Stocks fell sharply once again. This time, however, the villain wasn’t Omicron or anything to do with Covid-19. This time it was Congressional testimony before the Senate by Federal Reserve Chairman Jerome Powell, warning of persistent inflation and possible slower growth. In the 1970’s there was a word to describe persistent inflation and no real …
November 29, 2021 – Omicron is the new word of the day, a name given to the latest Covid-19 variant. We know it is spreading rapidly, but what we don’t know is still far greater than what we do know. Wall Street hates uncertainty. So, on Friday it was sell first, learn the facts later. However, any economic impact is likely to be temporary. This isn’t the winter of 2020 all over again. Rather, it is a pandemic winding its course. Long term economic values will not be impacted significantly by the emergence of Omicron. With that said, markets should remain unsettled until speculation is replaced by facts in the days and weeks ahead.
Stocks cratered on Friday as fear spread wildly that a new Covid-19 variant, subsequently named Omicron, might supersede Delta and extend the pandemic well beyond current expectations. While we know the variant exists, concentrated for now in southern Africa, it has begun to show up worldwide. Just as the original virus seemed to start slowly …
November 26, 2021 – Markets are selling off hard this morning on reports of a potentially disastrous new Covid variant out of South Africa. Sell first, ask questions later was the overnight mantra as travel, hotel and cruise stocks are down ~10%. Interest rates are collapsing, yet again. This follows a recent pattern where earnings reports showed no wiggle room for investors. Stocks are being taken to the woodshed on any potentially negative news updates. This happens in a fully, or overvalued, market, but also brings opportunities.
Futures are certainly ugly so far. Another new Covid variant out of South Africa raises more questions than answers. Fears today are centered upon transmissibility, hospitalization potential and whether or not vaccines will work on this strain. Mutations have been occurring since the onset of Covid-19. More mutations create more issues with vaccine viability. Today, …
November 24, 2021 – This is definitely a bifurcated market. Low P/E winners populate the banking and energy arenas. Simultaneously, the great stories of the pandemic, like Zoom and Peloton, continue to fade rapidly. That’s what happens when euphoria fades and reality returns.
As the Dow continues to rise, the NASDAQ continues to fall. Interest rates are inching up, but it is hard to say that inflationary worries are increasing. The 10-year Treasury yield is only up by about 10 basis points from its recent mid-point and still below Spring highs. Economically, there has been a bit of …
November 19, 2021 – Mega cap technology stocks continue to carry the market higher while the average stock is starting to show signs of profit-taking. This week’s semiconductor and retail updates were encouraging to say the least. As we enter the Holiday season, is it fair to ask how much upside is left for 2022?
Late last night the bipartisan CBO released their Build Back Better projections. They concluded this plan will add $367B to the deficit over 10 years excluding $207B in revenue that could result from spending $80B on tax enforcement at the IRS. Adding those gains brings the deficit tally to $160B. Even though reconciliation rules require …
November 15, 2021 – Last week’s blowups at Beyond Meat and Peloton remind us that a hot product doesn’t make a great company in the long run. Following the investing crowd works for a while, but in the long run, reality matters.
Stocks exhibited solid gains on Friday, continuing their rally in reaction to solid third quarter earnings and stable interest rates. But it wasn’t always sunshine for every company. Two companies that stumbled were Beyond Meat and Peloton. Some years ago, I was in conversation with a marriage counselor. She noted that in difficult divorce situations …
November 12, 2021 – Another inflation update is front and center in determining market action after Wednesday’s CPI report. Growth stocks were taken to the woodshed, while interest rates spiked back to recent yearly highs on the short end of the yield curve. Euphoria still exists though, as Rivian Automotive went public with a market capitalization higher than Ford and GM. Thursday offered a reprieve for growth investors as stocks regained their footing.
