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Weekly Update 8/20/2026: Earnings Season Winds Down

Insights
  • Fed minutes hint at hikes
  • RTX wins large contract
  • IBM makes quantum leap
  • Deere beats lowered expectations

Housing data 

This week included the release of a number of housing-related economic stats. On Monday, the National Association of Home Builders and Wells Fargo reported their index of homebuilder sentiment edged up just 1 point to 35 in August from July. A reading below 50 indicates more builders see conditions as poor than good. The index has been below this key figure since May 2024. “Our latest builder survey continues to show signs of weakness in the home building market,” NAHB Chief Economist Robert Dietz said in a statement. “August marked the 16th straight month that at least 30% of builders reported cutting prices to support demand, as well as the 16th consecutive month with the HMI below 40.” In August, 63% of builders reported using sales incentives to lure would-be buyers. Interest rates are not helping with the average 30-year fixed mortgage rate about equal to the one-year high it hit in late July. Below we discuss the Fed’s viewpoint on its benchmark rate, but it sounds like markets will not be getting any help in lowering rates from federal authorities.

More housing data released on Tuesday was also not optimistic. The Census Bureau reported that housing starts in July fell 12.4% to an annualized rate of 1.24 million. That was below the 1.35 million pace expected in a survey of economists by Bloomberg and a sharp about-face from the 19.7% growth the prior month. Single-family starts fell 9.9% to an annualized rate of 808,000, the lowest since November 2022. Home Depot CFO Richard McPhail commented this week that large home improvement projects were suffering under “frozen conditions” while customers focused on smaller, less expensive jobs. A silver lining in the report came from building permits, which rose 5.0%, beating the consensus expectation of a 0.6% increase. The increase was concentrated in multifamily permits (e.g., apartment buildings) where the affordability crisis is not as acute.     

The Fed and Yields

On Wednesday, the Fed released minutes of its July 28-29 meeting. “With regard to the outlook for monetary policy, participants reiterated that their interpretations of incoming information would be a key component of their deliberations,” the minutes showed. Several Fed members expressed a desire to institute a rate hike last month. Some said that an increase would be warranted if inflation did not recede. “Most participants anticipated that inflation would step down over the rest of the year as the effects of tariffs and earlier energy price increases wane, but many participants noted the possibility that inflation might be more persistently elevated,” the minutes said.

The vote of the Federal Open Market Committee was 9-3 in favor of holding the benchmark federal funds rate in the range of 3.50%-3.75%. Dallas Fed President Lorie Logan, Cleveland’s Beth Hammack and Minneapolis Fed leader Neel Kashkari dissented in favor of a 25 basis point (0.25%) rate boost. Two non-voting members of the committee also signaled that they would have supported an increase had they been allowed to vote. Uncertainty is elevated due to the Iran conflict as well as ballooning government deficits.

While the minutes laid out the thinking of the participants, Chairman Kevin Warsh was roundly criticized for his post-meeting press conference. Under repeated questioning, he failed to articulate a clear reason for why the Fed kept rates unchanged or when it might make a future move. Long-dated bonds reacted immediately during his speech by rising to an almost two-decade high. That steepening of the yield curve continued through much of August until this week when Treasury Secretary Scott Bessent increased the department’s plan for buying back securities dated from the 10-year to the 30-year sector. Yields fell on the longer dated instruments on Wednesday when this newest plan was unveiled, which many traders view as “artificial.” How long this reprieve will last remains to be seen. Money for the program doesn’t come out of thin air—the Treasury will have to borrow more in the short-term to refund the longer-term holders. This “twist” in borrowing may appease traders in the short-term, but it will take a true decline in inflation—either through a resolution of the Iran war or potentially an economic slowdown—for yields to likely show a sustainable drop.

The bond market selloff was putting pressure on the Trump administration, which was feeling pressure to deliver on its mandate of better affordability. The 30-year Treasury bond was trading at its highest yield since 2007 before an auction last week pushed that figure to its greatest yield since 2001. A separate 10-year auction last week cost the government the most in interest since 2007. Last month, Bessent and his lieutenants spearheaded the first U.S.-Japan coordinated yen purchases in nearly 30 years. By using dollars to purchase yen, it prevented the Japanese government from selling Treasuries to support its own currency and thus driving Treasury bond yields higher. Days later, the Treasury tweaked its forward guidance to suggest a reduction in sale of long-term securities. As stated above, the housing market is in a deep funk, and expensive mortgages are not helping. With midterm elections creeping closer, Bessent is using the “big toolkit we can roll out” because as he said last November: “Treasury yields are a strong barometer for measuring success.” Early returns were not positive as bonds began to unwind most of the gains today that followed the increased buyback plan yesterday. The most recent consumer and producer price inflation measures were helpful in showing that inflation had cooled somewhat, but there will be plenty more reports between now and the next Fed meeting on September 16. The bond market will determine the ultimate success of these moves, and we’ll report the outcome so make sure to keep reading each week for the latest developments!  

Company Events

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