To The Moon

Twas the last week of US economic reports before Q2 earnings reporting season kicks in.

For week ending 10 Jul 2026, there were only a handful of reports, that are not the main stream but nevertheless provides a glimpse of US economic health.

Reports released last week included:

• Mon, 06 Jul 2026 - S&P final US services PMI.

• Tue, 07 Jul 2026 - US trade balance.

• Wed, 08 Jul 2026 - Consumer credit for May 2026.

• Wed, 08 Jul 2026 - FOMC minutes of meeting for June 2026.

• Thu, 09 Jul 2026 - Jobless claims - weekly & continuing.

S&P US Service PMI.

The final report for S&P US Service PMI June 2026, came in at 51.2 vs Wall Street consensus of 51.3 vs May 2026’s 50.7.

This indicates a modest expansion in the service sector and is an increase from May's final reading that was revised down preliminary flash estimate of 51.3.

Latest reading highlights the fastest rate of expansion for US service sector in 4 months.

US Trade Balance.

The same could not be said for US Commerce Dept’s Trade Balance report for May 2026.

On 07 Jul 2026, report revealed that US goods & services trade deficit surged by +42.2% to $77.6 billion vs market consensus of -$78.3 billion vs April 2026’s -$54.6 billion,

This is the widest gap since March 2025 and ‘caused’ by:

• Imports rising by +3.3% to $395.3 billion.

• Exports falling by -3.2% to $317.7 billion.

May Report Drill down & Highlights:

• Goods Deficit: Widened sharply to $106.5 billion, the highest since March 2025.

• Services Surplus: Grew slightly to $28.9 billion.

• Imports: Increase was driven heavily by (i) consumer goods, (ii) industrial supplies, and investments in AI hardware.

• Exports fell largely due to a steep decline in (a) export of non-monetary gold and (b) slowdown in industrial supplies.

More importantly, the negative trade balance surge, combined with lower exports, is projected to exert downward pressure on US Q2 2026 GDP growth.

It is unfavourable for US forward because Hormuz Straits’ oil standoff will result in escalating costs of production in non-US countries, that will be pass-on to US consumers as higher import prices.

US Consumer Credit.

The May 2026 consumer credit report revealed a surprise contraction of approx. $182 million, vs market expectations for a $17.1 billion gain vs April 2026’s upwardly revised $20.82 billion. (see above)

This is the report’s first decline in over a year.

This drop was entirely driven by a -$1.34 billion decrease in revolving debt (eg. credit cards), pointing to weaker short-term consumer borrowing.

At the same time, it was offset slightly by a +$3.81 billion increase in non-revolving debt (eg. auto & student loans).

The sudden reduction in credit card borrowing indicates that Americans are actively curtailing short-term debt and paying down existing balances, likely responding to lingering inflation and high borrowing costs.

Overall consumer credit was unchanged on an annualized, seasonally adjusted basis, as revolving credit contracted at a 4.7% annual rate while nonrevolving credit grew at a 1.6% pace.

FOMC - June 2026 MoM.

The June 2026 FOMC minutes is the most salacious minutes of meeting ever.

It revealed a Fed undergoing a dramatic operational overhaul led by the newly appointed Chair, Kevin Warsh.

Nominated by Trump, Warsh faces the complex task of navigating a hawkish, deeply divided committee, as revealed by the Fed’s Dot Plot document where:

• 9 of 18 members favour at least one rate hike by 2026 to combat rising inflation.

• 8 of 18 members expected interest rate to remain status quo.

• 1 of 18 member anticipated a rate cut.

Fed chair Warsh has intentionally withheld his own forecast.

To preserve the current interest rate status quo without triggering an inflation rebound, the new Chair is changing how the Fed communicates and measures economic reality.

Firstly, a complete overhaul of Fed communications to maximize policy flexibility.

• Going forward explicit "forward guidance" will be excluded.

• Next, references to "full employment" will be removed from official statement.

Instead, the Fed will shift to a pure "wait & see, meeting-by-meeting” approach.

This effectively silences predictable rate-hike signaling, allowing the Fed to hold rates steady at 3.50%–3.75% despite intense underlying economic momentum fueled by massive corporate artificial intelligence infrastructure spending and persistent core inflation.

Secondly, a new & modified technical and accounting practise to calculate the personal consumption expenditure (PCE) index will take effect from 30 Sep 2026 onwards.

By creatively altering the formulas and weightings retroactively to 2021, this accounting shift artificially trims approximately -0.2% off the core PCE run-rate, effectively lowering a 3.4% reading to 3.2% on paper.

While $Wells Fargo(WFC)$ economists note this change offers no structural downward bias to actual living costs, it provides the Fed with crucial statistical cover to resist rate hikes.

By (a) restructuring the inflation calculation and (b) removing binding forward commitments, the Warsh administration aims to pacify political demands for stable rates, even as structural pressures keep the actual economy running hot. (see above)

Jobless Claims.

US Dept of Labour reports reflect stable, historically healthy labour market conditions as claims ticked down last week. This as market holds onto its “low hire, low fire” attitude.

Weekly.

For week ending 04 Jul 2026, weekly jobless claims fell by -2,000 to 215,000 vs Wall Street estimates of 218,000 vs previous week’s upwards revised claim of 217,000. (see below)

This is the 3rd weekly report below 220K after a 3-week spike between 225K-230K, as employers are limiting layoffs.

The 4-Week moving average also decreased by -3,750 (from previous week’s revised average) to 218,750, marking as the lowest in a month.

Continuing.

For week ending 27 Jun 2026, continuing claims rose slightly by +8,000 to 1.814 million vs economists' consensus of 1.82 million vs prior week’s downwards revised 1.806 million.

The rolling 4-week average rose by +7,000 to 1.808 million.

YTD 2026 average so far sits at 1.819 million, marking a clear improvement compared to:

• Same YTD 2025 average of 1.883 million.

• 2025 Full year average of 1.828 million.

• 2024 Full year average of 1.906 million.

The news comes as labour force participation hits historic lows, with the June jobs report showing that percentage of overall workers and job seekers plummeted to 61.5%.

Unemployment.

Lastly, hiring remains weak and similar to post-recessionary periods like 2010. 

For week ending 27 Jun 2026, advance unadjusted insured unemployment rate was 1.2%, an increase of +0.1% from the prior week.

My viewpoints: (mine only)

For a period of time, bad economic reports out can ironically trigger a positive stock market reaction.

This is because with the "bad news is good news", investors guessed that it would force the Fed cut interest rates, to prop up the economy, lower borrowing costs and boost stock valuations.

Even Trump believed that and started verbal abuse of ex-Fed chair, Mr Jerome Powell, when the Fed refused to cut interest rate.

For a while it was true, until the Trump administration became the incumbent government with its non-stop erosion of the country, the people and heavy borrowing, directly or indirectly.

With rising inflation being a reality, the "bad news is bad news" has taken roots.

Prolonged weakness as shared in my past weekly US economic reports round up, signals a structural drop in consumer demand and corporate revenue.

The coming quarterly earnings will be crucial, giving a deeper insight into all that is keeping US companies ticking or dying.

With US Treasury yields of 10, 20 & 30 years on the rise (see above), it does not require a genius to fairly and accurately guess, where the US market might be heading next. Agree ?

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