Americans aren't spending like they used to

Welcome to the second-to-last edition of Opening Bell. I'm Phil Rosen, writing to you from the Big Apple.

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Now let's find out what the luxury watch market says about the economy.

1. The talk of the town among economists is that the American consumer is stumbling after months of surprising resilience.

Spending has remained elevated even through the Fed's 10 straight rate hikes, but warning signs of a change have started to surface. Just look at the luxury watch market.

Demand has fallen off a cliff, and on secondary markets, prices for iconic brands like Rolex, Patek Pilippe, and Audemars Piguet have plunged near two-year lows, Bloomberg data shows.

Don't get me wrong, the going price for an Audemars Piguet is still above $71,000. But that's down 35% from last year.

When even the wealthiest spenders start to taper purchases, it's usually not a good sign for the broader economy.

Inflation in the US has cooled from a historic 9% last year to about 4% in May, but it's taken a dramatic increase in borrowing costs to get there.

The Fed's goal is to hit 2% inflation, but Jerome Powell said yesterday that he doesn't expect to get there until 2025.

Bank of America CEO Brian Moynihan said his firm's data shows consumers across the board have pulled back spending, which points to an incoming recession.

And, perhaps more relevant than bank statistics or the pace of big-ticket purchases: Student loan payments are set to put even more pressure on consumers.

That's going to further take the wind out of Americans' brisk spending over the last few years.

A Morgan Stanley survey found that 34% of individuals won't be able to complete the payments at all once they resume in October, while many more said they'd have to adjust spending in other areas.

"Overall, the majority of consumers surveyed (61%) continue to say they are likely to cut back on spending over the next six months," Morgan Stanley said.

How have your spending habits changed compared to one year ago? Tweet me (@philrosenn) or email me ([email protected]) to let me know.

In other news:

2. US stock futures rise early Thursday, as investors await Powell's comments from a conference in Madrid, where he will meet with Bank of Spain Governor Pablo Hernández de Cos. Meanwhile, the Fed said 23 of the biggest US banks weathered a severe recession scenario in a stress test. Check out the latest market moves.

3. Earnings on deck: Nike, Paychex, and more, all reporting.

4. Wall Street titans are sounding off on the AI boom. From David Rosenberg to Rob Arnott, experts are sharing what the disruptive technology can mean for the economy, jobs, and stock market. Full details.

5. The housing market is so unaffordable right now that a record share of homebuyers are looking to relocate. Redfin data shows one-quarter of house hunters are looking to move to a cheaper city like Phoenix or Miami, up from about 20% before the pandemic — and many are shrugging off concerns about rising natural disaster risks.

6. The biggest companies and banks can't agree on where the stock market is heading next. Indexes have had a strong start to the year, but bearish forecasters are concerned about a weakening consumer. The bulls, meanwhile, say falling inflation bodes well for equities.

7. Forget AI — two of the S&P 500's best-performing stocks in 2023 are cruise lines. Royal Caribbean and Carnival are rubbing shoulders with Nvidia, Tesla, and Meta this year. Here's why.

8. This former waitress who once lived paycheck-to-paycheck now owns 35 rental units. She broke down the two best principles she followed to achieve financial independence.

9. Stocks have rallied to new levels recently but bargains are still available. Morningstar analysts said there are certain high-quality picks that look cheap still — here's their list of 10 names.

10. The Russell 2000 should be able to beat the S&P 500 if it can overcome these key headwinds. The small-caps index should climb by 14% over the next 12 months, according to Goldman Sachs. That would surpass the projected 9% gain for the S&P 500.

Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email [email protected].

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.