Three Big Events On The Calendar This Week

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Three big events on the calendar this week, including: Janet Yellen’s semi-annual testimony before Congress, another attempt to pass a replacement to Obamacare, and Amazon Prime day.

Congress returned from a July 4 recess, with Senate Republicans beginning to consider what they should do if their Obamacare replacement bill fails. While lawmakers were on recess, they heard from constituents at home, and the message was strong opposition to the Better Care Reconciliation Act; a survey in late June showed the plan had only 17% support from US voters.

With a slim 52-seat majority, they can only afford to lose two GOP senators and still let Vice President Pence break a tie. Roughly 10 GOP senators have come out against the current version of the Senate healthcare bill. Senate Republicans want to roll out a new draft of their bill to repeal and replace Obamacare as soon as this week, with a vote next week.

Before a vote, they will need an update from the Congressional Budget Office. Senators could release an updated draft of their bill by the end of the week. Senate Republicans sent two proposals to the CBO late last month, one including an amendment from Sen. Ted Cruz and one without.

The Cruz proposal would give insurance companies the freedom to sell any kinds of health plans they want if they also sell at least one plan that qualifies under the regulatory requirements of the Affordable Care Act. But the amendment has drawn push-back from GOP senators, who warn that the proposal won’t be able to get enough support to pass. Some senators are now pushing a “repeal now, try to come up with a replacement later” approach.

A straight repeal bill almost certainly would not have the votes to pass. Trump has also suggested moving forward with a simple Obamacare repeal bill if negotiations fall apart. That would at least, supporters say, fulfill a key GOP promise and allow lawmakers more time to draft an acceptable replacement. But Senate Majority Leader Mitch McConnell and more moderate members would rather work with Democrats on a short-term plan to stabilize the insurance markets, lest they deteriorate even more.

Meanwhile, the Trump administration is aiming to come to an agreement on a draft tax plan with the House and Senate before the August recess, with the goal of beginning legislative action after the break. The plan always called for dealing with health care first, then tax reform, so…

What will Janet Yellen say in Congressional testimony? The Federal Reserve chair will discuss the outlook for policy and the economy in Congressional testimony on Wednesday and Thursday in her semi-annual testimony before the House and Senate. Investors will focus on her views regarding interest rate policy and when the central bank plans to start winding back its $4.5 trillion balance sheet.

In its latest meeting minutes, released last week, the Fed remained guarded about the timing of reducing reinvestment flows. The minutes noted that several Fed officials wanted to announce the start to the process of trimming asset holdings within “a couple of months’’, suggesting the September policy meeting may well mark the moment.

Against the backdrop of solid job gains, the quibble from the bond market is the lack of inflation pressure. A gain of 222,000 new jobs during June, alongside upward revisions for May and April, was accompanied by sluggish wage growth. So, we are left with a divergence between bond traders and policy officials.

While the Fed forecasts a further tightening of 100 basis points (or 4 more quarter-percentage point hikes) by the end of 2018, the bond market pegs that at around 45bp. Yellen ‘may well seek to narrow the gap between the Fed’s assessment on the policy outlook and what the market is currently anticipating.

Another focus for investors and markets is any expansion of Yellen’s comments regarding ‘somewhat rich’ asset price valuations and those of William Dudley, the NY Fed president, that loose financial conditions can provide ‘additional impetus’ for rate hikes. Look for Yellen to be very transparent. She will probably try to telegraph any Fed action. The Fed has been acting only after there is no doubt they will act.

Yellen says the process for trimming the Fed’s balance sheet will be like watching paint dry. Still, the testimony should be entertaining, if only to demonstrate Congress’ complete lack of basic economics.

In case you haven’t heard, Tuesday, July 11, is the third annual Amazon Prime Day, actually it starts at 6PM (pacific) tonight. With two years of experience under its belt, Amazon (AMZN) is planning its biggest Prime Day yet. If you haven’t heard of Prime Day, it’s Amazon’s biggest sales event of the year. More than 100,000 items are set to be discounted, but the discounts will be available only for Amazon Prime members.

