Fed Funds futures indicate that market participants do not
believe a rate hike is on the table anytime soon. There is only a 10% chance
that a hike will occur this year and 30% chance of a Fed rate hike in September
2017! Investors and analysts do not expect the FOMC to hike the key rate until
2018. Fed Chair Yellen, however, continues to hint at a rate hike this year.
The disconnect continues between the central banker’s forecasts and the market
response.
At 6 AM EST, S&P +3. Dow +24. Nasdaq +3. VIX 14.54. The
DAX and CAC are at the highs of the session up +1% and +0.8%, respectively. Oil
moves higher. WTIC 45.46. Brent 46.68. Natty gains +0.7% to 2.80. US 10-year
yield 1.39%. German bund -0.18%.
GS says, “The BOE is expected to implement credit easing in
August.” Goldman states the obvious since BOE Governor Carney said last week
that more stimulus would be provided in August. Goldman must have been sleeping
during that press conference.
At 7:22 AM EST, US futures and European stocks float higher.
S&P +6. Dow +50. Nasdaq +9. Chip maker AMD drops -4.2% on a downgrade.
DAX +1.4%. CAC +1.1%. FTSE +0.1%. Italy and Spain lead
higher on potential bank bailout news. MIB +2%. IBEX +1.3%. European auto
makers are rallying. BMW +3.1%. VW +2.8%. Daimler +3%.
The all-important Monthly Jobs Report is on tap shortly. The
consensus is for 180K jobs and the revision to last month’s 38K jobs
disappointment will be important. The unemployment rate is expected to bump up
a touch to 4.8% from last month’s 4.7%. Counter intuitively, when people begin
looking for work again due to a growing economy, the unemployment rate
typically moves higher. This is because people that were frustrated and not
looking for work are once again counted as looking for work and this sends the
percentage higher. The private payrolls are expected to come in at 170K jobs
versus the prior 25K jobs.
Average Hourly Earnings are expected at +0.2% month-on-month
versus the +0.2% consensus and +0.2% last month. Wages are arguably more
important than the headline jobs number and unemployment rate. The Federal
Reserve has been printing money and implementing Keynesian monetary policies
for nearly eight years straight trying to create inflation. The FOMC has the
+2% inflation goal. Inflation cannot exist without wage inflation occurring.
When was the last time you received a raise? If so, was it only enough to buy a
hotdog and a Coke?
If wages meet the +0.2% expectation, that would put the
annual wage number at about +2.7%, respectable, the highest since 2009, but
still far short of what is needed to convincingly bring about inflation. As a
rule of thumb, an annual wage rate of +4.5% will guarantee inflation and a robust
economy. Let’s be generous and say the +4.0% to +4.5% annual wage range would
be sufficient to bless an inflation path ahead. The +2.7% remains far short of
this goal. If the wages come in below the +0.2% month-on-month expected, that
would be a dire commentary on the Fed’s obscene eight-year financial
experiment. If wages are +0.3% or +0.4% or more, that would place the rate hike
talk back on the table. The wage component is key and directly impacts the
Fed’s rate hike, or cut, path ahead.
Average Hourly Workweek is expected to remain steady at 34.4
hours. Last month’s Labor Participation rate is 62.6% remaining at multi-decade
lows. The common people in America hope for jobs while the wealthy become
filthy rich as the Federal Reserve pumps stock prices higher with easy money. The
jobs stage is set. The tension increases.
Before the jobs data, S&P futures are up +6. Dow +50.
Nasdaq +7. Euro 1.1065. Euro/yen 111.11. Dollar/yen 100.42. Pound 1.2974.
Canadian dollar 1.2999. Aussie dollar 0.7517. WTIC oil 45.60. Brent oil 46.86.
Gold 1356. Silver 19.79. Natural gas 2.13.
At 8:30 AM, the Monthly Jobs Report is a huge 287K jobs with
a 4.9% unemployment rate. The average hourly earnings are up a tiny +0.1%. The
headline number is a shocker after last month’s paltry 38K jobs. April jobs are
revised 21K higher and May jobs 27K lower for a net -6K drop for revisions over
the last two months. The three-month average is 147K jobs nothing to write home
about.
