Investors were jolted by a stronger-than-expected retail sales report on Tuesday, which underscores the dual-edged sword now facing markets.
July’s 0.7% surge in retail sales is helping to bolster the view that a resilient U.S. economy can avoid a recession, despite more than a year of rate hikes by the Federal Reserve. However, the data also serves as another piece of information that some policy makers can use to support even more hikes in the final four months of this year, and left the benchmark 10-year Treasury yield…
The thing that will make companies lower prices is if consumers stop complaining about paying more for the things they need and want, and actually start refusing to buy them.
As the U.S. corporate earnings-reporting season progresses, with earnings from major retailers Walmart Inc. WMT, +0.59%,
Target Corp. TGT, +0.10%
and Home Depot Inc. HD, +0.52%
on tap next week, investors can get a ground-floor view of how consumer demand may have been hurt, or not, by higher prices, and what the companies plan to do, or not do, about it.
This dynamic of how consumers adjust their spending habits when prices change is referred to by economists as the price elasticity of demand.
“ For companies to cut prices, ‘you have to have the consumer go on strike, and they’re not there yet.’”
— Jamie Cox, Harris Financial Group
Those who trust companies will choose to ratchet down prices on their own, or at least not raise them because the rise in input costs has been slowing, haven’t been listening to what the many companies have told analysts on their post-earnings-report conference calls.
Kraft Heinz Co. KHC, +0.47%
acknowledged after its second-quarter report that its relatively higher prices have hurt demand, but not by enough for the food and condiments company to consider cutting prices.
Colgate-Palmolive Co. CL, +0.81%
said it will continue to raise prices, even as inflation slows and selling volume declines, as the consumer-products company continues to be laser focused on boosting margins and profits.
And while PepsiCo Inc. PEP, +0.16%
was worried that elasticities would increase, given how its lower-income customers were being particularly pressured by inflation, the beverage and snack giant reported strong results as it witnessed “better elasticities” in most of the markets in which it operated.
“Obviously, there is still carryover pricing, and I don’t think we’ll do anything different than our normal cycles on pricing in the balance of the year,” PepsiCo Chief Financial Officer Hugh Johnston told analysts, according to an AlphaSense transcript.
Basically, as MarketWatch has reported, so-called greedflation is alive and well.
Jamie Cox, managing partner for Harris Financial Group, said as long as the job market stays strong, as it is now, corporate greed will continue to pay off.
“If something is more expensive, and you have a job, you’ll complain about it, but you won’t substitute it for something cheaper,” Cox said. For companies to cut prices, “you have to have the consumer go on strike, and they’re not there yet,” Cox added.
“ ‘At some point, people are going to say, “All right — enough.” ’ ”
— Paul Nolte, Murphy & Sylvest Wealth Management
The reason elasticity is so important in the current environment is that, as long as consumers continue to pay the higher prices companies are charging, inflation will remain stubbornly high, making it, in turn, more likely that the Federal Reserve will continue to raise interest rates or, at the very least, not lower them.
But the longer interest rates stay high enough to crimp economic growth, the more likely the stock market will reverse lower as recession fears rise.
“At some point, people are going to say, ‘All right — enough,’ ” said Paul Nolte, senior wealth manager and market strategist at Murphy & Sylvest Wealth Management. “But we just haven’t seen that yet.”
What is elasticity?
Economists use the term “price elasticity of demand” to refer to the way in which consumers adjust their spending habits when prices change.
“Elasticity tries to measure how much more producers will want to produce if prices rise, and how much more consumers will want to buy if prices fall,” explained Bill Adams, chief economist at Comerica.
Elasticity often depends on the type of product a company sells.
For example, consumer-discretionary-goods companies that sell products and services that people want will often experience greater price elasticity than consumer-staples companies that sell things that people need, such as groceries and prescription drugs.
But even for needs, consumers often still have a choice, as less expensive generic, or private-label, alternatives may be available.
Andre Schulten, chief financial officer of consumer-staples maker Procter & Gamble Co. PG, +0.58%,
which recently beat earnings expectations as it continued to raise prices, telling analysts that, while there was “some trading into private label,” the overall market share of private-label products was unchanged for the year.
As Harris Financial’s Cox said, consumers may be complaining about higher prices, but they aren’t yet desperate enough to stop buying.
The Federal Reserve’s latest Beige Book economic survey stated that business contacts in some districts had observed a “reluctance” to raise prices as consumers appeared to have grown more sensitive to prices, but other districts reported “solid demand” allowed companies to maintain prices and profitability.
That’s likely why companies and analysts have become less concerned about price elasticity. Based on a FactSet analysis, mentions of the word “elasticity” in press releases and conference calls of S&P 500 companies SPX
increased as inflation and interest rates started surging in early 2022 through the end of the year.
Mentions of the word elasticity in earnings press releases and conference-call transcripts of S&P 500 companies.
FactSet
As the chart shows, “elasticity” popped up in more than 55% of earnings releases and conference calls in mid-2022, but with the second-quarter 2023 earnings-reporting season more than half over, mentions had dropped to about 20%.
Perhaps that will pick up, as retailers, especially those catering to lower-income customers — recall the PepsiCo comment — assess the demand impact of continued price increases.
Meanwhile, the branded-foods company Conagra Brands Inc. CAG, +0.71%,
whose wide-ranging food brands including Birds Eye, Duncan Hines, Hunt’s, Orville Redenbacher’s and Slim Jim, were starting to see the emergence of a different dynamic.
Chief Executive Sean Connolly said consumers were shifting behavior in some categories as prices remained high. Rather than trade down to lower-priced alternatives, he noticed some consumers buying fewer items overall, “more of a hunkering down than a trading down.”
That’s exactly the kind of consumer behavior that is needed, if companies are to stop feeding into the greedflation phenomenon and to start pulling back on prices.
US Bancorp DE lessened its position in shares of The TJX Companies, Inc. (NYSE:TJX – Free Report) by 3.5% during the 1st quarter, according to the company in its most recent disclosure with the SEC. The firm owned 571,509 shares of the apparel and home fashions retailer’s stock after selling 20,434 shares during the quarter. US Bancorp DE’s holdings in TJX Companies were worth $44,783,000 at the end of the most recent reporting period.
