Summer is over, but you might have time for one more cup...

As many head back to the office thinking about the possibilities of a September interest rate hike, the Fed's plans might have taken a hit last week given the weaker-than-expected ISM Manufacturing Purchasing Managers Index and monthly Jobs data. Both series were surprisingly weak, and while individual datapoints do not indicate an ominous new trend, they do confirm that this economic recovery remains tepid. Some Fed watchers believe the weaker week of data will not change the Fed's plan on hiking; while the average seer cooled their expectations as the two-year Treasury yield pulled in a few basis points. It will be a busy September with dozens of major Wall Street conferences giving companies an opportunity to massage earnings expectations while handing out new datapoints. Maybe the new data will get investors to trade their portfolios for the first time since Brexit. The market appears to continue to want to be buyers of risk with Junk Bonds, Financials, Technology and Small/Mid Caps continuing to perform well. Energy and Healthcare are performing in the opposite direction. Safe travels home. See you in the markets.

Some good streaks continuing in the markets. I highlight many of them here. Semis and Junk Bonds are incredible...

I can't remember the last time that the Barron's strategists had an average target less than the current market price. A contrarian signal? For the first time in years, there’s dissension in the ranks of the Barron’s strategists.

Their consensus outlook for U.S. stocks in the remainder of 2016 is mixed and even tinged with a bearish hue. That represents a downgrade from the cautious optimism seen last December, ahead of the coming year.

Their mean expectation for the Standard & Poor’s 500 index is 2138 at year end, below Friday’s close of 2180. Four strategists call themselves bullish, three are in the bear camp, and three are neutral.

In this tug of war, the bulls say the combination of global central bank easy-money policies, improved earnings-per-share growth in the second half, and the continuing search for yield should lead to a happy ending in 2016. The bears, however, contend that rising election uncertainty, a Federal Reserve eager to boost rates, and the market’s high price/earnings ratio could make the rest of 2016 volatile.

(Barron’s)

Face up to it, High Yield Debt rocks. Think of it as a giant buoy to protect stock prices...

Rising junk bond prices means diminished credit risk which is the most important factor for bank stocks...

Then follows loan growth and interest rate positioning. Investors are hopeful that short rates might rise which is helping to buoy Bank stock prices out of their underperformance.

Team Ned Davis is positioning for higher Bank stock prices. Especially among the majors...

Another contrarian play for you to consider: UBS thinks it is a great time to get LONG China...

Chinese corporate earnings are recovering: EBIT and net margins are rebounding, while top-lines are only decelerating gradually. We think equities still have room to rally given the stabilizing macro environment, compelling valuations, abundant liquidity and nascent signs of earnings stability.

(UBS)

Byron Wien also noticed the improving sentiment surrounding China during his summer gatherings...

As for China, the general feeling was that the economy had picked up some strength in 2016 and the fear of a hard landing had diminished. While the non-performing debt problem was worrisome, it was not likely to bring down the whole economy and there was a sizable minority of investors willing to put money there. Chinese consumers were holding back on their spending because of a lack of government-supported healthcare and retirement programs. Some of the macro people were concerned about strained diplomatic relations between the U.S. and China. Part of this was related to disagreements about territorial rights in the South China Sea and the buildup of military bases there and part to confusion about the Trans-Pacific Partnership. India continues to be the most popular Asian investment, but it is ranked very low in terms of ease of doing business. What was surprising was the increasing interest in the emerging markets, including Argentina, Peru and the Middle East. Nobody, however, had an appetite for investing in Africa.

(Barron’s)

Can you still even remember the components of the BRIC index?

@WhatILearnedTW: BKF and BKF-to-SPY breaking-out. At new recovery highs.

Although manufacturing is only 20% of the U.S. Economy, last week's PMI data was a big miss that made everyone double check their GDP estimates...

Don't forget the U.S. Auto Sales data which also sent out some shivering comments in the 90-degree weather...

Then there was Friday's jobs data which highlighted one important point about wages...

And when you factor in the decline in hours worked, here is what Earnings looks like in graphical form...

(@zerohedge)

The good news is that the mid and lower wage jobs are seeing inflation. But at the high end, income pools are seeing pressure...

(Ritholtz)

Some further good news for housing inflation is that the hottest markets are now beginning to cool the fastest.

Added information: our local market has seen an OBSCENE amount of new product built.

Rents in Denver have seen a "significant deceleration" in the past year, according to a new report.

Denver’s year-over-year growth rate for rent fell to 3.5 percent in August after rising by 11 percent in 2015, according to California property management software company Yardi Matrix. Denver's now below the national average for 2016 year-over-year rent growth, which stands at 5 percent in the U.S.

(Denver Business Journal)

Supply has also exceeded demand in the high end Manhattan housing market...

For the first 35 weeks of the year, contracts to buy Manhattan homes at $4 million or higher tumbled 21 percent from the same period in 2015, data compiled by luxury brokerage Olshan Realty Inc. show. The 758 properties in those deals spent an average of 291 days on the market, or 54 more days than a year earlier.

Developers have postponed plans to add even more apartments. The 3,574 units slated to reach the market this year are 38 percent fewer than what was estimated in January, according to brokerage Corcoran Sunshine Marketing Group. Of the units that have or will be listed in 2016, more than half are considered luxury, or priced at more than $2,400 a square foot.

“We’ve never had a buildup of housing inventory that has been so skewed to the high end,” said Jonathan Miller, president of appraiser Miller Samuel Inc. “There’s too much development being built at 2014 prices, and that buyer isn’t there. Conditions have changed quite a bit since then.”

(Bloomberg)

Speaking of residential housing markets, those are some significant month-over-month price gains...

(Bespoke)

Back to signs of deflation... the pendulum has swung toward ride sharing over owning in Los Angeles...

Spiegelman had been studying the economics of riding Uber and Lyft versus a taxi or driving a personal vehicle when he decided to run the math for his own car. He made a spreadsheet outlining the cost of leasing his Volkswagen: $458 monthly for the lease itself, $158 for insurance, $70 for gas, and at least $72 for parking, for a total cost of about $758. Based on those calculations, he said he has saved more than $1,100 in the last three months, spending an average of $3.42 for each UberPool or Lyft Line ride to work in August.

(BuzzFeed)

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