April 4, 2025
What You Need to Know Today:
Market is still looking for 2 rate cuts in 2025, CNBC survey says
We won’t get another update on the probable trajectory of Federal Reserve interest rate policy until the central bank updates its Dot Plot projections at its March 19 meeting. But meanwhile, we have a survey from CNBC that shows a majority of respondents–and this is a small sample of hust 25–still believe we’ll get two interest rate cuts from the Fed in 2025. But that faith in that two-cut scenario is fading.
So far, the big issue with big tech earnings is valuation
From BIG Tech earnings results so far, what seems clear is that if a company smashes through expectations like Alphabet (GOOG) did, the stock will climb. If, however, you merely match expectations like Meta Platforms (META) and Microsoft (MSFT) then shares retreat.
Lithium Americas closes $2.3 billion DOE loan–stock climbs and then gives it all back
Yesterday, Lithium Americas (LCA) announced that it had closed a $2.26 billion loan from the U.S. Department of Energy’s Loan Programs Office under the Advanced Technology Vehicles Manufacturing Loan Program. The funding is earmarked for the construction of processing facilities at the Thacker Pass lithium project in Humboldt County, Nevada. Thacker Pass is currently North America’s largest known lithium resource. The stock jumped almost 5% yesterday on the news. It fell 8.87% today to $4.11 a share. Lithium Americas is a member of my Millennial Portfolio.
At 2.8%, GDP growth misses estimates but maintains strong trend for the economy
The U.S. economy grew at a 2.8% annualized rate in the third quarter, the Bureau of Economic Analysis reported today. The growth rate was down slightly from 3.0% in the second quarter. Economists had projected 3.1% growth. GDP has now climbed for 10 straight quarters.
No consumer slowdown visible as confidence numbers blast through projections
The Conference Board’s gauge of confidence jumped 9.5 points to 108.7, the highest level since the start of the year, data released Tuesday showed. The median estimate in a Bloomberg survey of economists called for a reading of 99.5. The month to month increase was the biggest since March 2021.
Another bad day for bonds–10-year Treasury yield hits 4.28%
Yields rose and bond prices dropped again today as weak demand in a pair of Treasury note auctions suggested investors are anxious about supply on the eve of the next financing quarter. For the day, the yield on the benchmark 10-year Treasury rose 4 basis points to a yield of 4.28%. The yield on the 10-year Treasury is now up 53 basis points in the last month.
Special Report: 8 Steps to Protect Your Portfolio from the Global Debt Bomb–complete 8 steps
I’ve hi-lighted the key characteristics of the coming global debt bomb explosion that investors MUST include in any plan to protect a portfolio from the explosion of this bomb.
Live Market Report (20 minute delay)
Saturday Night Quarterback says, For the week ahead expect…
If you believe in the gods of the financial marketplace, it looks like they’ve arranged things so that investors and traders have the maximum opportunity to worry about the dangers of a U.S. default.
I’m actually somewhat more optimistic today, Saturday, May 13, than I was on Friday that Congress will pass a debt ceiling bill before the United States goes into default.. The decision to postpone talks between President Joe Biden and congressional leaders scheduled for Friday to next week actually strikes me as good news. It’s a sign that the staffs of the two sides are talking in an attempt to brainstorm a solution. And staffers are more likely than the politician themselves to come up with a pragmatic, cynical, short-term solution. I think we’re still in for two or three weeks of on-the-brink news and market volatility, but I think the odds are good that a short-term solution will emerge before we’re too far into June.
The “solution” will amount to kicking the problem down the road
Bad news on consumer sentiment on inflation, recession
It’s only a survey of consumer sentiment so it’s not very important to the financial markets, right? Wrong. The University of Michigan survey of consumer sentiment for May illustrates perfectly the trap that the Federal Reserve is caught in right now.
The regional banking crisis isn’t over–it’s just getting more selective (maybe)
Shares of California regional bank PacWest (PACW) closed down another 22.7% today, May 11 after the bank disclosed it lost 9.5% of deposits last week. That took down many regional banking peers. For example, Zions Bancorporation (ZION) finished the day down 4.51% and Comerica (CMA) was lower by 6.76%. The SDPR S&P Regional Banking ETF (KRE) was down 2.48%.
But not all regional banks fell.
