March 13, 2024 | Daily JAM, Morning Briefing |
There’s not much question of what the Federal Reserve will do at its March 20 meeting. The odds–99% on the CME Fed Watch Tool–are that the Fed will do nothing and leave interest rates at the current 5.25%-5.50% benchmark. But that day the Fed will also release its most recent quarterly revision of its economic projections for the year ahead, the Dot Plot. And those projections will have, potential, market moving power. The central question: Will the Fed hold to its projection of 2 interest rate cuts in 2024 or will the bank, worried by recent evidence that inflation has been stubbornly high in recent months, point toward just one cut by the end of the year?
March 12, 2024 | Morning Briefing, Short Term |
Core CPI inflation came in hotter than expected in February for a second straight month. The core Consumer Price Index, which excludes food and energy prices, increased 0.4% from January, the Bureau of Labor Statistics reported today. The year over year inflation rate rose to 3.8%. Economists had been projecting 3.7% annual rate. Core CPI over the past three months rose an annualized 4.2%, the highest annual rate since June. That adds to worries that the improvement in inflation has stalled in recent months.
March 11, 2024 | AAPL, Daily JAM, GOOG, Top 50 Stocks, Videos |
Today’s video is The Magnificent Five? The Magnificent Seven were the main drivers of market success at the end of 2023 and the beginning of 2024. But what happens when the Magnificent Seven are more like a magnificent Five, or even four? The original Magnificent Seven included Apple, Amazon, Meta Platforms, Microsoft, Alphabet (Google), Nvidia, and Tesla. Both Tesla and Apple have taken major hits largely due to problems with China. China’s regulations have made it harder to sell Apple products in the country in the government’s effort to push domestic goods. Apple sales in China are down 16-17%. in the first six weeks of 2024. This, alongside a Wall Street perception that Apple is behind in AI technology, has brought Apple shares down 12% for 2024. As for Tesla, China is producing massive numbers of cheaper electric vehicles that are increasingly exported globally (with the exception of the United States where high tariffs on Chinese electric vehicles limit sales) leaving Tesla down 25% in 2024. Google is also down 5% year to date though it may be too soon to write Alphabet off as “not magnificent” just yet. Both Apple and Tesla are no longer pacing the market and are indeed lagging. Bad thing? Good thing? I’d vote for “good thing.” The rally is beginning to spread out from a handful of big names. The only thing that makes me a bit wary is that so many investors are hoping to make money on speculative moves while the market is moving sideways. Those moves could cause volatility in a market that is otherwise likely to stay steady until we get big news from the Federal Reserve on interest rate cuts in June or so.
March 10, 2024 | Daily JAM, Morning Briefing |
A month after the stock market was rocked by a worse-than-expected inflation report, investors are fearing a reprise when the latest data arrives on Tuesday. Last Thursday stocks rallied when Fed Chair Jerome Powell said in his testimony before the Senate that the central bank is “not far” from being ready to cut interest rates. But this week Fed officials are in their regular blackout period ahead of their meeting on March 19 and 20. Absent Fed commentary on the inflation report, stocks may be volatile again.
February 26, 2024 | Daily JAM, Morning Briefing, Short Term |
On Thursday the financial markets get a new monthly PCE inflation report. The PCE, Personal Consumption Expenditures index, is the Federal Reserve’s favorite inflation measure. And Thursday’s report on January inflation could be bad news for the financial markets,
February 24, 2024 | Daily JAM, Short Term |
I think.the market to continue to come to terms with the likelihood that the Federal Reserve will begin to cut interest rates later than expected in 2024 and will make fewer cuts than expected.
February 23, 2024 | Daily JAM, Morning Briefing |
Economics is supposed to be the gloomy science. So where’s the gloom? Stock markets are supposed to climb a Wall of Worry. So where’s the worry? In its latest survey (February 16-21) of economists (72 of them), Bloomberg found them positively giddy–for economists.
February 15, 2024 | Daily JAM, Mid Term, Videos |
Today’s video is Inflation: Stickier for Longer. The market is now beginning to suspect that the Fed has a last mile problem. The CPI numbers from Tuesday weren’t terrible, but they weren’t as low as the market hoped. Headline inflation was at 3.1% annual rate and core inflation was 3.9%–markedly better than the past high of 9%, but not quite hitting the 2.9% for headline inflation that economists were looking for. The miss has finished a flip in sentiment about a March rate cut. The CME FedWatch poll in January had March rate cut odds at 90% likely, now, just a month later, the odds of no action are up to nearly 90%. Only about a third of investors believe there will be a rate cut in May with odds of no action up to 61%. The calendar is being pushed out to June or July for cuts from the Fed. This has resulted in bond yields going back up, around 4.3% on the ten year Treasury, and stocks going down a bit. There is a hope out there that the CPI numbers were a January blip, but if you look at the breakdown of the inflation numbers, it seems clear that inflation is just plain sticky. The Atlanta Federal Reserve Bank index that looks at the sectors that tend to be sticky and how much they’re influencing the overall inflation rate shows that prices in those sticky inflation categories have stopped and that they are a major factor keeping inflation higher than hoped. . Additionally, while there’s been a big drop in goods prices, the price of services has not gone down nearly as much. The super core inflicts number, which looks a prices in the services sector after taking out the cost of shelter has stalled. All this to say, we’ve got good evidence that this last mile from 3% to 2% on inflation could take a while.
February 13, 2024 | Daily JAM, Morning Briefing, Short Term |
Headline, all-items Consumer Price Index (CPI) inflation fell again in January, but not by as much as economists had projected before this morning’s report from the Bureau of Labor Statistics. In January prices rose at 3.1% year-over-year. That’s a slower increase than the 3.4% annual rate notched in December. But economist had projected that inflation would dip to a 2.9% annual rate. And stocks dropped on the disappointment.
February 11, 2024 | Daily JAM, Morning Briefing |
I expect another downward move for inflation when the January Consumer Price Index (CPI) is reported on Tuesday. Economists surveyed by Bloomberg expect that the core consumer price index, which excludes move volatile food and fuel prices, will show a year over year rate of increase of 3.7% in January. That would be the slowest year-over-year increase since April 2021.
February 5, 2024 | Daily JAM, Mid Term, Morning Briefing |
Maybe you can’t remember when the yield on the benchark 10-year Treasury fell through 4% and looked headed to 3.5%. It might be hard to remember because it was so long ago. Like two weeks. Today the yield on the 10-year Treasury completed a round trip, rising 14 basis points this morning to 4.16%.
January 31, 2024 | Daily JAM, Mid Term, Morning Briefing |
The Federal Reserve maintained its benchmark interest rate on Wednesday in a range of 5.25%-5.50%–as the financial markets expected. But the central bank pushed back more strongly than financial markets hoped on a March 20 schedule for the first cut in rates. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the Fed said in its policy statement.Fed chair Jerome Powell pushed back even moe strongly in his Wednesday press conference pushed back: A march cut is “probably not the most likely case or what we’d call the base case,” he said. “I don’t think it’s likely the Committee will reach a level of confidence by the time of the March meeting to identify March as the time to [cut rates].”
