Labor Fights Recession – by Justin Vaughn

(Justin Vaughn, Editor, Options Trading Report)

Stocks finished higher last Friday after a lackluster week. Investors and traders were ‘happy’ that several high flyers were having better than expected quarters. As the market opened up Monday, the mood was anxious in anticipation of the Labor numbers coming forth at the end of the week. Also, Jerome Powell’s upcoming appearance before Congress on Tuesday and Wednesday will most certainly stir the inflation pot. One subject to be discussed for sure will be future rate hikes to combat stubborn inflation. On the ‘street’ it is very surely assumed that stronger futures hikes will be necessary, with the next one thought to be coming at a 0.50 percentage boost. As Mr. Powell has remunerated many times, a definite downward trend must be the desired result of continued hikes. “Markets have been, and today are still, in a tug of war between hope and dread as to what the Fed might say or do,” said Brian Jacobsen, senior investment strategist at All-spring Global Investments. Markets were lethargic again Tuesday and Wednesday, not reacting with any vengeance after Jerome Powell testified for two days, hashing much of what is known over in front of our elected officials. He reiterated time and again that the ‘goal’ of 2% is reachable and perseverance is needed to achieve that goal. He also indicated that he is leaving the ‘door open’ to whatever is necessary on rate hike increase amounts. Investors and traders are also concerned about Friday’s release of the new Labor numbers and the influence they will have on Mr. Powell and his colleagues.

Closing bond prices Thursday were again higher, with the 2-year Treasury note finishing at 5.064% up 0.05% over Tuesday, while the ten-year poked up near the 4% range, falling just short. Thursday stocks were crumpled as investors’ concerns flowed from inflation to banking to the upcoming labor report, due Friday morning. The DowJones Industrial Average was blistered 542 points, 1.6%, while the technology heavy Nasdaq Composite was off 2%. The ‘big banking news’ was the near collapse of SVB Financial (SIVB) as they scrambled to raise cash, selling bank securities. The bank has been a favorite for tech start-ups. This negative had a ripple effect as major banks around the U.S. news were down around 5%.

The Crypto Market is ‘ajar’ as the fall of Sam Barkman-Fried has had far reaching consequences as more and more banking affiliated firms are showing weaknesses. As the ‘hammer’ drops, with the government stepping up and enforcing ‘buried’ regulations, crypto is being exposed. As the ‘crypto iceberg’ continues to ‘melt-away,’ investors are left with empty pockets….virtual emptiness.

As commodity prices settle back, uranium soars ahead. Cobalt and lithium production has built up massive reserves, so much so that prices have fallen back, not so with uranium. Mined in Zambia and the Congo uranium is in short supply, as Russia was a major producer, but now under strong sanctions that have handcuffed their production. As demand has stayed strong, with upstart nuclear power plants again coming to the fore, uranium is appreciating. In April of 2022 uranium peaked at $64 a pound as the Russian Invasion of Ukraine started, falling to the $40,s and now settling in and around $52 a pound. Justin Huhn, publisher and founder of the Uranium Insider Newsletter and investment service, commented, “The table is set for many years of a supportive environment for rising uranium prices.”

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Jay Bryson, chief economist with Wells Fargo, Barron’s “You don’t really care where interest rates are if you’re going out to restaurants,” Bryson says. And because services make up roughly 60% of consumer spending, the more heavily affected goods sectors have to weaken significantly before the impact “starts to trickle back into services,” he says.

Brian Moynihan, CEO of Bank of America, Barron’s “I think what’s on the table that people have gotten wrong is how long the Fed is going to have to leave rates at a higher structure than people may believe.”

Timothy Brackett, Marketfield Asset Management, Barron’s “It is our growing belief that we are witnessing the beginnings of a distressed cycle in commercial real estate [both office and multifamily] that will exceed expectations by a considerable margin.”

Berkshire Hathaway CEO Warren Buffet in his annual shareholder letter, Barron’s “When you are told that all [share] repurchases are harmful to shareholders or to the country, or particularly beneficial to CEO’s, you are listening to either an economic illiterate or a silver tongued demagogue.”