Jobless claims came in higher than expected, notching the highest level since June. ADP came in very light: 54K versus 59K expected and 106K prior. The 10Y gapped down to the lowest level since May 1, but futures remained flat.
continued for members… (more…)
Futures are off sharply as we begin the new month amid renewed tariff uncertainty.
continued for members… (more…)
YoY Core PCE, the Fed’s preferred gauge of inflation, rose to 2.9% in July – even further away from the Fed’s 2.0% target. Everything else was in line with expectations.
Futures were already modestly lower and were little moved after the print.
continued for members… (more…)
NVDA’s outlook slightly disappointed, but it’s still growing like a weed and is taking up financial engineering. Not surprisingly, this morning’s economic data came in on target. And, tomorrow’s PCE is in the hands of the BEA which is “supervised” by Trump loyalist Howard Lutnick. Oh, and Trump’s takeover of the Fed is proceeding and practically guarantees a rate cut. What could go wrong?
continued for members… (more…)
One of our favorite equity models is based on breakouts and breakdowns in the 2s10s. Breakdowns usually suggest corrections and breakouts suggest crashes. The last time we had a significant breakout was this past Feb-Apr, which saw SPX crash 21%.
Should we worry about the breakout occurring now, with equities flirting with new highs?
continued for members… (more…)
We knew during his first term that Trump was very focused on raising stock prices. He repeatedly touted increases in the DJIA as evidence of his prowess – until, of course, the Covid crash occurred on his watch.
So, it’s no surprise that Trump’s second term has picked up where the first one left off: laser focus on increasing stock prices by whatever means are available. As we all know, lower interest rates can lead to big equity rallies capable of ignoring such trivial matters as exploding deficits and debt-to-GDP ratios.
He might have faced little resistance from the Fed had he not announced draconian, inflation-inducing tariffs at the same time he was pressing Powell to lower interest rates. Stagflation is the Fed’s greatest fear, and they would have loved to juice the economy had higher inflation not been part of the bargain.
Powell had already presided over disastrous inflation once, and he had no interest in going down that road again. He refused to buckle under and was suddenly being called an “idiot” and a “moron” by the very guy who had named him Chairman of the FOMC. His job was on the line, though Trump’s Supreme Court stated otherwise.
Since then, Trump has set his sights on other targets such as the career statistician who released jobs numbers which contradicted Trump’s claims to a fabulous economy and, now, a Fed governor who committed the cardinal sin of doing her job. The charges lobbed against her, by tweet and not any legal process, have not been adjudicated in any sense and concern matters which occurred well before her tenure as a Fed governor.
The bigger issue, of course, is that Trump won’t be satisfied until he has control over the Fed – just like he has over the Supreme Court. And, that should concern all investors who want the stock market to be an actual market and not a device by which authoritarian politicians – this or any other – to enrich themselves, punish their opponents and ensure their reelection.
Even the conservative Wall Street Journal has taken to the editorial page to vent about Trump’s tendency toward manipulation and focus on retribution, in stark contrast to his campaign rhetoric.
Don’t expect Wall Street itself to complain too loudly. The street makes much more money in rising markets than falling ones. And, no one wants to be in Trump’s crosshairs while he can enlist the full power of the Administration, Congress and the Judiciary to crush his opponents. It’s just business.
continued for members… (more…)
In the end, Powell said nothing all that consequential in Jackson Hole. The Fed still stands ready to cut interest rates if the risk of rising unemployment begins to outweigh the risk of rising inflation. It’s exactly where we’ve been for months.
It would have been nice if Powell had delved into the relative risks posed by each leg of their mandate, offered more detail re their balance sheet, or even discussed how they expect tariffs to affect inflation.
But, as the philosopher once said: “You can’t always get what you want. But if you try sometimes you might find you get what you need.”
What the algos needed was reassurance that a September rate cut was still on the table. They got it, so the market took off like a rocket.
Strangely, futures didn’t top their previous highs. In fact, they’re pulling back a bit this morning.
continued for members… (more…)
Fed Chair Powell will deliver his much anticipated speech at the Fed’s annual Jackson Hole symposium this morning. Investors will be hanging on every word, trying to get a handle on what to expect for interest rates for the remainder of the year. Opinions are all over the map as to what the Fed will do and what the Fed should do.
FWIW, we are of the opinion that the impact of tariffs has yet to be fully felt and that inflation remains a bigger threat than an economic slowdown. The latest CPI, PPI and PCE data all show things moving in the wrong direction. Common sense dictates that there’s more to come.
continued for members… (more…)
Futures are off moderately after yesterday’s volatile session that saw stocks slide over 1% at one point. All eyes remain fixed on Jerome Powell’s speech in Jackson Hole tomorrow, especially as Trump amps up his efforts to take control of the Fed.
continued for members… (more…)
