(Justin Vaughn, Editor, Options Trading Report)
Big news in the job market, as more than 390,000 new jobs were posted this week, giving traders and investors renewed confidence. Also, signs of the economy beginning to ‘chill’ as seen in several areas, namely the housing market supply. Consumer spending slowed, as saving accounts began to steady as the Fed keeps tightening and is undeterred in its mission to control and bring down inflation. Jerome Powell has repeatedly said he wants to be near the ultimate level of 2% and will tighten at a quarter or half percent if necessary.
The latest government figures, released today, (Friday, 6-10) showed a jump in inflation in May to 8.6%. The cost of all consumer needs was dramatic as gas, food, and energy accelerated, exceeding economists’ estimates of 8.3% in May. Oil is a prime driver of inflation, along with foodstuffs, and has been nearly unstoppable for several months.
Thursday was a tough day for the indexes, all reporting lower finishes, and all influenced by unbridled inflation. The S&P 500 was down 2.4% or 97.95 points, finishing at 40121.82, with the Dow Jones Industrial Average losing 638 points and dropping near 31700. The tech-focused Nasdaq Composite lost 332 points to end the day at 11754.23. Most declines Thursday occurred in the final hour of frenzied trading, with many analysts and traders putting the blame squarely on inflation. “Once we get a few more data parts on inflation, hopefully, they will confirm that things are coming off the boil and the Fed, after June and July, can be a little less hawkish into the fall”, said Tim Holland, chief investment officer at Orion Advisor Solutions.
Lumber a commodity that soared during the Covid crisis, is suffering a tremendous fall, as prices are in a massive drop, exasperated by supply constraints. The effects of higher interest rates create a devastating equation of a commodity that once was (2020-2021) king. Home starts are significantly depressed, as climbing interest rates have dampened what was massive new home starts. Lumber prices have sunk, with July futures at $695.10, down from $1.334 in March, just before the Federal Reserve initiated interest rate hikes. “The global supply challenges are continuing to significantly limit our ability to transport products to our customers, and our inventory levels remain very high,” Chief Executive Don Kayne of Canfor Corporation said.
Sunflower oil is skyrocketing…as shoppers are disappointed to find a serious shortage of their ‘favorite oil-sunflower oil. All cooking oils are surging higher as reverberations from the war in Ukraine hit the shelves. Russia and Ukraine are the biggest producers of Sunflower oil, accounting for over 60% of the world’s production. Even before the war, the demand for sunflower seeds was accelerating around the world, with its nutritious oil in great demand, especially in European countries, and South America. Sunflower leaves and seeds are also used in the treatment of many aliments including coughs, rheumatism, bronchitis, and malaria. Many, including chefs and cooks, throughout the world believe it is the healthiest cooking oil. And it is a beautiful flower!.
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RUMBLINGS ON THE STREET
Josh White, Co-founder of LUX Capital, Barron’s “In the same way tech led the excess on the way up, you’ll see it on the way down.”
Jamie Dimon, CEO, JPMorgan Chase, Barron’s “The hurricane is right out there down the road coming our way,” referring to the many situations facing the U.S. at present.
Nia Carter, Venture Capital Investor, Barron’s “We should be moving to an internet where your digital property rights are genuine–you’re not a serf on Jack Dorsey’s or Mark Zuckerberg’s plantation; you own your homestead.”
Fayez Sarofim, Fayez Sarofim & Company, (He built a very successful Financial firm on “Buffettesque Principals”) Barron’s “It takes a foreign-born person to appreciate the U.S., and the ability of the American people to adapt,” he said. He added, “Nervous energy is a great destroyer of wealth.”