Can’t stop, won’t stopFed Chair Jerome Powell says his vows in front of the whole world, pledging to fight inflation for better or worse, for richer or poorer, till rate hikes do them part.
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Starting the long weekend earlyIt seems the stock market decided to start its long weekend with a sleepy end to the week, with investors trying to get all the selling out the way so they can chill today.
- Major US indices popped and dropped on Friday, starting the day on a bullish note before jobs data came out the ruin the fun and lead indices to close their third straight week in the red – the S&P 500 closed last week down 3.29%, the Dow lost 2.99% in the week, the Nasdaq sank 4.02% and the Russell 2K declined 4.74%.
- August’s job data showed continued strength in the jobs market in a month that’s historically volatile for jobs, with nonfarm payroll data showing the economy added 315k jobs in August, down from 526k in July but still stronger than the 300k expected and well above the pre-pandemic trend – job openings currently outweigh available workers by nearly 2:1.
- Debt investing is straight up not having a good time rn, with all of this has led the global bonds market to enter its first bear market in a generation – the Bloomberg Global Aggregate Total Return Index of government and investment-grade corporate bonds falling more than 20% from its 2021 peak, the biggest drawdown since its inception in 1990.
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Papa Powell takes the stageIt was all eyes on Jackson Hole last Friday as investors remained focused on monetary policy, and Papa Powell gets people feeling a bit queasy after warning of “some pain” to come.
- Fed Chairman Jerome Powell reiterated his commitment to halting inflation in his speech at Jackson Hole on Friday, warning the Fed expects to continue raising interest rates in a way that will cause “some pain” to the economy. Yeah, cause it’s all been soooo easy breezy up till now…
- Some were hoping for a dovish pivot from the central bank, but at the same time this news isn’t a real shock to anyone. Powell pledged that the Fed will “use our tools forcefully” and pointed to the lack of enough economic data to suggest a dovish stance is wise despite hints from CPI data that inflation is cooling – the goal is to get inflation back down to 2%.
- The market was straight up not having a good time on Friday and most major US indices had their worst day since June – the S&P sank 3.37%, the Nasdaq lost 4.1%, the Dow dumped 3.03% and the Russell 2K reversed 3.3%. Traders are currently debating between a 50bps and 75bps hike, with the probability of a half point hike sitting at 51.5% after the speech according to the CME.
PPI paints a pretty pictureThe economic news just keeps on coming and investors keep trying to dissect what it means for rate hikes while oil prices hold up the S&P 500.
- The Producer Price Index saw prices fall for the first time since early pandemic, as wholesale prices in the economy fell 0.5% MoM and 9.8% YoY from a much steeper 11.3% in June. The drop was primarily driven by a decline in energy prices for the month, with US gasoline prices falling below $4 per barrel this week for the first time since March. Better fill those tanks while you can.
- After starting the day on a positive note, major indices paired earlier gains related to CPI data on Wednesday and closed the day with either muted gains or losses. Bonds sold off on the news and sent yields higher as investors rethink their rate hike expectations – which are pretty much all over the place rn.
- Major oil producers were leading the S&P 500 on Thursday, thanks to a 2.62% jump in crude oil futures to take its weekly gains to 5.5%, headed up by Devon Energy’s 7.34% increase. Helping that was a forecast from the International Energy Agency, which sees oil demand growing this year, though in contrast OPEC sees oil going into a surplus this year… so that’s nice and clear then.
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Will this jolt the fed into aggression?Friday’s highly anticipated JOLTS report certainly did what it described: gave the market a shock with an ever-strengthening jobs market that hints rate hikes may not slow after all.
- The US economy added 528k jobs in July while analysts were optimistically expecting around half of that at 258k jobs, and the unemployment rate dropped to around 3.5% – any early economic data that signaled a softening in the labor market have been proven incorrect and has left people wondering what all this will mean for the Fed.
- It basically means the central agency has a long road ahead of them, but tbh we knew that already. A strong jobs market is ultimately good for the economy, esp given it’ll drive up wages, but that’s not gonna do much to help the Fed’s goal of weakening demand to tame inflation.
- It could also mean the end of the market’s recent rally, which saw growth stocks rebound after the Fed hinted last week that they may slow the pace of rate hikes if economic data supports it – which this data doesn’t. The dollar on the other hand, seems rather excited by the news and ended the week on a sharp uptick. Watch the market closely this week to see how it adjusts to the data.
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Papa Powell pumps up the marketThe market spends Wednesday afternoon cheering on the Fed’s latest rate hike decision, with J-Pow spurring on the gains with an update on where the agency’s head is at.
- July’s rate hike officially came in at 75bps, the second hike of that size, a relief for those that got spooked by a red-hot inflation reading a few weeks back and expected 100bps hike to hit. Interest rates are now sitting at 2.25%-2.50%, having been raised aggressively after the Fed’s “transitory” thesis on inflation last year turned out to be v wrong.