Deals are released sporadically throughout the day and are available for a set time or until the product sells out. New products will be rolled out every 5 minutes or so. What can you expect to be discounted? Everything from home goods, to electronics, to clothing; basically, if it’s available on Amazon, there’s a good chance Prime Day will be one of the best days to buy it.

Think of Prime Day as Black Friday in July; big-ticket items like TVs, tablets, and Amazon products like its Echo smart speakers, Kindle e-readers, and Fire TV will be way cheaper than usual. It’s also a good day to pick up tech accessories you’ve been meaning to buy, like headphones, portable chargers, car mounts, phone cases, or laptop stands.

Those discounts probably won’t be as dramatic, but if you buy a few of them, the savings will quickly add up. Another thing to watch out for is discounts on gift cards, which is basically free money. If you eat at certain restaurants or shop at a specific brick-and-mortar store, it’ll be well worth your while to keep an eye on those.

JP Morgan estimates that Amazon Prime Day would generate about $1 billion in sales, a 55% jump from last year. And because the event requires Prime subscription membership, the effect should carry over into the rest of the year. Still, you might want to shop around; 76 percent of Prime Day shoppers will visit other online stores to research product ratings and reviews before making a purchase on Amazon.

Rival retailers are not about to sit on the sidelines. Instead, they are hoping to capitalize on the heavier-than-normal shopping traffic online this week, and that means almost everybody will be running sales this week.

The Federal Reserve reports consumer credit rose at a 5.8% clip, or by $18.4 billion, in May. That’s the fastest rate in seven months, and comes as revolving credit like credit cards jumped 8.7%. Non-revolving credit, typically auto and student loans, rose 4.7%.

Abercrombie & Fitch (ANF) is not for sale. Shares of Abercrombie & Fitch plunged 21 percent and dragged down other retail stocks as the teen apparel maker terminated talks over a potential sale. Abercrombie, which has a market value of $650 million, had said in May it was in talks with several bidders regarding a potential sale

The first Model 3 rolled off the assembly line yesterday. The Tesla Model 3 will be priced at around $35,000. Tesla (TSLA) has already taken in roughly half a billion dollars in Model 3 deposits, at $1,000 apiece, and its proposed ramp-up schedule would have it rivaling well-established U.S. market peers like BMW and Mercedes by year’s end.

The only thing standing between Tesla and being the world’s first mass-market electric car-maker is proving it can build, deliver, and service enormous numbers of these vehicles—without sacrificing quality. One down, millions more to go.

Faraday Future, which also makes electric cars said it is deserting its plan to construct a $1 billion manufacturing plant in southern Nevada eight months after suspending the project and sinking at least $120 million into it. Thousands of jobs had been anticipated to come with the construction and launch of the proposed plant on a 900-acre site at the Apex Industrial Park in North Las Vegas.

Honda Motor (HMC) confirmed an 11th U.S. death involving one of its vehicles tied to a faulty Takata air bag inflator. Honda said the incident occurred in Florida in June 2016 when an individual was working on repairs on a 2001 Honda Accord and the air bag ruptured. At least 17 deaths and 180 injuries worldwide are now tied to the defect that prompted the largest ever auto safety recall and led Takata to file for bankruptcy protection last month.

The Consumer Financial Protection Bureau decided to ban most types of mandatory arbitration clauses, which require credit card or bank customers to use a mediator when they have a dispute — often giving up their right to sue in court.

Mandatory arbitration clauses are found in the fine print of tens of millions of financial products, from credit cards to checking accounts. Because consumers generally don’t carefully read the fine print on the agreements for their checking accounts and credit cards, they are often unaware they are subject to arbitration. Consumer advocates have been pushing for years for stricter federal regulation of these types of clauses.

Banks have strongly opposed banning arbitration clauses, arguing that arbitration is a more efficient way of handling small disputes. There’s also a bottom line impact: banks could be exposed to billions of dollars in lawsuits from customers, specifically class action suits.