THE DAILY NEWS

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REUTERS

"Fed says economic recovery remains on track despite COVID-19 surge"


Howard Schneider Lindsay Dunsmuir Ann Saphir

July 28, 2021

Summary

* Fed leaves interest rates, bond-buying program unchanged

* Powell says job gains needed before cutting bond-buying

* Central bank's policy statement was unanimous


WASHINGTON, July 28 (Reuters) - The U.S. economic recovery is still on track despite a rise in coronavirus infections, the Federal Reserve said on Wednesday in a new policy statement that remained upbeat and flagged ongoing talks around the eventual withdrawal of monetary policy support.

In a news conference following the release of the statement, Fed Chair Jerome Powell said the U.S. job market still had "some ground to cover" before it would be time to pull back from the economic support the U.S. central bank put in place in the spring of 2020 to battle the coronavirus pandemic's economic shocks.

"I would want to see some strong job numbers" in the coming months before reducing the $120 billion in monthly bond purchases the Fed continues to make, he told reporters.

But Powell also downplayed, at least for now, the risk that the renewed spread of the coronavirus through its more infectious Delta variant will put the recovery at risk or throw the Fed off track as it plans an exit from crisis-era policies.

"It will have significant health consequences" in the areas of the country where outbreaks are intensifying, Powell said.

Yet in the prior waves of coronavirus infections "there has tended to be less in the way of economic implications ..."

"It is not an unreasonable expectation" that would remain the case this time, he added.

"It seems like we have learned to handle this," with progressively less economic disruption, Powell said, even as he acknowledged a fresh outbreak might to some degree slow the return of workers to the labor market or disrupt planned school reopenings in the fall.

The Fed's policy statement, issued after the end of a two-day policy meeting, reflected that confidence as the central bank continues debating how to wind down its bond purchases.

There appeared to be progress in that discussion, though no clear timetable for reducing the bond purchases.

Powell said there was "very little support" for cutting the $40 billion in monthly purchases of mortgage-backed securities "earlier" than the $80 billion in Treasuries, and that once the process begins "we will taper them at the same time."

Overall, however, the Fed seemed unfazed by spread of the Delta variant, even though new daily coronavirus infections have roughly quadrupled since the Fed's June 15-16 policy meeting.

"With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen," the central bank said in its statement.

Though vaccinations have slowed - and Powell plugged inoculation as the best chance to get the economy durably back to normal - the Fed said it still expected vaccinations to "reduce the effect of the public health crisis on the economy."

That should translate into strong job growth, Powell said, and eventually allow the Fed to move away from its crisis-era programs.

In December, the Fed said it would not change its asset-buying program until there had been "substantial further progress" in repairing a labor market that was then 10 million jobs short of where it was before the pandemic.

That number is now below 7 million, and the Fed for the first time acknowledged the economy had taken a step towards its benchmark for trimming the purchases.

"The economy has made progress, and the (Federal Open Market) Committee will continue to assess progress in coming meetings," the Fed said in language pointing towards a possible reduction in bond purchases later this year or early in 2022.


The Fed also said that higher inflation remained the result of "transitory factors," and was not an imminent risk to the economy or the Fed's policy plans.

'MORE UPBEAT'

Along with leaving its bond-buying program unchanged, the central bank on Wednesday kept its overnight benchmark interest rate near zero.

Karim Basta, chief economist at III Capital Management, said the "incrementally more upbeat" policy statement opened the door to a September bond taper announcement if job growth comes in strong and the coronavirus caseload does not dent spending.

Acknowledging some progress towards their goals "seems designed to give them the option to announce" as soon as September their plans for winding down the bond purchases, he wrote.

The S&P 500 index, which was modestly lower before the release of the policy statement, ended the session flat.

Yields on U.S. Treasuries fell in choppy trading, while the dollar was slightly weaker against a basket of currencies.