- The aggression could be coming to an end soon though, according to Jerome Powell. He reassured everyone that the agency is aware of rate hikes impact on economic growth, and suggested that they could slow the pace of its hikes in its September meeting as it watches the labor market soften – data dependent, ofc – though they are prepared to push the economy into a recession if need be.
- Major US indices popped on the better-than-expected news. The S&P 500 lifted 2.62% to its highest price since June 9, the Nasdaq jumped 4.26%, the Russell 2K closed up 2.39%, and the Dow increased 1.37% – but, analysts are warning investors that the market could reverse in the days coming, which is what happened after the last hike. Look first, then leap, peeps.
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He's a 9.1 but he's inflationThe heat of Wednesday’s CPI is too much for major indices to handle and prices buckle, despite their best efforts at staying upbeat.
- Inflation reached a fresh new 40-year high of 9.1% in June, exceeding expectations for an 8.8% reading and marking the highest levels since 1981. Core CPI, which excludes energy and food prices bc they’re so volatile, decelerated for the third month in a row to come in at 5.9% YoY. It means that the factors the Fed’s policies can impact are falling, but prices it has little control over continue to rocket up.
- The flaming hot reading led the Treasury yield curve to invert by the most in around 22 years. The 2-year note (which is more sensitive to monetary policy changes) popped by 9 basis points while its 10-year counterpart fell nearly 4 basis points, leading to an increase in the spread of 13bps – yield curve inversions are often seen by analysts as a sign of an oncoming recession.
- Major US indices gave a good effort at gains but still ended the day down, marking the fourth straight session of losses for most of them. The S&P 500 fell 0.45%, the Nasdaq lost 0.14%, the Dow dumped 0.67%, and the Russell 2K sank 0.12% – investors are clearly trying to stay somewhat positive, but as Wells Fargo’s Michael Schumacher said: “this is a bad number”.
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Futures are jumpy over economic dataWe hope you’re all nice and rested after the long weekend, and you’re as ready to tackle the week ahead as stock futures seem to be this morning, despite looming economic data.
- Stock futures are on the rise on Tuesday morning despite all major US indices finishing last week in the red and having their worst H1 in decades. Futures tied to the Dow are up 0.2%, SPX futures are 0.24% higher, and Nasdaq futures are up 0.39% – prices could be taking a page out of European stocks’ book, which started the week on an upbeat note.
- China tariff talks could be boosting sentiment somewhat. US Treasury Secretary Janet Yellen and China’s Vice Premier Liu He met virtually on Monday to discuss economic sanctions and the possible lifting of tariffs to help stabilize global supply chains. Investors could be thinking that’ll help lift pressure on inflation, but analysts aren’t so sure.
- Speaking of inflation, it’s a big week for economic data. In a shortened trading week, all eyes are watching for Wednesday’s release of minutes from the Fed’s latest meeting and June jobs report data on Friday – all of which should give us an update on what the next rate hike might look like and prolly bring in a whole bunch of recession theories.
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The worst half in 50 yearsSo the first half of the year is over, and it’s been a wild ride – we can only hope that you and your portfolio have fared better than the S&P 500 so far.
- The S&P 500 suffered its worst first half since 1970, and its journey into the red has been shared with other indices. In 2022 to date: the S&P 500 is down 21%, the Nasdaq had its worst first half ever and lost 29%, the Dow has sunk 15%, and the Russell 2K has reversed nearly 25%. But it’s not the worst six months in 50 years, just the worst first half, so there’s that.
- Core personal consumption expenditure hit 4.7% in May for the slowest rate of inflation since November, meaning that disinflation could finally be rearing its pretty little head. Added to that, one S&P Dow Jones analyst said that a dismal H1 performance doesn’t necessarily mean we’re in for more pain, so the news is not without hope.
- Tech stocks have been badly hit in the second quarter. Tesla, which only last year reached a trillion-dollar market cap, had its worst quarter since going public; Amazon dropped the most since 2001 at 35%, Alphabet’s 22% loss was its worst since the 2008 crash, and Apple had its worst three months since 2018.
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Is that a week in the green we see?I spy with my little eye… something beginning with R. And no, this time we’re not talking about a recession.
- If you guessed recovery, then you got it. Major US indices are well on their way to a week in the green after last week’s painful sell-off, with 7 of 11 sectors closing Thursday on the up. This week, the S&P 500 rose 3.29%, the Nasdaq has lifted 3.83%, the Dow’s gained 2.64%, and the Russell 2K is ahead by 2.76%.
- Positive news from the country’s largest banks is helping. All of the 34 banks tested have passed the Fed’s latest round of stress tests, which measures lenders’ ability to weather a severe economic downturn – like the one a lot of people think is headed our way.
