(Justin Vaughn, Editor, Options Trading Report)
Peaks and valleys ruled the markets last week as investors and traders fought through a topsy-turvy sell off. After all the ups and downs of the weeks’ trading, indexes were just above where the ‘ride’ started. The standard-bearer S&P 500 after all the juggling still finished up 12% so far this year, a remarkable gain amidst the volatility of the recent market. “The market is apt to be volatile between now and Labor Day,” said George Ball, chairman of investment firm Sanders Morris. “Trading columns will be thin and there will be palpitations up and down related to various economic data releases,” he added. Last Friday’s job report was ‘monumental’ prompting the sell off and the realization that the Labor Market was ‘creaking.’ On a plus note, corporate earnings have ‘stayed on course,’ surpassing the five year reporting average. 78% of those reported 2nd quarter earnings so far, have bested year over year results, better than the five year average of 77% according to FactSet Analyst John Butters. With over 450 companies’ reporting 2nd quarter earnings nearly 80% have outperformed year over year quarterly results as noted by FactSet. Friday’s yield on the 10-year Treasury note slid a bit ro finish at 3.94%. The Japanese Nikkei Index by the close of the week had recovered all but 2.5% of its drop of 12%. The University of Michigan’s ‘Survey of Consumers,’ directed’ by Joanne Hsu said, “Consumers have shown that consumer sentiment, though far above a historic low in the mid-2022, remains guarded as high prices drag down attitudes especially for lower-income people.” After finishing an uneasy week with a churning market, investors and traders were struggling to find ‘good reason’ to buy stock. Some believe the the coming CPI (Consumer Price Index) report and Consumers retail sales report, due out Wednesday and Thursday respectively will ‘de-pressure’ market negatives, giving positive reasons to be in the market. These reports will hopefully be of a positive note and give market interest a ‘shot-in-the-arm’ as both releases will give a pulse of the market and economic conditions. As Monday closed the indexes were mixed, with the S&P 500 flat, while the Nasdaq Composite edged slightly up 0.2%. The Dow Jones Industrial Average, a composite of 30 Blue Chip value stocks representing a cross section of U.S. companies, lost 150 points. Many Strategists and Economists are now looking for the market to ‘sway’ near flatline while awaiting CPI and PPI numbers. “Like a stubbed toe, pull-backs in the market are inevitable, something investors tend to forget during low periods of volatility,” spoken by George Smith and Adam Turnquist in a joint note to clients on Monday. The Nasdaq was the leading Index on Tuesday surging upward 2.4% as tech showed dominance in their sector. The S&P 500 was 1.7% higher and the Dow Jones Industrial Average was ahead 1%, completing 4 consecutive days on winnings. Wednesday’s CPI announcement was 2.9%, slightly below 3%, as lengthy inflation’s stubborn numbers will now give the Federal Reserve good reason to cut interest rates. “Today’s CPI report confirms a trend that has been in place for a number of months: inflation moderating to a more normalized run rate level of price gains and one that should continue to build confidence for the Federal Reserve that this part of its mandate has been durably tamed,” said Rick Reider, chief investment officer of Global Fixed Income. A favored Federal Reserve measure, the personal-consumption-gauge (PCE) has drifted down to 2.5% from 7.1% 2 years ago, a very revealing indicator.
RUMBLINGS ON THE STREET
Joseph Hinrichs, chief executive at CSX, speaking on an earnings call Monday, WSJ “There’s just a little more uncertainty about where the economy really is,” Mr. Hinrichs said. You could say where we are today versus two months ago, the economy seems to be a little bit more fa\ragile,” he added.
Torsten Slok, chief economist, partner, Apollo Global Management, Barron’s “If there is one major economic theme in the next three to five years, it’s the risk that we will see permanent upside pressure in inflation.”
Adam Hetts, Janus Henderson, head of multi-asset Strategy, Barron’s “A reset could create a more solid foundation for a push higher over the rest of the year, assuming the U.S. The LaborCarl Weinberg Market holds together.”
Carl B. Weinberg, founder and chief economist of High Frequency Economics, Barron’s “The fundamental economic outlook hasn’t changed, neither has the inflation outlook, despite a spate of softer economic reports. This flight will end up with more moderately economic growth and pure statility.”