Reporting by Howard Schneider and Jonnell Marte Editing by Paul Simao

https://www.reuters.com/business/financ ... 021-07-28/
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REUTERS

"U.S. goods trade deficit widens on imports; inventories increase"


Lucia Mutikani

July 28, 2021

Summary

* Goods trade deficit increases 3.5% in June

* Wholesale inventories rise 0.8%; retail stocks up 0.3%


WASHINGTON, July 28 (Reuters) - The U.S. trade deficit in goods increased in June as imports continued to rise amid strong economic activity, suggesting trade likely remained a drag on growth in the second quarter.

The U.S. economy has rebounded more quickly from the pandemic compared to its global rivals, thanks to massive fiscal stimulus, low interest rates and vaccinations against COVID-19.

But bottlenecks in the supply chain have hampered manufacturers' ability to boost production, drawing in more imports.

"The widening in the advance nominal goods deficit in June is further evidence that net exports will be a drag on second- quarter GDP," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

The goods trade deficit increased 3.5% to $91.2 billion last month, the Commerce Department said on Wednesday.

Imports of goods advanced 1.5% to $236.7 billion.

There were increases in imports of food, industrial supplies and capital goods.


But imports of motor vehicles and consumer goods fell.

While that could hint at a possible moderation in consumer spending in the months ahead, the drop could reflect a global shortage of semiconductors, which has weighed on the production of motor vehicles and some household appliances.

Spending during the pandemic shifted to goods from services, with Americans cooped up at home.

With nearly half of the United States population fully vaccinated against the coronavirus, demand for services is picking up.

That has raised optimism among some economists that fewer goods will be imported in the coming months and allow the trade gap to shrink.

But the Delta variant of the virus is driving a resurgence in new infections across the country, which could limit demand for services.

"We expect the overall trade deficit to narrow in the coming months as consumers rotate their spending towards services and greater vaccine diffusion abroad encourages stronger export growth," said Mahir Rasheed, a U.S. economist at Oxford Economics in New York.

"However, risks from sticky supply chain disruptions and the rapid spread of the Delta variant could slow trade flows."

Stocks on Wall Street were mixed.

The dollar rose against a basket of currencies.

U.S. Treasury prices were lower.

EXPORTS RISE

Goods exports rose 0.3% to $145.5 billion, amid a sharp decline in food shipments.

Capital goods exports also slipped.

But the nation exported more motor vehicles and consumer goods.

The report was published ahead of Thursday's advance second-quarter gross domestic product data.

Trade has been a drag on GDP growth for three straight quarters.

According to a Reuters survey of economists, the economy likely grew at a robust 8.5% annualized rate last quarter, an acceleration from the first quarter's 6.4% pace.

The anticipated growth pace in the second quarter would be the fastest since 1983 and could mark a peak in the current cycle.

Some of the imports last month were used to replenish inventories at wholesalers and retailers, which could soften the drag on GDP growth from trade.

The Commerce Department reported wholesale inventories increased 0.8% last month after rising 1.3% in May.

Stocks at retailers gained 0.3% after dropping 0.8% in May.

Motor vehicle inventories slipped 0.3% after declining 5.5% in May.

Auto production has been undercut by the global chip shortage.

Retail inventories excluding autos, which go into the calculation of GDP, climbed 0.6% after advancing 0.9% in May.

Business inventories were drawn down in the first quarter.

"Overall, it looks like real inventories fell sharply in the second quarter on net, but the weakness was most severe early in the quarter," said Daniel Silver, an economist at JPMorgan in New York.

Reporting By Lucia Mutikani; Editing by Dan Burns and Andrea Ricci

https://www.reuters.com/business/us-goo ... 021-07-28/
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THE HILL

"Democrats need a coherent response to attacks on critical race theory"


Albert Hunt, opinion contributor 

28 JULY 2021

Republicans have their 2022 version of "defund the police" - attacking the critical race theory.

It's largely specious, and is pandering to racial resentments, but Democrats better figure out how to respond.


Last year after police violence, left-wing Democrats talked about defunding the police.

The vast majority of Democratic candidates, starting with Joe Biden, wanted to reform - not defund - police; however, caught in a squeeze, some down-ballot Democrats evaded the issue, and it hurt them.

Republicans apparently believe that "critical race theory" is an even more lethal weapon this year.

Dozens of state legislatures are considering a ban on teaching the concept - some of racism in America in general.