Watch My New YouTube Video: Quick Pick Albemarle
Today’s Quick Pick is Albemarle Corporation (NYSE: ALB), a lithium producer. Lithium demand continues to rise with electric vehicles and rechargeable batteries finding expanding and new markets. Lithium producers have had a difficult time meeting demand–and projections say the demand gap is going to expand– and the price of Lithium has shot up. However, Sociedad Quimica y Minera de Chile (NYSE: SQM), and Albemarle Corporation (NYSE: ALB), two Chilean lithium producers, took a hit recently due to political risks. Chile’s president, Gabriel Boric announced a plan on April 22 to nationalize the country’s lithium resources, sending the lithium stocks plunging. However, investors may have overlooked some key points in the announcement: the country will honor existing leases (SQM’s leases expire in 2030, and Albemarle’s leases expire in 2043) and this plan still has to be passed by the Chilean legislature. Recent votes have favored the right in Chile and Boric’s party may not have the votes (or inclination) in the current legislature to pass this proposal. A right-wing government would likely be unhappy with the idea of nationalizing a previously private sector. (Chile’s lithium resources already belong to the state with these companies holding time-limited production leases.) Right now, with Albemarle’s longer lease and changing Chilean politics, this is a good time to get in on Albemarle and its expanding lithium production from mines in Australia and the United States. (Only 30% of its revenue comes from Chile.)
The problem with Goldilocks (if you’re an investor or trader)
The Producer Price Index rose 0.25% in April from March and at a 2.3% rate year-over-year, the Bureau of Labor Statistics reported today, May 11. This index measures prices at the wholesale level–changes at that level eventually show up in the prices that consumers pay so they’re an indicator of the direction of future consumer inflation. Economists surveyed by Bloomberg had expected producer prices to rise 0.3% in April on a monthly basis and 2.5% on a yearly basis. In March, producer prices slipped 0.5% on a monthly basis and rose 2.7% on a yearly basis. The annual 2.5% rate is the lowest annual increase in producer inflation in more than two years. So in these numbers, we’ve got clear evidence that inflation is falling. But, also this morning, initial claims for unemployment for the week ending May 6 rose 22,000 to a seasonally adjusted 264,000 claims. That was above expectations from economists surveyed by Reuters for 245,000 initial claims for unemployment. The number of workers filing new claims for unemployment hit a 1-1/2-year high.
Please Watch My New YouTube Video: Lots of Volatility But It’s Not Tradeable
Today’s topic is Lots of Volatility – But It’s Not Tradeable. The market has not been responding as expected to recent events. On Friday, May 5, a combination of a chaotic market, a banking crisis, and job numbers that were much higher than expected, resulted in a completely unexpected market reaction. On previous behavior, these higher job numbers would have led to a conclusion that the Fed would continue to raise rates. Stocks would have tumbled. But Friday this time, we got a big rally in the news in the report. The market is vacillating between belief in a recession with banks failing, and belief in a strong job market where the Fed continues to raise rates. That’s created a scenario of wild swings, driven more, I’d argue, by where prices have been recently than by any trend in the news. You can see this in the VIX. The “fear index” rise as banks struggled but the jobs report said that it was alright to bid bank stocks (and the market in general) higher on the day even if the regional banking crisis is a long way from over. I’d prefer to trade volatility when “all” it requires is getting the direction of the news correct. Bu,t the current market requires getting both the trend in th news and the markrt’s reaction to that trend right in order to make a profit. That’s harder than I’d like and it seems prudent to wait for more predictable (and tradeable) volatility.
April CPI inflation report doesn’t settle anything about Fed rates or rate cuts
CPI inflation ticked lower in April with the all-items (headline) inflation rate nudging down to a year-over-year 4.9%. The core rate, which excludes food and energy prices, also slipped lower to a year-over-year 5.5% from a 5.6% rate in March. On a month-to-month basis all-items inflation rose by 0.4% in April from March after a 0.1% gain in March. The core rate rose 0.4% in April after rising 0.4% in March. If you were looking to have this morning’s inflation report settle the argument on when the Federal Reserve would pause its interest rate hikes, this report didn’t deliver. The most likely Fed reaction to this data would be a pause at the June 14 meeting that left the Fed’s benchmark short-term interest rate at the current 5% to 5.25% range. The CME Fed Watch Tool, which tracks prices in the Fed Funds Futures market, calculates that market participants believe that the Fed will hold rates steady at that meeting. Odds are 93.9% on the Fed Watch Tool in favor of no change in rates at the June 14 meeting. I can see the logic of that.