As we have been noting for several months now, volatility is back. This usually occurs as we transition from an “everyone wins” early-stage cycle to one led by quality growth stocks. On top of this, inflation is running rampant and adding more questions for investors. Long -duration assets do not enjoy rising rates. By long …
November 10, 2021 – Stocks ended an 8-day winning streak as inflation news reinforced worries.
Stocks fell yesterday, ending an 8-day winning streak for the S&P 500, one that ultimately took virtually all leading averages to all-time highs. Better than expected third quarter earnings and steady interest rates were the perfect setting for higher asset prices. Strong demand and supply chain snarls have also caused both shortages and inflation. October …
November 8, 2021 – A strong report may have overshadowed a stagnant labor participation rate. The lack of returning workers suggests the labor market will be tighter for longer. Wage inflation is likely to stay elevated going forward. The offset will be higher productivity.
Stocks set new record highs on Friday after a strong October employment report, with over 600,000 net new private sector jobs created. The unemployment rate fell to 4.6%, a full half percentage point drop since August. While more people returned to the work force, the work force itself remains significantly smaller than it was pre-pandemic. …
November 5, 2021 – Another well telegraphed Federal Reserve meeting came and went without any major surprises. Markets responded with another breakout to new all-time highs in the S&P 500, Dow Jones, Nasdaq and even the Russell 2000 (small cap index). Earnings continue to add fuel to the fire with beats consistent with prior quarters even with supply chain issues. Today’s payroll report could determine how the week closes.
Tapering has officially begun. Chairman Powell and his team’s announcement came with zero surprises; a slowing of bond purchases by $15B per month ($10B in Treasuries, $5B in mortgage-back securities) with an expected end date in June of 2022. “Data dependent” is back as tapering could be altered, higher or lower, if economic results and …
November 3, 2021 – The FOMC meeting today will set the stage for tapering, but the path for future rate increases won’t be determined for several months. Meanwhile, the economy recovers from the Delta variant and earnings continue to offer a pleasant surprise. Politically, Democrats took a thumping last night in key governor races and have to rethink their strategy in front of mid-term elections.
Stocks rose once again yesterday as the FOMC began its two-day meeting. The flow of earnings numbers slowed but the results were the same, better than expected. 10-year Treasury rates remained around 1.60% as the curve steepened slightly, a sign of optimism about the future of economic growth. This will be a big week for …
November 1, 2021 – Politically, the noise and promises continue, but little gets accomplished. Against that backdrop, the economy moves forward. A recent slowdown caused by supply snarls and the Delta variant may be passing. Markets sense that as risk assets start to rally once again.
Stocks continued their upward march on Friday despite a somewhat disappointing GDP report for the third quarter. Analysts were willing to shake off that news, betting that the weak Q3 numbers related to Covid-19 and supply chain problems may be fading. Interest rates remained well contained, although a flattening yield curve caused a bit of …
October 29, 2021 – More earnings reports have arrived as we close out the busiest week for large-cap management updates on business conditions, last quarter’s earnings and forward outlooks. Throw in a collapsing yield curve, a Q3 GDP report, and an ever-changing reconciliation bill and we have a messy omelet chock full of data.
First, Wednesday’s market action needs to be highlighted. The past several weeks produced broad-based rallies with wide participation. New highs were happening across the spectrum, led by banks, insurance companies, energy, software and reopening stocks. That was completely reversed on Wednesday as the equal weight S&P 500 Index was down ~1.3% while the market cap …
October 27, 2021 – It is remarkable, and a testament to good management, how well Corporate America did in the third quarter, despite the spike in Covid-19 and huge supply chain issues. Most encouragingly, demand remained strong. Without a further surge in inflation expectations, investors have pushed equity values to new highs. At the moment headwinds are few. The biggest current uncertainty is what economic and tax package Democrats can cobble together, if any.
