April 19, 2025
What You Need to Know Today:
Hooey’s on first in initial “insight” from new Treasury Secretary Bessent
On Wednesdatmay, February 5, newly minted Treasury Secretary Scott Bessent said the Trump administration’s focus with regard to bringing down borrowing costs is 10-year Treasury yields, rather than the Federal Reserve’s benchmark short-term interest rate.
Gold is up today on Ukraine worries, but the trend points up for all of 2025
Gold will rally to a record next year on central-bank buying and U.S. interest rate cuts, according to Goldman Sachs. The investment bank listed the metal among top commodity trades for 2025. “Go for gold,” analysts said in a note, reiterating a target of $3,000 an ounce by December 2025.
As the Cop29 climate meeting talks, the world blows through another global heating benchmark
The internationally agreed goal to keep the world’s temperature rise below 1.5C is now “deader than a doornail.” Climate scientists say that 2024 is almost certain to be the first individual year above this threshold.Three of the five leading research groups monitoring global temperatures consider 2024 on track to be at least 1.5C (2.7F) hotter than pre-industrial times. That would make 2024 the hottest year on record, beating the 2023 record. The past 10 consecutive years have already been the hottest 10 years ever recorded. This hasn’t stopped world leaders gathered in Baku from talking about how to achieve this goal.
With stocks looking stalled, Nvidia reports after the close on Wednesday
NVIDIA (NVDA) will release its third quarter results after the market closes on Wednesday. Analysts are forecasting over 80% year over year growth in both revenue and EPS. Several Wall Street firms have raised their price targets on Nvidia ahead of its earnings report, citing strong demand for AI chips and the potential for upside surprises. Analysts from HSBC, Oppenheimer, Susquehanna, Wedbush, Raymond James, and Mizuho have increased their price targets, with HSBC setting the highest at $200. The stock closed at $140.15 on Monday, November 18. On the other hand…
Saturday Night Quarterback says (on a Sunday), For the week ahead expect…
The indicator known as earnings-revision momentum— the ratio of upward versus downward revisions to analysis forecast per-share earnings over the next 12 months for the Standard & Poor’s 500 stocks—-has slumped into negative territory and is hovering near its second-worst reading in the past year, according to Bloomberg.
Watch my new YouTube video: Fed one and done in December?
Today’s video is Fed One and Done in December? On November 13, the CPI inflation numbers showed inflation ticking up slightly, but the market still believes the Fed will cut rates again in December. On November 13, the CME Fedwatch tool had it at 83% odds we’ll get a cut and I think it’s almost certain. However, when the Dot Plot forecast of GDP, inflation, and interest rates is released in December, I think we’ll see much more uncertainty for the future and likely a planned pause. The three major factors poised to affect the economy are a substantial tax cut, high tariffs and the possibility of mass deportations promised by the president-elect. While two of those items may cancel each other out–with tax cuts being massively stimulative and tariffs cutting into growth by 1.5-2 percentage points while raising costs for consumers, the question of deportations remains. Mass deportations could result in a huge labor shortage and disruptions to supply chains, leading to higher prices. The economy will be under a lot of inflationary pressure from these potential policies and it’s likely the Fed will announce a pause until they see how this all shakes out.
Special Report: 10 Contrarian Bargains to Buy Now–My third of 10 Picks is Barrick Gold
A few days ago I recommended selling positions in the SPDR Gold Shares (GLD) and in the VanEck Gold Miners ETF (GDX) on the grounds that with bon yields rising, gold wouldn’t move higher. (This was all, of course, before Hamas attacked Israel and sent markets running for safety. On Friday, October 13, Comex gold for December delivery was up 3.11%.) So what I am I doing today recommending Barrick Gold (GOLD) as the third pick in my Special Report “10 Contrarian Bargains to Buy Now”?