“Smart” money begins to question the speed of Fed interest rate cuts
There’s always the question of exactly how smart the smart money is, but I find these moves from big Wall Street names interesting as I look for any signs of cracks in the current consensus looking for a quick pivot to interest rate cuts from the Federal Reserve. Strategists at Goldman Sachs have joined those at Barclays in advising customers that the Federal Reserve will be less aggressive in cutting interest rates this year than markets are predicting, Bloomberg reported today, May 9.
Don’t forget tomorrow’s CPI inflation report
Tomorrow, May 10, brings the key CPI inflation report for April. Economists surveyed by Bloomberg are projecting that headline inflation will rise at a 5% year-over-year rate. That would match the 5% headline rate for the Consumer Price Index in March. The headline rate would remain so elevated because of a rise in oil prices in April after OPEC+ announced a drop in crude production. Month-to-month headline CPI inflation is expected to have climbed by 0.4% in April after a 0.1% month-to-month increase in March. The Federal Reserve watches the core rate, which strips out the costs of food and energy. Here too economists are not expecting a significant drop in inflation. Core inflation is projected to have climbed at a 5.5% rate against the 54.6% rate projected in March.
Please stand by–we’re having technical difficulties with our portfolio price feed
Every once in a while, Yahoo changes “something” on its feed of stock prices. No notification. No clue what to do if the change breaks something on a user’s site.
Well, that’s where I found myself and this site again on Friday. We know there are no prices in the portfolios. We’re working on getting everything hooked back up.
Please Watch My New YouTube Video: Trend of the Week Where Is All That Oil Cash Going to Go?
This week’s Trend of the Week is Where is All That Oil Cash Going to Go? The likely answer: the Permian Basin and acquisitions. Oil companies like Exxon Mobil (XOM) are putting so much cash into the bank, they don’t know what to do with it. Exxon Mobil had $32.7 billion in cash in the bank. With little debt, and plenty left over after capital spending, dividends, and buybacks, the company is left with a tremendous amount of cash. Historically, extra cash could be used in oil exploration, which could take 5-15 years. In a global warming economy, that doesn’t make sense since we don’t know where oil prices and demand will be in the years ahead. The better option is acquisitions. One of the companies Exxon is rumored to be targeting is Pioneer Natural Resources (PXD) for their assets in the Permian Basin. Chevron (CVX) is in a similar position as Exxon and you can expect them to be in the market for Permian companies as well. Other Permian Basin companies that are ripe for being acquired are Devon Energy (DVN) and Diamondback Energy (FANG). I already have PXD and DVN in a portfolio in my JubakPicks Portfolio, and I’ll now be adding FANG as well.
Saturday Night Quarterback (on a Monday)says, For the week ahead expect…
The next potential BIG volatility day comes on Tuesday, May 9, when President Joe Biden is scheduled to meet with Speaker of the House Kevin McCarthy will hold talks on raising the debt ceiling to avert a U.S. default. I don’t expect a breakthrough of any dimension. The politics say to me that both sides are dug in and that we’re still too far away–weeks perhaps–from the excrement hitting the propellers. The question for investors and traders is when the financial markets might start taking the prospects of a U.S. default seriously.
Huge April jobs number is a big shock to stock market
The U.S. economy added 253,000 jobs in April, the Bureau of Labor Statistics announced today, Friday, May 5. The official unemployment rate dipped by 10 basis points to 3.4%. (The U-6 unemployment rate, which includes discouraged workers who have stopped looking for a job and workers with part-time jobs who would like full-time work, fell to 6.1% in April (before seasonal adjustments) from 6.8% in March.) Economists were looking for the economy to add just 180,000 jobs in the month. The number is a huge surge after a drop from 472,000 jobs added in January to a revised 165,000 in March.
That was quick–fear is back but for how long?
For a few hours on Wednesday, stocks behaved as if the regional banking crisis was over and as if the Federal Reserve was about to not only end its interest rate increases but also begin cutting interest rates. Then Fed chair Jerome Powell reminded investors and traders that a pause in interest rate increases didn’t mean the Fed was about to pivot immediately to cutting interest rates. And investors and traders decided that the regional bank crisis might not be over if PacWest Bancorp (PACW) was exploring “alternatives” and if Western Alliance Bancorporation (WAL) might be looking for a deal. (The bank has denied that speculation.) Today, May 4, the fear is back.
