(Justin Vaughn, Editor, Options Trading Report)
It was a soft week for all indices, with apprehention festering over tightening, Covid increases, and the war. Investors are clouded with decisions of what to buy and when to buy–many sectors are looking negative. The S&P 500 lost .57% to close at 4123.34. The tech focused Nasdaq Composite dropped 1.40% to finish at 12144.66, and the ‘steady’ Dow Jones Industrial Average was off .30%, ending the week at 32899.37. It was the fifth week in a row downward. Unemployment improved with economy showing 428,000 new jobs. Interestingly the job market appears to have doubled the jobs available, showing a positive of nearly 500,000 needed. Many workers have simply disappeared and many have started small business. The ‘falling out’ will take time to effectively correct the actual numbers. The Federal Reserve approved a increase of half a percentage point, twice March’s quarter point, a clear indication inflation is heavier than thought. The Chairman, Jerome Powell reiterated a three-quarter percentage increase was not on the table at present. Government bonds dropped, upping the yield from 2.92% to 3.07% on Thursday (5-5-22), and then on Friday moving uo to 3.13%, the highest since November of 2018. Interestingly, in June-July of 2020, they were neat .50%. The CPI (Consumer Price Index), will report if the U.S. economy got relief in April for the soaring inflation. The government reported inflation jumped in March 8.5%, ahead of February’s 7.9%. Surging inflation has proven to be the hardest to control that Mr. Powell has experienced while in office. The half percentage point increase now seems to be the norm for tightening in the long term.
Finally Germany, France and the rest of Europoan Union (EU), are jumping on the anti-Russian bandwagon to cut off Russian energy-oil and natural gas. The strong move by the EU, is finally a solid show of solidarity. The EU has sent a sign to Putin, and the rest of the world, that these countries are willng to sacrifice much needed energy, paying higher prices for oil and natural gas. Russia has been shipping 27% of EU’s oil and 41% of its natural gas. Alternative suppliers, around the globe are lining up to fill the gap. Higher gas and oil prices will undoubtedly push for rapid exploration, as we are already experiencing. Brent crude, as of May 5 is resting at $111 a barrel. U.S. inventories have dropped from 2.1 billion barrels in 2020 to 1.7 billion presently, with upped production swiftly coming on line. Concerns are not critical, with short term oil shipments accelerating. The oil situatiion will be easily overcome, with the natural gas needs a bit more critical, and far reaching. Cutting off a brutal Putin, and starving the nation with severe income will hopefully have some heavy effects on his war-mongering.
A Twist On Tesla…..And Electric Automobiles. The world’s richest man has achieved dominance in the electric car field. An onslaugh of entries are arriving presently and in the near future. Competition is gearing up at every level targeting Tesla. The first and evidently ‘the best’ has had ‘clear sailing’ with massive growth. Consider the ‘new-horizon.’ Audi is entering the EV scene with four models in the next two years thoroughly tested, and priced very competitively. BMW, Mercedes Benz, and Jaguar are not far behind in the luxury field. GM, Ford, Toyota, Nissen and the ‘rest are on the cusp to enter the field. Tesla will certainly pivot to combat these challengers and be a continuing player. With a valuation of $1.036 billion and volume of $87 billion, Tesla leads all competitors, now. Will they lead the the future in EV’s? It will be an interesting ‘ride.’
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RUMBLINGS ON THE STREET
Janet Yellon, Treasury Secretary, Barron’s “I do believe we’re going to see solid growth in the coming year. The Fed will need to be skillful and also lucky, but I believe it’s a combination that is possible.”
Jason Pride, chief investment officer of private wealth investments at Glenmede, WSJ “We may now be realizing the group that experienced a lot of growth, your tech companies, that growth may have been over-extrapolated,” Mr.Pride said.
Craig Lazzara, managing director of S&P Dow Jones Indices, WSJ “The macroeconomic environment is evolving rapidly and may not support extraordinary home-price growth for much longer,” said Mr. Lazzara.
Andy Jessy, CEO Amazon, Barron’s “The pandemic and subsequent war in Ukraine have brought unusual growth and challenges.”
Randall W. Forsyth, Lead Writer Barron’s, UP & DOWN WALL STREET, “The euro has slid about 8% since January to a five-year low around $105. Much of the fall has come since Russia’s invasion of Ukraine, which started Feb. 24th, but the common currency’s decline was already under way. Since late May (2021) it’s down more than 14%. The euro-zone inflation rate is running at an annualized 7.5%.”
THE NUMBERS – Barron’s
2.89% – Yield on 10-year Treasuries at the end of April, up from 2.32% in March, biggest monthly increase in 17 years. The 10-year breached 3% on Monday.
92% – Decline in nonfungible tokens since September 2021, from 220.000 a week to 19,000
11.5M – Number of seasonally adjusted job openings in March, a record, with 4.5 million workers changing jobs, another record
$110B – U.S. trade deficit in goods and services in March, a record