Morning Briefing
September 13, 2022 | Daily JAM, Morning Briefing |
Stocks plunged today as the Consumer Price Index inflation measure came in above economist expectations and market hopes.
Headline CPI inflation ran at an 8.3% annual rate in August. That was down from the 8.5% annual rate in July and the 9.1% annual rate in June. But above the 8.1% annual rate forecast by economists.
On the news, stocks fell steeply with the Standard & Poor’s 500 down 4.32% for the day and the Dow Jones Industrial Average off 3.94%. The NASDA Composite fell 5.16% and the NASDAQ 100 plummeted y 5.54%. The small-cap Russell 2000 was down 3.91%. I think that within a few days the reaction is likely to strike investors as excessive. The trend in inflation did still point down and it increasingly looks like June’s 9.1% in the peak. And while the hotter-than-expected inflation rate did just about guarantee that the Federal Reserve will raise interest rates by 75 basis when it meets on Wednesday, September 21, most of Wall Street had already concluded that a 75 basis-point move was locked in. So what’s the hubbub, Bub?
September 9, 2022 | Daily JAM, Morning Briefing |
According to the CME Fed Watch Tool, which calculates the odds of a Fed move in interest rates by looking at prices in the Fed Funds Futures market, the odds of a 75 basis point interest rate increase by the Federal Reserve at its September 21 meeting have climbed to 90%. The odds were 87% yesterday and just 68% a month ago on August 9.
And what does the market expect after that? 50 basis points higher at the November 2 meeting (83% odds) and 66.5% odds that interest rates will finish the year at 3.75 to 4.00% after the December 14 meeting. After that though, the picture gets murky. And that murkiness is the reason, in my opinion, for another Bear market rally to end 2022.
September 8, 2022 | Daily JAM, Morning Briefing |
Today, September 9, the European Central Bank raised its key interest rates by an unprecedented 75 basis points and central bank officials said they were prepared to deliver another jumbo interest-rate increase at their October meeting.
Today’s 75 basis point move is unprecedented for the usually very slow-moving and conservation ECB. A second 75 basis-point move would be, what? super-unprecedented. The willingness of the European Central Bank to advance a big interest rate increase as the slowing EuroZone economy faces the very real possibility of a recession due to soaring energy costs and uncertain supplies gives the U.S. Federal Reserve more policy cover for a 75 basis-point increase when it meets on September 21.
September 7, 2022 | Daily JAM, Morning Briefing |
Even though today global stocks rose to put an end to their longest losing streak since 2011–with eight straight down days through Tuesday–Goldman Sachs strategists are warning that there’s more selling ahead. In its note to clients Goldman Sachs called the July move a “bear market rally.” Strategists said “Its duration and magnitude were not unusual relative to the experience of previous decades. We expect further weakness and bumpy markets before a decisive trough is established.”
September 6, 2022 | Daily JAM, Morning Briefing |
I hope that President Joe Biden got a T-shirt on his August trip to Saudi Arabia. You know one that says “I went to Saudi Arabia and all I got was this lousy T-shirt.” Because the U.S. President sure didn’t get a surge in OPEC oil production. In September the oil cartel plus Russia agreed on a piddling 100,000 barrel a day increase in production in response to pleas from President Biden and other Western leaders to an increase in oil production to combat soaring energy proved. On Sunday, OPEC took back that entire increase
September 2, 2022 | Daily JAM, Morning Briefing |
The U.S. economy added 315,000 jobs in August. Economists had projected that the economy would add 300,000 jobs. The unemployment rate rose to 3.7% from 3.5% as more workers entered the workforce. The labor participation rate rose in August to 62.4 $ from 62.1% in July. That’s till 1 percentage point below the labor force participation rate in February 2020, before the Pandemic. That took the official unemployment rate up to 3.7% from 3.5% in August. Out-of-the-box financial markets saw these numbers as likely to convince the Federal Reserve to raise interest rates by just 50 basis points at its September 21 meeting instead of the 75 basis points expected by the majority of investors before today’s data. In early trading the Standard & Poor’s 500 was up by as much as 1.3%.
August 31, 2022 | Daily JAM, Morning Briefing |
The stock market still hasn’t completely accepted the likelihood of a recession forced by the Federal Reserve’s interest rate increases. And there’s still optimism about interest rate cuts in the second half of 2023. But I sense that the market consensus is moving on from the hopes for a soft landing–where higher interest rates slow the economy and whip inflation without causing a recession–to what Bloomberg today called a “growth recession.”
August 31, 2022 | Daily JAM, Morning Briefing |
With all due apologies to T.S. Eliot, when it comes to stocks, April isn’t the cruelest month. That title goes, hands down, to September. Which my calendar says starts tomorrow. September is, on average, the worst-performing month for stocks
August 30, 2022 | Daily JAM, Morning Briefing |
Today’s JOLTS report–Job Openings and Labor Turnover Survey–from the Department of Labor showed the number of available jobs climbing in July to 11.2 million. That’s up from a revised 11 million openings in June. Economists had expected a decline in the number of job openings to 10.4 million for the month. The surprising increase in job openings shows that the labor market continues to be extremely tight. The Federal Reserve has tagged labor market conditions as a key indicator that it is watching as it sets interest rates.
August 29, 2022 | Daily JAM, Morning Briefing |
Financial markets are fixated on the risk from the Federal Reserve’s interest rate increases. But that means the markets are overlooking the risk posed by the Fed’s efforts to reduce the size of its balance sheet.
August 28, 2022 | Daily JAM, Jubak Picks, Morning Briefing |
Asian traders bid down futures for Japanese stocks by almost 2% and by 1.5% for Australian stocks ahead of the Monday opening of New York markets. On Friday, after a hawkish speech on interest rates and inflation by Federal Reserve chair Jerome Powell the Standard & Poor’s 500 lost 3.37%.
August 26, 2022 | Daily JAM, Morning Briefing, UUP |
Well, that was short and direct. Especially for the Federal Reserve. In a speech of less than 10 minutes Fed chair Jerome Powell warned financial markets to expect that the central bank will keep raising interest rates and will then leave them at higher levels for some time in order to control inflation. Stocks dropped on Powell’s remarks with the S&P 500 down 2.80% at 3 p.m. New York time.