Other hedge funds and other institutional investors also recently added to or reduced their stakes in the company. Householder Group Estate & Retirement Specialist LLC acquired a new stake in TJX Companies during the first quarter valued at $25,000. ICA Group Wealth Management LLC acquired a new stake in TJX Companies during the fourth quarter valued at $27,000. Lakewood Asset Management LLC acquired a new stake in TJX Companies during the fourth quarter valued at $28,000. Freedom Wealth Alliance LLC acquired a new stake in TJX Companies during the fourth quarter valued at $28,000. Finally, Ameliora Wealth Management Ltd. acquired a new stake in TJX Companies during the fourth quarter valued at $30,000. Institutional investors and hedge funds own 92.26% of the company’s stock.
Insider Buying and Selling at TJX Companies
In other TJX Companies news, EVP Scott Goldenberg sold 26,271 shares of TJX Companies stock in a transaction dated Thursday, May 18th. The shares were sold at an average price of $78.91, for a total transaction of $2,073,044.61. Following the completion of the sale, the executive vice president now directly owns 72,580 shares in the company, valued at $5,727,287.80. The sale was disclosed in a document filed with the SEC, which is available through this hyperlink. Company insiders own 0.13% of the company’s stock.
Wall Street Analysts Forecast Growth
Several research firms recently commented on TJX. Telsey Advisory Group restated an “outperform” rating and set a $95.00 price target on shares of TJX Companies in a research report on Wednesday. Loop Capital raised shares of TJX Companies from a “hold” rating to a “buy” rating and increased their price objective for the company from $75.00 to $95.00 in a report on Wednesday, July 12th. UBS Group increased their price objective on shares of TJX Companies from $80.00 to $88.00 and gave the company a “neutral” rating in a report on Monday, August 7th. Barclays increased their price objective on shares of TJX Companies from $93.00 to $95.00 and gave the company an “overweight” rating in a report on Thursday, May 18th. Finally, Piper Sandler assumed coverage on shares of TJX Companies in a report on Thursday, June 29th. They set an “overweight” rating and a $110.00 price objective on the stock. Three equities research analysts have rated the stock with a hold rating and sixteen have issued a buy rating to the company’s stock. According to MarketBeat.com, TJX Companies has an average rating of “Moderate Buy” and an average target price of $89.65.
Shares of TJX stock opened at $85.89 on Friday. The company has a debt-to-equity ratio of 0.45, a current ratio of 1.20 and a quick ratio of 0.58. The firm’s 50-day moving average is $83.51 and its two-hundred day moving average is $79.95. The TJX Companies, Inc. has a 12 month low of $59.78 and a 12 month high of $87.81. The company has a market capitalization of $98.71 billion, a PE ratio of 26.43, a price-to-earnings-growth ratio of 2.30 and a beta of 0.92.
TJX Companies (NYSE:TJX – Get Free Report) last issued its earnings results on Wednesday, May 17th. The apparel and home fashions retailer reported $0.76 EPS for the quarter, topping analysts’ consensus estimates of $0.71 by $0.05. TJX Companies had a net margin of 7.56% and a return on equity of 62.78%. The company had revenue of $11.78 billion for the quarter, compared to the consensus estimate of $11.82 billion. During the same period in the previous year, the firm earned $0.68 earnings per share. TJX Companies’s quarterly revenue was up 3.3% compared to the same quarter last year. Analysts predict that The TJX Companies, Inc. will post 3.57 earnings per share for the current year.
TJX Companies Announces Dividend
The company also recently announced a quarterly dividend, which will be paid on Thursday, August 31st. Shareholders of record on Thursday, August 10th will be paid a dividend of $0.3325 per share. This represents a $1.33 dividend on an annualized basis and a yield of 1.55%. The ex-dividend date of this dividend is Wednesday, August 9th. TJX Companies’s dividend payout ratio (DPR) is presently 40.92%.
The TJX Companies, Inc, together with its subsidiaries, operates as an off-price apparel and home fashions retailer in the United States, Canada, Europe, and Australia. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International. The company sells family apparel, including footwear and accessories; home fashions, such as home basics, furniture, rugs, lighting products, giftware, soft home products, decorative accessories, tabletop, and cookware, as well as expanded pet, kids, and gourmet food departments; jewelry and accessories; and other merchandise.
Further Reading
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Food prices rose 0.2% on the month in July after remaining unchanged in June, and they rose 4.9% on the year, while the cost of food at home rose 3.6% on the year, government data released Thursday showed. Prices of fresh fruits and vegetables rose just 1.2% year over year.
However, there were some big — even alarming — outliers: Frozen fruit and vegetable prices increased by 11.8% in July over last year, frozen vegetable prices rose 17.1% and frozen noncarbonated juice and drink prices rose 16.3%.
Those price rises are at odds with overall inflation figures. U.S. consumer prices rose to 3.2% in July from 3% in the prior month, the Bureau of Labor Statistics said this week. It was the first increase in 13 months.
Why have the prices of frozen fruits and vegetables shot up over the past 12 months, while the cost of fresh fruits and vegetables has increased so little?
Climate change and extreme weather conditions — from heavy rainfall to drought, particularly in California — have led to big problems for farmers. This has been compounded by issues related to the war in Ukraine and an ongoing increase in the cost of labor, experts said.
As a result, a large proportion of the fruits and vegetables grown were destined to be sold as fresh produce — which led to a shortage of ingredients for frozen goods, said Brad Rubin, sector manager at Wells Fargo Agri-Food Institute. “Because of the late crop, lots of produce is being pushed to the fresh market to keep up with demand,” he said.
California weather
California has experienced some drastic weather conditions over the last 12 months. Some 78 trillion gallons of water fell in California during winter 2022 and early spring 2023, according to data from the National Weather Service, delaying planting. And all that snow and rain was followed by a months-long drought in the region.
What happens in California is felt by consumers across the country.
“California produces nearly half of U.S.-grown fruits, nuts and vegetables,” according to estimates from the Sciences College of Agriculture, Food & Environmental Sciences at California Polytechnic State University in San Luis Obispo. “California is the only state in the U.S. to export the following commodities: almonds, artichokes, dates, dried plums, figs, garlic, kiwifruit, olives, pistachios, raisins and walnuts,” it says.
The subsequent price rises hit ingredients like strawberries and raspberries especially hard, Rubin added. Inventories of frozen berries are “near five-year lows” after winter storms in Watsonville flooded agricultural fields, damaging and delaying the strawberry crop. Most of the strawberries in the U.S. are grown in California.
