Crypto Going Mainstream, Sarge-Folio Going Higher, 'The Late Show' Going Away
Crypto legislation setting standards for stablecoins makes big progress; retail's on the rebound; the Fed responds in cut-and-paste fashion; and Union Pacific targets Norfolk Southern.
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The Genius Act had already been passed in the U.S. Senate. On Thursday afternoon, the House of Representatives passed the same bill that will set standards for stablecoins by a convincing 308-122 margin. This bill now heads to Pres. Trump for an autograph to be signed into law. Industry executives have been invited to the White House later today for the signing.
Firms like Coinbase Global COIN and Circle CRCL had lobbied the Trump administration to provide increased regulatory clarity across the cryptocurrency industry after a messy (and costly) past few years battling with Biden administration officials. The industry may have found allies on that side of the proverbial aisle, but the margin of passage in the House illustrates clearly that the issue is bipartisan in nature.
The House also passed two other crypto-centric bills on Thursday that may have a more difficult time finding their way to the president's desk. The Digital Asset Market Clarity Act and the Anti-CBDC Surveillance Act made it through the House. The Senate is working on and having trouble passing their own version of the Digital Asset Market Clarity Act. It is said that the Senate version of this bill may be significantly different from what passed in the House.
The Anti-CBDC Surveillance Act would prohibit the Federal Reserve Bank from issuing its own digital currency. The argument against the central bank issuing a digital currency is that it would all but eliminate the use of cash. The argument against it was also that how people use their digital currency (instead of cash) could be tracked and used against them.
This one, I am not sure of. While I don't think the Fed or anyone else needs to know if you pay a kid $30 to shovel your snow or lose a $10 sports bet with a friend at work, this would also eliminate the "cash industry" that is used by many small businesses to avoid paying taxes. Additionally, if competing central banks issue digital versions of their fiat currencies, the U.S. may have to do the same just to maintain its reserve currency status.
In Other News...
Both chambers of the U.S. legislature passed a DOGE-inspired $9 billion reduction in federal spending on things like foreign aid and public broadcasting. The tallies here were much more partisan in nature with a 51-48 vote in the Senate and a 216-213 vote in the House. Once signed into law, also likely later today, this legislation will claw back $7.9 billion in foreign aid and $1.1 billion that had been earmarked for the Corporation for Public Broadcasting or CPB. This is the organization that oversees federal funding for both NPR (National Public Radio) and PBS Public Broadcasting Service). The CPB will also be defunded for the next two years for having long ago openly adopted what Republican legislators perceive as a highly liberal content bias.
CBS to End 'The Late Show'
Paramount Global's PARA CBS has announced that "The Late Show" will be cancelled this May when host Stephen Colbert's contract expires. Honestly, I couldn't care less. Being a professional trader means getting to work at 03:30 a.m. every business day. It's been almost four decades since I knew what was on TV after 10 p.m.
Powell Responds
Fed Chair Jerome Powell countered, in written form, criticisms that have come his way over massive cost overruns in the Fed's renovation project at central bank headquarters. In a letter addressed to Russ Vough, who is director of the White House Office of Management and Budget, Powell wrote, “We take seriously the responsibility to be good stewards of public resources as we fulfill the duties given to us by Congress on behalf of the American people.”
Powell's letter largely just rehashes information already available on the Fed's website. Kind of like the Fed's official monetary policy statements, which have become nothing more than "cut and paste" jobs with a couple of tweaks that a first-year economics student would be embarrassed to have published.
Waller Speaks
On Thursday, Fed Gov. Christopher Waller, who is a rising candidate along with former Fed Gov. Kevin Warsh and Director of the National Economic Council Kevin Hassett, to succeed Jerome Powell as Fed Chair by May (or sooner), spoke at NYU. Waller said, "The economy is still growing but its momentum has slowed significantly and the risks to the FOMC's employment mandate have increased."
Waller made note of the 74,000 private sector jobs added in June, which was the slowest pace of organic job creation (government job creation can be and often is artificial and is not considered organic) in the U.S. since last October. He then added, "This is why I say private-sector payroll gains are near stall speed and flashing red." Waller feels that getting started on reducing short-term interest rates sooner rather than later could prevent the Fed from falling behind should the economy and labor markets falter initio late summer / early autumn.
