Consumer Spending Trends - Bank of America Institute data indicates a 2% increase in debit and credit card spending in June [1] - While consumer spending rebounded in June, it didn't fully offset earlier declines, suggesting a cooling trend [2] - Lower-income households are primarily driving the pullback in spending, while higher-income household spending accelerated by 1.2% [5] - Discretionary travel spending is declining, but restaurant spending shows a dichotomy, with fewer households dining out but spending more per transaction [6][7] Income and Wage Growth - Higher-income households experienced accelerated after-tax wage growth, nearing 3%, for the third consecutive month [9] - Lower-income households saw decelerated after-tax wage growth, increasing by 1.6% compared to 1.8% previously [10] Credit Card Usage - Younger generations entering a challenging labor market are a focal point regarding credit card usage [11]

Core Insights - Amazon's sales dropped 41% on the first day of its four-day Prime Day event compared to the first day of last year's two-day event [1] - Momentum Commerce's CEO suggested that the decline in sales was due to consumers adding items to their carts but delaying purchases for potentially better deals [2] - Amazon's Vice President expressed satisfaction with shopper engagement and noted that the extended duration of Prime Day was in response to consumer demand for more time to explore deals [4] Sales Performance - The first day of this year's Prime Day saw a significant sales drop, but there is potential for overall sales to surpass last year's event due to the longer duration [2] - Last year's shorter Prime Day encouraged quicker purchases to avoid missing discounts, contrasting with this year's consumer behavior [3] - Adobe reported that Prime Day's kickoff surpassed Thanksgiving 2024's eCommerce spend of $6.1 billion, with 50.2% of sales made via mobile devices [5] Market Context - Prime Day, alongside Walmart's Walmart+ Week, is viewed as a test for consumer spending amid economic uncertainty and declining consumer confidence [6] - Retailers are closely monitoring consumer behavior changes due to global tariffs and economic conditions [6]

Market Sentiment & Trade - The market has absorbed tariff headlines well, with a 26% increase since Liberation Day despite existing uncertainties [1] - There's a prevailing sentiment that bad news isn't causing sell-offs, and good news is driving the market forward, despite trade deal uncertainties [2] - The market anticipates potential rate cuts and a recovery in EPS and GDP in 2026 [5] Macroeconomic Factors - Macroeconomic degradation, specifically in unemployment or core CPI, could impact how news is absorbed [3] - Increased pricing pressure is emerging, particularly affecting low-end consumers, potentially impacting philanthropic giving and smaller businesses [4] - Philanthropic giving and spending reflect sentiment about the future rather than past data [7] Economic Dynamics - Significant cash reserves exist on the sidelines from individuals and institutions, suggesting potential for increased money velocity [8] - The "fourth industrial revolution," largely US large-cap dependent, is expected to broaden out to other sectors [8] - About half of the S&P is performing better than the S&P itself, with 175 stocks up over 10% year-to-date, indicating broadening market participation [9] Potential Risks - The Build Back Better (BBB) initiative could exacerbate existing pressures on the low end of the consumer market [10]

Market Outlook - The market reacts significantly to Trump's tweets, but the actual economy is slowing sharply in the second half [1] - Strategists are mostly following what the market is doing, not thinking outside the box with big bold numbers [8] - May to October is a seasonally fraught period, with weakness occurring 60-65% of the time in the last century [9] - There are signs consumers could slow down, as seen in disappointing early Amazon Prime data [10] Inflation and Economic Conditions - Inflation is expected to breach 3% by year-end, based on the core personal consumption expenditure deflator (core PCE) [2] - A soft stagflationary environment with inflation above the 2% target and a slowing economy will affect S&P 500 earnings, including big tech [2] - The market may experience an echo of the stagflationary trades seen in the first four months of the year, though potentially half as bad (around 12% drop instead of over 20%) [3] - Inflation faced easy anniversary comparisons, but six-month annualized data and individual components of core PCE suggest inflation is sticky [5][6] Fed Policy - With a slowing economy and sticky inflation, fewer Fed cuts are expected [10] Potential Market Pullback - The market anticipates some weakness in the second half of the year [9] - A pullback is expected due to a slowing economy, slowing earnings, sticky inflation, and fewer Fed cuts [10]

Consumer Spending & Demand - The company is seeing good demand and strength in consumer spending, with growth in the high 30s percentage year-over-year [1][2] - Consumers' shopping patterns, borrowing, and ability to pay back loans remain strong [2] - The company is witnessing a shift from revolving credit to responsible payment options [7][9] BNPL & Credit Scoring - FICO's move to reflect buy now pay later (BNPL) data in credit scores is considered beneficial [3][4] - A significant percentage of people who haven't tried BNPL services feel it doesn't reflect their repayment history or help build their credit score [3] - The company has been reporting transactions to credit bureaus since 2017, demonstrating responsible repayment behavior by customers [4] - The company encourages the rest of the BNPL industry to participate in reporting to credit bureaus [5] Business & Industry Trends - Elective medical services are becoming a component of the company's volume, indicating a shift in BNPL usage [8] - The company expects continued strength and is optimistic about the second half of the year [10] - Consumers are apportioning their money and seeking fixed payment timelines for a sense of control and confidence [10]

