I read that double green in ‘American Roulette’ is the most unpopular in part because the casino has the edge. But sometimes the ball lands in that pocket.

Yesterday’s session was led by a bevy of unlikely winners in the most beaten-down sectors of 2025. Real Estate (XLRE) was undoubtedly the most unlikely “winner.” Consumer Staples (XLP) haven’t fared well lately, and Energy (XLE) needed the threat of Russian sanctions to spark a move higher.  

Utilities (XLU) have been up every day lately. This has emerged as the ‘Swiss Army Knife’ of the market—safety, high dividend yields, and now the breakneck race to power Artificial Intelligence (AI).

Bonds Set the Pace

Thus, $44.0 billion in 7-year notes were auctioned yesterday, and demand was through the roof. In fact, it set a record for the lowest share to primary dealers. Today, the Treasury Department announces its refunding plans. This is supposed to be a wildcard that could send yields higher and tie up the Fed – not yesterday.

Powell’s Prerogative

Powell & Co. has three areas of concern that have been smashed or mitigated since the last Federal Open Market Committee (FOMC).

Jay Powell’s Checklist of Concerns:
Inflation
Labor Market
Trade Policy & Tariffs

Inflation?

Imports have crashed, and import prices have been anything but inflationary.

Labor

The JOLTS report signals faster deterioration in the labor market than Wall Street models.

The layoff rate has remained unchanged, but I had previously stated that the labor crisis would not stem from mass layoffs. Instead, quits are fading, as openings ebb and hiring rates stumble.

Powell often talks about public perception of inflation and the Fed’s determination to keep those expectations low.  Right now, the public has a perception of the labor market that should be sending off bells at Fed headquarters (assuming there was enough left in the budget for bells).

Consumer confidence edged higher as expectations improved, but when asked if jobs are “hard to get,” 18.9% agreed, up from only 14.5% in January.

The labor market needs you, Jay.

Policy Uncertainty

I guess Jay Powell ain’t heard…nobody went up there to tell him. Lots of trade deals have been inked, and there is more to come.

Bottom Line

America is crushing it on inflation, and yet other nations have cut rates aggressively.

Powell’s Fed days have been terrible for the stock market – he could change all of that today, along with improving his legacy.

He could be a good fella and help out the middle class.

Today’s Session

Lots of data was released this morning.  GDP was a shocker, coming in at +3.0% against the consensus of +2.3%. A major contributor was the massive decline in imports, that were up significantly in the first quarter, ahead of tariffs.  Real final calls to private domestic purchasers (best gauge) was +1.2, which is steady, but the lowest since 2022. 

Steady Refunding

Treasury is refunding $90 billion and raising $35 billion during the next Fiscal quarter. Buybacks will happen twice a month instead of once.

Comments

The Fed needs to stop paying interest on Bank reserves and apply those moneys to the deficit. Over $168BN was paid out last year in interest AND NOT just to US Banks, but to Foreign banks, AND excess reserves. Crazy. STOP THE MADNESS. Prior to 2008, it was ILLEGAL for the Fed to pay interest on Bank reserves. Daniel Jensen on 7/30/2025 12:42:05 PM

Powell is a globalist period full stop. 40% of payouts are to foreign banks. You would have to be pretty naive to think they haven't gotten to him. I would bet that nobody on the committee knows who Adam Smith is. mike t on 7/31/2025 7:31:56 AM

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