January 16, 2025
What You Need to Know Today:
Economy added only 12,000 jobs in October–if we can trust the data
The U.S. economy added 12,000 jobs in October. The unemployment rate, which uses a different survey method, held steady at 4.1%. The Bureau of Labor Statistics revised the August and September reports to take a total of 112,000 jobs off earlier estimates. The average job growth over the past three months is now 104,000, down from 189,000 over the six months before that. The revised data and the October estimate are both more in line, in my opinion, with what is likely to have been happening in the economy as the result of high interest rates from the Federal Reserve. I thought hugh interest rates should have been slowing the economy more than the initial data suggested. And now it it looks like those high rates were working much more in line with past history of the economy. Of course, the big question today is should we believe the October report
Imagine that! In two days of speculative fever a lot of people lost a lot of money on GameStop–and a few made out like bandits.
GameStop (GME) stock fell as much as 17% in early trading Friday, June 7, after the video game retailer reported quarterly results that missed analyst estimates and announced a stock sale. The came just hours before a highly anticipated livestream from “Roaring Kitty,” an alias used in the past by bullish retail investor Keith Gill. Yesterday GameStock shares had soared 47% on Thursday after “Roaring Kitty” scheduled a YouTube livestream for noon ET on Friday.
And now they tell us: A day before the jobs report the BLS tells us that the employment numbers have been wrong
The Federal Reserve has been telling us over and over again that it’d decision on cutting interest rates depends on the data. Among other things, the Fed wants to see a steady slowdown in the employment market reflected in the data before it cuts interest rates. But what if the data have been wrong? For months? Today in its regular Quarterly Cent of Employment and Wages the Bureau of Labor Statistics raised just that possibility.
Special Report: Trade War! Trade War!! What stocks to sell; what positions to trim (first 4 sells including AAPL)
This Special Report; Trade War! Trade War! gives you my recommendations for what to sell, where to take profits, and where to trim as seen through the lens of a likely global trade war. Here are my choices with my first 3 sells
Slump in factory ISM raises question of how slow is too slow
Be careful what you wish for. Financial markets have been hoping to see signs of a slowing U.S. economy that would let the Federal Reserve begin to cut interest rates. But after the Institute for Supply Management’s (ISM) manufacturing gauge fell 0.5 point to 48.7 in May, the weakest in three months, in data released on Monday, investors have begun to worry if this much of a slowdown is a good thing.
Saturday Night Quarterback says, For the week ahead don’t expect…
Don’t expect inflation worries to go away. One thing that is keeping inflation worries at full boil is the problem of understanding why inflation has stayed higher than expected for so long. Has something fundamentally changed in the economy? And could that keep inflation higher than expected for longer than now expected? The answer according to a new and disconcerting study from the Cleveland Federal Reserve Bank is “yes.” The inflationary impacts from pandemic-era supply chain shocks have largely resolved and the remaining forces that are keeping inflation elevated are “very persistent,” Cleveland Fed economist Randal Verbrugge wrote in a report released on Thursday. Inflation may not return to the U.S. central bank’s 2% target until mid-2027.
Special Report: Your 10 Best Moves for the Rest of 2023, Part 2–10 of 10 Moves (revised on 10/22)
So what do you do with your portfolio for the rest of 2023? And what’s your best strategy to be prepared for 2024? In Part 1 of this Special Report I laid out the 10 developments that I thought would drive the financial markets for the rest of 223 and into 2024. Today, in Part 2, I’m going to give you the first 2 of 10 moves to take–with as much detail and as many specifics as possible–that you should be making now to position your portfolio for the uncertainties of the last quarter of 2023.
Live Market Report (20 minute delay)
Will Powell take it all back on Tuesday?
Was it accidental or intentional? We’ll find out on Tuesday when Fed chair Jerome Powell answers questions at the Economics Club in Washington. On Wednesday, February 1, in his post-Fed-meeting remarks, Powell came across as more dovish on inflation and interest rates than many Wall Street strategists and the financial markets had expected.
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
After a big week of tech earnings news, stocks and investors will move onto fourth quarter 2022 earnings for consumer stocks, health care, and a little taste of fintech.