The Macro
June retail sales rebounded sharply in June from what was a tough May. Headline retail sales grew 0.6% month over month in June, crushing expectations for growth of 0.1%. This was up from a gnarly looking -0.9% print for May. Ex-autos, June retail sales were up 0.5% m/m, up from -0.2% in May and also above expectations that had been for growth of 0.3%.
Strength was visible in sales of motor vehicles, building materials, clothing and in e-commerce. Weakness was seen in sales of furniture, appliances, gasoline, and at department stores. Interestingly, despite the unexpected strength in retail sales for June, the Atlanta Fed revised their GDPNow model for the second quarter down to growth of 2.4% (q/q, SAAR) from 2.6% almost solely by tweaking lower its input for real personal consumption expenditures.
....On the day of an upward surprise to retail sales.
Can't make this stuff up. Atlanta explained that it also took this week's inflation data and the Fed's Beige Book Into account. Atlanta will revise this model again later today after the Census Bureau releases its data for June housing starts.
Elsewhere, weekly initial jobless claims dropped more than expected and the Philly Fed painted a much stronger picture of July manufacturing in that region than anyone had expected. This came two days after the New York Fed had released a similarly and also surprisingly upbeat July manufacturing survey for that region.
Markets
It was another incredible day for the Sarge-folio. I am starting to believe I am dreaming, and I don't want to wake up. I really don't remember an explosive and sustained stretch of positive action like this in my many years on Wall Street. I know enough to know that the market is helping me and I take nothing for granted. The trick is maintaining one's established rules for discipline when it feels like the street is throwing money at you. I have seen many "bull-market" traders disappear when the worm turns never to be heard from again.
On Thursday, the S&P 500 added 0.54%, while the Nasdaq Composite tacked on 0.75%. Both of these major indexes set all-time highs yet again. Small caps roared with the Russell 2000 gaining 1.2% to move into positive territory year to date. The Dow Transports "rolled" to a 0,96% gain, while the KBW Banks stormed back, adding 1.31%.
Nine of the 11 S&P sector SPDR exchange-traded funds ended the day in the green, led by the Financials XLF, Staples XLP and Industrials XLI Only Health Care XLV took a real serious beating. Snap On SNA, Albemarle ALB and PepsiCo PEP led the S&P 500 with gains of more than 7% apiece. Elevance Health ELV easily led S&P 500 losers with a drubbing of 12.22%.
Winners beat losers by more than 2 to 1 at the NYSE and by a rough 9 to 4 at the Nasdaq. Advancing volume took a convincing 73.8% share of composite Nasdaq-listed trade and a nearly as impressive 69.7% share of composite NYSE-listed activity. Aggregate trade increased by 10.4% on a day over day basis across Nasdaq-listings and by 6.5% across NYSE-listings. Volume increased across the membership of the S&P 500 as well. Yes, Thursday's action was meaningful as was Wednesday's and this is confirming the upward trend already in place.
News Item
The Wall Street Journal reported on Thursday evening that Union Pacific UNP was in talks to acquire rival railroad Norfolk Southern NSC. Talks are said to still be in the early stages, but NSC was up 3.7% on Thursday and is up another 4.5% overnight. UNP was down 1.6% on Thursday and is up 0.6% overnight, so there is smoke. Is there fire? Stay tuned.
Economics
(All Times Eastern)
08:30 - Housing Starts (Jun): Expecting 1.39M, Last 1.394M SAAR.
08:30 - Building Permits (Jun): Expecting 1.295M, Last 1.256M SAAR.
10:00 - U of M Consumer Sentiment (Jul-adv): Expecting 61.3, Last 60.7.
10:00 - U of M One-Year Inflation Expectations (Jul-adv): Expecting 4.7%, Last 5.0%.
10:00 - U of M Five-Year Inflation Expectations (Jul-adv): Expecting 4.0%, Last 4.0%.
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 537.
1:00 - Baker Hughes Oil Rig Count (Weekly): Last 424.
The Fed
(All Times Eastern)
No public appearances scheduled.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: MMM (2.01), AXP (3.87), CMA (1.22), SLB (.74)
At the time of publication, Guilfoyle had no position in any security mentioned.
