March 10, 2025
What You Need to Know Today:
Pending home sales climb again. Is this another negative sign for 2025?
Pending sales of U.S. homes increased for a fourth month in November to the highest level since early 2023. But why? That’s the key question. If it’s because potential buyers have given up waiting for the Federal Reserve to cut interest rates further, then this “good news” is another negative indicator for 2025
Saturday Night Quarterback says (on a Sunday), For the week ahead expect…
I expect investors and traders to be looking to Friday’s PCE inflation report for confirmation of the Federal Reserve’s 50 basis-point interest rate cut and for evidence that the Fed will cut by 50 points again at its November 7 meeting.
Look at the leaders in yesterday’s strong rally: Look familiar?
It’s not just that stocks soared Thursday, September 19 with the Standard & Poor’s 500 climbing 1.7% to set its 39th record in 2024. It’s what stocks topped the leader board in the advance and what stocks lagged.
Investors add 2+2 after Fed rate cut and lower initial claims report–and stocks roar higher
The number of Americans filing new applications for unemployment benefits dropped to a four-month low last week. Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 219,000 for the week ended September 14. That’s the lowest level since the middle of May, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week. And stocks soared.
The Fed cuts by 50 basis points–don’t make too much of the dip in stocks today
The Federal Reserve lowered its benchmark interest rate by 50 basis points Wednesday. The vote for a 50 basis point cut was 11-1 with the only negative vote–for a 25 basis point cut rather than 50–the first dissent in the Jerome Powell era. The Fed’s dot plot showed a narrow majority, 10 of 19 Fed officials, favoring at least an additional half-point in rate cuts at Fed’s two remaining 2024 meetings. The Federal Open Market Committee to lower the federal funds rate to a range of 4.75% to 5%, after holding it for more than a year at its highest level in two decades. It was the Fed’s first rate cut in more than four years.
Think about gold and gold miners as two different asset classes right now
I think you want to own gold–through something like the SPDR Gold Shares ETF (GLD) right now to profit from decreasing interest rates at most of the world’s central banks, from global macro uncertainty, from the possibility of domestic violence in the United States around the election, and from what sure looks like a train wreck in U.S. fiscal policy.
In the short term. Say six to nine months–maybe even a year–from now. The SPDR Gold Shares ETF is up 24.84% for 2024 as of the September 16 close. In that same time period I think shares of gold mining companies are likely to lag the gains in gold. Shares of Barrack Gold (GOLD), the world’s second largest gold producer, are up just 15.09% in 2024.
Please note I’ve just posted an update to my Special Report: Your 10 Best Moves for the Rest of 2023
The update to my Special Report: Your 10 Best Moves for the Rest of 2023, Part 2–10 of 10 Moves (revised on 10/22) includes the last one of my 10 picks, plus updated performance numbers for the stocks in the original post.I’m pleased to say that I think the advice is still what I would give today.
Live Market Report (20 minute delay)
Special Report: 10 Picks for the Coming Recession
10 Picks for the Coming Recession. This one is especially difficult. Not only do I face the usual crystal-ball problem that comes up whenever you try to pick an investment for the future–what’s the macro and micro world going to look like in 6 months or a year from now–but I’ve got two big Recession-specific challenges. First, is there actually going to be a Recession in 2023? All the signs, in my opinion, point toward a recession in the second and third quarters, but it’s by no means guaranteed that we’ll have the two quarters of negative GDP growth that’s required by the minimal definition of a recession. And what’s the point, you might well ask, of making picks for a coming recession that never arrives? And, second, how bad will this recession be?
China’s economy is picking up speed, but not quickly enough for impatient Asian markets
China’s economy grew at a faster-than-expected pace in the first quarter. Gross domestic product grew 4.5% year-on-year in the first three months of the year, data from the National Bureau of Statistics (NBS) showed on Tuesday, faster than the 2.9% in the previous quarter. It beat analyst forecasts for a 4.0% expansion and marked the strongest growth in a year. But investors in Asian financial markets reacted with disappointment
Truly bad “possibilities” on a debt ceiling default move up in the calendar
The exact date that the federal government could run out of accounting gimmicks and actually default on the national debt is open to debate. Could be June or July or as late as December or even sometime in 2024. The estimates are all over the block. Which is one reason that the stock market isn’t pricing in this potential event. The timing largely depends on the pace of tax payments. The more the government collects and the sooner, the farther away a default would be. Now with income tax day upon us, Yahoo Finance is reporting two new studies that say a default is on the schedule for earlier than expected.
Saturday Night Quarterback says, For the week ahead…
I expect the earnings season story for the coming week to continue to be dominated by banks. But whereas last week, Friday specifically, was all about big banks, this coming week will be dominated by earnings reports from regional and smaller banks. That’s the very kind of banks that are the focus of worry about the collapse of Silicon Valley Bank and Signature Bank. We will, however, get a sprinkle of earnings reports from non-bank names just to add some spice to the week.