Labor costs
Frozen fruits and vegetables have a longer supply chain than fresh produce, which can make them more vulnerable to disruptions in inventory, experts say. Rising energy prices are also pushing up the cost of cold storage.
In addition to those issues, U.S. farmers are dealing with increased labor costs and fewer migrant workers, partly due to changes in government policies and the closure of borders during the COVID-19 pandemic, according to a February 2023 report from the Federal Reserve Bank of San Francisco.
“Immigration has traditionally provided an important contribution to the U.S. labor force,” the report said. “The flow of immigrants into the United States began to slow in 2017 due to various government policies, then declined further due to border closures in 2020-21 associated with the COVID-19 pandemic. This decline in immigration has had a notable effect on the share of immigrants in the U.S. labor force.”
Russia’s invasion of Ukraine also continues to affect agricultural production in the U.S., said Curt Covington, senior director of institutional business at AgAmerica Lending, a financial-services company providing agricultural loans. Because the war disrupted supplies of commodities like wheat and corn — also pushing up prices for those goods — farmers have been prioritizing planting those crops over vegetables.
“These escalating frozen-vegetable prices present a challenge for farmers as they grapple with increased production costs and labor pressures,” and that presents a long-term challenge for farmers, “potentially impacting their profitability,” Covington said.
All of these factors — from international supply chains to extreme weather conditions — will have an effect on the cost of frozen goods in U.S. supermarkets. Ultimately, experts said, consumers will end up paying the price.
MarketWatch Picks spoke to smart shopping and money saving experts to help arm you with the tools you need to get ready for school like a pro.
Getty Images/iStockphoto
To quote the great poet Taylor Alison Swift, “August slipped away into a moment in time.” Now that we’re midway through summer’s final month, it’s time to get ready to head back to school, if your kids haven’t already. Whether you’re sending little ones to school for the first time or getting young adults ready, your list is likely long and daunting — and with prices still affected by record inflation, searching for the best deal is no doubt important. MarketWatch Picks spoke to smart shopping and money saving experts to help arm you with the tools you need to get ready for school like a pro.
1. Trying to get it done all-in-one? Hit your favorite discount retailers
“Back to school sales are extremely prevalent right now, so it should be easy to track down savings from many of your favorite retailers. Target and Walmart are both big picks for consumers, as they’re great for checking off pretty much everything on most school supply lists,” says Julie Ramhold, consumer analyst with DealNews.com. “They also tend to be great options for parents who need to shop for uniforms, too, so if you don’t want to shop multiple stores, these are both definitely worth being your first picks,” Ramhold adds.
If you’re shopping primarily for basic supplies, you’re likely to spend a lot less browsing store brands than name brands or at other retailers, says money saving expert Andrea Woroch. “When it comes to basic supplies and clothing, you can save up to 50% by opting for store brands over name brands. For example, Target’s Up & Up 1-subject notebook costs just $0.99. Comparatively, the same type of notebook from Five Star costs $3.39. That’s a $2.40 price difference for just 1 item,” she says. “For clothing, you can get this girl’s polo uniform shirt from Walmart’s Wonder Nation for under $5. Meanwhile, a similar style from Land’s End will cost you nearly triple even when it’s on sale for $16,” Woroch says.
Certainly, if you have a membership at one of these retailers — like Walmart+ or Target Circle — that may help you decide where to shop if your loyalty is divided.
The MarketWatch Picks team has put together this guide to see if springing for a Walmart+ membership is right for you.
But don’t forget to compare prices between the two. “Don’t spend your time driving around to them to see how they stack up; instead, take the school supply list and add every item to your cart online at each store,” Ramhold says.
And don’t forget to check out even the off-brand discount stores if you’re looking to save on the basics, says Trae Bodge, smart shopping expert at TrueTrae.com. “For example, at Dollar General, you can find more than 100 back-to-school items from brands like Crayola, BIC, and Elmer’s, plus store brands like iMagine and Office Hub that offer a 100% satisfaction guarantee.
2. Got younger kids? Splurge on some items that will last
There is an exception to Woroch’s approach to opting for store brands over name brands: Items like backpacks and sneakers tend to hold up longer if they’re higher quality, giving you more bang for your buck. “For this reason, shop discount stores or at outlet centers to get name brands for less. I also suggest going with a backpack in a plain print or color so your child can use it for a few school years. Opting for a character style backpack could mean that your child outgrows it the following school year and you will have to replace it,” Woroch says.
3. Got older kids? Save by empowering them to shop on their own
Older kids have likely shopped for back to school with you a few times by now and may have their own ideas about what works best for them. Luckily for you, this can also serve as a smart budgeting tool. “For teens and tweens, I strongly recommend giving them a gift card to shop for themselves. They will be much more mindful of what they buy with “their” money vs. yours, and they’ll learn quickly about how pricey items can impact their budget,” Bodge says. “To make it fun, I like to give a personalized Visa or Mastercard with the Build-a-Card service from GiftCardGranny. You can upload a fun photo and personalized message and the cards ship within 1-2 days.”
You can also use cash back apps like Fetch to score gift cards, Woroch notes. “Just take pictures of all your school shopping receipts and upload them to the app to earn points which are good towards free gift cards to various stores that sell school supplies like Target, Amazon and Walmart which you can then use to offset additional school purchases either now or mid year when you need to restock your supplies!”
4. Stack your errands list if you’re strapped for time and look for free loyalty programs where you already shop (if you haven’t already)
Chances are you’ll have to hit the pharmacy sooner or later. “For example, if you need to pick up other things at CVS, you’ll find that they have a broad selection of healthy snacks for lunches as well as budget-friendly school supplies. Ifyou join their free ExtraCare program, you’ll save even more with access to sale prices and ongoing personalized offers online or in the CVS Pharmacy app,” Bodge says.
Ramhold notes that the CVS ExtraCare program also has a “Spend $40, get $10” program right now. “You could earn free money to use at CVS for purchases you’d buy anyway and then apply that free money towards additional school supplies so you can get items without spending more out of pocket,” Ramhold adds.
5. Take a beat to understand what you don’t need to buy as well as what you do – and don’t buy everything right now.
It’s definitely important to make sure that what you need isn’t just sitting under your nose. “Before you go shopping, take stock of what you have at home. This way, you’re not wasting money on supplies you already have at home! For example, you can tear out pages from half-used notebooks, reuse folders and binders, and put together a pack of crayons or markers from a scattered set. Lastly, toss that dirty backpack in the wash so it looks new again,” Woroch says.
