Stagflation fears are back
Why it matters: The word "stagflation" revives miserable memories of the 1970s, when Americans faced a dreadful combination of higher prices and few job opportunities.
The big picture: This was the week mainstream economists were vindicated.
Predictions of weaker growth and more persistent inflation — the "stag" and the "flation" — looked farfetched, until now.
What they're saying: "The bottom line is that the risk of stagflation has risen meaningfully," Olu Sonola, an economist at Fitch Ratings, wrote in a client note.
"Inflation is drifting further from target, private sector economic growth has slowed materially, and the labor market has just sounded a warning bell."
Catch up quick: Trump fired the Bureau of Labor Statistics' top official on Friday, hours after the agency reported weaker-than-expected jobs growth.
He claimed, without evidence, that the numbers were politically manipulated.
In an interview with Axios, top White House economist Stephen Miran agreed that the BLS needed new leadership to address massive data revisions, but did not claim the numbers were manipulated.
By the numbers: The economy added just 73,000 jobs last month, while historic downward revisions suggested the labor market added almost no jobs at all the previous two months.
What's going on: That's the "stag." Now consider the other indicators released in the past week.
💰 GDP: The economy expanded at a 3% annualized rate in the second quarter, boosted by the reversal of unprecedented importing activity in the first quarter. Dig into the report and the growth snapshot looks worse.
A measure of underlying domestic demand — which strips out swings in trade, inventory and government spending — rose at only a 1.2% rate in the second quarter, the weakest since the end of 2022.
🛒 Inflation: The Fed's go-to inflation measure rose in the final two months of the second quarter, despite moderating underlying growth.
The Personal Consumption Expenditures price index rose by 2.6% in the 12 months through June, the second consecutive increase.
The gauge that excludes food and energy rose by 2.8%, ticking up slightly from May.
Between the lines: The collection of data — especially the weak jobs report — strengthens the case for the Federal Reserve to cut interest rates in September.
But inflation concerns will still be top of mind for the Fed. There are early signs that Trump's tariffs are pushing prices higher. No one knows whether those increases will be persistent.
For the record: "We've been here before when there was large scale doom-mongering ... about the Tax Cuts and Jobs Act and about the President's tariffs on China in the first term," Miran says.
All of the "doom-mongering" turned out to be wrong, Miran said.
He added that there was good reason to believe the economy would get stronger from here, citing Trump's tax and spending bill, as well as a spate of recent trade deals.
The bottom line: If Trump gets the rate cut he has been yearning for, it might be for a reason he likely hates — a slowing economy.
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Shares of Nvidia (NVDA) and AMD (AMD) fell on Monday after the two companies agreed to pay the US government 15% of the revenue for certain chip sales to China. Nvidia stock was off by 0.4% premarket, while AMD stock dropped 1.4% as investors digested the unusual deal in which the chipmakers will essentially pay for export licenses. While the details are still being worked out, the chips in question reportedly include Nvidia's H20 AI chip and AMD's MI308 chips, which previously faced export controls from the Trump administration. Nvidia CEO Jensen Huang made the deal at the White House last Wednesday, the same day Apple (AAPL) agreed to increase its US investment to $600 billion, ostensibly to help the company avoid tariffs, as the Trump administration looks to monetize trade policy. An Nvidia spokesperson told Yahoo Finance: 'We follow rules the U.S. government sets for our participation in worldwide markets. 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Here are some of the biggest stories you may have missed overnight and early this morning: Nvidia, AMD revenue deal brings 'monetization of US trade policy' Yahoo Finance poll: Americans face new, complex financial challenges Earnings live: stock tanks, AMC to report Debate over Fed rate cuts heats up: What to watch this week Fed's Bowman makes case for 3 interest rate cuts in 2025 Intel CEO to visit White House on Monday Citi strategists raise S&P 500 target on resilient earnings Bitcoin Nears Record as Treasury Investors Boost Crypto Market BofA poll shows record number of investors say stocks overvalued Lithium market soars as CATL shuts one of world's biggest mines stock tanks after the company reports earnings stock plunged aorund 20% in premarket trading on Monday after the Israeli-based software company reported earnings. In the second quarter, reported earnings of $0.03 per share and revenue of $299 million. While revenue beat analyst expectations of $293 million, GAAP profits fell short, as Wall Street was looking for $0.20 per share, per S&P Global Market Intelligence. Investors have been looking for signs that economic uncertainty is pushing companies to pull back their spending on technology and software. The company's operating loss fell to $11.6 million from $1.8 million a year ago, and the operating margin fell to negative 4% from 1% last year. Read more live coverage of corporate earnings here stock plunged aorund 20% in premarket trading on Monday after the Israeli-based software company reported earnings. In the second quarter, reported earnings of $0.03 per share and revenue of $299 million. While revenue