This won’t end quickly: Republicans to unveil demands for avoiding a debt ceiling default on U.S. credit
Next week House Speaker Kevin McCarthy will unveil a plan that would suspend the nation’s debt ceiling for a year in return for spending cuts, the rollback of Biden administration global warming initiatives, and additional work requirements for Medicaid recipients. Republicans know these demands are dead in the water in the Senate and with the White House, but they hope, I’d guess, that President Joe Biden will agree to concessions in order to avoid a U.S. default on its debt.
Buckle your seatbelts; we’re in for a bumpy ride.
The bill, which is likely to be introduced on the House floor next week, is essentially a Republican wish list of spending cuts and regulatory changes with little chance of being enacted.
Buying more VIX Call Options on Monday because this market is just too complacent
The VIX “fear index,” known more formally as the CBOE S&P 500 Volatility Index (VIX), dropped again today with a retreat of 3.60% taking the index down to a close of 17.16. The VIX, which measures the price that investors and traders are willing to pay in the options market to hedge risk on the Standard & Poor’s 500 in the next month or so, hasn’t been this low in 2022. The prior low for the VIX this year was 17.87 on February 2. You have to go back to December 27, 2021, when the index stood at 17.22 to find a roughly comparable level. With all that lurking out there in the financial world, I find the VIX at 17.16 too good to pass up.
Parse this: Good news on big bank earnings sends big bank stocks up but everything else down
It is good, maybe great news this morning from three of the country’s biggest banks. JPMorgan Chase posted a surprise 2% increase in deposits and first-quarter net income surged 49%. Wells Fargo (WFC) saw net interest income rocket by 45%. Citigroup (C) reported a 23% gain in net interest income and a 4% increase in fixed-income trading. As of 2:30 p.m. New York time JPMorgan Chase shares were up 7.33%. Wells Fargo had tacked on a small 0.05% gain. And Citigroup was up 4.88%. And all the major stock indexes were significantly in the red.
Please Watch My New YouTube video: Quick Pick Moderna
Today’s Quick Pick is Moderna (NASDAQ: MRNA). You’re familiar with Moderna as the developer of one of the RNA-Covid vaccines. The stock market has been treating the stock like the company was a one-trick pony with sales dependent totally on the demand for Covid-19 vaccines. But I think of the MRNA Covid-19 vaccine as proof of the validity of Moderna’s technology platform which takes a lot of the risk out of what is still an early-stage biotech stock. The company now has 36 other vaccines in its development pipeline using the mRNA technology that was proven effective in the Covid vaccines. Around six of those are expected to launch in the next few years. The huge jump in revenue from the Covid vaccines “shot” the stock up around 900%. (The company’s revenue was $155 million in 2018, and at the end of 2022 its revenue was $19.3 billion.) But more recently, the shares have been in a steep decline and Morningstar now calls them 40% undervalued. The stock has pulled back further in the last week or so on news that results from some trials have not been positive enough to lead to early termination of the trials. The huge revenue–and the resulting profitability–from the Covid-19 vaccines put Moderna in a unique position for such a young biotech company. They’re able to fund their own research, clinical trials, and the development of new products internally. That means the company doesn’t have to sell off a share of future profits and revenue on new drugs or vaccines in order to fund research and development. I’ll be adding the stock to my Jubak Picks portfolio tomorrow, April 14.
Fed minutes from March meeting add the central bank to Recession coming camp
Minutes from the Federal Reserve’s March 21-22 meeting show the central bank’s staff projecting a mild recession later in 2023 with a recovery from 2024 to 2025. A key reason cited by the staff: stress in the banking sector.
Please Watch My New YouTube Video: Earnings Season Blues
Today’s topic is Earnings Season Blues. We’re looking at an earnings recession. First-quarter earnings reports will start dropping Friday with the big banks reporting numbers. And the projection from Wall Street analysts is for a 6.8% year-over-year drop in earnings from the companies in the Standard & Poor’s 500. This comes on the heels of a drop of 4.6% year over year for the fourth quarter. That would mark two negative quarters in a row. The second quarter 2023 projection is another year-over-year decline of 4.6%. These drops reflect higher inflation, higher costs, and slowing demand. Interestingly, the stock market has stayed within a range since December 2022–with stock prices not really reacting to negative earnings news. The market is showing investors and traders still hope the Fed will bail out the market by cutting rates in 2023 or 2024. This hope balances out the negative news coming from earnings reports and projections. That balance could start to falter if we continue to get negative earnings (which we will), and the Fed disappoints by continuing to raise interest rates. The most recent inflation numbers show that inflation is coming down (slowly) overall, but core inflation was actually up slightly, leaving the Fed’s decision on when to stop the hikes up in the air.
