(Justin Vaughn, Editor, Options Trading Report)
April Fools Day kicked off a second quarter, following a blazing January-February-March. Twenty two record setting new highs for the indices, leaving no doubt that the ‘bull’ is alive and rearing its head. After finishing 2023 at a torrid pace 2024 opened and continued strong throughout the first quarter. Monday’s opening was scattered as the Dow Jones Industrial Average drifted lower, while the Nasdaq Composite was a bit higher. Bonds were weaker as the 10-year Treasury edged 12 points higher to 4.32%. Investors and traders were directionless as the indexes floundered. Even the heavy techs were hesitant, with the magnificant 7 struggling to stay even.
The market opened Tuesday with the Dow Jones falling nearly 400 points, as nearly every sector gave up ground. Both the S&P 500 and Nasdaq Composite were off 0.8% and 1.2% respectively. Worries mounted that the Fed will cut interest rates at least one time in the first half of the year, giving the market more jitters. Even as the lingering Fed concerns of inflation and world-wide warring conditions, the market has been able, in the first three months, (and last months of 2023) building on positive economic conditions. The economy continues to defy economists as the U.S. consumer stays steady and is willing to adjust to higher prices for nearly every commodity…and travel. Oil was stronger hitting the $85.00 a barrel level, boosting gasoline closer to $4.00 a gallon. The market firmed on Wednesday after two aimless sessions Monday and Tuesday, up a slight 0.1%. Mr. Powell’s comments gave life to the market as he said: “The Fed will likely cut interest rates this year amid inflation’s ‘bumpy’ path downward.” All three indexes, including the Russell 2000 ‘perked up’ reversing to hi-ground, with the Nasdaq Composite leading the turn-around. All released economic data indicates a resiliently strong market. Recent data released Wednesday morning showing prices paid in the services sector hit its lowest level since March of 2020, hinting that inflation is in fact in a decline, after a slight increase last month. Disney successfully fended off Nelson Peltz ‘quest to secure board seats, ending his months-long effort.
All three indexes were positive on Thursday’s open, finally heading to higher ground to start the second quarter. The March Jobs Report due to be released on Friday is a heavy component for the Fed in its rate hike decision process. Economists and labor experts alike pretty much agree that the very solid U.S. labor market will show that jobless claims will be insignificant, less than 10,000. The Labor Market throughout the entire pandemic, starting in March of 2020, has been a stalwart component in the equation of the U.S. economy. It has not wavered nor given the Fed any negative concerns. The University of Michigan Consumer Sentiment Survey, released this week, hit the highest ‘level’ in three years. A powerful survey of the pulse of the U.S. consumer.
The mysterious value of gold, a gleaming metal that perplexes everyone. A fixed price of $35.00 an ounce in 1971, ended the backing of the dollar. According to the World Gold Council, gold appreciated more than 10 times in the 70’s, then fell flat in the 80’s and 90’s. Gold soared over 250% during the major financial crisis of 2006 to 2008, as it became the “safe haven” for many investors. Recent movements to the $2,100 level have been attributed to the many world-wide warring crises, Israel/Hamas, Ukraine/Russia, and several African Nations. Major gold purchases by central banks have boosted gold prices to the $2,300 level. The World Gold Council revealed central Banks in February purchased 19 tons of gold, buying heavily the past 9 months. As Mr. Buffett once stated: “You can fondle the cube, but it will not respond.”
RUMBLINGS ON THE STREET
John Reade,m Chief market at The World Gold Council, WSJ “Chin’s real-estate sector has difficulties. The equity market is volatile. The currency is weak. All of these things are encouraging Chinese investors to diversify into gold.”
Christopher Waller,Fed Governor, WSJ, “These shorter-term inflation measures are not telling me that progress has slowed and may have been stalled. In my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future.”
Senator Marsha Blackburn (R., Tenn) WSJ She and Senator Richard Blumenthal (D., Conn) have asked the administration to “declassify information provided to lawmakers in closed-door briefings about the threat posed by TicTok so that the public could see it.” Ms. Blackburn added, “What we do know, and the briefing confirmed, is what we’ve long suspected: TicTok is basically spyware that can be used by its Beijing parent ByteDance,” she said.
Marta Norton, chief investment officer of the Americas for Morningstar Wealth, WSJ “If the market has been wrong about anything over these past few years, it’s been way too precise in trying to determine the timing of the Fed pivot.”