100% CONFIDENT
According to the CME FedWatch Tool, which is used to gauge market expectations based on Fed funds futures contracts, traders are now highly confident that the Federal Reserve will lower interest rates by September. The tool’s calculations have revealed a notable lack of bets on rates remaining unchanged, indicating a strong consensus among traders. This confidence is reflected in the high probability of a quarter percentage point reduction and a smaller chance of a half-point cut. The catalyst for this shift in expectations was the recent decrease in the consumer price index for June, which revealed the lowest annual inflation rate in three years. In addition, Fed Chairman Jerome Powell has recently suggested a willingness to consider rate cuts to boost confidence in reaching the Fed’s target inflation rate of 2%. Moreover, with upcoming Fed meetings scheduled for July 31 and September 18, traders eagerly await official announcements regarding interest rate adjustments.
HESITATE DESPITE NEW LOW
Last week, mortgage rates dropped to the lowest level in months, causing many people to apply to refinance their home loans. As a result, the number of applications to refinance loans went up by 15%, hitting the highest level since August 2022. This figure is much lower than before the pandemic, however, it shows that more people are taking advantage of the lower rates. Furthermore, the average interest rate for 30-year fixed-rate mortgages also went down. Nevertheless, applications for new mortgages to buy homes decreased by 3% last week, thus, fewer people are looking to buy homes right now, probably because prices are high and there are not many options available. Moreover, some sellers are now reducing their prices to attract buyers, but many buyers might be waiting for rates to drop even more before making a move.
BACK ON GAINS
Bitcoin traders are observing a potential increase in prices, as market sentiment is becoming more positive and the selling pressure seems to be decreasing. This optimism is fueled by expectations of crypto-friendly policies in the U.S. due to the selection of Senator JD Vance as Donald Trump’s running mate, as well as the ongoing distribution of Mt. Gox funds to creditors. These developments have boosted investor confidence and shifted perceptions towards digital asset industry regulations. Furthermore, the rising likelihood of Trump winning the 2024 elections, now at 69%, is further reinforcing positive sentiment and raising hopes for favorable policies regarding cryptocurrency.
CHIPS CHALLENGED
Former U.S. President Donald Trump has stirred controversy by suggesting that Taiwan should pay for U.S. defense, arguing that the country does not provide any benefits in return. This statement came as a result of the growing concerns over Taiwan’s dominance in the semiconductor industry, particularly in the production of advanced chips. Trump’s remarks have raised questions about the global reliance on Taiwanese chip manufacturing and the potential implications of a Chinese attack on the island. Moreover, let’s highlight that in response to these concerns, the Biden administration is pushing for more chip production to be brought back to the U.S. by offering incentives to companies like TSMC and Samsung. This move aims to reduce dependence on foreign manufacturing and strengthen domestic chip production capabilities. Furthermore, following Trump’s comments, stocks of major semiconductor companies, such as Intel and AMD, experienced a decline, underscoring the significance of these developments on the market.
PROFIT DECLINE
U.S. Bancorp has revealed that in the second quarter it experienced a significant decline in profit, with a 10% drop attributed to lower interest income resulting from increased deposit costs and weakened loan demand. To retain deposits, banks are offering higher interest rates, while customers are holding off on taking loans until interest rates stabilize. This has impacted U.S. Bancorp’s net interest income, which decreased by 9% to $4.05 billion, and average loans fell by 3.6%. Nonetheless, despite these challenges, CEO Andy Cecere highlighted that credit metrics are in line with expectations and the bank’s reserve levels are sufficient for future losses. Moreover, although adjusted net income for the lender was $1.62 billion, it is important to remark that the U.S. Bancorp’s stock has shown no growth this year and is the worst performer among its peers tracked by the S&P 500 Banks Index, which has seen a 17.33% gain over the same period.
