CPI inflation climbs to 5.4% annual rate, stocks shrug

CPI inflation climbs to 5.4% annual rate, stocks shrug

The Federal Reserve has said that the current jump in inflation is temporary, a result of post-pandemic glitches in the supply chain. So far the market is going along with that view. But huge jumps in monthly inflation in May and now, this morning, June are treating that confidence.
The consumer price index (CPI) rose 0.9% in June from May and by 5.4% from June 2020, according to the Labor Department today. Excluding more volatile food and energy components, core CPI inflation rose by 4.5% from June 2020. That’s the biggest jump in core inflation since November 1991.

Today brings the selling that many expected after Wednesday’s Fed meeting

Today brings the selling that many expected after Wednesday’s Fed meeting

Yesterday, growth stocks climbed in the face of signals from the Federal Reserve on Wednesday that interest rates increase were coming sooner–as soon as the end of 2022–than expected. That seemed puzzling. May be, one line of thought (mine) had it, investors and traders decided that growth stocks would outrun any increase in interest rates that might take place in 2022 or 2023. Today, we got the selling that many had expected yesterday

Federal Reserve says it is staying the course, for now

Ahead of Wednesday’s Fed meeting, stocks tread water

As of the close on Monday, June 4, the major stock indexes were treading water waiting to here what, if anything, the Federal Reserve might say after the Wednesday meeting of its interest-rate-setting body, the Open Market Committee. (No one really expects the Fed to actually do anything about the monthly schedule for bond purchases or about changing the benchmark interest rate now set at 0% to 0.25%.) The Standard & Poor’s 500 was up 0.18% but the Dow Jones Industrial Average was off 0.25%. The NASDAQ Composite was up 0.74% but the small cap Russell 2000 was lower by 0.54%.

Saturday Night Quarterback says, For the week ahead expect…

Saturday Night Quarterback says, For the week ahead expect…

I expect an end to the short-covering in the Treasury market ahead of Wednesday’s meeting of the Federal Reserve’s Open Market Committee. Short-covering in the Treasury market as bond traders unwound bets against Treasuries sent the yield on the benchmark 10-year Treasury note down 11 basis points this week. That’s the biggest weekly decline in a year. Yields on the 10-year Treasury hit 1.43% on Friday, a three-month low.

Faith in the Fed, yes, but today no one wanted to get too far ahead of the June 16 meeting

Faith in the Fed, yes, but today no one wanted to get too far ahead of the June 16 meeting

Yesterday the Standard & Poor’s 500 hit its first new all-time high since early May as investors and traders bought into the reassurance from the Federal Reserve that the 5% year over year increase in the Consumer Price Index was merely a temporary jump in inflation. Today, with the weekend immediately ahead and the June 16 meeting of the Fed’s interest-rate setting Open Market Committee looming on Wednesday, June 16, nobody wanted to get much further ahead of actual news from the central bank.

Prices rise by at 5% year over year rate in May, market continues to buy Fed argument that inflation is temporary

Prices rise by at 5% year over year rate in May, market continues to buy Fed argument that inflation is temporary

Inflation, as measured by the Consumer Price Index (CPI), rose by 5 percent in May from May 2020. That’s the fastest rate of increase since the Great Recession that followed on the Global Financial Crisis. Both the Federal Reserve and the Biden White House continue to say that the recent high rate of inflation is only temporary and that the rate will all as companies work glitches out of their supply chains and recalculate post-pandemic consumer demand. Today the stock market agreed with that view. At the close the Standard & Poor’s 500 was up 0.47% and the Dow Jones Industrial Average had gained 0.06%. The NASDAQ Composite was ahead 0.78% and the BIG TECH heavy NASDAQ 100 was higher by 1.05%. The small cap Russell 200 was off 0.68%. The locus of the biggest price increases does support the Fed’s view.

Banks keep sending their money to the Federal Reserve at 0% rather than lending it

Banks keep sending their money to the Federal Reserve at 0% rather than lending it

The Federal Reserve’s Revere Repurchase Facility, the way for banks to park short-term money with the Fed overnight, keeps attracting more and more cash from banks. Even though the Fed ways 0% interest. As of June 8 banks were placing $497.4 billion–roughly half a trillion–with the Fed overnight.
The amount parked with the Fed has been growing too. And the total parked each night with the Fed could hit $1 trillion by the end of the second quarter of 2021, according to the Bank Policy Institute

On the market’s risk complacency, I’m adding another VIX call to my Volatility Portfolio–this one for October

On the market’s risk complacency, I’m adding another VIX call to my Volatility Portfolio–this one for October

The CBOE S&P Volatility Index (VIX) dropped 8.9% on Friday, June 4, to 16.44. It’ up just slightly today to 16.73 (up 1.89%) as of 2 p.m. New York time. That’s, in my opinion, an extremely low reading on the fear index considering how many potentially market moving volatility events we’ve got ahead of us over the next six months. (For a list see my Special Report: 5 picks and 5 hedges for a falling market.) So today, June 7, I’m adding another Call Option on the ViX to my Volatility Portfolio.