Just as the headline 287K jobs is a shocker so is the hourly
wages. US futures catapult higher on the report not because of the headline
number but instead because of the low wages. S&P +11. The disinflationary
and deflationary funk continues. With non-existent rises in wages, inflation
will not increase and the Fed will not hike rates as per the discussion above.
The central bankers will maintain easy money policies so stocks rally strongly.
All Hail the central bankers! The day takes on a party atmosphere. Private
sector job gains are up 265K.
The bump higher in the unemployment rate to 4.9% is not too
surprising since, as described above, more people may be entering the job
market more actively looking for work. Leisure and hospitality jobs are the top
gainer up 59K jobs (lower-paying jobs) and healthcare jobs gain 58K.
Information systems gain 44K jobs which is the VZ workers going back to work
(this may have bumped the jobs numbers by 30K or more). The U-6 rate is down to
9.6% from 9.7%. The Labor Participation Rate is 62.7% compared to 62.6% last
month. Average hours worked are steady at 34.4 hours for the last five months.
Pandemonium breaks out in markets. S&P futures rocket
launch higher up +13. Dow +102. Nasdaq +20. Russell 2000 Index futures +11.
European stocks move higher. DAX +1.9%. CAC +1.6%.
US Treasury yields are; 2-year 0.65%, 5-year 1.02%, 10-year
1.43%, 30-year 2.16%.
Euro 1.1038. Euro/yen 111.30. Dollar/yen 100.82. Pound
1.2949. Euro/pound 0.8523. Mexican peso 18.7782. Canadian dollar 1.3045.
Dollar/yuan 6.6906. Aussie dollar 0.7508.
WTIC 45.54. Brent 46.84. Natty 2.77. Gold 1344. Silver
19.47. Copper 2.13.
US Treasury yields are; 2-year 0.63%, 5-year 0.99%, 10-year
1.41%, 30-year 2.14%. German bund -0.17%. Japan 10-year yield -0.29%.
DAX +2.1%. CAC +1.8%. FTSE +0.6%. Euro 1.1018. Dollar/yen
101.04. Pound 1.2929. Canadian dollar 1.3049. Aussie dollar 0.7527. WTIC 45.49.
Gold 1344.
At 8:45 AM EST, it’s a bull party! S&P +18. Dow +135.
Nasdaq +30. Wage growth is nil so the Keynesian money printing will continue
forever! All Hail the central bankers! US futures and European stocks rejoice! DAX
+2.4%. CAC +2.2%. FTSE +0.7%. MIB +2.8%. IBEX +2.4%. PSI +1.3%.
At 9:06 AM, S&P +15. Dow +111. Nasdaq +21. WTIC oil
45.81. Brent oil 47.07. USD 96.22.
Elizabeth Holmes, beleaguered leader of the troubled
Theranos, the company that claimed it had technology to carry out many medical
tests with only one drop of blood, is banned from the medical industry for two
years. Holmes, in her signature black turtleneck, was called the next Steve
Jobs; now she hangs her head in shame. Will the smart and pretty Holmes redeem
herself in coming years? Time will tell.
CUDA +16%. Barracuda may send other cybersecurity companies
such as PANW, FEYE and SYMC higher. JUNO -25%.
S&P +12. Dow +94. Nasdaq +18. DAX +1.6%. WTIC 45.59.
Brent 46.83. Gold 1362. Silver tags 20.00. Copper 2.13.
Treasury yields retreat; 2-year 0.60%, 5-year 0.97%, 10-year
1.37%, 30-year 2.11%. The 2-10 spread is 77 bips. The long duration yields fall
so the preference is to buy the long end. The 2-year yield is somewhat anchored
so no one expects an increased chance of a Fed rate hike anytime soon. A hike
is not on the table especially due to the lack of wage growth which will
prevent inflation from occurring. Stocks rally since central banker easy money
continues forever.
At 9:20 AM, the NYSE observes a moment of silence to honor
the five murdered police officers in Dallas, Texas, overnight.
The US Capitol in Washington, DC, is on lockdown after a
staff member attempts to enter buildings brandishing a gun. Authorities are
searching for the man. The world becomes nuttier each day. Stocks are set for a
positive start.