The issue is featured scores of times daily by Fox News.

Although there are variations, the critical race theory argues that racism is systemically embedded in American history, our legal system and politics.

Its most radical opponents charge that it calls for shaming whites and reverse discrimination, but one of the central figures in developing the theory says it's about learning the stain of slavery and recognizing its legacy of discrimination thereafter.


Republicans see it as wedge, focusing on the most radical interpretation to put Democrats on the defensive: If Democrats don't oppose bans on critical race theory, it could alienate Black supporters; if they do, it could offend moderate white voters.

The reality is that racism is a systemic shame and that there remains discrimination.

But America has made enormous progress in the past half century, and no child should be made to feel guilty because of the color of his or her skin.

That may not be easy to put on a bumper sticker.

The main right-wing push to ban this from being taught in elementary and secondary public schools is bogus.

According to a survey from the Association of American Educators, only 4 percent of public school and public charter school respondents report it being taught - and the overwhelming majority oppose any such mandate.

Politicians cultivating this as a campaign weapon have "painted it in the most lurid way," notes Randall Kennedy, a Harvard Law School professor and expert on issues of race and the legal system.

He told me, "You need to put critical race theory in quotation marks as it's used in different ways by different people."

In a broad sense, he says, some elements are "dislikeable," but enumerating a deeper and uglier history of racism is important.

Anything political that critics don't like, they call "critical race theory."

Kennedy says, "It really is a stalking horse for race."

The best case may be the effort to ban critical race teaching in North Carolina by state senate president Phil Berger, a ruthlessly smart right-wing leader.

Berger defines teaching about critical race in the most radical way.

He says it teaches the "only remedy to past discrimination is present discrimination" and making whites to feel guilty.

He criticized the Mecklenburg County (Charlotte) school system for telling students "it is no longer enough to be passively 'not racist.'

"We are called on to be antiracist."

Incredibly Berger wraps his push to stop critical race theory in the mantle of civil rights, citing the 1964 civil rights act and misconstruing Barack Obama's speech to the 2004 Democratic convention.

This is the same Berger under whose leadership the Republican legislature passed a racially discriminatory redistricting measure and a voter ID law that - according to the federal courts - was intended "to target African Americans with almost surgical precision."

What Berger really is up to, North Carolina civil rights leader the Rev. William Barber told me, is "nothing more than Jesse Helms race baiting and lying."

Helms was a longtime segregationist U.S. Senator.

In reality, few Blacks espouse the critical race theory as defined by Berger - and the Charlotte school system has it right: We should be actively antiracist.

Most telling, Berger - parading as a champion of free speech - said: "We don't burn books with radical ideas."

"We read them, discuss them and either accept or reject the ideas they present."

He then proposes to ban the teaching of certain concepts.

That's part of a national pattern - one that Democrats, so far, have not countered.

The right wing has vociferously campaigned against "cancel culture," in which leftists, mainly at elite universities, oppose what they deem unacceptable speech or actions.

In the critical race debate, the cancel culturists are the conservatives.

Al Hunt is the former executive editor of Bloomberg News. He previously served as reporter, bureau chief and Washington editor for the Wall Street Journal. For almost a quarter century he wrote a column on politics for The Wall Street Journal, then The International New York Times and Bloomberg View. He hosts Politics War Room with James Carville. Follow him on Twitter @AlHuntDC.

https://www.msn.com/en-us/news/politics ... d=msedgntp
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POLITICO

"‘A very dangerous precedent’: Democrats take aim at Biden’s Somalia airstrikes"


By Andrew Desiderio and Lara Seligman  

28 JULY 2021

Top Democratic lawmakers took aim this week at the Biden administration’s recent airstrikes in Somalia, disputing the legal rationale for the operations and arguing that it undercuts the president’s stated desire to replace outdated war authorizations.

“I think President [Joe] Biden should submit a new authorization for the use of military force and should recognize that the 2001 AUMF should be terminated,” Sen. Ben Cardin said.

The Pentagon justified the strikes, which targeted al Qaeda affiliates in the war-torn country, by invoking the 2001 Authorization for the Use of Military Force against the terrorist groups that attacked the U.S. on 9/11.

