| The US stock rally energizes some bulls, China's economic slowdown continues, and how geopolitical tensions and AI are transforming global trade. — Kristine Aquino The S&P 500's gain of about 20% this year is prompting investors to get serious about the rally. Oppenheimer Asset Management's John Stoltzfus raised his year-end price target on the index to 4,900 from 4,400 — that would imply an advance of nearly 7% through year and would send the gauge above the record high set in January 2022. Meanwhile, hedge fund managers who make both bullish and bearish equity wagers slashed positions on both sides of their book last week, according to data from JPMorgan's prime brokerage unit. The process, known as de-grossing, mirrors a pattern of risk reduction also seen among Morgan Stanley's hedge fund clients. China's economy continues to display signs of a downturn, with survey data showing manufacturing contracted in July. Manufacturers reported muted foreign demand as a key factor weighing on total sales, with new export orders down noticeably last month. Meanwhile, home sales tumbled by the most in a year, delivering a blow to real estate developers in need of cash to alleviate a multi-year credit crisis. The latest setback was seen in Country Garden, one of China's largest private-sector developers, which canceled a stock offering worth the equivalent of $300 million. Global trade is undergoing a radical transformation, thanks to US-China tensions and Russia's invasion of Ukraine, as well as a shift from fossil fuels and the emergence of artificial intelligence. Traffic is surging as the US tries to source more supplies from Mexico, prompting officials in the city of Laredo — the port of entry — to push for $40 million of road enhancements. Meanwhile, workers in southwestern France are retraining to learn how to supervise robots that play a key role in Europe's ambitions to challenge China in building EV batteries. S&P 500 futures were down 0.3% as of 5:50 a.m. in New York, while Nasdaq 100 contracts fell 0.4%. The Bloomberg Dollar Spot Index climbed toward the day's highs, dragging down all Group-of-10 currencies. Treasury yields were little changed, while UK and Europe bond markets are similarly listless. Gold and oil fell, while Bitcoin slid nearly 1% and headed for a third straight day of losses. At 9:45 a.m., we'll get S&P survey data on manufacturing, followed by similar figures from ISM at 10 a.m. At the same time, the US will publish data on construction spending and job openings. Chicago Fed President Austan Goolsbee speaks at an event at 10 a.m. Earnings include Pfizer, Merck, Starbucks, Caterpillar and Uber. Here's what caught our eye over the past 24 hours: The housing market has been remarkably resilient throughout this period of higher mortgage rates, but 6 months ago this strength wasn't so obvious. In February on the Odd Lots podcast, we spoke to Chase Emmerson, a land broker and investor in Arizona, who said that in the winter months a number of homebuilders had put a halt on fresh land purchases. That of course fit with other measures of housing activity which briefly went into a freeze last winter and rates started to spike. But now it's the opposite. According to fresh research from John Burns Real Estate Consulting, the land market is "on fire" once again across much of the industry. In other words, if you were a homebuilder and your first reaction to higher rates was to slow down land acquisition, you likely got burned and regret that decision. You're scrambling to play catch up for that pause, and now you're paying more for land than you otherwise would have. This has kind of been the economic story of the last few years. Betting on downturns has been costly. The auto industry learned this lesson. It canceled numerous chip orders when the pandemic hit in early 2020, and it's been struggling to play catch up ever since. The carmakers got burned betting on a downturn. Every restaurant or service-type of industry that let workers go got caught way short due to lack of staffing throughout 2020, 2021, and 2022. In the latest edition of the Dallas Fed Manufacturing Report, one company in the Computer and Electronic Product Manufacturing industry said the following: "We continue to be concerned by all of the talk of a recession. We aren't seeing that reflected in reduced customer demand yet. We intend to make significant capital investments over the next six months to expand capacity and reduce our unit costs, as we hope to gain market share in the event of a recession." Now of course this is just one anonymous company, in one survey, in one industry, in the state of Texas. But at some point perhaps firms get trained that cutting labor and capacity is a bad move. That if they do that, then not long after they will be behind and have to play catch up, like automakers or homebuilders or restaurants or whoever else. If more companies perceive recessions as a time to take advantage of the mistakes of their competitors, then that's a recipe for shallow, short recessions, or even not having a recession at all. Yesterday in the newsletter, I wrote about the power of Big Fiscal to kick economic activity into a higher gear. Short-circuiting recessionary channels, by implicitly punishing companies that shed capacity, is potentially one way for an economy to sustain output at higher levels for a longer period of time. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart. | 
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