Live Market Report (20 minute delay)
Please Watch My New YouTube Video: Trend of the Week The Pain is Spreading
This week’s Trend of the Week is The Pain is Spreading. By pain, I mean layoffs. It started with technology companies as we saw job cuts from companies like Meta Platforms, Amazon, and Alphabet. Then recently announced cuts of 7,000 employees. Now, layoffs are spreading to other areas of the market. 3M (NYSE: MMM), a generally reliable blue chip stock, announced they’d be cutting 2,500 jobs back in January and have now added 6,000 more jobs to the chopping block- about 10% of their total workforce. This is in reaction to slowing sales and the potential for losses from liability lawsuits. In the most recent quarter, organic sales were down 4.9% (better than the expected 6.9%) with a guidance of a 2% sales decline for 2023. While 3M is trying to cut costs with layoffs, Wall Street remains skeptical. 3M hasn’t seen the rally other blue chip stocks have seen recently. The company has so many products out there, it is representative of the market as a whole. And this one example plays into the bigger picture of the slowing economy, greater job losses, and, possibly, a recession.
Selling my Schwab May 19 Puts on today’s 66% jump
I’m closing this position on Schwab (SCHW) in my Volatility Portion at a slight loss–I bought these Put Options on March 28 at $3.70 and they traded at $3.50 today May 2–that’s a 5.4% loss. But with the expiration date on these options approaching, I am concerned that the price of the option will fall with time decay.
Selling the KRE Put Options that I bought yesterday after today’s 70% jump
Yes, it’s a volatile market. Yesterday, May 1, the take from the Wall Street talking heads and JPMorgan Chase CEO Jamie Dimon was that the banking crisis (or at least this stage of it, to be fair to Dimon) was over. Today, May 2, the fear is that the crisis isn’t over. Regional bank stocks have plunged again with Western Alliance Bancorporation (WAL), for example, down 17.12% for the day as of 3 p.m. New York time. The regional bank ETF, the SPDR S&P Regional Banking ETF (KRE) is down 6.61%. That all means that the August 18 Put Options with a strike price of $41 that I bought yesterday at $2.55 are selling at 3 p.m. today at $4.72. Counting a slight gain from yesterday’s action after the buy, these Puts are up 85% in a day. I’m taking that gain today and selling this position out of my Volatility Portfolio
Special Report: My 5 Favorite Shorts for This Market–short #2 ahead of the Fed meeting (so 3 to come)
JPMorgan Chase’s (JPM) deal today, Monday, May 1, to acquire First Republic Bank (FRC) after the Federal Deposit Insurance Corporation (FDIC) regulators seized the bank certainly puts an end to the First Republic chapter of the banking crisis. But there are lots of chapters to go in this banking crisis. So my second short for this market is to buy Put Options on the SPDR S&P Regional Banking ETF (KRE).
Saturday Night Quarterback (on Sunday) says, For the week ahead expect…
The Federal Reserve’s meeting on Wednesday, May 3, is a big story but it’s not the only story. There will also be earnings from Apple, Ford, Qualcomm, and Starbucks. The Federal Reserve is very likely to raise interest rates another 25 basis points on Wednesday. The CME FedWatch Tool puts the odds at 83.9%. That’s down from 89.1% on April 21 but up from just 47.1% on March 29. Unless the Fed is playing games with the market–they are such jokesters, aren’t they–I think we’ll get that 25 basis point boost. After all, it’s not like inflation has waved the white flag lately, right? The key for stock market direction, however, isn’t what the Fed does at this meeting but what the Fed says about future interest rate increases, or the lack thereof. The Goldilocks scenario that is supporting stocks at current levels is built on a relatively quick end to rate increases and then a relatively rapid pivot to interest rate cuts–by the end of 2023. Wall Street will be listening for anything that hints at that scenario in the Fed’s post-meeting statement. And stocks will rally if Wall Street thinks it hears anything to confirm its hopes. On Friday, the CME FedWatch Tool put the odds for a June 14 interest rate increase at just 26.8% and the odds that the Fed will put interest rates on hold at 62.2%. There’s enough wiggle room in those odds to convince me that the market isn’t all that certain about the Fed ending interest rate increases at that meeting.The other story this week is earnings.
Omph, that wasn’t good inflation news today–but still, go figure, stocks climbed
The headline Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation measure, climbed at 4.2% in the year through March. That was a big drop from the 5.1% year-over-year rate in February. (Although, I’d note, economists were expecting this all items number to drop to 4% before the actual report.) But the core inflation rate, after stripping out more volatile food and fuel prices, hardly budged in March at 4.6% year-over-year from the 4.7% year-over-year rate in February. And it’s the core PCE inflation rate that carries the most weight with the Federal Reserve. In other words, inflation remains elevated and very, very sticky.