US stocks begin trading by gapping higher as the futures
indicate. The S&P 500 launches 15 points, +0.7%, to 2113. The Dow
Industrials are up 129 points, +0.7%, to 18026 above the 18K level. The Nasdaq
Composite is up 30 points, +0.6%, to 4906. The Russell 2000 small caps gain 10
points, +0.9%, to 1160.
The VIX drops like a rock to 13.75 providing bull fuel for
stocks. Market bears are toast with the VIX under 14. Short-sellers are running
for the exits creating more short-covering
fuel for higher stock prices.
GPS +5.5%. CUDA +15%. HUM -1.4%. ANTM +0.7%. Energy, basic
materials, industrials, chips and banks send equities higher. XLE +1.1%. XLB
+1.3%. XLI +1.1%. SOX +1.1%. XLF +1.5%. BAC +1.8%. C +1.2%. GS +1.3%. KRE
+1.6%. Banks celebrate. Utilities and telecoms are sold. XLU -0.6%. T -0.7%. VZ
-0.2%.
The financials and industrials lead in the Dow Industrials
index while healthcare, telecom and big box retail lags. AXP +2.5%. JPM +2.2%.
CAT +2.0%. JNJ, UNH, VZ and WMT are each flat or negative.
The Dallas murders are the deadliest attack against US law
enforcement officials since 9-11. One of the attackers in the Dallas killings
is Micah Xavier Johnson form Texas. Micah is a prophet’s name from the Old
Testament. Interestingly, law enforcement says Johnson hated white cops; the
police are pushing a racism narrative. Officials conveniently fail to repeat
the report from hours ago that say the nutcase was yelling, “The end is near”
as he shot people. These statements appear to conflict.
Was the Dallas murderer perhaps a religious zealot believing
the end of the world is near or was he a racist targeting cops? The other three
suspects may provide answers. The news flow is fishy; you cannot trust what you
are told from the main stream media, law enforcement and other outlets these
days since words and statements are chosen that weave a narrative to promote a
particular political agenda. Technology has greatly changed the world.
Gun makers SWHC gain +4.1% and RGR +3.5% after President
Obama touts more anti-gun rhetoric this morning. The president is the single
best marketing force behind the strong guns and ammunition sales over the last
few years and big profits in Smith & Wesson and Sturm Ruger stock prices. Every
time President Obama threatens to take away Second Amendment rights from law-abiding
American citizens, gun sales go through the roof.
Treasury yields are; 2-year 0.62%, 5-year 0.99%, 10-year
1.39%, 30-year 2.13%.
DAX +2.1%. CAC +1.7%. The SPX and INDU are each up +1%.
COMPQ +1.1%. The RUT is up 16 points, +1.4%, to 1166. Euro 1.1049. Dollar/yen
100.76. Pound 1.949. Canadian dollar 1.3053.
WTIC oil 45.27. Brent 46.61. Gold 1355. Silver 19.92. Copper
2.13.
At 10:57 AM EST, stocks are at the highs. The SPX is up 24
points, +1.1% to 2121. The Dow is up 171 points to 18066. The Nasdaq gains 64
points and RUT is up 22 points. VIX 13.55. TRAN +1.7%. Semiconductors run
higher fueling big gains for the broad indexes. SOX +2.5%. NXPI +2.5%. AVGO +2.1%.
MU +3.6%.
European indexes end the session in a sea of green. The pubs
will be joyous this evening. The DAX leaps 213 points, +2.3%, to 9633. The CAC
jumps 69 points, +1.7%, to 4187. The FTSE gains +0.9% to 6592. Italy’s MIB
explodes +4.1% higher to 16062 fueled by bank bailout news. Spain’s IBEX jumps
+2.2% to 8188. Portugal’s PSI is up +1.4% to 4451.
The Italian banks explode limit up on bailout news. The central
bankers will save the troubled European banks. Intesa Sanpaolo catapults
+10.4%. Banco Popolare is very popular launching +18.4%. Monte dei Paschi gains
+4.6%. Traders celebrate central banker bailouts. The central bankers are the
market.
