🛎Equity market in a hole🚽

Stocks continued to retreat after the hawkish remarks by Uncle Powell last Friday. Clearly, the Fed would need to lift interest rates high enough to tame inflation. This means the rate will enter into a restrictive zone where aggregate demands in the economy cool. 

His comments were sufficient to push the odds of a September rate hike to 0.75% to 75%, up from 55% a week ago. The Treasury market responded decisively, with the 2-year yield rising above 3.4%. Indeed, it puts pressure on the stock market given that as Treasury rates climb, corporate rates and mortgage bonds will follow, punishing business and household spending. 

🕹Balance sheet reduction impact is to come💊

Pika World has highlighted the risk of balance sheet reduction that could further support high bond yields. The concern is focused on the likelihood of slowing consumers’ spending, which eats into companies’ profitability and sales. 

While second-quarter earnings had generally fared well, guidance has been disappointing, and market participants are now uncertain if the third quarter result can be better than the current expectations. 

🔋Lululemon’s Outlook is milky🔫

Analysts are now looking towards the athletic apparel’s upcoming earnings in hindsight of potential inflation risk on the business. The concern lies in the bloating inventories across various retailers, and promotions are pervasive industry-wide. 

The stock price has also exceeded high consensus expectations, and investors see a weaker risk/reward outlook. Some are quick to reiterate the more inefficient consumer spending on apparel and general merchandise that could further dampen the mood. 

It is a stock that Pika World will be monitoring to get better sensing of the weaker economy narrative. 

📖What’s on the menu today?🌴

At 10 pm, we will receive two pieces of important data. 

First, the CB Consumer Confidence for Aug is set to maintain firm at 97.9 from 65.7 in the prior period. This will give confidence that consumers’ spending may remain robust to withstand a dramatic slowdown that most investors fear.

Next, the JOLTs Job Openings for July are expected to remain healthy at 10.475M compared to 10.698M in the prior period. 

FOMC Member Williams will speak at 11 pm.