Obviously buy whatever necessary supplies your child’s teacher recommends, but hold off on spending too much on clothing, Bodge suggests. “Reason being is that they will inevitably see a trend at school that they’d like to take part in, and fall clothing will start to go on sale in October,” Bodge says.
You can also save by swapping rather than buying, shopping second-hand, or collaborating with other local families. “Swapping is another way to avoid spending. Reach out to other families from your school or in your neighborhood to set up a clothing or supply swap,” Woroch says.
Both Bodge and Woroch note that if your family has a Sam’s Club or Costco membership, consider buying supplies and snacks in bulk or teaming up with another family – or even a whole classroom – for a supply run. “Have 1 parent buy all the supplies and divvy it up among families, then collect cash via Venmo/Paypal/Zelle,” Woroch says.
As for shopping secondhand, Bodge recommends considering retailers like ThredUp and Poshmark for clothing or purchasing refurbished tech from Best Buy to save on big ticket items. This can help you save significantly. “If your kids are like, “ew, used” show them how much further their budget will go when buying secondhand. Plus, no one besides you will ever know,” Bodge adds.
The numbers: The University of Michigan’s gauge of consumer sentiment inched down to a preliminary August reading of 71.2 after hitting a 22-month high of 71.6 in the prior month.
Economists polled by the Wall Street Journal had expected sentiment to inch up to a 71.7 reading in August.
Another key part of the report is the U. of M. measure of inflation expectations.
According to the report, Americans’ expectations for overall inflation over the next year slipped to 3.3% in August from 3.4% in the prior month, while expectations for inflation over the next 5 years inched down to 2.9% from 3%.
Key details: According to the Michigan report, a gauge of U.S. consumers’ views on current conditions rose to to 77.4 in August from 76.6 in the prior month, while a barometer of their future expectations fell to 67.3 from 68.3.
Big picture: Sentiment has been boosted by waning recession fears and disinflation in grocery store prices.
What the University of Michigan said: “Consumer sentiment was essentially unchanged from July, with small offsetting increases and decreases within the index. In general, consumers perceived few material differences in the economic environment from last month, but they saw substantial improvements relative to just three months ago,” said Joanne Hsu, the director of University of Michigan consumer surveys.
SPX
were mixed in early trading Friday while the yield on the 10-year Treasury note BX:TMUBMUSD10Y
rose to 4.12%, the highest level since the spike last week after Fitch Ratings downgraded the U.S. credit rating.
The numbers: The U.S. producer price index rose 0.3% in July, the Labor Department said Friday, up from a revised flat reading in June and the largest gain since January.
Economists polled by The Wall Street Journal had forecast a 0.2% advance.
The core producer price index, which excludes volatile food, energy prices, and trade services rose 0.2 in July, up from a 0.1% gain in the prior month. This is the largest increase since February.
Key details: Over the past year, headline producer price inflation was running at a 0.8% rate in July, up from 0.2% in the prior month.
Core prices are up 2.7% from a year earlier, matching the gain in June. Core PPI prices were running at a 5.8% rate in July 2022.
A big part of the increase in producer prices was in the services sector.
The cost of services rose 0.5% last month, up from a 0.1% drop in June. This is the largest increase in a year. The increase was led by a 7.6% gain for portfolio management.
The cost of goods rose 0.1% in July after a flat reading in the prior month.
Energy prices were flat in July, down sharply from a 0.7% gain in the prior month.
Wholesale food prices jumped 0.5% after a 0.2% fall in the prior month.
Further back on the production line, prices for intermediate goods fell 0.6%, the sixth straight monthly decline.
Big picture: Price pressures have been diminishing at the producer level much faster than at the consumer level. Economists are watching the inflation data closely to see if the July interest rate hike by the Federal Reserve was the last hike of the cycle.
What are they saying? “In short, PPI surprised to the upside in July. While we do not expect further rate hikes this year, if inflation surprises to the upside and the labor market and growth do not slow, another increase in interest rates cannot be ruled out in 2023,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
The World Health Organization has upgraded COVID-19 variant EG.5 to a variant of interest, or VOI, from a variant under monitoring, or VUM, as it continues to become more prevalent around the world.
The variant — which has been nicknamed Eris by some media, following the Greek-alphabet designation used for other variants — has been found in 51 countries, with most sequences, 30.6%, stemming from China, said the WHO.
Other countries that have submitted at least 100 sequences to a central database include the U.S., the Republic of Korea, Japan, Canada, Australia, Singapore, the United Kingdom, France, Portugal and Spain, the WHO said in a statement.
Eris is a descendent lineage of XBB.1.9.2, which is an omicron subvariant. It was first detected on Feb. 17 and designated as a VUM on July 19.
Its latest designation means it’s more prevalent than it was, has a growth advantage over earlier variants and merits closer monitoring and tracking.
Here’s what you need to know about Eris.
Eris is spreading around the world
The strain is increasing in global prevalence, accounting for 17.4% of cases sequenced in the week through July 23, up from 7.6% four weeks earlier. The WHO has been tracking COVID data on a 28-day basis, largely because countries have cut back on testing and surveillance as they emerge from the pandemic, meaning the agency has far less data than it did during the pandemic.
It’s already dominant in the U.S.
Eris has become dominant in the U.S., according to projections made by the Centers for Disease Control and Prevention, although a shortage of data is hampering the agency’s efforts to surveil the illness.
The CDC said last week it was unable to publish its “nowcast” projections, which it releases every two weeks, for where EG.5 and other variants are circulating for every region, because it did not have enough sequences to update the estimates.
“Because nowcast is modeled data, we need a certain number of sequences to accurately predict proportions in the present,” CDC representative Kathleen Conley told MarketWatch.
“For some regions, we have limited numbers of sequences available and therefore are not displaying nowcast estimates in those regions, though those regions are still being used in the aggregated national nowcast,” she said.
It is estimated that EG.5, an omicron subvariant, accounted for 17.3% of COVID cases in the U.S. in the two-week period through Aug. 5. That was up from an estimated 11.9% in the previous period and was more than any other variant.
The public-health risk is deemed to be low at the global level, lining up with the risk posed by XBB.1.16 and other currently circulating VOIs, according to the WHO statement. But it’s likely more infectious.
“While EG.5 has shown increased prevalence, growth advantage, and immune escape properties, there have been no reported changes in disease severity to date,” said the WHO.
That growth advantage and immune-escape properties mean Eris may cause a rise in case incidence over time and become dominant in some countries or even the world, according to the WHO.