Auto makers are joyous. BMW +4.3%. Porsche +5.1%. Peugeot
+5.3%. GS downgrades the UK banks but they print strong gains. RBS +6.66%. BCS
+3.6%. Lloyds +5.9%.
For the week, the DAX is down -1.4% not even the huge Friday
rally could turn the week positive. The CAC ends down -2% this week. The FTSE
ends the week +0.3% higher bucking the negative trend. The MIB loses -1.4% this
week despite today’s joy. The IBEX is down -1%. PSI loses -2.3%. Portugal and
France lead lower.
The bull party is in full swing into lunchtime with the SPX
up 21 points to 2124. The Dow is up 201 points at 18097 ready to take 18.1K.
The shorts are running for their lives. Stocks are melting-up with traders
looking for new all-time highs. The lack of wage growth in the jobs report, which
verifies that inflation will not appear anytime soon, opens the door to
perpetual central banker easy money which pumps stock prices higher and makes
the wealthy filthy rich.
Attorney General Lynch, fresh off her incestuous meeting and
collusion with the Clinton’s, President Obama and FBI Director Comey to sweep
the Hillary Clinton email scandal under the rug, conducts a press conference on
the Dallas shooting. What do you think the chances are that she will blame guns
for the murders?
Lynch does not provide any new material information on the
shootings and attackers and instead, right on cue, she touts the Whitehouse
anti-gun agenda. She is filling in for President Obama who would be giving the
same anti-gun and anti-Second Amendment speech if he was stateside (the
president is in Warsaw for the NATO Summit). These folks are very predictable.
As Lynch talks, SWHC is up +3.2% and RGR shoots +4.1% higher.
AMZN is up +1.3% printing a new all-time record high at
746.10. Amazon is up +73% over the last year. CEO Jeff Bezos sleeps on bags of
money. Amazon is a retail giant. Twitter is making deals to stream sporting
events the news sending TWTR up +4%. Retailer GPS remains joyous since last
evening gaining +5.3% today. INTC gains +2.1% ona Bernstein upgrade which lifts
the entire chip sector.
At 1 PM, the BHI Oil Rig count is up 10 rigs to 351. Oil
rigs have increased five of the last six weeks. Oil prices begin trailing lower
after the rig count. WTIC oil 45.45. Brent oil 46.73.
At 2:33 PM EST, WTIC oil is up +0.5% to 45.35. Brent oil
gains +0.7% to 46.31. Prices are dropping. Natty 2.80. Gold 1360. Silver is up
+1.7% to 20.17. Virtually every asset class is higher today including bonds
(lower yields) except copper that sits at the flat line at 2.12.
The SPX is up 37 points, +1.5%, to 2129 only a point away
from the all-time closing high from May 2015. The Dow is up 258 points, +1.4%,
to 18153. The Nasdaq leaps 80 points, +1.6%, to 4957. The Russell 2000 small
caps catapult 27 points higher, +2.3%, to 1176. VIX 13.36. The bull’s are
partying like its 1999.
Euro 1.1043. Euro/yen 111.07. Dollar/yen 100.58. Pound
1.2947. Euro/pound 0.8530. Mexican peso 18.4599. Pound 1.3047. Dollar/yuan
6.6908.
At 2:36 PM EST, the SPX prints above the all-time closing
high at 2130.82 from 5/21/15 over 13 months ago. The SPX all-time intraday high
is 2134.72 from 5/20/15. The S&P 500 is above 2130.82 for two minutes and
then retreats lower.
At 2:54 PM, the SPX makes a second run at the all-time
closing high printing a HOD at 2132, but again, price retreats after a couple
minutes. The SPX does not move above 2030.82 for the remainder of the day.
At 3 PM Consumer Credit data reports a strong $18.6 billion increase
in credit especially credit cards, student debt and auto loans. The prior month
was $13.4 billion. Consumer debt is at a record $3.6 trillion.
Bulls remain in charge all day long with low volatility. VIX
13.32. Banks remain strong. BAC +1.2%. JPM +2%. C +1.6%. GS +2.2%. WTIC 45.23.
Brent 46.63. Euro 1.1053. Dollar/yen 100.44. Pound 1.2955. Euro/pound 0.8532.
