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With two last trading days in the second quarter, investors and traders alike will be looking for any surprises in today’s pending home sales figures, which are predicted to have swung back into positive territory to 0.10% after MoM growth plunged to -7.66%, levels not seen since 2022. Also on everyone’s radar will be tomorrow’s PCE Deflator updates for both top-line and core. Expectations are for both measures to have backed off slightly with the top-line falling 0.10% to 2.6% and the core to have retreated 0.20% to 2.6%. As always, the devil is in the details and we will be among the many parsing through those details to better gauge just how the consumer is doing and where potential pain points might be.

Speaking of the consumer, while Levi Strauss (LEVI) surprised 45% to the upside yesterday, today we’ll see if Nike (NKE) has any surprises in store given analysts’ earnings estimates of $0.85 per share. Also reporting today are Walgreens Boot Alliance (WBA) and McCormick & Company (MKC). 

While there have been some concerns about bank strength this year, the Fed came out yesterday and revealed that all 31 of the banks and lenders that participated in this year’s stress test were “able to absorb losses while maintaining more than the minimum required capital levels.” The scenario included evaluating capital levels in a hypothetical environment where unemployment spiked to 10%, commercial real estate values fell 40% and housing prices declined 36%. 

As we head into vacation season, the outlook calls for more of the same, with the CME’s Fedwatch Tool reporting that fed funds futures traders have priced in a roughly 90% chance the Fed takes no action in its July meeting and only a 56% chance we see a 25 basis point cut in September. Given the Fed’s data-dependent nature, we’ll have to see what unfolds over July and August but for now, the status quo works for us. See you in the third quarter!

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