Market 07/02: Powell: "needs more confidence to cut interest rates"

Fed officials' statements: Powell, Goolsbee

Powell: Fed needs more confidence (on disinflation progress) before cutting interest rates

Key points in Fed Chair Powell's speech:

• Inflation is trending to continue declining

• Fed needs more confidence (on inflation data) before cutting interest rates

• Fed does not think inflation will reach 2% this year or next

• Budget deficit is currently very large and unsustainable

• 4% is a very low unemployment rate

• Acting too quickly risks inflation coming back

Market reaction

• Market now prices 69% chance of Fed rate cut in September

• DXY drops sharply as market expects Fed to ease policy

• Government bond yields fall across the board

Goolsbee: Inflation has improved in the US

• I see some warning signs that the real economy is weakening.

• A series of inflation indicators have improved

• Inflation is gradually returning to 2%

• Policymakers should prepare for rate cuts

JOLTs: May job openings up but April data continues to be revised down

May job openings (job openings) better than expected:

• at 8.14 million (prior month: 7.92 million - lowest in 3 years; expected: 7.95 million)

However, April new job openings revised down to: 7.919 million (from 8.059 million in initial estimate).

• Job openings data revised down in 14/17 recent months

Government continues to subsidize jobs

• Government jobs surge while private sector jobs drop sharply.

Service sector labor demand starts to decline: early indicator that service inflation may ease

• Job openings rate in Leisure sector falls to lowest since April 2020

• Labor demand in lodging and food services declining rapidly

Labor market continues to normalize via this job openings report:

• May job openings >1.5 million higher than number of unemployed workers (prior month: 1.427 million)

  • … 2nd lowest since summer 2021.

• Job vacancies per unemployed worker holds at 1.2, matching lowest since June 2021

  • At 2022 peak, this ratio was 2:1.

• Quit rate unchanged at 2.2% - unchanged since October last year

Crypto Market: Fed's net liquidity surges sharply

Fed's net liquidity just had the largest surge in 15 months.

• The last time this happened, BTC rose 38% in 1 week

• US Department of Justice selects Coinbase for trading digital assets with large capital

• Robinhood considers trading Crypto Futures contracts in the US and Europe

Other news: Tesla's Q2/2024 EV deliveries exceed expectations

1. Tesla announces delivery of 443,956 electric vehicles in Q2/2024, exceeding expectations of 439,300 vehicles. Tesla stock rises after better-than-expected results

2. Butter prices rise to record high in history

3. Number of open Chinese stock Options contracts drops to 12-year low

   • Investors remain cautious — demand in the Chinese stock market remains extremely low.

4. FYI: Leading companies in the consumer retail industry are raising prices and reducing package sizes.