Following a strong March where consumers ramped up purchases in advance of tariff-induced price hikes, retail sales plunged in April to 0.1%, well below expectations of 0.4%. Combined with UNH’s 10%+ downdraft following news of a criminal probe, futures are off moderately this morning.
Even Walmart is warning of a weakening consumer and risks posed by prices elevated by Trump’s tariffs.
“The higher tariffs will result in higher prices,” CEO Doug McMillon.
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When asked why he robbed banks, bank robber Willie Sutton is reported to have replied “Because that’s where the money is.” This week, we’ve seen a spectacular bout of deal making and gift giving in Saudi Arabia that would make Mr. Sutton blush.
Futures are up modestly as ES tags its .786 Fibonacci retracement.
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CPI came in at 0.2% MoM and 2.3% YoY, a little lighter than expected – but, only because most tariff price hikes hadn’t worked their way into the official print just yet. There’s very little chance, for instance, that new vehicle price increases will remain tame unless tariffs are eliminated altogether.
The biggest contributor to lower inflation remains oil and gas, which registered double digit declines. Unfortunately, the 12% YoY decline in retail gas prices has likely bottomed out unless CL and RB continue to fall. At current prices, the YoY delta will be back to flat – removing a key source of falling inflation rates.
Futures are marginally lower after an initial bump on the news.
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Trump blinked again, this time with China. The postponement of huge tariffs has sent futures soaring – right up to the 200-day moving average. Tariffs on Chinese imports will still be 30%, more than enough to eliminate the profit margin for many US retailers.
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Yesterday was a bust. About 30 minutes before I needed to leave for the airport, I had one of those kidney stone attacks that had me doubled over in pain. All I can say is thank goodness for pain killers.
While I made my plane, I wasn’t able to post at all. This morning, with the pain level more tolerable, I’ll catch everyone up on our charts.
Futures continue to be all over the map, buffeted by rumors of trade deals done and trade deals stuck. Currently, they’re up slightly.
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Due to some last minute travel plans, today’s analysis will be posted after 3pm ET. Thanks for your understanding.
No one really expects the FOMC to change interest rates, but a great deal of attention will be paid to Powell’s comments, if any, on the impact tariffs will have on the economy and the Fed’s policy.
The overnight ramp job is ebbing, with futures currently about 10 points higher.
Our charts turned bearish almost a week ago, though there has been less clarity on the extent of a pullback.
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Futures are off almost 1% in advance of tomorrow’s FOMC announcement and press conference.
While traders are nearly unanimous that there won’t be a rate cut tomorrow, there is less certainty as to how explicit Powell’s comments on the impact of tariffs will be. Many corporations are forecasting significant declines in earnings or pulling their forecasts all together.
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While the SPX was oversold at its April lows, there was a reason for the selloff. That reason, Trump’s disastrous trade war, is still with us. Yet, the market is back to where it was when the tariffs were announced after nine straight daily gains, the longest winning streak in more than 20 years.
Friday’s rally was especially dubious as it was based, in our opinion, on falsified employment data. We’ll get ISM services data (watch the employment component, which fell from 52.1 in Feb to 46.2 in Mar) and an FOMC meeting and rate decision this week. We’ll soon see whether or not the rally’s longevity is warranted.
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I’ll admit it, I’m pissed. I don’t often hop on my digital soapbox, but after this morning’s outrageous jobs report it’s just too hard to keep it to myself.
I’ve taken the opportunity to speak to numerous business owners over the past month about their reaction to Trump’s tariff nonsense. They have uniformly been extremely negative, with many wondering if they’ll be able to stay in business when tariffs erase their already slim profit margins.
So, it’s surprise that virtually all of the hiring surveys since tariffs were announced have looked like this.
It was therefore quite shocking to see the Bureau of Labor Statistics, a division of the Department of Labor, release a jobs report that was much more positive than virtually anyone on Wall Street or in academia had forecast.
It so shocked the markets that futures soared up to new highs despite very disappointing earnings outlooks from both AAPL and AMZN after the close yesterday. Truly a WTF moment, until you think back to January 25.
Trump was inaugurated on Jan 20. Five days later, in one of his first acts as president, Trump fired multiple inspectors general via Friday night emails. These are the people who are supposed to ensure that the government plays by the rules. The person who oversaw the Department of Labor and thus the BLS was this guy.
Thus, the person who might have raised the alarm about DOGE’s chainsaw firings, labor related crimes, or, say, artificially inflating the jobs numbers, was dismissed. Never mind that he had an exemplary military and civilian career, succeeding Scott Dahl who was forced out in 2020 after warning Congress about massive fraud related to the pandemic handouts during Trump’s first presidency.
But, hey, all’s fair in love and politics – a world where the veracity of economic data just became more questionable than ever. The irony is that even if this data were true, which it is definitely not, it would suggest that the economy is doing just fine and that inflation is a more serious concern than employment. It’s the sort of scenario that would suggest the Fed not cut interest rates.
Naturally, Trump renewed his criticism of the Fed for not cutting rates.
Why would anyone be pissed about this? After all, a rising stock market is great for the country – or at least stockholders. But, a market that relies on falsified data is not a legitimate market at all. Such illegitimate markets seriously distort the feedback loop determining hiring and capital allocation. It also moves us that much closer to the kind of banana republic BS that the US used to oppose.
For example, a business owner who relies on the bullish message the market is sending might be inclined to expand their workforce or operations as the economy is entering a recession – thus compounding the negative impacts to his business and increasing the risk that the recession is even worse.
A market which is easily manipulated is also, obviously, going to be more frequently manipulated – enabling those at the controls to bend it to their own purposes instead of serving the intended purpose of markets – to facilitate the exchange of financial assets on a free and fair basis.
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