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DOW + 41 = 18,355
SPX + 6 = 2163
NAS + 22 = 2159
10 Y + .02 = 1.55%
OIL + 1.64 = 41.15
GOLD – 5.10 = 1358.70

US services companies expanded more gradually in July, with job gains slowing in a key gauge of economic growth. The Institute for Supply Management says its non-manufacturing index fell to 55.5 in July from 56.5 in June, although any reading above 50 signals growth. New orders increased over the past month, while the index’s employment and production measures remained positive but downshifted. The ISM services index has shown growth for 78 straight months.

Friday morning, we will cover the government’s update on non-farm payrolls for July – the monthly jobs report. This morning we saw a preview (of sorts) as ADP reports private-sector hiring held steady in July, and employers added 179,000 jobs in July after a revised 176,000 job gains in the prior month. Most estimates for the Friday Jobs Report are running around 185,000 new jobs. If the labor market is able to build on its recent strength, it could make the case for the Federal Reserve to raise interest rates later this year.

Atlanta Fed President Dennis Lockhart is not ruling out a rate increase at the U.S. central bank’s next meeting in September, saying “at this point… we just have to wait and see how the data comes in.” He also expressed concern about what he called lofty asset valuations in the financial markets.

When the Fed held off hiking rates in July, equity markets surged. However, the credibility of the Fed eroded, due to their verbal chatter signaling a desire for higher rates leading up to their meeting, only to be followed by no action. The economy is not a runaway train; it is a slow moving train that has been very consistent at just chugging along. If the Fed is going to actually raise rates in September, chatter makes no difference; they are going to have to start pounding the table; and they aren’t.

Valuations in financial markets are lofty, but we aren’t seeing frothy markets. For more than two weeks, the S&P 500 has been virtually stuck in an amazing, maddening range of less than 1%. This is an almost unheard-of level of inaction.

The S&P 500 is overbought, which would normally play out in one of two ways: The market continues in a sideways consolidation where the bears balance out the bulls and put the market back into a more normal condition or we get a profit-taking pullback (where traders and investor decide to cash in on some of the profits they’ve made over the past three to four weeks). And while August is a historically volatile month, the consolidation pattern we’ve seen would argue for a breakout to the upside – again, it might be preceded by a slight pullback.

The bull stayed on track yesterday, chugging just a bit higher, once again frustrating naysayers crying “what goes up must come down.” The S&P 500 rose 0.3% to 2163.79 yesterday, which is not exactly a huge move. But markets looked very strong below the surface. The Russell 2000 was up 0.9%, showing pretty solid out-performance. We also saw a major intraday rebound in crude oil prices on today’s E.I.A. inventory report, which in turn pushed up energy stocks. And on the flip side, traders took profits in safety assets like gold, silver, and utilities stocks.

Of course, this market could jump the tracks in an instant. Bill Gross and Jeff Gundlach think so. Gross, a fund manager at Janus Capital once known as the “bond king” of Pimco, wrote in his monthly investment outlook for August, “I don’t like bonds; I don’t like most stocks; I don’t like private equity.” Gundlach, who manages more than $100 billion in assets at DoubleLine Capital, was even more direct in an interview with Reuters at the end of last week: “Sell everything.”

Although stocks have done well, with the S&P 500 recently reaching an all-time record high, Gundlach thinks equity investors are deluded. He says economic growth is weak and corporate earnings are stagnant. “The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.”

The Bank of England meets on Thursday and they are expected to cut interest rates for the first time in seven years this week, in reaction to a string of data pointing to a sharp economic downturn following the U.K.’s vote to leave the European Union. The Bank of England was expected to cut rates at its July meeting, but they did not deliver.

The July minutes referred to “preliminary signs” of a post-Brexit impact on business confidence, the bank pointed out it had no official data on economic activity to warrant a rate cut. Instead, the minutes said “most members of the committee expect monetary policy to be loosened in August,” setting the stage for action this week.