Consumer Travel Trends - TSA expects to screen 185 million travelers this holiday weekend, with recent days ranking among the busiest in TSA history [1] - TSA hit a new all-time high a week ago Sunday, screening over 3 million people [3] - People like to travel and continue to spend, regardless of economic conditions [2] Booking Holdings' Strategy & Performance - Booking Holdings is investing heavily in generative AI to develop tools like the AI trip planner on Bookingcom [3][5] - Booking Holdings emphasizes its global presence, noting that the US is a small portion of its global business [7] - Regional events and geopolitical risks impact specific areas, but Booking Holdings' global reach mitigates overall impact, as travelers may shift destinations [9][10] AI and Technology in Travel - Travelers want help and assistance to ensure they're getting the best value for their trip [4] - AI is transforming the travel experience, offering assistance in location, translation, and overall ease of travel [3][5] - The use of AI in travel is continuously improving, with Booking Holdings aiming to be a leader in this area due to its scale and long-term investment [5]

Investment Rating - The report maintains a base case for a 25 basis point rate cut in September, with potential for an earlier cut in July if unemployment rises sharply [6][11][40]. Core Insights - The Federal Reserve is closely monitoring economic data over the summer months to determine the timing of potential rate cuts, with a consensus forming around the likelihood of cuts resuming in September [5][8]. - Consumer spending has shown significant slowdown, particularly in real services spending, which has implications for economic growth and inflation [10][12][19]. - The unemployment rate is projected to rise to 4.4% in June, with a possibility of reaching 4.5% if job market conditions worsen, which could prompt earlier rate cuts [11][23][40]. Economic Indicators - Services inflation has remained subdued, with core PCE inflation at 0.179% month-over-month, indicating a cooling inflation environment [9][30]. - Real personal spending has stagnated, with a notable decline in both goods and services spending observed in recent months [10][30]. - The housing sector is experiencing weakness, with new home sales declining by 13.7% month-over-month in May, reflecting ongoing challenges in the market [15][18][30]. Labor Market Trends - Initial jobless claims have shown a slight decline, but continuing claims are rising, suggesting a loosening labor market [24][67]. - The Conference Board Consumer Confidence Index fell to 93.0 in June, indicating growing concerns among consumers regarding the labor market and economic conditions [19][30]. - Average hourly earnings are expected to slow to 0.2% month-over-month, reflecting a weakening labor demand environment [38][39]. Manufacturing and Trade - ISM Manufacturing is expected to remain in contraction, while ISM Services is projected to rebound slightly, indicating modest growth in services activity [60][63]. - The trade balance is anticipated to widen to -$71.7 billion, driven by a drop in exports, which could weigh on GDP growth [57][58].

The UK’s bright weather is lifting spirits and helping fill cash registers, @lararhiannonw writes, but it also comes with challenges (via @opinion) https://t.co/xfWrrZDopP ...

Market Overview - The market has recovered most of its losses from earlier in the quarter, finishing strong despite initial turbulence caused by President Trump's trade policies [1][2] - The upcoming week is expected to be shortened, following a quarter that started poorly but ended on a high note, emphasizing the importance of maintaining a steady investment approach [2] Company Insights - Constellation Brands is expected to report disappointing earnings, reflecting broader challenges in the consumer packaged goods sector [4] - The company faces headwinds from the rise of GLP-1 weight loss drugs and increasing consumer preference for cannabis, which are negatively impacting alcohol sales [4] - Constellation Brands' sales are particularly affected by Trump's immigration policies, as approximately half of its beer sales come from Hispanic consumers who are now spending less due to concerns over employment [4] Economic Indicators - The Chicago Purchasing Managers' Index will be released, serving as a key indicator of the industrial economy's health, with potential implications for Federal Reserve interest rate decisions [3] - Mortgage application figures are anticipated, which have been described as a significant burden on the economy [5] - The labor report set to be released on Thursday is critical; weak data could lead to renewed criticism of Fed Chair Jerome Powell and raise the possibility of a rate cut in July [5]

Joining us now, Seth Carpenter, global chief economist at Morgan Stanley. Steve Leeman, uh, is also here, Steve. Um, welcome, Seth.Good to have you on. Let me just Let's I you know, I said immediately, wow, we got good reasons and bad reasons to cut. Yeah, there's a lot to get through here, Joe, and I think we're still seeing maybe some distortions from tariffs and some also some of the changes going on from the Trump administration.So, just to get to the income number, which Rick correctly raised, you know ...