In January jobs surprise economy adds 517,000 jobs–maybe
Today, Friday, February 3, the Bureau of Labor Statistics reported that the U.S. economy added a whopping 517,000 jobs in January. Economists had been expecting more along the lines f 50,000 jobs added in the month. The huge January surge took the headline unemployment rate to 3.4% The last time the unemployment rate was this low was May 1969. On the surface, the stronger, the much stronger, than expected job gain in January will put pressure on the Federal Reserve to continue raising interest rates. If the labor market is booming, it’s hard o see inflation coming down rapidly. But the real story here may be beneath the surface.
Please Watch My New YouTube Video: Quick Pick Intel
Today I posted my two-hundred-and-thirty-second YouTube video: Quick Pick Intel Today’s Quick Pick: Intel (NASDAQ: INTC). Intel’s revenue and earnings report last week was terrible. It was a classic kitchen sink quarter, where the company laid out all the bad news at once, so investors only have positive things to look forward to. The stock was trading at $28 on January 31, and the 52-week range is $52.5 – $24, so we’re currently pretty close to the bottom of the range. The 2022 loss is a little over 38% but year to date, even with all of this bad news, the stock is actually up 5.75. If you have a longer time range, this is the time to buy Intel. We’re close to a bottom here and their plans going forward include new chips and, in 2024, new technology that can really compete with AMD. Additionally, Intel’s fab business, where they manufacture chips designed by other companies, went up about 30%. They are one of the few companies left that are actually manufacturing the chips, (their biggest competitor being Taiwan Semiconductors.) As Intel improves its own technology, its fab business will grow and become more appealing to chip designers. As long as Intel hits its projected milestones throughout 2023, this is a good buy for 2024.
Special Report: How to Save Your Retirement Portfolio Even If You’re Over 50
It’s been a tough market–and a tough decade looms– but taking smart risks using this strategy can save your retirement portfolio even if you’re over 50. You can do it if you take some risk. Some smart risk. Emphasis on the “smart.” The goal is to find a way to get some extra upside return while keeping your potential downside losses to a minimum. And here are my 10 picks for starting a Save Your Retirement Portfolio.
Please Watch My YouTube Video: Now It’s May for the Fed’s Pause
Today I posted my two-hundred-and-thirty-first YouTube video: Now It’s May for the Fed’s Pause Today’s topic is: Now It’s May for the Fed’s Pause. There wasn’t a lot of suspense about today’s Fed meeting. The CME FedWatch chart, which measures what investors think the Fed is going to do, had a 25 basis point raise at 98% odds– meaning 98% of investors believed that is what the Fed will do–before the Fed meeting. The other 1.8% believed the Fed won’t raise rates at all. So no one was expecting a 50 basis point rise. And the Fed didn’t disappoint the financial markets. The central bank delivered the expected 25 basis point increase. So now we’re asking, when will the Fed pause the rate increases? We’ll be getting the next update and Dot Plot set of projections from the Fed on March 22, when many expect another small raise, but also a signal that the central bank will stop raising rates by the following meeting on May 3. The March 22 meeting will give us an update on the Fed’s projections for a peak interest rate. I:n December the Fed looked like it was projecting a peak of slightly over 5%. The market is now expecting a peak of below 5%. Look to the March meeting to see if those projections get closer together or further apart.
Fed raises interest rates by 25 basis points as expected; market convinces itself that the Fed is talking “Pause soon”
The Federal Reserve raised short-term interest rates Wednesday by 25 basis points, as expected. That brings the Fed’s benchmark interest rate to a range of 4.50% to 4.75%, the highest level since October 2007. After a pullback on the news and the Fed’s press release, the stock market advanced because in his press conference Fed chair Jerome Powell didn’t strongly push back on questions suggesting that the Fed sees inflation continuing to fall and that the central bank is nearing a pause in its interest rate increases. If you’re familiar with the way that financial markets torture the Fed’s frequently opaque language to support the current consensus, you won’t be surprised that today’s move up on stocks is based on a very minor shift in the Fed’s language.
