November 10, 2024
What You Need to Know Today:
September jobs report good news for the economy
The U.S. economy added 254,000 jobs in September, the most in six months. The unemployment rate fell to 4.1% and hourly earnings increased 4% from a year earlier, according to Bureau of Labor Statistics. Strong data is reassuring investors worried that the Federal Reserve had moved too slowly to cut interest rates and that the economy was headed toward a slump.
Japan taketh away and Japan giveth–today’s rally in Tokyo wipes out most of yesterday’s loss
Today, Tuesday August 6, the Nikkei 225 index closed up 10.23% in Tokyo. That erased most of Mondyay’s 12% loss. And it led to the U.S. futures market opening higher and U.S. stock indexes moving up today. At the close in New York, the Standard & Poor’s 500 was ahead by 1.03%, and the Dow Jones Industrial Average was higher by 0.76%. The NASDAQ Composite had gained 1.03% and the small cap Russell 2000 had added 1.23%.The volatility eertainly isn’t over but today the market is following the usual patterns–with buying on the drop emerging after a big sell off–and that’s a big relief after the panic-inducing movement of the last three sessions. Those on Wall Street trying to figure out where we are in the unwinding of the yen/dollar carry trade that has lent so much intensity of the drop ay that the selling of dollar assets to buy ten isn’t over. Which makes sense.
Could the stock correction be all about Japan? And close to an end?
Okay, the correction in the NASDAQ and the near correction in the Standard & Poor’s 500 isn’t all about Japan. U.S. stock valuations are stretched. Air is coming out of the AI bubble. The U.S. economy is slowing But to me those factors don’t explain the stunning rapidity of this drop. Nor why the biggest damage to any global market is taking place in Tokyo. To me this event has all the hallmarks of a move that has more to do with the unwinding of massive speculative trades than with anything we might label “fundamentals” or “macro economics.”Edward Yardeni, president of Yardeni Research and one of the smartest long-time observers of the financial markets I follow, points his finger at Japan and the surprise interest rate increase from the Bank of Japan that has led to a rapid unwinding of the speculative dollar/yen carry trade.
Saturday Night Quarterback says (on aMonday morning), for the weeks ahead expect…
Yeah, I know you can read a calendar, but take a moment to think about how the extraordinary August economic news vacuum feeds into the current market plunge. No Federal Reserve meeting in August so no interest rate cut until September 18. Which also means no new economic projections from the Fed on GDP growth or the likelihood of recession. No Fed Speak at all, really, with reassurance that the economy is slowing but not headed for recession, until the August 22-24 central bank gab fest in Jackson Hole. No significant earnings news–big enough to affect sentiment at least–until Nvidia’s (NVDA) earnings on August 28.
Weak July jobs report, tick up in unemployment rate send stocks tumbling on recession fears
The U.S.economy added only 114,000 jobs in July. Economists surveyed by Bloomberg had projected an increase of 175,000 jobs in the month. The unemployment rate unexpectedly climbed by 0.2 percentage points to 4.3% in July, exceeding all 69 estimates by economists. Average hourly earnings rose 0.2% on a monthly basis, also less than forecast, and on an annual rate increased by 3.6%–the least since May 2021. The jump in the unemployment rate triggered the Sahm Rule. Coined by former Federal Reserve economist Claudia Sahm, the rule says that when the average jobless rate over three months is 0.5 percentage point above the 12-month low, a recession is coming. And that’s exactly where we are now. “We’re not headed in a good direction,” Sahm said on Bloomberg Radio Friday. It’s fair to say the stocks weren’t happy on Friday.
Stock indexes fall hard on data saying U.S. manufacturing contracted in July
The latest report on the ISM manufacturing index came in at 46.8 for July, lower than expected and down 1.7 points from the 48.5 recorded in June. (In this index ny reading below 50 indicates contraction in the sector.) That sign of contraction fueled fears that the Federal Reserve may have waited too long to cut interest rates–a rate cut seems to be in the cards for the central bank’s September meeting–and that the U.S. economy is in danger of slipping into recession. The stock market tumbled Thursday. The Dow Jones Industrial Average fell almost 500 points, or about 1.2%. The S&P 500 dropped about 75 points, or almost 1.4%, while the tech-heavy Nasdaq composite index was down more than 400 points, or about 2.3%. Money flowed into bonds: The 10-year Treasury yield fell below 4% for the first time since February.