Democrats, who have long maintained that the 2001 authorization is irrelevant 20 years after the U.S. invaded Afghanistan, said the Biden administration did not have the authority to strike in Somalia.

“What the Biden team is doing is consistent with what we’ve seen now in three prior administrations, but it’s, to me, inconsistent with the intent of Congress,” said Sen. Ben Cardin (D-Md.), a senior member of the Senate Foreign Relations Committee.


“I think President [Joe] Biden should submit a new authorization for the use of military force and should recognize that the 2001 AUMF should be terminated,” Cardin added.

Sen. Tim Kaine (D-Va.), who has been working with the White House on a replacement for the 2001 AUMF that better aligns with the current terror threats, called on the Biden administration to brief Congress “expeditiously” on its “counterterrorism goals and the current threats.”

“I have received no information suggesting that these strikes are necessary to protect any U.S. personnel and would need to understand, if this is so, why they are occurring,” Kaine added.

Biden has backed efforts to repeal some war authorizations, such as the 2002 AUMF for Iraq, and replace others, like the 2001 measure.

Yet like his predecessors he has cited a range of legal justifications, including outdated war authorizations, following military action.

That includes twice invoking his Article II constitutional “self-defense” authority when he ordered airstrikes against Iran-backed militant groups in Iraq and Syria that attacked American troops.

“If you’re taking strikes in Somalia, come to Congress and get an authorization for it."

"If you want to be involved in hostilities in Somalia for the next five years, come and explain why that’s necessary and come and get an explicit authorization,” added Sen. Chris Murphy (D-Conn.), another top Foreign Relations Committee member.

“This idea that that’s too much trouble, that that’s too much to ask, is a very dangerous precedent for Congress to set.”


The criticism comes days after the Pentagon struck al-Shabab in Somalia on Friday, marking the second such operation in less than a week and the Biden administration’s second in the country since taking office.

In both cases, Gen. Stephen Townsend, head of U.S. Africa Command — not Biden — authorized the strike.

The mission was conducted to support an American-trained Somali force known as the Danab after they came under fire from al-Shabab militants in the Galmudug area of Somalia, defense officials said.

Murphy said the strike approval process raised questions about the chain of command.

“Any time you’re taking strikes in countries that have no clear authorization for hostilities passed by Congress, the chief executive needs to be involved.”

The U.S. resumed operations in the country after a six-month hiatus despite new limits the Biden administration placed on drone strikes outside active combat zones.

While the Trump administration gave regional commanders broad authority to green-light such operations, proposals for airstrikes are now generally routed through the White House.

Prior to last week’s actions, the U.S. had not conducted a strike in Somalia since Jan. 19, the day before Biden took office.


Biden’s invocation of the 2001 AUMF comes as his administration is conferring with lawmakers about a replacement for that authorization — one that includes specific geographic designations, mandates a cut-off date, and names specific terrorist groups covered under the AUMF.

“It illustrates that we need to come up with some sort of mechanism where we can approve geographies,” Sen. Todd Young (R-Ind.), who has long advocated for war powers reforms, said of the Somalia strikes.

“We don’t want to hamstring the president’s Article II powers — which we don’t have the power to do anyway.”

Cardin said citing the 2001 AUMF “makes it more difficult” to get a new authorization through Congress, adding: “It undercuts our ability to see an urgency for action.”

The Foreign Relations Committee has asked the Biden administration for more information about the airstrikes.

Sen. Bob Menendez (D-N.J.), who chairs the panel, said his main focus was on repealing the AUMFs that no longer have functional value.

But the committee is scheduled to hold a hearing next week with top State Department officials on AUMFs more broadly, allowing senators to question administration officials directly about the invocation of the 2001 AUMF as well as Biden’s Article II powers.

After that hearing, the committee will vote on a bipartisan measure to repeal the 2002 and 1991 AUMFs, both of which authorized military force in Iraq for different conflicts.

But the 2001 AUMF is still on lawmakers’ minds as a future target.

“It’s just more evidence of how badly the 2001 AUMF is in need of reform,” Murphy added.