Stocks rose once again on the heels of good economic and earnings news. Bond prices held relatively steady. After the bell, tech giants Alphabet# and Microsoft# reported results that generally beat expectations, but the stock reactions were relatively muted. Today, the flow of earnings continues as we hear from the likes of Coca Cola#, McDonalds#, …
October 25, 2021 – Earnings season is off to a good start. Optimism for future growth is rising once again. But so are interest rates. How earnings and rates intersect over the next year will determine the future for stock prices. The fact that Powell and Yellen are starting to acknowledge the persistence of some inflationary forces signals that the Fed is unlikely to fall far behind the curve. That should give investors some comfort.
Stocks finished mixed Friday with the Dow up slightly while the NASDAQ suffered a modest decline as social media stocks fell sharply in the wake of Snap’s disappointing earnings. But, overall, it was a very strong week for stocks as earnings season got underway in earnest. What we have learned so far, as we head …
October 22, 2021 – Funds continue to flow into equities and out of bonds this month. After a rough September that saw more than half the market drop 10%+, we are back to making new highs, yet again. Seasonally, stocks are in their strongest stretch, pointing towards new highs in the near future. Numerous factors helped us quickly recover from the September mini-swoon.
Earnings keep rolling in and although estimates were lowered throughout September, the number of beats is consistent with prior, record-breaking quarters. Banks and financial companies always report first. With their sensitivity to interest rates, loans and consumer demand, they are a decent precursor for what’s happening in most industries. Loan growth demand continues to be …
October 20, 2021 – As earnings season progresses, we are seeing the impact of pricing power. Those that have it continue to prosper. Those that don’t hope they can raise prices enough to offset all their added costs. Investors need to focus on who has pricing flexibility and who doesn’t.
Stocks continued their rebound yesterday as earnings season began to get into high gear. The next 10 days will be the peak of earnings reports. Yesterday was a bit educational. Two big Dow components, Johnson & Johnson# and Procter & Gamble# reported. J&J had really good results and raised guidance. It generally operates in business …
October 18, 2021 – Earnings season got off to a good start. This week and next are the peak for earnings. We will learn a lot more about costs and supply chain issues, but whatever issues exist today may get resolved over the next year or so. That is last week’s message to investors. The solution will take time, but directionally, by mid-Summer 2022, Covid, supply chain issues, and inflation spikes should all be in the rear-view mirror.
Stocks rose sharply Thursday and Friday, putting the bulls back into the driver’s seat. We often see one-day rallies within downtrends, but two strong days back-to-back usually signify a change in investor emotions. What drove the change? Good initial third quarter earnings, and finally, energy from Washington to force steps to reduce supply chain logjams …
October 15, 2021 – Solid earnings, government assistance with cargo ships stacking up in the ocean, and a decline in interest rates pointed towards “risk-on” yet again. Markets had one of their best days of 2021 with rallies across the board.
Another Friday comment from us and another late week rally ensues. Stocks were in positive territory across the board yesterday, this time led by Technology, Basic Material, Financial, Industrial and Discretionary stocks. That screams optimism on the economy. Energy, which has been the leading sector in 2021, lagged along with Consumer Staples and Utility stocks. …
October 13, 2021 – Earnings season is getting underway. You will hear a lot about inflationary pressures and supply chain snarls. Right now, markets are fixated on those issues and reacting poorly. While they won’t go away near term, both will ease over time. It’s hard to see clear skies in the middle of a storm, but the underlying factors that will sustain economic growth remain in place.
Stocks continued to edge lower as concerns about inflation, supply chain issues, and Washington politics continued to weigh on investors. This morning starts earnings season with three big names reporting, JP Morgan Chase#, Blackrock#, and Delta Airlines. JP Morgan Chase should provide the best view of the economy overall, mainly through comments regarding loan demand. …
October 11, 2021 – Markets remain volatile as growth slows, interest rates rise, and Washington politics remain a mess. Until supply chain problems are resolved the picture is unlikely to change. Demand is strong but much of it is unfilled. Perhaps it is time for Washington to take notice.