Please Watch My New YouTube Video: Trend of the Week Watch the Yuan
Today I posted my two-hundred-and-thirtieth YouTube video: Trend of the Week Watch the Yuan. This week’s Trend of the Week: Watch the Yuan. China controls one of the two largest treasury portfolios in the world, and the strength of the yuan affects treasuries worldwide. Right now, the yuan is under pressure from many different sources that I’m not sure the market is taking into account. China’s battle with high rates of COVID has left the Chinese government with two choices: either let the yuan fall and import inflation, or spend money to support the yuan causing inflation problems on the other end. It’s clear to me that China will provide stimulus to counteract the slowing economy from the COVID outbreak, which will put added pressure on the yuan. Additionally, as Russia tries to make up for losses in its oil exports, it really only has one option: sell from its huge currency reserve. Due to global sanctions, the only currency it can trade is the yuan. Expect to see Russia selling off its yuan to buy rubles in order to support its own currency. All these factors are putting pressure on the yuan. There’s a lot to watch in global currencies right now, including strange things happening with the yen in Japan and the dollar under pressure as the U.S. faces the debt ceiling crisis. Keep an eye on the Treasury market.
GM investment pops shares of Lithium Americas by 14.60% today
Along with announcing a big earnings beat today, General Motors (GM) reported that it will invest $650 million in Lithium Americas to help fund the development of that company’s Thacker Pass lithium mine in Nevada. The Thjacker Pass mine is projected to be the largest lithium mine in North America, but it is mired in a long-running lawsuit brought by Native American tribes and environmental groups that fear mining and processing of lithium would inflict large-scale damage to the local environment. Shares of Lithium Americas were up 14.60% as of the close today on the news.
General Motors reports record revenue in fourth quarter and big beat on earnings
General Motors (GM) shares are up 8.34% as of the close today after the company reported a huge jump in earnings for the fourth quarter and the full year. For the quarter the car company reported adjusted earnings per share of $2.12 versus an expected $1.69, and revenue of $43.1 billion versus an expected $40 billion. Revenue grew by 28% year over year. For the full year, GM reported EBIT profit of $14.5 billion, near the high end of its forecast of $13 billion to $15 billion.
Gold is back and I like the shiny metal as risk of a debt ceiling crisis increases–here’s how I’d play gold now
With the Federal Reserve seemingly winding down its cycle of interest rate increases, a stronger dollar is no longer the big currency market story. Gold is. Gold is back. And for at least the next 3 to 6 months.
Sell any post-Fed rally–stocks are way ahead of themselves on the Fed, interest rates, and inflation
Here’s what I expect on Wednesday. The Federal Reserve’s Open Market Committee will announce a 25 basis point interest rate increase. In his post-meeting press conference Fed chair Jerome Powell will try to talk the financial markets out of their exuberance by stressing that the Fed doesn’t see a quick end to interest rate increases because at 5% inflation is still running way ahead of the Fed’s 2% target rate. And I expect that investors and traders will ignore Powell’s comments and bid stocks high because a pause in rate increases is just around the corner–maybe as early as March–and financial markets can look for the Fed to begin cutting interest rates in the second half of the year. To which I say, Bushwah! I would sell any post-meeting rally. March increasingly looks like the month where reality will whack the markets on its head.
Tesla rally took some (but not all) EV stocks up on Friday
An 11% rally in a sector leader, like Tesla (TSLA) on Friday translated into a jump in other stocks in the sector. But not all equally. The move was most clearly concentrated in shares of electric vehicle charging stocks.
Saturday Night Quarterback says, For the week ahead expect…
I expect Federal Reserve to raise interest rates by 25 basis points on Wednesday, February 1. As of Friday, everybody from Elon Musk to my Amish egg guy thinks the Fed will raise rates by 25 basis points instead of the 50 basis points at the Fed’s December meeting. A 25 basis point move would, the consensus thinking goes, pave the way to a March end to this cycle of interest rate increases. And with a pause in effect, can a pivot to interest rate cuts by far behind? (I think this is very wishful thinking, but reality has never stopped a rally before.) On Friday, the CME FedWatch tool, which calculates the odds of a Fed move by looking at prices in the Fed Funds futures market, put the odds of a 25 basis point increase by 98.4%. No one, I repeat, no one was putting money on a 50 basis point move. The remaining 1.6% of the market was looking for the Fed to hold rates steady–in other words no interest rate increase. (I think even this tiny percentage might simply be an artifact of a few traders speculating on a big market reaction to a 25 basis point increase.)
So here’s what I think happens before and after the news.