“I think the administration is struggling a little bit to find the legal authorization for these strikes.”

Pentagon spokesperson Cindi King declined to give additional details about the dual attacks, including why the Biden administration had conducted two in a row after a six-month hiatus, citing operational security.


But a defense official said the end of Somalia’s rainy season has allowed operations to resume on both sides and anticipated a resumption of active fighting.

The defense official defended the airstrike, drawing a distinction between “deliberate” strikes against a particular threat developed in advance by military planners, and close-air-support or self-defense operations based on an imminent threat."

"In the latter cases, commanders must be able to authorize a strike quickly in life-threatening situations."

"All strikes go through rigorous approval processes including assessments of civilian casualties and collateral damage, the official said.

Republicans defended and applauded the administration’s airstrikes, as they have often done since Biden became president.

On the issue of war powers, GOP lawmakers have generally backed expanded presidential authority to conduct military operations.

“I don’t think the president needs a law passed by Congress in order to target terrorists who are posing a threat to the United States, no matter where they are in the world,” said Sen. Marco Rubio (R-Fla.), the vice chair of the Senate Intelligence Committee.

“Especially if it’s a one-off, targeted engagement, not a full-scale military situation.”

https://www.msn.com/en-us/news/politics ... d=msedgntp
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RIGZONE

"Oil Increases as Signs of Demand Strength Continues"


by Bloomberg | Jill R. Shah

Thursday, July 29, 2021

Oil rose the most in a week as investors see strong demand growth that should continue to whittle down oil supplies following positive signals from broader markets.

Futures in New York rose 1.7% on Thursday as equities climbed toward all-time highs.

While U.S. gross domestic product growth missed forecasts in the second quarter, household spending jumped by the most decades, underscoring the demand for oil and other commodities to support the supply chain.

Oil was also supported by a weaker dollar, which boosts the appeal of commodities priced in the currency.

“Almost unequivocally, we have a fairly robust increase in risk appetite across the board,” said Bart Melek, head of commodity strategy at TD Securities.

“That’s certainly rallying things up.”

Oil has been volatile throughout July and is headed for its second monthly loss since October amid price pressure from new OPEC+ output and the resurgence of Covid-19.

While the fast-spreading delta variant has led to renewed restrictions in some regions, the global market is still expected to be tight through the end of the year.

“Delta is an issue, but not the issue because you’re not seeing further shutdowns just yet,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

“We see that even here when we’re talking about renewed mask recommendations, not mandates.”

More restrictions in Asia have impacted road traffic.

Congestion remains significantly below normal in Kuala Lumpur, Bangkok, Jakarta and Singapore as governments have imposed various levels of lockdowns, according to a report by BloombergNEF oil analyst Luxi Hong.

Prices

West Texas Intermediate for September rose $1.23 to settle at $73.62 a barrel on the New York Mercantile Exchange in New York.

Brent for September, which expires Friday, gained $1.31 to end session at $76.05 on the ICE Futures Europe exchange.

Meanwhile, investors are also keeping an eye on commentary from the U.S. oil industry, which reports earnings this week.

While companies have maintained discipline and focused on returns for shareholders, higher oil prices could encourage increased output.

“It’s a matter of when, not if, before we see more of a supply response in the U.S.,” said Haworth.

https://www.rigzone.com/news/wire/oil_i ... 7-article/
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CNBC

"Treasury yields are mostly flat as investors digest economic data"


Hannah Miao @HANNAHMIAO_ Vicky McKeever @VMCKEEVERCNBC

U.S. Treasury yields were mostly flat Thursday as investors digested the latest economic data.

The yield on the benchmark 10-year Treasury note was little changed at 1.264% by 4:13 p.m. ET.

The yield on the 30-year Treasury bond was mostly flat at 1.914%.

Yields move inversely to prices.

One basis point equals 0.01%.

U.S. gross domestic product for the second quarter rose 6.5% from the year prior, slightly stronger than the 6.3% annualized gain in the first quarter, but well below economists’ 8.4% expectation.

Jobless claims for the week ending July 24 showed 400,000 people filed initial claims for unemployment benefits, nearly double the pre-pandemic norm.