Stocks gave up some ground on Friday but still finished the week with decent gains. Trading remained volatile. Leadership rotated between growth and value stocks several times depending on the economic news of the day and trends in interest rates. The week ended with 10-year Treasury yields crossing the 1.60% barrier for the first time …
October 8, 2021 – Stocks have been STIMIED (more later) over the past month with numerous headwinds popping up. One of them, the debt ceiling, looks to have a solution. Even though it is basically kicking the can down the road, markets bounced higher after McConnell’s Wednesday afternoon offering, and continued to ramp yesterday. More shoes need to drop before we get the all-clear signal for stocks to resume their march to new highs. Today’s jobs report may offer critical data for bulls or bears.
Around 1PM on Wednesday, with the markets testing 3-month lows, news broke that Senator McConnell offered Democrats two options for defusing another DC standoff related to paying our bills. Everyone knew the debt ceiling would eventually be raised, but constant bickering and political posturing caused some chaos in T-Bill rates and equities. Although thoughts of …
October 6, 2021 – Hopefully the debt ceiling issue can be solved shortly. The Democrats control the fate. If they don’t get it on the path to success soon, meaning within days, markets will scream, and the problem will get solved. Apart from that, it will take the Democrats another month or two to finalize a spending compromise. In the meantime, the Delta variant is fading, and the economy is improving. As we enter Q4, markets should take notice.
Markets rallied sharply yesterday, essentially recovering what they lost on Monday. As we keep repeating, the major characteristic of a market in transition is heightened volatility. This week’s action to date certainly puts an exclamation point on that statement. In terms of the economy, not much has changed since last Friday. As the Covid-19 Delta …
October 4, 2021 – A tough September is not a harbinger of what’s to come. The Delta variant is fading, and interest rates are not likely to rise as fast as they did in September. Inflation concerns remain. However, that should mute future upside. Higher earnings, on the other hand, will mute the downside.
Stocks rallied at the end of a dismal September. While growth in September deteriorated a bit thanks to the persistence of the Delta variant of Covid-19, stocks fell due to a combination of issues, a slowdown in growth being just one. Interest rates rose, the Fed hinted at tapering bond purchases before year end, and …
October 1, 2021 – Concerns, they are aplenty. Markets ended September on a sour note, as major averages tested last week’s spike lows. The key to the next 5% move revolves around equities holding near current support levels. Near-term headwinds are compounding, pointing to more downside risk. Rest assured, this bull market is not over yet.
Another quarter is in the books as we enter October which historically has been a favorable seasonal time to be invested. This is especially true in years where stock market returns are already generous. History says we should expect a solid finish for 2021. Even after a nearly 5% drop across the board in September, …
September 29, 2021 – Stocks stumbled yesterday as inflation fears rose. Fed Chairman Jerome Powell acknowledged that near-term inflationary pressures have been stronger than the Fed predicted and could persist for longer. Not market calming words, but with the Delta variant finally fading, economic growth could rise again. Don’t equate a one-day stumble with a serious market correction quite yet.
Stocks got routed yesterday amid multiple concerns I will detail in a moment. Despite the drop, the yield on 10-year Treasuries rose again, topping 1.5% (Spoiler alert: this is one of the concerns). But don’t forget two things: First, my two-day rule says a trend isn’t reversed based on one bad day. Just harken back …
September 27, 2021 – Congress takes center stage this week as it tries to pass close to $5 trillion in new spending. To meet divergent requests, the bills will be rejiggered countless times between now and any vote. Few Democrats are likely to know all that is within. It is all a grand experiment. We won’t know the full results for years, but whatever they are, they will be expensive and dependent on interest rates staying low for a very long time.
Stocks rose sharply last week after a brief hiccup last Monday as investors worried about a default by a major Chinese real estate company. When traders accepted the belief that any default at Evergrande could be isolated and not spread across markets, it was back to the races for investors. The Fed at its FOMC …
September 24, 2021 – Monday’s near-1,000 point drop in the Dow Jones Industrial Average is already a distant memory as major averages erase all of those losses and then some. China’s response to Evergrande’s potential default soothed some concerns, while Chairman Powell threaded the needle this week after another Fed meeting ended with no action. From here inflation remains the extreme wild card.
