💳 Is The US Consumer Drowning In Debt?

Good morning. US stock futures ticked higher in Tuesday morning trading after the S&P 500 and Nasdaq Composite closed at fresh record highs.

💰 US consumer borrowing hits highest level in 3 months

📝 Our report: US consumer borrowing saw its biggest spike in three months in May, thanks to a surge in credit-card balances. Total credit outstanding rose $11.4 billion after a revised $6.5 billion gain in April, according to the most recent Federal Reserve data. The median forecast in a Bloomberg survey of economists called for an $8.9 billion increase for May.

 🔑 Key points:

• Many Americans who have whittled away their pent-up savings accumulated during the pandemic are relying on credit cards and other payment methods to spend.

• Combined with the rise in the cost of living, that’s further straining household finances and points to a slowdown in consumption.

• The latest quarterly data from the New York Fed show that household debt, including mortgages, rose to a record $17.7 trillion in the first three months of the year. Consumers have added $3.4 trillion in debt since the pandemic, and borrowing over the past few years is carrying much higher interest rates.

💡 So what: The rise in US consumer borrowing to its highest level in three months suggests increasing consumer confidence and spending, which can boost economic growth. However, it also raises concerns about potential over-reliance on credit and the risk of higher debt levels, which could lead to financial strain for households if interest rates rise or economic conditions worsen.

Tuesday - Fed Chairman Powell Testimony to Senate, NFIB Optimism Index

Wednesday - Fed Chairman Powell Testimony to House

Thursday - US Consumer Price Index

Friday - Consumer Sentiment (prelim)

📈 Micheal Mauboussin shares his 9 tip to become a great stock picker!

💰 10 books on personal finance everybody should read!

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✈️ Boeing pleads guilty to fraud charges

WHAT: Airplane manufacturing giant Boeing will plead guilty to criminal fraud related to the fatal 737 Max crashes, earning the title of felon but sidestepping a trial as it attempts to move past safety and manufacturing issues. Under the deal, Boeing would face a fine of up to $487.2 million, though the Justice Department recommended that the court credit Boeing with half that amount it paid under a previous agreement, resulting in a fine of $243.6 million.

WHY: The U.S. accused Boeing of conspiracy to defraud the government by misleading regulators about its inclusion of a flight-control system on the Max that was later implicated in the two crashes — a Lion Air flight in October 2018 and an Ethiopian Airlines flight in March 2019. All 346 people on board the flights were killed.

📽️ Theater owners worry over mega studio consolidation

WHAT: While insiders call the merger of mega Hollywood studio Paramount and Skydance a perfect match, Hollywood's cinema operators are getting a bit jittery. “A merger that results in fewer movies being produced will not only hurt consumers and result in less revenue, but negatively impact people who work in all sectors of this great industry — creative, distribution and exhibition,” Michael O’Leary, president and CEO of the National Association of Theatre Owners, or NATO, said in a statement on the heels of the merger announcement.

WHY: The theatrical industry as a whole has struggled with a slower influx of titles. Pandemic shutdowns crippled production and were followed by a dual Hollywood strike that also disrupted the pipeline of new films.

📉 Big bank predicts dip in stock market before US elections

WHAT: Morgan Stanley's Chief Investment Officer Mike Wilson is predicting a "highly likely" scenario that could see the benchmark S&P 500 index drop 10% before the U.S. presidential election in November. "The average company has not had good earnings results," he said, adding that a nearly 17% gain in the S&P 500 for the year to date has been powered by a small number of companies.

WHY: Among the reasons for a decline are uncertainty over how swiftly the Federal Reserve will bring interest rates down from nearly two-decade highs and falling pricing power on the part of companies, increasing the likelihood of disappointing earnings results, he said.

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