Friday, May 8, 2020

The Morning Call--Unemployment soaring, stocks soaring

The Morning Call


The Market

The Averages  (23875, 2881) made another strong opening, fading into the close but this time finishing up on the day. The S&P managed to close back above its 4/17 high although the Dow failed to do so---leaving the indices out of sync.  This pin action doesn’t change my thought that they remain in  ‘a standoff level between the bulls and bears.  I wait the outcome.’

GLD and the long bond rose markedly on decent volume and the dollar fell.  In other words, these indicators reversed Wednesday’ pin action decidedly.  That puts them back in line with a disappointing economic outlook which is at odds with the stock Market.  So, price action across all Markets remains a bit confusing.

            Thursday in the charts.



Yesterday, March consumer credit and weekly jobless claims continued the trend of really poor numbers; although preliminary Q1 nonfarm productivity fell less than expected.

            This expert says recession will be over by the end of 2020.

                        On the other hand, the service sector is crashing and that is not a good omen.

Overseas, March German industrial production, the April Chinese Caixin services and composite PMI’s and the April EU construction PMI were below expectations while the April Chinese trade balance was much stronger than anticipated

            The coronavirus

            More coronavirus data.

The lockdown could cause more deaths than the virus.

            Trump picks the worst possible time to attack China.

                ***overnight, US/Chinese trade negotiators talk by phone, agree to continue implementing Phase 1 of the trade deal.

                Government orders alone didn’t shutdown the economy.  They probably won’t reopen it.

                The Fed

            The main headline yesterday was the pin action in the bond market where futures are starting to price in negative rates by the end of the year.

            The decline of real interest rates.

            Yesterday futures were pricing in negative short term rates.

            Eurodollar futures were also pricing negative rates.

            Paul Tudor Jones buys Bitcoin as hedge against central bank money printing.

Bottom line:  if I judge the price action in the Markets based on economic factors, I would totally confused because the price action in gold, the dollar and the long bond are pointing to a weak economy (which includes lower corporate profits and an elevated risk of major bankruptcies) while the equity Market is tip toeing through the tulips.  The conundrum is resolved by QEInfinity.  Act accordingly.

            One chart says it all.

    News on Stocks in Our Portfolios
C.H. Robinson Worldwide (NASDAQ:CHRW) declares $0.51/share quarterly dividend, in line with previous.

Nike (NYSE:NKE) declares $0.245/share quarterly dividend, in line with previous.


   This Week’s Data


            March consumer credit fell $12.1 billion versus estimates of a $15 billion increase.

                        April nonfarm payrolls declined by 20,500,000 jobs versus expectations of a 22,000,000 decrease.

                        High stock prices and high unemployment---not a good look.


            March Japanese household spending dropped 4.0%, in line; cash earnings rose 0.1% versus +0.3%; the April services PMI was 21.5 versus 22.8; the composite PMI was 25.8 versus 27.8.

            The March German trade balance was +E17.4 billion versus consensus of +E17.0 billion.


            March median household income.

            Update on hotel occupancy rates.

            US to remove Patriot missile protection from Saudi Arabia.

What I am reading today


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