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Weekly Update 7/17/2026: Earnings Season Begins

Insights
  • Big banks report big results
  • IBM earnings to fall short
  • ABB announces accretive acquisition
  • Travelers reports solid quarter
  • Fed Chairman Warsh speaks on Capitol Hill
  • Consumer and producer prices tame...for now

Mr. Warsh Goes to Washington

In remarks given during his semi-annual testimony before Congress on Capitol Hill, new Fed Chair Kevin Warsh outlined his viewpoints. “The members of our committee [FOMC] have no tolerance for persistently elevated inflation. And we share a resolute commitment to restoring price stability.” He added: “If we get policy right—and we will—the inflation surge over the last five years will be a thing of the past.” Investors are certainly hoping that he is right as annual inflationary gauges have consistently been above the Fed’s stated 2.0% target. During his testimony, Warsh gave few signs on his view on interest rates and whether the Fed’s funds rate is at an appropriate level. This is in line with his stated view that the Fed should not telegraph its next move. He did state: “Inflation’s a choice, meaning monetary policymakers need to choose lower prices.” He promised to set interest rates without taking political factors into account.

Investors were not expecting new monetary or economic headlines. These events before Congress are a chance for politicians to ask questions that they think their constituents would want them to ask. It is not a chance to unveil new central bank policy. The real event will take place later this month when the FOMC convenes. Three weeks later the minutes of the meeting will be released which will detail the conversations policymakers had with each other. That is where the real market moving info is uncovered. Stay tuned.

Inflation Data Released

For the first time in six years, consumer prices in the U.S. declined. The Bureau of Labor Statistics (BLS) reported earlier this week that the consumer price index (CPI) fell 0.4% in June, thanks primarily to the largest decline in gas prices since 2022. Excluding food and energy, the so-called core rate was flat from the prior month. The annual rate of change in the headline rate was 3.5% with the core rising 2.6%. Those yearly figures were below what economists expected and were below the month prior increases. On an annualized basis, core CPI rose 2.3% over the past three months ended June (versus 3.2% in the period ended May) and 2.6% over the past six months (vs. 3.1% prior).

The decline in energy was the biggest factor in the headline decline. A 9.7% drop in gasoline prices contrasted with a 7.0% increase in the month prior. Halfway through July, that input is already down 7% so when the next CPI figure is released, that will likely contribute to another headline drop. Gains in beef and eggs offset declines in fresh vegetables and nonalcoholic beverages. Core goods prices fell 0.1%, which is the same rate as in May. This suggests that some of the Trump administration’s tariff actions from last year have likely now passed. This was the argument former Fed Chair Powell made, that once a tariff is levied, it is a one-time event that will anniversary a year later (unless the tariff rate is further raised). It leads to a higher level of prices for goods but not an ongoing rate of increase.

Core services also registered more favorable results. Rent of primary residences slowed to an increase of 0.15% versus the 0.36% increase in the prior month. Owners’ equivalent rent also slowed to an increase of 0.24% in June compared to the 0.30% rise in May.

Additionally, airfares grew just 0.2%, wireless telephone services fell 3.3%, medical care services fell 0.1% and car insurance fell. Overall, core services prices were unchanged, down from a 0.3% rise in May.  

Wholesale price data was released on Wednesday with the producer price index (PPI). The BLS reported that headline PPI fell 0.3% in June after a revised 0.6% rise in May. On an annual basis, that translated to a 5.5% increase, down from the 6.0% pace a month earlier and below the 6.2% figure expected in a survey of economists by Bloomberg. Excluding food and energy, the core rate rose 0.2% in May or 4.7% on an annual basis. Both figures were slightly above revised May figures but below expectations. Transportation and warehousing pricing helped lead energy prices lower by 6.4% in June from the prior month. Food prices fell for the first time in three months. Increases in airfares contributed to the overall rise.

With both CPI and PPI coming in below expectations, Warsh was given a double gift during his first appearance before Congress. It will temper anxieties about inflation running out of control. With the next Federal Open Market Committee meeting in less than two weeks, the pressure to raise the benchmark rate should abate. However, renewed hostilities in the Strait of Hormuz could result in merely a temporary reprieve as the price of Brent crude surged above $80 per barrel this week after touching a low of $71.57 as recently as July 1. According to the prediction markets, the chance of traffic returning to “normal” as defined by 60 or more ship crossings per day by January 2027, is only 47%. The collapse of the interim peace deal is likely to have broader implications which the Fed and investors will have to analyze in the weeks ahead.

More Data

It was a busy week for economic releases. Besides the key consumer and wholesale price data, the National Association of Home Builders released their July survey results. The reading came in at 34, which was not a good figure. Anything under 50 indicates that more builders see conditions as poor than good. The index has remained under 40 for 15 straight months, the longest stretch since 2022. Present sales, future sales and buyer traffic all fell for the second consecutive month. “Affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages continue to affect the market,” NAHB Chief Economist Robert Dietz said in a release. A separate report Thursday showed contract signings for previously owned homes fell 5.4% to 72.5 in June, based on National Association of Realtors data. That trailed the 0.5% decline estimated by economists.  

In related housing news, the Census Bureau reported that new residential construction rose 19% to an annualized rate of 1.43 million in June, driven by a rebound in apartment construction. That was the highest annualized rate since March, and the figure surpassed all estimates in a Bloomberg survey of economists. Following a nearly 40% drop in May, multifamily construction, i.e. apartment buildings, rose by more than 76% in June. Single-family home starts, however, fell 0.2% due to consistent hurdles related to elevated inventory and weak demand thanks to high mortgage rates. Overall permit rates, which are an indicator of future construction, fell 3% while permits for single-family homes fell to a 10-month low. Multifamily applications also declined. This week the 21st Century ROAD to Housing Act was passed by Congress, which is a potentially favorable long-term supply-side policy development, but it is not expected to impact affordability here in the short-term. The Act focuses on encouraging local zoning and permit changes, supporting factory-built housing, expanding certain affordable-housing tools and limiting large institutional ownership of single-family homes. The Bloomberg housing analyst wrote in a note: “Directionally, these measures are supportive of housing supply, but they don't provide a material catalyst for public homebuilders. A key limitation is that much of the Act functions as a framework for reform rather than a direct federal override of local housing constraints.”

The Census Bureau reported that retail sales rose 0.2% in June after a revised 1% increase in May. Outside of gasoline stations, sales rose 0.7%. Gasoline station sales fell 5.3%, the sharpest decline since 2022 thanks to a drop in the average price of a gallon of fuel. Seven of 13 categories posted gains including sporting goods and hobby stores, electronic and appliance stores and outlays at motor vehicle parts dealers.  

The Labor Department said initial unemployment claims fell by 8,000 to 208,000 in the week ended July 11. The median forecast in a Bloomberg survey of economists called for 217,000 applications. Continuing claims, which measures those people who still receive benefits, also came in lower than expected. This suggests that while some sectors, such as technology, shed jobs with large headline layoff numbers, employers are generally holding onto their workers. Summertime can be volatile for this weekly figure given this is when retooling of auto factories normally takes place. Plus, the World Cup soccer tournament taking place in various states is affecting the need for part- and full-time workers.    

Company Events

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