What a difference a few days make. As we’ve noted over the years, in bull markets corrections are fast and furious. Granted, a 3-day recovery after the first 5% correction in almost a year is faster than normal, but the point remains. So long as global GDP trends are positive, earnings are expanding and massive …
September 22, 2021 – While the economy continues to be strong, the stock market looks increasingly worried. Chinese issues this week deflected concerns from inflation, supply chain disruptions, and labor shortages. The three dominating concerns have to be resolved if equity investors are going to return to a good mood. A less aggressive Fed policy is key. We will hear the Fed’s message this afternoon. We will see the market’s reaction soon thereafter.
Stocks tried to recover from Monday’s decline, the sharpest since May, but failed in the end. Monday’s drop was precipitated by the potential collapse of Evergrande, one of the two largest Chinese real estate developers. While that collapse still remains a probability, most investors have reached the conclusion that the damage will be contained. Nonetheless, …
September 20, 2021 – News from China of a bubbling debt crisis centered on Evergrande, a huge real estate developer, brings back haunting memories of our own real estate debt crisis of more than 15 years ago. While the magnitude of the problem could be similar, China is a state-run economy. The Chinese should be able to contain the problem. While the solution may be painful to Evergrande’s owners and lenders, right now it appears the pain can be contained. Markets will be focused on China’s response over the next several days and weeks.
Stocks slid again on Friday as various concerns still haunted investors. The pending timing of the Fed’s tapering of bond purchases, ongoing supply chain disruptions, continued spikes in the prices of key commodities, and the ongoing impact of the Delta variant all weighed on stock prices. Add in worries about the possibility of cascading defaults …
September 17, 2021 – Economic data and quadruple-witching Friday brought more volatility this week. Markets fluctuated while digesting robust retail sales reports while also worrying about future Fed reactions should this data continue. Today could bring even more whipsaws with futures and options expirations.
Yesterday, the Dow Jones opened up nearly 130 points, then dropped over 400 in the next hour and a half before closing down by a mere 63 points. Two main variables are at play, namely quadruple witching and an unexpected robust August retail sales report. Overnight futures activity showed 100 point swings from positive to …
September 15, 2021 – The Delta variant and ongoing supply chain disruptions continue to create havoc. For the first time since the pandemic began, analysts are starting to reduce earnings expectations. Meanwhile, it is full speed ahead in Washington trying to push a $3.5 trillion spending package through Congress. With only a little over $2 trillion in taxes on the table, the obvious result would be a further explosion in debt.
Despite a favorable inflation report, stocks fell again yesterday. The S&P 500 is now down 6 of the last 7 sessions. The NASDAQ Composite fell for the fifth day in a row. The last time it fell 6 consecutive sessions was in August 2019. Despite the recent weakness, the Dow and S&P 500 are still …
September 13, 2021 – House tax proposals do not seem as onerous as President Biden’s earlier request. Assuming the $3.5 trillion spending target is lowered before passage, further moderation of tax requests is likely. Separately, markets are looking ahead to next week’s FOMC meeting where the roadmap for bond purchase tapering will be the prime topic.
Stocks fell once again on Friday despite a strong start. In fact, losses accelerated into the close capping the worst week for the market since February. Over the weekend, the House disclosed, in a 4-page framework, proposals to raise taxes needed to fund its planned $3.5 trillion in spending. As promised, no one earning $400,000 …
September 10, 2021 – Interest rates continue to meander at historically low levels. Once in a generation stimulus measures, global GDP expansion, and inflation spikes should force yields higher. Debt ceiling limits have slowed Treasury issuance, but what happens next could be the catalyst to get back to something closer to “normal” in bond land. Implications are far and wide.