Yes, falling inflation; yes, sticky inflation–today’s CPI has both
All items inflation as measured by the Consumer Price Index rose by just 0.1% in March, the Bureau of Labor Statistics reported today. That is a big drop from the 0.4% increase in February. The year-over-year all-items inflation rate fell to 5.0% in March. from 6.0% in February. Inflation is coming down and it’s coming down pretty fast, right? Well, no. The core inflation rate, which excludes energy and food prices on the theory that they are too volatile to count as “real” inflation, rose 0.4% in March after climbing 0.5% in February. The year-over-year core inflation rate rose slightly to 5.6%. So inflation is proving to be very sticky.
Selling Intel out of Jubak Picks to take profits ahead of PC sales weakness
I will sell Intel (INTC) out of my Jubak Picks Portfolio tomorrow, April 12. The position was up 14.55% as of the close on April 11 since I added it on February 8, 2023.
Please Watch My New YouTube Video: Trend of the Week Houston, We Have a Trend Problem
This week’s Trend of the Week is Houston, We Have a Trend Problem. The problem with trends is that the data is always old. There is always a lag. Inflation numbers for March will come out on April 28, jobs numbers for March came out on April 7, and GDP first quarter numbers will be in around April 27. These month-old numbers tell us where we’ve been, but we need to know where we’re going–and importantly, the speed at which we’re moving. It’s not just the trend, it’s the momentum of the trend. Inflation is undoubtedly coming down. What we don’t know is how the combination of Fed actions, a slowing economy, and the banking crisis are affecting inflation and economic growth. Currently, core inflation numbers are around 4.5%, and the Fed still wants those numbers closer to 2%, but for how long will the Fed continue to raise rates, and how close will the central bank actually get to 2%?m All that is still up in the air. At the time of filming, the consensus (56%) was that the Fed will raise rates another 25 basis points in May, and then pause. The decision is data-dependent, but the problem with that is that the data right now is all past data. The data doesn’t show real-time momentum. Forward-looking data doesn’t actually exist, but boy, would it be great if it did!
Move #5 in my Special Report: 5 Moves for the Next 5 Months
I will add this last 5 Moves for 5 months post to the end of my post of the entire Special Report today. I’m also posting it here, however, as a stand-alone so you will get notice in your email box that Move #5 has gone up. Here’s what I will post for Move #5.
Rising consumer expectations on inflation NOT good news for the Fed
U.S. households project that inflation a year from now would stand at 4.7%, versus February’s 4.2%, according to the most recent survey from the New York Federal Reserve Bank. This was the first increase in year-ahead expected inflation since October.
PC sales didn’t fall in Q1;: they plummeted with Apple leading the way down
Shipments by all PC makers slumped 29% in the first quarter to a level below that in early 2019, according to tech market analysts at IDC. Lenovo Group and Dell Technologies registered drops of more than 30%, while HP (HPQ) was down 24.2%. No major brand was spared from the slowdown, with Asustek Computer Inc. rounding out the top 5 with a 30.3% fall. But Apple (AAPL)let the plunge with personal computer shipments down by 40.5% in the first quarter.
More evidence of a credit crunch–bank lending drops
Lending by U.S. banks contracted by the most on record in the last two weeks of March, according to the Federal Reserve’s latest H.8 report. Commercial bank lending dropped nearly $105 billion in the two weeks that ended March 29, the most in Federal Reserve data back to 1973. A more than $45 billion decrease in the latest week was primarily due to a drop in loans by small banks. But big banks weren’t immune. The Fed’s report showed that lending decreased $23.5 billion at the 25 largest domestically chartered banks in the latest two weeks, and plunged $73.6 billion at smaller commercial banks over the same period.
Saturday Night Quarterback says, For the week ahead expect…
Look for a disconcerting CPI inflation report for March on Wednesday, April 12. The headline, all-items inflation rate is expected to drop to an annual rate of 5.2% from 6%, according to economists surveyed by Bloomberg. That would be good news for the Federal Reserve’s effort to lower inflation. Except that economists expect the core Consumer Price Index inflation rate, which excludes more volatile energy and food prices, to rise to an annual rate of 5.6% from 5.5%. And the core rate is the inflation rate that the Fed watches.
Rumors swirl around Pioneer Natural Resources again–this time that ExxonMobil is talking about an acquisition
The Wall Street Journal reported today, Friday, April 7, that Exxon Mobil (XOM) has held preliminary, informal talks with Pioneer Natural Resources (PXD) about a possible acquisition.
Economy adds 236,000 jobs in March–Economists worry, Is this the slowdown before the plunge?
U.S. payrolls rose by 236,000 in March. That was in line with forests from economists surveyed by Bloomberg. (The Bureau of Labor Statistics revised its February report upward to show 326,000 jobs added in that month.) The official unemployment rate slipped to 3.5% from 3.6%. Average hourly wages increased at a 4.2% rate year-over-year. That was below estimates and the slowest growth since June 2021. The lower total for new jobs in the month is better than a poke in the eye with a sharp stick for investors hoping that the Federal Reserve will decide its job is done and end its interest rate increases after one final 25 basis point increase at the Fed’s May 3 meeting. But the market read today was that the drop isn’t big enough to convince the Fed.
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