Economic Bliss – by Justin Vaughn – Options Trading Report

(Justin Vaughn, Editor, Options Trading Report)

After a sizzling first four days last week, with the indices blazing new records, Friday took a breather, easing back. The Dow Jones Industrial Average and the S&P 500 had nice gains for the week rising 2% and 2.3% respectfully. The Nasdaq Composite surged with the heavy tech index up 2.9% as the magnificent seven and ‘tag-alongs’ were actively strong. As Mike Bailey, director of research at FBB Capital quotes: “It’s more of a pause as opposed to game over,” referring to Friday’s negative market. Investors and traders stepped back from the charging bull on Monday and Tuesday as securities faded a bit as the Dow Jones led the market downward, falling 162 points in late trading Tuesday. Both the S&P 500 and Nasdaq Composite fell 0.4%. Even as Tuesday’s open hinted at a possible positive market, stocks turned and extended losing for the third straight day. After a sizzling couple of months with index records being broken weekly, the market has settled back. Bill Merz, head of capital-markets research at U.S. Bank Wealth Management said: “We’re in an environment where growth continues to positively surprise. The market is telling us loud and clear what is apparent in some of the backward-looking economic data: “This is a good environment to lean into risky assets.” After three days of climbing the 10-year Treasury note reversed, to fall from 4.252% to 4.233%. At the opening bell Wednesday all the indexes were stronger as investors were looking forward to the release of the PCE (Personal Consumer Expenditures Index), a favorite of the Federal Reserve in calculating and measuring inflation.

Economists and analysts alike are encouraged by the economic data and that the economy is building a solid base, with the U.S. consumer able to navigate under current financial conditions. The corporate sector is humming along, with a majority of companies bettering revenues and earnings year over year.

The S&P 500 hit a new record Wednesday as the Dow Jones soared 475 points, and the market was off and running ‘full-steam-ahead,’ with investors and traders jumping back in the fray. Even the small-cap Russell 2000, filled with growth and value stocks was a prime mover, up 2%. Steve Sosnick, chief strategist at Interactive Brokers said; It’s healthy that we’re seeing the market move more or less sideways right now. If the broad market is just shooting higher all the time without pause, that’s a runaway train.” The 10-year U.S. Treasury yield dropped again to 4.196% from 4.233% slipping back the past three days. Bitcoin dropped a bit to $68,641.21, (and sure to move, one way or the other) and oil hovered steady at near $86.00.

Cocoa Update…Cocoa hit a record $10,000 a metric ton last week and presently trading at $9,900 a metric ton. March gains alone are over 54% and 130% for the year. Projected harvests are severely affected by continuing poor weather conditions. ‘El Nino’ rains and the spread of “black pod disease” have caused serious crop damage in Ivory Coast and Ghana, the largest producers of cocoa beans. U.S. chocolate producers are fighting an uphill battle, paying exorbitant cocoa bean prices and facing consumers reluctant to pay heavy price increases for their candy. Some chocolate producing companies have seen their stock recently drop downwards 5% to 8%. Sales have declined also, as retail prices slow consumer buying. Chocolate affectionados will have to ‘dig deeper’ to satisfy their cravings

RUMBLINGS ON THE STREET

Mustala Suleyman, AI pioneer, head of Microsoft’s AI products, WSJ “I believe AI will be one of the most significant transformations we’ll witness this century,” he said in a November opinion article in the Journal.

Carl Riccadonna, Chief U.S. economist at French Bank BNP Paribas, WSJ Speaking of Mr. Powell’s remarks on Wednesday, “The outcome makes us more confident in our expectation for the first cut to come in June.”

Joseph Quinlan, chief market strategist for Merrill and the Private Bank, Bank of America, Barron’s “Between China’s push for self-sufficiency and the U.S. bipartisan, anti-China embrace on trade and investment, investors should expect more volatility and uncertainty around the large-cap earnings of U.S. multinationals most exposed to China.”

Sam Weinstein, a professor at the Cardozo Law School at Yeshiva University, WSJ “There may be lots of bad conduct by Apple, but proving a monopoly may be difficult. Case law is pretty favorable to Apple.”