Please Watch My New YouTube Video: Quick Pick Procter & Gamble
Today’s Quick Pick is Procter & Gamble (NYSE: PG). P&G’s first quarter earnings were good and a bit of a surprise. Reporting at $1.37 for the quarter, they beat Wall Street expectations ($1.32) by five cents and they were up 4 cents year over year. The company also raised guidance for revenue growth to 4% in 2023, higher than the prior 1%. While the report was good, it wasn’t that much better–it was a modest beat. What interests me is the market’s reaction to the report. The stock has been rallying since early March, but when P&G released the report, the stock jumped 3.7%. To me, this shows a hunger in the market for the (supposed) safety of blue chip stocks. As worries of a slowing economy and a possible recession grow, stocks that produce reliable, regular growth become more valuable. As I mentioned in my 10 Picks to prepare for a recession on JubakAM.com, P&G is a good place to be during a mild recession. Different story in a major downturn. Then everything falls.
Special Report: My 5 Favorite Shorts for This Market–Shorts #1, #2 , #3 and #4 (so 1 more to come.)
I’m expecting modestly positive economic news in the next few days. Which will, in my opinion, create a low-risk opportunity to make big gains by going short this market in order to profit as stock prices fall. I’m looking to put the first of those shorts in place right now. With the rest to go into place in the days after the Federal Reserve meets on Wednesday, May 3. In this Special Report, I’ll explain this perhaps initially counter-intuitive call on short-term market direction and give you the details on five of my favorite shorts for profiting in this market. With the first short pick today
GDP growth slowed in the first quarter by more than expected
Gross domestic product rose at a 1.1% annualized rate in the first quarter of 2023, the Commerce Department reported this morning. Consumers, again, kept the economy going with s 3.7% increase in consumer spending. Business investment in equipment posted the biggest drop since the start of the pandemic and inventories subtracted 2.26 percentage points from GDP in the quarter, the biggest negative impact on GDP in two years. The GDP data showed services spending rose at a 2.3% annualized rate, led by health care and restaurants and hotels. Outlays on goods increased at a 6.5% rate, the most in nearly two years. The results put even more pressure on continued job growth and increases in wages to keep consumer spending growing.
The median projection in a Bloomberg survey of economists called for a 1.9% GDP growth rate in the quarter.
Please Watch My New YouTube Video: Look Out Below! Central Banks to Take Away $1 Trillion in Cash
Today’s topic is Look Out Below! Central Banks to Take Away $1 Trillion in Cash. Citigroup recently reported that central banks pumped about $1 trillion into the financial markets during the recent bank-collapse crisis. While investors are currently focused on interest rates and inflation and how that affects the price of money, they may be overlooking this important liquidity story. Citigroup projects that this much liquidity injected into the financial system is equal to a rate cut of 50 basis points. The market indeed has received the rate cut it was looking for, just not where it was expected. We’ve now seen peak liquidity. Central banks will not keep putting this kind of liquidity into the market, and in fact, will try to take some of it back. Citigroup says we’ve gone through a risk-on rally fueled by extra cash from central banks, making junk bonds and high-risk investments very attractive. We also had a rally in corporate debt, as investors felt they could take on more risk with more cash in the market. Taking all this out of the market will make risk less attractive.
Microsoft soars on earnings, so I’m selling the shares I bought for my Volatility Portfolio
Back on March 24, I added shares of Microsoft (MSFT) to my Volatility Portfolio on the thinking that in a quarter when earnings were projected to be down for the Standard & Poor's 500 as a whole, reliable technology growth stocks such as Microsoft would outperform....
Financial markets begin, and I stress “begin,” to price in a debt ceiling default
You’d only notice if you’re paying very close attention to yields at the short end of the Treasury market. But bond traders are seeing what looks like the very beginning of a move to price in the possibility of a default by the U.S. government on its debt if the debt ceiling isn’t raised sometime between now and September. Analysts at JPMorgan Chase noted last week that yields on a three-month Treasury bill have spiked, while one-month yields have plummeted, a gap they noted is the “widest in over 20 years.” The gap may reflect investors’ fear of a default over the summer.
