Wall Street tests positive for the yips

Stocks took a hard beating yesterday after inflation and a potentially hawkish Fed sent chills through the markets. Longer maturity bond yields are pulling back and that could tell us something about what prescient bond traders are thinking.

Eat to live or live to eat.  I am going to get personal now. I go to the grocery store just about every evening and shop for the night’s supper. My day starts early, as you know, and by the time I am commuting home from the office I have very little appetite for fuss. I shop at the most convenient store and attempt to move through the aisles as fast as possible so that I can swiftly get home to my kitchen and family…and comfortable shoes. Though cooking is technically labor, it helps relax me and unwind from a long day. It just so happens that Whole Foods is the most convenient store on my route home. Now, Whole Foods is not known for its discounts, by any means, but I am willing to pay the price for convenience and I prefer organic food when I can find it, which too, comes at a premium price. I know that right now you are thinking that I am glutton for financial pain. All this aside, within Whole Foods, though the prices are higher than your average grocery store, I am (believe it or not) price sensitive. For me that means looking at the price as I drop the item into my, now mandatory, reusable shopping bag, and commenting to myself. I know that my typical weeknight bill has historically been $30 – $40. As I leave the store, I usually throw the receipt in the trash can by the exit, EXCEPT when the bill is outside that typical range. I keep the receipt so that I can later look back and see which items may have caused the bill to be so high. Most times, the culprit is a usual suspect like a jar of spice, a unique hybrid fruit that caught my attention, or perhaps, a designer chocolate bar (they sell plenty of those). Lately, however something has changed. I am just now looking at my crumpled-up bill from last night and the outliers appear to be 1 pack of chicken breasts for $14.46 and 2 packages of diced butternut squash for $11.98. Never mind the brown basmati rice or green onion, if I simply pan seared 3 chicken breasts and roasted some squash, my humble dinner for 3 would have cost me $26.44! The crazy thing is that same meal would have run me less than $20 just last year! What gives?

You are a faithful reader, so you know exactly what is going on. This very real inflation. Every now and then we hear that the price of chocolate, coffee, avocados, or some other climate sensitive item will cost more due to low crop yields or some supply snag, but the inflation we have been seeing is quite literally across the board on items which do not have simple-to-find, lower-cost alternatives. Let’s have a look at the latest Bureau of Labor Statistics CPI numbers from yesterday. To begin with, the topline annual inflation number came in at +8.3%. Economists were expecting or, I should say, hoping for +8.1%. The hotter-than-expected number was the core cause for yesterday’s deep selloff. The silver lining in the release is that the numbers, though higher than expected, moderated from the prior month, giving hope that inflation is beginning to ease. Now, let’s look deeper and find the causes. Meats/protein in general gained +1.1% in just 1 month. Chicken gained +3.4% and the cost of eggs increased by +10.3%! I am not sure which came first, but if you buy one or both of those, your grocery bill was significantly higher than only 1 month ago! There is some good news. Motor fuel costs fell by -5.8% for the month and used cars moderated by -0.4%. Those two were big drivers of inflation in the past year and they are easing a bit, which is a sign that, perhaps, consumers are turning away from sky high prices. Looking at the year over year numbers, though they appear to be flattening out, the absolute numbers are still astonishing. Motor fuel is still higher by +44% while used cars and trucks are more expensive by +22.7%! Rent will cost you +5.2% more than a year ago as will a haircut (it’s true). Getting back to my shopping bag from last night. Since last year, chicken has risen by +16.4%, citrus fruits gained +18.6%, lettuce is higher by +12.7%, eggs cost +22.6% more, and rice climbed by +9.2%. Those are noticeable numbers, which is why last night’s grocery bill is still on my desk this morning. I either must make more money or eat a little less. My family would suggest maybe a little bit of both.

WHAT’S SHAKIN’

The Walt Disney Co (DIS) shares are lower by -4.62% in the premarket after it announced that it missed on EPS and Revenues by -7.72% and -4.30% respectively. Though subscriber growth for its streaming service was better than expected, the company was quick to lower expectations for the remainder of the year. Potential average analyst target upside: +54.6%.

General Motors Co (GM) is lower by -3.76% in the premarket after Wells Fargo lowered its rating to UNDERWEIGHT along with Ford (F). The reason for the downgrade, according to the analyst was that costs of EV production have increased significantly and both companies are in a hurry to convert their offerings to electric in the coming years. Potential average analyst target upside: +66.2%.

YESTERDAY’S MARKETS

Stocks fell once again after the morning’s CPI release showed that inflation was slightly hotter than expected, despite moderating from a month earlier. Investors are fearful that the Fed will have to act even more aggressively to respond to sticky inflation. The S&P500 fell by -1.65%, the Dow Jones Industrial Average lost -1.02%, the Nasdaq Composite Index dropped by -3.18%, and the Russell 2000 Index sold off by -2.48%. Bonds gained and 10-year Treasury Note yields fell by -7 basis points to 2.92%. Cryptos fell by -12.73% and Bitcoin lost -8.38%.

NXT UP

  • Initial Jobless Claims (May 7) is expected to come in at 193k, lower than last week’s 200k claims.
  • Producer Price Index (April) is expected to have expanded by +0.5% after gaining +1.4% in March. The annual increase is expected to be +10.7% compared to the prior month’s +11.2% gain.

IMPORTANT DISCLOSURES.

Muriel Siebert & Co., Inc. is an affiliated broker/dealer of the public holding company, Siebert Financial Corporation, which also owns Siebert AdvisorNXT, Inc. Siebert AdvisorNXT, Inc. 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.

You are being provided this Market Note for general informational purposes only. It is not intended to predict or guarantee the future performance of any security, market sector or the markets generally. This Market Note does not describe our investment services, recommendations or market timing nor does it constitute an offer to sell or any solicitation to buy. All investors are advised to conduct their own independent research before making a purchase decision. This Market Note is to provide general investment education and you are solely responsible for determining whether any investment, security or strategy, or any other product or service, is appropriate for you based on certain investment objectives and financial situation. Do not use the information contained in this email as a basis for investment decisions. You should always consult your investment advisor and tax professional regarding your investment situation before investing. The charts and graphs are obtained from sources believed to be reliable however Siebert AdvisorNXT does not warrant or guarantee the accuracy of the information. Any retransmission, dissemination or other use of this email is prohibited. If you are not the intended recipient, delete the email from your system and contact the sender. This is a market commentary, not research under FINRA Rule 2210 (b)(1)(D)(iii) and FINRA Rule 2210 (c)(7)(C).

© 2021 Siebert AdvisorNXT All rights reserved.