KITE tumbles -7%. JUNO -31%. Cancer drug companies are
smacked but CELG is up +0.6% and AMGN +3%. IBB +1.2%. The semiconductors lead
higher. SOX +2.8%. Nvidia is at a new all-time high with NVDA up +4%. NXPI
+3.6%. INTC +2.4%. Amazon is at new all-time record highs with AMZN up +1.2%.
Retail, basic materials, industrials and banks lead the
bullish parade. XRT +2.5%. XLB +2.5%. XLI +1.9%. XLF +1.8%. The sector leaders
over the last month are utilities, telecom, consumer staples, consumer
discretionary and healthcare. A few stocks on the new high list include UPS up
+1.6%, MMM +1.2%, GE +1.2%, NUE +3.3% and VMC +1.5%.
Treasury yields are; 2-year 0.62%, 5-year +0.96%, 10-year
1.37%, 30-year 2.10%.
US stocks end the session in a joyous upside celebration. 95%
of stocks on NYSE are higher. This morning’s jobs report shows flat wage growth
so inflation will not appear anytime soon. With disinflation and deflation
continuing to run the US and global show, the Fed will maintain easy money
policies indefinitely. Market participants do not expect the Fed to hike the
key rate until 2018. Stocks rally strongly driven by perpetual central banker
easy money.
A disturbing development this week is that the SNB (Swiss
National Bank) reveals $500 billion in holdings in stocks such as AAPL and JNJ.
Say what? The central bankers are madmen. BOJ Governor Kuroda is buying stocks
and ETF’s as part of Japan’s monetary policy. It is very sick. The central
bankers are printing money that is sending asset prices higher as they keep
buying those assets with more and more easy money. These are derivatives on top
of derivatives. Price discovery is lost due to the near-eight years of Keynesian
money printing. It will be a spectacular event when it all falls apart.
For the robust session, the SPX jumps 32 big points, +1.5%,
to 2130 falling one point short of a new all-time closing high. You would think
after it made it all that way it would have closed above. The HOD is 2132. The
all-time closing high is 2131 and all-time intraday high, the highest number the
S&P 500 has ever printed in history, is 2135. The weekend newspaper and
internet headline writer’s are disappointed that they cannot tout a new
all-time record. The S&P 500 bounced off the 200-day MA at 2025 eight
trading days ago and is now over 100 handles higher.
The Dow gains 251 points, +1.4%, to 18147. The market bears
are running for cover creating upside market fuel. The INDU bounced off the
200-day MA at 17293 eight trading days ago and never looked back now above
18.1K. The COMPQ gains 80 points, +1.6%, to 4957. The RUT is up a huge 28
points, +2.4%, to 1177. Bullish traders wree buying small caps with reckless
abandon unconcerned about price.
Volatility sinks creating a happy session for bulls. The VIX
is at 13.20 sown at the lows for the year. The VIX has dropped from near 27
down to 13 in only 10 days the largest and fastest drop ever; -52%. Traders are
fearless. Low volatility indicates a complete lack of fear in the markets and
this jives with traders believing in the central bankers continuing their easy
money policies.
The CPC put/call drops to 0.73 which indicates complacency
in markets. The CPCE put/call drops to 0.52 also indicating complacency and
lack of fear. The NYMO spikes to 49 starting into the elevated area where
market tops are placed. The VIX, CPC, CPCE and NYMO all hint that a significant
near-term top is at hand likely next week. Traders are drinking Fed wine, BOE
champagne and ECB brandy without a care in the world fully believing in the
power of the central bankers. What have we become?
For the week, the SPX is up +1.3%. The Dow gains +1.1% and
the Nasdaq Composite is up +1.9%. The Russell 2000 small caps gain +1.8% this
week. WTIC oil is slapped -8.4% lower this week to 45.12. Brent oil drops -8.1%
to 46.55. Natty gas loses -6% to 2.82. Gold gains +1.7% this week to 1367.
Silver is up +2.5% to 20.35. Copper
tanks -4.4% this week dropping while no one was looking. The US 10-year yield
travels through 1.31% to 1.44% this week settling at 1.37%.
Energy is a loser this week with XLE down -1.3%. Financials
print gains with XLF up +0.8% and bank earnings on tap beginning next week.
