(Justin Vaughn, Editor, Options Trading Report)
Stocks lost ground on Wednesday, with the market again digesting ‘bad news; continuing high inflation, banking fears, and of course the looming recession, all of which are ‘dragging’ the market down. Some on Wall Street see a prolonged period of concern-possibly stretching to 2024. The strength of the labor market is a pivotal factor. As numbers are slowly weakening, the overall indication is positive, as jobs and wage increases seem to defy an impending recession. As economists have repeatedly said, a recession is a combination of several conditions of which ‘labor’ is a major component. Robert Frick, corporate economist at Navy Federal Credit Union commented, “The great labor market machine is finally slowing down some, but it still has a lot of strength left.” Mr. Powell has groped with strong labor numbers for many months, stymied as to how and why the labor market has defied recession tendencies
Finally a new low…Inflation sunk to its lowest level in nearly two years, dropping to 5% from February’s 6%. The CPI (Consumer Price Index) is an accurate indicator of the pulse of the economy, as softer retail prices across the board in gasoline, energy, groceries, and utilities led to falling retail prices. “The inflation problem doesn’t get solved by itself–it needs higher unemployment to get there,” said Steve Blitz, chief U.S economist at TS Lombard.
Thursday’s market was on the upswing from the bell. Attention is focused on Friday’s release of the ‘Big Bankers’ quarterly earnings, as investors and traders will be looking for positive numbers, as the industry was thoroughly ‘tested’ by the recent failures. As the street looks for confidence in these banking giant’s results, the banking industry will ‘heal’ more quickly if the numbers are positive, (and what the street expects). JPMorgan Chase, Bank of America, and Wells Fargo, the banking stalwarts, will release results on Friday, setting ‘the tone’ for all the rest.
Bitcoin streamed past $30,000, its highest level since last June, renewing crypto investors confidences. Ethereum followed rising to a healthy $2,114.03 on Thursday. Many crypto investors are looking at the recent movement from the $20,000,s to $30,000 as a breakthrough, to the next level of $40,000. David Brickell, director of sales at Paradigm committed. The bigger question is why is BTC not higher, adding that the coin looks to be ready to “take the next leg higher.” As these widely held favorites surged significantly higher, many fledgling crypto currencies tagged higher also, as the industry has been mired in controversy for many months.
The Dollar and the Juan…The dollar, often maligned and ‘giving way’ to the Chinese yuan, is still in control. The “Currency composition of foreign-exchange reserves,” has the U.S. dollar controlling 60%, with China at 2.7%, a mere insignificant portion. The Euro, Japanese Yen, and others comprise the remaining 40%, according to The International Monetary Fund. Also according to the Bank for International Settlements about 50% of the global trade is involved with U.S. dollars. Recently, as China has taken over total control of Hong Kong, a major financial center in the far east, commerce is moving out and away to non communist countries. China has lost billions in commerce, with more losses to come. The U.S. dollar is well capitalized, with the strictest policies, safeguarding worldwide transactions, a welcome set of rules for many countries. The often ‘battered’ dollar is a bastion of strength, able to stand strong…on its own.
JPMorgan Chase released first quarter earnings early Friday morning, with ‘spectacular’ results: Revenue increased from $36.19 billion to $39.34 billion, EPS soared from $3.41 to $4.32, profit surging up 52%, besting all analysts’ predictions. Shares soared 7.3%, up over $9.00 in early trading-and remaining extremely strong. As the leader of banks of the world, JPMorgan Chase has ‘raised the bar’ again and again. Jamie Dimon, CEO, is…the Dean!!
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RUMBLINGS ON THE STREET
Jamie Dimon, JPMorgan Chase CEO, in his shareholder letter on the SVB failure, Barron’s “Most of the risks were in plain sight.”
Neil Dutta, head of economics at Renaissance Macro Research, Barron’s Right now the economy is enjoying “a bit of an immaculate disinflation. The Fed will welcome that. But the risk is that a soft landing brings about some reflationary dynamics later,” he added in an interview Friday.
Randal W. Forsyth, Writer of ‘THE ECONOMY’, Barron’s “Ultimately, the March employment report did little to settle the stand off between the Fed and the interest-rate markets. Fed chairman Jereome Powell & Company are sticking to their script of one more interest-rate hike, to a medium rate of 5.1% by year end.”
Aaron Black, Wall Street Journal’s ‘Heard On The Street’ WSJ “The problem for the Federal Reserve is that with the March unemployment rate at just 3.5%, it remains hard to argue that the labor market overall is in bad shape. It also doesn’t help that the Fed will have to make another decision on rates during its next rate-setting meeting on May 3, two days before the next monthly jobs number will come out on Friday, May 5.”