(Justin Vaughn, Editor, Options Trading Report)
All indices slid back on Friday, with the Dow Jones Industrial Average falling 100 points, while the tech heavy Nasdaq Composite and S&P 500 suffered minor losses of 0.24% and 0.19% respectively. Speaker of the House Kevin McCarthy chose House Representative Garret Graves to be his ‘point man’ and fresh face, in discussions with President Biden on the debt-ceiling crisis. Investors and traders were disheartened Friday as the Republicans spoke negatively of the status of discussions on solving the debt-ceiling debacle. President Biden, out of the country until Sunday, further pushing ahead the ‘day-of-reckoning.’ A host of earnings reports flooded out Friday, with nearly all nicely positive. Still the market backed off!
The debt-ceiling crisis continued to ‘hang over’ the market’ at Monday’s opening, freezing gains all day long. Regional Bank stocks, buoyed by good earnings reports, were on the positive side. Janet Yellen warned again that the U.S. would lapse after June 1st unable to financially stay above water. The indexes were mixed at closing, with the S&P 500 and Nasdaq Composite slightly higher while the Dow Jones Industrial Average lost 100 points. Stocks retreated again Tuesday, with the Dow Jones shedding another 230 points as concerns deepened. The feelings on the ‘Street’ are more negative that a solution can be attained by June 1st. After meeting lateTuesday, Kevin McCarthy reported no movement and alluded to possible joint cooperation between the Senate and the House of Representatives to work-a-deal. As the day progressed, concerns about China-U.S relations surfaced as China and Russia continued discussions on energy related issues, and the most talked about… chip concerns. Noted market strategist Ryan Detrick of Carson Group said, “This time a week ago we were feeling pretty optimistic things would be solved, but the realization is: to make the sausage in Washington it is messy.” And still, a major concern is inflation and all the ramifications to control it, and the after effects. Recent Federal Reserve Officials comments tend to favor continuing the 0.25 rate hikes of the past several months. As Thursday’s session ended, both sides commented that an agreement is close. It appears the ‘difference’ is $70 billion dollars, and as quoted, ‘a doable number.’ The ending indices were mixed, with the DJIA losing a bit, 0.11%, while the S&P 500 edged up 36 points, the technology minded Nasdaq Composite had a significant move, up 213 points, or 1.71%, after a ‘better-than-expected’ earnings report from tech favorite Nvidia.
As the subject of this paper several times the past two months, Lithium is again in the spotlight as China scrambles to find more sources for fast growing demand in the manufacturing of Electric Vehicles. China is a leading producer of EV’s that are more economically priced. Presently, China is the holder of approximately 8% of the world’s known resources, and a refiner of nearly 50% of finished Lithium. China is actively securing several nations in Africa and Latin America as potential usable reserves. Australia and the golden triangle (Bolivia, Chile, Argentina) have the largest reserves presently, with Australia blocking China from any investment. The golden triangle is in the process of developing a strong ‘cartel’ to control production and prices, much like the giant oil cartel, OPEC. With the U.S. moving ‘head-first into lithium mining and refining, and with untold reserves in the Southern California-Salton Sea area, the U.S. will become a major player by 2025 and not dependent.
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RUMBLINGS ON THE STREET
Nicholas Colas, Co-founder of DataTrek Research, Barron’s, speaking to the University of Michigan Sentiment Survey, which revealed the lowest number level in 40 years. “Sentiment, when it is this distressed, is always a contrary indicator,” he said
Ben Levisohn, Substitute Writer of ‘UP & DOWN WALL STREET,’ for Barron’s, “Always look on the bright side of life, Monty Python once sang, and that’s a message the stock market seems to be embracing.”
Janet Yellen, U.S. Secretary of the Treasury, at the G-7, on the debt-ceiling crisis, Barron’s “Personally, I think we should find a different system for deciding on fiscal policy.”
Christyan Malek, Global head of energy strategy, J.P. Morgan, Barron’s “At J.P. Morgan, we believe the world can cope with $150 a barrel. There is plenty of scope to go up without hurting demand. It’s very different from any previous cycle. You have ESG (environmental, social, and corporate governance) pressures not to invest in oil. It comes at a higher (cost of capital) than it traditionally has.”