Basic materials are a big winner this week up +1.3%. Ditto industrials; XLI
+1.9%. Healthcare stocks are winners. XLV +2.1%. Biotech is up big. IBB +3.2%.
Retail stocks jump higher. XRT +2.5%. Chips were joyous driving the broad
indexes higher. SOX +2.3%. NXPI +1.5%. INTC explodes +3.8% higher this week.
Amazon prints a new all-time record high gaining +2.8% this
week. General Electric, an industrial, gains +2.3% and CAT is up +1.2% this
week. IR +2.7%. Infrastructure plays are receiving bids ahead of the
presidential election. FLR +4.7%. The shippers feel a little bit of love this
week. UPS +1.1%. FDX +1.6%.
After the bell, two permabulls, Fundstrat strategist Tom Lee
and Wells Capital James Paulsen, appear on CNBC television. Are two prominent
bulls appearing on television at the same time after all-time market highs are
teased a sign of a top? All bullish prognosticators have been correct to hold
on to long trades with record market highs at hand (although many individual
stocks remain badly beaten down and are losses for investors). Lee says PE’s
for the broad sectors have room to run higher which should take the SPX to
2400. Yesterday, Paulsen was touting a SPX 2200 and higher target.
Notable stories this week include the UK property fund
failures, the UK prime minister race with May in the lead and the Italian bank
trouble. The US 10-year drops to a 1.31%-handle this week and 30-year yield
down to 2.10%. The pound was pounded down to a 1.27-handle on Wednesday.
US traders are tripping over each other to buy interest rate
sensitive and perceived safety stocks such as utilities, telecom, dividend
stocks and REIT’s. This will not end well. Buying a stock to receive a 3or 4%
yield thinking you are safe in a market downturn is a stupid idea when the
underlying stock may drop from -20% to -50% or more. That will take a lot of
dividend years to get back to even.
Protestors begin to assemble in different major cities
across the US for another night of race demonstrations. The Baton Rouge,
Louisiana, police push back demonstrators from roadways but everyone remains
calm. Dallas killer Micah Xavier Johnson was an Army Reserve veteran that
served in Afghanistan. He was a black man that was apparently racist towards
whites especially white cops. The police say that Johnson was the only shooter
which differs from earlier reports.
A candlelight vigil occurs in Dallas in the evening to honor
the five dead police officers. Officers are targeted and injured by gunmen in
Missouri, Tennessee and in Georgia. The violence is spinning out of control and
a hot and humid evening, a Friday night with a weekend at hand and the sun
going down creates concern that more madman may surface overnight tonight. Will
the protests demonstrating against police racism remain calm? Will the police
remain calm?
Much of the distrust against police started after the
government decided to militarize the forces making cops look like jack-booted
enforcers. The friendly beat cop from a few decades ago is now dressed in black
shouting commands like an SS officer. Relations between the public and cops
deteriorate. A cop in military-style gear is not approachable for a common person.
When people and groups stop talking or do not talk to each other, divides grow
larger.
The Dallas shooter was killed by police using a robot with
an explosive charge. This sets a new and dangerous precedent in America where
the police, now militarized, are judge and jury implementing street justice killing
suspects with robots. The United States begins sliding down a slippery slope.
Hillary Clinton has been quiet as a mouse after the FBI
announcement this week that does not indict the democrat presidential nominee. Since
the week has ended and folks are at happy hour, Clinton finally comments on the
FBI decision under the cover of the weekend. Clinton pushes back against Comey’s
comments that she mishandled classified information. Clinton will perform
damage control this weekend and seek to push the email scandal off the radar
screen. Republicans, however, plan to keep pounding Clinton on the lies and
discrepancies with her past testimony compared to the FBI results. Republican
POTUS candidate Trump is taking advice from his handlers and trying to look
more presidential.
A Salt Lake City resident that had contracted the Zika virus
dies. Authorities are determining what role the Zika virus played in the death.
Protestors demonstrating against police racism in
Atlanta, Georgia, block a roadway and
are in a standoff with authorities. So far, heads remain calm. Protestors in
Baton Rouge are facing off against riot police.