Special Report: It’s a new world for dividend income investors: 3 trends (all now posted) and 10 picks (all first now posted PFE, BEPC, NKE, EQNR, V, HON, T, VZ, RTX, ABBV)
Let’s say you’re a dividend income investor. You need cash income in retirement. Or you want your portfolio to generate cash now so you can invest in new opportunities. Or you just want the extra safety and lower risk that owning a stock with a substantial dividend can bring. Whatever your reasons–and I can think of a lot more–this is a particularly challenging financial market for dividend income investors.But I do think there are strategies dividend income investors can successfully pursue even in this challenging market. In the rest of this Special Report I’m going to explain the three ways I think you should be thinking about dividend income investing in this market. And then I’m going to give you 10 dividend stocks that I think are especially well-suited to producing income (and price appreciation, which is always nice even if you’re an income investor) in this market environment. First pick just posted–Pfizer
Live Market Report (20 minute delay)
Oil rally is over–pending any explosion in the Middle East
Oil prices fell again on Wednesday, November 8. West Texas Intermediate, the U.S. benchmark, lost another 2.30% to $75.59 a barrel. International benchmark Brent dropped 2.19% to $79.82 a barrel. The cause? A drop in China's exports that fueled fears that demand from...
A good auction for Treasuries sends 10-year yield to 4.51% today
Stocks had a mixed close today, November 8. The Standard & Poor’s 500 was up just 0.03% and the NASDAQ Composite actually fell by 0.05%. The small-cap Russell 200 lost 1.17% as small company stocks continue to send a warning sign about the economy and bond yields. I think it would have been much worse without a strong action for 10-year Treasuries today A successful auction–lots of demand at lower yields–of $40 billion in 10-year notes took the yield on the 10-year Treasury down 6 basis points to 4.51%.
What a surprise! Consumers are in debt trouble
Credit card debt surged again during the third quarter and so did the number of people missing payments, according to data released today, November 7, by the Federal reserve Bank of New York. Credit card balances rose by $48 billion in the third quarter to a record high of $1.08 trillion The $154 billion year-over-year gain in debt was the largest such increase since of this beginning of this data in 1999.
Does the red for the Russell 2000 tell us something about the duration of this rally?
The small-cap Russell 2000 fell today by 1.29% at the close. All the other major indexes were up: the Standard & Poor; 500 gained 0.18%; the Dow Jones Industrial Average added 0.10%; the NASDAQ Composite tacked on 0.30%; and the NASDAQ 100 climbed 0.37%. I find this “interesting.” That’s “interesting” as in “watch out” and not “interesting” as in “I’m buying this rally.”
Are financial markets getting interest rates wrong again?
The financial markets continue to swing from extreme to extreme in sentiment. The markets were wrong at the beginning of last week. It’s likely the markets are wrong again.
Saturday Night Quarterback says, For the week ahead expect…
Nothing this week from new House Speaker Mike Johnson suggests that Congress will act in time to prevent a U.S. government shutdown on November 17.
The small-cap Russell 2000 is up 8.5% in a week–time to go short
On Monday, I will add to my short position in the small-cap Russell 2000 by buying more of the ProShares Short Russell 2000 ETF (RWM) for my Jubak Picks Portfolio. This buy will give me two positions in the ProShares Short Russell ETF. The first position, added to the portfolio on July 23, 2023 is up 0.08% as of the close on November 3. Why go all in on shorting the Russell now?
All it took was a weak jobs report and stocks are off to the races
The U.S. economy added “only” 150,000 jobs in October, the Bureau of Labor Statistics announced this morning, November 3. Economists had projected that the economy would add 180,000 jobs for the month. The unemployment rate climbed slightly to 3.9% from 3.8%, And the government statisticians revised September’s shocking 336,000 job increase the month down to 297,000 and revisions to the August and September totals took 101,000 jobs out of the totals for those to months. The Wall Street conclusion: The Fed has done its job and the economy has slowed.
Apple revenue falls again, warns holiday quarter will be flat
So let’s see how the market takes this tomorrow.
Today stocks staged an impressive upside more. The Standard & Poor’s 500 closed up 1.89% and the NASDAQ Composite ended the day 1.78% higher. The small cap Russell 2000 was the day’s best performer with a win of 2.67% Tomorrow? Well, the October jobs report released at 8:30 will certainly help set the tone for the day with a weak report likely to reinforce the belief that the Federal Reserve is done aiding interest rates. But given how much of the recent bounce has been fueled by a return of optimism about technology stocks, it’s likely that Apple’s disappointing results, announced after the close of trading today, Thursday, November 2, will determine the direction of the trend.
The biggest good news from Barrick Gold’s earnings aren’t the earnings
Yesterday, Thursday, November 2, Barrick Gold (GOLD) reported earnings of 24 cents a share for the company’s this quarter. That was ahead of the 21 cents a share consensus estimate among Wall Street analysts. In the third quarter of quarter of 2022, the company reported earnings of 13 cents a share. The surprise was the fourth for Barrack in the last four quarters. But to me other news overshadowed the earnings themselves.
Are you glad that the stock market correction is all over? So why am I buying more VIX Call Options?
Whew. Glad that’s done with. No more worries about rising interest rates or higher bond yields. No more fretting over lower earnings and revenue guidance for the fourth quarter and 2024. No more nightmares about a wider Middle East war. Or a government shutdown on November 17. Or…
Well, you get the idea.