Please Watch My New YouTube Video: Quick Pick Las Vegas Sands
Today’s Quick Pick is Las Vegas Sands Corp. (NYSE: LVS). Is Macau gaming the best way to play China? I would say yes. News out of China is that it’s clearly reaccelerating and will easily hit 5% economic growth in the current quarter. The economy is reopening and growth is up and Macau, as a gaming center, is benefitting in a pure Covid reopening story. Total gaming revenue in Macau was up 247% year over year in March and 450% in April. Normally I’d look at MGM International to play Macau, but their Las Vegas presence outweighs their China presence, and at this moment, I’m looking for something with less presence in Las Vegas. Although the name may suggest otherwise, Las Vegas Sands has a much bigger presence in China and is in the process of selling their Las Vegas assets in order to invest more in Singapore and Macau. This is a good place to play China gaming as the country accelerates and I’ll be adding it to my JubakPicks Portfolio with a target price of $70 a share.
First quarter earnings far: Bad but not as bad as feared
When is a 4.5% year-over-year drop in earnings for the stocks in the Standard & Poor’s 500 good news? When the forecast for first-quarter earnings projected a 6.8% drop. Bloomberg now projects, with 74% of the companies in the S&P 500 reporting first-quarter results, that earnings for the stocks in the index will be down 4.5% year over year this quarter.
Higher initial claims for unemployment report today suggests smaller jobs gains in tomorrow’s report for April
Initial claims for unemployment rose by the most in six weeks while continuing claims fell in the week ended April 29, the Labor Department reported this morning. Initial unemployment claims rose by 13,000 to 242,000. Economists surveyed by Bloomberg were looking for 240,000 initial claims. Continuing claims, which include people who have received unemployment benefits for a week or more and are a good indicator of how hard it is for people to find work after losing their jobs, fell by 38,000 to 1.81 million in the week ended April 22. That marked the biggest drop since July. If you think that a rise in unemployment and a weakening of the labor market is a good thing, as the Federal Reserve does, because it sets the stage for a decline in inflation, then today’s data had its negative aspects too. A separate report out today showed U.S. worker productivity declined in the first quarter by more than forecast and labor costs accelerated. That’s a strong argument for higher inflation.
Please Watch My New YouTube Video: Is This the End of Momentum?
Today’s topic is Is This the End of Momentum? One Last Momentum Blowout. This has been a great market for very specific stocks. We’re seeing a very narrow momentum market. A few stocks are overperforming the index and propping it up. An example is Meta Platforms (NASDAQ: META), formerly known as Facebook. Meta is up 102% this year and it’s up about 14% in the last month. The S&P is up 9.5% year to date and just 1.5% in the last month. We’re seeing a large divergence between the index and a narrow group of a few rallying stocks, like Meta, Netflix, Microsoft, and Nvidia. These stocks are outperforming the index, but they’re up based on very recent history. Meta’s recent earnings jolted the stock upwards, but it’s still a company that is bleeding money to develop its virtual reality products, with billions of dollars ($13.7B in 2022) lost by its Reality Labs program. The company had staked its future on the Metaverse but has yet to create a viable product from the project. As the momentum of these few stocks starts to slow, Meta could take a big hit because of these fundamental factors. In my opinion, we’re near the top of this momentum market and it’s time to start taking profits from companies like Meta, Microsoft, and Nvidia.
Powell talks the market out of its enthusiasm
Immediately after the Federal Reserve’s decision to raise interest rates another 25 basis points today, stocks moved up on a reading of the Fed’s 2 p.m. statement released with the rate news that saw the Fed as saying it would begin to cut interest rates soon. At 2:26 p.m. New York time the Standard & Poor’s 500 was up 0.58%. In Wednesday’s statement, the Fed said, “In determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” In March, the central bank had said it “anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.” But stocks peaked for the day shortly after Fed chair Jerome Powell began his press conference at 2:30 p.m.
Fed hikes interest rates by 25 basis points as expected and tweaks language
Today, Federal Reserve’s Open Market Committee raised the Fed’s benchmark rate by 25 basis points to a target range of 5%- to 5.25%. The interest rate increase was expected by just about everyone. At 1:50, 10 minutes before the Fed’s announcement, the Fed Funds Futures market had priced in 88.2% odds of a 25 basis point increase. The Fed’s statement omits prior language from the March meeting that said “some additional policy firming” may be warranted. Instead, the Fed said it will take into account various factors “in determining the extent to which additional policy firming may be appropriate.” In other words, rate increases or a pause will depend on the data.
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