- That’s a great sign for the financial health of the country and its biggest institutions – which regulators say are systemically important to the economy – especially given the Fed really upped its game and stress tested for conditions “much more severe than any post-World War II recession”. The economy may have its issues, but this defos seems a good sign.
Illustration by TradingView
A recession-proof rally?Major US indices woke up from the long weekend ready to march out of the doldrums despite hearing constant calls for a recession from the barracks.
- US equities blocked out the haters on Tuesday, with every single sector opening the week in the green. After all closing last week near 18-month lows, the S&P 500 surged 2.45%, the Nasdaq lifted 2.49%, the Dow jumped 2.15%, and the Russell 2K rallied 1.7%. From the look of overnight futures though, the rally may be short-lived.
- Goldman gave a not-so-bullish update on where they think the economy is heading. The bank thinks there’s a 48% cumulative probability of a recession over the next two years, up significantly from its previous guess of 35%. They are “increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations”.
- The calls were joined by investor Cathie Wood, who says the Fed is ignoring dangerous recession signals. She called recent rate hikes “draconian”, arguing that economic indicators are flashing red and that the Fed is risking weak economic growth throughout this year. Buckle in, folks.
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The Fed tries to put out the inflation fireEquities have been burning after an inflation reading last week, so the Fed whips out the extinguisher and turns it all the way up to 1.75%.
- The Fed hiked rates by 75bps on Wednesday for the third hike of the year, following the latest meeting of the FOMC. The increase is “unusually large” (though not unexpected) and marks the harshest rate hike in 28 years, and takes rates to a range of 1.5% - 1.75% – the highest level since covid hit in March 2020.
- Major US indices snapped a five-day losing streak to actually rally on Wednesday. The S&P 500 lifted 1.46%, the Nasdaq added 2.49%, the Dow moved up by 1%, and the Russell 2K gained 1.36%. That being said, it’s not unusual for it to take a few days to see a real market reaction to policy news, so keep your eyes peeled for possible volatility.
- Papa Powell did his best to soothe any fears with a generally optimistic view of the economy. While officials significantly cut their outlook for 2022 economic growth from 2.8% to 1.7%, as well as hinting that another 75bps hike isn’t off the table in July, Powell also said “overall economic activity appears to have picked up after edging down in the first quarter”.
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CP-I can see another day in the redMajor US indices have clearly forgotten that contacting an ex is never a good idea, flirting with a bear market once again after taking a fiery shot of CPI data.
- Wall Street just had its worst week since January thanks to a Friday sell-off. Last week, the S&P 500 lost 5.06% to hit its lowest close since March 2021, the Nasdaq declined 5.7% for its lowest close since November 2020, the Dow dumped 4.58%, and the Russell 2K reversed 4.4%.
- Inflation continues to put pedal to the metal in May, accelerating 8.6% from a year ago for the highest increase since December 1981, and 1% since last month. On the bright side, core inflation excluding food and energy only rose 6%, but that was still higher than expected and the energy crises ain’t going anywhere fast.
- The Fed is raising rates this week. Previous forecasts of a half point hike are looking less likely thanks to red hot inflation, which will prolly put the agency under pressure to implement harsher rate hikes of 0.75%. Disappointing earnings forecasts from the likes of Target and Microsoft gave investors the ick last week – so basically, buckle in for the week ahead.
Illustration by TradingView
Papa Powell stays head of the familyAs the Federal Reserve faces an uphill battle with inflation and staving off a recession, it’s voted to keep its chief commander at the helm for another term.
- Jerome Powell has been voted in for another four years as Fed Chair by pretty much a landslide, clearly having proven himself in his first four years despite being plagued by covid, inflation, rate hikes, and all sorts.
- It came on the back of April’s producer prices data, which notched their fifth straight month of double-digit MoM increases and came in hotter than expected. CPI data was higher than expected as well, but at least they weren't as hot as last month. Small wins.
- Market losses slowed their roll, at last. Don’t get us wrong, most indices still declined – the S&P 500 was down 0.13%, the Nasdaq declined 0.18%, the Dow lost 0.33% – but prices saw a recovery in day trading and the losses were less than the last few days.
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Stocks get excited for a hikeThe Federal Reserve announces its next rate-hike, and investors seem keen to get some relief from inflation.
- The Fed implemented its second rate hike of the year, announcing a widely-expected half point hike following the conclusion of its Federal Open Market Committee meeting on Wednesday – it’s the biggest increase in 22 years.
- The agency will also start massively shrinking its balance sheet amid one of the tightest labor markets we’ve seen in a while. This market doesn’t usually take this kind of news well, but inflation and consumer prices are skyhigh and people are excited for that to be addressed – a similar rate hike is expected at the next few meetings.