The Fed on Wednesday held its benchmark interest rate near zero, following a two-day policy meeting.

The Fed’s statement said “progress” had been made on its employment and inflation targets.

However, Fed Chairman Jerome Powell cautioned that “substantial further progress” had not yet been reached on these goals.

PNC chief economist Gus Faucher said the comments indicated that the Fed had started the “tapering clock” on paring back its asset purchases.

Tiffany Wilding, U.S. economist at PIMCO, said on Thursday that the Fed’s statement suggests that it could announce the first reduction in bond purchases as early as September.

However, Wilding said it “reaffirmed our view that December is the most likely timing for any announcement.”

Data also provided by Reuters

https://www.cnbc.com/2021/07/29/us-bond ... ision.html
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CNBC

"Pending home sales drop in June — more evidence of a housing turnaround"


Diana Olick @IN/DIANAOLICK @DIANAOLICKCNBC @DIANAOLICK

PUBLISHED THU, JUL 29 2021

KEY POINTS

* Signed contracts on existing homes fell in June.

* Prices in May were up nearly 17% compared with May 2020, according to the latest reading from S&P Case-Shiller

* Mortgage rates moved slightly higher at the start of June, which only added to affordability issues.


Pending sales of existing homes in June as measured by signed contracts fell 1.9% from May, according to the National Association of Realtors.

Sales were also down 1.9% compared with June 2020.


Pending sales are a forward-looking indicator of closed sales in one to two months.

“Pending sales have seesawed since January, indicating a turning point for the market,” said Lawrence Yun, Realtors’ chief economist.

“Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.”

Prices in May were up nearly 17% compared with May 2020, according to the latest reading from the S&P Case-Shiller national home price index.

That is the largest annual gain on record.


Prices in June could very well top that, given the still tight supply of homes for sale, especially on the low end of the market.

Prices are high because inventory has been so low.

But that is starting to change.

The number of newly listed homes in June rose 5.5% compared with June 2020, according to Realtor.com.

“With prices at record highs and mortgage rates still hovering near record lows, sellers are recognizing the favorable conditions,” said George Ratiu, senior economist at Realtor.com.

Regionally, pending sales increased 0.5% in June compared with May and were up 8.7% from a year ago.

In the Midwest, sales rose 0.6% monthly but fell 2.4% annually.

In the South, pending sales fell 3% monthly and 4.7% from June 2020.

In the West sales decreased 3.8% monthly and 2.6% annually.

Mortgage rates moved slightly higher at the start of June, which only added to affordability issues.

Rates then came down again by the end of the month.

Yun is predicting mortgage rates will rise more steadily toward the end of the year.

“This rise will soften demand and cool price appreciation,” he added.

Sales of newly built homes, which are counted by signed contracts, also fell in June, down 6% for the month and nearly 20% year over year, according to the U.S. Census.

https://www.cnbc.com/2021/07/29/pending ... june-.html
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CNBC

"U.S. GDP rose 6.5% last quarter, well below expectations"


Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM

PUBLISHED THU, JUL 29 2021

KEY POINTS

* GDP rose at a 6.5% annualized pace in the second quarter, according to the Commerce Department’s first estimate Thursday.

* That was well below the Dow Jones estimate of 8.4%.

* Initial claims for unemployment insurance also missed expectations, with the 400,000 total above the 380,000 expectation.


The U.S. economy rose at a disappointing rate in the second quarter, the Commerce Department reported Thursday in a sign that the U.S. has escaped the shackles of the Covid-19 pandemic but still has more work to do.

Gross domestic product, a measure of all goods and services produced during the April-to-June period, accelerated 6.5% on an annualized basis.

That was slightly better than the 6.3% gain in the first quarter, which was revised down narrowly.

While that would have been strong prior to the pandemic, the gain was considerably less than the 8.4% Dow Jones estimate.

Gross private domestic investment fell 3.5% as declines in private inventory and residential investment held back gains.

Rising imports and a 5% decline in the rate of federal government spending, despite the ballooning budget deficit, also were factors, the Bureau of Economic Analysis report said.