It has the same symptoms as other strains
The Eris variant causes the same symptoms as seen with other strains of COVID, such as sore throat, runny nose, cough, congestion, fever, fatigue, body aches and a possible loss of taste or smell.
The best defense against Eris is vaccination
Like earlier strains of COVID, the best protection is to be vaccinated with any of the vaccines developed by Pfizer Inc. PFE, -0.03%
and German partner BioNTech SE BNTX, -0.32%,
Moderna Inc. MRNA, -1.01%
or Novavax Inc. NVAX, +9.83%
The vaccines that will be made available in the fall will be designed to protect against all subvariants of XBB, including Eris.
Shares of Alibaba Group Holding Ltd. were rallying more than 2% in Thursday’s premarket trading after the Chinese e-commerce giant topped expectations with its latest revenue and earnings.
The company notched fiscal first-quarter net income of RMB34.3 billion ($4.6 billion), or RMB13.30 per American depositary share, compared with net income of RMB22.7 billion, or RMB8.51 per ADS, in the year-before period.
On an adjusted basis, Alibaba BABA, +0.67%
earned RMB17.37 per ADS, while the FactSet consensus was RMB14.59 per share. Revenue rose to RMB234.2 billion from RMB205.6 billion, where analysts had been modeling RMB224.7 billion.
Chief Executive Daniel Zhang said the company’s reorganization was “beginning to unleash new energy across our businesses.” Alibaba recently realigned into six units with their own CEOs and boards of directors, and the ability to pursue independent fundraising.
“Through this self-driven transformation, we aim to catalyze innovation, promote vitality in our organization and enable businesses to focus on long-term growth,” Zhang continued. “We look forward to positive impacts on our business, including strengthening competitiveness, sustainable growth and shareholder value creation.”
Overall revenue for the company’s Taobao and Tmall Group, which represents the company’s core e-commerce marketplaces in China, rose to RMB115.0 billion from RMB102.5 billion.
Within that group, customer management revenue was up 10% to RMB79.7 billion, “primarily due to the increase in merchant’s willingness to invest in advertising” and an increase in the volume of online physical goods generated on the platforms.
Alibaba bought back $3.1 billion worth of ADRs during the June quarter, “which is supported by our continuous generation of strong free cash flow,” Chief Financial Officer Toby Xu said in the release. Free cash flow was RMB39.1 billion in the quarter, up 76% from a year earlier.
U.S.-listed shares of Alibaba are up about 8% so far this year.
Online retail giant Amazon.com Inc.’s AMZN, +8.27% second-quarter results and third-quarter forecast sales last week were a bet that more consumers would start buying more things, but Wall Street’s expectations for the third quarter overall have only grown dimmer.
With most of the 500 companies that make up the S&P 500 Index SPX
already through the second-quarter earnings reporting season, slightly more than normal have reported per-share profit that beat Wall Street’s estimates, according to FactSet.
For the third quarter though, analysts now expect a mere 0.2% increase in per-share profit growth overall, according to a FactSet report on Friday, or slightly lower than the 0.4% growth that was expected for the third quarter on June 30,
And with some two months still left in the third quarter, and with that forecast likely to come down as the period progresses, Wall Street’s profit expectations are getting ever closer to turning negative.
Wall Street analysts overall still expect a bigger rebound for the fourth quarter, the FactSet report said. And they expect 2023 overall to eke out a per-share profit gain of 0.8%.
Worries of a U.S. recession emerging at some point during the back half of this year have started to fade at least a little after many economists fixated on the possibility earlier this year when the Federal Reserve was raising interest rates to combat a jump in inflation in 2022 . Some analysts now say savings fatigue could prompt more shoppers to splurge this year, after relentlessly tightening their budgets due to rising prices.
Federal Reserve Chair Jerome Powell last month said policymakers at the central bank had also shucked off their worries of a downturn.
“The staff now has a noticeable slowdown in growth starting later this year in the forecast. But given the resilience of the economy recently, they are no longer forecasting a recession,” he said last month.
Not everyone is convinced that a downturn has vanished from the horizon though. Sheraz Mian, director of research at Zacks, told MarketWatch last month that more bearish analysts had kept pushing out their recession forecasts, after being defied by the actual, and more positive, economic data. Some economists continue to push out those forecasts.
“We still expect a recession, but now we are looking for it to begin in Q1 2024 rather than Q3 2023,” Thomas Simons, U.S. economist at Jefferies, said in a research note on Friday.
He said that interest rate hikes from the Federal Reserve were only just starting to affect customer behavior. Households were trying to rebuild their savings, after spending through whatever they had built up during the pandemic. Student-loan payments were returning, he said, and corporate margins were thinning.
“Corporate profit margins are narrowing, and businesses will look to cut costs through layoffs,” he said.
This week in earnings
Among S&P 500 index companies, 34 report results during the week ahead, including one from the Dow Jones Industrial Average, according to FactSet.
Results from Walt Disney Co. DIS, +0.95%
will likely gobble up more media attention, but earnings from Paramount Global Inc PARA, +3.58%
— which oversees CBS, Showtime, Comedy Central and other channels — will offer more detail about how studios are positioning themselves with Hollywood actors on strike. Lions Gate Entertainment Corp. LGF.A, -2.44%
also reports.
Results from Tyson Foods Inc. TSN, +0.34%
will give investors and customers a brief look at the state of the grocery aisle where higher food prices over the past year have strained spending on other things. Beyond Meat Inc. BYND, -1.38%,
which also reports during the week, will be hoping new product launches of plant-based meat-like alternatives can overtake analyst skepticism, amid competition with fake meat and real meat alike.
Elsewhere, ride-hailing platform Lyft Inc. LYFT, -5.73%,
online dating service Bumble Inc. BMBL, -3.86%
and video-game maker Take-Two Interactive Software Inc. TTWO, -2.45%
also report during the week. And Canadian pot producer Canopy Growth Corp. CGC, -3.47%
will get another chance to pick up the pieces, after over-expanding and now trying to hold onto its cash.
The call to put on your calendar
Disney drama: One way or another, people on both coasts are mad at Disney DIS, +0.95%
Chief Executive Bob Iger right now, as his company prepares to report quarterly results on Wednesday. Shares of Disney are down slightly this year. The company is currently fighting with Florida Gov. Ron DeSantis, who is trying to stamp out Disney World’s self-governing privileges after the company criticized the state’s restrictions on classroom discussion of gender identity. When Iger accused striking actors and writers in Hollywood of not being “realistic,” the actors and writers shot back, noting his hefty executive compensation plan.
