Weekly Update 07/25/2025: Earnings Season Gets Busy
- Linde signs long term deal for rockets
- NextEra building backlog
- AT&T signs up more customers
- Alphabet sales surge
- Housing market in the doldrums
Housing update
Investors got a view of the health of the housing market through the usual two key reports—new and existing home sales data. Existing home sales, which comprise about 90% of residential transactions, fell to a nine-month low thanks to high prices. The National Association of Realtors (NAR) reported that sales of previously owned properties fell 2.7% in June to an annualized rate of 3.9 million. The median sales price rose 2% from a year ago to $435,300. Prices are up almost 50% from five years ago thanks to a post-pandemic era boom which has since dissipated but has left an inventory of fully priced properties. “Multiple years of undersupply are driving the record high home price. Home construction continues to lag population growth. High mortgage rates are causing home sales to remain stuck at cyclical lows,” said Lawrence Yun, NAR chief economist. Many owners are resistant to move since that would mean giving up mortgages that were secured at much lower rates than the 7%+ currently offered. Economists at Goldman Sachs did an analysis which showed that 87% of mortgage holders have rates below current levels, with two-thirds at least 2 percentage points below today’s rates. That is worth hundreds if not thousands of dollars on a monthly basis to these homeowners, suggesting they will not be moving anytime soon.
Meanwhile new homes sales were not much better when the Census Bureau released data yesterday. Contract signings rose a meager 0.6% to an annualized rate of 627,000 last month. That was about 23,000 short of the median estimate in a Bloomberg survey of economists. New home sales are viewed as more current than existing home transactions because the former is tabulated when a contract is signed not when the deal actually closes which could be weeks later. Atlanta-based PulteGroup Inc. has included sales incentives to try to move its inventory of homes. These enhancements are more than double the normal incentive amount according to executives on its latest earnings call. An industry survey revealed that 37% of homebuilders reported cutting prices in June. The supply of new homes for sale rose to 511,000, the highest level since 2007. While the median sales price of a new home decreased 2.9% from a year ago to $401,800, it still remains more than 23% higher than the early months of the pandemic. Sales volumes in the South have cooled since a boom during the pandemic as many Northerners fled to areas promising more open space. Sales in last month’s report showed volumes sliding in the West and Northeast. The bottom line is that homes remain unaffordable for a wide group of buyers given the current 7%+ mortgage rate.
With building permits filed down for the month of June, that future indicator suggest that the crucial spring selling season will be a bust, and soft demand will likely carry over into the fall. Stay tuned.
Tariff update
The U.S. and Japan have reached a trade agreement which will involve levies of 15% on goods brought in from that country. That lowers the current tariff on autos from 25% down to 15%. Japan would also enter in a joint venture for liquefied natural gas exploration in Alaska. “The government was determined to protect national interests,” Japanese Prime Minister Shigeru Ishiba told reporters Wednesday morning in Tokyo. The deal “will lead to Japan and the U.S. working together to create jobs, produce high-quality goods, and contribute to fulfilling various roles in the world going forward,” he added. There is no change to tariffs on steel, which will remain at 50%. Japan’s Nikkei Stock Average closed up 3.5% after the news broke with Toyota Motor shares up 14% and Honda Motor higher by 11%. It is now cheaper for Japan to export cars to the U.S. than for Ford or GM to import vehicles from their plants in Mexico where the U.S. is charging 25% on those imports. Thus, the deal lowers costs for the Japanese auto makers and imposes no annual quota while simultaneously reduces the pressure on them to build more cars in the U.S. No wonder Tokyo’s chief negotiator wrote “mission accomplished” on his personal X (formerly known as Twitter) account. Meanwhile, there is no change to tariffs on imported metals like steel, thus making it more expensive for U.S. automakers to purchase it, aluminum and copper, which are all major components of vehicle manufacturing. While the deal includes access for American cars in Japan, the fact is that there just is not pent up demand for U.S. vehicles. American companies sold a mere 16,000 in Japan last year, good for 0.35% market share. Japan sold 5.3 million vehicles in the U.S., representing about one-third of the entire market with approximately half being imported for sale. “Any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than the tariff imposed on North American-built vehicles with high U.S. content is a bad deal for U.S. industry and U.S. auto workers,” said Matt Blunt, head of the American Automotive Policy Council, on Wednesday. The body represents General Motors, Ford Motor and Stellantis.
A proposed commitment of $550 billion investment in the U.S. through companies backed by the Japanese government will alleviate some of the apparent inequity. The administration can direct these funds to infrastructure programs of its choice. It remains unclear how the investment fund would be structured. Prime Minister Ishiba said that it would consist of loan investments and guarantees, but Commerce Secretary Howard Lutnick said it would also involve equity. “The Japanese are the financier, the banker,” he said on Bloomberg TV on Wednesday.
The European Union was hoping for a similar deal to that reached with Japan, especially European auto makers. To be precise, a 15% baseline tariff would be a flat rate for most EU exports to the U.S. That would not be added on top of existing levies that existed before the administration started raising tariffs this year. Currently, the U.S.’s 10% blanket tariff is layered on top of existing tariffs. So, to get that 15% would be a big win for Europe and, like the Japan deal, give the administration something to tweet.
Deals with two of the U.S.’s largest trading partners, Canada and Mexico, have not yet been reached and seem somewhat stalled. That could lead to Canada getting hit with a 35% tariff and Mexico with a 30% levy if something is not negotiated by August 1 when President Trump’s self-imposed deadline is reached. The 90-day truce with China ends August 12. Markets liked the fact that frameworks were being put in place which prevent the back-and-forth squabbling that exploded during the spring. Earlier Tuesday, a pact with the Philippines and a trade framework with Indonesia were announced. We will see how many more can be done in the next week.
The 15% target with Japan is being viewed as a win by investors. That is lower than the 25% level which was feared, and the administration can tally a ‘win’ since it is higher than the 10% level implemented on most goods back on April 5. On the other hand, it is the highest level on Japan in decades and, at the end of the day, tariffs are a tax on the consumer. With the tariff levels bouncing around so frequently, there was no way data like the CPI or PPI could capture the true effect. Now that frameworks are being announced and goods will begin to be charged when they hit U.S. shores, investors will begin to get a better picture of what the full effect is. Data for July and August which will be released in August and September will be closely watched for any signs that inflation is becoming more ominous.
Company Events
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