The overall increase came thanks to increasing personal expenditures, which rose 11.8% as consumers accounted for 69% of all activity.

Nonresidential fixed investment, exports and state and local government spending also helped boost output.

The personal savings rate dropped sharply, tumbling to $1.97 trillion from $4.1 trillion in the previous period.

The headline gain was a yardstick for how far the economy has come from the shutdowns imposed during the early days of the pandemic, when governments across the country halted large swaths of economic activity to combat Covid.

At its nadir, the economy collapsed 31.4% in the second quarter of 2020; it bounced back 33.4% in the subsequent three-month period and has continued to push toward normal since.

In the years prior to the pandemic, the Q2 gain would have been the strongest since the third quarter of 2003.

Though output has remained below its pre-pandemic level, the National Bureau of Economic Research pronounced the recession that began in February 2020 to have ended just two months later, the shortest on record.

However, the second quarter is likely to be the high point of the pandemic recovery.

“The good news is that the economy has now surpassed its pre-pandemic level,” wrote Paul Ashworth, chief U.S. economist at Capital Economics.

“But with the impact from the fiscal stimulus waning, surging prices weakening purchasing power, the delta variant running amok in the south and the saving rate lower than we thought, we expect GDP growth to slow to 3.5% annualized in the second half of this year.”


Still, areas of the economy remain underwater as the labor market in particular has struggled to get back to normal.

In a separate report Thursday, the Labor Department said 400,000 people filed initial claims for unemployment benefits for the week ended July 24.

That level is nearly double the pre-pandemic norm and was above the 380,000 Dow Jones estimate.


However, it was a decrease from the previous week’s 424,000.

Continuing claims edged higher to 3.27 million, according to data that runs a week behind the headline number.

The total of those receiving benefits rose by nearly 600,000 to 13.16 million, according to data through July 10.


https://www.cnbc.com/2021/07/29/q2-gdp- ... imate.html
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REUTERS

"TREASURIES-U.S. yields slightly higher after soft auction; risk tone still positive"


By Gertrude Chavez-Dreyfuss

JULY 29, 2021

* U.S. Q2 advance GDP lower than expected

* U.S. initial jobless claims were higher than forecast

* U.S. 10-year TIPS yield hits new record low

* U.S. 7-year note auction was worst in four months - analyst


NEW YORK, July 29 (Reuters) - U.S. Treasury yields inched higher on Thursday, but were below their peaks for the day, after a soft 7-year note auction added to the positive risk tone which persisted all day despite weaker-than-expected U.S. data.

Overall, U.S. yields have been on a downward trajectory over the last couple of months.

Since mid-May, U.S. 10-year yields have fallen about 40 basis points.

A Federal Reserve statement on Wednesday that suggested the U.S. central bank is inching closer to reducing its asset purchases had limited impact on the market, as yields stalled.

A Fed tapering would typically reduce the appeal of Treasuries, pushing yields higher.

"The Fed thinks they can taper and the economy can keep growing," said Zhiwei Ren, portfolio manager at Penn Mutual Asset Management in Philadelphia.

"They think they can hike rates and the economy can keep growing and they can hike more."

"I don't think the bond market is buying it," he added.


Treasury yields initially fell on Thursday after the release of softer-than-forecast U.S. economic data, but came slightly back up.

The advance estimate for U.S. gross domestic product in the second quarter showed the economy grew at a 6.5% annualized rate, lower than market forecasts for an 8.5% rise.

In a separate report, U.S. initial jobless claims were at 400,000 for the latest week, higher than consensus expectations of 380,000.

U.S. stocks looked past the U.S. data, with the Dow and S&P 500 hitting fresh intraday record highs earlier due in part to a slate of strong corporate earnings reports.

Upbeat Chinese news on regulation that pushed their shares higher added to the sanguine mood on Wall Street, as did strong European economic reports on euro zone investor sentiment and German inflation.

Thursday's U.S. 7-year auction was lackluster, with a yield of 1.05%, higher than the expected rate at the bid deadline of 1.042%, suggesting that investors wanted a little more yield to take the note.

The bid-to-cover ratio, a gauge of demand, was 2.23, below both the 2.36 last month and what analysts said was the 2.33 average.

