They’re Here

They’re here.  Scaries overcame markets today as investor fear caused a broad selloff in the equity markets.  Tech stocks slid at the opening, followed by the broader market, ultimately the dip buyers entered the market, rescuing the tech-heavy Nasdaq leaving the broader indexes with deep losses.

N O T E W O R T H Y

The future’s so bright… I gotta wear shades.  In case you haven’t noticed, I am a big music fan.  My appetite for a good tune is not limited to a single genre, or even a century for that matter.  If you like music too, you are likely to have noticed that I often use some clever… and some not-so-clever lyrics in order to underscore — or amplify a point. In this case, I turned the clock back to the 1980s which was an interesting time for music. It reflected a sea change from the decade earlier when the US was working its way out of the Korean and Vietnam wars.  The 1980s were the Reagan years.  The US did suffer through 2 recessions, but GDP was growing, taxes were being cut, the Soviet Union was on its heels, and inflation… inflation… well… that was a bit of a problem in the early years, as we were at the end of an inflation super cycle that began a decade earlier.  By 1985, inflation had receded to manageable levels and GDP growth was cruising along between +5% and +6%. Being a geek suddenly became an asset as technology became all the rage.  Hemlines were being raised and big hair was well… big, really big.  It was an era of positivity.  The future looked suddenly… bright.  In 1986 a band you have probably never heard of released a song called “The Future’s So Bright.”  The one hit wonder was performed by Timbuk 3.  The lyrics start with “I study nuclear science, I love my classes.”  The singer states that he is “doing all right, getting good grades.”  He then goes on to let us know that he has a job waiting for his graduation.  The future looked so bright, he had to wear shades. He couldn’t have known that the Berlin Wall would come crashing down just 3 years later… or maybe he knew.  What could have caused me to pen so many lines about a one hit wonder?  The Fed… obviously.  Almost every morning I reveal the Fed speaker calendar for the day in the NXT UP section.  I provide the schedule because well, it’s important.  The Fed members are some of the smartest economists in the country.  More importantly, they are responsible for manning the controls of the largest economy in the world.  They are always important, but right now, they are very much in the limelight.  In the past 12 months, the US economy and the stock markets have hit extremes that many would not have even thought possible even a year prior.  The Fed’s activities played a big part in turning the economy around and providing the support which helped reverse equity markets from deep losses.  The economy has now in fact, turned positive in a big way and corporate earnings are growing above expectations.  The stage is set for explosive growth as restrictions are being lifted and shutters are being reopened. Rates remain low and the Fed continues to pump liquidity into the capital markets.  Stocks are near all-time highs and we now have Dogecoin millionaires (we will cover that at some future time).  The Government is intent on spending lots of money to fix the needy US infrastructure and provide jobs and revenues to US companies.  The future looks bright.  Don’t believe me?  Ask the Fed.  Both Lael Brainard and Loretta Mester both said separately today the “outlook is bright.”  James Bullard said that it was “too early to talk taper.”  That means cut off quantitative easing. Raphael Bostic said that the US was on the road to recovery.  Mary Daly admitted that she was “bullish about where the economy will be at the end of the year.”  She made sure to say that inflation was “transitory.”  They all made sure to let us know that even though things were… absolutely awesome… we are far from achieving our goal of full recovery.  Neel Kashkari said as much in his speech today, as well. The message was clear and completely in synch.  Things are going great, things will get even better, and “don’t worry, we are not going to pull away the punch bowl so fast.”  These are all triggers which would ordinarily cause equities to rally.  But they didn’t.  Why not?  For one thing traders don’t like to be told that everything is all right.  Traders also know that this morning we will get a read on consumer prices in a CPI release which is expected to show a year-over-year growth of +3.6%… quite a bit higher than the 2% target set by the Fed.  Oh, and yesterday morning, the JOLTS Job Opening number showed that there were 8.234 million vacancies, far more than expected and at an all-time record.  Yeah, you read that right. It was another sign that competition for workers is starting to heat up which is likely to lead to inflation.  Janet Yellen, the former Fed Chair and now Treasury Secretary admitted that the Fed would have to raise rates at some point… just maybe not today.  “Not yet,” “not at this point,” and “too early” all sound good but offer no tangible timelines.  Those interpretations are left up to traders who seem to be expecting rate reversals sooner than later, quick to sell vulnerable equities and driving up option trading volume betting on Fed tightening. The Fed may resist for some time but ultimately, they will have to reduce stimulus.  Getting back to the song lyrics, the singer says “Fifty thou a year — buys a lot of beer.”  Well, it seems that it may buy a whole lot less if inflation turns out to be not-so-transient. You go ahead and wear your shades, they look cool.

THE MARKETS

Stocks sold off yesterday as traders’ fears of inflation and a near term economic falter drove selling.  The initial selling was in tech and growth stocks which ultimately turned around later in the session.  The S&P500 fell by -0.87%, the Dow Jones Industrial Average dropped by -1.36%, the Russell 2000 Index gave up -0.26%, and the Nasdaq Composite Index slipped by -0.09%.  Bonds fell and 10-year treasury yields climbed by +2 basis points to 1.62%.

NXT UP

– CPI YoY (April) may have risen to +3.6% from +2.6%.

– CPI Excluding Food and Energy (April) is expected to come in at +2.3%, up from the prior month’s read of +1.6%.

– More Fed speakers today.  We will hear from Clarida, Rosengren, Bostic, and Harker.

– Before-the-bell releases are expected from Dynatrace and Lumentum while post-bell announcements will come from Sonos, Vroom, Bumble, American Well, Poshmark, and Tattooed Chef.

IMPORTANT DISCLOSURES.

Muriel Siebert & Co., LLC is an affiliated broker/dealer of the public holding company, Siebert Financial Corporation, which also owns Siebert AdvisorNXT, LLC. Siebert AdvisorNXT, LLC is a registered investments advisor (RIA) with the SEC and with state securities regulators. We may only transact business or render personal investment advice in states where we are registered, filed notice or otherwise excluded or exempted from registration requirements. Investment Advisor products are NOT insured by the FDIC, SIPC any federal government agency or Siebert’s parent company or affiliates.

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