While the friction in Florida hasn’t hurt Disney’s parks attendance, the Hollywood shutdown has threatened Disney’s massive film and TV show operations, as Disney+ subscribers fall and investors more aggressively seek profits from studios’ streaming operations. Elsewhere, Rich Greenfield, an analyst at LightShed Partners, said “Pixar and Disney Animation have not had a breakout hit that impacted children’s play patterns and both Marvel and Lucasfilm feel increasingly tired from overuse.”
The sense is growing that more time is needed for Iger to fix Disney’s problems. On Wednesday, analysts may get a deeper sense of how much more, with the chance of more drama between Disney and its home state and the writers and actors the company depends on.
The number to watch
UPS and the Teamsters deal: United Parcel Service Inc. reports quarterly results on Tuesday, as rank-and-file Teamsters vote on a tentative labor agreement struck with the package deliverer in an effort to avert a strike. The deal, if approved, would raise worker pay and give the economy and businesses a breather, after threats of strikes or work stoppages at the nation’s ports and railways were averted over the past year.
Local Teamsters unions have voted overwhelmingly to at least endorse the agreement, between UPS UPS, -0.31%
and the Teamsters union, which represents 340,000 UPS workers, but not everyone was happy with the deal. Some part-timers felt the Teamsters could have used their leverage to wrest more from UPS, following a profit windfall at the company. And investors have held out for more detail from UPS executives themselves on what the deal might mean for the bottom line and for shipping prices.
The second-quarter earnings season so far is showing that one trend that featured in the first quarter has not gone away.
“Greedflation,” or the practice of companies raising prices to protect their profit margins, is alive and well, based on the number of companies that have so far acknowledged raising prices yet again, even as inflation readings have come down and as some acknowledge that their input costs are falling.
At the same time, companies continue to emphasize on earnings calls that their customers are showing signs they are weary of higher prices and are shopping more frequently at more stores, while spending less per trip.
“Across industries, we’ve seen the same story over and over the last two years,” said Liz Zelnick, director of economic security and corporate power at Accountable.US, a liberal-leaning consumer-advocacy group.
“CEOs claim outside forces made them gouge consumers, then turn around and give themselves raises and boast of record profits and billions in new investor handouts,” she said, referring to the billions of stock buybacks and dividend payouts the same companies have made.
On a call with analysts, Chief Executive Jon Moeller signaled more price increases to come, which he attributed to the company’s innovation pipeline, which is creating must-have products.
“If you look back historically, pricing has been a positive contributor to our top-line growth for something like 48 out of the 51 last quarters and again as we strengthen our innovation program even further, that will provide opportunities to continue to benefit from modest pricing,” said Moeller, according to a FactSet transcript.
The company blew past earnings estimates with adjusted per-share earnings of $1.37, ahead of the $1.32 FactSet consensus, and sales of $20.6 billion, versus the $20 billion FactSet consensus.
Gross margin increased 380 basis points from a year ago, driven by 340 basis points of pricing benefit and 290 basis points of productivity savings.
Coca-Cola Co. KO, -1.51%
also swept past estimates and raised guidance after the drinks and snacks giant increased prices by 10%. The company’s adjusted operating margin rose to 31.6% from 30.6% a year ago.
Conagra Brands Inc. CAG, -0.62%
raised prices by up to 17%, which Chief Executive Sean Connolly described as “inflation-justified.” The parent of brands such as Birds Eye, Duncan Hines, Hunt’s, Orville Redenbacher’s and Slim Jim also reported that its customers are buying less food to stretch their budgets.
“[W]hile we did lose share in the quarter, as price gaps have stayed wider for longer than we would have liked, we are managing the business for the long term and still generated mid-single-digit top-line growth within the range of what we expected,” Chief Executive Miguel Patricio said.
The company, parent to brands including Kraft Mac and Cheese, Heinz Ketchup, Jell-O and Lunchables, indicated on the post-earnings conference call with analysts that rather than increasing discounting, or just cutting prices, it will remain focused on protecting margins, which has been allowing it to accelerate investment in the business, particularly in marketing, research and development and technology.
Besides, as Chief Financial Officer Andre Maciel said, the gaps between Kraft’s prices and those of competitors are not getting worse. “If anything, they are slightly getting better,” Maciel said, according to an AlphaSense transcript.
Considering the market-share losses and with inflation coming down, “do you think you took too much price, given you said you took price ahead of competitors, and they have not followed?” UBS analyst Cody Ross asked on the conference call.
CEO Miguel Patricio’s answer was simple: “No.”
“I mean, we had very high inflation. And we are leaders in the vast majority of categories where we play. And it’s our role as leader to try to compensate … this inflation with price increases,” Patricio said. “So I would do everything again. I mean we can always go back on price if we think we have to or when we have to. But we had to lead price increases.”
All of that leaves families to foot the bill for higher food prices, said Accountable.US’s Zelnick.
The Consumer Staples Select Sector SPDR exchange-traded fund XLP
has gained 1.2% in the year to date, while the SPDR S&P Retail ETF XRT
has gained 10.3%. The S&P 500 XRT
has gained 17%.
SPX
looked set to trade up modestly following the data on nonfarm payrolls.
• “The Fed will take comfort from moderating job growth, but will continue to fret about the tight labor market. So far, the July employment and CPI reports are a wash for the Fed’s September 20 decision (we expect no change in rates), placing extra pressure on the August releases to add some clarity.” — Sal Guatieri, senior economist at BMO Capital Markets, in a tweet
• “This month’s slow job growth is a sign the economy is continuing to cool; while a negative in some senses, this is a positive indicator for the Fed and may soon end its interest rate hikes. … Moving forward, we anticipate the unemployment rate will remain low. We also expect unemployment will rise to its natural long-run rate of 4.5% over the next two years.” — Steve Rick, chief economist at TruStage, previously known as CUNA Mutual Group, in a note
• “Since bad news is good news these days, Jay Powell will be smiling this morning, if not entirely happy. The below consensus reading in hiring in the July payrolls is the type of labor market softening the Fed is looking for. … But there were some more mixed elements in the report as well. The unemployment rate ticked down a notch to 3.5% and average nominal wages grew 0.4% for the second consecutive month. The Fed will continue to be looking for a broader set of data and will be focused on a further deceleration in prices before throwing in the towel for September.” — Ali Jaffery, economist at CIBC, in a note
• “The wage data is stronger than the payroll data, suggesting that demand for labor is still robust, and that the slowing pace of hiring is more due to a lack of supply of labor. [Average hourly earnings] rose 0.4% in July, same as May and June. AHE Y/Y was steady at +4.4%. This, combined with the firmer household survey data, should keep the Fed on their toes for another rate hike as soon as next month, but the [consumer price index] data next week will have a big influence in that decision as well.” — Thomas Simons, U.S. economist at Jefferies, in a note
• “If you were to write the script of what a soft landing looks like, this is it. Payrolls grew a strong +187k, signaling a slower yet still strong — and more sustainable —pace.” — Justin Wolfers, University of Michigan economics professor, in a tweet
For weeks, Wall Street had been closely eyeing the performance of Amazon Web Services: Would it rise more than 10% in year-over-year sales?
