Rise and shine everyone.

A mixed day yesterday, with the indices selling into the close. Indices closed more or less flat thought. Nvidia opened with somewhat of a recovery but we’re still down from where we were before earnings. the stock was trading in a very tight range and looks like the break below is taking time to recover.

But, the euphoria was kicked off by macro news - the second estimate of the 2Q GDP growth was revised upward from 2.8% to 3.0%, based on stronger consumer spending.

After the release, we say exactly what we’d expected. Yields started to move up, particularly on the long end. This is what I talked about last weekend on the Weekend Edition and on Fox later in the week.

Markets pricing in a “less bad” economy, will send yields higher. With that, we saw the US dollar recover as well.

Meanwhile, we still have some risk-off fear here and there. Gold keeps pushing higher and Bitcoin pulls back.

Finally, today's focus will be US PCE inflation. I almost forgot about this one. Speaking of inflation, we got numbers from France and the EA today. France came in below 2% just like yesterday and the EA reported inline, at 2.2% down from 2.6% the previous month. This makes it easier for the ECB to cut rates in September.

And we hope you have a nice long holiday as markets will be closed on Monday for Labor Day!

Consumer Stories

That Dollar General though! Down -32% on earnings. They delivered a double miss and same-store sales turned negative in July.

“More of our customers report that they are now resorting to using credit cards for basic household needs. And approximately 30% have at least 1 credit card that has reached its limit…. We are not losing share but the consumer is clearly cash strapped.” - DG Earnings Call

It’s that K-shaped economy - the lower-end consumer is cash-strapped. I hate to think what the interest on the credit card will look like.

We heard from a few more consumer companies - Best Buy actually did very well. After the close, we had Lululemon and Ulta. LULU came out slightly better, raising guidance and increasing its share buyback. Ulta not so much. They cut their outlook and talked about actions to address adverse trends. Sephora is probably eating their lunch a little bit here, and remember, prices for mid- to high-end products have been increased by 30%-40%.

Chart of the Day - XLRE For the Win!

This is the Relative Rotation Graph built by Julius de Kempenaer, which plots momentum vs. relative strength. And shows the rotation for a group. I’ve taken the S&P Sectors for the past 4 weeks.

Who would’ve thought? Real Estate tops the charts and is now a leading sector.

When you look at it as a table, it’s pretty clear that more defensive positioning has been the winner in August.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)

No earnings of note.