(Justin Vaughn, Editor, Options Trading Report)
Stock prices are floating in the atmosphere… It seems stock splits are out of style, as stocks keep ‘climbing the mountain.’ Once upon a time …in the 70’s, 80’s, and 90’s when a stock reached near $100.00, serious talk of splitting shares was commonplace on the street, and in the boardroom. Stockholders looked forward to splits and receiving more shares, along with more potential of stock appreciation as shares after the split were ‘cheaper.’ (Not really, as values were adjusted per the split) And ‘back then’ when ‘roadside investors’ bought 100, 200, 300, or more shares looking forward to ‘doubling-up’ on a split, was reason enough to invest in securities. Today with Berkshire Hathaway stock hovering above $600,000 a share, Chipotle over $2,700, and NVR above $7,500 a share, splitting is not on the table, as stock prices float to the atmosphere. Thank You Mr. Buffett for leading the way to no… splits. (Berkshire Hathaway in the 90’s was $20,000).
The jobs report, out last week, stung the market ending Friday. All three indexes suffered with the heavy-tech Nasdaq Composite taking the biggest hit. Unemployment edged up to 3.9% reversing a downward trend, along with wages firming. “Labor is rolling and wage inflation is rolling over. The Fed is threading the needle on its dual mandate,” said Jamie Cox, managing partner at Harris Financial Group, referring to the Fed’s goals of maximizing employment and keeping prices stable. The benchmark 10 year Treasury note slipped lower to finish at 4.088%. Bitcoin finished the week at a new high on Friday at $69,294, with gold moving stronger to $2,178 an ounce. Upcoming Tuesday will be the release of the CPI for February, while on Thursday The Census Bureau will be reporting retail sales information. Friday the University of Michigan will announce the Consumer Sentiment index for March.
Bitcoin led the market Monday soaring to over $72,000, with strong ETF activity amid bullish predictions. The rest of the market ‘snoozed,’ Monday anxiously awaited the highly anticipated release of the February CPI, (Consumer Price Index) due Tuesday morning. Both the S&P 500 and Nasdaq Composite Indexes backed off, dragged down by a couple of Magnificent 7 members. Tuesday’s CPI came in at 3.2% (for February). Economists had predicted a figure of 3.1%. Of course the market reaction was negative, with averages turning sour. The CPI is a prime component that the Fed factors into determining present and future rate hikes. Mr. Powell has steadily maintained his goal of 2% inflation; the means to that end is a lengthy process, with many steps downward. With stronger than expected labor and wage strength, the CPI has remained somewhat stubborn. Even as the CPI has remained obstinate the market has continued positive with the S&P 500 climbing to new levels, standing up 8.3% for the year. Both high tech and chip makers have forged ahead driving the tech minded Nasdaq Composite. The Dow Jones Industrial Average jumped 236 points to finish Tuesday while bitcoin took a breather, trending in the $71,000 level, off slightly from its high.
Wednesday’s market hit the skids, with both the S&P 500 and Nasdaq slipping 0.2% and 0.5% respectfully. High tech and the chip sector pulled the averages down along with the aftermath of digesting the slightly negative CPI. On Thursday, February’s Producer Price Index came in hotter than expected at 0.6% from last month double than what was expected at 0.3%. A retail sales report showed an increase of 0.6% shy of the anticipated 0.8%, but better than January.
RUMBLINGS ON THE STREET
Kathy Bostjancic, chief economist for Nationwide Mutual, WSJ “The labor market is broadly normalizing with sturdy gains that are not overly exuberant,” said Ms.Bostjancic. It’s an overall solid picture for the economy.”
Rep. Kat Cammack (R, Fla.) a member of the House Energy and Commerce Committee, referring to the Whitehouse proposed ban of TikTok, WSJ “They made the point for us. They hurt themselves pretty tremendously by doing what they did in targeting members of Congress and using content creators and users of the app as foot soldiers of the Chinese government,” she said.
Richard Bernstein, CEO and chief investment officer of Richard Bernstein Advisors, Barron’s “If you have a stronger economy and the Fed is on hold, the headline S&P 500 doesn’t do an awful lot. But the rotation within the stock market would be tremendous, with money moving out of the Magnificent Seven into other categories.”
Barry Bannister, chief equity strategist at Stifel, Barron’s “A solid economy and sticky inflation will mean that some of the high (price/earnings multiple) megacap growth stocks top out and the market broadens out.”