I don’t think any of these things are behind us. The rally of the last day and a half–I’m writing this at 1 p.m. Nw work time on Thursday–is a product of a little bit of possible good news from the Fed and from the U.S. Treasury (on a small reduction in the size of the next Treasury auction) and a temporarily oversold market resulting from a lot of bad days in a row. I’m not saying this is just a dead cat bounce (you know the image–even dead cats bounce, but they don’t bounce far). Good news from Apple (AAPL) on earning and revenue after the close today. And tomorrow’s jobs report for October could be weak enough to keep the “Fed is done” narrative going without being so weak that it resurrects fears of an economic slowdown.
Federal Reserve holds rates steady as expected, so why did 10-year yields fall 18 basis points?
Certainly, it wasn’t any surprise that at today’s meeting the Federal Reserve decided to keep its policy rate steady at 5.25% to 5.50%. Going into the meeting the CME FedWatch tool put the odds of the Fed standing pat on rates at close to 100%. So why then the huge rally in the 10-year Treasury that pushed yields down 18 basis points on the day to 4.76%?
We are rightly skeptical of all of China’s economic data–but we KNOW the unemployment figures are cooked
Anyone who has followed China’s economy or invested in the country’s stocks is righty skeptical of all of the country’s economic data. The GDP growth numbers, for example, always seem to come in near target even when other measures show that the economy has hit a pothole. But right now, when the country faces a huge employment crisis and millions of migrant workers have no jobs and no safety net and millions of recent college graduates can’t find work, we know that the official numbers are a crock of chicken manure. And how do we know this? Because the Chinese government tells us so.
Not quite as bad as expected–Treasury increases its bond sales to just $112 billion and not the $114 billion feared
I guess it’s good news. Today the U.S. Treasury Department said it will slow the pace of increases in its longer-dated debt auctions in the November 2023 to January 2024 quarter to just $112 billion in the next auction, up from $103 billion. Primary dealers surveyed by Bloomberg had expected an increase to $114 billion in next week’s quarterly refunding.
And don’t forget Friday’s report on October jobs–will we get another surprise?
The “experts” expect that the Labor Department’s employment situation report on Friday, November 3, will show that the U.S. economy added 190,000 jobs in October. That would be a big drop from the 336,000 jobs added in September. But remember that these experts were projecting that the economy would add just 170,000 jobs before the September report.
The “other” big interest rate news tomorrow: How big will the Treasury’s bond auctions be?
The Federal Reserve will announce its interest rate decision on Wednesday–the market currently expects no change to policy interest rates. But I’d argue that the bigger news on internet rates for the day will come when the Treasury announces how many notes and bonds it intends to sell in auctions from November through January. Right now, it looks to me like the bond market is driving interest rates rather than the Fed so the number of bonds Treasury needs to sell is likely to set interest rate trends for the next few weeks. Bloomberg’s survey of Wall Street primary bond dealers shows that the consensus projection for the quarterly refunding sales announcement—including 3-, 10- and 30-year Treasuries— is for a $114 billion total, up from the $103 billion total three months ago.
Step #8 in my Special Report: Sell DE, CAT and BHP tomorrow
Today I posted Step #8 in my Special Report: 8 Steps to Protect Your Portfolio from the Global Debt Bomb. I recommended selling Deere (DE), Caterpillar (CAT), and BHP Group (BHP) out of portfolios ahead of rising yields i the bond market. (In the case of Deere, I said I would keep my position in my long-term portfolio but sell the position in my 12-18 month portfolio.) Here’s what I posted in my Special Report
Step #7 in my Special Report: Sell GM and Ford sometime between now and December
I added Step #7 to my Special report: 8 Steps to Protect Your Portfolio from the Global Debt Bomb today. And my advice is to sell Ford and General Motors sometime between now and before the December 13 meeting of the Federal Reserve. Here’s what I wrote in that Special Report.
I’ve added the last 2 steps to my Special Report “8 Steps to Protect Against the Global Debt Bomb”
This morning I added Step #7 and Step #8 to my Special Report on how to protect your portfolio agains the coming global debt bomb. And I promised Step #9 on what to sell in the technology sector by the end of this week.
Saturday Night Quarterback says, For the week ahead expect…
To catch you up in case your eyeballs have been focused elsewhere (and there’s certainly a lot of elsewhere to watch right now). First, the Russell 2000 broke below its July high. Then the NASDAQ Composite followed (down 12.2% from the July 31 high at the close on October 26.) Then the NASDAQ 100 joined in (down 10.9% as of the close on October 26.) And finally on Friday, October 27, the Big Daddy, the Standard & Poor’s 500 extended its slide from its July high to 10%. All thee indexes are now in correction. (Defined as a drop of 10% or more from the previous high.) The index and correction that worries me the most? The NASDAQ 100.
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