- Major US indices all trended upwards on Wednesday. The S&P 500 closed up nearly 3%, the Nasdaq led the pack with a 3.4% jump, the Dow was up 2.8% and the Russell 2K ran ahead by 2.69% – all four have seen gains every day this week, so clearly they wanted to keep the good vibes going after a rocky start to the year.
Illustration by TradingView
Welcome to the inflation ageThis feels like the theme song of Q1, but here it is: inflation is up, and stocks are down.
- Most major US indices stumbled over CPI data on Tuesday. The S&P 500 fell 0.34% and is down 2% for the week, the Nasdaq lost 0.36% and is 2.7% lower this week, but the Dow somehow managed a jump of over 2%.
- Inflation was red-hot, rising 1.2% in March (above estimates) to represent an 8.5% increase YoY. The last time inflation was this high was 16.5 years ago – when Raegan took office. Yikes. As expected, energy saw the biggest CPI increase at 11%, and oil lifted over 5% on Tuesday.
- Tomorrow will reveal the producer side of things when PPI data comes out, but it’ll probs be along the same lines. Nobody is massively shocked, but it does mean the Fed will more than likely raise interest rates by half a point in May, as opposed to a quarter – and experts are already warning of recession shock.
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“Recession shock” territoryThe stock market stumbled last week as the Fed gets more hawkish and Bank of America warns about “recession shock”.
- All the major US indices closed last week in the red after a solid effort at a comeback in March. The S&P 500 sank 1.27%, the tech-heavy Nasdaq lost 3.59%, the Dow dumped 0.28% in its second week down, and the Russell 2K reversed 4.6%.
- BofA thinks the stock market is headed for a world of pain. As the Fed tightens its monetary policy and inflation continues to hit consumer spending, BofA said: “‘inflation shock' worsening, 'rates shock' just beginning, 'recession shock' coming". Sounds ominous.
- Earnings SZN is on the way, but peeps aren’t feeling very confident. Big banks will be kicking things off this week as per, but are expected to report a decline in earnings from a year ago thanks to the war in Ukraine and tough comparables. The market is also expecting some hot inflation data this week. Strap in folks.
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The economy holds off on hopeThe US stock markets started Q2 on a sad note despite the labor market roaring back to life.
🔍 Key points:
- Major US indices were lacking them weekend feels on Friday. The S&P 500 and the Nasdaq closed down around 1.5%, the Russell 2K lost 1%, and the Dow dashed 1.56% – but all four started Monday on a positive note.
- US unemployment reached a new pandemic low in March, with over 431k jobs in the month to bring the unemployment rate to 3.6% – nearly matching the 3.5% boasted in Feb 2020, which matched a near 50-year low.
- So what does this week have in store? March’s jobs report posed as a nice prelude to this week’s FOMC meeting minutes, and will likely play a role in any rate hike decisions the Fed makes there on Wednesday. The next one is expected in May, but this will likely whet its appetite for a half point hike instead of a quarter point.
SPAC attackUS stocks saw their winning streak come to an end on Wednesday, while the SEC sets its sights on SPACs.
🔍 Key points:
- Major US indices fell into a funk on Wednesday, marking the first day of the week in the red for most. The S&P 500 sank 0.63%, the Nasdaq lost 1.1%, the Russell 2K fell 1.92%, and the Dow dumped 0.19%.
- Crude oil was on the rise on Wednesday as a “little progress” came out of peace talks between Russia and Ukraine. But, news that Biden is on the verge of releasing a whole ton of oil from US emergency reserves sent Brent Crude down nearly 5% in Thursday morning trading.
- Elsewhere, the SEC is taking aim at SPACs with a host of new rules that, if enacted, would mark one of the biggest attempts so far to crack down on the popular new market for blank-check companies – which are already struggling through 2022.
Alex Maisuradze / Wikimedia Commons
Another week on Wall StreetWe’re kicking off another week on Wall Street as investors contemplate what upcoming economic data will bring.
🔍 Key points:
- All the major US indices started the week in the red on Monday after a modest rally last week that saw the S&P 500 gain 1.79%, the Dow jump 0.31%, and the Nasdaq pop 2.32% – the Russell 2K was the one hold out, sinking just over 0.3%.
- The market’s winning streak is at risk this week though as investors await a bunch of economic data. Keep an eye out for Tuesday’s JOLTs report, personal consumption expenditures (PCE) on Wednesday, and Friday’s monthly jobs report.
- The state of the economy will impact the Fed’s decision on rate hikes in April, and investors are already expecting a half point hike after hawkishness from Fed Chair J-Powell. On the other hand though, another round of peace talks between Russia and Ukraine have started on Monday, and the Ukraine president says he is willing to discuss neutrality.
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