The Morning Call
5/5/22
The
Market
Technical
Wednesday in the
charts.
https://www.zerohedge.com/markets/stocks-bonds-gold-crypto-rip-after-powell-takes-75bps-hike-table
Note: as you might
guess, the S&P soared back above the lower boundary of its (former?) short
term trading range and the 23.6% Fibonacci retracement level. I suggested
yesterday that I thought that the challenge of those levels was quite weak,
that I would not be surprised by a bounce and that if we got it, I would likely
reinstate the short term trading range---which I am doing. However, I don’t
think that this necessarily means that the worst is over and that those levels
won’t be challenged again. The S&P is in a trading range. From a technical
perspective, it was due for an oversold bounce which got amplified by less
hawkish comments from Powell (see below). It is too soon to get jiggy.
The latest
Investor Intelligence Bull/Bear ratio.
https://www.linkedin.com/feed/hashtag/?keywords=stockmarket
More deleveraging still
needed.
https://www.zerohedge.com/markets/markets-are-risk-another-major-deleveraging-event
The buyback window
is now open.
https://www.zerohedge.com/the-market-ear/cfro1x7twm
Fundamental
Headlines
The
Economy
US
Weekly jobless claims totaled 200,000 versus
forecasts of 182,000.
The March trade
balance was -$109.8 billion versus predictions of -$107.0 billion.
Q1 nonfarm
productivity fell 7.5% versus estimates of -5.4%; unit labor costs rose 11.6%
versus +9.9%.
The April services
PMI was 55.6 versus consensus of 54.7; the April composite PMI was 56.0 versus
55.1
The April ISM
nonmanufacturing index was 57.1 versus expectations of 58.5.
International
March German
factory orders fell 4.7% versus projections of -1.1%; the April construction PMI
was 46.0 versus 50.2.
The April Chinese
Caixin services PMI was 35.2 versus estimates of 42.1; the composite PMI was
37.2 versus 43.8.
The April EU construction
PMI was 50.7 versus forecasts of 47.6.
The April UK
services PMI was 58.9 versus predictions of 58.3; the composite PMI was 58.2
versus 57.6.
Other
Welcome back to the old normal.
https://alhambrapartners.com/2022/05/02/weekly-market-pulse-welcome-back-to-the-old-normal/
The importance of
the dollar to international trade. Overall, this piece is spot on. However, the
statement that the US derives only marginal benefit from the dollar as the
primary means of international exchange is ludicrous. It is only the continuing
demand for dollars that allows the government to spend like a drunken sailor
with few consequences. If the world suddenly decided that it didn’t need or
want dollars, the deficit spending would crater the dollar and inflation would
become an even bigger problem than it already is.
https://www.ft.com/content/e6e845a5-861b-4496-a93a-a29297196297
The Fed
The FOMC’s April
meeting wrapped up yesterday. The action that it is taking is (1) raising the
Fed Funds rate by 50 basis points, indicating that more such rises were coming
but emphasizing that a 75 basis point increase is not on the table [which is
dovish relative to what the Market was pricing] and (2) starting the upwind of
its balance sheet [Quantitative Tightening] in June by reducing it $47 billion,
rising to $95 billion in September.
Somewhat
confusingly, between the narrative relayed in the formal statement and the subsequent
comments of Powell in his presser, there was something for everyone---more of
the Fed’s usual ‘on the one hand, on the other hand’ plot line. ‘On the one
hand’, Powell addressed the American people and swore the Fed’s primary goal
was to reduce inflation. ‘On the other hand’, he expressed great confidence
that its policies would not cause a recession (what else is he going to say;
also see the Bank of England’s announcement below) and as I noted above, he
took a 75 basis point rate rise off the table (but why would he limit his
alternatives?). In short, he tempered the hawkish narrative. My bottom line:
thank goodness that the Fed is finally starting to act responsibly; but how
long it can do so if the Market cracks is still an open question.
https://www.zerohedge.com/economics/fomc-4
More analysis (must read).
https://www.zerohedge.com/markets/what-sparked-todays-euphoric-post-fed-meltup
The Bank of
England raises rates and predicts a recession and higher inflation (compare and contrast).
https://www.zerohedge.com/markets/bank-england-preview-another-25bps-rate-hike
Bottom line
Update on
valuations.
Have growth stocks
bottomed?
https://www.morningstar.com/articles/1091555/have-growth-stocks-bottomed
Barry Ritholtz’ s latest thoughts.
https://ritholtz.com/2022/05/too-many-bears/
An
attitude adjustment.
https://thereformedbroker.com/2022/05/04/attitude-adjustment/
April’s
dividends by the numbers.
This
analyst thinks that the bull market in bonds has ended.
https://www.ft.com/content/44558dfa-8ca0-4c1c-9f76-645565187eb9
News on Stocks in Our Portfolios
UPS (NYSE:UPS) declares $1.52/share quarterly dividend, in line with previous.
What
I am reading today
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