- Seasonal Factors: Seasonal trends could weigh on prices from now through November, making sustained gains challenging without further supply disruptions.
Today’s rally provides a brief respite for oil markets, but the sustainability of the rebound will depend on geopolitical developments and supply dynamics in the coming weeks.
WTI extends gains with news that Libya will be stopping all production and exports
- Report via Bloomberg
Libyan eastern-based government says all oil fields closing down, halting production and exports – statement.
- Force majeure announced in response to the attempts to takeover the central bank by the Tripoli-based governments. WTI up over 2% as Libya announces force majeure.
EU News
European equity market’s closes flat
- Italian stocks lag, FTSE 100 was closed
Closing changes on Monday:
- Stoxx 600 flat
- German DAX flat
- Francis CAC +0.2%
- UK’s FTSE 100 closed for holiday
- Spain’s IBEX flat
- Italy’s FTSE MIB -0.1%
Germany Aug Ifo business climate index 86.6 vs 86.0 expected
- German Ifo data for August 2024
- German Ifo Business Climate index: 86.6 vs 86.0 expected
- German Ifo Current Conditions index 86.5 vs 86.5 expected
- German Ifo Expectations index 86. vs 86.5 expected
Swiss Non-Farm Payrolls 5.499 vs 5.484M prior
- CH non-farm payrolls data for Q2 2024
Swiss Non-Farm Payrolls Q2:5.499 vs 5.484M prior
Riksbank meeting minutes
- Monetary policy minutes from 19 Aug 2024 meeting
- Minutes-Swedish C. Bank Statement: The uncertainty over the inflation outlook motivated a continued gradual adjustment of monetary policy
- Minutes-Swedish C. Bank Statement: If the outlook for inflation stays the same, the policy rate can be cut two or three more times during the second half of the year, which is somewhat faster than was forecast in June
- Minutes-Swedish C. Bank Statement: Riksbank’s asset holdings will continue to decrease through maturities and the sales of government bonds decided on in January.
Swedish Central Bank’s Breman:
- I support the proposal to cut the policy rate and the forecast that the policy rate can be cut a further two or three times before the end of the year
- If the outlook for inflation changes, monetary policy will be adjusted
- I have considered a cut of 0.5 percentage points at today’s meeting, but I feel confident that a 0.25 percentage points is a well-balanced monetary policy.
- Unlike the situation in 2022, the Riksbank now has eight monetary policy meetings a year instead of five. This reduces the need to make cuts in larger steps.
- At present there are currently several advantages in gradually adjusting monetary policy
- If new information clearly changes the inflation outlook, we need to be able to make different decisions than those indicated by the interest rate path.
It is a UK bank holiday today
The UK markets will be closed in observance of the Summer Bank Holiday.
Next Monday September 2, the US and Canada will have the day off in observance of Labor Day.
Asia-Pacific-World News
Canada to impose 100% tariff on China EVs; will also tax Chinese steel and aluminum
- Canada to follow the US
This isn’t a surprise as it was floated weeks ago. The tariffs will be 100% on EVs and 25% on aluminum and steel.
PBOC sets USD/ CNY central rate at 7.1139 (vs. estimate at 7.1132)
- PBOC CNY reference rate setting for the trading session ahead.
In open market operations:
- PBOC injects 300 billion Yuan via 1- year MLF at 2.30% versus prior 2.30%
- Injects CNY 471B via 7-day reverse repo at maintained 1.70%
India GDP seen at 6.9% in April to June vs 7.8% in previous quarter
- Reuters poll
- Reuters Poll: India annual GDP growth seen at 6.9% in April-June (vs 7.8% in previous quarter).
- Reuters Poll: India economy to grow 7.0% in 2024-25 and 6.7% in 2025-26 (unchanged from July poll)
Japan leading indicator -2.1 vs -2.6 prior
- Japan leading indicator data for June 2024
Japan Leading Indicator Revised: -2.1 vs -2.6 prior
Japan’s Nikkei 225 index falls near -1.00% at the open
- Japanese Nikkei index falls by 0.91% at 38019, trading below 100-day moving average but above 200-day moving average. Price down 2.86% for the month, up 22.25% from low of 31123.10.
Japan’s Nikkei is trading down -0.91% at 38019.
Cryptocurrency News
Ethereum Faces August Slump as Investor Interest Wanes
Ethereum (ETH) is down nearly 3% on Monday, reflecting a broader decline in investor interest during the historical August lull.
Market Performance:
- Ethereum (ETH): -3.0%
Market Drivers:
- ETF Outflows: Ethereum ETFs saw $44.5 million in outflows last week, led by significant withdrawals from Grayscale’s ETHE. This marks a continuation of negative flows, impacting ETH’s price and leading to a low weekly gain.
- Decreased Trading Activity: Ethereum’s trading volume and transaction count have dropped substantially. The 7-day moving average of daily trading volume fell from $6.56 billion in late July to $2.9 billion. Monthly transaction counts are at their lowest since May 2020.
- Ethereum Foundation Sale: The potential sale of 35K ETH by the Ethereum Foundation last Friday further pressured prices, coinciding with a brief market rise.
Market Sentiment:
- Institutional Interest Decline: Unlike Bitcoin ETFs, which have experienced net inflows despite some outflows from Grayscale’s GBTC, Ethereum ETFs are seeing a consistent outflow trend, indicating a shift in institutional interest.
- Historical Patterns: The decline aligns with Ethereum’s typical performance during August, though analysts from Coinbase note that this year’s drop has been less severe compared to previous years.
Outlook:
- Technical Resistance: Ethereum has struggled to break above a key resistance level, resulting in consolidation as the market navigates lower trading volumes and investor caution.
Despite these challenges, Coinbase analysts suggest that this year’s August decline in Ethereum trading volumes is relatively moderate compared to historical averages.
Meme Coin Shake-Up: New Contenders Surge as DOGE and SHIB Falter
Dogecoin (DOGE) and Shiba Inu (SHIB) underperform, new meme coins surge
Dogecoin (DOGE) and Shiba Inu (SHIB), two stalwarts of the meme coin market, both saw their values decline by over 3% on Monday. Meanwhile, the new entrants into the meme coin space, DOGS, SUNDOG, and CAT, experienced significant gains, with some up nearly 30% in the last 24 hours.
Market Performance:
- Dogecoin (DOGE): -3.2%
- Shiba Inu (SHIB): -3.1%
- SUNDOG: +29.7%
- CAT: +28.4%
Market Drivers:
- DOGS Airdrop: The DOGS community has launched on-chain claiming of airdrops, creating buzz and potentially leading to increased user engagement.
- SUNDOG and CAT Surge: SUNDOG, introduced by Justin Sun on the TRON network, and Simon’s CAT have seen notable price rallies. SUNDOG has gained traction, with its market cap exceeding $288 million since its launch.
- New Meme Coins: The spotlight has shifted to newer meme coins such as Daddy Tate (DADDY), Fwog (FWOG), and Resistance Dog (REDO), which also saw impressive gains of up to 46% in the same period.
Market Sentiment:
- Shift in Attention: The gains in newer meme coins highlight a shift in market focus from established names like DOGE and SHIB to emerging players in the meme coin arena.
- Potential Network Strain: The TON network might face a stress test as DOGS anticipates significant airdrop activity, potentially impacting trading volumes and network performance.
Outlook:
- Established vs. Newcomers: While DOGE and SHIB grapple with declines, the rapid rise of new meme coins suggests a dynamic shift in investor interest, possibly driven by innovation and fresh market narratives.
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