Musk talks Tesla shares higher after earnings
Yesterday Tesla (TSLA) reported fourth-quarter earnings of $1.19. That did beat Wall Street projections by 8 cents a share. Revenue climbed 37.2% from a year earlier. That was in line with market expectations. And today Tesla shares closed up 1% to $177.90. What turned a modest earnings beat into a huge day for Tesla shares?
Consumer spending drops again in December
Consumer spending, the bulwark of the economy and the reason we had the very positive (2.9%) year-over-year GDP growth rate in the fourth quarter that was announced yesterday, fell by 0.2% in December from November, the Commerce Department reported today, Friday, January 27. After adjusting for inflation, consumer spending fell 0.3% in the month. Today’s report also adjusted the November figures to show a small drop in consumer spending for November. The initial report for that month showed a slight increase.
Please Watch My New YouTube Video: Quick Pick Microsoft
Today I posted my two-hundred-and-twenty-ninth YouTube video: Quick Pick Microsoft . This week’s Quick Pick: Microsoft (NASDAQ: MSFT). Microsoft came out with earnings on Tuesday (shortly after filming this video). The earnings were expected to be disappointing as their revenue from their cloud service, Azure has slowed and the growth rate has been declining since September 2021. Microsoft’s earnings report initially surprised investors and the stock rose more than 4% in after-hours trading. But the next day, investors focused on the declining growth in Azure revenue and negative guidance for the future. The stock fell 0.59% at the end of the day. I’m suggesting buying Microsoft on the dip. Microsoft has invested $10B in OpenAI, the company that created ChatGPT. OpenAI’s software can, among other things, create entire, fully-sourced essays, and research answers to questions using a simple search. This AI software is a new technology that has been looking for a way to be monetized, and Microsoft has an easy answer. Bringing ChatGPT to their already established suite of word processing tools, spreadsheets, and (let’s not forget) Microsfot’s search engine Bing. Microsoft opens up an immediate use for AI that will enhance the company’s legacy revenue stream. I’m buying on this dip with an eye to a future that features OpenAI.
My egg guy finally raised his prices today–what we don’t know about inflation (or growth) is What are the lags?
Maybe the Federal Reserve will send a signal on Wednesday that it thinks inflation is under control. I do think the inflation rate will continue to fall. To the Fed’s 2% target? I’ve got my doubts. I think there are still a lot of price increases working their way through the system.
U.S. economy shows solid 2.9% growth in the fourth quarter, but…
The U.S. economy grew at a 2.9% annual rate in the December quarter of 2022. That brought growth for 2022 as a whole to 2.1%. Consumer spending was strong enough to offset slowdowns in housing and manufacturing. So good news. But growth in the quarter was still slower than the 3.2% growth rate in the third quarter
Please Watch My New YouTube Video: Don’t pay for the illusion of control
Today I posted my two-hundred-and-twenty-eighth YouTube video: Don’t Pay for the Illusion of Control. Today’s topic is: Don’t Pay for the Illusion of Control. The market is rallying on the expectation that the Fed will reduce its interest rate increases to just 25 basis points on February 1, after the previous hike of 50 basis points. The belief is that the Fed will continue to wind down rate increases until they eventually stop after having vanquished inflation without tanking the economy. I have a few concerns about this rally. The market has priced this as 100% likely, so if the Fed disappoints with another 50 basis point increase, the market will not react well. Another huge problem with the idea that the Fed is controlling the market is this: there is no controlling this economy. Fed rates are just one of the factors in a very complicated economic picture right now. Here is a sample of some of the other things that can and will affect the market: as the Fed has reduced its balance sheet (and therefore reduced its supply of treasuries), the debt ceiling crisis has resulted in a lower supply of treasuries from the Treasury, and banks are moving their money to reserves, while money market funds are looking to buy bonds and there are none to be found. On a global scale, China’s battle with COVID could cause as many as one million deaths and slow that economy, while Beijing pours money into its financial system. Japan has seen an unusual surge in inflation and the fighting in Ukraine will likely get worse this spring as Russia looks to regain control of the war. All this to say, the Fed does not control the economy and I wouldn’t put all my eggs in the Fed basket.
Jim’s Stock Alerts
Download Jim’s eBook for Free
