This morning\u2019s Personal Consumption Expenditures (PCE) data reflected improving household spending and progress on inflation last month. Cash register activity rose 0.2% month over month (m\/m), slower than the 0.3% projected but recovering from April\u2019s 0.1% increase, which indicated a decline in volumes because price pressures rose faster than outlays. On the contrary, volumes increased in April, as the PCE price index reflected no m\/m change in inflation, slowing from 0.3% in the prior period. May\u2019s core figures also decelerated from 0.3% m\/m and 2.8% year over year (y\/y) to 0.1% and 2.6%. Headline PCE slowed from 2.7% y\/y to 2.6%.<\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n Meanwhile, household outlays were supported by tight labor conditions and buoyant capital markets. Consumer spending strength was broad based with volumes increasing across durables, nondurables and services by 1.1%, 0.3% and 0.1%.\u00a0Price pressures, on the other hand, were helped by declines of 0.8% and 0.6% across durable and nondurables and a modest 0.2% increase in services. The pace of personal income rose 0.5% m\/m, above the median estimate of 0.4% and April\u2019s 0.3%. The wider spread between income and spending drove the personal savings rate to 3.9% from 3.7% during the previous month.<\/p>\n\n\n\n A separate report from the University of Michigan (UMich) reflected favorable revisions for both consumer sentiment and inflation expectations. June consumer sentiment was upgraded from 65.6 to 68.2 while inflation expectations over 1- and 5-years were downgraded from 3.3% and 3.1% to 3% for both time periods. <\/p>\n\n\n\n Last night\u2019s debate between President Joe Biden and former President Donald Trump eventually descended into which White House candidate is the better golfer, but regardless of their country club skills, the general consensus indicated that the incumbent underperformed. Indeed, odds of former President Trump rewinning the Oval Office rose to well above 50%, according to several sources. In one survey, the probability of Trump reclaiming the helm rose up to 67%. The debaters wrestled with issues involving inflation, government debt, international policy, the economy, police funding and other matters.<\/p>\n\n\n\n Nike posted earnings that solidly beat the analyst consensus estimate, but its revenue and guidance fell significantly short of expectations, causing its share price to tank more than 11% in after-market trading yesterday. For the current quarter, Nike expects sales to drop 10% while analysts anticipated guidance pointing to a 3.2% decline. For its fiscal year that started this month, the company guided for a double-digit revenue decline, substantially worse than investors estimates for a nearly 1% increase. In providing the downward guidance revision, Nike said it is battling macro uncertainty in China and \u201cuneven consumer trends\u201d across markets. During the recent quarter, Nike experienced improving momentum with its performance segment, which includes items such as shoes for basketball and running, but it was insufficient for offsetting declines in the lifestyle fashions. China was the only market to exceed the company\u2019s expectations despite a decline in sales in the country. Nike\u2019s cost cutting helped the company exceed expectations for earnings. Earlier this year, Nike said it would layoff more than 1,500 employees.<\/p>\n\n\n\n Stocks have pared gains after two of the major benchmarks hit all-time highs this morning while rates move in a bifurcated fashion. While short-end yields and the dollar are near the flatline, the long-end is moving notably higher, as last night\u2019s presidential debate placed national fiscal conditions increasingly into focus. All major US equity indices were pointing north with the Russell 2000, Nasdaq Composite, S&P 500 and Dow Jones Industrial baskets up 0.5%, 0.3%, 0.3% and 0.2%. Sectoral breadth is positive with seven out of eleven sectors higher and led by technology, energy and financials; they\u2019re up 1%, 0.6% and 0.5%. Driving the laggards are utilities, consumer discretionary and consumer staples with the segments lower by 1.1%, 0.5% and 0.3%. The 2- and 10-year Treasury maturities are shifting in bear-steepening fashion, changing hands at 4.71% and 4.33%, flat on the session for the former but 5 basis points higher for the latter. The greenback is similarly near the flatline on the back of stable Fed easing projections. The US currency is gaining relative to the franc, pound sterling, yen and yuan but losing versus the euro and Aussie and Canadian dollars. Commodities are mixed, with copper, silver, and gold higher by 1.3%, 1.1% and 1.1%, but lumber and crude oil are down 3.7% and 0.4%.<\/p>\n\n\n\n As we turn the calendar to July, closing out another remarkable quarter for stocks, evaluating the risks going forward could serve portfolios well. On the one hand, the political landscape may become volatile in the coming weeks, as the incumbent struggles with suitability concerns while contending with his controversial predecessor on the other side. Conversely, the fixed-income complex looks like it\u2019s paying close attention to the outlook for fiscal debt, revenues, spending and issuance, with terrific inflation reports no longer able to pull down the long-end. Finally, geopolitical uncertainty may become problematic in the second half, as contentious elections around the world coincide with conflicts in the Middle and Far East. <\/p>\n\n\n\n![\"Real](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/07\/Real-PCE-6-28-24.png\")
<\/figure>\n\n\n\n![\"PCE](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/07\/PCE-Price-Index-6-28-24.png\")
<\/figure>\n\n\n\nUniversity of Michigan Survey Improves<\/strong><\/h2>\n\n\n\n
Presidential Candidates Illustrate Political Polarization<\/strong><\/h2>\n\n\n\n
Nike Sales and Guidance Disappoints Investors<\/strong><\/h2>\n\n\n\n
Stock Rally Fades in Early Trading<\/strong><\/h2>\n\n\n\n
Bond Investors Appear Focused on Deficit<\/strong><\/h2>\n\n\n\n