Weekly applications for U.S. home mortgages fell to their lowest level in five months even as borrowing costs declined. The Mortgage Bankers Association said its seasonally adjusted index of mortgage activity for home purchases, a leading indicator of housing sales, fell 2 percent in the week ended on July 29 to its lowest level since late February. The MBA’s seasonally adjusted gauge on refinancing applications fell 4 percent from the prior week. It reached its highest level since June 2013 in the week ended on July 8. Thirty-year loan rates hit a more than three-year low last month.

Nearly 120,000 units of digital currency bitcoin worth about $72 million was stolen from the exchange platform Bitfinex in Hong Kong, in the second-biggest security breach ever of such an exchange. Bitfinex is the world’s largest dollar-based exchange for bitcoin, and is known in the digital currency community for having deep liquidity in the U.S. dollar/bitcoin currency pair. Bitcoin prices fell sharply overnight, sliding as much as 22% to $480.

HSBC cast doubt over reaching its profitability targets after first half earnings tumbled 29% on year – just shy of expectations – due to a slowdown in its key markets of Britain and Hong Kong.

Societe Generale (SCGLF) and Credit Agricole (CRARF) beat estimates, reporting a jump in second quarter net profit helped by a gain from their stake sales in Visa Europe.

Rio Tinto (RIO) reported its weakest first-half earnings in 12 years, down 47% as iron ore and copper prices fell, but the results beat analyst forecasts. Rio Tinto also cut its interim dividend by 58% to $0.45 a share.

After the closing bell yesterday, Tesla Motors (TSLA) reported its 13th straight quarterly loss as a rise in sales of its Model S and Model X electric cars failed to make up for the huge cost of ramping up production. Tesla said its net loss widened to $293 million.

Aetna (AET) has become the last of the five major national health insurers to project a loss on Affordable Care Act plans for 2016, underscoring concerns about the stability of insurance marketplaces at the heart of Obamacare. Aetna also said it would re-evaluate its participation in the 15 state exchanges where it currently sells plans and cancel a planned expansion into more.

Wal-Mart (WMT) is in talks to buy Jet.com, a year-old online rival, as part of a multi-billion-dollar revamp of its e-commerce division aimed at boosting online sales growth. The talks were reported by the Wall Street Journal, which said Jet.com could be worth as much as $3 billion. Wal-Mart is playing catch up with Amazon.com on distribution and technology.

The acquisition could give it access to Jet.com’s innovative pricing software, its network of warehouses and customer data. For the past five years Wal-Mart has been on an acquisition spree, buying 15 startups in an attempt to bring in the talent and technology needed to drive e-commerce growth.

Without giving a reason for the delay, Toyota (TM) has postponed the global launch of its plug-in Prius gasoline hybrid model to winter. It had planned to start selling the car in Japan, North America and Europe around autumn. A spokesperson also said it would reduce initial production of the model, although output would eventually pick up according to demand.

Time Warner (TWX) has purchased a 10% stake in Hulu for about $583 million. Time Warner networks like Turner Classic Movies, Cartoon Network, CNN, TNT, and TBS will be available live and on-demand on Hulu’s new service—a service that will now be even more appealing to consumers looking to give up on their cable bundles.

The opening ceremony isn’t until Friday, but the Olympics officially kicked off at noon on Wednesday with a women’s soccer match between Sweden and South Africa. Every team in the women’s soccer competition is playing today, on what Google’s Olympic calendar refers to as “Day -2.” The men’s soccer competition begins on Thursday. Other than soccer, men’s and women’s archery are the only events that will start before the opening ceremony.

Michael Phelps, the most decorated Olympian of all time with 18 gold medals among his career haul of 22, will carry the U.S. flag in Friday’s opening ceremony of the Rio Olympics. The U.S. Olympic Committee announced that Phelps, who will be the first American male swimmer to compete at five Games, had been chosen in a vote of fellow team members to lead the delegation into the Maracana stadium.