beat analyst expectations of $293 million, GAAP profits fell short, as Wall Street was looking for $0.20 per share, per S&P Global Market Intelligence. Investors have been looking for signs that economic uncertainty is pushing companies to pull back their spending on technology and software. The company's operating loss fell to $11.6 million from $1.8 million a year ago, and the operating margin fell to negative 4% from 1% last year. Read more live coverage of corporate earnings here US gold futures fall as traders await clarification on tariffs US gold futures (GC=F) in New York fell 2% as traders waited for the White House to clarify its tariff policy. Last week, the US Customs and Border agency surprised the market by ruling that 100oz and 1kg gold bars would face tariffs. Bloomberg News reports: Read more here. US gold futures (GC=F) in New York fell 2% as traders waited for the White House to clarify its tariff policy. Last week, the US Customs and Border agency surprised the market by ruling that 100oz and 1kg gold bars would face tariffs. Bloomberg News reports: Read more here. Target still in the bear camp Good WSJ story this morning on Target (TGT) and its many challenges, one of them finding its next CEO. I wrote more on this a couple months ago. I would expect an abysmal quarter (another one) from Target when it reports second quarter earnings on August 20. The company is not only dealing with operational challenges, but it has totally lost the value perception battle with Walmart. I don't see these dynamics changing this year, and maybe not until deep into 2026 provided an outside CEO is brought in to run a full assessment of the business. Good WSJ story this morning on Target (TGT) and its many challenges, one of them finding its next CEO. I wrote more on this a couple months ago. I would expect an abysmal quarter (another one) from Target when it reports second quarter earnings on August 20. The company is not only dealing with operational challenges, but it has totally lost the value perception battle with Walmart. I don't see these dynamics changing this year, and maybe not until deep into 2026 provided an outside CEO is brought in to run a full assessment of the business. Bitcoin near a fresh record Bitcoin looks to be breaking out of its recent trading range, nearing a fresh record this morning. There doesn't appear to be a clear catalyst for the pop today, though this Sunday X post from bitcoin evangelist Michael Saylor may have stoked the bulls. It suggests he will continue to be a buyer of bitcoin — perhaps no surprise, but the crypto market likes to be coddled. "If you don't stop buying Bitcoin, you won't stop making Money," Saylor wrote. Bitcoin looks to be breaking out of its recent trading range, nearing a fresh record this morning. There doesn't appear to be a clear catalyst for the pop today, though this Sunday X post from bitcoin evangelist Michael Saylor may have stoked the bulls. It suggests he will continue to be a buyer of bitcoin — perhaps no surprise, but the crypto market likes to be coddled. "If you don't stop buying Bitcoin, you won't stop making Money," Saylor wrote. crashing Shares of (AI) are getting crushed pre-market to the tune of 30%. And the rout is 100% deserved. Late Friday the company said it sees preliminary first fiscal quarter revenue of $70.2 million to $70.4 million, about 33% below the mid-point of its prior guidance for $100 million to $109 million. Sales would be down 19% from the prior year. The adjusted operating loss will be $57.7 million to $59.9 million, roughly twice the $23.5 million to $33.5 million loss that it had expected. I don't think there is anything to read into the AI trade here — this seems very company-specific, and tied to a sales reorg. Shares of (AI) are getting crushed pre-market to the tune of 30%. And the rout is 100% deserved. Late Friday the company said it sees preliminary first fiscal quarter revenue of $70.2 million to $70.4 million, about 33% below the mid-point of its prior guidance for $100 million to $109 million. Sales would be down 19% from the prior year. The adjusted operating loss will be $57.7 million to $59.9 million, roughly twice the $23.5 million to $33.5 million loss that it had expected. I don't think there is anything to read into the AI trade here — this seems very company-specific, and tied to a sales reorg. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNN
19 minutes ago
- CNN
US and China reportedly agree to critical extension, preventing tariff surge on the world's two largest economies
Tariffs Asia ChinaFacebookTweetLink Follow The United States and China agreed to pause tariff hikes on each other's goods for an additional 90 days, according to multiple reports citing White House officials. Without the agreement, tariffs were set to immediately surge, risking a return to ultra-high levels that had formed an effective blockade on trade between the world's two largest economies. The news, first reported by CNBC, comes hours ahead of a 12:01 am ET deadline when tariffs on Chinese goods were set to rise to 64% from 30%. It's unclear what rates China would have charged on American goods, which are currently subject to minimum 10% tariffs. It also comes after Trump imposed a slew of 'reciprocal' tariffs on trading partners around the world, which have raised the United States' effective tariff rate to levels not seen since the Great Depression. Higher tariffs on Chinese goods, America's second-largest source of imports, would have almost certainly raised the costs many American businesses and consumers could pay — or already are paying — because of increased import taxes Trump enacted. This is a developing story. It will be updated.