It did, and then some, on Thursday when Amazon.com Inc. AMZN, +0.55%
announced its quarterly results, boosting company shares more than 9% in after-hours trading.
Sales for Amazon’s market-leading AWS jumped 12%, to $22.1 billion, offering proof of its “stabilization” after several rough quarters, Jefferies analyst Brent Thill told CNBC late Thursday. More important, it signals healthier days — for now — in the cloud market amid a stampede for generative-AI services and concerns about Amazon’s place in it.
“I am bullish on AWS’s growth,” Amazon Chief Executive Andy Jassy said in a conference call with analysts late Thursday, in which he predicted AWS would become a $100 billion business within several years.
Last week, Microsoft Corp. MSFT, -0.26% said it expected revenue growth from Azure and other cloud services to continue cooling in the current quarter. Meanwhile, Alphabet Inc.’s GOOGL, +0.05%
GOOG, +0.10%
Google Cloud revenue grew 28%, topping Wall Street estimates.
Maribel Lopez, founder and principal analyst at Lopez Research, called Amazon’s cloud revenue “surprising” and resilient despite costoptimization among enterprise buyers.“Upcoming AI workloads should keep [Amazon] in a similar top-line growth trajectory, but the challenge will be keeping the cost to serve down,” she said in an email. “The new chipsets will assist with cost containment. Overall, the AI business will provide a bright light in the cloud market.”
Although Thill and other analysts openly wonder how AWS will adapt in the age of AI, the company’s second-quarter sales figures heartened Amazon’s top boss, who knows a thing or two about the cloud-computing industry.
“Our AWS growth stabilized as customers started shifting from cost optimization to new workload deployment, and AWS has continued to add to its meaningful leadership position in the cloud with a slew of generative AI releases that make it much easier and more cost-effective for companies to train and run models,” the embattled Jassy, who previously ran AWS, said in a statement Thursday, announcing the results.
Underscoring the importance of AWS, it was mentioned 49 times in Amazon’s second-quarter earnings release, mostly cited in customer use cases.
The second-quarter earnings season so far is showing that one trend that featured in the first quarter has not gone away.
“Greedflation,” or the practice of companies raising prices to protect their profit margins, is alive and well, based on the number of companies that have so far acknowledged raising prices yet again, even as inflation readings have come down and as some acknowledge that their input costs are falling.
At the same time, companies continue to emphasize on earnings calls that their customers are showing signs they are weary of higher prices and are shopping more frequently at more stores, while spending less per trip.
“Across industries, we’ve seen the same story over and over the last two years,” said Liz Zelnick, director of economic security and corporate power at Accountable.US, a liberal-leaning consumer-advocacy group.
“CEOs claim outside forces made them gouge consumers, then turn around and give themselves raises and boast of record profits and billions in new investor handouts,” she said, referring to the billions of stock buybacks and dividend payouts the same companies have made.
On a call with analysts, Chief Executive Jon Moeller signaled more price increases to come, which he attributed to the company’s innovation pipeline, which is creating must-have products.
“If you look back historically, pricing has been a positive contributor to our top-line growth for something like 48 out of the 51 last quarters and again as we strengthen our innovation program even further, that will provide opportunities to continue to benefit from modest pricing,” said Moeller, according to a FactSet transcript.
The company blew past earnings estimates with adjusted per-share earnings of $1.37, ahead of the $1.32 FactSet consensus, and sales of $20.6 billion, versus the $20 billion FactSet consensus.
Gross margin increased 380 basis points from a year ago, driven by 340 basis points of pricing benefit and 290 basis points of productivity savings.
Coca-Cola Co. KO, -0.49%
also swept past estimates and raised guidance after the drinks and snacks giant increased prices by 10%. The company’s adjusted operating margin rose to 31.6% from 30.6% a year ago.
Conagra Brands Inc. CAG, -0.75%
raised prices by up to 17%, which Chief Executive Sean Connolly described as “inflation-justified.” The parent of brands such as Birds Eye, Duncan Hines, Hunt’s, Orville Redenbacher’s and Slim Jim also reported that its customers are buying less food to stretch their budgets.
“[W]hile we did lose share in the quarter, as price gaps have stayed wider for longer than we would have liked, we are managing the business for the long term and still generated mid-single-digit top-line growth within the range of what we expected,” Chief Executive Miguel Patricio said.
The company, parent to brands including Kraft Mac and Cheese, Heinz Ketchup, Jell-O and Lunchables, indicated on the post-earnings conference call with analysts that rather than increasing discounting, or just cutting prices, it will remain focused on protecting margins, which has been allowing it to accelerate investment in the business, particularly in marketing, research and development and technology.
Besides, as Chief Financial Officer Andre Maciel said, the gaps between Kraft’s prices and those of competitors are not getting worse. “If anything, they are slightly getting better,” Maciel said, according to an AlphaSense transcript.
Considering the market-share losses and with inflation coming down, “do you think you took too much price, given you said you took price ahead of competitors, and they have not followed?” UBS analyst Cody Ross asked on the conference call.
CEO Miguel Patricio’s answer was simple: “No.”
“I mean, we had very high inflation. And we are leaders in the vast majority of categories where we play. And it’s our role as leader to try to compensate … this inflation with price increases,” Patricio said. “So I would do everything again. I mean we can always go back on price if we think we have to or when we have to. But we had to lead price increases.”
All of that leaves families to foot the bill for higher food prices, said Accountable.US’s Zelnick.