"Bid to cover at 2.23x reflected a preference for either 5s or 7s in this environment," Jim Vogel, senior rates strategist at FHN Financial, said in a research note after the auction.

"Dealers are not stepping up this week, with a share of only 22.2%."

"It's the worst 7-year auction in four months."


In late afternoon trading, the U.S. 10-year Treasury yield was up a little at 1.267%.

U.S. 30-year yields were little changed at 1.913% from Wednesday's 1.911%.

Post-auction, U.S. 7-year note yields were slightly higher at 1.024%.

In other parts of the Treasury market, the yield on 10-year Treasury Inflation-Protected Securities (TIPS) plunged to a fresh record low of -1.175%, as investors priced in higher inflation going forward.

Penn Mutual's Ren said the record low yields on 10-year TIPS, also known as real yields, is a "pessimistic signal" on the economy.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by David Gregorio and Sonya Hepinstall)

https://www.reuters.com/article/usa-bon ... SL1N2P52AH
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REUTERS

"Wall St gains with upbeat earnings and forecasts"


By Caroline Valetkevitch

JULY 29, 2021

NEW YORK (Reuters) - U.S. stocks ended higher on Thursday, boosted by robust U.S. earnings and forecasts, while data showed the economy recovered to pre-pandemic levels in the second quarter.

The U.S. economy grew solidly in the second quarter, putting the level of gross domestic product above its pre-pandemic peak, but the pace of GDP growth was slower than economists had expected.

Among the latest upbeat earnings news, shares of Ford Motor Co jumped 3.8% as the company lifted its profit forecast for the year, while KFC owner Yum Brands Inc rose 6.3% after it beat expectations for quarterly sales.

The day’s lower than expected economic data may have calmed a bit of investor angst that the Federal Reserve’s “easy money policy” may be going away soon, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Investors also saw “some pretty good earnings today,” he said.

Stocks got a boost on Wednesday after the Fed said it was not yet time to start withdrawing its massive monetary stimulus.

Economically sensitive groups including financials, materials and energy led S&P sector gains on Thursday.

The Dow Jones Industrial Average rose 153.6 points, or 0.44%, to 35,084.53, the S&P 500 gained 18.51 points, or 0.42%, to 4,419.15 and the Nasdaq Composite added 15.68 points, or 0.11%, to 14,778.26.

The Dow and S&P 500 hit intraday record highs early in the session.

The S&P 500 real estate sector hit a record intraday high as well, but ended down 0.2%.

On the down side, Facebook Inc shares fell 4% as the company warned revenue growth would “decelerate significantly” following Apple Inc’s recent update to its iOS operating system that would impact the social media giant’s ability to target ads.

Results were in from about half of the S&P 500 companies as of Thursday morning.

Nearly 91% of the reports have beaten profit estimates, and second-quarter earnings now are expected to have jumped 87.2% from a year ago, according to Refinitiv data.

After the bell, shares of Amazon.com Inc were down more than 5% after the company reported results and forecast third-quarter sales below Wall Street expectations.

During the regular session, Tesla Inc jumped 4.7% and was the biggest boost to the S&P 500, followed by Apple, which rose after Wednesday’s declines.

Also, shares of Robinhood Markets Inc, the popular trading app used by many investors to participate in this year’s “meme” stock trading frenzy, ended down 8.4% on their first day of trading.

With rising inflation and concerns that higher prices would not be as transient as expected, focus on Friday will be on the June reading of the personal consumption expenditures price index.

Volume on U.S. exchanges was 9.13 billion shares, compared with the average of about 9.86 billion for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 2.34-to-1 ratio; on Nasdaq, a 1.22-to-1 ratio favored advancers.

The S&P 500 posted 76 new 52-week highs and 1 new low; the Nasdaq Composite recorded 105 new highs and 49 new lows.

Reporting by Caroline Valetkevitch in New York; Additional reporting by Sagarika Jaisinghani in Bengaluru; Editing by Maju Samuel and Matthew Lewis

https://www.reuters.com/article/us-usa- ... SKBN2EZ1GX
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