The Morning Call---Fed failing to follow its own policy rules

 

The Morning Call

 

5/6/22

 

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/sinko-de-mayo-post-powell-panic-bid-hangover-sparks-market-carnage

 

Note: I am giving up trying to make a call on the lower boundary of the S&P’s short term trend. Clearly, there is a battle royale going on between buyers and sellers at the area marked by the lower boundary of the S&P short term trading range and the 23.6% Fibonacci retracement level. It is best to wait for follow through whichever direction that might be. However, just as a reminder, if trends turns out to be down, there is no visible support until the ~3800 level on the S&P.

 

            Key long term charts.

            https://allstarcharts.com/may-strategy-session-3-key-takeaways-2/

 

            How much dry powder is on the sidelines?

            https://www.zerohedge.com/the-market-ear/c9vapwkg4u

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

April nonfarm payrolls rose 428,000 versus expectations of 391,000; the unemployment rate was up to 3.6% versus 3.5%.

                          https://www.zerohedge.com/economics/april-payrolls-rise-more-expected-wage-growth-slows

 

                        International

 

                          March German industrial production fell 3.9% versus estimates of -1.0%.

 

April Japanese YoY CPI came in at +2.5% versus projections of +1.4%; YoY core CPI was +1.9% versus +1.8%.

 

The April UK construction PMI was 58.2 versus consensus of 58.0.

 

                        Other

 

                          Mortgage delinquencies declined in Q1.

                          https://www.calculatedriskblog.com/2022/05/mba-mortgage-delinquencies-decrease-in.html

 

            The Fed

 

              M2 still has a lot of inflation potential (must read).

              https://scottgrannis.blogspot.com/2022/05/m2-still-has-lot-of-inflation-potential.html

 

The Fed behind the curve by failing to follow its own policy rules. Note: as I harp on repeatedly, this historically has been the Fed’s problem; but it never seems to learn its lesson. So once again, it will likely f**k up the transition to a neutral monetary policy.

              https://econbrowser.com/archives/2022/05/guest-contribution-the-fed-needs-at-least-four-more-50-basis-point-rate-increases-in-2022-to-get-back-on-track

 

            Inflation

 

              New low in new home affordability.

              https://politicalcalculations.blogspot.com/2022/05/new-lows-for-affordability-of-us-new.html#.YnQUjtrMKUk

 

              Peak inflation doesn’t look imminent.

              https://www.capitalspectator.com/peak-inflation-still-doesnt-look-imminent/

 

              The falling jobless rate complicates the Fed’s inflation fight.

              https://www.bloomberg.com/news/articles/2022-05-05/falling-jobless-rate-is-set-to-complicate-fed-s-inflation-fight?srnd=economics-vp&sref=loFkkPMQ

 

            Recession

 

              34% of retailer could not make rent in April.

              https://www.zerohedge.com/markets/34-retailers-couldnt-make-rent-april-new-survey-shows

 

     Bottomline.

           

            More on valuations.

            https://www.advisorperspectives.com/dshort/updates/2022/05/05/is-the-market-still-overvalued

 

            A coming bull market in bonds?

            https://www.advisorperspectives.com/commentaries/2022/05/05/bull-market-in-bonds-set-to-return-with-a-vengeance

 

 

 

    News on Stocks in Our Portfolios

 

EOG Resources press release (NYSE:EOG): Q1 Non-GAAP EPS of $4.00 beats by $0.31.

Revenue of $3.98B (+7.9% Y/Y) misses by $1.64B.

EOG Resources (NYSE:EOG) declares $0.75/share quarterly dividend, in line with previous.

The Board of Directors also declared a special dividend of $1.80/share on EOG's common stock. The special dividend will be payable June 30, 2022, to stockholders of record as of June 15, 2022.

Nike (NYSE:NKE) declares $0.305/share quarterly dividend, in line with previous.

C.H. Robinson Worldwide (NASDAQ:CHRW) declares $0.55/share quarterly dividend, in line with previous.

What I am reading today

 

            Seizing Russian assets, international law and the constitution.

https://www.nakedcapitalism.com/2022/05/no-biden-cant-just-sell-off-seized-russian-yachts-and-central-bank-assets-to-help-aid-ukraine-international-law-and-the-us-constitution-forbid-it.html

 

 

 

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