Look out below! Central banks to claw back $1 trillion in liquidity provided during banking crisis
Global central banks injected $1 trillion into financial markets during the first quarter, according to calculations by Citigroup as they sought to limit the damage from a banking crisis that claimed Silicon Valley Bank and Credit Suisse. That cash injection was equivalent, Citigroup says, to a 50 basis point cut to global investment-grade risk premium. Which goes a way to explaining the huge risk-on rally in the first months of 2023. And now, Citigroup warns, central banks will be looking to claw back some of that cash.
Please Watch My New YouTube Video: Trend of the Week Consumers Are Falling Behind on Their Debt Payments
This week’s Trend of the Week is Consumers Are Falling Behind on Debt Payments. Although the economy has been slowing for some time, there’s been a lag in consumers falling behind on debt payments. Until recently, consumers seem to have been relying on funds saved during the Covid crisis, but we’re now starting to see that life raft disappear as consumers start to sink underwater on debt payments. This isn’t a good sign for banks that may already be struggling with unrealized losses from the banking crisis. Wells Fargo recently put aside $1.2 billion for potential loan losses and other banks are following suit. About 20% of consumers are using “buy now, pay later” credit card features for things like groceries, showing that the slowing economy and slowing wage growth are finally catching up with consumers. Watch those delinquency rates going forward.
Intuitive Surgical reports a surprisingly strong first quarter
Last week Intuitive Surgical (ISRG) surprised everybody, including, apparently, management. Intuitive Surgical’s first-quarter revenue grew 14% year-over-year to $1.7 billion. (Wall Street was expecting $1.6 billion.) Surgical procedures performed using the company’s da Vinci system, rose 26% year-over-year, well above expectations for 15% growth. And the company raised guidance for global procedure growth to 18% to 21% from the prior guidance of 12% to 16%.
The stock market is trading in narrower and narrower bands
Important observation out of Morningstar on Friday. While the Morningstar U.S. Market Index is up 15.4% from its bear-market low on October 14, the market is only 1.4% higher than it was at the end of November. AND in recent months, the stock market has been moving in tighter and tighter bands. So far in April, the Morningstar U.S. Market Index has only moved up 0.9%. That puts the month on track to show one of the flattest monthly returns since May 2022.
Disney begins second round of cuts of 7,000 jobs today
Layoffs aren’t just for technology companies right now. Disney (DIS) has begun the second round of a projected three rounds of job cuts that will add up to a total reduction of 7,000 employees this year.
The Fed’s preferred inflation number coms out on April 28 , but the Fed can’t comment on it
The Bureau of Economic Analysis is scheduled to report the Personal Consumption Expenditures index, the Federal Reserve’s preferred measure of inflation, on April 28. But because the Fed’s pre-meeting quiet period stretches from April 22 to May 4, there won’t be any comments from Fed officials to spin the data for the financial markets. That could be, well, awkward, since it will leave Wall Street more in the dark than usual about what the inflation results mean. The PCE index is expected by economists surveyed by Bloomberg to have fallen in March to a 4.1% annual rate from the 5% reported for February. If the inflation numbers come in on expectations, investors and traders will be left wondering if the drop is enough to lead the Fed to stop its interest rate increases after a 25 basis point boost at the May 3 meeting.
Saturday Night Quarterback says, For the week ahead expect…
I expect to see the growth economy’s last stand when the Bureau of Economic Analysis the Advanced Estimate of first-quarter GDP on Thursday, April 27. The Atlanta Federal Reserve Bank’s GDPNow forecast predicts that the U.S. economy grew at a 2.5% real year-over-year rate in the first quarter of 2023. That would be roughly equal to the revised 2.6% growth rate in the fourth quarter of 2022. Which would be great news if projections from economists didn’t show growth turning negative in the second and third quarters. The growth estimate for growth for all of 2023 is around 0.4% (the Federal Reserve) or 0.3% (Goldman Sachs.)
Another sign of a credit problems? American Express adds $320 million to provisions for bad credit card debt in first quarter
A big increase in provisions for bad credit card debt overshadowed beats on revenue and confirmed positive revenue guidance for 2023. The company reported earnings of $2.40 a share, below the consensus projection of $2.65.
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