My one-hundred-and-sixty-fifth YouTube video “Trend of the Week The Fed Talks but the Market’s Not Listening” went up today. The market has strongly rallied in the last month, in good part on the optimistic belief in a “soft landing” from the Fed that controls inflation without a recession and puts an end to rate increases. The fact is, everything the Fed has said thus far indicates they plan to raise rates by an additional 1.5% in 2022 to fight inflation and that they are sticking to their 2% inflation goal in mind. When will the market start paying attention?
Buy on the rumor, sell on the news: I’m selling ChargePoint out of my Volatility Portfolio tomorrow, August 9
As I referenced in my post “What to sell and when in this Bear Market Rally,” I’m applying the old Wall Street advice of buy on the rumor and sell on the news to electric vehicle charging stocks. Specifically to ChargePoint Holdings (CHPT)Like just about any stock associated with controlling global climate change, ChargePoint soared ahead on the surprise deal that revived “green spending” in the Inflation Reduction Act of 2022. There’s money in that bill for promoting electric vehicles and for solar and wind power. (And let’s not forget big bucks for hydrogen power, too.) That bill has now passed the Senate (amazingly) and looks almost certain to pass the House of Representatives, where Speak Nancy Pelosi can, I think, be counted on to hold her slim majority together. Which means all that potential spending good news for stocks in this sector is now out there.
Finally, on Friday, August 5, in documents filed with the Securities & Exchange Commission Tesla put dates to the split its 3/1 split
Trick or trend: Anticipation of bigger interest rate increase from the Fed leads to a stronger dollar–add to dollar ETF UUP
In the last week, as odds have climbed of a 75-basis-point interest rate increase from the Federal Reserve at its September 22 meeting, the U.S. dollar has reversed its slide during the last two weeks of July.
Stands to reason. Higher U.S. interest rates make dollar-denominated assets, such as Treasuries, more attractive. More dollar buying, stronger dollar.
I expect that all eyes will be on the July CPI inflation (Consumer Price Index) report due on Wednesday, August 10, before the market open. The market hope is that we’ll see the first signs that inflation has peaked after the headline CPI inflation surged at a 9.1% annual rate in June.
I’ve seen several comments on the site asking this question. I assume we’re talking about oil stocks in the short- and medium-term. In the long term, I think it’s clear that you should be thinking about selling these out of your portfolio at a profit (of course) whenever you can. Demand for oil will fall in the long-term–defining long-term as 5 years or more–or we can all count on figuring out how to survive 120-degree (Fahrenheit) heat. Today, August 5, is a good synopsis of what’s going on with oil and oil stocks in the short- and medium-term.
My one-hundred-and-sixty-fourth YouTube video “Quick Pick Cummins Part 3” went up today. I’m returning to my pick Cummins (CMI) because the company just released strong second-quarter earnings. What caught my eye is that besides not affirming guidance for the rest of 2022, the company reported growth in gross margins and operating margins at a time when many companies are feeling squeezed.
Today’s surprise in the July jobs number–the U.S. economy added 528,000 jobs rather than the 270,000 or so economists expected is indeed a big deal. It certainly argues that any “official” recession call from economists is still a way off. And it shows an economy hot enough to result in a 75-basis-point interest rate increase from the Federal Reserve on September 22 rather than the 50 basis points that the financial markets were expecting just a couple of days ago. But there are numbers below the headlines of this report that make me wonder if the labor market–and the economy–is as hot as the headline number argues. The place to begin is the difference between the official unemployment rate and the U-6 all-in unemployment rate.
The U.S. economy added 528,000 jobs in July. The increase crushed all estimates. Economists surveyed by Bloomberg were looking for about half that gain. The Labor Department also revised June job gains upward to 398,000. The unemployment rate dipped to 3.5%, matching a five-decade low. Wages rose with average hourly earnings up 0.5% in July month to month. Annual wage growth came in at a 5.2% annual rate. That was the same rate as in June.
My one-hundred-and-sixty-third YouTube video “Jobs: the Recession Barrier Erodes” went up today. Are we in a recession or not? Many economists argue that because there’s strength in the labor market, we can’t be in a recession. But what we’re starting to see is that many companies, like Walmart (WMT), Tesla (TSLA) Warner Brothers—Discovery (WBD), Peloton (PTON), and Compass (COMP) are cutting jobs. Many of these cuts are so recent that they’re not included in official backward-looking data. The market right now is hoping for a soft landing, but these cuts lead me to think that a soft landing isn’t in the cards.
Oil falls on surprise build in U.S. inventories in spite of a shockingly small increase in production from OPEC+
As of 2 p.m. New York time today, August 3, U.S. benchmark West Texas Intermediate crude was down 3.30% to $91.30 a barrel. International benchmark Brent fell 3.07% to $97.45 a barrel.
The drop was a result of Wednesday data from the U.S. Energy Information Administration showing that U.S. crude and gasoline inventories unexpectedly rose last week. U.S. crude supplies were up 4.5 million barrels in the week ended July 29, while gasoline supplies rose 200,000 barrels. This comes at a time when gasoline inventories usually fall on high seasonal demand. This report was, for the day, more than enough to offset the announcement of a smaller than expected increase in oil production by OPEC+ of just 100,000 barrels a day for September.
Just when it looks certain that the economy is headed toward recession, services post a big pickup in July
The Purchasing Managers Index (PMI) survey for non-manufacturing (AKA services) from the Institute for Supply Management showed a surprise pickup in July. The services index rebounded to 56.7 in July from 55.3 in June, the ISM reported on Wednesday, August 3. This put an end to a string of three straight monthly drops in the index. (In this index any reading above 50 indicates expansion. Below 50 indicates contraction.) Economists polled by Reuters had forecast a decrease in the non-manufacturing PMI to 53.5. This positive surprise comes after the Monday report from the ISM that the manufacturing sector showed a drop in July.