The Consumer Staples Select Sector SPDR exchange-traded fund XLP
has gained 1.2% in the year to date, while the SPDR S&P Retail ETF XRT
has gained 10.3%. The S&P 500 XRT
has gained 17%.
The Institute for Supply Management’s manufacturing index is due for release Tuesday, which outside of inflationary periods (i.e., now), tends to be one of the more important economic indicators for financial markets, given its record as a bellwether.
ISM manufacturing data during the current rate-hike cycle (in red) has lagged other periods.
Even compared to other rate-hike cycles, the ISM manufacturing series has been one of the worst in history, points out Jason Daw, head of North America rates strategy at RBC Dominion Securities. Daw makes the case that the U.S. economy overall is not very strong for this period of the cycle, and the manufacturing data, not just ISM but also industrial production, has been particularly feeble.
But the call of the day comes from JPMorgan’s economic team. They note that while global manufacturing stalled in the first half, the non-manufacturing components rose at a 3.2% annualized rate, allowing the global economy to grow at an above trend 2.7% rate.
The team led by Bruce Kasman say that the typical channels through which weak manufacturing would bring down the broader economy haven’t materialized. “A major channel by which weakness in goods sectors broadens out is through depressing corporate income and pricing power. While our start-of-year outlook anticipated elevated wage gains to pressure corporate profits, the surprising strength in [first-half] global GDP was accompanied by upside surprises to inflation,” they say. In turn, there have been solid gains in both labor income and profits, and while margins have come off their peaks, they are well above pre-pandemic levels.
Business hiring, they add, is the ultimate signal of confidence, and employment growth has continued even though expectations have soured.
Now, say the JPMorgan team, the stage is set for a goods sector recovery. Labor income, when adjusted for inflation, is rising, while finished goods inflation is falling sharply.
Also, business capital spending continues to expand, particularly in emerging economies outside of China. And importantly, inventories are swinging from a drag to a lift. In the first half, the step down in the pace of stock building depressed global industrial production by 3.4 percentage points.
“Even if the pace of stockbuilding was only to level off, the impulse to global industry would be material. Add to that a potential desire to align the pace to firming demand growth and the boost could generate a jump in factory output in the coming months,” they say.
Finally, they note, the tech spending decline after the 2020 to 2021 surge looks to be ending, and global motor vehicle production is picking up as supply-chain bottlenecks ease.
The markets
After an okay finish for the S&P 500 SPX, -0.29%
to a strong July, U.S. stock futures ES00, -0.36%
NQ00, -0.42%
were a bit lower as the seasonally weak month of August commenced. Gold futures GC00, -1.28%
were trading below $2,000 an ounce. The dollar DXY, +0.42%
rose.
The ISM report is due out at 10 a.m. Eastern, when the job openings and construction spending reports also come out. Monthly auto sales also will be released throughout the day.
The inflation-adjusted equity premium is looking pretty bleak. That’s calculated by taking the expected return to the S&P 500 and subtracting 10-year TIPS yields. “While admittedly this graphic is skewed by the few megacaps trading at huge multiples, it’s sobering nonetheless,” says Michael Ashton, better known as the Inflation Guy.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.
I’ve lived in the city for the last four decades, but I’ve mostly been renting. My priorities are a three-bedroom apartment with easy access to grocery stores and the subway in a nice, quiet neighborhood.
But housing prices are insane in New York City. I want a house, but my partner is looking at a co-op. And for my price range of $700,000, the best options I can find are co-ops.
I plan to buy the home and live in it, and am not looking to rent it out in the foreseeable future. The home is for my family of four.
So my question is this: Is a co-op a good idea?
New York Native
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear New Yorker,
For those unfamiliar with what a co-op is, it’s short for housing cooperative. A cooperative is a legal group that owns one or more residential buildings, and the residents are members of it. The cooperative can comprise apartments, but it can also be made up of single-family homes. Residents who purchase a co-op unit don’t own the unit itself and have a share in the common areas. Instead, they’re purchasing a share of the overall property, and that share gives them the right to live in a specific unit.
When you look for homes, you may find that co-operative apartments are cheaper than comparable condominium units in the same city, or than single-family homes. And with the median home price in Manhattan being $1.2 million, according to Douglas Elliman, a co-op apartment for $700,000, if you find one, may sound like a good deal.
But, as you already know, for a three-bedroom, you’ll be quickly priced out of Manhattan. The real-estate brokerage said that a three-bedroom co-op apartment on the island would run about $2.23 million. And only 12% of co-op sales were three-bedroom apartments, versus 38% for one-bedrooms.
You will find deals further out. In Queens, Douglas Elliman said, the median price of a condo unit was about $720,000 in the second quarter of this year, and a co-op apartment cost roughly $310,000.
But there are drawbacks that you should consider, if you haven’t already.
First of all, you don’t technically own your co-op apartment as you would own an apartment in a condominium. Co-ops also charge you fees, which can run $4,000 a month, as Streeteasy observes, depending on the size of the unit, and so on. Applying for co-op ownership can be a painful process. Renting them out (if you can do that at all) will be hard, since the renter will have to go through the co-op board.
Selling is similarly tough, as the prospective buyer needs to be approved by the board. A board can require that a buyer put a lot of money up front, as Curbed explains. Ultimately, you may end up with less equity over time as experts say co-ops don’t typically appreciate at the same pace as condominium units or single-family houses or town houses.
Co-ops are also very “secretive,” as the Guardian put it, with little transparency into how boards make their decisions about potential buyers and renters. According to data from the New York City Department of Housing Preservation and Development, there were 3.6 million housing units as of 2021, out of which 832,000 were in a condominium or a co-op.
That being said, co-ops aren’t all that bad.
The important thing to remember is if you’re just looking for an affordable place to live with your family, the numbers may very well make sense.
Co-op apartments are priced lower than units in condominiums, as already mentioned, so you’re still able to find good options with easy access to the subway and other urban amenities. You can stop dealing with rent hikes from your landlord and have a property to call your own. And, ultimately, you also live in a building with many long-term tenants versus living among neighbors who change every year. There can also be a greater sense of community in a co-op vs. a condominium as co-op residents may tend to change less frequently.
So you have to weigh the pros and cons. If you’re looking for a more affordable entry into New York City real estate, and have the stomach to navigate the co-op process, then, by all means, apply for that apartment your wife liked.
Bottom line: Just be sure you won’t want to move in a couple of years from now because you likely won’t be able to rent it out for long, if at all.
By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