Market averages continue to waffle around recent highs with minor movement for most of this week. If this morning’s futures hold up, major averages will end the week flat. The 10-year Treasury yield is also in a holding pattern, closing near similar levels as two months ago at 1.30%. As we have been espousing, interest …
September 8, 2021 – Disruptions of supply chains and the impact of the Delta variant may be starting to give investors jitters. Over the next two weeks, headlines will be filled with details of the President’s huge spending and tax plans. Investors are unlikely to enjoy that either. The Fed is still buying bonds and the economy is still growing, but markets look ready to take a rest. Any decline should be viewed as a correction, not an end to the bull market.
Stocks fell broadly yesterday as some economists lowered growth projections for the rest of this year, and signs that inflation might be more persistent than transient, gripped investors. The good news is that the Delta variant seems to be near a peak. It is probably past peak in the South and Midwest, which were impacted …
August 30, 2021 – Fed Chairman Jerome Powell on Friday signaled a start of tapering before the end of the year. At the same time, he indicated that any hike in the Federal Funds rate is likely a long way off. It is a message markets wanted to hear. It is also predicated on his belief that current inflationary pressures are transient.
Stocks rose Friday after a dovish speech by Federal Reserve Chairman Jerome Powell. While his forecast that the Fed would begin to slow the pace of bond purchases before the end of this year was on target with consensus, his statement that the time to think about raising short-term rates was a long way off …
June 18, 2021-Fed announcements usually take a few days before the market figures out what they really said. This time is no different as rates initially spiked but made a 180 degree turn yesterday. Winners and losers in the stock market also flip-flopped. What to do now?
Market participants, in both stocks and bonds, waited with bated breath for the conclusion to the 2-day Federal Reserve Meeting. After two straight months of worrisome inflationary data, lower than expected employment reports and a continued rise in consumer spending, many were frightened at the prospect of the Federal Reserve changing their stance and pulling …
May 21, 2021 – After a 3-week hiatus, buyers came rushing back to the markets. Technology stocks rebounded the most, coinciding with a slight reversal in interest rates. Taper talk is coming, and we examine what that means for markets from here.
After three straight days of losses in the overall market, bargain hunters stepped up to the plate yesterday with technology stocks leading the charge higher. The Nasdaq bounced back 1.8%, pointing towards hope of at least a short-term bottom after another mini-correction. The Dow closed up 0.5% and the Russell 2000 Small Cap Index gained …
February 22, 2021 – The biggest factor this morning is the ongoing rise in 10-year bond yields. Higher yields mean lower P/Es for stocks. They impact growth stocks more than value names. As the economy recovers in a rising rate environment, watch for better relative performance from value sectors and a sharp headwind to excessive speculative activity.
Last week was highlighted by a continued move higher for long-term bond yields, a modest correction among high flying tech stocks, and ongoing volatility in the speculative fringes of the stock market. The short squeeze targets like GameStop continued to move back down in the direction of fair value, while SPACs continued to raise billions …
November 22, 2021 – Record highs in the stock market masked an overall deterioration as slowing growth and rising costs impact more companies. While some of the pressures may be peaking or have already peaked, the clear sailing witnessed last spring is unlikely to return.
Lockdowns in Austria sent the Dow and S&P 500 lower on Friday although the NASDAQ continued to rise. Interest rates remained within a tight range. While stocks continue to rise, look at the chart below. It is a chart of the Russell 3000, perhaps the market’s broadest relevant index containing, as the name implies, 3,000 …
November 17, 2021- It’s amazing how well corporations have navigated a minefield littered with disease, shortages, and rising inflation. The ability to pivot quickly is the hallmark of good leadership.
Stocks continued to move higher yesterday. The Dow was aided by a strong performance by Home Depot# after it reported better than expected earnings. Indeed, the theme this earnings season is the skill demonstrated by corporations in managing through a minefield created by Covid-19’s Delta variant, massive political uncertainty, supply chain disruptions, and sharply rising …